SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _______________
Commission File No. 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 of Incorporation) (I.R.S. Employer Identification Number)
200 Manufacturers Road, Chattanooga, Tennessee 37405
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (423) 266-2175
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock: Par value $.01 a share New York Stock Exchange
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
requirement for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant: $18,817,962 calculated by using
the closing price on the New York Stock Exchange on March 21,
1996 of the Company's Common stock, and excluding common shares
owned beneficially by directors and officers of the Company, and
by certain other entities, who may be deemed to be "affiliates",
certain of whom disclaim such status.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of March 26, 1996
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Common Stock, $.01 par value 11,528,046 shares
DOCUMENTS INCORPORATED BY REFERENCE
Part of Documents from Which Portions are
Form 10-K Incorporated by Reference
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Part III Proxy Statement for Annual Meeting of Shareholders
SIGNAL APPAREL COMPANY, INC.
ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
INDEX
Item
- ----
PART I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
PART II
5. Market for the Registrant's Common Equity and
Related Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
8. Financial Statements and Supplementary Data
9. Disagreements on Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners
and Management
13. Certain Relationships and Related Transactions
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
PART I
Item 1. BUSINESS
(a) Signal Apparel Company, Inc. ("Signal" or the "Company") is
engaged in the manufacture and marketing of apparel within
the following product lines: knit sportswear and activewear,
women's knit apparel and screenprinted knit apparel.
In November 1994, the Company purchased all the outstanding
capital stock of American Marketing Works, Inc. ("AMW"), a
branded licensed apparel company.
(b) The Company is engaged in the single line of business of
apparel manufacturing and marketing.
For financial information about the Company, see the
information discussed in Item 8 below.
(c) GENERAL
Founded in 1891 as Wayne Knitting Mills, a women's hosiery
company, in Fort Wayne, Indiana, the Company merged with the
H. W. Gossard Co. of Chicago, Illinois in 1967 and became
Wayne-Gossard Corporation. The Company's name was changed
to Signal Apparel Company, Inc. in February 1987. As a
result of a merger in July 1991, The Shirt Shed, Inc. became
a wholly-owned subsidiary of the Company. During 1993, The
Shirt Shed, Inc. began doing business under the name Signal
Artwear. In November 1994, the Company purchased all the
outstanding capital stock of American Marketing Works, Inc.
("AMW"), a branded licensed apparel company.
The Company is a vertically integrated manufacturing company
which manufactures and markets activewear in juvenile, youth
and adult size ranges and upscale knit apparel for the
ladies' market. The Company's products are sold to
wholesalers, screen printers and retail accounts with the
Signal Sport, Signal Artwear, Riddell Athletic, or a
customer's label or, under applicable license agreements,
with the label of designers or sports personalities (Magic
Johnson and Hank Aaron). Currently, a major portion of the
products manufactured by the Company consists of products
generally similar in design and composition to those
produced by the Company's competition. The Company's
business is therefore highly subject to competitive
pressures.
In August 1995, Bruce E. Krebs was elected President and
Chief Operating Officer of the Company. Mr. Krebs was
formerly President of H. H. Cutler Company, a division of V.
F. Corporation.
Since August 1995, Mr. Krebs has led the Company in an
aggressive cost reduction program which has included among
other actions the consolidation of divisional sales,
merchandising and manufacturing functions into corporate
functions, merging the Rutledge, Tennessee cut and sew
facility into the Tazewell, Tennessee cut and sew facility,
the closing of AMW's California facilities, and the
announced closing of the Signal Artwear Indiana facilities
and the Company's satellite art facility in Charlotte, North
Carolina.
The screenprint/distribution functions formerly performed at
the California and Indiana facilities are being consolidated
into a new facility in Chattanooga, Tennessee.
As part of its recent consolidation, the Company's
divisional management structure has been replaced by a
strategic business unit structure. Under this structure,
the Company's strategic business units are:
SIGNAL KNITWEAR/PRIVATE LABEL BUSINESS UNIT:
Signal Knitwear manufactures fabric from which it produces
T-shirts, fleece garments, and other sportswear. The
products of the division are sold primarily to wholesalers,
distributors, screenprinters, private label customers and to
certain retail accounts. In addition to sales to its own
customers, Signal Knitwear is a source of unprinted products
for other units of the Company.
LICENSED SPORTS BUSINESS UNIT:
The Licensed Sports Business Unit, consisting of AMW
Licensed Sports and Riddell Athletic, is engaged in selling
screenprinted apparel to mid-mass and mass merchants, chain
stores, sporting goods and sport specialty stores and
department stores as a line of popularly priced sportswear,
ranging from children's to adult sizes. This unit markets
tops and bottoms from the Signal Knitwear division and other
suppliers with a variety of silkscreened graphics derived
under license from popular cartoons, colleges and
professional sports leagues. Finished products are
generally sold under licensed brands such as Hank Aaron
Originals, Hank Aaron Signature Series, Magic Johnson Tees
and Pure Magic.
SIGNAL ARTWEAR BUSINESS UNIT:
The Shirt Shed, Inc., a wholly-owned subsidiary doing
business as Signal Artwear, is a screenprinting company
engaged in selling to mass merchants and chain stores a line
of popularly priced sportswear, ranging from children to
adult sizes. Signal Artwear utilizes unprinted tops and
bottoms from Signal Knitwear and other suppliers and
produces its finished products through the addition of a
variety of silkscreened graphics derived under license from
popular cartoons, movies, and television shows, as well as
original concepts produced by an internal art staff. In
addition, Signal Artwear provides screenprinting services on
a contract basis.
HERITAGE SPORTSWEAR BUSINESS UNIT:
Heritage Sportswear produces and sells two designer lines of
tailored knits designed under license by Joan Vass and
Cynthia Rowley which bear the "joan vass, u.s.a." and
"Cynthia Rowley" labels, respectively. These designer lines
are sold to fine specialty stores, department stores, and
Joan Vass and Cynthia Rowley stores, respectively. The
division also produces knit shirts and fashion fleece
products which are marketed by other divisions of the
Company.
SALES BY PRODUCT LINE
The following table reflects the percentage of net sales
contributed by the Company's product lines to net sales
during 1995, 1994, and 1993:
Percentage of
Product Line Net Sales
------------ ------------------------
1995 1994 1993
---- ---- ----
Active sportswear 32% 48% 45%
Screenprinted apparel 51% 31% 33%
Women's knit apparel 17% 21% 20%
In 1995 and 1994 no one customer accounted for as much as
10% of sales. One customer, K-Mart Corporation, accounted
for 21% of sales in 1993.
DESCRIPTION OF OPERATIONS
The primary raw material used by the Company is yarn made
from both synthetic and natural fibers which it purchases
from several different suppliers. The Company also
purchases sewing thread, dyes and chemicals, inks, elastic,
hangers, cartons and printed bags. Supplies of synthetic
fibers are dependent upon the availability of petroleum,
while supplies of natural fibers are dependent upon
worldwide crop conditions. These factors generally have had
a greater effect on price than on availability.
Although the Company does not have formal arrangements
extending beyond one year with its suppliers, the Company
has not experienced any significant difficulty obtaining
yarn or any other raw materials from its current sources and
believes that, in any event, adequate alternative sources of
supply are available.
"Signal Artwear" and "Signal Sport" are the principal
registered trademarks of the Company. In addition to the
license to use the "Riddell" trademark and logo, the Company
is licensed through May 1996 to use the registered trademark
"joan vass, u.s.a." in connection with women's knit apparel.
The Company is negotiating to extend the license for a
minimum of five years; however, there is no assurance that
the Company will be able to obtain such an extension. The
Company is also licensed to use the "Cynthia Rowley"
registered trademark in connection with women's knit
apparel. The Company and its various subsidiaries are
licensed to use various trademarks of the National Football
League, the National Basketball Association, the National
Hockey League and various colleges in connection with
collections of activewear. In the fourth quarter of 1995,
the Company entered into an arrangement with Henry Aaron,
Inc. permitting the Company to manufacture and sell knit
products featuring the trademarks of Major League Baseball.
The Company is also licensed by several companies to print
various cartoon, movie and celebrity characters and other
graphics on garments. The Company is licensed by affiliates
of well known athletes Magic Johnson and Hank Aaron to
produce and sell products bearing labels with their
respective names. The ability to use the foregoing
trademarks is important to the implementation of the
Company's strategy of expanding sales of products directed
to the retail market. Sales under the license to use the
"joan vass, u.s.a." trademark have represented a significant
portion of the sales of the Company's Heritage Sportswear
Division.
The business of the Company tends to be seasonal with peak
shipping months varying from product line to product line.
To meet the demands of peak shipping months, it is necessary
to build inventories of some products well in advance of
expected shipping dates. The Company believes that its
credit practices and merchandise return policy are customary
in the industry. Borrowings are used to the extent
necessary to finance seasonal inventories and receivables.
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition".
During 1995, the Company sold its products to over 3,400
customers, including department stores, mass merchandisers,
other retailers and specialty stores, wholesalers,
distributors, screenprinters, and other manufacturers.
Products are shipped directly from the Company's
manufacturing facilities and warehouses.
On December 31, 1995, Signal Knitwear, Heritage Sportswear,
Signal Artwear and American Marketing Works had scheduled
order backlogs of approximately $2,941,000, $2,807,000,
$7,926,000, and $3,214,000, respectively. On December 31,
1994, Signal Knitwear, Heritage Sportswear, Signal Artwear
and American Marketing Works had scheduled order backlogs of
approximately $7,050,000, $2,322,000, $8,250,000 and
$4,265,000, respectively. On December 31, 1993, Signal
Knitwear, Heritage Sportswear, and Signal Artwear had
scheduled order backlogs of approximately $15,700,000,
$3,800,000 and $10,300,000, respectively. Scheduled order
backlogs consist of orders received from customers and
entered into the Company's order entry system, at which
point the orders are scheduled for production. The Company
expects to ship substantially all of its December 31, 1995
backlog of unfilled orders by December 31, 1996; however,
orders are subject to cancellation, generally without
penalty, by customers prior to shipment. The Company's
backlog of orders on December 31, 1995 is not necessarily
indicative of actual shipments or sales for any future
period, and period-to-period comparisons from 1994 to 1995
may not be meaningful.
The apparel industry as a whole, including the part of the
industry engaged in by the Company, is highly competitive.
The Company believes that the principal methods of
competition in the markets in which it competes are design
and styling, price and quality. The designer and brand name
markets are influenced by fashion, design, color, consistent
quality and consumer loyalty. Imports offer competition to
the sweater and knit shirt product lines. The industry is
very fragmented, and the Company's relative position in the
industry is not known.
Compliance with federal, state and local provisions which
have been enacted regulating the discharge of materials into
the environment, or otherwise relating to the protection of
the environment, have not had, and are not expected to have,
any material effect upon the capital expenditures, operating
results, or the competitive position of the Company.
The Company had approximately 1,200 employees at March 1,
1996, compared to 1,750 employees at March 1, 1995. The
reduction of 550 employees since March 1, 1995 is the result
of extensive actions to reduce costs as well as reduced
manufacturing volume.
(d) All of the Company's manufacturing facilities are located in
the United States. Substantially all (over 95%) of the
Company's sales are domestic.
Item 2. PROPERTIES
The company operates owned and leased facilities, aggregating
approximately 967,700 square feet of usable space. The following
table sets forth certain information concerning each of these
facilities:
Facility Square Owned/ Products/
Location Feet Leased Operations
- -------- ------ ------ ----------
SIGNAL KNITWEAR:
Chattanooga, TN 192,200 Owned Sportswear - warehouse,
distribution and
offices
New Tazewell, TN 91,300 Owned Sportswear - cut and
sew, warehouse and
distribution
LaGrange, GA 134,500 Owned Sportswear - knitting,
dyeing and finishing,
warehouse and
distribution
HERITAGE SPORTSWEAR:
Marion, SC 164,600 Owned Women's apparel, knit
sweaters and skirts -
knitting, cut and sew,
and offices
Lakeview, SC 85,100 Owned Women's apparel, knit
sweaters and skirts -
warehouse and
distribution
New York, NY 3,900 Leased Showroom and offices
SIGNAL ARTWEAR:
Wabash, IN 69,000 Owned Screen printing -
printing, warehouse and
offices
3,900 Leased Storage
Marion, IN 223,700 Leased Screen printing -
warehouse and printing
Chattanooga, TN 100,000 Leased Screen printing -
printing, warehouse,
distribution and
offices
New York, NY 4,200 Leased Showroom and offices
Charlotte, NC 3,800 Leased Offices
IDLE FACILITIES:
Rutledge, TN 59,700 Owned
Marion, SC 29,200 Owned
Gardena, CA 49,000 Leased
The buildings at all facilities set forth in the table above and
the machinery and equipment contained therein are well maintained
and are suitable for the Company's needs (see later paragraph for
a discussion of the idle facilities). Substantially all of the
buildings are protected by sprinkler systems and automatic alarm
systems, and all are insured for amounts which the Company
considers adequate. The plant in Rutledge, Tennessee is subject
to mortgage liens incurred in connection with industrial
development financing. The plants in New Tazewell, Tennessee,
LaGrange, Georgia and Wabash, Indiana are subject to mortgage
liens incurred in connection with financing with the senior
lender and a principal shareholder, Walsh Greenwood and
affiliates.
The Company owns or leases several facilities, aggregating
approximately 137,900 square feet, which were idled by the
Company during 1995. Also, on February 26, 1996, the Company
announced the closing of its Signal Artwear screenprinting
facilities located in Wabash and Marion, Indiana. This closing
will take effect on April 12, 1996. At the present time the
Company intends to sell the owned facilities and is renegotiating
the leases on the leased facilities.
As part of its strategic plan, the Company uses independent
contractors to supplement the productive capacities of its own
manufacturing facilities. The Company believes the production of
its own facilities plus the contracted production will support
the expected level of business in 1996.
Item 3. Legal Proceedings
The Company is unaware of any material pending legal proceeding
other than ordinary, routine litigation incidental to its
business.
Item 4. Submission of Matters To A Vote of Security Holders
No matters were submitted to a vote of security holders in the
fourth quarter of 1995.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
MARKET PRICES AND DIVIDENDS
Quarter Ended
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March 31 June 30 September 30 December 31
1995 1994 1995 1994 1995 1994 1995 1994
- --------------------------------------------------------------------------------
Common Stock:
High $8.13 $7.50 $7.38 $8.00 $5.88 $8.13 $7.75 $8.00
Low 6.50 5.13 5.25 6.50 5.25 6.50 5.50 4.00
Cash dividends -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
The Company's loan agreements contain provisions which currently
restrict the Company's ability to pay dividends (see Note 4 of
Notes to Consolidated Financial Statements). No Common Stock
dividends were declared during the five-year period ended
December 31, 1995.
Shareholders of record as of March 27, 1996:
Common 1,040
The Company's Common Stock is listed on the New York Stock
Exchange.
Item 6. Selected Financial Data
SUMMARY OF SELECTED FINANCIAL DATA
Dollars in Thousands (Except Per Share Data)
1995 1994(a) 1993 1992 1991(b)
- --------------------------------------------------------------------------------
Net Sales $89,883 $95,818 $131,000 $172,194 $90,137
================================================================================
Net loss (39,959) (53,304) (34,878) (20,210) (31,771)
================================================================================
Net loss per common
share (3.80) (6.88) (4.17) (2.41) (6.59)
================================================================================
Total assets 43,229 69,448 87,914 121,280 113,732
================================================================================
Long-term obligations 57,243 49,258 26,748 72,126 54,869
================================================================================
(a) The data includes amounts applicable to American Marketing
Works from date of acquisition, November 22, 1994.
(b) The data includes amounts applicable to The Shirt Shed, Inc.
from date of acquisition, July 22, 1991.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
Net sales of $89.9 million for 1995 represent a decrease of 6.2%
or $5.9 million when compared to the $95.8 million in net sales
for 1994. This decrease is comprised of a $17.0 million
reduction for active sportswear, a $4.3 million reduction for
women's fashion knitwear and a $1.2 million reduction for Signal
Artwear screenprinted products, partially offset by a $16.6
million increase due to the inclusion of sales of American
Marketing Works, Inc. (AMW).
Sales of active sportswear decreased 37% to $28.9 million in 1995
as compared to $45.9 million in 1994. Of the $17.0 million
reduction, $4.2 million resulted from reduced sales of Riddell
products while $4.5 million is reduced sales to distributors and
$2.4 million is a result of reduced sales to a large customer.
Reduction in unit volume accounted for 79% of the total reduction
of active sportswear sales while reduction in average selling
price accounted for the remaining 21%. The decrease in average
selling price was due to a combination of product mix and unit
selling price changes.
Sales of women's fashion knitwear decreased 22% to $15.6 million
in 1995 as compared to $19.9 million in 1994. The $4.3 million
sales reduction was primarily due to competition from garments
selling at lower retail prices. Unit volume accounted for a $4.4
million reduction which was partially offset by an increase in
average selling price. The increase in average selling price was
due to a combination of product mix and unit selling price
changes.
Signal Artwear sales were $27.0 million for 1995 versus $28.2
million in 1994. The sales reduction was primarily the result of
reduced sales to a large customer. Unit volume accounted for a
$2.6 million reduction which was partially offset by an increase
in average selling price. The increase in average selling price
was due to a combination of product mix (including fewer
closeouts in 1995) and unit selling price changes.
Gross profit was $14.0 million (15.6% of sales) in 1995 compared
to $8.4 million (8.7% of sales) in 1994. The $5.6 million
increase in gross profit in 1995 was the result of decreased
closeout sales ($5.5 million) and improved manufacturing
efficiencies ($1.4 million) partially offset by lower margins on
first quality sales due to sales mix ($1.3 million). The 1995
gross profit includes a $2.0 million charge for inventory write-
downs which compares to a $7.7 million charge for inventory
write-downs in 1994.
Royalty expense related to licensed product sales was 7.1% and
3.5% of total sales for 1995 and 1994, respectively. In 1995
$1.0 million was accrued for unearned minimum royalties which
accounts for one-seventh of the royalty expense experienced in
1995. The balance of the increase in royalty expense percentage
over 1994 is the result of increased sales of licensed products
relative to total sales.
Selling, general and administrative ("SG&A") expenses were 30%
and 28% of sales for the years ended December 31, 1995 and 1994
respectively. Actual SG&A expense increased $.5 million to $27.3
million. SG&A expenses for AMW of $7.4 million were included in
1995 (where SG&A expenses for AMW of only $1.0 million were
included in 1994) but this was partially offset by SG&A expense
reductions at other divisions.
The primary elements making up the 1995 other expense amount of
$1.3 million are $.4 million amortization of goodwill and $.1
million in factor charges for customer late payments. The
primary elements making up the 1994 other expense amount of $2.0
million are $1.0 million amortization of goodwill, and $.2
million in factor charges for customer late payments.
AMW has incurred significant losses in 1994 and 1995 and the
Company's projections for future operating results for AMW
indicate an impairment of the goodwill. Accordingly, the Company
deemed it appropriate to write off the goodwill arising from the
acquisition. The write-off resulted in a charge of $10.7 million
in 1995.
In August 1995, the Company named Bruce E. Krebs President and
Chief Operating Officer. This change in management was
undertaken to assist the Company to effect its plans to improve
sales and operating results.
Since August 1995, Mr. Krebs has led the Company in an aggressive
cost reduction program which has included among other actions the
consolidation of divisional sales, merchandising and
manufacturing functions into corporate functions, merging the
Rutledge, Tennessee cut and sew facility into the Tazewell,
Tennessee cut and sew facility, the closing of AMW's California
facilities, and the announced closing of the Signal Artwear
Indiana facilities and the Company's satellite art facility in
Charlotte, North Carolina.
The screenprint/distribution functions formerly performed at the
California and Indiana facilities are being consolidated into a
new facility in Chattanooga, Tennessee.
1994 COMPARED WITH 1993
Net sales of $95.8 million for 1994 represent a decrease of 26.9%
or $35.2 million when compared to the $131.0 million in net sales
for 1993. This decrease is comprised of a $13.2 million
reduction for screenprinted products, a $12.5 million reduction
for active sportswear, a $5.2 million reduction for women's
fashion knitwear and a $4.3 million reduction for discontinued
lines. The inclusion of AMW's operations since the date of
acquisition increased sales by $1.8 million.
Signal Artwear's sales were $28.2 million in 1994 versus $42.6
million in 1993. Of the $14.4 million reduction, $14.7 million
is a result of reduced sales to a large customer. On a license
basis, team sports were down $6.0 million while sales of licensed
products under three movie themes accounted for a $7.9 million
reduction. Closeout sales were up $3.1 million while first
quality sales were down by $17.5 million. Total dozens sold were
down 20% in 1994 from 1993 with a 91% increase of dozens in
closeout sales and a 42% reduction of dozens in first quality
sales. Decreased dozens accounted for 58% of the total sales
dollar reduction while product mix change accounted for the
balance of the reduction. Orders for printed sportswear and
licensed apparel for Signal Artwear were approximately $8.3,
$10.3 and $13.0 million at year-end 1994, 1993 and 1992,
respectively. Orders for printed sportswear and licensed apparel
for AMW were approximately $4.3 million at December 31, 1994.
Sales of active sportswear decreased 22% to $45.9 million in 1994
as compared to $59.0 million in 1993. Of the $13.2 million
reduction, $5.7 million is a result of reduced sales to a large
customer. In 1994, there was a 24% reduction in the dozens of
active sportswear sold which accounted for a $13.9 million
decrease in sales dollars. The sales price per dozen increased
1% ($.7 million) in 1994 over 1993 due to sales mix.
Sales of women's fashion knitwear excluding discontinued lines,
decreased $5.2 million to $19.9 million in 1994 as compared to
$25.1 million in 1993. The 21% sales reduction was primarily due
to competition from garments selling at lower retail prices.
Unit volume accounted for 32% of the decrease. Reduction in
average selling price accounted for 68% of the decrease and was
due to a combination of product mix and unit selling price
changes.
Gross profit was $8.4 million (8.7% of sales) in 1994 compared to
$12.4 million (9.5% of sales) in 1993. The $4.1 million
reduction in gross profit in 1994 compared to 1993 was the result
of decreased sales volume excluding closeouts ($9.2 million),
increased losses on closeouts ($1.6 million), offset by more
favorable sales mix ($2.0 million), increased manufacturing
efficiencies ($2.2 million), reduced favorable raw material
prices and contractor purchase price variances ($.8 million) and
a favorable inventory reserve adjustment ($3.3 million). The
1994 gross profit includes a $7.7 million charge for inventory
write-downs which compares to a $9.6 million charge for inventory
write-downs in 1993.
Royalty expense related to licensed product sales was 3.5% and
3.6% for the years ended December 31, 1994 and 1993,
respectively. Royalty expense declined $1.4 million in 1994
versus 1993 due to decreased sales of licensed apparel.
Selling, general and administrative ("SG&A") expenses were 28%
and 24% for the years ended December 31, 1994 and 1993,
respectively. SG&A expenses decreased $4.7 million in 1994
compared to 1993. Closing of the Keds division, Joan Vass
Sporting and the certain outlet stores accounted for a $3.0
million reduction. Reduction in legal and professional expense
($2.0 million) and in shipping expense ($.8 million) offset by
the addition of AMW ($1.0 million) were the primary elements of
the remaining reduction.
The primary elements making up the 1994 other expense amount of
$2.0 million are $1.0 million amortization of goodwill and $.2
million in factor charges for customer late payments. The
primary elements making up the 1993 other expense amount of $1.4
million are $1.0 million for amortization of goodwill and $.3
million in factor charges for customer late payments.
Signal Artwear has incurred losses each year since its
acquisition in 1991 and the Company's projections for future
operating results for Artwear indicate an impairment of the
goodwill. Accordingly, the Company deemed it appropriate to
write off the goodwill arising from the acquisition. The write-
off resulted in a charge of $26.5 million in 1994.
FINANCIAL CONDITION
Additional working capital was required in 1995 to fund the
continued losses incurred by the Company. The Company's need was
met through several transactions with the Company's principal
shareholders and the senior lender. In January 1995, Walsh
Greenwood and affiliates purchased 30 shares of the Company's
Series C Preferred Stock for an investment of $3.0 million.
Effective March 31, 1995, the Company entered into a secured
credit agreement with Walsh Greenwood (the "Walsh Greenwood
Credit Agreement"), pursuant to which the Company could borrow up
to $15.0 million. Effective August 10, 1995, the Company amended
the Walsh Greenwood Credit Agreement, and the principal amount
available under the credit agreement was increased to $20.0
million. At December 31, 1995, the Company had borrowed the
entire $20.0 million available under the Walsh Greenwood Credit
Agreement. At December 31, 1995, the Company had overadvance
borrowings of approximately $8.3 million with its senior lender.
During the first quarter of 1996, the senior lender agreed to an
additional $5.0 million discretionary overadvance because a
principal shareholder, Walsh Greenwood, agreed to guarantee such
additional discretionary overadvances with the senior lender.
After this transaction, the discretionary overadvance facilities
aggregated $13.0 million. (See Note 4 for a more detailed
discussion of the discretionary overadvance facilities with the
Company's senior lender.)
Working capital at December 31, 1995 decreased $30.4 million from
the prior year. The decrease in working capital was primarily
due to a significant increase in the current portion of long-term
debt resulting from the classification of certain long-term debt
as a current obligation ($21.6 million), a significant decrease
in inventories ($11.2 million) and a decrease in accounts
receivable ($2.4 million), which were partially offset by lower
accounts payable and accrued liabilities ($1.1 million) and lower
discretionary overadvances ($2.5 million).
Accounts receivable decreased $2.4 million or 35% compared to the
prior year due primarily to reduced sales.
Inventories decreased $11.2 million or 34% compared to last year.
Inventories decreased as a result of the Company's sale of excess
and closeout inventory of approximately $6.0 million (net of
reserves) during 1995 and the implementation of an inventory
control program to more efficiently utilize working capital.
Total current liabilities increased $18.3 million or 57% over
year-end 1994, primarily due to the classification of the
revolving advance account ($11.3 million) and senior term notes
($3.8 million) with the senior lender (See Note 4 for a further
discussion) and of certain senior notes ($6.5 million) as a
current obligation. Additionally, accounts payable and accrued
liabilities decreased $1.1 million and the discretionary
overadvance with the senior lender decreased $2.5 million.
Cash used in operations was $11.3 million in 1995, compared to
$11.2 million used in operating activities in 1994. The net loss
of $40.0 million was the primary use of funds in 1995. These
items were partially offset by depreciation and amortization
($3.7 million), write-off of goodwill ($10.7 million),
significantly lower inventory levels ($11.2 million) and a
decrease in accounts receivable ($2.4 million).
Cash used in investing activities of $.4 million was for
purchases of property and equipment. Commitments to purchase
equipment totaled approximately $.1 million at December 31, 1995.
During 1996, the Company anticipates capital expenditures of
approximately $.5 million.
Cash provided by financing activities was $12.9 million in 1995.
The Company borrowed $20.0 million in the form of a senior
secured subordinated promissory note pursuant to the Walsh
Greenwood Credit Agreement during 1995. Also, the Company issued
30 shares of Series C Preferred Stock to Walsh Greenwood for an
equity investment of $3.0 million.
The revolving advance account decreased $9.3 million from $28.9
million at year-end 1994 to $19.6 million at December 31, 1995.
Committed credit lines with the Company's senior lender
aggregated a maximum of $40.0 million, including overadvance
facilities, at December 31, 1995. At year-end, approximately
$8.3 million was overadvanced under the revolving advance
account, which is classified as a current obligation in the
consolidated balance sheets at December 31, 1995 (see Note 4 for
a more detailed discussion of the revolving advance account under
the credit facility with the senior lender and the related
discretionary overadvance facilities).
Interest expense was $8.3 million in 1995 compared to $3.0
million in 1994. Total outstanding debt averaged $55.2 million
and $31.9 million for 1995 and 1994, respectively, with average
interest rates of 15.0% and 9.4%. Average outstanding debt
increased due to the borrowings under the Walsh Greenwood Credit
Agreement totalling $20.0 million with an annual interest rate of
25%. As a result of continued losses, the Company has been
unable to fund its cash needs from operating activities. The
Company's liquidity shortfalls were primarily funded through the
$20.0 million Walsh Greenwood Credit Agreement.
The Company also uses letters of credit to support some domestic
sourcing of inventory and certain other obligations. Outstanding
letters of credit were $1.9 million at December 31, 1995,
(excluding collateral of $2.0 million pledged to the senior
lender in the form of a standby letter of credit).
Total shareholders' equity decreased $33.7 million compared to
year-end 1994. The Company sustained losses of $40.0 million
during 1995 (including the write-off of goodwill of $10.7
million), which were partially offset by a $3.0 million
investment in Preferred Stock by a principal shareholder and by
the conversion of $2.4 million of promissory notes into Common
Stock.
LIQUIDITY AND CAPITAL RESOURCES
As a result of continuing losses, the Company has been unable to
fund its cash needs through cash generated by operations during
1994 and 1995. The Company's liquidity shortfalls from
operations during these periods have been funded through several
transactions with its principal shareholders and with the
Company's senior lender. These transactions are detailed above
in the Financial Condition section.
The Company's senior lender waived all existing loan covenant
violations as of December 31, 1995. However, as the Company is
not currently in compliance with certain financial covenants of
its financing agreement with the senior lender, all long-term
debt due the senior lender is subject to accelerated maturity and
as such, has been classified as a current liability in the
consolidated balance sheets. If the senior lender were to
accelerate the maturity of the debt, the Company would not have
funds available to repay this debt.
Actions taken by the Company since year-end 1994 to improve its
operations and liquidity have included: (i) the institution of an
extensive cost reduction program that has reduced general and
administrative expenses during 1995 and is expected to further
reduce such expenses during 1996; (ii) the sale of excess and
close-out inventories during 1995 and into 1996; (iii) the
implementation of an inventory control program in order to
eliminate the manufacture of excess goods and to more effectively
utilize working capital; (iv) the extension of the maturity dates
of $6.5 million in senior notes acquired in the AMW acquisition;
(v) obtaining $20.0 million in financing under the Walsh
Greenwood Credit Agreement; and (vi) further guarantees by Walsh
Greenwood to the senior lender in order to support an increase in
the Company's overadvance position with the senior lender. The
Company believes it can improve its operating margins as a result
of certain of the actions being taken. The Company has also
considered the sale of certain assets. At the present time,
however, the Company has no definitive plans for any such sale.
The Company closed its AMW facility in Gardena, California on
October 18, 1995. The Company closed its Rutledge, Tennessee
sewing plant on November 29, 1995. On February 26, 1996, the
Company announced the closing of its Wabash, Indiana facility.
This closing will take effect on April 12, 1996.
Effective August 1, 1995 the Board of Directors named Bruce Krebs
President and Chief Operating Officer, and Gary LaBelle assumed
the position of Vice President of Operations. These appointments
were made in order to both increase sales and further streamline
the operations of the Company.
The Company did not meet its sales and profit projections for the
first three months of 1996. If the Company's sales and profit
margins for the remainder of 1996 do not meet projected levels,
management will be required to reduce the Company's activities or
seek additional capital to complete its plan for improving the
Company's performance. In any event, additional capital will be
required to continue the Company's operations at current levels.
In order to obtain such additional capital, the Company may be
required to issue securities that would dilute the interests of
the stockholders of the Company. No assurance can be given that
any such additional financing will be available to the Company on
commercially reasonable terms or otherwise. If sales and profit
margins continue to fall below projected levels or if additional
funds cannot be raised, the Company's ability to continue as a
going concern will be jeopardized.
In December 1995, the Company began actively pursuing the
possibility of issuing a significant amount of its Common Stock
in a private placement transaction exempt from registration under
the Securities Act of 1933, which could include an offshore
private placement pursuant to Regulation S under such Act.
Securities sold in such a transaction may not be offered or sold
in the United States (or, in the case of offshore sales under
Regulation S, to or for the benefit of any "U. S. person" as
defined in Regulation S) absent registration or an applicable
exemption under such Act. The Company believes that any such
offering may require that the shares of Common Stock issued
therein be offered at a price below the then current quoted
market price for such shares. The Company will continue to
explore financing alternatives. It is essential that the Company
be able to obtain additional financing through such a transaction
or otherwise, in order to successfully implement its business
plan for 1996.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
Financial Statement Schedules:
See Part IV, Item 14 (a) 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Signal Apparel Company, Inc.:
We have audited the accompanying consolidated balance sheets of
SIGNAL APPAREL COMPANY, INC. (an Indiana corporation) AND
SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity
(deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Signal Apparel Company, Inc. and subsidiaries as of December
31, 1995 and 1994, and the results of their operations and their
cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
As discussed in Note 1 to the consolidated financial statements,
the liquidity of the Company has been adversely affected by
recurring losses from operations, which raises substantial doubt
about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result
should the Company be unable to continue as a going concern.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
March 26, 1996
CONSOLIDATED BALANCE SHEETS
Signal Apparel Company, Inc. and Subsidiaries
December 31, 1995 and 1994
(Dollars in thousands)
1995 1994
--------- ---------
Assets
Current assets:
Cash $ 1,495 $ 303
Receivables, less allowance for
doubtful accounts of $1,703 in
1995 and $1,787 in 1994 4,358 6,713
Inventories 22,122 33,350
Prepaid expenses and other 1,346 1,135
--------- ---------
Total current assets 29,321 41,501
--------- ---------
Property, plant and equipment, at cost:
Land 505 505
Buildings and improvements 12,460 12,437
Machinery and equipment 37,103 38,684
--------- ---------
Total property, plant and equipment 50,068 51,626
Less accumulated depreciation 36,431 34,816
--------- ---------
Net property, plant and equipment 13,637 16,810
--------- ---------
Goodwill, less accumulated amortization
of $41 in 1994 0 10,786
Other assets 271 351
--------- ---------
Total assets $ 43,229 $ 69,448
========= =========
Liabilities and Shareholders'
Equity (Deficit)
Current liabilities:
Accounts payable $ 7,030 $ 8,663
Accrued liabilities 9,834 10,925
Accrued interest 2,076 431
Current portion of long-term debt 22,986 1,144
Discretionary overadvances from bank 8,349 10,849
--------- ---------
Total current liabilities 50,275 32,012
--------- ---------
Long-term debt (less current portion):
Senior obligations 20,841 30,217
Subordinated debt to related parties 3,000 5,434
--------- ---------
Total long-term debt 23,841 35,651
--------- ---------
Other noncurrent liabilities 2,067 1,084
--------- ---------
Commitments and Contingencies (Notes 1,
2, 4, 5 and 8)
Shareholders' equity (deficit):
Series A Preferred Stock, $100,000
stated value per share, 400 shares
authorized, 327.087 shares issued and
outstanding in 1995 and 1994
(liquidation preference of $100,000
per share plus cumulative unpaid
dividends of $6,875 in 1995 and 1994) 39,584 39,584
Series C Preferred Stock, $100,000
stated value per share, 1,000 shares
authorized, 317.678 shares issued in
1995 and 287.678 shares issued in 1994
(liquidation preference of $100,000
per share plus cumulative unpaid
dividends of $4,850 in 1995 and 1994) 36,618 33,618
Common Stock, 40,000,000 and 20,000,000
shares authorized in 1995 and 1994,
$.01 par value per share,
11,528,046 shares issued in 1995 and
10,204,296 shares issued in 1994 115 102
Additional paid-in capital 73,012 69,721
Accumulated deficit (181,166) (141,207)
--------- ---------
Subtotal (31,837) 1,818
Less cost of common treasury
shares (140,220 shares) (1,117) (1,117)
--------- ---------
Total shareholders' equity (deficit) (32,954) 701
--------- ---------
Total liabilities and
shareholders'
equity (deficit) $ 43,229 $ 69,448
========= =========
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
Signal Apparel Company, Inc. and Subsidiaries
Years ended December 31, 1995, 1994, and 1993
(In thousands, except per share data)
1995 1994 1993
- -----------------------------------------------------------------
Net sales $ 89,883 $ 95,818 $ 131,000
Cost of sales 75,896 87,450 118,562
- -----------------------------------------------------------------
Gross profit 13,987 8,368 12,438
Royalty expense (6,362) (3,342) (4,702)
Selling, general and
administrative expenses (27,279) (26,803) (31,549)
Interest expense (8,255) (3,002) (4,855)
Other expense, net (1,314) (2,044) (1,425)
Write-off of goodwill (10,736) (26,481) --
Restructuring costs -- -- (4,785)
- -----------------------------------------------------------------
Loss before income taxes (39,959) (53,304) (34,878)
Income taxes -- -- --
- -----------------------------------------------------------------
Net loss (39,959) (53,304) (34,878)
Less Preferred Stock dividends -- (9,224) (2,501)
- -----------------------------------------------------------------
Net loss applicable to
Common Stock $ (39,959) $ (62,528) $ (37,379)
=================================================================
Weighted average common and
common equivalent shares
outstanding 10,503 9,082 8,963
=================================================================
Net loss per common share $ (3.80) $ (6.88) $ (4.17)
=================================================================
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Signal Apparel Company, Inc. and Subsidiaries
Years ended December 31, 1995, 1994, and 1993
(Dollars in thousands, except share data)
<CAPTION>
Preferred Stock Addt'l
--------------------------- Common Class A Class B Paid-In Accum. Treasury
Series A Series B Series C Stock Common Common Capital Deficit Stock Total
- ----------------------------- ------ ------ ------ ------- ------- ------ -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992,
as previously reported $ - $ - $ - $ - $ 82 $ 9 $68,620 $ (41,300) $(1,117) $ 26,294
Net loss - - - - - - - (34,878) - (34,878)
Redesignation of Common Stock - - - 91 (82) 9) - - - -
Exercise of employee stock
options - - - - - - 12 - - 12
Issuance of 544.765 shares
of Preferred Stock 32,709 21,768 - - - - - - - 54,477
Cumulative accrued dividends
on Preferred Stock 1,455 1,046 - - - - - (2,501) - -
- ----------------------------- -------- -------- ------- ------ ------- ------ -------- --------- --------- ---------
Balance, December 31, 1993 $34,164 $22,814 $ - $ 91 $ - $ - $68,632 $ (78,679) $(1,117) $ 45,905
Net loss - - - - - - - (53,304) - (53,304)
Issuance of 70 shares of
Series C Preferred StoCk - - 7,000 - - - - - - 7,000
Exchange of 287.678 shares
of Series B Preferred Stock
for 287.678 shares of
Series C Preferred Stock - (22,814) 22,814 - - - - - - -
Cumulative accrued dividends
on Preferred Stock 5,420 - 3,804 - - - - (9,224) - -
Issuance of 1,100,000 shares
of restricted Common Stock
in connection with the
acquisition of American
Marketing Works, Inc. - - - 11 - - 1,089 - - 1,100
- ----------------------------- -------- --------- ------- ------ ------- ------ -------- ---------- -------- ---------
Balance, December 31, 1994 $39,584 $ - $33,618 $ 102 $ - $ - $69,721 $ (141,207) $(1,117) $ 701
Net loss - - - - - - - (39,959) - (39,959)
Exercise of employee stock
options - - - - - - 97 - - 97
Issuance of 30 shares of
Series C Preferred Stock - - 3,000 - - - - - - 3,000
Issuance of 1,310,000 shares of
Common Stock - - - 13 - - 2,740 - - 2,753
Grant of 200,000 shares of
Common Stock below market
value - - - - - - 454 - - 454
- ----------------------------- -------- ------- -------- ------ ------- ------ -------- ---------- -------- ---------
Balance, December 31, 1995 $39,584 $ - $36,618 $ 115 $ - $ - $73,012 $(181,166) $(1,117) $(32,954)
============================= ======== ======= ======== ======= ======= ====== ======== ========== ======== =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Signal Apparel Company, Inc.
and Subsidiaries
Years ended December 31, 1995, 1994, and 1993
(Dollars in thousands)
1995 1994 1993
--------- --------- ---------
Operating Activities:
Net loss $(39,959) $(53,304) $(34,878)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 3,708 4,653 5,338
Loss on disposal of property,
plant and equipment 166 251 732
Write-off of goodwill 10,736 26,481 --
Grant of Common Stock options
below market value 454 -- --
Changes in operating assets and
liabilities, net of effects of
business acquired:
Decrease in receivables 2,354 5,273 3,319
Decrease in inventories 11,229 6,858 25,209
(Increase) Decrease in prepaid
expenses and other (130) 330 345
Increase (Decrease) in accounts
payable and accrued
liabilities 118 (1,790) (3,867)
--------- --------- ---------
Net cash used in operating
activities (11,324) (11,248) (3,802)
--------- --------- ---------
Investing activities:
Purchases of property, plant and
equipment (452) (2,168) (1,838)
Proceeds from the sale of property,
plant and equipment 81 20 25
Acquisition of business, less cash
acquired -- (1,343) --
--------- --------- ---------
Net cash used in investing
activities (371) (3,491) (1,813)
--------- --------- ---------
Financing activities:
Net increase (decrease) in revolving
advance account (9,244) 8,918 (16,354)
Proceeds from subordinated notes 20,000 3,000 7,500
Principal payments on borrowings (668) (4,102) (718)
Principal payments on multiemployer
withdrawal liability (298) (218) (206)
Proceeds from issuance of stock 3,000 7,000 15,000
Proceeds from exercise of stock options 97 -- 12
--------- --------- ---------
Net cash provided by
financing activities 12,887 14,598 5,234
--------- --------- ---------
Increase (decrease) in cash 1,192 (141) (381)
Cash at beginning of year 303 444 825
--------- --------- ---------
Cash at end of year $ 1,495 $ 303 $ 444
========= ========= =========
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Signal Apparel Company, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies
Basis of Presentation
The Company's consolidated financial statements have been
presented on a going concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company reported a net loss
applicable to Common Stock of $39,959,000 for the year ended
December 31, 1995, and cumulative losses for the past three years
of $139,866,000. The 1994 loss includes a write-down of goodwill
of approximately $26,481,000 related to the acquisition of The
Shirt Shed, Inc., while the 1995 loss includes a write-down of
goodwill of approximately $10,736,000 related to the acquisition
of AMW (see "Goodwill"). As a result of these losses,
shareholders' equity has declined to a deficit of $32,954,000 at
December 31, 1995.
Over 1995 and during the first quarter of 1996, the Company
experienced liquidity shortfalls from operations that were
resolved through (i) the sale of $3,000,000 of Series C Preferred
Stock to Walsh Greenwood, a principal shareholder (see Note 5) in
January 1995, (ii) the advance to the Company, pursuant to the
Walsh Greenwood Credit Agreement, of $20,000,000 under a senior
secured subordinated promissory note (Note 4), (iii) the waiver
(as of December 31, 1995) by Walsh Greenwood Trading Company
Limited Partnership (as asignee under the Walsh Greenwood Credit
Agreement) of certain defaults by the Company under the Walsh
Greenwood Credit Agreement, including payment (but not the
accrual) of interest charges and compliance with financial
covenants, which arise prior to January 1, 1997; and (iv) the
provision by the senior lender of additional discretionary
overadvances of $5,000,000 since December 31, 1995 (see Note 4).
As the Company is not currently in compliance with certain
financial covenants of its financing agreement with the senior
lender, all long-term debt due the senior lender is subject to
accelerated maturity and as such, has been classified as a
current liability in the consolidated balance sheets. If the
senior lender were to accelerate the maturity of the debt, the
Company would not have funds available to repay this debt.
The Company's continued existence is dependent upon its raising
additional financing or equity funds, maintaining existing credit
facilities in place and substantially improving its operating
results during 1996. Actions taken by the Company during 1995 to
improve its operations and liquidity include (i) the $15,000,000
senior secured subordinated promissory note closed on March 31,
1995, and later amended and increased to $20,000,000 on August
10, 1995 under the Walsh Greenwood Credit Agreement, (ii) the
institution of an extensive cost reduction program that is
expected to substantially reduce general and administrative
expenses, (iii) the sale of excess and closeout inventories of
approximately $6,000,000 and the implementation of an inventory
control program in order to eliminate the manufacture of excess
goods and more efficiently utilize working capital, (iv) the
extension of the maturity dates of senior notes of $6,500,000 to
December 31, 1996 (Note 4), (v) the closure and the consolidation
of certain facilities, and (vi) the consideration by the Company
of the sale of certain assets. The Company believes it can
improve its operating margins as a result of certain of the
actions being taken.
In order for the Company to have sufficient liquidity for it to
continue as a going concern in its present form, the Company will
need to raise additional funds and execute the above steps and
other planned improvements. 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. There
can be no assurances that all of the above steps, if successfully
completed, can return the Company's operations to profitability.
Nature of Operations
The Company is a vertically integrated manufacturing company
which manufactures and markets activewear in juvenile, youth and
adult size ranges and upscale knit apparel for the ladies'
market. The Company's products are sold to wholesalers,
screenprinters and retail accounts, primarily in the United
States.
Principles of Consolidation
The consolidated financial statements include the accounts of
Signal Apparel Company, Inc. ("Signal") and its wholly-owned
subsidiaries (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
Inventories
Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market for all inventories. For discontinued and
closeout inventories, the Company evaluates the need for write-
downs on an item by item basis. Market value for finished goods
and blank (unprinted) goods is net realizable value.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided over
the estimated useful lives of the assets principally using
accelerated methods. Assets under capital leases are included in
property, plant and equipment, and amortization of such assets is
included with depreciation expense. The estimated useful lives
of the assets range from 4 to 32 years for buildings and
improvements and from 3 to 10 years for machinery and equipment.
Expenditures for maintenance and repairs are charged to expense
as incurred. Depreciation and amortization of property, plant
and equipment for financial statement purposes amounted to
$3,353,000 in 1995, $3,635,000 in 1994, and $4,355,000 in 1993.
At December 31, 1995, the Company had idle property, plant and
equipment (as a result of plant consolidation) with a net book
value of approximately $2,300,000. The Company plans to relocate
certain machinery and equipment, and has written the property,
plant and equipment down to its estimated net realizable value.
Net Loss Per Common Share
The net loss per common share is based on the weighted average
number of common shares outstanding during each year after giving
effect to dividend requirements of the preferred stock. Effects
of the Company's Common Stock equivalents (see Note 5) have been
excluded from the per share computations as they are anti-
dilutive for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Credit and Market Risk
The Company sells products to a wide variety of customers
servicing the ultimate consumer. Pursuant to the terms of a
factoring agreement with its senior lender, the Company sells
substantially all accounts receivable, except cash in advance or
cash on delivery sales, to the factor on a preapproved basis.
The Company pays a factoring commission as compensation for the
credit risk and other services provided by the factor.
With regard to credit-approved sales, the factor accepts the
credit risk for nonpayment due to financial inability to pay.
With regard to noncredit approved sales, the Company accepts all
credit risk of nonpayment for any reason. A portion of accounts
receivable due from customers (approximately 47% and 49% at
December 31, 1995 and 1994, respectively) is carried at the risk
of the factor. The Company performs ongoing credit evaluations
of those customers carried at its own risk and generally does not
require collateral for such receivables. The Company maintains
an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
In 1995 and 1994, no one customer accounted for more than 10% of
total sales. One customer accounted for 21% of net sales in
1993.
Goodwill
In connection with the acquisition of American Marketing Works,
Inc. ("AMW"), the Company recorded goodwill for the excess of the
cost over the net assets acquired. The Company continually
evaluates whether later events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance may not be
recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate
of the related business segment's undiscounted net income over
the remaining life of the goodwill in measuring whether goodwill
is recoverable.
In 1995, the Company determined that the goodwill related to the
acquisition of AMW had been impaired. This impairment was due to
operating losses by AMW, the loss of significant licenses,
shortfalls in sales projections, and the uncertainty about AMW's
return to profitability. As a result, the unamortized balance of
the AMW goodwill was written off. In 1994, the Company
determined that goodwill related to the acquisition of The Shirt
Shed, Inc. had been impaired due to continuing operating losses
along with the uncertainty about Shirt Shed's return to
profitability. As a result, the unamortized balance of the Shirt
Shed goodwill was written off. The charges for the goodwill
write-offs were $10,736,000 and $26,481,000 in 1995 and 1994,
respectively, and have been separately presented in the
accompanying statements of operations.
2. Acquisition of American Marketing Works
Pursuant to a Stock Purchase Agreement dated October 6, 1994, as
subsequently amended (as so amended, the "Purchase Agreement"),
the Company acquired, as of November 22, 1994, all of the
outstanding capital stock of AMW from Kidd, Kamm Equity Partners,
L.P., a Delaware limited partnership ("KKEP"), MW Holdings, L.P.,
a California limited partnership ("MWH"), Marvin Winkler, Sherri
Winkler and certain investment companies (collectively, the "AMW
Shareholders"), in exchange for 1,400,000 shares of the Company's
Common stock, $.01 par value per share (the "AMW Acquisition").
Included in the 1,400,000 shares were 150,000 unvested shares and
150,000 shares subject to being returned to the Company. These
300,000 shares became fully vested (and nonreturnable) in 1995.
An Amendment to the Purchase Agreement provided for the issuance
of an additional 10,000 shares of Common Stock to certain of the
AMW Shareholders in further consideration of the sale of their
entire equity interest in the Company.
The shares of the Company's Common stock issued in connection
with the AMW Acquisition were issued as unregistered, restricted
shares of stock pursuant to the rules and regulations of the
Securities and Exchange Commission. As an additional inducement
to the AMW Shareholders to enter into the Purchase Agreement, the
Company entered into a Registration Rights Agreement dated
November 22, 1994 with KKEP as "nominee" for all of the AMW
Shareholders (other than Marvin Winkler and Sherri Winkler, who
did not receive any shares) under a separate agreement between
KKEP and such shareholders. The Registration Rights Agreement
effectively grants KKEP (as "Holder," as defined therein, of a
majority of the "Registrable Securities" issued in the AMW
Acquisition) the right to require the Company, upon written
notice given anytime within two years after November 22, 1994, to
effect one registration of all "Registrable Securities" issued in
the AMW Acquisition for sale under the Securities Act of 1933, as
amended.
On November 30, 1994, KKEP, in its capacity as nominee for the
AMW Shareholders, notified the Company of its exercise of the
demand registration rights. In accordance with the terms of the
Registration Rights Agreement, the Company has requested, and
KKEP has agreed to, a delay in the registration of shares
pursuant to such notice.
In connection with the AMW Acquisition, the Company agreed with
the other parties to the Purchase Agreement that (i) a
subordinated promissory note of AMW in the principal amount of
$1,560,000 from MWH and (ii) a subordinated promissory note of
AMW in the principal amount of $750,000 from Marvin Winkler
(president of the general partner of MWH as well as former
Chairman and CEO of AMW) and his wife, Sherri Winkler
(collectively, the "Subordinated Notes") would be amended and
restated in principal amounts equal to the outstanding principal
plus accrued and unpaid interest on each of the Subordinated
Notes as of November 22, 1994 (totalling $1,635,400 and $798,300,
respectively) (said amended and restated notes, collectively, the
"Purchase Notes"). In 1995 the Company entered into an
agreement with Marvin and Sherri Winkler and MW Holdings whereby
the Purchase Notes were converted into 1,000,000 shares of Common
Stock.
The AMW acquisition was accounted for as a purchase in accordance
with Accounting Principles Board Opinion No. 16, and accordingly,
the purchase price has been allocated to the assets acquired and
liabilities assumed based on the estimated fair values as of the
acquisition date. The net excess of the cost over the estimated
fair values of the acquired net assets as a result of the
acquisition was allocated to goodwill.
The results of operations of AMW are included in the accompanying
financial statements from the date of acquisition. The following
summarized unaudited pro forma financial information gives effect
to the acquisition as if it had occurred on January 1 of each
period and has been prepared for comparative purposes only. The
information does not purport to be indicative of the results of
operations had the transaction been in effect on the date
indicated or which may occur in the future:
Year Ended
Dollars in Thousands December 31,
(except per share data) 1994 1993
---- ----
(unaudited)
Net sales $125,603 $169,018
Net loss applicable to
common shareholders 71,407 38,770
Net loss per common share 6.99 3.80
3. Inventories
Inventories consisted of the following at December 31, 1995
and 1994:
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------------
Raw materials $ 1,343 $ 963
Work in process 2,855 5,639
Finished goods 16,742 25,392
Supplies 1,182 1,356
- -----------------------------------------------------------------
$22,122 $33,350
=================================================================
4. Long-Term Debt
Long-term debt consisted of the following at December 31, 1995
and 1994:
(Dollars in thousands) 1995 1994
- -----------------------------------------------------------------
Senior obligations:
Revolving advance account under
credit facility -- interest payable
monthly at the alternate base rate
(as defined) plus 1.25% (9.911% at
December 31, 1995); secured by
accounts receivable, inventories
and certain machinery and equipment $19,640 $28,924
Senior term note -- interest payable
monthly at the alternate base rate
(as defined) plus 1.5% (10.161% at
December 31, 1995); secured by real
estate; payable in equal monthly
installments of $17,600 over a
period through July 1999 with a
balloon payment due August 1999 1,209 1,422
Senior term note -- interest payable
monthly at the alternate base rate
(as defined) plus 1.5% (10.161% at
December 31, 1995); secured by
accounts receivable, inventories,
and machinery and equipment; payable
in equal monthly installments of
$49,500 over a period through
July 1999 with a balloon payment
due August 1999 3,394 3,993
Tranche A note -- interest payable
monthly at the commercial paper rate
(as defined) plus 4.75% (10.608% at
December 31, 1995); secured by certain
machinery and equipment and certain
issued and outstanding stock; payable
on December 31, 1996 4,750 4,750
Tranche B note -- interest payable
monthly at the commercial paper rate
(as defined) plus 7.65% (13.508% at
December 31, 1995); secured by certain
machinery and equipment and certain
issued and outstanding stock; payable
on December 31, 1996 1,750 1,750
Senior secured subordinated promissory
note -- interest at 25% (15% payable
on December 31, 1995 and quarterly
thereafter, and 10% payable at
maturity); secured by a second lien
on accounts receivable, inventory,
machinery and equipment, and certain
real estate; payable on
March 31, 1998 20,000 --
Obligations under capital leases 386 293
Mortgage notes payable 347 396
Other 700 682
- -----------------------------------------------------------------
Total 52,176 42,210
Less: Current portion of senior
obligations 22,986 1,144
Discretionary overadvances
from bank 8,349 10,849
- -----------------------------------------------------------------
Senior obligations, excluding current
portion and discretionary overadvances 20,841 30,217
Subordinated debt to related parties
(Notes 2 and 5) 3,000 5,434
- -----------------------------------------------------------------
Total excluding current portion $23,841 $35,651
=================================================================
On November 7, 1995, the financing arrangement with the Company's
senior lender was extended through December 31, 1997. Under the
current financing arrangement, the Company's total outstanding
obligations (including the revolving advance account and senior
term notes) at any month-end cannot exceed the lower of
$40,000,000 or the borrowing base, as defined in the agreement.
The borrowing base is generally equal to the sum of 85% of
eligible receivables (as defined), plus the lower of the
inventory cap ($16,000,000, subject to adjustment) or 50% of
eligible inventory (as defined), less certain reserves, plus the
discretionary overadvances and the senior term notes.
The senior lender has agreed to allow certain discretionary
overadvances in excess of the borrowing base. At December 31,
1995, the discretionary overadvance facilities aggregated
$8,000,000, $4,000,000 of which is secured by a collateral pledge
by two principal shareholders, FS Signal Associates II and Walsh
Greenwood. All such overadvance facilities with the senior
lender are discretionary. The collateral pledge may only be
repaid after repayment of all outstanding borrowings under the
discretionary overadvance facility from the senior lender. At
December 31, 1995, approximately $8,349,000 was overadvanced
against the overadvance arrangements of $8,000,000. Such
overadvances are classified as current in the consolidated
balance sheet at December 31, 1995.
Subsequent to December 31, 1995, a principal shareholder, Walsh
Greenwood, agreed to guarantee $5,000,000 in additional
overadvances from the senior lender. Therefore, in the first
quarter of 1996, the Company's discretionary overadvance
borrowings aggregated $13,000,000.
Under the revolving advance account, interest is at the alternate
base rate plus 1.25%. The alternate base rate is a fluctuating
rate equal to the higher of the prime rate (as defined) or the
federal funds rate plus .5%, and is payable monthly. In addition
to the amounts due to the senior lender for interest, the Company
is obligated to pay a quarterly fee of .25% per annum on the
difference between $40,000,000 and the average amount of
obligations outstanding, as defined, to such lender.
The current financing arrangement requires, among other things,
the maintenance of minimum amounts of working capital, cumulative
pretax operating results and net worth, and also limits the
Company's ability to pay dividends and limits the amount of
indebtedness the Company may incur. As of December 31, 1995, the
Company was not in compliance with various covenants of the
credit facility. Due to the Company's noncompliance with certain
financial covenants, the long-term portion of the debt with the
senior lender is classified as a current liability in the
accompanying consolidated balance sheets at December 31, 1995.
In connection with the AMW Acquisition, the senior lender amended
its agreement with the Company. In connection with these
amendments, AMW granted security interests in all of its
inventory, equipment and trademarks to the senior lender. The
Company pledged all the issued and outstanding stock of both AMW
and Shirt Shed to the senior lender. Walsh Greenwood and
affiliates, principal shareholders of the Company, guaranteed up
to $250,000 of the obligations of AMW to the senior lender and to
AMW's prior fixed assets lender (in addition to the guarantees of
such AMW debt by the Company and KKEP, as discussed above). FS
Signal Associates II, another of the Company's principal
shareholders, pledged 500,000 shares of the Company's Common
Stock to the senior lender to secure the obligations of AMW to
the senior lender.
In connection with the acquisition of AMW, the Company amended
and restated a credit agreement with AMW's former lender. The
amended and restated credit agreement includes two promissory
notes ("Tranche A" and "Tranche B"). The notes are secured by a
first lien on AMW's machinery and equipment. Additionally, the
Company pledged all of the issued and outstanding stock of AMW to
this lender as collateral. A principal shareholder, FS Signal
Associates II, pledged 500,000 shares of the Company's Common
Stock to this lender to secure AMW's obligations. Another
shareholder, KKEP pledged 1,400,000 shares of the Company's
Common Stock to this lender, also.
Effective March 31, 1994, the Company signed a promissory note
for $3,000,000 with a related party, FS Signal Associates I. The
promissory note is due on April 30, 1997, subject to the terms of
the subordination agreement with the Company's senior lender.
Interest is payable at maturity at the prime rate, as defined,
plus 3%. In connection with this promissory note, accrued
interest payable at maturity to FS Signal Associates I was
approximately $638,000 and $276,000 at December 31, 1995 and
1994, respectively.
On March 31, 1995, the Company executed the Walsh Greenwood
Credit Agreement with Walsh Greenwood and affiliates. The
related promissory note had a face amount of $15,000,000 or the
unpaid draws (subsequently amended to $20,000,000, effective
August 10, 1995). At December 31, 1995, the Company had
$20,000,000 outstanding under the amended credit agreement, which
matures on March 31, 1998 and may be prepaid in whole or in part
at any time. Interest is at a fixed rate of 25% of the face
amount. Interest at the rate of 15% is payable on December 31,
1995, and quarterly thereafter. The remaining 10% is payable on
March 31, 1998. If any principal or interest payment is not paid
on the due date, the overdue amount earns interest at an annual
rate of 27% until such amount is paid. Funds prepaid cannot be
redrawn. The promissory note is secured by a security interest
immediately after the security interest of the Company's senior
lender and a first lien on any acquisition. The funds received
from the promissory note could only be used for working capital
requirements and could not be used to repay any principal on debt
with the Company's senior lender. The credit agreement
prohibits, among other things, the payment of cash dividends to
any class of stock, except required dividends on the Company's
Preferred Stock. As additional conditions to the extension of
credit under this agreement, the Company obtained an agreement
from the holders of the Company's Preferred Stock (i) to waive
accrual and payment of all future dividends and dividend
accumulations from January 1, 1995 until the earlier of January
1, 2001, or such time as all outstanding principal and interest
under the credit agreement with Walsh Greenwood and affiliates
has been paid in full and (ii) to grant the Company the right,
upon payment in full of all principal and interest due under the
credit agreement with Walsh Greenwood and upon repayment of
$6,500,000 in outstanding senior notes, to redeem all of the
Company's outstanding Preferred Stock with shares of the
Company's Common Stock valued for such purposes at $7.00 per
share. Such right of redemption extends until June 30, 1998. In
connection with this promissory note, accrued interest payable at
maturity was approximately $1,429,000 at December 31, 1995, which
is classified as an other noncurrent liability in the
accompanying consolidated balance sheets. Accrued interest
payable on December 31, 1995 was approximately $1,840,000. Such
interest was not paid at year-end and is classified as accrued
interest in the accompanying consolidated balance sheets. (See
Note 5 for discussion of warrants issued in conjunction with this
transaction.) As of December 31, 1995, Walsh Greenwood Trading
Company Limited Partnership (as asignee under the Walsh Greenwood
Credit Agreement) agreed to waive certain defaults by the Company
under the Walsh Greenwood Credit Agreement, including payment
(but not the accrual) of interest charges and compliance with
financial covenants, which arise prior to January 1, 1997.
On November 5, 1995, Marvin and Sherri Winkler and MW Holdings,
L.P., converted outstanding promissory notes totalling
approximately $2,434,000 into 1,000,000 shares of the Company's
Common Stock (Note 2).
Interest expense in the Consolidated Statements of Operations
includes interest to related parties of $3,852,000, $298,000, and
$1,557,000 during 1995, 1994, and 1993, respectively.
The Company made cash payments for interest of $4,634,000,
$2,674,000, and $4,245,000 during 1995, 1994, and 1993,
respectively. The aggregate future scheduled maturities of long-
term debt for the five years subsequent to December 31, 1995,
excluding the discretionary overadvances from the senior lender
in the amount of $8,349,000, are as follows: 1996 - $22,986,000;
1997 - $3,186,000; 1998 - $20,181,000; 1999 - $170,000; 2000 -
$304,000.
Due to the current financial condition (Note 1) and the ongoing
attempts to raise additional funds, it is not practical to
estimate the fair value of long-term debt.
5. Capital Stock
On June 22, 1993, the shareholders approved amendments to the
Restated Articles of Incorporation to reclassify all outstanding
shares of Class B Common Stock as Class A Common Stock and to
redesignate the Class A Common Stock as Common Stock.
Accordingly, the differences which had previously existed between
Class A Common Stock and Class B Common Stock as to voting rights
and dividend rights were eliminated.
On May 11, 1995, the shareholders approved amendments to the
Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 40,000,000
shares.
On May 11, 1995, the shareholders approved an amendment to the
Company's 1985 Stock Option Plan to increase the number of shares
of Common Stock available for grant thereunder from 1,160,000 to
1,910,000 shares. The options have a term of 10 years and vest
over periods from one to four years from date of grant. At
December 31, 1995, stock options available for grant totalled
962,514 and the number of shares exercisable was 201,786. A
summary of stock option activity is as follows:
Shares Price Range
------ -----------
Outstanding at December 31, 1992 503,000 $ 4.63 - $19.13
Granted 526,500 $ 7.06 - $ 7.50
Exercised (2,000) $ 4.63
Canceled or Expired (529,000) $ 8.50 - $19.13
----------
Outstanding at December 31, 1993 498,500 $ 7.06 - $ 7.50
Granted 150,000 $ 4.00 - $ 5.50
Exercised --
Canceled or Expired (165,000) $ 7.06 - $ 7.50
----------
Outstanding at December 31, 1994 483,500 $ 4.00 - $ 7.06
Granted 505,000 $ 4.00 - $ 6.19
Exercised (13,750) $ 7.06
Canceled or Expired (214,514) $ 4.00 - $ 7.06
----------
Outstanding at December 31, 1995 760,236 $ 4.00 - $ 7.06
==========
Under the restated articles of incorporation, the Company has the
authority to issue 1,600,000 shares of preferred stock having no
par value, issuable in series, with the designation, powers,
preferences, rights, qualifications and restrictions to be
established by the board of directors. At December 31, 1995, the
Company had authorized 400 shares of Series A Preferred Stock,
250 shares of Series B Preferred Stock, 1,000 shares of Series C
Preferred Stock, 100 shares of Series D Preferred Stock and
20,000 shares of Series E Preferred Stock.
The Series A Preferred Stock bears a 15% cumulative, undeclared
dividend, compounded quarterly, and is senior to all other
classes or series of the Company's equity securities in all
regards, including dividends, distributions and redemptions. The
Series B Preferred Stock bears a 12.5% cumulative, undeclared
dividend, compounded quarterly, and is junior to the Company's
Series A Preferred Stock, but senior to all other equity of the
Company in all regards, including dividends, distributions and
redemptions. The Series C Preferred Stock bears a 12.5%
cumulative, undeclared dividend, compounded quarterly; is junior
to the Company's Series A Preferred Stock and is equivalent with
the Company's Series B Preferred Stock, but senior to all other
equity of the Company in all regards, including dividends,
distributions and redemptions. The Series D Preferred Stock is
junior to the Series A, B and C Preferred Stock of the Company;
bears a cumulative dividend at an annual rate equal to ten
percent (10%) of the stated value of such stock, compounded
quarterly; and is required to be redeemed by the Company on
November 22, 1999 at a redemption price equal to the stated value
per share for such stock plus accrued and unpaid dividends,
subject to the rights of the holders of the Company's other
outstanding series of Preferred Stock which are senior to the
Series D Preferred Stock. The Series A, B, C and D Preferred
Stock have a stated value of $100,000 per share and a liquidation
preference of $100,000 per share, plus cumulative unpaid
dividends.
The Series E Preferred Stock is junior to all other series of
outstanding Preferred Stock of the Company and bears a cumulative
dividend at an annual rate equal to seven percent (7%) of the
stock's $1,000 stated value, to be paid quarterly. The Series E
Preferred Stock is convertible into shares of Common Stock at the
price per share equal to the lower of (i) the product of .60
multiplied by the average daily closing bid prices of Common
Stock for the period of five (5) consecutive trading days
immediately preceding the date of conversion of the shares of
Series E Preferred Stock or (ii) the product of .60 multiplied by
the average daily closing bid prices of Common Stock for the
period of five (5) consecutive trading days immediately preceding
the date of closing of the offering of the Series E Preferred
Stock.
The Series A, B, C, D and E shareholders' voting rights are
limited to certain consent actions as defined in the Preferred
Stock certificates. At December 31, 1995, there were no shares
of the Series B, D or E Preferred Stock outstanding.
Pursuant to a license agreement between the Company and an
affiliate of Time Warner, Inc., the Company canceled a warrant
previously issued to purchase 171,173 shares of Common Stock at
an exercise price of $12.61 per share and issued two new warrants
in 1994 to the same affiliate, one to purchase 193,386 shares of
Common Stock at $11.61 per share and expiring July 22, 2001, and
the other to purchase 38,674 shares of Common Stock at $8.52 per
share and expiring April 30, 2003. Both of these new warrants
were exercisable as of the date of issuance.
In 1993, the Company, FS Signal and Walsh Greenwood entered into
a restructuring agreement pursuant to which outstanding debt and
unpaid fees owed to Walsh Greenwood and FS Signal were canceled
and extinguished. Also, the outstanding warrants issued in
connection with all such debt were canceled. In consideration of
this cancellation, the Company issued shares of Preferred Stock
at the rate of one share of Preferred Stock per $100,000
principal amount of debt extinguished, together with fractional
shares of such stock in consideration of accrued interest which
was extinguished. This resulted in the issuance of an aggregate
of 176.587 shares of Series A Preferred Stock and 217.678 shares
of Series B Preferred Stock. As an inducement to Walsh Greenwood
and FS Signal to enter into the restructuring agreement, the
Company issued warrants to acquire 675,000 shares of Common Stock
at a price of $7.06 per share to Walsh Greenwood and warrants to
acquire an aggregate of 2,047,500 shares of Common Stock at a
price of $7.06 per share to FS Signal. The Company also agreed
to make available, by private placement, up to 200 additional
shares of Series A Preferred Stock at a price of $100,000 per
share. As an inducement to purchase such Preferred Stock, the
Company granted FS Signal a warrant to acquire up to 2,000,000
additional shares of Common Stock at $7.06 per share, which vests
at the rate of 100,000 warrant shares per $1,000,000 invested in
Preferred Stock. As of December 31, 1995, FS Signal had invested
an additional $15,050,000 in the Company in the form of purchases
of 150.5 shares of such Series A Preferred Stock, and warrants to
acquire 1,500,000 shares of Common Stock had vested.
In February 1994, the Company exchanged 70 shares of the Series C
Preferred Stock for $7,000,000 of collateral pledged by Walsh
Greenwood to the senior lender at the rate of $100,000 per share.
In conjunction with financing provided to the Company in March
1994 (Note 4), the Company issued warrants to FS Signal
Associates I to purchase 300,000 shares of the Company's Common
Stock at an exercise price of $7.06 per share, such warrants
expire on April 30, 1999.
In June 1994, the Company issued 130.334 shares of Series C
Preferred Stock to FS Signal Associates I, 9.375 shares to FS
Signal Associates II, and 77.969 shares to Walsh Greenwood in
exchange for 217.678 shares of Series B Preferred Stock
previously issued to these related parties.
In consideration of funding provided by the senior lender to AMW
(Note 4), the Company issued warrants, effective November 18,
1994, to the senior lender to purchase 100,000 shares of Common
Stock at $7.06 per share, expiring November 18, 1997.
In January 1995, Walsh Greenwood made an equity investment in the
Company of $3,000,000 for which they received 30 shares of Series
C Preferred Stock. In connection with this investment, the
Company issued warrants to Walsh Greenwood to purchase 300,000
shares of the Company's Common Stock at an exercise price of
$7.625 per share, such warrants expire on February 1, 2000.
In conjunction with the Walsh Greenwood Credit Agreement executed
in March 1995 and later amended in August 1995 (Note 4), the
Company issued warrants to Walsh Greenwood to purchase 2,000,000
shares of Common Stock at an exercise price of $2.25 per share,
expiring on March 31, 1998. Such warrants vested as funds were
drawn at the rate of 100,000 warrants for each $1,000,000 drawn.
Additionally, Walsh Greenwood received a second warrant to
purchase 2,000,000 shares with an exercise price at a 25%
discount to the 20-day average trading price in December 1996.
These warrants vested upon issuance 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. Additionally, the warrants have registration
rights no more favorable than the equivalent provisions in the
currently outstanding warrants issued to principal shareholders
of the Company, except that the registration rights shall include
three demand registrations. The issuance of these warrants in
conjunction with the Walsh Greenwood credit agreement was subject
to shareholder approval, which was obtained at the Company's
Annual Meeting of Shareholders on May 11, 1995.
Pursuant to the acquisition of American Marketing Works, Inc.
(AMW), the Company issued 1,410,000 shares of the Company's
Common Stock (Note 2).
On November 5, 1995, Marvin and Sherri Winkler and MW Holdings
agreed to convert outstanding promissory notes totaling
approximately $2,434,000 into 1,000,000 unregistered shares of
the Company's Common Stock. The Company 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
agreed to pay 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 be paid in shares of Common Stock) until such
shares are registered or disposed of.
Pursuant to the engagement of Grisanti, Galef and Goldress, Inc.
as interim manager of the Company in July 1993, the Company
issued warrants, effective August 13, 1993, to purchase up to
200,000 shares of the Company's Common Stock at an exercise price
of $7.06 per share, expiring on September 1, 1998. In October
1994, the Company amended this warrant by decreasing the warrant
shares outstanding to 100,000 and immediately vesting the 50,000
shares not previously vested.
Warrants to purchase 9,254,560 shares had vested at December 31,
1995. A summary of warrant activity is as follows:
Shares Price Range
----------- -----------
Outstanding at December 31, 1992 2,331,173 $12.61 - $20.875
Issued 5,485,000 $7.06 - $12.00
Exercised --
Canceled or Expired (2,722,500) $11.25 - $20.875
----------
Outstanding at December 31, 1993 5,093,673 $7.06 - $12.61
Issued 632,060 $7.06 - $11.16
Exercised --
Canceled or Expired (271,173) $7.06 - $12.61
----------
Outstanding at December 31, 1994 5,454,560 $7.06 - $11.16
Issued 4,300,000 $2.25 - $7.625*
Exercised --
Canceled or Expired --
----------
Outstanding at December 31, 1995 9,754,560 $2.25 - $11.16*
==========
*As previously discussed, warrants to purchase 2,000,000
shares were issued with an exercise price at a 25% discount
to the 20-day average trading price in December 1996.
6. Income Taxes
The Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the differences between the financial reporting and income tax
bases using enacted tax rates in effect for the year in which the
differences are expected to reverse.
There was no income tax provision or benefit recorded during the
years ended December 31, 1995, 1994, and 1993 due to the losses
sustained by the Company.
Deferred income tax assets and liabilities for 1995 and 1994
reflect the impact of temporary differences between the amount of
assets and liabilities for financial reporting and income tax
reporting purposes. The Company has established a valuation
allowance for the entire amount of the net deferred tax asset due
to the uncertainty regarding the realizability of these assets.
Temporary differences and carryforwards which give rise to
deferred tax assets at December 31, 1995 and 1994 are as follows
(in thousands):
1995 1994
---- ----
Deferred tax assets:
Tax loss carryforwards $61,767 $52,399
Inventory reserves 1,208 2,253
Other reserves 1,859 1,351
Multi-employer withdrawal liability 492 614
Other 2,230 2,181
-------- --------
Total deferred tax assets 67,556 58,798
Valuation allowance (66,602) (57,605)
Deferred tax liabilities:
LIFO to FIFO change (954) (1,193)
-------- --------
Net deferred tax asset $ 0 $ 0
======== =========
The Company and its subsidiaries file a consolidated federal
income tax return. At December 31, 1995, the Company had tax
loss carryforwards of approximately $162,000,000 which expire in
years 1999 through 2010 if not utilized earlier. At the time
Shirt Shed and AMW were acquired, they had tax loss carryforwards
of $17,400,000 and $11,800,000, respectively, which are included
above. These tax loss carryforwards are subject to annual
limitations imposed for the change in ownership (as defined in
Section 382 of the Internal Revenue Code) and application of the
consolidated income tax return rules.
The Company did not pay any income taxes in 1995, 1994 and 1993.
7. Pension and Retirement Plans
The Company sponsors defined contribution plans for employees.
The Company makes contributions to the plans equal to a
percentage of the participants' contributions within certain
limitations. The Company recognized expense related to these
plans of $109,000 in 1995, $154,000 in 1994 and $261,000 in 1993.
The Company's policy is to fund amounts accrued annually.
Certain former employees of Signal participate in a defined
benefit pension plan negotiated with a union (multi-employer
plan) that no longer represents the Company. In 1990, Signal
accrued an estimated withdrawal liability related to the
multiemployer plan of $2,500,000, which was payable in quarterly
installments of approximately $104,000, including interest,
beginning November, 1991.
Currently, the Company is renegotiating the payment schedule with
the union. Due to the uncertainty of the timing of these
payments, the total multiemployer liability of $1,294,000 is
classified as a current liability at December 31, 1995. The
total multiemployer withdrawal liability was $1,613,000 at
December 31, 1994.
8. Commitments and Contingencies
Operating Leases
The Company occupies certain manufacturing facilities, sales and
administrative offices and uses certain equipment under operating
lease arrangements. Rent expense aggregated approximately
$1,729,000 in 1995, $2,205,000 in 1994, and $2,137,000 in 1993.
Approximate future minimum rental commitments for all
noncancelable operating leases as of December 31, 1995 are as
follows (dollars in thousands):
1996 $ 1,196
1997 774
1998 444
1999 79
-------
$ 2,493
=======
Real estate taxes, insurance, and maintenance expense are
generally obligations of the Company.
Royalty and Other Commitments
Pursuant to the terms of various license agreements, the Company
is obligated to pay future minimum royalties of $4,240,000 due in
1996, $310,000 due in 1997, and $250,000 due in 1998. Of the
$4,800,000 million, $3,525,000 was accrued as of December 31,
1995.
Legal Proceedings
The Company is a party to various legal proceedings incidental to
its business. The ultimate disposition of these matters is not
presently determinable but will not, in the opinion of
management, have a material adverse effect on the Company's
financial condition or results of operations.
9. Restructuring Costs and Asset Realization
During 1993, the Company recorded restructuring costs of
$4,785,000 (or $.53 per share). The restructuring costs
primarily relate to the Company's attempts to reduce the overhead
costs, improve manufacturing efficiencies and eliminate an
unprofitable product line. The restructuring costs include a
$1,700,000 charge for elimination of the Keds Apparel division,
$700,000 for a plant closing in Griffin, Georgia, $1,900,000 for
employee severance and related costs, and $500,000 in other
nonrecurring charges.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable
PART III
Those portions of the Company's Proxy Statement for its 1996
Annual Meeting of Shareholders described below are incorporated
herein by reference.
Item 10. Directors and Executive Officers of the Registrant
Election of Directors and Executive Officers
Item 11. Executive Compensation
Executive Compensation and Employment Agreements
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Security Ownership of Certain Beneficial Owners and Management
Election of Directors
Item 13. Certain Relationships and Related Transactions
Compensation Committee Interlocks and Insider Participation
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. Financial Statements and Schedules
The financial statements are incorporated by reference under
Part II, Item 8 and are set forth in the Index to Financial
Statements and Schedules found in Part II, Item 8.
(a) 2. Financial Statement Schedules:
Report of Independent Public Accountants
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted as the required information
is inapplicable or the information is presented in the
consolidated financial statements or related notes.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of Signal Apparel Company, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Part
II, Item 8 of this Form 10-K and have issued our report thereon
dated March 26, 1996. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole.
Schedule II is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Anderson LLP
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
March 26, 1996
<TABLE>
SIGNAL APPAREL COMPANY, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<CAPTION>
Additions
------------------
Balance at Charged to Balance
Beginning Costs and at End
of Period Expense Other Deductions of Period
--------- -------- ----- ---------- ---------
<C> <C> <C> <C> <C>
Year ended December 31, 1995
Deducted from asset accounts:
Allowance to reduce inventories
to net realizable value $ 5,933 $ 1,804 $ $ 4,558 $ 3,179
Allowance for doubtful accounts 1,787 264 348 (1) 1,703
------- ------- ------- ------- -------
$ 7,720 $ 2,068 $ $ 4,906 $ 4,882
======= ======= ======= ======= =======
Year ended December 31, 1994
Deducted from asset accounts:
Allowance to reduce inventories
to net realizable value $ 7,886 $ 7,675 $ $ 9,628 $ 5,933
Allowance for doubtful accounts 1,060 710 256 (2) 239 (1) 1,787
------- ------- ------- ------- -------
$ 8,946 $ 8,385 $ 256 $ 9,867 $ 7,720
======= ======= ======= ======= =======
Year ended December 31, 1993
Deducted from asset accounts:
Allowance to reduce inventories
to net realizable value $ 6,691 $10,082 $ $ 8,887 $ 7,886
Allowance for doubtful accounts 313 1,191 444 (1) 1,060
------- ------- ------- ------- -------
$ 7,004 $11,273 $ $ 9,331 $ 8,946
======= ======= ======= ======= =======
<FN>
<F1>
(1) Uncollectible accounts written off, net of recoveries.
<F2>
(2) Represents allowance for doubtful accounts acquired in acquisition of AMW.
</FN>
</TABLE>
(a) 3. Exhibits:
(2.1) Stock Purchase Agreement dated October 6,
1994, by and among the Company, Kidd, Kamm Equity
Partners, L.P., MW Holdings, L.P., and the additional
parties listed on the signature pages thereto.
Incorporated by reference to Exhibit 2-1 to current
report on Form 8-K dated November 22, 1994.
(2.2) Amendment, dated November 1, 1994, to Stock
Purchase Agreement dated October 6, 1994. Incorporated
by reference to Exhibit 2-2 to current report on Form
8-K dated November 22, 1994.
(2.3) Amendment No. 2, dated November 21, 1994, to
Stock Purchase Agreement dated October 6, 1994.
Incorporated by reference to Exhibit 2-3 to current
report on Form 8-K dated November 22, 1994.
(3.1) Copy of Restated Articles of Incorporation,
as amended November 15, 1995.
(3.2) Copy of Bylaws as amended March 23, 1992.
Incorporated by reference to Exhibit 3-2 to Form 10-K
for the year ended December 31, 1991.
(10.1) License Agreement, dated June 1, 1992,
between the Company and Joan Vass, Inc. Incorporated
by reference to Exhibit 10-1 to Form 10-K for the year
ended December 31, 1992.
(10.2) Factoring Agreement dated as of May 23,
1991 between the Company and BNY Financial Corporation,
together with BNY Financial Corporation General
Security Agreement, Inventory Security Agreement,
Equipment Security Agreement, and related documents,
all dated as of May 23, 1991 relating to a $60,000,000)
credit facility. Incorporated by reference to Exhibit
10-10 to Form S-4 Registration Statement filed with the
Commission on May 28, 1991.
(10.3) Factoring Agreement dated as of July 25,
1991 between The Shirt Shed, Inc. and BNY Financial
Corporation. Incorporated by reference to Exhibit 10-1
to Current Report on Form 8-K dated July 22, 1991.
(10.4) General Security Agreement, Inventory
Security Agreement, Equipment Security Agreement, and
related documents, all dated as of July 25, 1991
between The Shirt Shed, Inc. and BNY Financial
Corporation. Incorporated by reference to Exhibit
10-10 to Form 10-K for the year ended December 31,
1991.
(10.5) Promissory Note of Signal Apparel Company,
Inc., for $5,000,000 dated as of November 12, 1992, and
payable to BNY Financial Corporation and related letter
dated October 15, 1992, canceling the Promissory Note
for $3,500,000 payable to BNY Financial Corporation.
Incorporated by reference to Exhibit 10-8 to Form 10-K
for the year ended December 31, 1992.
(10.6) June 12, 1991 Letter Agreement to Factoring
Agreement dated as of May 23, 1991, between the Company
and BNY Financial Corporation. Incorporated by
reference to Exhibit 10-12 to Form 10-K for the year
ended December 31, 1991.
(10.7) Letter Amendments, dated as of July 22,
1991, to Factoring Agreements dated as of (i) May 23,
1991, between the Company and BNY Financial
Corporation, and (ii) July 25, 1991 between The Shirt
Shed, Inc. and BNY Financial Corporation. Incorporated
by reference to Exhibit 10-13 to Form 10-K for the year
ended December 31, 1991.
(10.8) July 25, 1991 Letter Amendments to
Factoring Agreement dated as of July 25, 1991, between
The Shirt Shed, Inc. and BNY Financial Corporation.
Incorporated by reference to Exhibit 10-14 to Form 10-K
for the year ended December 31, 1991.
(10.9) July 25, 1991 Letter Amendments to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-15 to Form 10-K for the year ended
December 31, 1991.
(10.10) Letter Amendment dated as of October 23,
1991, to prior Letter Amendment, dated July 25, 1991,
to factoring Agreements dated (i) May 23, 1991, between
the Company and BNY Financial Corporation, and (ii)
July 25, 1991, between The Shirt Shed, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-16 to Form 10-K for the year ended December
31, 1991.
(10.11) January 24, 1992 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991
between the Company and BNY Financial Corporation and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-14 to Form 10-K for the year ended
December 31, 1992.
(10.12) January 31, 1992 Letter Amendment to
Factoring Agreement dated as of May 23, 1991, between
the Company and BNY Financial Corporation.
Incorporated by reference to Exhibit 10-18 to Form 10-K
for the year ended December 31, 1991.
(10.13) February 21, 1992 Letter Amendments to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-19 to Form 10-K for the year ended
December 31, 1991.
(10.14) Guaranty by the Company of obligations of
The Shirt Shed, Inc. to BNY Financial Corporation,
dated July 25, 1991. Incorporated by reference to
Exhibit 10-21 to Form 10-K for the year ended December
31, 1991.
(10.15) Guaranty by The Shirt Shed, Inc. of
obligations of the Company to BNY Financial
Corporation, dated July 25, 1991. Incorporated by
reference to Exhibit 10-23 to Form 10-K for the year
ended December 31, 1992.
(10.16) Execution version (March 27, 1992) of
Letter Amendment dated as of January 24, 1992 to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-1 to Form 10-Q for the quarter ended
March 31, 1992.
(10.17) March 20, 1992 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-2 to Form 10-Q for the quarter ended
March 31, 1992.
(10.18) March 28, 1992 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between the Company and The Shirt
Shed, Inc. Incorporated by reference to Exhibit 10-3
to Form 10-Q for the quarter ended March 31, 1992.
(10.19) July 31, 1992 Letter concerning Factoring
Agreements dated as of (i) May 23, 1991, between the
Company and BNY Financial Corporation and (ii) July 25,
1991, between The Shirt Shed, Inc. and BNY Financial
Corporation. Incorporated by reference to Exhibit 10-4
to Form 10-Q for the quarter ended September 30, 1992.
(10.20) November 12, 1992 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-24 to Form 10-K for the year ended
December 31, 1992.
(10.21) March 29, 1993 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-25 to Form 10-K for the year ended
December 31, 1992.
(10.22) March 1, 1993 Letter concerning Factoring
Agreements dated as of (i) May 23, 1991, between the
Company and BNY Financial Corporation and (ii) July 25,
1991, between The Shirt Shed, Inc. and BNY Financial
Corporation. Incorporated by reference to Exhibit 10-
26 to Form 10-K for the year ended December 31, 1992.
(10.23) May 14, 1993 Letter Amendment to Factoring
Agreements dated as of (i) May 23, 1991, between the
Company and BNY Financial Corporation, and (ii) July
25, 1991, between The Shirt Shed, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-1 to Form 10-Q for the quarter ended March
31, 1993.
(10.24) August 12, 1993 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991, between The Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-5 to Form 10-Q for the quarter ended June
30, 1993.
(10.25) November 8, 1993 Waiver concerning
Factoring Agreements dated as of (i) May 23, 1991,
between the Company and BNY Financial Corporation, and
(ii) July 25, 1991 between The Shirt Shed, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-7 to Form 10-Q for the quarter ended
September 30, 1993.
(10.26) Letter Agreement dated as of March 31,
1994 to Factoring Agreements dated as of (i) May 23,
1991, between the Company and BNY Financial
Corporation, and (ii) July 25, 1991, between The Shirt
Shed, Inc. and BNY Financial Corporation. Incorporated
by reference to Exhibit 10-28 to Form 10-K for the year
ended December 31, 1993.
(10.27) Subordination Agreement, dated March 31,
1994 between the Company, FS Signal Associates I and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-3 to Form 10-Q for the quarter ended
March 31, 1994.
(10.28) July 14, 1994 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991
between the Company and BNY Financial Corporation and
(ii) July 25, 1991, between The Shirt Shed, Inc., and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-2 to Form 10-Q for the quarter ended June
30, 1994.
(10.29) July 29, 1994 Letter Amendment to
Factoring Agreement, dated May 23, 1991 between the
Company and BNY Financial Corporation, and The Shirt
Shed, Inc. as guarantor. Incorporated by reference to
Exhibit 10-3 to the Form 10-Q for the quarter ended
June 30, 1994.
(10.30) Promissory Note of the Company for
$4,157,000 dated July 29, 1994 and payable to BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-4 to the Form 10-Q for the quarter ended
June 30, 1994.
(10.31) Promissory Note of the Company for
$1,480,000 dated July 29, 1994 and payable to BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-5 to the Form 10-Q for the quarter ended
June 30, 1994.
(10.32) Guaranty by The Shirt Shed, Inc. of the
obligations of the Company to pay a Promissory Note in
the amount of $1,480,000 to BNY Financial Corporation.
Incorporated by reference to Exhibit 10-6 to the Form
10-Q for the quarter ended June 30, 1994.
(10.33) Deed to Secure Debt and Security Agreement
dated July 29, 1994 between the Company and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-7 to the Form 10-Q for the quarter ended
June 30, 1994.
(10.34) Real Estate Mortgage, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing
dated July 29, 1994 between the Shirt Shed, Inc. and
BNY Financial Corporation. Incorporated by reference to
Exhibit 10-8 to the Form 10-Q for the quarter ended
June 30, 1994.
(10.35) Deed of Trust, Assignment of Leases and
Security Agreement dated July 29, 1994 between the
Company and BNY Financial Corporation. Incorporated by
reference to Exhibit 10-9 to the Form 10-Q for the
quarter ended June 30, 1994.
(10.36) Letter Agreement dated September 1, 1994
between the Company, BNY Financial Corporation, FS
Signal Associates II and WG Trading Co. Incorporated
by reference to Exhibit 10-4 to the Form 10-Q for the
quarter ended September 30, 1994.
(10.37) November 14, 1994 Letter Amendment to
Factoring Agreements dated as of (i) May 23, 1991
between the Company and BNY Financial Corporation and
(ii) July 25, 1991 between The Shirt Shed, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-3 to current report on Form 8-K dated
November 22, 1994.
(10.38) November 22, 1994 Letter Amendments to
Factoring Agreements dated as of (i) May 23, 1991
between the Company and BNY Financial Corporation and
(ii) July 25, 1991 between The Shirt Shed, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-4 to current report on Form 8-K dated
November 22, 1994.
(10.39) Factoring Agreement dated as of November
22, 1994 between American Marketing Works, Inc. and BNY
Financial Corporation, together with Equipment Security
Agreement, Inventory Security Agreement and Trademark
Assignment of Security related thereto, all dated as of
November 22, 1994 relating to a $14,000,000 credit
facility. Incorporated by reference to Exhibit 10-5 to
current report on form 8-K dated November 22, 1994.
(10.40) November 22, 1994 Letter Amendment to
Factoring Agreement dated as of November 22, 1994
between American Marketing Works, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-6 to current report on Form 8-K dated
November 22, 1994.
(10.41) November 22, 1994 Letter Amendments to
Factoring Agreements dated as of (i) May 23, 1991
between the Company and BNY Financial Corporation; (ii)
July 25, 1991 between the Shirt Shed, Inc. and BNY
Financial Corporation; and (iii) November 22, 1994
between American Marketing Works, Inc. and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-7 to current report on Form 8-K dated
November 22, 1994.
(10.42) Guaranty by the Company of obligations of
American Marketing Works, Inc. to BNY Financial
Corporation, dated November 22, 1994. Incorporated by
reference to Exhibit 10-8 to current report on Form 8-K
dated November 22, 1994.
(10.43) Guaranty by The Shirt Shed, Inc. of
obligations of American Marketing Works, Inc. to BNY
Financial Corporation, dated November 22, 1994.
Incorporated by reference to Exhibit 10-9 to current
report on Form 8-K dated November 22, 1994.
(10.44) Guaranty by American Marketing Works, Inc.
of obligations of the Company to BNY Financial
Corporation, dated November 22, 1994. Incorporated by
reference to Exhibit 10-10 to current report on Form 8-
K dated November 22, 1994.
(10.45) Guaranty by American Marketing Works, Inc.
of obligations of The Shirt Shed, Inc. to BNY Financial
Corporation, dated November 22, 1994. Incorporated by
reference to Exhibit 10-11 to current report on Form 8-
K dated November 22, 1994.
(10.46) Pledge Agreement, dated November 22, 1994,
between the Company and BNY Financial Corporation re:
capital stock of The Shirt Shed, Inc. and American
Marketing Works, Inc. Incorporated by reference to
Exhibit 10-12 to current report on Form 8-K dated
November 22, 1994.
(10.47) Letter Agreement dated March 30, 1995
amending the Factoring Agreement dated as of May 23,
1991 by and between BNY Financial Corp. and the Company
waiving compliance with certain provisions thereof.
Incorporated by reference to Exhibit 10-1 to Form 10-Q
for the quarter ended June 30, 1995.
(10.48) Letter Amendment dated November 7, 1995
amending the Factoring Agreements dated as of May 23,
1991 by and between BNY Financial Corp. and the
Company, dated July 25, 1991 by and between BNY
Financial Corp. and Shirt Shed and dated November 22,
1994 by and between BNY Financial Corp. and AMW waiving
compliance with certain provisions thereof.
(10.49) Letter Amendment dated March 14, 1996
amending the Factoring Agreements dated as of May 23,
1991 by and between BNY Financial Corp. and the
Company, and dated July 25, 1991 by and between BNY
Financial Corp. and Shirt Shed waiving compliance with
certain provisions thereof.
(10.50) Warrant Certificate covering 100,000
shares of Common Stock of the Company, issues to BNY
Financial Corporation in connection with transactions
related to the Company's acquisition of American
Marketing Works, Inc. Incorporated by reference to
Exhibit 10-13 to current report on Form 8-K dated
November 22, 1994.
(10.51) Amended and Restated Credit Agreement
dated as of February 16, 1995 among American Marketing
Works, Inc., certain Lenders and Greyrock Capital
Group, Inc. Incorporated by reference to Exhibit 10.48
to Form 10-K for the year ended December 31, 1995.
(10.52) Tranche A Note of American Marketing
Works, Inc. for $4,750,000 to Greyrock Capital Group,
Inc. dated February 16, 1993. Incorporated by reference
to Exhibit 10.49 to Form 10-K for the year ended
December 31, 1995.
(10.53) Tranche B Note of American Marketing
Works, Inc. for $1,750,000 to Greyrock Capital Group,
Inc. dated February 16, 1993. Incorporated by reference
to Exhibit 10.50 to Form 10-K for the year ended
December 31, 1995.
(10.54) Security Agreement dated February 16, 1993
between American Marketing Works, Inc. and Greyrock
Capital Group, Inc. Incorporated by reference to
Exhibit 10.51 to Form 10-K for the year ended December
31, 1995.
(10.55) Guaranty and Security Agreement dated as
of November 22, 1994 between the Company and Greyrock
Capital Group, Inc. guaranteeing the obligations of
American Marketing Works, Inc. to Greyrock Capital
Group, Inc. Incorporated by reference to Exhibit 10.52
to Form 10-K for the year ended December 31, 1995.
(10.56) Guaranty and Security Agreement dated as
of November 22, 1994 between The Shirt Shed and
Greyrock Capital Group, Inc. guaranteeing the
obligations of American Marketing Works, Inc. to
Greyrock Capital Group, Inc. Incorporated by reference
to Exhibit 10.53 to Form 10-K for the year ended
December 31, 1995.
(10.57) Agreement dated as of March 31, 1995
among AMW, The 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.
Incorporated by reference to Exhibit 10.8 to Form 10-Q
for the quarter ended March 31, 1995.
(10.58) License Agreement between the Company, The
Shirt Shed, Inc. and LCA Entertainment (as agent for DC
Comics, Inc.) dated as of February 1, 1991, regarding
exclusive rights to use certain elements from "BATMAN
II" sequel motion picture, "BATMAN' comic books and
planned "BATMAN" television series in connection with
certain categories of apparel products. Incorporated
by reference to Exhibit 10-4 to Form 10-K for the year
ended December 31, 1991.
(10.59) Warrant Purchase Agreement, dated as of
March 1, 1991, between the Company, The Shirt Shed,
Inc. and Licensing Corporation of America.
Incorporated by reference to Exhibit 10-25 to Form 10-K
for the year ended December 31, 1991.
(10.60) Warrant No. 002 issued to Licensing
Corporation of America, covering 193,386 shares of the
Company's Common Stock, dated as of July 27, 1991 and
expiring July 22, 2001. Incorporated by reference to
Exhibit 10-1 to the Form 10-Q for the quarter ended
September 30, 1994.
(10.61) Warrant No. 003 issued to Licensing
Corporation of America, covering 38,674 shares of the
Company's Common Stock, dated as of April 30, 1993 and
expiring April 30, 2003. Incorporated by reference to
Exhibit 10-2 to the Form 10-Q for the quarter ended
September 30, 1994.
(10.62) Restructuring Agreement, dated as of
August 13, 1993 by and among the Company, FS Signal
Associates, and Walsh Greenwood & Co. Incorporated by
reference to Exhibit 10-3 to Form 10-Q for the quarter
ended September 30, 1993.
(10.63) Waiver Letter, dated as of June 12, 1992,
pertaining to Credit Agreement dated as of October 23,
1991, as amended, between the Company and FS Signal
Associates. Incorporated by reference to Exhibit 10-1
to Form 10-Q for the quarter ended September 30, 1992.
(10.64) Waiver Letter, dated as of June 12, 1992,
pertaining to Credit Agreement dated as of October 23,
1991, as amended, between the Company and WG Partners,
L.P. Incorporated by reference to Exhibit 10-2 to Form
10-Q for the quarter ended September 30, 1992.
(10.65) Subordination Agreement, dated as of June
12, 1992, between the Company, FS Signal Associates and
BNY Financial Corporation. Incorporated by reference
to Exhibit 10-3 to Form 10-Q for the quarter ended
September 30, 1992.
(10.66) Subordination Agreement, dated March 30,
1994, between the Company, FS Signal Associates and BNY
Financial Corporation. Incorporated by reference to
Exhibit 10-47 to Form 10-K for the year ended December
31, 1993.
(10.67) Promissory Note dated March 31, 1994
between the Company and FS Signal Associates I.
Incorporated by reference to Exhibit 10-2 to Form 10-Q
for the quarter ended March 31, 1994.
(10.68) Warrant Certificate covering 2,047,500
shares of Common Stock of the Company, issued to FS
Signal Associates in connection with the Restructuring
Agreement dated as of August 13, 1993. Incorporated by
reference to Exhibit 10-4 to Form 10-Q for the quarter
ended September 30, 1993.
(10.69) Warrant Certificate covering 2,000,000
shares of Common Stock of the Company, issued to FS
Signal Associates in connection with the Restructuring
Agreement dated as of August 13, 1993. Incorporated by
reference to Exhibit 10-5 to Form 10-Q for the quarter
ended September 30, 1993.
(10.70) Warrant Certificate dated April 1, 1994 to
purchase 300,000 shares of Common Stock of the Company,
issued to FS Signal Associates I in connection with the
promissory note dated March 31, 1994. Incorporated by
reference to Exhibit 10-4 to Form 10-Q for the quarter
ended March 31, 1994.
(10.71) Warrant Certificate covering 675,000
shares of Common Stock of the Company, issued to Walsh
Greenwood in connection with the Restructuring
Agreement dated as of August 13, 1993. Incorporated by
reference to Exhibit 10-6 to Form 10-Q for the quarter
ended September 30, 1993.
(10.72) License Agreement between the Company and
RHC Licensing Corporation dated June 2, 1992.
Incorporated by reference to Exhibit 10-52 to Form 10-K
for the year ended December 31, 1992.
(10.73) Warrant Certificate covering 200,000
shares of Common Stock of the Company issued to
Grissanti, Galef & Goldress, Inc. in connection with
their engagement. Incorporated by reference to Exhibit
10-1 to Form 10-Q for the quarter ended September 30,
1993.
(10.74) Amendment to Warrant Certificate dated
October 18, 1994 reducing the shares issuable from
200,000 to 100,000 to Grisanti, Galef & Goldress, Inc.
Incorporated by reference to Exhibit 10-3 to Form 10-Q
for the quarter ended September 30, 1994.
(10.75) Agreement dated June 21, 1994 by and among
the Company, FS Signal Associates I, and Walsh
Greenwood & Co. exchanging all outstanding shares of
the Company's Series B Preferred Stock on a one-per-one
basis for shares of the Company's Series C Preferred
Stock. Incorporated by reference to Exhibit 10-1 to
form 10-Q for the quarter ended June 30, 1994.
(10.76) Put/Call Agreement dated November 22,
1994, among the Company, MW Holdings, L.P., Marvin
Winkler and Sherri Winkler. Incorporated by reference
to Exhibit 10-1 to current report on Form 8-K dated
November 22, 1994.
(10.77) Registration Rights Agreement dated
November 22, 1994, between the Company and Kidd, Kamm
Equity Partners, Inc. Incorporated by reference to
Exhibit 10-2 to current report on Form 8-K dated
November 22, 1994.
(10.78) Employment Agreement with Marvin Winkler
dated as of April 1, 1995. Incorporated by reference to
Exhibit 10.1 to Form 10-Q for the quarter ended March
31, 1995.
(10.79) Agreement dated May 10, 1995 by and
between the Company and Sherri Winkler and MW Holdings,
Inc. Incorporated by reference to Exhibit 10.4 to Form
10-Q for the quarter ended March 31, 1995 .
(10.80) Employment Agreement with Leon Ruchlamer
dated as of March 27, 1995. Incorporated by reference
to Exhibit 10.5 to Form 10-Q for the quarter ended
March 31, 1995.
(10.81) Employment Agreement with William Watts
dated as of March 15, 1995. Incorporated by reference
to Exhibit 10.81 to Form 10-Q for the quarter ended
March 31, 1995.
(10.82) Agreement dated April 24, 1995 between the
Company and MC Properties I. L.P. Incorporated by
reference to Exhibit 10.7 to Form 10-Q for the quarter
ended March 31, 1995.
(10.83) Settlement Agreement dated as of March 1,
1995 with Glenn Grandin. Incorporated by reference to
Exhibit 10.9 to Form 10-Q for the quarter ended March
31, 1995.
(10.84) Settlement Agreement dated as of April 13,
1995 with Daniel Cox. Incorporated by reference to
Exhibit 10.10 to Form 10-Q for the quarter ended March
31, 1995.
(10.85) Credit Agreement dated as of March 31,
1995 between the Company and Walsh Greenwood & Co.
Incorporated by reference to Exhibit 4.1 to current
report on Form 8-K filed on May 10, 1995.
(10.86) Promissory Note in face amount of
$15,000,000 dated March 31, 1995 issued to Walsh
Greenwood by the Company. Incorporated by reference to
Exhibit 4.2 to current report on Form 8-K filed on May
10, 1995.
(10.87) Fixed Rate Warrant Certificate for
1,500,000 Warrants dated March 31, 1995 issued to Walsh
Greenwood by the Company. Incorporated by reference to
Exhibit 4.3 to current report on Form 8-K filed on May
10, 1995.
(10.88) Discount Rate Warrant Certificate for
1,500,000 Warrants dated March 31, 1995 issued to Walsh
Greenwood by the Company. Incorporated by reference to
Exhibit 10.1 to current report on Form 8-K filed on May
10, 1995.
(10.89) Agreement among Signal Apparel Company,
Inc. and certain shareholders of Signal Apparel
Company, Inc. Incorporated by reference to Exhibit 10.
1 to current report on Form 8-K filed on May 10, 1995.
(10.90) Tennessee Deed of Trust and Security
Agreement dated March 31, 1995 between the Company and
Walsh Greenwood. Incorporated by reference to Exhibit
10.2 to current report on Form 8-K filed on May 10,
1995.
(10.91) Deed to Secure Debt and Security Agreement
dated March 31, 1995 between the Company and Walsh
Greenwood. Incorporated by reference to Exhibit 10.3
to current report on Form 8-K filed on May 10, 1995.
(10.92) Real Estate Mortgage, Security Agreement,
Assignment of Lease and Rents and Fixture filing dated
March 31, 1995 between The Shirt Shed and Walsh
Greenwood. Incorporated by reference to Exhibit 10.4
to current report on Form 8-K filed on May 10, 1995.
(10.93) Severance Agreement dated November 5, 1995
with Marvin Winkler.
(10.94) Employment Agreement with Bruce Krebs
dated November 27, 1995.
(10.95) Employment Agreement with Gary LaBelle
dated November 30, 1995.
(10.96) First Amendment dated August 10, 1995, to
Credit Agreement dated March 31, 1995, between the
Company and Walsh Greenwood.
(10.97) Replacement Promissory Note in the face
amount of $20,000,000 dated August 10, 1995, between
the Company and Walsh Greenwood.
(10.98) Fixed Rate Warrant Certificate for 500,000
Warrants dated August 10, 1995, issued to Walsh
Greenwood by the Company.
(10.99) Discount Rate Warrant Certificate for
500,000 Warrants dated August 10, 1995, issued to Walsh
Greenwood by the Company.
(10.100) First Amendment dated August 10, 1995, to
Tennessee Deed of Trust and Security Agreement dated
March 31, 1995, between the Company and Walsh
Greenwood.
(10.101) First Amendment dated August 10, 1995, to
Secured Debt and Security Agreement dated March 31,
1995, between the Company and Walsh Greenwood.
(10.102) First Amendment dated August 10, 1995, to
Real Estate Mortgage, Security Agreement, Assignment of
Lease and Rents and Fixture Filing dated March 31,
1995, between The Shirt Shed and Walsh Greenwood.
(10.103) Letter Agreement dated March 27, 1996
waiving certain defaults under the Walsh Greenwood
Credit Agreement.
(21) List of Subsidiaries
(23) Consent of Arthur Andersen LLP, Independent
Public Accountants
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/Bruce Krebs
------------------------------
Bruce Krebs
President and
Chief Operating Officer
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below or on counterparts
thereof by the following persons on behalf of the registrant in
the capacities and on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/Bruce Krebs President and Chief March 29, 1996
- --------------------- Operating Officer --------------
Bruce Krebs
/s/William H. Watts Executive Vice President March 29, 1996
- --------------------- and Chief Financial --------------
William H. Watts Officer
/s/James V. Elkins Controller March 29, 1996
- --------------------- --------------
James V. Elkins
/s/Jacob I. Feigenbaum Director March 29, 1996
- --------------------- --------------
Jacob I. Feigenbaum
/s/Paul R. Greenwood Director March 29, 1996
- --------------------- --------------
Paul R. Greenwood
/s/Gregory Murphy Director March 29, 1996
- --------------------- --------------
Gregory Murphy
/s/Leon Ruchlamer Director March 29, 1996
- --------------------- --------------
Leon Ruchlamer
/s/Stephen Walsh Director March 29, 1996
- --------------------- --------------
Stephen Walsh
EXHIBIT INDEX
Exhibit No.
per Item 601
of Reg. S-K Description of Exhibit
(3.1) Copy of Restated Articles of
Incorporation as amended November
15, 1995
(10.48) Letter Amendment dated November 7,
1995 amending the Factoring
Agreements dated as of May 23, 1991
by and between BNY Financial Corp.
and the Company, dated July 25,
1991 by and between BNY Financial
Corp. and Shirt Shed and dated
November 22, 1994 by and between
BNY Financial Corp. and AMW waiving
compliance with certain provisions
thereof
(10.49) Letter Amendment dated March 14,
1996 amending the Factoring
Agreements dated as of May 23, 1991
by and between BNY Financial Corp.
and the Company, and dated July 25,
1991 by and between BNY Financial
Corp. and Shirt Shed waiving
compliance with certain provisions
thereof
(10.93) Severance Agreement dated November
5, 1995 with Marvin Winkler
(10.94) Employment Agreement with Bruce
Krebs dated November 27, 1995
(10.95) Employment Agreement with Gary
LaBelle dated November 30, 1995
(10.96) First Amendment dated August 10,
1995, to Credit Agreement dated
March 31, 1995, between the Company
and Walsh Greenwood
(10.97) Replacement Promissory Note in the
face amount of $20,000,000 dated
August 10, 1995, between the
Company and Walsh Greenwood
(10.98) Fixed Rate Warrant Certificate for
500,000 Warrants dated August 10,
1995, issued to Walsh Greenwood by
the Company
(10.99) Discount Rate Warrant Certificate
for 500,000 Warrants dated August
10, 1995, issued to Walsh Greenwood
by the Company
(10.100) First Amendment dated August 10,
1995, to Tennessee Deed of Trust
and Security Agreement dated March
31, 1995, between the Company and
Walsh Greenwood
(10.101) First Amendment dated August 10,
1995, to Deed to Secure Debt and
Security Agreement dated March 31,
1995, between the Company and Walsh
Greenwood
(10.102) First Amendment dated August 10,
1995, to Real Estate Mortgage,
Security Agreement, Assignment of
Lease and Rents and Fixture Filing
dated March 31, 1995, between Shirt
Shed and Walsh Greenwood
(10.103) Letter Agreement dated March 27,
1996 waiving certain defaults under
the Walsh Greenwood Credit
Agreement
(21) List of Subsidiaries
(23) Consent of Arthur Andersen LLP,
Independent Public Accountants
(27) Financial Data Schedule
Provided by: JOSEPH H. HOGSETT
SECRETARY OF STATE OF INDIANA
CORPORATIONS DIVISION
302 W. WASHINGTON ST. RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
Indiana Code 23-1-38-1 et seg.
FILING FEE $30.00
(SEAL OF THE STATE OF INDIANA)
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333(R5/9-91)
State Board of Accounts Approved 1988
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and one copy to address in
upper right corner of this form.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
SIGNAL APPAREL COMPANY, INC.
The undersigned officers of:
SIGNAL APPAREL COMPANY, INC.
(hereinafter referred to as the "Corporation") existing pursuant
to the provisions of:
(Indicate appropriate act)
xx Indiana Business Corporation Law
---
Indiana Professional Corporation Act of 1983
---
as amended (hereinafter referred to as the "Act"), desiring to
give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the
following facts:
ARTICLE I Amendment(s)
SECTION 1 The date of incorporation of the corporation is:
April 24, 1891
---------------
SECTION 2 The name of the corporation following this
amendment to the Articles of Incorporation is:
Signal Apparel Company, Inc.
-----------------------------
SECTION 3
The exact text of Article(s) Fourth of the Articles of
Incorporation is now as follows:
The total number of shares of capital stock of all
classifications which the Corporation shall have the authority to
issue is Forty-One Million Six Hundred Thousand (41,600,000)
shares, divided into two classes, as follows: Forty Million
(40,000,000) shares of Common Stock having a par value of $.01
per share, One Million Six Hundred Thousand (1,600,000) shares of
Preferred Stock having no par value.
SECTION 4 Date of each amendment's adoption:
May 11, 1995
ARTICLE II Manner of Adoption and Vote
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a
resolution proposing to amend the terms and provisions of
Article(s) Fourth of the Articles of Incorporation and directing
a meeting of the Shareholders, to be held on May 11, 1995,
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on
February 24, 1995, at which a quorum of such Board was
present.
(b) Written consent executed on ___________ 19, ____, and
signed by all members of the Board of Directors.
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in
respect of the Articles of Amendment adopted the proposed
amendment. The amendment was adopted by: (Select appropraite
paragraph)
(a) Vote of such Shareholders during the meeting called by
the Board of Directors. The result of such vote is as
follows:
TOTAL
SHAREHOLDERS ENTITLED TO VOTE: 10,377,826
SHAREHOLDERS VOTED IN FAVOR: 9,758,320
SHAREHOLDERS VOTED AGAINST: 74,292
(b) Written consent executed on _________, 19____, and
signed by all such Shareholders.
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and
the vote by which they were adopted constitute full legal
compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
I hereby verify subject to the penalties of perjury that the
statements contained are true this 26 day of July, 1995.
Current Officer's Signature Officer's Name Printed
/s/Robert J. Powell Robert J. Powell
Officer's Title
Secretary
RESTATED ARTICLES OF INCORPORATION
OF
SIGNAL APPAREL COMPANY, INC.
(formerly Wayne-Gossard Corporation)
FIRST: The name of the Corporation is Signal Apparel
Company, Inc.
SECOND: The address of the registered office of the
Corporation in the State of Indiana is 1 North Capitol Avenue in
Indianapolis, Indiana 46204. The name of the registered agent
of the Corporation at such address is The Corporation Trust
Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may now or
hereafter be organized under the Business Corporation Law of the
State of Indiana.
FOURTH: The total number of shares of capital stock of all
classifications which the Corporation shall have authority to
issue is Twenty-One Million Six Hundred Thousand (21,600,000)
shares, divided into two classes, as follows: Twenty Million
(20,000,000) shares of Common Stock having a par value of $.01
per share, One Million Six Hundred Thousand (1,600,000) shares of
Preferred Stock having no par value.
A. Authorized and unissued shares of the Common Stock may
be issued from time to time as additional shares of the Common
Stock outstanding at the date of these Restated Articles or, as
provided in Division B, shares of Common Stock or Preferred Stock
may be issued in one or more additional series, all for such
consideration as the Board of Directors may determine. All
shares of any one series shall be of equal rank and identical in
all respects.
B. Authority is hereby expressly granted to the Board of
Directors by the affirmative vote of 75% of the Directors from
time to time to create additional series of Common Stock and
Preferred Stock and, in connection with the creation of each such
series, to fix by the resolution or resolutions providing for the
issuance of shares thereof, the number of shares of such series,
and the designations, powers, preferences and rights and the
qualifications, limitations or restrictions thereof.
FIFTH: The business and affairs of the Corporation shall be
managed by the Board of Directors consisting of not less than 5
nor more than 10 persons. The exact number of Directors within
the limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of
Directors. The Directors need not be elected by ballot unless
required by the Bylaws of the Corporation.
Subject to the rights of the holders of any series of
Preferred Stock then outstanding to elect directors pursuant to
any resolution adopted by the Board of Directors pursuant to the
authority granted thereby, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or
other cause shall be filled by a majority vote of the directors
then in office, and any director so chosen shall hold office for
a term expiring at the next annual meeting of stockholders. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Meetings of the Board of Directors may be conducted through
the use of any means of communication by which all the Directors
participating may simultaneously hear each other during the
meeting, including telephone conference calls. A director
participating in a meeting by such means is deemed to be present
in person at the meeting.
Whenever these Restated Articles require the affirmative
vote 75% of the members of the Board of Directors to take any
action, if 75% of the number of members of the Board of Directors
is not a whole number, then the number of votes required shall be
determined in accordance with the following sentence. If 75% of
the number of members of the Board of Directors is greater than a
whole number but less than such whole number plus .5, then the
number of votes required shall be such whole number. If 75% of
the number of members of the Board of Directors is greater than
or equal to .5 plus such whole number, then the number of
affirmative votes required shall be the next higher whole number.
SIXTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Indiana, the Board of
Directors is expressly authorized to adopt, amend or repeal the
Bylaws of the Corporation by majority vote.
SEVENTH: Special Meetings of stockholders of the
Corporation may be called upon not less than 10 nor more than 60
days' written notice by the Board of Directors pursuant to a
resolution approved by 75% of the entire Board of Directors.
EIGHTH: Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is
made a party or threatened to be made a party to or was or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer, of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Indiana Business Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification
conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition: provided, however, that, if the Indiana Business
Corporation Law requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Article
or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim, and if successful in whole or in
part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible
under the Indiana Business Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the Indiana Business Corporation Law, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to
indemnification and the right to the payment of expenses incurred
in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any
statute, provision of the Restated Articles, Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under the Indiana Business Corporation
Law.
Provided by: JOSEPH H. HOGSETT
SECRETARY OF STATE OF INDIANA
CORPORATIONS DIVISION
302 W. WASHINGTON ST. RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
Indiana Code 23-1-38-1 et seg.
FILING FEE $30.00
(SEAL OF THE STATE OF INDIANA)
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333(R5/9-91)
State Board of Accounts Approved 1988
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and one copy to address in
upper right corner of this form.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
SIGNAL APPAREL COMPANY, INC.
The undersigned officers of:
SIGNAL APPAREL COMPANY, INC.
(hereinafter referred to as the "Corporation") existing pursuant
to the provisions of:
(Indicate appropriate act)
xx Indiana Business Corporation Law
---
Indiana Professional Corporation Act of 1983
---
as amended (hereinafter referred to as the "Act"), desiring to
give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the
following facts:
ARTICLE I Amendment(s)
SECTION 1 The date of incorporation of the corporation is:
April 24, 1891
---------------
SECTION 2 The name of the corporation following this
amendment to the Articles of Incorporation is:
Signal Apparel Company, Inc.
-----------------------------
SECTION 3
The exact text of Article(s) Annex 1 and Annex 2 of the Articles
of
Incorporation is now as follows:
See "Exhibit 1" and "Exhibit 2" attached hereto.
SECTION 4 Date of each amendment's adoption:
August 13, 1993 (for both)
ARTICLE II Manner of Adoption and Vote
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a
resolution proposing to amend the terms and provisions of
Article(s) Annex 1 and Annex 2 of the Articles of Incorporation
and directing a meeting of the Shareholders, to be held on
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on
__________, 19____, at which a quorum of such Board
was present.
(b) Written consent executed on August 13, 1993, and signed
by all members of the Board of Directors.
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in
respect of the Articles of Amendment adopted the proposed
amendment. The amendment was adopted by: (Select appropraite
paragraph)
(a) Vote of such Shareholders during the meeting called by
the Board of Directors. The result of such vote is as
follows:
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
TOTAL
SHAREHOLDERS ENTITLED TO VOTE:
SHAREHOLDERS VOTED IN FAVOR:
SHAREHOLDERS VOTED AGAINST:
(b) Written consent executed on _________, 19____, and
signed by all such Shareholders.
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and
the vote by which they were adopted constitute full legal
compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
I hereby verify subject to the penalties of perjury that the
statements contained are true this 13 day of August, 1993.
Current Officer's Signature Officer's Name Printed
/s/Robert J. Powell Robert J. Powell
Officer's Title
Secretary
EXHIBIT 1
- ---------
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF THE
SERIES A PREFERRED STOCK
OF
SIGNAL APPAREL COMPANY, INC.
_____________________________
[Pursuant to Section 23-1-25-2 of the
Business Corporation Law of the State of Indiana]
___________________________
RESOLVED that, pursuant to authority conferred upon the
Board of Directors by the Restated Articles of Incorporation, the
Board of Directors hereby provides for the issuance of a series
of Non-Convertible Preferred Stock of the Corporation to consist
of 400 shares, and hereby fixes the voting powers, designations,
references and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof,
of the shares of such series, in addition to those set forth in
the Certificate of Incorporation, as follows:
SECTION 1
DESIGNATION AND RANK
1.1. Designation. This certificate authorizes a
single Series of Non-Convertible Preferred Stock designated
"Series A Preferred Stock" (hereinafter called the "Series A
Preferred"). The number of authorized shares constituting the
Series A Preferred is 400. Shares of the Series A Preferred
shall be issued at a stated value of $100,000.00 per share (the
"Stated Value"). The number of authorized shares of the Series A
Preferred shall not be increased.
1.2. Rank. With respect to the payment of dividends
and other distributions with respect to the capital stock of the
Corporation, including the distribution of the assets of the
Corporation upon liquidation, the Series A Preferred shall be
senior to all other series and classes of preferred stock of the
Corporation, whether such series and classes are now existing or
are created in the future, and shall be senior to all other
series and classes of capital stock of the Corporation, whether
such series and classes are now existing or are created in the
future.
SECTION 2
DIVIDEND RIGHTS
2.1. Dividend Rate. From the date of issuance,
dividends shall accrue on each share of Series A Preferred at an
annual rate equal to fifteen percent (15%) multiplied by the
Stated Value, compounded quarterly. The annual rate at which
such dividends shall accrue is hereinafter referred to as the
"Dividend Rate."
2.2. Accrual and Payment. Dividends on each share of
Series A Preferred shall be payable in cash, shall be cumulative
and compounded quarterly and shall accrue from the date of
original issuance of such share, whether or not declared by the
Board of Directors or a committee thereof, and except as
otherwise provided herein, dividends on the Series A Preferred
shall be payable, when and as declared by the Board of Directors
or a committee thereof, on December 31, March 31, June 30 and
September 30 (or, if such day is not a Business Day, on the next
Business Day thereafter) of each year, commencing on September
30, 1993 (each such date being hereinafter referred to as a
"Dividend Payment Date"), to holders of record as they appear on
the books of the Corporation on such record date, not exceeding
60 days preceding the relevant Dividend Payment Date, as may be
determined by the Board of Directors or a committee thereof in
advance of the payment of the particular dividend. Dividends
shall be paid on each Dividend Payment Date with respect to the
quarterly period ending on such Dividend Payment Date. Dividends
in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of
record on such date, not exceeding 60 days preceding the payment
date thereof, as may be fixed by the Board of Directors or a
committee thereof. Dividends payable on the Series A Preferred
for any period less than a full quarterly period shall be
computed at the Dividend Rate per annum based on a 360-day year
of twelve 30-day months. "Business Day" shall mean any day
excluding Saturday, Sunday and any day which shall be, in the
State of New York, a legal holiday or a day on which banking
institutions are authorized by law to close. In the event that
the Corporation fails to declare and pay full quarterly dividends
on any given Dividend Payment Date, such dividends shall be
compounded as follows: additional dividends, in an amount equal
to the accrued and unpaid dividends on such share of Series A
Preferred multiplied by the Dividend Rate, shall accrue with
respect to each share of Series A Preferred until all accrued and
unpaid dividends shall have been paid. Any reference herein to
accrued dividends shall include the additional dividends payable
with respect to the Series A Preferred pursuant to the preceding
sentence.
2.3. Dividends or Distributions to Junior Stock. So
long as any shares of Series A Preferred are outstanding, no
dividend or distribution shall be declared or paid or set aside
for payment on the common stock of the Corporation or on any
other stock of the Corporation ranking junior to the Series A
Preferred as to dividends, nor shall any common stock or any
other stock of the Corporation ranking junior to the Series A
Preferred be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any such stock)
by the Corporation (except by conversion into or exchange for
shares of common stock or other stock of the Corporation ranking
junior to the Series A Preferred as to dividends) unless, in each
case, full cumulative dividends on all outstanding shares of the
Series A Preferred shall have been declared and paid through and
including the most recent Dividend Payment Date.
SECTION 3
LIQUIDATION RIGHTS
3.1. Preferences of Series A Shares on Winding-up of
the Corporation. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up of affairs of the
Corporation or other similar event, before any distribution is
made upon any class of stock of the Corporation ranking junior to
the Series A Preferred, the holders of shares of Series A
Preferred shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its shareholders, an
amount per share equal to the Stated Value, plus all accrued and
unpaid dividends (the Stated Value plus such accrued and unpaid
dividends constituting the "Liquidated Value"). Neither the
consolidation nor merger of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all
or substantially all of the assets of the Corporation, shall
itself be deemed to be a liquidation, dissolution or winding-up
of the affairs of the Corporation within the meaning of any of
the provisions of this Section 3.
3.2. Pro Rata Distribution. If, upon distribution of
the Corporation's assets in liquidation, dissolution, winding-up
or other similar event, the net assets of the corporation to be
distributed among the holders of shares of Series A Preferred and
any other class or series of stock of the Corporation ranking on
a parity with the Series A Preferred as to distributions upon
liquidation are insufficient to permit payment in full to such
holders of the preferential amounts to which they are entitled,
then the entire net assets of the Corporation shall be
distributed among the holders of shares of Series A Preferred and
such other class or series of stock ratably in proportion to the
full amounts to which they would otherwise be respectively
entitled and such distributions may be made in cash or in
property taken at its fair value (as determined in good faith by
the Board of Directors), or both, at the election of the Board of
Directors.
3.3. Priority. All of the preferential amounts to be
paid to the holders of the Series A Preferred and the holders of
any other class or series of stock of the Corporation ranking on
a parity with the Series A Preferred as to distributions upon
liquidation shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of
the common stock of the Corporation and any other class or series
of stock of the Corporation which is junior to the Series A
Preferred as to distributions upon liquidation.
SECTION 4
VOTING RIGHTS
4.1. General. The holders of shares of Series A
Preferred shall have only such voting rights as are expressly set
forth herein or otherwise provided by law.
4.2. Consent for Certain Actions. So long as any of
the shares of the Series A Preferred are outstanding, except
where the vote or written consent of the holders of a greater
number of shares of the Corporation is required by law or by the
Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent of the holders of
two-thirds (2/3) of the outstanding shares of Series A Preferred,
given in person or by proxy, either in writing or at a special
meeting called for that purpose, neither the Corporation nor any
of the Corporation's direct or indirect subsidiaries shall take
any of the following actions:
(a) the amendment or repeal of any provision of, or
the addition of any provision to, the Restated Articles of
Incorporation or By-Laws of the Corporation if such action
would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
the Series A Preferred;
(b) the reclassification of any common stock into
shares having any preference or priority as to dividends or
the distribution of assets upon liquidation superior to or
on a parity with any such preference or priority of the
Series A Preferred;
(c) the application of any of its assets (in excess of
one percent (1%) of its net worth on an annual basis) to the
redemption, retirement, purchase or other acquisition
directly or indirectly, through subsidiaries or otherwise,
of any shares of common stock, except for purchases of the
Corporation's Common Stock on the open market or purchases
from employees of the Corporation upon termination of
employment or pursuant to any rights of first refusal held
by the Corporation; or
(d) the creation, authorization or issuance, directly
or indirectly, of any equity security having any preference
or priority as to dividends or the distribution of assets
upon liquidation superior to any such preference or priority
of the Series A Preferred.
The holders of the Series A Preferred shall be entitled to notice
of any meeting of the stockholders of the Corporation.
SECTION 5
MISCELLANEOUS
5.1. Heading of Subdivisions. The headings of the
various Sections and subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of
the provisions hereof.
5.2. Severability of Provisions. If any right,
preference or limitation of the Series A Preferred set forth in
this resolution (as such resolution may be amended from time to
time) is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation
unless so expressed herein.
Exhibit 2
- ---------
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF THE
SERIES B PREFERRED STOCK
OF
SIGNAL APPAREL COMPANY, INC.
________________________________
[Pursuant to Section 23-1-25-2 of the
Business Corporation Law of the State of Indiana]
________________________________
RESOLVED that, pursuant to authority conferred upon the
Board of Directors by the Restated Articles of Incorporation, the
Board of Directors hereby provides for the issuance of a series
of Junior Non-Convertible Preferred Stock of the Corporation to
consist of 250 shares, and hereby fixes the voting powers,
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such class, as follows:
SECTION 1
DESIGNATION AND RANK
1.1. Designation. This certificate authorizes a
single Series of Non-Convertible Preferred Stock designated
"Series B Preferred Stock" (hereinafter called the "Series B
Preferred"). The number of authorized shares constituting the
Series B Preferred is 250. Shares of the Series B Preferred
shall be issued at a stated value of $100,000.00 per share (the
"Stated Value"). The number of authorized shares of the Series B
Preferred shall not be increased.
1.2. Rank. With respect to the payment of dividends
and other distributions with respect to the capital stock of the
Corporation, including the distribution of the assets of the
Corporation upon liquidation, the Series B Preferred shall be
junior to the Company's Series A Preferred Stock, but senior to
all other series and classes of preferred stock of the
Corporation, whether such series and classes are now existing or
are created in the future, and shall be senior to all other
series and classes of capital stock of the Corporation, whether
such series and classes are now existing or are created in the
future.
SECTION 2
DIVIDEND RIGHTS
2.1. Dividend Rate. From the date of issuance
dividends shall accrue on each share of Series B Preferred at an
annual rate equal to twelve and one-half percent (12.5%)
multiplied by the Stated Value, compounded quarterly. The annual
rate at which such dividends shall accrue is hereinafter referred
to as the "Dividend Rate."
2.2. Accrual and Payment. Dividends on each share of
Series B Preferred shall be payable in cash, shall be cumulative,
compounded quarterly and shall accrue from the date of original
issuance of such share, whether or not declared by the Board of
Directors or a committee thereof, and except as otherwise
provided herein, dividends on the Series B Preferred shall be
payable, when and as declared by the Board of Directors or a
committee thereof, on December 31, March 31, June 30 and
September 30 (or, if such day is not a Business Day, on the next
Business Day thereafter) of each year, commencing on September
30, 1993 (each such date being hereinafter referred to as a
"Dividend Payment Date"), to holders of record as they appear on
the books of the Corporation on such record date, not exceeding
60 days preceding the relevant Dividend Payment Date, as may be
determined by the Board of Directors or a committee thereof in
advance of the payment of the particular dividend. Dividends
shall be paid on each Dividend Payment Date with respect to the
quarterly period ending on such Dividend Payment Date. Dividends
in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of
record on such date, not exceeding 60 days preceding the payment
date thereof, as may be fixed by the Board of Directors or a
committee thereof. Dividends payable on the Series B Preferred
for any period less than a full quarterly period shall be
computed at the Dividend Rate per annum based on a 360-day year
of twelve 30-day months. "Business Day" shall mean any day
excluding Saturday, Sunday and any day which shall be, in the
State of New York, a legal holiday or a day on which banking
institutions are authorized by law to close. In the event that
the Corporation fails to declare and pay full quarterly dividends
on any given Dividend Payment Date, such dividends shall be
compounded quarterly, as follows: additional dividends, in an
amount equal to the accrued and unpaid dividends on such share of
Series B Preferred multiplied by the Dividend Rate, shall accrue
with respect to each share of Series B Preferred until all
accrued and unpaid dividends shall have been paid. Any reference
herein to accrued dividends shall include the additional
dividends payable with respect to the Series B Preferred pursuant
to the preceding sentence.
2.3. Dividends or Distributions to Junior Stock. So
long as any shares of Series B Preferred are outstanding, no
dividend or distribution shall be declared or paid or set aside
for payment on the common stock of the Corporation or on any
other stock of the Corporation ranking junior to the Series B
Preferred as to dividends, nor shall any common stock or any
other stock of the Corporation ranking junior to the Series B
Preferred be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any such stock)
by the Corporation (except by conversion into or exchange for
shares of common stock or other stock of the Corporation ranking
junior to the Series B Preferred as to dividends) unless, in each
case, full cumulative dividends on all outstanding shares of the
Series B Preferred shall have been declared and paid through and
including the most recent Dividend Payment Date.
SECTION 3
LIQUIDATION RIGHTS
3.1. Preferences of Series B Shares on Winding-up of
the Corporation. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up of affairs of the
Corporation or other similar event, before any distribution is
made upon any class of stock of the Corporation ranking junior to
the Series B Preferred, the holders of shares of Series B
Preferred shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its shareholders, an
amount per share equal to the Stated Value, plus all accrued and
unpaid dividends (the Stated Value plus such accrued and unpaid
dividends constituting the "Liquidation Value"). Neither the
consolidation nor merger of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all
or substantially all of the assets of the Corporation, shall
itself be deemed to be a liquidation, dissolution or winding-up
of the affairs of the Corporation within the meaning of any of
the provisions of this Section 3.
3.2. Pro Rata Distribution. If, upon distribution of
the Corporation's assets in liquidation, dissolution, winding-up
or other similar event, the net assets of the Corporation to be
distributed among the holders of shares of Series B Preferred and
any other class or series of stock of the Corporation ranking on
a parity with the Series B Preferred as to distributions upon
liquidation are insufficient to permit payment in full to such
holders of the preferential amounts to which they are entitled,
then the entire net assets of the Corporation remaining after all
required distributions have been made to holders of shares of
Series A Preferred Stock and of any other class or series of
Stock of the Corporation ranking senior to the Series B Preferred
Stock shall be distributed among the holders of shares of Series
B Preferred and any other class or series of stock ranking on a
parity with the Series B Preferred Stock ratably, in proportion
to the full amounts to which they would otherwise be respectively
entitled and such distributions may be made in cash or in
property taken at its fair value (as determined in good faith by
the Board of Directors), or both, at the election of the Board of
Directors.
3.3. Priority. All of the preferential amounts to be
paid to the holders of the Series B Preferred and the holders of
any other class or series of stock of the Corporation ranking on
a parity with the Series B Preferred as to distributions upon
liquidation shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of
the common stock of the Corporation and any other class or series
of stock of the Corporation which is junior to the Series B
Preferred as to distributions upon liquidation.
SECTION 4
VOTING RIGHTS
4.1. General. The holders of shares of Series B
Preferred shall have only such voting rights as are expressly set
forth herein or otherwise provided by law.
4.2. Consent for Certain Actions. So long as any of
the shares of the Series B Preferred are outstanding, except
where the vote or written consent of the holders of a greater
number of shares of the Corporation is required by law or by the
Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent of the holders of
two-thirds (2/3) of the outstanding shares of Series B Preferred,
given in person or by proxy, either in writing or at a special
meeting called for that purpose, neither the Corporation nor any
of the Corporation's direct or indirect subsidiaries shall take
any of the following actions:
(a) the amendment or repeal of any provision of, or
the addition of any provision to, the Restated Articles of
Incorporation or By-Laws of the Corporation if such action
would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
the Series B Preferred;
(b) the reclassification of any common stock into
shares having any preference or priority as to dividends or
the distribution of assets upon liquidation superior to or
on a parity with any such preference or priority of the
Series B Preferred;
(c) the application of any of its assets (in excess of
one percent (1%) of its net worth on an annual basis) to the
redemption, retirement, purchase or other acquisition
directly or indirectly, through subsidiaries or otherwise,
of any shares of common stock, except for purchase of the
Corporation's Common Stock on the open market or purchases
from employees of the Corporation upon termination of
employment or pursuant to any rights of first refusal held
by the Corporation; or
(d) the creation, authorization of issuance, directly
or indirectly, of any equity security having any preference
or priority as to dividends or the distribution of assets
upon liquidation superior to any such preference or priority
of the Series B Preferred, other than any such creation,
authorization or issuance of shares of the Company's Series
A Preferred.
The holders of Series B Preferred shall be entitled to notice of
any meeting of the stockholders of the Corporation.
SECTION 5
MISCELLANEOUS
5.1. Headings of Subdivisions. The headings of the
various Sections and subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of
the provisions hereof.
5.2. Severability of Provisions. If any right,
preference or limitation of the Series B Preferred set forth in
this resolution (as such resolution may be amended from time to
time) is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation
unless so expressed herein.
INDIANA SECRETARY OF STATE
CORPORATIONS DIVISION
DATE: 12/20/93 TIME: 10:14 RECEIPT NO: 0405977
PAYMENT: CHECK CHECK REF#: 44525 AMT PAID: $30.00
COMMENT:
DESCRIPTION: 27 Amend Art of Inc (Pro EFF DATE: 12/17/93
PAYEE NAME AND ADDRESS (XXXXX)
Witt, Gaither & Whitaker
American Natl. Bank Bldg.
Chattanooga, TN
USER ID: BB2 NAME: s/s (signature illegible)
----------------------------
Provided by: JOSEPH H. HOGSETT
SECRETARY OF STATE OF INDIANA
CORPORATIONS DIVISION
302 W. WASHINGTON ST. RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
Indiana Code 23-1-38-1 et seg.
FILING FEE $30.00
(SEAL OF THE STATE OF INDIANA)
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333(R5/9-91)
State Board of Accounts Approved 1988
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and one copy to address in
upper right corner of this form.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
SIGNAL APPAREL COMPANY, INC.
The undersigned officers of:
SIGNAL APPAREL COMPANY, INC.
(hereinafter referred to as the "Corporation") existing pursuant
to the provisions of:
(Indicate appropriate act)
xx Indiana Business Corporation Law
---
Indiana Professional Corporation Act of 1983
---
as amended (hereinafter referred to as the "Act"), desiring to
give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the
following facts:
ARTICLE I Amendment(s)
SECTION 1 The date of incorporation of the corporation is:
April 24, 1891
---------------
SECTION 2 The name of the corporation following this
amendment to the Articles of Incorporation is:
Signal Apparel Company, Inc.
-----------------------------
SECTION 3
The exact text of Article(s) Annex 3 of the Articles of
Incorporation is now as follows:
See "Exhibit 1" attached hereto.
SECTION 4 Date of each amendment's adoption:
June 21, 1994
ARTICLE II Manner of Adoption and Vote
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a
resolution proposing to amend the terms and provisions of
Article(s) Annex 3 of the Articles of Incorporation and directing
a meeting of the Shareholders, to be held on
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on
__________, 19____, at which a quorum of such Board
was present.
(b) Written consent executed on June 21, 1994, and signed
by all members of the Board of Directors.
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in
respect of the Articles of Amendment adopted the proposed
amendment. The amendment was adopted by: (Select appropraite
paragraph)
(a) Vote of such Shareholders during the meeting called by
the Board of Directors. The result of such vote is as
follows:
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
TOTAL
SHAREHOLDERS ENTITLED TO VOTE:
SHAREHOLDERS VOTED IN FAVOR:
SHAREHOLDERS VOTED AGAINST:
(b) Written consent executed on _________, 19____, and
signed by all such Shareholders.
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and
the vote by which they were adopted constitute full legal
compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
I hereby verify subject to the penalties of perjury that the
statements contained are true this 22 day of June, 1994.
Current Officer's Signature Officer's Name Printed
/s/Glenn M. Grandin Glenn M. Grandin
Officer's Title
Senior V.P.
Exhibit 1
- ---------
ANNEX 3
VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF.
OF THE
SERIES C PREFERRED STOCK
OF
SIGNAL APPAREL COMPANY, INC.
SECTION 1
DESIGNATION AND RANK
1.1. Designation. The number of authorized shares
constituting the "Series C Preferred Stock" (hereinafter called
the "Series C Preferred") is 1,000. Shares of the Series C
Preferred shall be issued at a stated value of $100,000.00 per
share (the "Stated Value"). The number of authorized shares of
the Series C Preferred may be increased by the affirmative vote
of 75% of the Board of Directors.
1.2. Rank. With respect to the payment of dividends
and other distributions with respect to the capital stock of the
Corporation, including the distribution of the assets of the
Corporation upon liquidation, the Series C Preferred shall be
junior to the Corporation's Series A Preferred Stock and the
Corporation's Series B Preferred Stock, but senior to all other
series and classes of preferred stock of the Corporation, whether
such series and classes are now existing or are created in the
future, and shall be senior to all other series and classes of
capital stock of the Corporation, whether such series and classes
are now existing or are created in the future.
SECTION 2
DIVIDEND RIGHTS
2.1. Dividend Rate. From the date of issuance
dividends shall accrue on each share of Series C Preferred at an
annual rate equal to twelve and one-half percent (12.5%)
multiplied by the Stated Value, compounded quarterly. The annual
rate at which such dividends shall accrue is hereinafter referred
to as the "Dividend Rate."
2.2. Accrual and Payment. Dividends on each share of
Series C Preferred shall be payable in cash, shall be cumulative,
compounded quarterly and shall accrue from the date of original
issuance of such share, whether or not declared by the Board of
Directors or a committee thereof, and except as otherwise
provided herein, dividends on the Series C Preferred shall be
payable, when and as declared by the Board of Directors or a
committee thereof, on December 31, March 31, June 30 and
September 30 (or, if such day is not a Business Day, on the next
Business Day thereafter) of each year, commencing on June 30,
1994 (each such date being hereinafter referred to as a "Dividend
Payment Date"), to holders of record as they appear on the books
of the Corporation on such record date, not exceeding 60 days
preceding the relevant Dividend Payment Date, as may be
determined by the Board of Directors or a committee thereof in
advance of the payment of the particular dividend. Dividends
shall be paid on each Dividend Payment Date with respect to the
quarterly period ending on such Dividend Payment Date. Dividends
in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of
record on such date, not exceeding 60 days preceding the payment
date thereof, as may be fixed by the Board of Directors or a
committee thereof. Dividends payable on the Series C Preferred
for any period less than a full quarterly period shall be
computed at the Dividend Rate per annum based on a 360-day year
of twelve 30-day months. "Business Day" shall mean any day
excluding Saturday, Sunday and any day which shall be, in the
State of New York, a legal holiday or a day on which banking
institutions are authorized by law to close. In the event that
the Corporation fails to declare and pay full quarterly dividends
on any given Dividend Payment Date, such dividends shall be
compounded quarterly, as follows: additional dividends, in an
amount equal to the accrued and unpaid dividends on such share of
Series C Preferred multiplied by the Dividend Rate, shall accrue
with respect to each share of Series C Preferred until all
accrued and unpaid dividends shall have been paid. Any reference
herein to accrued dividends shall include the additional
dividends payable with respect to the Series C Preferred pursuant
to the preceding sentence.
2.3. Dividends or Distributions to Junior Stock. So
long as any shares of Series C Preferred are outstanding, no
dividend or distribution shall be declared or paid or set aside
for payment on the common stock of the Corporation or on any
other stock of the Corporation ranking junior to the Series C
Preferred as to dividends, nor shall any Common Stock or any
other stock of the Corporation ranking junior to the Series C
Preferred be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any such stock)
by the Corporation (except by conversion into or exchange for
shares of common stock or other stock of the Corporation ranking
junior to the Series C Preferred as to dividends) unless, in each
case, full cumulative dividends on all outstanding shares of the
Series C Preferred shall have been declared and paid through and
including the most recent Dividend Payment Date.
SECTION 3
LIQUIDATION RIGHTS
3.1. Preferences of Series C Shares on Winding-up of
the Corporation. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up of affairs of the
Corporation or other similar event, before any distribution is
made upon any class of stock of the Corporation ranking junior to
the Series C Preferred, the holders of shares of Series C
Preferred shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its shareholders, an
amount per share equal to the Stated Value, plus all accrued and
unpaid dividends (the Stated Value plus such accrued and unpaid
dividends constituting the "Liquidation Value"). Neither the
consolidation nor merger of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all
or substantially all of the assets of the Corporation, shall
itself be deemed to be a liquidation, dissolution or winding-up
of the affairs of the Corporation within the meaning of any of
the provisions of this Section 3.
3.2. Pro Rata Distribution. If, upon distribution of
the Corporation's assets in liquidation, dissolution, winding-up
or other similar event, the net assets of the Corporation to be
distributed among the holders of shares of Series C Preferred and
any other class or series of stock of the Corporation ranking on
a parity with the Series C Preferred as to distributions upon
liquidation are insufficient to permit payment in full to such
holders of the preferential amounts to which they are entitled,
then the entire net assets of the Corporation remaining after all
required distributions have been made to holders of shares of
Series A Preferred Stock, Series B Preferred Stock and of any
other class or series of Stock of the Corporation ranking senior
to the Series C Preferred shall be distributed among the holders
of shares of Series C Preferred and any other class or series of
stock ranking on a parity with the Series C Preferred ratably, in
proportion to the full amounts to which they would otherwise be
respectively entitled and such distributions may be made in cash
or in property taken at its fair value (as determined in good
faith by the Board of Directors), or both, at the election of the
Board of Directors.
3.3. Priority. All of the preferential amounts to be
paid to the holders of the Series C Preferred and the holders of
any other class or series of stock of the Corporation ranking on
a parity with the Series C Preferred as to distributions upon
liquidation shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of
the common stock of the Corporation and any other class or series
of stock of the Corporation which is junior to the Series C
Preferred as to distributions upon liquidation.
SECTION 4
VOTING RIGHTS
4.1. General. The holders of shares of Series C
Preferred shall have only such voting rights as are expressly set
forth herein or otherwise provided by law.
4.2. Consent for Certain Actions. So long as any of
the shares of the Series C Preferred are outstanding, except
where the vote or written consent of the holders of a greater
number of shares of the Corporation is required by law or by the
Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent of the holders of
two-thirds (2/3) of the outstanding shares of Series C Preferred,
given in person or by proxy, either in writing or at a special
meeting called for that purpose, neither the Corporation nor any
of the Corporation's direct or indirect subsidiaries shall take
any of the following actions:
(a) the amendment or repeal of any provision of, or
the addition of any provision to, the Restated Articles of
Incorporation or By-Laws of the Corporation if such action
would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
the Series C Preferred;
(b) the reclassification of any common stock into
shares having any preference or priority as to dividends or
the distribution of assets upon liquidation superior to or
on a parity with any such preference or priority of the
Series C Preferred;
(c) the application of any of its assets (in excess of
one percent (1%) of its net worth on an annual basis) to the
redemption, retirement, purchase or other acquisition
directly or indirectly, through subsidiaries or otherwise,
of any shares of common stock, except for purchase of the
Corporation's Common Stock on the open market or purchases
from employees of the Corporation upon termination of
employment or pursuant to any rights of first refusal held
by the Corporation; or
(d) the creation, authorization or issuance, directly
or indirectly, of any equity security having any preference
or priority as to dividends or the distribution of assets
upon liquidation superior to any such preference or priority
of the Series C Preferred, other than any such creation,
authorization or issuance of shares of the Corporation's
Series A Preferred Stock or Series B Preferred Stock.
The holders of Series C Preferred shall be entitled to notice of
any meeting of the stockholders of the Corporation.
Provided by: JOSEPH H. HOGSETT
SECRETARY OF STATE OF INDIANA
CORPORATIONS DIVISION
302 W. WASHINGTON ST. RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
Indiana Code 23-1-38-1 et seg.
FILING FEE $30.00
(SEAL OF THE STATE OF INDIANA)
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333(R5/9-91)
State Board of Accounts Approved 1988
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and one copy to address in
upper right corner of this form.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
SIGNAL APPAREL COMPANY, INC.
The undersigned officers of:
SIGNAL APPAREL COMPANY, INC.
(hereinafter referred to as the "Corporation") existing pursuant
to the provisions of:
(Indicate appropriate act)
xx Indiana Business Corporation Law
---
Indiana Professional Corporation Act of 1983
---
as amended (hereinafter referred to as the "Act"), desiring to
give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the
following facts:
ARTICLE I Amendment(s)
SECTION 1 The date of incorporation of the corporation is:
April 24, 1891
---------------
SECTION 2 The name of the corporation following this
amendment to the Articles of Incorporation is:
Signal Apparel Company, Inc.
-----------------------------
SECTION 3
The exact text of Article(s) Annex 4 of the Articles of
Incorporation is now as follows:
See "Exhibit 1" attached hereto.
SECTION 4 Date of each amendment's adoption:
November 7, 1994
ARTICLE II Manner of Adoption and Vote
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a
resolution proposing to amend the terms and provisions of
Article(s) Annex 4 of the Articles of Incorporation and directing
a meeting of the Shareholders, to be held on
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on
November 7, 1994, at which a quorum of such Board was
present.
(b) Written consent executed on __________, 19__, and
signed by all members of the Board of Directors.
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in
respect of the Articles of Amendment adopted the proposed
amendment. The amendment was adopted by: (Select appropriate
paragraph)
(a) Vote of such Shareholders during the meeting called by
the Board of Directors. The result of such vote is as
follows:
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
TOTAL
SHAREHOLDERS ENTITLED TO VOTE:
SHAREHOLDERS VOTED IN FAVOR:
SHAREHOLDERS VOTED AGAINST:
(b) Written consent executed on _________, 19____, and
signed by all such Shareholders.
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and
the vote by which they were adopted constitute full legal
compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
I hereby verify subject to the penalties of perjury that the
statements contained are true this ____ day of _______, 19__.
Current Officer's Signature Officer's Name Printed
/s/Robert J. Powell Robert J. Powell
Officer's Title
Secretary
EXHIBIT I
---------
FORM OF
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF THE
SERIES D PREFERRED STOCK
OF
SIGNAL APPAREL COMPANY, INC.
______________________________
[Pursuant to Section 23-1-25-2 of the
Business Corporation Law of the State of Indiana]
______________________________
RESOLVED, that, pursuant to authority conferred upon
the Board of Directors by the Restated Articles of Incorporation,
the Board of Directors hereby provides for the issuance of a
series of Redeemable Preferred Stock of the Corporation to
consist of 100 shares, and hereby fixes the voting powers,
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitation or
restrictions thereof, of the shares of such series, in addition
to those set forth in the Certificate of Incorporation, as
follows:
SECTION 1
DESIGNATION AND RANK
1.1. Designation. This certificate authorizes a
single series of redeemable Preferred Stock designated "Series D
Preferred Stock" (hereinafter called the "Series D Preferred").
The number of authorized shares constituting the Series D
Preferred Stock is 100. Shares of the Series D Preferred shall
be issued at a stated value of $100,000.00 per share (the "Stated
Value"). The number of authorized shares of the Series D
Preferred may be increased by the affirmative vote of 75% of the
Board of Directors.
1.2. Rank. With respect to the payment of dividends
and other distributions with respect to the capital stock of the
Corporation, including the distribution of the assets of the
Corporation upon liquidation, the Series D Preferred shall be
junior to the Corporation's Series A Preferred Stock, the
Corporation's Series B Preferred Stock and the Corporation's
Series C Preferred Stock and senior to all other series and
classes of preferred stock of the Corporation, whether such
series and classes are now existing or are created in the future,
and shall be senior to all other series and classes of capital
stock of the Corporation, whether such series and classes are now
existing or are created in the future.
SECTION 2
DIVIDEND RIGHTS
2.1. Dividend Rate. From the date of issuance,
dividends shall accrue on each share of Series D Preferred at an
annual rate equal to ten percent (10%) multiplied by the Stated
Value, compounded quarterly. The annual rate at which such
dividends shall accrue is hereinafter referred to as the
"Dividend Rate".
2.2. Accrual and Payment. Dividends on each share of
Series D Preferred shall be payable in cash, shall be cumulative,
compounded quarterly and shall accrue from the date of original
issuance of such share, whether or not declared by the Board of
Directors, or a committee thereof, and except as otherwise
provided herein, dividends on the Series D Preferred shall be
payable, when and as declared by the Board of Directors, or a
committee thereof, on December 31, March 31, June 30 and
September 30 (or, if such day is not a Business Day, on the next
Business Day thereafter) of each year, commencing on December 31,
1994 (each such date being hereinafter referred to as a "Dividend
Payment Date"), to holders of record as they appear on the books
of the Corporation on such record date, not exceeding 60 days
preceding the relevant Dividend Payment Date, as may be
determined by the Board of Directors or a committee thereof in
advance of the payment of the particular dividend. Dividends
shall be paid on each Dividend Payment Date with respect to the
quarterly period ending on such Dividend Payment Date. Dividends
in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of
record on such date, not exceeding 60 days preceding the payment
date thereof, as may be fixed by the Board of Directors or a
committee thereof. Dividends payable on the Series D Preferred
for any period less than a full quarterly period shall be
computed at the Dividend Rate per annum based on a 360-day year
of twelve 30-day months. "Business Day" shall mean any day
excluding Saturday, Sunday and any day which shall be, in the
State of New York, a legal holiday or a day on which banking
institutions are authorized by law to close. In the Event that
the Corporation fails to declare and pay full quarterly dividends
on any given Dividend Payment Date, such dividends shall be
compounded quarterly, as follows: additional dividends, in an
amount equal to the accrued and unpaid dividends on such share of
Series D Preferred multiplied by the Dividend Rate, shall accrue
with respect to each share of Series D Preferred until all
accrued and unpaid dividends shall have been paid. Any reference
herein to accrued dividends shall include the additional
dividends payable with respect to the Series D Preferred pursuant
to the preceding sentence.
2.3. Dividends or Distributions to Junior Stock. So
long as any shares of Series D Preferred are outstanding, no
dividend or distribution shall be declared or paid or set aside
for payment on the common stock of the Corporation or on any
other stock of the Corporation ranking junior to the Series D
Preferred as to dividends, nor shall any Common Stock or any
other stock of the Corporation ranking junior to the Series D
Preferred be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any such stock)
by the Corporation (except by conversion into or exchange for
shares of common stock or other stock of the Corporation ranking
junior to the Series D Preferred as to dividends) unless, in each
case, full cumulative dividends on all outstanding shares of the
Series D Preferred shall have been declared and paid through and
including the most recent Dividend Payment Date.
SECTION 3
LIQUIDATION RIGHTS
3.1. Preferences of Series D Shares on Winding-up of
the Corporation. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up of affairs of the
Corporation or other similar event, before any distribution is
made upon any class of stock of the Corporation ranking junior to
the Series D Preferred, the holders of shares of Series D
Preferred shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its shareholders, an
amount per share equal to the Stated Value, plus all accrued and
unpaid dividends (the Stated Value plus such accrued and unpaid
dividends constituting the "Liquidation Value"). Neither the
consolidation nor merger of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all
or substantially all of the assets of the Corporation, shall
itself be deemed to be a liquidation, dissolution or winding-up
of the affairs of the Corporation within the meaning of any of
the provisions of this Section 3.
3.2. Pro Rata Distribution. If, upon distribution of
the Corporation's assets in liquidation, dissolution, winding-up
or other similar event, the net assets of the Corporation to be
distributed among the holders of shares of Series D Preferred and
any other class or series of stock of the Corporation ranking on
a parity with the Series D Preferred as to distributions upon
liquidation are insufficient to permit payment in full to such
holders of the preferential amounts to which they are entitled,
then the entire net assets of the Corporation remaining after all
required distributions have been made to holders of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and of any other class or series of stock of the
Corporation ranking senior to the Series D Preferred shall be
distributed among the holders of shares of Series D Preferred and
any other class or series of stock ranking on a parity with the
Series D Preferred ratably, in proportion to the full amounts to
which they would otherwise be respectively entitled and such
distributions may be made in cash or in property taken at its
fair value (as determined in good faith by the Board of
Directors), or both, at the election of the Board of Directors.
3.3. Priority. All of the preferential amounts to be
paid to the holders of the Series D Preferred and the holders of
any other class or series of stock of the Corporation ranking on
a parity with the Series D Preferred as to distributions upon
liquidation shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of
the common stock of the Corporation and any other class or series
of stock of the Corporation which is junior to the Series D
Preferred as to distributions upon liquidation.
SECTION 4
VOTING RIGHTS
4.1. General. The holders of shares of Series D
Preferred shall have only such voting rights as are expressly set
forth herein or otherwise provided by law.
4.2. Consent for Certain Actions. So long as any of
the shares of the Series D Preferred are outstanding, except
where the vote or written consent of the holders of a greater
number of shares of the Corporation is required by law or by the
Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent of the holders of
two-thirds (2/3) of the outstanding shares of Series D Preferred,
given in person or by proxy, either in writing or at a special
meeting called for that purpose, neither the Corporation nor any
of the Corporation's direct or indirect subsidiaries shall take
any of the following actions:
(a) the amendment or repeal of any provision of, or
the addition of any provision to, the Restated Articles of
Incorporation or By-Laws of the Corporation if such action
would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
the Series D Preferred;
(b) the reclassification of any common stock into
shares having any preference or priority as to dividends or
the distribution of assets upon liquidation superior to or
on a parity with any such preference or priority of the
Series D Preferred;
(c) the application of any of its assets (in excess of
one percent (1%) of its net worth on an annual basis) to the
redemption, retirement, purchase or other acquisition
directly or indirectly, through subsidiaries or otherwise,
of any shares of common stock, except for purchase of the
Corporation's Common Stock on the open market or purchases
from employees of the Corporation upon termination of
employment or pursuant to any rights of first refusal held
by the Corporation; or
(d) the creation, authorization or issuance, directly
or indirectly, of any equity security having any preference
or priority as to dividends or the distribution of assets
upon liquidation superior to any such preference or priority
of the Series D Preferred, other than any such creation,
authorization or issuance of shares of the Corporation's
Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock.
The holders of Series D Preferred shall be entitled to notice of
any meeting of the stockholders of the Corporation.
SECTION 5
REDEMPTION RIGHTS
5.1. Mandatory Redemption. Each outstanding share of
Series D Preferred shall be redeemed by the Corporation on the
date which is the fifth-year anniversary of the Closing Date (as
such term is defined in that certain Put/Call Agreement, dated
November 14, 1994, by and among the Corporation, MW Holdings,
L.P., Marvin Winkler and Sherri Winkler) (the "Redemption Date"),
at a redemption price equal to the Stated Value per share,
together with accrued and unpaid dividends thereon to the date
fixed for redemption, without interest (the "Redemption Price"),
to the extent the Corporation shall have funds legally available
for such payment and subject to the rights of the holders of the
Corporation's Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock.
5.2. Status of Purchased or Redeemed Series D
Preferred. Shares of Series D Preferred which have been issued
and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions
of the laws of the State of Indiana) have the status of
authorized and unissued shares of the class of Preferred Stock
undesignated as to series and may be redesignated and reissued as
part of any series of the Preferred Stock; provided, however,
that no such issued and reacquired shares of Series D Preferred
shall be reissued or sold as Series D Preferred.
5.3. Procedure for Redemption. The Corporation shall
give notice of redemption of the Series D Preferred by first
class mail, postage prepaid, mailed not less than 30 days nor
more than 60 days prior to the Redemption Date, to each holder of
record of the outstanding Series D Preferred at such holder's
address as they appear on the books of the Corporation on such
record date. Each such notice shall state: (a) the Redemption
Date; (b) the number of shares of Series D Preferred to be
redeemed; (c) the Redemption Price; (d) the place or places where
certificates for such shares are to be surrendered for payment of
the Redemption Price; and (e) that dividends on the Series D
Preferred shares to be redeemed will cease to accrue on such
Redemption Date. Notice having been mailed as aforesaid, from
and after the Redemption Date (unless default shall be made by
the Corporation in providing money for the payment of the
Redemption price of the Series D Preferred shares called for
redemption) dividends on the shares of Series D Preferred so
called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding and shall have the
status of authorized but unissued shares of Preferred Stock,
unclassified as to series, and shall not be reissued as shares of
Series D Preferred, and all rights of the holders thereof as
holders of the Series D Preferred (except the right to receive
from the Corporation the Redemption Price) shall cease. Upon
surrender in accordance with said notice of the certificates for
any shares of Series D Preferred so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the Redemption
Price.
SECTION 6
MISCELLANEOUS
6.1. Headings of Subdivisions. The headings of the
various Sections and subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of
the provisions hereof.
6.2. Severability of Provisions. If any right,
preference or limitation of the Series D Preferred set forth in
this resolution (as such resolution may be amended from time to
time) is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation
unless so expressed herein.
Provided by: JOSEPH H. HOGSETT
SECRETARY OF STATE OF INDIANA
CORPORATIONS DIVISION
302 W. WASHINGTON ST. RM E018
INDIANAPOLIS IN 46204
TELEPHONE: (317) 232-6576
Indiana Code 23-1-38-1 et seg.
FILING FEE $30.00
(SEAL OF THE STATE OF INDIANA)
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
State Form 38333(R5/9-91)
State Board of Accounts Approved 1988
INSTRUCTIONS: Use 8 1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and one copy to address in
upper right corner of this form.
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
SIGNAL APPAREL COMPANY, INC.
The undersigned officers of:
SIGNAL APPAREL COMPANY, INC.
(hereinafter referred to as the "Corporation") existing pursuant
to the provisions of:
(Indicate appropriate act)
xx Indiana Business Corporation Law
---
Indiana Professional Corporation Act of 1983
---
as amended (hereinafter referred to as the "Act"), desiring to
give notice of corporate action effectuating amendment of certain
provisions of its Articles of Incorporation, certify the
following facts:
ARTICLE I Amendment(s)
SECTION 1 The date of incorporation of the corporation is:
April 24, 1891
---------------
SECTION 2 The name of the corporation following this
amendment to the Articles of Incorporation is:
Signal Apparel Company, Inc.
-----------------------------
SECTION 3
The exact text of Article(s) Annex 5 of the Articles of
Incorporation is now as follows:
See "Exhibit 1" attached hereto.
SECTION 4 Date of each amendment's adoption:
November 1, 1995
ARTICLE II Manner of Adoption and Vote
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a
resolution proposing to amend the terms and provisions of
Article(s) Annex 5 of the Articles of Incorporation and directing
a meeting of the Shareholders, to be held on
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
allowing such Shareholders to vote on the proposed amendment.
The resolution was adopted by: (Select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on
November 1, 1995, at which a quorum of such Board was
present.
(b) Written consent executed on ______,19___, and signed by
all members of the Board of Directors.
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in
respect of the Articles of Amendment adopted the proposed
amendment. The amendment was adopted by: (Select appropraite
paragraph)
(a) Vote of such Shareholders during the meeting called by
the Board of Directors. The result of such vote is as
follows:
No shareholder vote required pursuant to Section 23-1-25-2
of the Indiana Code
TOTAL
SHAREHOLDERS ENTITLED TO VOTE:
SHAREHOLDERS VOTED IN FAVOR:
SHAREHOLDERS VOTED AGAINST:
(b) Written consent executed on _________, 19____, and
signed by all such Shareholders.
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and
the vote by which they were adopted constitute full legal
compliance with the provisions of the Act, the Articles of
Incorporation, and the By-Laws of the Corporation.
I hereby verify subject to the penalties of perjury that the
statements contained are true this ____ day of _________, 19___.
Current Officer's Signature Officer's Name Printed
/s/Robert J. Powell Robert J. Powell
Officer's Title
Secretary
EXHIBIT 1
- ---------
VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF THE
SERIES E PREFERRED STOCK
OF
SIGNAL APPAREL COMPANY, INC.
________________________________
SECTION 1
DESIGNATION AND RANK
1.1. Designation. The number of authorized shares
constituting the "Series E Preferred Stock" (hereinafter called
the "Series E Preferred") of Signal Apparel Company, Inc. (the
"Corporation") is 20,000. Shares of the Series E Preferred shall
be issued at a stated value of $1,000.00 per share (the "Stated
Value"). The number of authorized shares of the Series E
Preferred may be increased by the affirmative vote of 75% of the
Board of Directors.
1.2. Rank. With respect to the payment of dividends
and other distributions with respect to the capital stock of the
Corporation, including the distribution of the assets of the
Corporation upon liquidation, the Series E Preferred shall be
junior to the Corporation's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred
Stock, but senior to all other series and classes of preferred
stock of the Corporation, whether such series and classes are now
existing or are created in the future, and shall be senior to all
other series and classes of capital stock of the Corporation,
whether such series and classes are now existing or are created
in the future.
SECTION 2
DIVIDEND RIGHTS
2.1. Dividend Rate. From the date of issuance
dividends shall accrue on each share of the Series E Preferred at
an annual rate equal to seven percent (7%) per annum multiplied
by the Stated Value, or $70 per share per year for each full
year. The annual rate at which such dividends shall accrue is
hereinafter referred to as the "Dividend Rate."
2.2. Accrual and Payment. Dividends on each share of
the Series E Preferred shall be payable at the option of the
Corporation (i) in cash or (ii) by the issuance of that number of
whole shares of the Common stock (the "Common Stock") computed by
dividing the amount of the dividend by the market-price
applicable to such dividend. For the purposes of this Section 2,
"market price" means the average of the daily closing prices of
the Common Stock for a period of the last five (5) consecutive
trading days preceding the date of calculating the market price.
The closing price for each trading day shall be (i) for any
period during which the Common Stock shall be listed for trading
on a national securities exchange, the last reported price per
share of the Common Stock as reported by the primary stock
exchange, or the NASDAQ Stock Market, if the Common Stock is
quoted on the NASDAQ Stock Market. Dividends on each share of
the Series E Preferred shall accrue from the date of original
issuance of such share, whether or not declared by the Board of
Directors or a committee thereof, and except as otherwise
provided herein, dividends on the Series E Preferred shall be
payable, when and as declared by the Board of Directors or a
committee thereof, on December 31, March 31, June 30 and
September 30 (or, if such day is not a Business Day, as defined
hereafter, on the next Business Day thereafter) of each year,
(each such date being hereinafter referred to as a "Dividend
Payment Date"), to holders of record as they appear on the books
of the Corporation on such record date, not exceeding 60 days
preceding the relevant Dividend Payment Date, as may be
determined by the Board of Directors or a committee thereof in
advance of the payment of the particular dividend. Dividends
shall be paid at a rate of $17.50 per share for each full
calendar quarter on each Dividend Payment Date with respect to
the quarterly period ending on such Dividend Payment Date.
Dividends in arrears may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to
holders of record on such date, not exceeding 60 days preceding
the payment date thereof, as may be fixed by the Board of
Directors or a committee thereof. Dividends payable on the
Series E Preferred for any period less than a full quarterly
period shall be computed at the Dividend Rate per annum based on
a 360-day year of twelve 30-day months. "Business Day" shall
mean any day excluding Saturday, Sunday and any day that shall
be, in the State of New York, a legal holiday or a day on which
banking institutions are authorized by law to close. If any
cumulative dividends in respect of the Series E Preferred are not
paid in full, the owners of all series of the Series E Preferred
shall participate ratably in any payment of accumulated
dividends.
2.3. Dividends or Distributions to Junior Stock. So
long as any shares of the Series E Preferred are outstanding, no
dividend or distribution shall be declared or paid or set aside
for payment on the Common Stock or on any other capital stock of
the Corporation ranking junior to the Series E Preferred as to
dividends, nor shall the Common Stock or any other stock of the
Corporation ranking junior to the Series E Preferred be redeemed,
purchased or otherwise acquired for any consideration (or any
moneys paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation
(except by conversion into or exchange for shares of the Common
Stock or other stock of the Corporation ranking junior to the
Series E Preferred as to dividends) unless, in each case, full
cumulative dividends on all outstanding shares of the Series E
Preferred shall have been declared and paid through and including
the most recent Dividend Payment Date.
SECTION 3
LIQUIDATION RIGHTS
3.1. Preferences of the Series E Shares on Winding-up
of the Corporation. In the event of any voluntary or involuntary
liquidation, dissolution, winding-up of affairs of the
Corporation or other similar event, before any distribution is
made upon any class of stock of the Corporation ranking junior to
the Series E Preferred, the holders of shares of the Series E
Preferred shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its shareholders, an
amount per share equal to the Stated Value, plus all accrued and
unpaid dividends (the Stated Value plus such accrued and unpaid
dividends constituting the "Liquidation Value"), whether or not
such accrued and unpaid dividends have been declared by the Board
of Directors of the Corporation. Neither the consolidation nor
merger of the Corporation with or into any other corporation or
corporations, nor the sale or lease of all or substantially all
of the assets of the Corporation, shall itself be deemed to be a
liquidation, dissolution or winding-up of affairs of the
Corporation within the meaning of any of the provisions of this
Section 3.
3.2. Pro Rata Distribution. If, upon distribution of
the Corporation's assets in liquidation, dissolution, winding-up
of affairs or other similar event, the net assets of the
Corporation to be distributed among the holders of shares of the
Series E Preferred and any other class or series of stock of the
Corporation ranking on a parity with the Series E Preferred as to
distributions upon liquidation are insufficient to permit payment
in full to such holders of the preferential amounts to which they
are entitled, then the entire net assets of the Corporation
remaining after all required distributions have been made to
holders of shares of the Corporation's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and of any other class or series of stock of the
Corporation ranking senior to the Series E Preferred shall be
distributed among the holders of shares of the Series E Preferred
and any other class or series of stock ranking on a parity with
the Series E Preferred ratably, in proportion to the full amounts
to which they would otherwise be respectively entitled and such
distributions may be made in cash or in property taken at its
fair value (as determined in good faith by the Board of
Directors), or both, at the election of the Board of Directors.
3.3. Priority. All of the preferential amounts to be
paid to the holders of the Series E Preferred and the holders of
any other class or series of stock of the Corporation ranking on
a parity with the Series E Preferred as to distributions upon
liquidation shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any assets of the Corporation to, the holders of
the Common stock of the Corporation and any other class or series
of stock of the Corporation that is junior to the Series E
Preferred as to distributions upon liquidation.
SECTION 4
VOTING RIGHTS
4.1. General. The holders of shares of the Series E
Preferred shall have only such voting rights as are expressly set
forth herein or otherwise provided by law. Shares of the Series
E Preferred shall not give their holders any pre-emptive rights
to acquire any other securities issued by the Corporation at any
time in the future.
4.2. Consent for Certain Actions. So long as any of
the shares of the Series E Preferred are outstanding, except
where the vote or written consent of the holders of a greater
number of shares of the Corporation is required by law or by the
Restated Articles of Incorporation, and in addition to any other
vote required by law, without the prior consent of the holders of
two-thirds (2/3) of the outstanding shares of the Series E
Preferred, given in person or by proxy, either in writing or at a
special meeting called for that purpose, neither the Corporation
nor any of the Corporation's direct or indirect subsidiaries
shall take any of the following actions:
(a) the amendment or repeal of any provision of, or
the addition of any provision to, the Restated Articles of
Incorporation or By-Laws of the Corporation if such action
would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of,
the Series E Preferred;
(b) the reclassification of any common stock into
shares having any preference or priority as to dividends or
the distribution of assets upon liquidation superior to or
on a parity with any such preference or priority of the
Series E Preferred;
(c) the application of any of its assets (in excess of
one percent (1%) of its net worth on an annual basis) to the
redemption, retirement, purchase or other acquisition
directly or indirectly, through subsidiaries or otherwise,
of any shares of common stock, except for purchase of the
Common Stock on the open market or purchases from employees
of the Corporation upon termination of employment or
pursuant to any rights of first refusal held by the
Corporation; or
(d) the creation, authorization or issuance, directly
or indirectly, of any equity security having any preference
or priority as to dividends or the distribution of assets
upon liquidation superior to or on parity with any such
preference or priority of the Series E Preferred, other than
any such creation, authorization or issuance of shares of
the Corporation's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock.
The holders of the Series E Preferred shall be entitled to notice
of any meeting of the stockholders of the Corporation.
SECTION 5
CONVERSION
5.1 For the purposes of conversion, shares of the
Series E Preferred shall be valued at $1,000.00 per share
("Value"), and, if converted at the option of a shareholder,
shares of the Series E Preferred shall be converted into shares
of the Common Stock at the price per share equal to the lower of
the (i) product of .60 multiplied by the average daily closing
prices of the Common Stock for the period of five (5) consecutive
trading days immediately preceding the date of conversion of the
shares of the Series E Preferred or (ii) product of .60
multiplied by the average daily closing prices of the Common
Stock for the period of 5 consecutive trading days immediately
preceding the date of closing of the offering of the Series E
Preferred (the lower of (i) or (ii) is hereinafter referred to as
the "Shareholder Conversion Price"). The closing price for each
trading day shall be determined as provided in the last sentence
of Section 5.3.
5.2 Any holder of the Series E Preferred (an "Eligible
Holder") at any time after the later of January 2, 1996 and the
40th day following the date of the closing of the sale of the
Series E Preferred may convert up to 100% of its holdings of the
Series E Preferred.
5.3 Notwithstanding any other provisions of this
Section 5, the Corporation may, at its sole option, but shall not
be obligated to, at any time, and from time to time, on and after
the 75th day after the date of closing of the offering of the
Series E Preferred, and upon written notice delivered to each of
the Eligible Holders not less than 30 days prior to any date
stipulated by the Corporation for the conversion of shares of the
Series E Preferred (the "Conversion Date"), require the Eligible
Holders, on a pro-rata basis, to convert all or any portion of
their shares of the Series E Preferred into shares of the Common
Stock at a price per share equal to the lower of the (i) product
of .60 multiplied by the average daily closing prices of the
Common Stock for the period of five (5) consecutive trading days
immediately preceding the date of closing of the offering of the
Series E Preferred or (ii) product of .60 multiplied by the
average daily closing prices of the Common Stock for the period
of five (5) consecutive trading days immediately preceding the
Conversion Date (the lower of (i) or (ii) is hereinafter referred
to as the "Corporate Conversion Price"); provided, however, that
an Eligible Holder shall have the right in accordance with
Section 5.2 hereof, at such holder's option, to convert all or a
portion of the shares of the shares of Series E Preferred held by
such holder into shares of the Common Stock at the Shareholder
Conversion Price, by the Eligible Holder giving written notice to
the Corporation prior to the Conversion Date that it elects to
convert a stated number of shares of the Series E Preferred into
shares of the Common Stock and by surrender of the share
certificates representing the shares of the Series E Preferred to
be converted in accordance with Section 5.4 hereof. The closing
price for each trading day shall be (i) for any period during
which the Common Stock shall be listed for trading on a national
securities exchange, the last reported price per share of the
Common Stock as reported by the primary stock exchange, or the
NASDAQ Stock Market, if the Common Stock is quoted on the NASDAQ
Stock Market.
5.4 The conversion right granted by Section 5.2 hereof
may be exercised only by an Eligible Holder of the Series E
Preferred, in whole or in part, by the surrender of the share
certificate or share certificates representing the shares of the
Series E Preferred to be converted at the principal office of the
Corporation (or at such other place as the Corporation may
designate in written notice sent to the holder by first-class
mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole shares of
the Common Stock as shall be computed by dividing (1) the
aggregate Value of the shares of the Series E Preferred so
surrendered plus any accrued but unpaid dividends thereon, if
any, by (2) the Shareholder Conversion Price in effect at the
time of such surrender. On each Conversion Date, all shares of
the Series E Preferred required by the Corporation to be
converted, without any action on the part of the holder thereof,
shall be deemed automatically converted into that number of whole
shares of the Common Stock as shall be computed by dividing (1)
the aggregate Value of the shares of the Series E Preferred so
converted plus any accrued but unpaid dividends thereon, if any,
by (2) the Corporation Conversion Price in effect at the time of
such exercise. In the event of any exercise of the conversion
right (whether at the initiative of an Eligible Holder or of the
Corporation) of the Series E Preferred granted herein (i) share
certificates representing shares of the Common Stock purchased by
virtue of such exercise shall be delivered to such holder
forthwith, and (ii) unless all the holder's shares of the Series
E Preferred have been fully converted, a new share certificate
representing the shares of the Series E Preferred not so
converted, if any, shall also be delivered to such holder
forthwith. The share certificates representing shares of the
Common Stock so purchased shall be dated the date of such
surrender and the holder making such surrender shall be deemed
for all purposes to be the holder of the Common Stock so
purchased as of the date of such surrender.
5.5 All shares of the Common Stock that may be issued
upon conversion of shares of the Series E Preferred will, upon
issuance, be duly issued, fully paid and nonassessable and free
from all taxes, liens, and charges with respect to the issue
thereof. At all times that any shares of the Series E Preferred
are outstanding, the Corporation shall have authorized, and shall
have reserved for the purpose of issuance upon such conversion, a
sufficient number of shares of the Common Stock to provide for
the conversion into shares of the Common Stock of all shares of
the Series E Preferred then outstanding at the then effective
Shareholder Conversion Price or the Corporation Conversion Price,
as the case may be. Without limiting the generality of the
foregoing, if, at any time, the Shareholder Conversion Price or
the Corporation Conversion Price, as the case may be, is
decreased, the number of shares of the Common Stock authorized
and reserved for issuance upon the conversion of shares of the
Series E Preferred shall be proportionately increased.
5.6 The number of shares of the Common Stock issued
upon conversion of shares of the Series E Preferred and the
Shareholder Conversion Price or the Corporation Conversion Price,
as the case may be, shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
5.6.1. In the case of any amendment to the
Restated Articles of Incorporation to change the
designation of the Common Stock or the rights,
privileges, restrictions or conditions in respect of
the Common Stock or division of the Common Stock into
series, the rights of the holders of shares of the
Series E Preferred shall be adjusted so as to provide
that upon conversion thereof the holder of shares of
the Series E Preferred being converted shall procure,
in lieu of each share of the Common Stock theretofore
issuable upon such conversion, the kind and amount of
shares, other securities, money and property receivable
upon such designation, change or division by the holder
of one share of the Common Stock issuable upon such
conversion had conversion occurred immediately prior to
such designation, change or division. The Series E
Preferred shall be deemed thereafter to provide for
adjustment that shall be nearly equivalent as may be
practicable to the adjustments provided for in this
Section 5. The provisions of this subsection 5.6.1
shall apply in the same manner to successive
reclassifications, changes, consolidations and mergers.
5.6.2. If the Corporation, at any time while any
shares of the Series E Preferred are outstanding, shall
amend the Restated Articles of Incorporation so as to
change the Common Stock into a different number of
shares, the Shareholder Conversion Price or the
Corporation Conversion Price, as the case may be, shall
be proportionately reduced, in case of such change
increasing the number of shares of the Common Stock, as
of the effective date of such increase, or if the
Corporation shall take a record of holders of the
Common Stock for the purpose of such increase, as of
such record date, whichever is earlier, or the
Shareholder Conversion Price or the Corporation
Conversion Price, as the case may be, shall be
proportionately increased, in the case of such change
decreasing the number of shares of the Common Stock, as
of the effective date of such decrease or, if the
Corporation shall take a record of holders of the
Common Stock for the purpose of such decrease, as of
such record date, whichever is earlier.
5.6.3. If the Corporation, at any time while any
of the Series E Preferred are outstanding, shall pay a
dividend payable in shares of the Common Stock, the
Shareholder Conversion Price or the Corporation
Conversion Price, as the case may be, shall be
adjusted, as of the date the Corporation shall take a
record of the holders of the Common Stock for the
purpose of receiving such dividend (or if no such
record is taken, as of the date of payment of such
dividend), so that each Eligible Holder of shares of
the Series E Preferred converted after such time shall
be entitled to receive the aggregate number and kind of
shares of the Common Stock that, if such shares of the
Series E Preferred had been converted immediately prior
to such time, such holder would have owned upon such
conversion and been entitled to receive by virtue of
such dividend.
5.7 Whenever the Shareholder Conversion Price or the
Corporation Conversion Price, as the case may be, shall be
adjusted pursuant to Section 5.6 hereof, the Corporation shall
make a certificate signed by its President or a Vice President
and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a
description of the basis on which the Board made any
determination hereunder), and the Shareholder Conversion Price or
the Corporation Conversion Price, as the case may be, after
giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid)
to each holder of the Series E Preferred at its address shown on
the books of the Corporation. The Corporation shall make such
certificate and mail it to each such holder promptly after each
adjustment.
5.8 No fractional shares of the Common Stock shall be
issued in connection with any conversion of shares of the Series
E Preferred, but in lieu of such fractional shares, the
Corporation shall make a cash payment therefor equal in amount to
the product of the applicable fraction multiplied by the
Shareholder Conversion Price or the Corporation Conversion Price,
as the case may be, then in effect.
5.9 No shares of the Series E Preferred which have
been converted into shares if the Common Stock shall be reissued
by the Corporation; provided, however, that each such share,
after being retired and canceled, shall be restored to the status
of an authorized but unissued share of the Series E Preferred and
may thereafter be issued as a share of the Series E Preferred.
BNY FINANCIAL CORPORATION
A WHOLLY OWNED SUBSIDIARY OF THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
1290 AVENUE OF THE AMERICAS, NEW YORK, N.Y. 10104
212-408-7000
Signal Apparel Company, Inc. ("Signal")
P. O. Box 4296
200 Manufacturers Road
Chattanooga, Tennessee 37405
The Shirt Shed, Inc. (Shirt Shed")
570 S. Miami Street
Wabash, Indiana 46992
March 14, 1996
Re: Our Factoring Agreement with Signal bearing the effective
date of May 23, 1991 as amended and supplemented (the "Signal
Agreement") Factoring Agreement with Shirt Shed bearing the
effective date of July 25, 1991 as amended and supplemented (the
"Shirt Shed Agreement") (the Signal Agreement and the Shirt Shed
Agreement herein collectively, the "Agreements")
Gentlemen:
We refer to each and both of the above mentioned Agreements
between ourselves on the one hand and Signal and Shirt Shed on
the other hand, and in particular to the covenants appearing
therein in subparagraphs 11 (a) (iii) thereof (herein the
"Tangible Net Worth Covenant"), 11 (a) (iv) thereof (herein the
"Working Capital Covenant") and 11 (a) (v) thereof (herein the
"Pre-Tax Operating Earnings Covenant"; together with the Working
Capital Covenant and the Tangible Net Worth Covenant, herein
collectively the "Covenants").
In consideration of payment to us of a fee of $30,000, we hereby
waive any default under the above Agreements to the extent
arising out of the failure of Signal and/or Shirt Shed to have
been in compliance with the above specified Covenants as of
December 31, 1995.
Except to the limited extent set forth herein: (a) no waiver of
any other term, condition, covenant, agreement or any other
aspect of any of the Agreements is intended or implied; and (b)
except for the specific period of time and circumstances covered
by this letter, no other aspect of the Covenants referred to in
this letter is waived, including without limitation for any other
period or circumstance, and no such additional waiver is intended
no such waiver is intended or implied. This limited waiver is
therefore limited exclusively to the specific purposes and time
period(s) for which it is given.
If the foregoing is in accordance with your understanding, would
you kindly sign below to so indicate.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/Wayne Miller
----------------------
Title: VP
AGREED:
Signal Apparel Company, Inc.
By: /s/William H. Watts
-------------------------
Title: CFO
Shirt Shed, Inc.
By: /s/William H. Watts
-------------------------
Title: CFO
BNY FINANCIAL CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1764 BY ALEXANDER HAMILTON
1290 AVENUE OF THE AMERICAS, NEW YORK, NY 10104
212-408-7000
November 7, 1995
Signal Apparel Company, Inc. ("Signal")
P. O. Box 4296
200 Manufacturers Road
Chattanooga, Tenn. 37405
The Shirt Shed, Inc. ("Shirt")
570 South Miami Street
Wabash, IN 46992
American Marketing Works, Inc. ("American")
14501 S. Figueroa St.
Gardenea, CA 90248
Ladies/Gentlemen:
We refer to the Factoring Agreement between us and Signal
bearing the effective date of May 23, 1991, between us and Shirt
bearing the effective date of July 25, 1991, and between us and
American bearing the effective date of November 22, 1994, all as
amended and supplemented (each) individually an "Agreement" and
collectively the "Agreements"). All capitalized terms not
otherwise defined herein shall have such meanings as are set
forth in the Agreements.
It has come to our attention that Signal and Shirt are in
violation of Paragraph 1.1(a)(v) of their Agreements for the
period ending September 30, 1995, in that their Cumulative Pre-
Tax Operating Earnings for the period ending on such date were
less than that required under the Agreement. Pursuant to your
request we hereby confirm that provided Signal and Shirt's actual
financial performance with respect to their Cumulative Pre-Tax
Operating Earnings through September 30, 1995 was no less than
that which was reported to us in their financial reporting, we
shall waive such failure to achieve the required Cumulative Pre-
Tax Operating Earnings level as a default under the Agreements.
It should be clearly understood by you that the waiver contained
herein is specifically with respect to the covenant section
referred to above and only for the period referred to above, and
should not be construed by you as a waiver of any other sections
of the Agreements, nor of the specified section of the Agreements
for any other computation period, as it is our expectation that
all of the terms and conditions contained in the Agreements shall
be fully adhered to and complied with.
Additionally this letter shall serve to confirm the
agreement between us that Section 9(c) of each of the Agreements
shall be amended by deleting the date of "March 31, 1997" in each
instance in which it appears in said section and inserting in its
place and stead in each instance the date of "December 31, 1997".
Furthermore, Paragraph 9(a)(i) of each of the Agreements is
hereby amended by deleting the date of "March 31, 1997" appearing
in said paragraph and inserting in its place and stead the date
of "December 31, 1997".
This letter shall also serve to confirm the understanding
between us that Section 1 of the July 25, 1991 letter amendment
(the "Letter Agreement") amending the Signal Agreement and the
Shirt Agreement shall be amended such that any reference to
"Factoring Agreements" shall refer to the Factoring Agreements
collectively with Signal, Shirt, and America, and any reference
contained in said Section 1 to the phrase "either or both"
appearing on the 6th line of said Section 1 and the 11th and 14th
lines of the second page of the Letter Agreement shall be deleted
and inserted in its place and stead shall, in each instance, be
the phrase "any or all", and the word "both" appearing as the
last word of the 7th line of said Section 1 shall be deleated and
the phrase "any of the" shall be inserted in its place and
stead.; additionally, the word "two" appearing at the last line
of the first page of the Letter Agreement and the first word of
the second page of the Letter Agreement shall be deleted in each
instance and inserted in its place and stead shall be the word
"three". It being the intention of this paragraph to have the
effect of including American Marketing Works, Inc. into the
calculation of the aggregate Minimum computed for each Signal
Contract Year and to have American along with Signal and Shirt be
jointly and severally liable for such aggregate Minimum for each
Signal Contract Year, as more fully set forth in the Letter
Agreement.
Except as hereby specifically modified or amended all of the
terms and conditions contained in the Agreements shall continue
to remain in full force and effect in accordance with their
terms.
If the forgoing correctly sets forth the agreement between
us, please execute a copy of this letter in the space provided
below and return a fully executed copy to our offices.
Very truly yours,
BNY FINANCIAL CORPORATION
By: \s\ Wayne Miller
-----------------------
VP
READ & AGREED TO:
SIGNAL APPAREL COMPANY, INC.
By: \s\ William H. Watts
-----------------------
Title: CFO
SHIRT SHED, INC.
By: \s\ William H. Watts
-----------------------
Title: CFO
AMERICAN MARKETING WORKS, INC.
By: \s\ William H. Watts
-----------------------
Title: CFO
(S790\3)
SEVERANCE AGREEMENT
This severance agreement (the "Agreement") is made as
of this 5th day of November, 1995, by and between Signal
Apparel Company, Inc. ("Signal"), and Marvin Winkler
("Winkler") Sherri Winkler and MW Holdings, L.P.
(collectively, the "Winkler Parties").
WHEREAS, the parties wish to enter into an agreement
terminating the employment of Winkler by Signal.
NOW THEREFORE, in consideration of the promises and
covenants contained in this Agreement, the Parties agree as
follows:
1. Resignation of Winkler. Winkler hereby resigns
from his position as Chairman of the Board and Chief
Executive Officer of Signal and from any and all other
offices, positions and duties which he now holds with
Signal, or with any subsidiary or division thereof,
including, but not limited to positions, duties, and
responsibilities he may now hold with AMW, Inc. and The
Shirt Shed, Inc.
2. Status of Employment Agreements, Mutual Release.
The Signal Employment Agreement dated April 1, 1995,
("Signal Employment Agreement") and the AMW Employment
Agreement, February 16, 1993 (collectively, the "Employment
Agreements"), and all rights and liabilities thereunder, are
of no force and effect and each party releases the other
from any claim they may have by virtue of the Employment
Agreements or any other duties arising out of the employmennt
relationship other than as expressly reserved by this agreement,
and provided that Signal expressly does not release Winkler from
claims for indemnification or contribution brought by any third
party, as set forth in Secion 11 of this Agreement.
3. Severance Payment. Signal shall pay Winkler's
ordinary salary as it would have been otherwise due Through
January 15, 1996 under Section 2 of the Signal Employment
Agreement. Winkler shall not be entitled to any future
salary, severance or other payments hereunder except as
specifically provided for herein.
4. Payments With Respect to Claimed Commissions.
Signal shall pay to Winkler $60,000, constituting the unpaid
portion of all commissions claimed by Winkler for sales
completed prior to the purchase of American Marketing Works,
Inc. by Signal, as follows: 6 installments of $10,000 per
month shall be paid on the first business day of each month
commencing December 1, 1995 and ending on May 1, 1996.
5. Payment on Purchase Note(s). Signal shall pay to
Winkler, Sherri Winkler and MW Holdings, L.P. $44,600 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 seven equal monthly
installments of $5,575 on the first business day of each
month commencing on December 1, 1995 and ending on June 1,
1996 and one installment of $5,602.67 on July 1, 1996.
6. Insurance. Signal shall pay the premium on all
health insurance policies that it currently provides for the
benefit of Winkler until March 31, 1996.
7. Expenses. Subject to Signal's prior approval, it
shall reimburse Winkler for reasonable freight expenses
incurred in connection with transporting his furniture and
other household furnishings by Armstrong Relocation Services
to California, and for the cost of coach airplane tickets to
California for Winkler, Sherri Winkler and their children.
8. Return of Property. Winkler shall return all
Signal property in his possession or under his control;
provided, however, Winkler may elect, on or before November
15, 1995, to purchase the desk and chair and other furniture in
his possession and which he uses (which are owned by Signal) by
paying to Signal the sum of $1,000.
9. Conversion of Purchase Notes. Signal hereby
grants to Winkler, MW Holdings, L.P. and Sherri Winkler, and
Winkler 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,
Winkler, Sherri Winkler, MW Holdings, L.P. and other parties
names therein into One Million (1,000,000) shares of Common
Stock. When Signal next files a registration statement
under the Securities Act of 1933, it will use its best
efforts to include thereunder such One Million (1,000,000)
shares. If such registration does not occur within one year
from the date hereof, Signal shall thereafter use its reasonable
best efforts to register such shares by including them in any
registration which Signal may file thereafter and pay to Winkler
interest calculated at the rate of 7% per annum on the value of
such One Million (1,000,000) shares as have not been registered,
with such value based on the closing price of Signal's
common stock on the New York Stock Exchange on the date of
the execution of this Agreement (or if it does not trade on
such date, on the next trading day) ("Value"). Such interest
shall be paid quarterly, one-half in cash and one-half in
Common Shares of Signal stock based on such Value, until
such shares are registered, disposed of by Winkler, or until
the right to register such shares hereunder expires, which
shall be such time as Winkler can sell or transfer such shares
without registration.
10. The Steele Litigation. Signal shall provide for
representation of Winkler in connection with the Steele
Litigation and shall indemnify him against any judgment
entered against him in that action to the full extent
required by Signal's certificate of incorporation, its by-
laws, and the laws of the State of Indiana (collectively
"Signal's Indemnity Obligation"). Winkler shall assist
Signal in the defense of the Steele Litigation in any
reasonable manner requested by Signal, including but not
limited to the following:
a. Winkler shall provide Signal with any
documents in his possession which will be of assistance in
defending the Steele Litigation; and
b. Winkler shall, if requested by Signal,
testify in the Steele Litigation and shall make himself
available to Signal for witness preparation sessions.
11. Releases. Winkler hereby unequivocally releases,
acquits, covenants not to sue and forever discharges Signal
and its officers, directors, employees, agents, attorneys,
shareholders, heirs, assigns, successors, trustees, parents,
subsidiaries, operating divisions, affiliated companies, and
all others in the world (collectively, the "Signal
Releasees") of and from all manner of action and actions,
cause and causes of action, claims, whether known or
unknown, suits, debts, wages, sums of money, accounts,
bills, contracts, torts, controversies, agreements, damages,
judgments, expenses, attorney's fees, executions, claims
arising under any federal law and the laws of any state
(statutory, regulatory and common law) and the laws,
ordinances, statutes and common laws of all cities and other
states and provinces in the United States and the World;
provided, however, Winkler does not release Signal and its
officers, directors and employees or its agents, attorneys, or
shareholders from any such claim arising from the acquisition of
AMW, Inc., nor any claims for indemnification or contribution
arising from any claims brought by any third party, nor any
release of rights and obligations arising under this agreement or
in the future. Included specifically within this General Release
is any claim that Winkler was forced to resign or was
constructively discharged.
Winkler agrees that he will not bring or attempt to
bring any other action against any Signal Releasee for any
matter arising out of his employment or resignation from
employment in any court or before any administrative agency.
Signal hereby unequivocally releases, acquits,
covenants not to sue and forever discharges Winkler and his
heirs, assigns or trustees and all others in the world
(collectively, the "Winkler Releasees") of and from all
manner of action and actions, cause and causes of action,
claims, whether known or unknown, suits, debts, wages, sums
of money, accounts, bills, contracts, torts, controversies,
agreements, damages, judgments, expenses, attorney's fees,
executions, claims arising under any federal law and the
laws of any state (statutory, regulatory and common law) and
the laws, ordinances, statutes and common laws of all cities
and other states and provinces in the United States and the
World; provided, however, that Signal does not release the
Winkler Releasees from any such liability arising from the
acquisition of AMW, nor from any such liability resulting
from claims for indemnification or contribution brought by
any third party, except to the extent required by Signal's
indemnity obligations, based upon his actions as an officer
or director of Signal, nor from any liability as may be incurred
by Winkler in connection with the rights and obligations created
by this agreement or in the future.
Signal agrees that it will not bring or attempt to
bring any other action against any Winkler Releasee for any
matter arising out of his employment by Signal or
resignation from such employment in any court or before any
administrative agency.
12. Confidentiality. The parties agree to maintain
this Agreement (including the exhibits hereto), its terms
and the negotiations related hereto in confidence, without
any disclosure to third parties except that a disclosure may
be made:
a. by any Party to the extent necessary in a
proceeding to enforce the Agreement;
b. by any Party to the extent required by law;
and
c. by any Party on obtaining the prior written
consent of all other Parties.
The parties acknowledge that this Agreement will be
filed as an exhibit to Signal's next Quarterly Report on
Form 10-Q; and the parties agree that, unless otherwise
required by law, Annex A hereto shall be the only public
statement made concerning this Agreement and the termination
of Winkler's employment.
Furthermore, in accordance with Section 7 of the Signal
Employment Agreement, the Winkler Parties shall not, without
prior written consent of Signal, communicate or divulge any
confidential information to anyone other than Signal and
those designated by it. For purposes of this provision, the
term confidential information includes all secret or
confidential information, knowledge or data relating to
Signal which shall not be or become public knowledge (other
than by acts by Winkler or representatives of Winkler in
violation of this Agreement.
13. Choice of Law and Venue. This Agreement shall be
deemed to be a contract entered into pursuant to the laws of
the State of New York which shall, in all respects, be
governed, construed, applied and enforced in accordance with
the substantive laws of the State of New York without
reference to conflict of law principles. Any controversies
arising out of this Agreement shall be resolved in the
courts located in the Southern District of New York and the
parties hereto submit to the jurisdiction thereof.
14. Use of Settlement Agreement. This Agreement shall
not be construed, considered or used as an admission of
liability or fault on the part of any Party, which liability
or fault all Parties expressly deny. Moreover, this
Agreement should not be construed as to release any claims
that Signal or the Winkler Parties may have against any
third party.
15. Necessary Documents. The Parties agree to enter
into and execute such further documents or instruments as
may be necessary and appropriate to effectuate this
Agreement.
16. Power and Authority to Execute. Each Party hereto
represents and warrants that it has the full power and
authority to execute, deliver and perform this Agreement,
that each individual signing on behalf of a party has been
duly authorized by that party to execute this Agreement on
its behalf and that no claims being released under the terms
of this Agreement have been assigned, sold or otherwise
transferred to any other entity.
17. Successors-In-Interest Bound. This Agreement
shall be binding upon and shall insure to the benefit of,
the Parties and their respective officers, directors,
affiliates, attorneys, administrators, agents,
representatives, successors and assigns.
18. Advice of Counsel. Each of the Parties has had
the benefit of the advice of counsel of its own choice in
the negotiating, drafting and execution of this Agreement,
and the language in all parts of this Agreement is a product
of the efforts of all counsel. Accordingly, neither the
entire Agreement nor any provision contained herein shall be
deemed to have been proposed or drafted by any party or
constructed against an party. This Agreement shall be
construed as a whole according to its plain meaning.
19. Entire Agreement of the Parties. This Agreement
and the documents annexed hereto constitute the entire
agreement and understanding among the Parties with respect
to the subject matter hereof. This Agreement supersedes all
prior agreements and understandings, both written and oral,
concerning such matters. Moreover, each party represents
and warrants that it has entered into this Agreement wholly
upon its own volition, judgment, belief and knowledge and
without any duress or reliance upon any statement or
representation of another party except those representations
and warranties expressed in this Agreement.
20. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall
be an original, but all of which when taken together shall
constitutes one and the same instrument. This Agreement
shall be of no force and effect until executed by all
Parties hereto.
21. Validity of Agreement. Each Party represents and
warrants that this Agreement is a legal, valid and binding
obligation, enforceable in accordance with its terms and
that there are no laws, rules or regulations that prohibit
its enforceability.
22. No Waiver. No waiver of any right under this
Agreement shall be deemed effective unless contained in a
writing executed by the Party charged with such waiver, and
no waiver of any breach of failure perform shall be deemed
to be a waiver of any future breach or failure to perform or
of any other provision of this Agreement. This Agreement
may not be amended except in a document signed by the Party
to be charged.
23. Headings. The headings contained herein are for
reference only and are not a part of this Agreement and
shall not be used in connection with the interpretation of
this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of this 5th day of November, 1995.
Date: November 5, 1995
SIGNAL APPAREL COMPANY, INC.
By:/s/Bruce Krebs
-------------------------
MW HOLDINGS, L.P.
By:/s/Sherri Winkler
-------------------------
/s/Marvin Winkler
----------------------------
MARVIN WINKLER
/s/Sherri Winkler
----------------------------
SHERRI WINKLER
19527V.01!
Annex A
PRESS RELEASE
SIGNAL APPAREL COMPANY, INC. Contact:
200 Manufacturers Road Robert Powell
Executive Vice President
(615) 755-6601
Signal Apparel Company, Inc. and Marvin Winkler jointly
announced today Mr. Winkler's decision to step down as
Chairman of the Board and Chief Executive Officer of the
Company. Mr. Winkler will remain a substantial shareholder
in the Company.
In announcing the decision, Mr. Winkler stated that he
had established several key Company objectives when he
joined the company in late 1994. First and foremost of
these objectives was the rebuilding of the Signal management
team in order to position the Company for growth and
profitability. "With the addition of Bruce Krebs in August,
1995 as President and Chief Operating Officer and with key
management changes in the Operations, Sales, Design and
Merchandising areas, Signal has one of the top management
teams in the active apparel industry," stated Mr. Winkler in
announcing his decision. "The Company has successfully
consolidated its operations, boosted operating efficiencies,
cut unnecessary overhead, and developed many new major
licensing initiatives. It is time to let Bruce Krebs manage
the company and implement the strategic plans which have
been developed by the new management team over the last six
months," added Winkler.
Mr. Winkler is planning to pursue several different
opportunities, and an announcement in this regard is
anticipated in the coming month.
Signal Apparel Company, Inc. is engaged in the manufacture
and marketing of apparel. The Company's Common Stock is
traded on the New York Stock Exchange under the symbol SIA.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made between SIGNAL
APPAREL COMPANY, INC., an Indiana corporation, with its
principal offices at 200-A Manufacturers Road, Chattanooga,
Tennessee (the "Company") and BRUCE KREBS (the "Employee").
RECITALS:
The Company and the Employee have reached an
understanding with respect to the employment of the Employee
by the Company. The parties desire to set forth their
understanding with respect to such employment fully and
completely in writing.
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company shall employ the
Employee, and the Employee shall work for the Company upon
the terms and conditions set forth herein.
2. Exclusive Agreement. During the term of this
Agreement, the Employee shall devote his full time and best
effort to the business of the Company.
3. Employment Term. Unless earlier terminated in
accordance with the terms of this Agreement, the Employee s
term of employment by the Company (the "Employment Term")
shall be for a period of three (3) years commencing August
1, 1995.
4. Confidential Information. The Employee
acknowledges that any use of the Company s Confidential
Information (defined below) by the Employee other than for
the sole benefit of the Company would be wrongful and cause
irreparable harm to the Company. Accordingly, the Employee
shall not, at any time during or subsequent to his
employment by the Company, without the express written
consent of the Company, publish, disclose or divulge to any
person, firm or corporation, or use, directly or indirectly,
for his own benefit or for the benefit of any person, firm
or corporation, for use other than for the Company, any
property, trade secrets, or Confidential Information
(defined below) of the Company or its affiliates.
"Confidential Information" includes, but is not limited to
all data, reports, interpretations, forecasts, records,
statements (written and oral) and documents of any kind
relating to the Company s costs and financial information,
manufacturing methods or processes, market studies,
products, existing and potential customers, pricing methods
and strategies, new product plans and sources of supply. In
addition, all other information disclosed to the Employee or
which the Employee shall obtain during such employment with
the Company which the Employee has a reasonable basis to
believe to be confidential, or which the Employee has a
reasonable basis to believe the Company treats as
confidential, shall be presumed to be Confidential
Information.
5. Salary and Expenses. The Company shall pay the
Employee a salary of Three Hundred Thousand ($300,000.00)
per year payable in accordance with the normal payroll
practices of the Company. The Company shall also reimburse
the Employee for all reasonable, legitimate and documented
business expenses incurred by him, on behalf of the Company,
upon submission of accounts in satisfactory form, subject to
such limitations as the Company may impose in its discretion
from time to time.
6. Additional Benefits. In addition to the
compensation described in Section 5, the Employee shall be
entitled during the Employment Term to receive the following
additional benefits:
(a) Health Insurance. The Company will provide
the Employee with health insurance coverage consistent with
the coverage provided to other employees of the Company from
time to time.
(b) Retirement Plans. The Employee will be
eligible to participate in the Company s 401(k) retirement
plan and such other retirement plans as may be established
by the Company from time to time.
(c) Holidays and Vacations. The Employee shall
be entitled to such paid holidays as may be designated by
the Company. In addition, the Employee shall be entitled to
three weeks of paid vacation for each year during which time
his compensation shall be paid in full. Notwithstanding any
other provisions of this Agreement, in the event Employee is
terminated from the Company for any reason, Employee will be
entitled to a payment reflecting Employee's unused accrued
vacation through such date of termination.
(d) Sick Leave. The Employee shall be entitled
to sick leave in accordance with Company practices.
(e) Stock Options. Effective August 10, 1995,
the Company agrees to grant to the Employee options to
purchase 100,000 shares of common stock which will be
exercisable one year from the date of grant and will be
governed by the terms of the Company's 1985 Stock Option
Plan.
(f) Bonus. The Employee has the following bonus
plan in effect for the three year term of this employment
agreement:
Employee is eligible to receive a year end bonus based
upon the pre-tax earnings of the Company for each fiscal
year, if any. This bonus will equal 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.
Bonus payments payable pursuant to this Section shall
be made in a lump sum payment within two weeks of the
finalization of the Company's year end audit.
Notwithstanding the foregoing, Employee must be
employed with the Company on December 31 of any given year
in order to be eligible to receive the above bonus for that
year. In the event Employee is not so employed, the
following provisions shall apply:
(1) If Employee is terminated for cause by the
Company, or if Employee voluntarily terminates
Employee's employment with the Company prior to
December 31 of any given year (except as described
under the circumstances in Section 7(d)), Employee
shall receive no bonus for that year or any
subsequent year;
(2) If Employee is terminated by the Company without
cause, prior to December 31 of any given year or
if Employee exercises Employee's rights under
Section 7(d), whether or not Employee is in breach
of this Agreement or if this Agreement is
terminated prior to December 31 upon the death or
disability of Employee as provided in Section
7(a), Employee shall receive only a prorata
portion of any bonus earned pursuant to this
Section 6 which prorata portion shall be based
upon the percentage of 365 calendar year days for
which Employee is employed during said calendar
year. Any bonus due pursuant to this subsection
(2) shall be paid as provided in this Section 6.
Any direct or indirect payments made by the Company to
or on behalf of the Employee determined by the Company s
accountants to be reportable for tax purposes shall be
treated as compensation to the Employee.
7. Termination of Employment.
(a) The Employee s employment pursuant to this
Agreement shall terminate upon the death of the Employee or
upon his inability, by reason of a mental or physical
condition, to perform his duties hereunder for an
uninterrupted period of sixty (60) days ("Disability"), and
may be terminated for "cause" (as defined below) by the
Company at any time during the Term immediately upon written
notice of termination (except as provided otherwise below)
given by the Company to the Employee describing such cause.
For purposes of this Agreement, "cause" for termination
shall be deemed to exist if: (i) the Employee is convicted
of a felony which involves an intentional act of the
Employee; (ii) the Employee engages in dishonesty or fraud;
or (iii) the Employee breaches any of his material
obligations as President and Chief Operating Officer of the
Company.
Any written notice of termination for cause pursuant to
this Section shall be a written notice which (a) indicates
the specific termination provision relied upon, (b) sets
forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's
employment, and (c) if the date of termination is other than
the date of receipt of such notice, specifies the
termination date. In the event that Employee's employment
is terminated pursuant to subsection (iii) above, Employee
shall have a period of thirty (30) days to cure the breach
of Employee's obligations under this Agreement as described
in the Notice of Termination. In the event that Employee
cures such breach within said thirty (30) day period, the
notice of termination shall be considered rescinded. In the
event that Employee fails to cure such breach, then this
Agreement will terminate without further notice to Employee
as set forth in the notice of termination, and the
provisions of 7(b) shall be applicable. Employee shall not
have the opportunity to cure any termination for cause
pursuant to subsections (i) and (ii) above.
(b) In the event (i) the Employee s employment
under this Agreement is terminated for cause as provided
above, or (ii) the Employee voluntary terminates his
employment with the Company, other than pursuant to Section
7(d), prior to the end of the Employment Term, the Company
shall promptly pay to the Employee (or to the Employee s
legal representatives) the amount of any compensation
attributable to periods prior to such termination, plus the
amount of any reimbursable expenses. No other payments
shall be due Employee.
(c) In the event the Employee s employment is
terminated without cause, whether or not Employee is in
breach of this Agreement, or the Employee loses his
employment for any other reason other than pursuant to
Section 7(b), including but not limited to bankruptcy,
closure, reorganization, buyout, merger, consolidation or
for any other reason, the Employee is automatically entitled
to severance payments equal only to one year's salary as
provided in Section 5 above and continuation of existing
health care benefits for one year. No other payments shall
be due Employee except any bonus payments which may be due
pursuant to Section 6(f). Said severance payments shall be
paid in the same manner and on the same schedule (i.e.
monthly, weekly, etc.) as Employee was being paid on the
date of termination. To the extent possible under the
Company's Stock Option Plan, all stock options shall
automatically vest and become immediately exercisable under
this provision. Severance payments being made pursuant to
this Section shall survive the death of Employee.
(d) Notwithstanding the provisions of Section
7(b), in the event of a merger, consolidation, buyout,
reorganization or any other similar occurrence, Employee
shall have the option of terminating Employee's employment
with the Company and receiving the salary and benefits as
provided in Section 7(c) above. In the event Employee
exercises this option prior to December 31 of any given
year, the provisions of Section 6(f)(2) shall apply. Such
option shall be exercised by written notice from Employee to
the Company which Notice must be given within thirty (30)
days of the definitive closing date of any such occurrence.
8. Duty of the Employee upon Termination. The
Employee shall, upon termination of this Agreement, return
to the Company all of the Company s records of any type and
all literature, supplies, letters, written or printed forms,
and/or memorandum pertaining to the Company s business.
9. Covenants on Termination.
(a) During the Employment Term and for a period
of one (1) year thereafter, the Employee shall not, directly
or indirectly, on Employee's own behalf or on behalf of any
other person, corporation, partnership or any other entity,
whether as an employee, officer, director, proprietor,
partner, investor, consultant, advisor, agent or in any
other capacity, induce or attempt to induce any customer of
the Company to reduce its business with the Company, or
solicit or attempt to solicit any employees of the Company
to leave the employ of the Company, nor shall Employee
affiliate with any party engaging in the above actions.
(b) The Employee acknowledges that the
restrictions contained in this Section are reasonable and
necessary to protect the business and interests of the
Company and that any violation of these restrictions will
cause substantial and irreparable injury to the Company.
Therefore, notwithstanding the provisions of Section 13
below, the Employee agrees that the Company is entitled, in
addition to any other remedies, to preliminary and permanent
injunctive relief to secure specific performance, and to
prevent a breach or contemplated breach of this Agreement.
10. Severability. In the event any clause or
provision of this Agreement shall be held to be invalid or
unenforceable, the same shall not affect the validity or
enforceability of any other provision herein, and this
Agreement shall remain in full force and effect in all other
respects. If a claim of invalidity or unenforceability of
any provision of this Agreement is predicated upon the
length of the terms of any covenant or the area covered
thereby, such provision shall not be deemed to be invalid or
unenforceable; rather, such provision shall be deemed to be
modified to the maximum area or the maximum duration as any
court of competent jurisdiction shall deem reasonable, valid
and enforceable.
11. Entire Agreement. The parties understand and
agree that this Employment Agreement is the entire Agreement
between the parties regarding the terms and conditions of
the Employee s employment and there are no other agreements.
The terms of this Agreement may not be varied, modified,
supplemented or in any other way changed by extraneous
verbal or written representations by the Company or its
agents to the Employee, unless by amendment to this
Agreement executed in writing by both parties.
12. Governing Law. The Agreement shall be governed
by, construed and enforced in accordance with the laws of
the state of Tennessee.
13. Arbitration. Each party agrees not to bring suit
against the other party in the courts of any jurisdiction in
connection with any dispute which might be the subject of a
civil action arising from the interpretation or application
of this Agreement. Each party agrees that any such dispute
shall be finally resolved by submission to compulsory
commercial arbitration to be held in Chattanooga, Tennessee
according to the American Arbitration Association rules, by
one or several arbitrators appointed. The parties agree to
be bound by the decision of the arbitration and that a
judgment of any court of competent jurisdiction may be
rendered upon the award made pursuant to said submission to
arbitration.
14. Survival. The Covenants of Paragraphs 4, 9, 10,
11 and 13 shall survive the termination of this Agreement.
15. Notice. All notices, demands, requests, consents,
reports, approvals, or other communications which may be or
are required to be given, served, or sent pursuant to this
Agreement shall be in writing and shall be mailed by first
class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram or
hand delivery, addressed as first set forth above, or such
other address as a party may subsequently specify in
writing.
IN WITNESS WHEREOF, the parties have executed this
Agreement this 27th day of November, 1995.
SIGNAL APPAREL COMPANY, INC.
Dated: 11/27/95 By: /s/William H. Watts
-------------- ---------------------------
Its: Exec. V. P. & CFO
Dated: 11/27/95 /s/Bruce Krebs
-------------- --------------------------------
BRUCE KREBS
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made between SIGNAL APPAREL
COMPANY, INC., an Indiana corporation, with its principal
offices at 200-A Manufacturers Road, Chattanooga, Tennessee
(the "Company") and GARY LABELLE (the "Employee").
RECITALS:
The Company and the Employee have reached an
understanding with respect to the employment of the Employee
by the Company. The parties desire to set forth their
understanding with respect to such employment fully and
completely in writing.
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company shall employ the Employee,
and the Employee shall work for the Company upon the terms and
conditions set forth herein.
2. Exclusive Agreement. During the term of this
Agreement, the Employee shall devote his full time and best
effort to the business of the Company.
3. Employment Term. Unless earlier terminated in
accordance with the terms of this Agreement, the Employee s
term of employment by the Company (the "Employment Term")
shall be for a period of three (3) years commencing August 1,
1995.
4. Confidential Information. The Employee acknowledges
that any use of the Company s Confidential Information
(defined below) by the Employee other than for the sole
benefit of the Company would be wrongful and cause irreparable
harm to the Company. Accordingly, the Employee shall not, at
any time during or subsequent to his employment by the
Company, without the express written consent of the Company,
publish, disclose or divulge to any person, firm or
corporation, or use, directly or indirectly, for his own
benefit or for the benefit of any person, firm or corporation,
for use other than for the Company, any property, trade
secrets, or Confidential Information (defined below) of the
Company or its affiliates. "Confidential Information"
includes, but is not limited to all data, reports,
interpretations, forecasts, records, statements (written and
oral) and documents of any kind relating to the Company s
costs and financial information, manufacturing methods or
processes, market studies, products, existing and potential
customers, pricing methods and strategies, new product plans
and sources of supply. In addition, all other information
disclosed to the Employee or which the Employee shall obtain
during such employment with the Company which the Employee has
a reasonable basis to believe to be confidential, or which the
Employee has a reasonable basis to believe the Company treats
as confidential, shall be presumed to be Confidential
Information.
5. Salary and Expenses. The Company shall pay the
Employee a salary of One Hundred Sixty-Five Thousand Dollars
($165,000.00) per year payable in accordance with the normal
payroll practices of the Company. The Company shall also
reimburse the Employee for all reasonable, legitimate and
documented business expenses incurred by him, on behalf of the
Company, upon submission of accounts in satisfactory form,
subject to such limitations as the Company may impose in its
discretion from time to time.
6. Additional Benefits. In addition to the
compensation described in Section 5, the Employee shall be
entitled during the Employment Term to receive the following
additional benefits:
(a) Health Insurance. The Company will provide the
Employee with health insurance coverage consistent with the
coverage provided to other employees of the Company from time
to time.
(b) Retirement Plans. The Employee will be
eligible to participate in the Company s 401(k) retirement
plan and such other retirement plans as may be established by
the Company from time to time.
(c) Holidays and Vacations. The Employee shall be
entitled to such paid holidays as may be designated by the
Company. In addition, the Employee shall be entitled to three
(3) weeks of paid vacation for each year during which time his
compensation shall be paid in full. Notwithstanding any other
provisions of this Agreement, in the event Employee is
terminated from the Company for any reason, Employee will be
entitled to a payment reflecting Employee's unused accrued
vacation through such date of termination.
(d) Sick Leave. The Employee shall be entitled to
sick leave in accordance with Company practices.
(e) Stock Options. Subject to the approval of the
Company's Compensation Committee, the Company agrees to grant
to the Employee options to purchase 50,000 shares of common
stock which will be exercisable one year from the date of
grant and will be governed by the terms of the Company's 1985
Stock Option Plan.
(f) Bonus. The Employee has the following bonus
plan in effect for the three year term of this employment
agreement:
Employee is eligible to receive a year end bonus based
upon the pre-tax earnings of the Company for each fiscal year,
if any.
This bonus will be paid in cash and stock options issued
pursuant to the Company's 1985 Stock Option Plan according to
the formula set forth below. The exercise price for the stock
options will be based upon the "Fair Market Value" of the
Company's Common Stock on the date of grant, as defined in the
Stock Option Plan, and all options shall be fully exercisable
one year from the date of grant. All bonuses earned pursuant
to this Section, whether in cash or stock options, will be
subject to a cap of five million dollars in pre-tax earnings
of the Company and no bonus will be paid on any pre-tax
earnings in excess of five million dollars.
The cash component of the bonus will be equal to 1%, or
fraction thereof, of Employee's annual salary for each
$100,000, or portion thereof, of pre-tax earnings of the
Company for each fiscal year. The cash component of the bonus
will be capped at 50% of Employee's annual salary per fiscal
year. The Company's pre-tax earnings will be rounded to the
nearest thousand dollars for the purpose of this calculation.
By way of example, if the Company has $1,625,000 in pre-
tax earnings in a given fiscal year, Employee will be entitled
to a cash bonus equal to 16.25% of Employee's annual salary.
The stock option component of the bonus will be equal to
an option to purchase ten shares of the Company's Common Stock
for each $1,000 in pre-tax earnings of the Company, subject to
a cap of 50,000 shares per fiscal year. The Company's pre-tax
earnings will be rounded to the nearest thousand dollars for
purposes of this calculation.
By way of example, if the Company has $2,325,000 in pre-
tax earnings in any given fiscal year, Employee will be
entitled to stock options to purchase 23,250 shares of the
Company's Common Stock.
Bonus payments payable pursuant to this Section shall be
made in a lump sum payment within two weeks of the
finalization of the Company's year end audit. Stock Options
to be granted pursuant to this Section will also be granted
within such two week period.
Notwithstanding the foregoing, Employee must be employed
with the Company on December 31 of any given year in order to
be eligible to receive the above bonus for that year. In the
event Employee is not so employed, the following provisions
shall apply:
(1) If Employee is terminated for cause by the Company,
or if Employee voluntarily terminates Employee's
employment with the Company prior to December 31 of
any given year (except as described under the
circumstances in Section 7(d)), Employee shall
receive no bonus for that year or any subsequent
year;
(2) If Employee is terminated by the Company without
cause, prior to December 31 of any given year or if
Employee exercises Employee's rights under Section
7(d), whether or not Employee is in breach of this
Agreement or if this Agreement is terminated prior
to December 31 upon the death or disability of
Employee as provided in Section 7(a), Employee
shall receive only a prorata portion of any bonus
earned pursuant to this Section 6 which prorata
portion shall be based upon the percentage of 365
calendar year days for which Employee is employed
during said calendar year. Any bonus due pursuant
to this subsection (2) shall be paid as provided in
this Section 6.
Any direct or indirect payments made by the Company to or
on behalf of the Employee determined by the Company s
accountants to be reportable for tax purposes shall be treated
as compensation to the Employee.
7. Termination of Employment.
(a) The Employee s employment pursuant to this Agreement
shall terminate upon the death of the Employee or upon his
inability, by reason of a mental or physical condition, to
perform his duties hereunder for an uninterrupted period of
sixty (60) days ("Disability"), and may be terminated for
"cause" (as defined below) by the Company at any time during
the Term immediately upon written notice of termination given
by the Company to the Employee describing such cause. For
purposes of this Agreement, "cause" for termination shall be
deemed to exist if: (i) the Employee is convicted of a felony
which involves an intentional act of the Employee; (ii) the
Employee engages in dishonesty or fraud; (iii) the Employee
breaches any of his material obligations under this Agreement;
(iv) the Employee has been materially negligent or grossly
inefficient in the performance of his duties under this
Agreement; or (v) the Employee refuses or fails to take
reasonable and material actions directed by the President.
Any written notice of termination for cause pursuant to
this Section shall be a written notice which (a) indicates the
specific termination provision relied upon, (b) sets forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment, and
(c) if the date of termination is other than the date of
receipt of such notice, specifies the termination date. In
the event that Employee's employment is terminated pursuant to
subsections (iii), (iv) or (v) above, Employee shall have a
period of thirty (30) days to cure the breach of Employee's
obligations under this Agreement as described in the Notice of
Termination. In the event that Employee cures such breach
within said thirty (30) day period, the notice of termination
shall be considered rescinded. In the event that Employee
fails to cure such breach, then this Agreement will terminate
without further notice to Employee as set forth in the notice
of termination, and the provisions of 7(b) shall be
applicable. Employee shall not have the opportunity to cure
any termination for cause pursuant to subsections (i) and (ii)
above.
(b) In the event (i) the Employee s employment
under this Agreement is terminated for cause as provided
above, or (ii) the Employee voluntary terminates his
employment with the Company, other than pursuant to Section
7(d), prior to the end of the Employment Term, the Company
shall promptly pay to the Employee (or to the Employee s legal
representatives) the amount of any compensation attributable
to periods prior to such termination, plus the amount of any
reimbursable expenses. No other payments shall be due
Employee.
(c) In the event the Employees employment is
terminated without cause, whether or not Employee is in breach
of this Agreement, or the Employee loses his employment for
any other reason, other than pursuant to Section 7(b),
including but not limited to bankruptcy, closure,
reorganization, buyout, merger, consolidation or for any other
reason, the Employee is automatically entitled to severance
payments equal only to one year's salary as provided in
Section 5 above and continuation of existing health care
benefits for one year. No other payments shall be due
Employee except any bonus payments which may be due pursuant
to Section 6(f). Said severance payments shall be paid in the
same manner and on the same schedule (i.e. monthly, weekly,
etc.) as Employee was being paid on the date of termination.
To the extent possible under the Company's Stock Option Plan,
all stock options shall automatically vest and become
immediately exercisable under this provision. Severance
payments being made pursuant to this Section shall survive the
death of Employee.
(d) Notwithstanding the provisions of Section 7(b),
in the event of a merger, consolidation, buyout,
reorganization or any other similar occurrence, Employee shall
have the option of terminating Employee's employment with the
Company and receiving the salary and benefits as provided in
Section 7(c) above. In the event Employee exercises this
option prior to December 31 of any given year, the provisions
of 6(f)(2) shall apply. Such option shall be exercised by
written notice from Employee to the Company which Notice must
be given within thirty (30) days of the definitive closing
date of any such occurrence.
8. Duty of the Employee upon Termination. The Employee
shall, upon termination of this Agreement, return to the
Company all of the Company s records of any type and all
literature, supplies, letters, written or printed forms,
and/or memorandum pertaining to the Company s business.
9. Covenants on Termination.
(a) During the Employment Term and for a period of
one (1) year thereafter, the Employee shall not, directly or
indirectly, on Employee's own behalf or on behalf of any other
person, corporation, partnership or any other entity, whether
as an employee, officer, director, proprietor, partner,
investor, consultant, advisor, agent or in any other capacity,
induce or attempt to induce any customer of the Company to
reduce its business with the Company, or solicit or attempt to
solicit any employees of the Company to leave the employ of
the Company, nor shall Employee affiliate with any party
engaging in the above actions.
(b) The Employee acknowledges that the restrictions
contained in this Section are reasonable and necessary to
protect the business and interests of the Company and that any
violation of these restrictions will cause substantial and
irreparable injury to the Company. Therefore, notwithstanding
the provisions of Section 13 below, the Employee agrees that
the Company is entitled, in addition to any other remedies, to
preliminary and permanent injunctive relief to secure specific
performance, and to prevent a breach or contemplated breach of
this Agreement.
10. Severability. In the event any clause or provision
of this Agreement shall be held to be invalid or
unenforceable, the same shall not affect the validity or
enforceability of any other provision herein, and this
Agreement shall remain in full force and effect in all other
respects. If a claim of invalidity or unenforceability of any
provision of this Agreement is predicated upon the length of
the terms of any covenant or the area covered thereby, such
provision shall not be deemed to be invalid or unenforceable;
rather, such provision shall be deemed to be modified to the
maximum area or the maximum duration as any court of competent
jurisdiction shall deem reasonable, valid and enforceable.
11. Entire Agreement. The parties understand and agree
that this Employment Agreement is the entire Agreement between
the parties regarding the terms and conditions of the
Employee s employment and there are no other agreements. The
terms of this Agreement may not be varied, modified,
supplemented or in any other way changed by extraneous verbal
or written representations by the Company or its agents to the
Employee, unless by amendment to this Agreement executed in
writing by both parties.
12. Governing Law. The Agreement shall be governed by,
construed and enforced in accordance with the laws of the
state of Tennessee.
13. Arbitration. Each party agrees not to bring suit
against the other party in the courts of any jurisdiction in
connection with any dispute which might be the subject of a
civil action arising from the interpretation or application of
this Agreement. Each party agrees that any such dispute shall
be finally resolved by submission to compulsory commercial
arbitration to be held in Chattanooga, Tennessee according to
the American Arbitration Association rules, by one or several
arbitrators appointed. The parties agree to be bound by the
decision of the arbitration and that a judgment of any court
of competent jurisdiction may be rendered upon the award made
pursuant to said submission to arbitration.
14. Survival. The Covenants of Paragraphs 4, 9, 10, 11
and 13 shall survive the termination of this Agreement.
15. Notice. All notices, demands, requests, consents,
reports, approvals, or other communications which may be or
are required to be given, served, or sent pursuant to this
Agreement shall be in writing and shall be mailed by first
class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by telegram or hand delivery,
addressed as first set forth above, or such other address as
a party may subsequently specify in writing.
IN WITNESS WHEREOF, the parties have executed this
Agreement this 30th day of November, 1995_.
SIGNAL APPAREL COMPANY, INC.
Dated: 11/30/95 By: /s/Bruce Krebs
------------- -----------------------
Its: President & COO
------------------
Dated: 11/30/95 /s/Gary Labelle
------------- ----------------------------
GARY LABELLE
FIRST AMENDMENT TO CREDIT AGREEMENT
dated as of August 10, 1995
Among
SIGNAL APPAREL COMPANY, INC.,
THE SHIRT SHED, INC.,
AMERICAN MARKETING WORKS, INC.,
and
WALSH GREENWOOD & CO.
Index of Closing Documents
--------------------------
1. First Amendment to Credit Agreement
a. Signal Apparel Company, Inc. Officers' Certificate
b. The Shirt Shed, Inc. Officers' Certificate
c. American Marketing Works, Inc. Officers'
Certificate
2. Promissory Note
3. Fixed Rate Warrant Certificate
4. Floating Rate Warrant certificate
5. First Amendment to Tennessee Deed of Trust and Security
Agreement
6. First Amendment to Deed to Secure Debt and Security Interest
7. First Amendment to Real Estate Mortgage, Security Agreement,
Assignment Leases and Rents and Fixture Filing
8. UCC-3 Amendment for Signal Apparel Company, Inc. (as filed
with the Tennessee Secretary of State)
9. UCC-3 Amendment for The Shirt Shed, Inc. (as filed with the
Tennessee Secretary of State)
10. UCC-3 Amendment for American Marketing Works, Inc. (as filed
with the Tennessee Secretary of State)
11. UCC-3 Amendment for Signal Apparel Company, Inc. (as with
the Register of Deeds of Claiborne County)
FIRST AMENDMENT TO CREDIT AGREEMENT
dated as of August 10, 1995
Among
SIGNAL APPAREL COMPANY, INC.,
THE SHIRT SHED, INC.,
AMERICAN MARKETING WORKS, INC.,
and
WALSH GREENWOOD & CO
FIRST AMENDMENT TO CREDIT AGREEMENT
AGREEMENT, entered as of the 10th day of August, 1995
by and among SIGNAL APPAREL COMPANY, INC., an Indiana
corporation ("Signal"), THE SHIRT SHED, INC., a Delaware
corporation ("SSI"), AMERICAN MARKETING WORKS, INC., a
Delaware corporation ("AMW") and WALSH GREENWOOD & CO., a
New York limited partnership (the "Lender").
WHEREAS, the parties entered a Credit Agreement, dated
as of March 31, 1995, (the "Credit Agreement") and certain
other documents defined in the Credit Agreement as the "Loan
Documents" by which the Lender extended to Signal, SSI and
AMW loans in the amount of $15,000,000; and
WHEREAS, Signal, SSI and AMW desire to borrow an
additional Five Million Dollars ($5,000,000), in excess of
the Commitment, as defined in the Credit Agreement, and
desires to amend the Credit Agreement to effect such
borrowing; and
WHEREAS, Lender is willing to loan to Signal, SSI and
AMW an additional Five Million Dollars ($5,000,000) (the
"Additional Loan") and to amend the Credit Agreement in
accordance with the terms of this First Amendment to Credit
Agreement (the "First Amendment").
NOW, THEREFORE, for and in consideration of the
foregoing, the parties agree as follows:
1. All terms not specifically defined herein shall
have the meaning ascribed to them in the Credit Agreement or
the Loan Documents, as defined in the Credit Agreement.
2. The definitions of "Commitment" and "Loan
Documents" contained in Section 1.1 of the Credit Agreement
shall be replaced with the following:
Commitment: the obligation of the Lender to
make Loans to Signal pursuant to Section 2.1, in a
maximum principal amount of $20,000,000, as such amount
may be reduced from time to time pursuant to this
Agreement.
Loan Documents: this First Amendment; the
Agreement; the Fixed Rate Warrants; the Discount Rate
Warrant; the Note; the Replacement Note; the Real Estate
Mortgage, Security Agreement, Assignment of Leases,
Rents and Fixture Filing; the Tennessee Deed of Trust
and Security Agreement; the Deed to Secure Debt and
Security Interest; UCC financing statements covering
both personalty and fixtures; the Intercreditor
Agreement; the Shareholders' Agreement and other
documents, agreements, certificates, schedules or
exhibits called for in any of the foregoing or otherwise
required of the Company to effect the purposes hereof.
3. The Additional Loan shall be evidenced by a
replacement promissory note of the Company , Substantially
in the form of Exhibit A (the "Replacement Note") evidencing
the obligation of the Company to pay a principal amount
equal to the lesser of (a) the amount of the Commitment and
(b) the Principal Amount, on the Maturity Date, together
with any accrued and unpaid interest. The Replacement Note
shall (x) be dated as of the Closing Date, (y) be stated to
mature on the Maturity Date, and (z) bear interest on the
unpaid Principal Amount thereof from time to time
outstanding as provided in Section 2.5. Interest on the
Replacement Note shall be paid in accordance with Section
2.5(c). All Additional Loans pursuant to the Commitment as
amended by this First Amendment, the Replacement Note and
all obligations of the Company under this First Amendment
shall be Obligations of the Company the payment of which is
secured by the security interests in the Collateral granted
Lender by the Company pursuant to Section 3. Upon the
execution and delivery of the Replacement Note, all
references to the "Note" in any of the Loan Documents shall
mean the Replacement Note without the need for further
amendment of any of the Loan Documents.
4. Upon the execution hereof by all parties, Signal
shall issue to Lender an additional 500,000 Fixed Rate
Warrants, for a total of 2,000,000 Fixed Rate Warrants,
which shall be treated in all respects as Fixed Rate
Warrants issued pursuant to Section 4.1.
5. Upon the execution hereof by all parties, Signal
shall issue to Lender an additional 500,000 Discount Rate
Warrants, for a total of 2,000,000 Discount Rate Warrants,
which will vest immediately and which otherwise will be
treated in all respects as Discount Rate Warrants issued
pursuant to Section 4.2.
6. In order to induce the Lender to enter into this
First Amendment and to make the Additional Loan, the Company
hereby represents and warrants to the Lender that, except as
reflected in the most recent Form 10-K and the most recent
Form 10-Q filed by Signal with the Untied States Securities
and Exchange Commission, and except as further qualified in
the Agreement (including any amendments to Schedules
provided thereunder), all of the representations and
warranties of the Company contained in Section 5 of the
Agreement are true and accurate as of the date hereof;
provided, however, the financial statements referred to in
Sections 5.1 and 5.2 shall be the audited year end financial
statements as of December 31, 1994.
7. The agreement of the Lender to make the Additional
Loan and the effectiveness and of this First Amendment shall
be subject to the satisfaction, immediately prior to or
concurrently with the making of such Additional Loan of the
following conditions precedent:
(a) Loan Documents. The Lender shall have
received each Loan Document, including, without
limitation, this First Amendment, the Replacement Note,
and the additional Fixed Rate Warrants and Discount Rate
Warrants, in each case executed and delivered by a duly
authorized officer of the Company.
(b) Corporate Proceedings of the Company. The
Lender shall have received a copy of the resolutions in
form and substance reasonably satisfactory to the
Lender, of the Board of Directors of each of Signal, SSI
and AMW authorizing (i) the execution, delivery and
performance of the First Amendment, the Replacement
Note, the additional Fixed Rate Warrants and Discount
Rate Warrants and all other documents and agreements
required of the Company required hereunder and (ii) the
borrowing contemplated hereunder, certified by the
Secretary of each of SSI, AMW and Signal, as of the
effective date of this First Amendment, which
certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(c) Corporate Documents. Lender shall have
received a certificate from the Secretary of each of
AMW, SSI and Signal that the copies of the Restated
Articles of Incorporation and By-Laws of Signal, SSI and
AMW delivered as of the Closing Date remain true,
complete and correct copies thereof as of the date
hereof and have not been amended, restated or revoked.
(d) Financial Information. The Lender shall have
received a copy of each of the financial statements
referred to in Section 5.1.
(e) Litigation. No suit, action, investigation,
inquiry or other proceeding except as disclosed herein
(including, without limitation, the enactment or
promulgation of a statute or rule) by or before any
arbitrator or any Governmental Authority shall be
pending and no preliminary or permanent injunction or
order by a state or federal court shall have been
entered (i) in connection with this First Amendment, or
(ii) which, in any such case, in the reasonable judgment
of the Lender, would have a material adverse effect on
(A) the transactions contemplated by this First
Amendment or (B) the business, operations, properties,
prospects or financial or other condition of Signal and
its Subsidiaries taken as a whole.
(f) No Violation. The consummation of the
transactions contemplated hereby shall not contravene,
violate or conflict with, nor involve the Lender in a
violation of, any Requirement of Law.
(g) Consents, Licenses, Approvals, Etc. The
Lender shall have received a certificate of a
Responsible Officer of Signal either (i) attaching
copies of all consents, licenses and approvals required
in connection with the execution, delivery and
performance by Signal and its Subsidiaries of each Loan
Document, including, but not limited to, consents of the
Company's senior bank lenders, and such consents,
licenses and approvals shall be in full force and
effect, or (ii) stating that no such consents, license
or approval are so required (Schedule 6.1(g)).
(h) Representations and Warranties. Each of the
representations and warranties restated by the Company
in accordance with Paragraph 6 hereof shall be true and
correct in all material respects on and as of the
Effective Date as if made on and as of such date.
(i) No Default. No Default or Event of Default
shall have occurred and be continuing on such date or
after giving effect to such Loan.
(j) Security Interest. The security interests in
personal property granted by the Agreement as amended
hereby shall be duly perfected in accordance with
applicable state law, and Signal and SSI shall have
executed and presented for filing any amendments to the
Deed to Secure Debt and Security Interest, the Real
Estate Mortgage, Security Agreement, Assignment of
Leases, Rents and Fixture Filing, the Tennessee Deed of
Trust and Security Agreement, and the filings made under
the Uniform Commercial Code necessary to reflect this
amendment and the Additional Loans and shall have paid
or tendered for payment all additional taxes and fees.
8. Signal agrees (a) to pay or reimburse the Lender in
an amount up to, but not exceeding, $25,000 for all its out-
of-pocket costs and expenses incurred in connection with the
development, preparation and execution of this First
Amendment, the Replacement Note and any other documents
prepared in connection therewith, including the fees and
disbursements of counsel to the Lender, (b) to pay or
reimburse the Lender for all its costs and expenses incurred
in connection with the development, preparation and execution
of any amendment, supplement or modification thereto, or the
enforcement or preservation of any rights under any Loan
Document and any other such documents and any such amendment,
supplement or modification thereto, including, without
limitation, reasonable fees and disbursements of counsel to
the Lender, (c) to pay, indemnify, and hold the Lender
harmless from, any and all recording and filing fees and any
and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise, franchise and other taxes, if
any, which may be payable or determined to be payable in
connection with the execution and delivery of, or any
amendment, supplement or modification of, or any waiver or
consent under or in respect of this First Amendment(provided
that Signal shall have the right to contest before the
relevant Governmental Authority any such tax that may be
assessed), and (d) to pay, indemnify, and hold the Lender
harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind or nature
whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this First
Amendment and the transactions contemplated hereby and any
such other documents (all the foregoing, collectively, the
"indemnified liabilities"), provided, that Signal shall have
no obligation hereunder to the Lender with respect to willful
misconduct of the Lender. The agreements in this Section
shall survive repayment of the Replacement Note and all other
amounts payable under the Loan Documents.
9. This First Amendment may be executed by one or more
of the parties to this First Amendment on any number of
separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered in New York
by their proper and duly authorized officers as of the day and
year first above written.
SIGNAL APPAREL COMPANY, INC.
By /s/William H. Watts
-------------------------
Title CFO
----------------------
THE SHIRT SHED, INC.
By /s/William H. Watts
-------------------------
Title CFO
-----------------------
AMERICAN MARKETING WORKS, INC.
By /s/ William H. Watts
-------------------------
Title CFO
-----------------------
WALSH GREENWOOD & COMPANY
By /s/Paul R. Greenwood
--------------------------
Title
-----------------------
SIGNAL APPAREL COMPANY, INC. OFFICERS' CERTIFICATE
To: Walsh Greenwood & Co., party to the Credit Agreement
referred to herein.
This Officers' Certificate is given in connection with the First
Amendment to Credit Agreement dated as of August 10, 1995 (the
"Amendment") among Signal Apparel Company, Inc. (the "Company"),
American Marketing Works, Inc., The Shirt Shed Inc. and Walsh
Greenwood & Co. (the "Lender"). The Amendment modifies
provisions of a Credit Agreement, dated as of March 31, 1995 by
and among the Lender, the Company, American Marketing Works, Inc.
and The Shirt Shed, Inc. (the "Credit Agreement"). Capitalized
terms used herein and not defined herein have the meanings
assigned to them by or pursuant to the terms of the Credit
Agreement and the Amendment.
I.
We, Robert Powell and William Watts, Chief Financial Officer of
the Company, do hereby certify as follows:
1. Attached hereto as Exhibit A is a true, correct, and
complete copy of the resolutions duly adopted by the Board of
Directors of the Company at a meeting held on August 10, 1995 at
which a quorum was present and acting throughout. Such
resolutions have not been amended, modified or rescinded, are in
full force and effect on the date hereof in the form adopted, and
are the only resolutions adopted by the Board of Directors or any
committee thereof relating to the Loan Documents.
II.
Robert Powell, as the Secretary of the Company, certifies that
William Watts, as Chief Financial Officer of the Company is a
duly elected or appointed officer of the Company and is
authorized to execute and deliver the Amendment, the Replacement
Note and the other Loan Documents on behalf of the Company.
III.
This portion of the Officers' Certificate is given by William
Watts, as Chief Financial Officer of the Company (the "Executive
Officer").
The Executive Officer hereby certifies that:
1. No Default has occurred and is continuing, nor will the
Amendment or the Loan being requested on the date hereof create a
Default; and
2. The representations and warranties made by the Company in
the Amendment are true and correct in all material respects on
and as of the date of this certificate;
The Executive Officer also certifies that:
A. Robert Powell is the duly elected Secretary of the Company
and is authorized to execute and deliver the Credit Agreement and
the Notes on behalf of the Company.
In making the foregoing certification, the Executive Officer has
read, in particular, Paragraphs 6 and 7 of the Amendment and all
Sections of the Credit Agreement incorporated or referenced by
such paragraphs and all definitions used in that Amendment and in
the Credit Agreement to the extent unchanged by the Amendment.
The Executive Officer states that he has made such examination or
investigation as is necessary to enable him to express an
informed opinion as to whether or not each such covenant or
condition has been complied with.
In rendering this certification, the Executive Officer made
inquiries of the appropriate employees of the Company and of
advisors to the Company, including but not limited to, its
accountants, actuaries, and attorneys.
IN WITNESS WHEREOF, I have signed this Officers' Certificate and
affixed the corporate seal of the Company.
Dated August 10, 1995.
----------------
/s/Robert Powell
- ----------------------
Robert Powell
Secretary
IN WITNESS WHEREOF, each of the undersigned officers of the
Company has signed this Officers' Certificate.
Dated August 10, 1995.
----------------
/s/William Watts
- ----------------------
William Watts
Chief Financial Officer
RESOLUTIONS
OF THE
BOARD OF DIRECTORS
OF
SIGNAL APPAREL COMPANY, INC.
ADOPTED
MARCH 31, 1995
On August 10, 1995 the members of the Board of Directors of
Signal Apparel Company, Inc. (the "Company"), participating in a
duly called meeting held by telephone in accordance with the
Bylaws of the Company, approved the following resolutions:
WHEREAS, the Company desires additional working capital to
fund current operations; and
WHEREAS, Walsh Greenwood & Co. ("Walsh Greenwood") has
offered to amend the Credit Agreement, dated as of March 31, 1995
(the "Credit Agreement"), and to lend to the Company an
additional principal amount of up to $5,000,000 pursuant to the
terms of the Credit Agreement as amended by the First Amendment
to Credit Agreement presented to the Board (the "Amendment"), the
principle terms of which include:
1. a maximum borrowing of an additional $5 million for a
total of up to $20 million which shall be drawn in increments of
not less than $1 million upon notice received two business days
prior to each draw;
2. the issuance to Walsh Greenwood of warrants to purchase
500,000 shares of the Company's Common Stock at $2.25 per share,
which warrants will vest on the basis of 100,000 warrants for
each $1 million drawn and which will be exercisable for three
years from vesting, such warrants containing provisions
substantially similar to those of the Fixed Rate Warrants issued
under the Credit Agreement;
3. the issuance to Walsh Greenwood of warrants to purchase
500,000 shares of the Company's Common Stock at a 25% discount to
the 20 day average trade price in December, 1996, which warrants
will vest immediately upon the commitment by Walsh Greenwood of
the full amount of the additional credit and which will be
exercisable for three years beginning January 1, 1997, such
warrants containing provisions substantially similar to the
Discount Rate Warrants issued under the Credit Agreement;
4. a Replacement Note in the face amount of $20 million will
evidence the borrowing and will be upon terms substantially
similar to the Note issued pursuant to the Credit Agreement;
7. all borrowings will continue to be secured by a security
interest in all assets of the Company currently pledged to its
senior lenders, but will be subordinate to the security interests
of such lenders;
8. all borrowings shall be used only for working capital and
shall not be used to repay any principal of any bank debt;
9. such covenants as are contained in the Credit Agreement
WHEREAS, Messrs. Greenwood and Walsh have informed the Board
that they may be deemed to have financial or management
interests, which they have fully disclosed to the Board, in Walsh
Greenwood sufficient to create the possibility of a conflict of
interest as contemplated by Section 23-1-35-2 of the Indiana
Business Corporation Law; and
WHEREAS, pursuant to the terms of Section 23-1-35-2 of the
Indiana Business Corporation Law, approval of the aforementioned
transactions by a majority of the members of the Board of
Directors other than Messrs. Greenwood and Walsh will result in
the approval of the transactions by a majority of disinterested
directors; and
WHEREAS, in connection with the Credit Agreement, the
Company received an opinion from the firm of Value Research
Corporation concerning the Credit Agreement and related
transactions, to the effect that the transactions were fair, from
a financial point of view, to the existing investors in the
Company's Common Stock and to the creditors of the Company as a
group; and
WHEREAS, after having reviewed and considered: (i) the
information disclosed to the Board by Messrs. Greenwood and
Walsh, concerning their financial or management interests in
certain of the entities (other than the Company) which are
parties to the proposed transactions, (ii) the opinion of Value
Research Corporation that the transactions in connection with the
Credit Agreement are fair, from a financial point of view, to the
existing investors in the Company's Common Stock and to the
creditors of the Company as a group, and (iii) the recommendation
of management of the Company to the effect that the proposed
amendment of the Credit Agreement is fair to and in the best
interest of the Company, its creditors and its shareholders, the
Board has concluded that the plan submitted by management to
enter into such amendment will enable the Company adequately to
fund its working capital requirements and will enhance the value
of the Company's business,
NOW THEREFORE, be it
RESOLVED that the officers of the Company be authorized and
directed to borrow from Walsh Greenwood an additional principal
amount of up to $5,000,000 for a total of up to $20 million in
accordance with the terms of the Amendment, in all events
subordinate to security interests previously granted to the
Company's senior bank lenders; and to issue to Walsh Greenwood
the Fixed Rate Warrants and the Discount Rate Warrants; and
FURTHER RESOLVED, that the Company be authorized and
directed to issue its Common Stock in accordance with the terms
of the new Fixed Rate Warrants and the Discount Rate Warrants
and, should the Company not possess sufficient authorized and
unissued shares for such purpose, or should shareholder approval
be required as a prerequisite to the issuance of such shares
under any governmental statute or regulation or under the rules
of the New York Stock Exchange, that the Company be authorized to
present for vote of the shareholders of the Company at the next
meeting of shareholders following the discovery of such
insufficiency or requirement a proposal to (i) increase the
number of authorized shares of the Company's Common Stock, by
amendment of the Company's Restated Articles of Incorporation or
otherwise, in an amount at least sufficient to satisfy the
requirements of the warrants or (ii) approve the issuance of such
shares in accordance with the terms of the warrants, as
applicable; and
FURTHER RESOLVED, that the proper officers of the Company
are hereby authorized, directed and empowered to negotiate,
execute, deliver and perform the Amendment, warrants, notes,
amendments to mortgages and all other documents or certificates
necessary or desirable in connection with the foregoing; and that
the proper officers of the Company are directed and empowered to
take all such further actions as, in their judgment, they deem
necessary, desirable or proper to implement the foregoing
resolutions.
THE SHIRT SHED, INC. OFFICERS' CERTIFICATE
To: Walsh Greenwood & Co., party to the Credit Agreement
referred to herein.
This Officers' Certificate is given in connection with the First
Amendment to Credit Agreement dated as of August 10, 1995 (the
"Amendment") among The Shirt Shed Inc. (the "Company"), American
Marketing Works, Inc., Signal Apparel Company, Inc. and Walsh
Greenwood & Co. (the "Lender"). The Amendment modifies
provisions of a Credit Agreement, dated as of March 31, 1995 by
and among the Lender, the Company, American Marketing Works, Inc.
and Signal Apparel Company, Inc. (the "Credit Agreement").
Capitalized terms used herein and not defined herein have the
meanings assigned to them by or pursuant to the terms of the
Credit Agreement and the Amendment.
I.
We, Robert Powell and William Watts, Chief Financial Officer of
the Company, do hereby certify as follows:
1. Attached hereto as Exhibit A is a true, correct, and
complete copy of the resolutions duly adopted by the Board of
Directors of the Company at a meeting held on August 10, 1995 at
which a quorum was present and acting throughout. Such
resolutions have not been amended, modified or rescinded, are in
full force and effect on the date hereof in the form adopted, and
are the only resolutions adopted by the Board of Directors or any
committee thereof relating to the Loan Documents.
II.
Robert Powell, as the Secretary of the Company, certifies that
William Watts, as Chief Financial Officer of the Company is a
duly elected or appointed officer of the Company and is
authorized to execute and deliver the Amendment, the Replacement
Note and the other Loan Documents on behalf of the Company.
III.
This portion of the Officers' Certificate is given by William
Watts, as Chief Financial Officer of the Company (the "Executive
Officer").
The Executive Officer hereby certifies that:
1. No Default has occurred and is continuing, nor will the
Amendment of the Loan being requested on the date hereof create a
Default; and
2. The representations and warranties made by the Company in
the Amendment are true and correct in all material respects on
and as of the date of this certificate;
The Executive Officer also certifies that:
A. Robert Powell is the duly elected Secretary of the Company
and is authorized to execute and deliver the Credit Agreement and
the Notes on behalf of the Company.
In making the foregoing certification, the Executive Officer has
read, in particular, Paragraphs 6 and 7 of the Amendment and all
Sections of the Credit Agreement incorporated or referenced by
such paragraphs and all definitions used in that Amendment and in
the Credit Agreement to the extent unchanged by the Amendment.
The Executive Officer states that he has made such examination or
investigation as is necessary to enable him to express an
informed opinion as to whether or not each such covenant or
condition has been complied with.
In rendering this certification, the Executive Officer made
inquiries of the appropriate employees of the Company and of
advisors to the Company, including but not limited to, its
accountants, actuaries, and attorneys.
IN WITNESS WHEREOF, I have signed this Officers' Certificate and
affixed the corporate seal of the Company.
Dated August 10, 1995.
/s/Robert J. Powell
- --------------------------
Robert Powell
Secretary
IN WITNESS WHEREOF, each of the undersigned officers of the
Company has signed this Officers' Certificate.
Dated August 10, 1995.
/s/William Watts
- --------------------------
William Watts
Chief Financial Officer
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
THE SHIRT SHED, INC.
RESOLVED, whereas the Company requires
additional working capital to fund its operations;
whereas the Company entered a Credit Agreement, dated
March 31, 1995, with Walsh Greenwood & Co. (the "Credit
Agreement") pursuant to which the Company and its
affiliates borrowed $15,000,000; whereas Walsh Greenwood
& Co. is willing to amend the Credit Agreement to
increase the maximum of borrowing thereunder to
$20,000,000 upon the terms and conditions of a
First Amendment to Credit Agreement (the "Amendment")
presented to the Board, the Company hereby is authorized
and directed to enter the Amendment and all other
agreements and amendments referenced thereby and to borrow
up to $20,000,000 upon the terms specified in the
Amendment; and
FURTHER RESOLVED, that the officers of the Company
be authorized and directed to execute upon behalf of
the Company the Amendment, a First Amendment to Real
Estate Mortgage, Security Agreement, Assignment of Leases
and Rents and Fixture Filing and such other documents,
certificates, and agreements as may be required under the
Amendment or to effect the foregoing resolution.
AMERICAN MARKETING WORKS, INC. OFFICERS' CERTIFICATE
To: Walsh Greenwood & Co., party to the Credit Agreement
referred to herein.
This Officers' Certificate is given in connection with the First
Amendment to Credit Agreement dated as of August 10, 1995 (the
"Amendment") among American Marketing Works, Inc. (the
"Company"), Signal Apparel Company, Inc., The Shirt Shed Inc. and
Walsh Greenwood & Co. (the "Lender"). The Amendment modifies
provisions of a Credit Agreement, dated as of March 31, 1995 by
and among the Lender, the Company, Signal Apparel Company, Inc.
and The Shirt Shed, Inc. (the "Credit Agreement"). Capitalized
terms used herein and not defined herein have the meanings
assigned to them by or pursuant to the terms of the Credit
Agreement and the Amendment.
I.
We, Robert Powell and William Watts, Vice President/Finance of
the Company, do hereby certify as follows:
1. Attached hereto as Exhibit A is a true, correct, and
complete copy of the resolutions duly adopted by the Board of
Directors of the Company at a meeting held on August 10, 1995 at
which a quorum was present and acting throughout. Such
resolutions have not been amended, modified or rescinded, are in
full force and effect on the date hereof in the form adopted, and
are the only resolutions adopted by the Board of Directors or any
committee thereof relating to the Loan Documents.
II.
Robert Powell, as the Secretary of the Company, certifies that
William Watts, as Vice President/Finance of the Company is a duly
elected or appointed officer of the Company and is authorized to
execute and deliver the Amendment, the Replacement Note and the
other Loan Documents on behalf of the Company.
III.
This portion of the Officers' Certificate is given by William
Watts, as Chief Financial Officer of the Company (the "Executive
Officer").
The Executive Officer hereby certifies that:
1. No Default has occurred and is continuing, nor will the
Amendment or the Loan being requested on the date hereof create a
Default; and
2. The representations and warranties made by the Company in
the Amendment are true and correct in all material respects on
and as of the date of this certificate;
The Executive Officer also certifies that:
A. Robert Powell is the duly elected Secretary of the Company
and is authorized to execute and deliver the Credit Agreement and
the Notes on behalf of the Company.
In making the foregoing certification, the Executive Officer has
read, in particular, Paragraphs 6 and 7 of the Amendment and all
Sections of the Credit Agreement incorporated or referenced by
such paragraphs and all definitions used in that Amendment and in
the Credit Agreement to the extent unchanged by the Amendment.
The Executive Officer states that he has made such examination or
investigation as is necessary to enable him to express an
informed opinion as to whether or not each such covenant or
condition has been complied with.
In rendering this certification, the Executive Officer made
inquiries of the appropriate employees of the Company and of
advisors to the Company, including but not limited to, its
accountants, actuaries, and attorneys.
IN WITNESS WHEREOF, I have signed this Officers' Certificate and
affixed the corporate seal of the Company.
Dated August 10, 1995.
/s/Robert J. Powell
- -------------------------
Robert Powell
Secretary
IN WITNESS WHEREOF, each of the undersigned officers of the
Company has signed this Officers' Certificate.
Dated August 10, 1995.
/s/William Watts
- -------------------------
William Watts
Vice President/Finance
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
AMERICAN MARKETING WORKS, INC.
RESOLVED, whereas the Company requires
additional working capital to fund its operations;
whereas the Company entered a Credit Agreement, dated
March 31, 1995, with Walsh Greenwood & Co. (the "Credit
Agreement") pursuant to which the Company and its
affiliates borrowed $15,000,000; whereas Walsh Greenwood
& Co. is willing to amend the Credit Agreement to
increase the maximum of borrowing thereunder to
$20,000,000 upon the terms and conditions of a
First Amendment to Credit Agreement (the "Amendment")
presented to the Board, the Company hereby is authorized
and directed to enter the Amendment and all other
agreements and amendments referenced thereby and to borrow
up to $20,000,000 upon the terms specified in the
Amendment; and
FURTHER RESOLVED, that the officers of the Company
be authorized and directed to execute upon behalf of
the Company the Amendment and such other documents,
certificates, and agreements as may be required under
the Amendment or to effect the foregoing resolution.
PROMISSORY NOTE
$20,000,000 New York, New York
August, 1995
FOR VALUE RECEIVED, each of the undersigned, SIGNAL
APPAREL COMPANY, INC., an Indiana corporation ("Signal"), THE
SHIRT SHED, INC., a Delaware corporation ("SSI") and AMERICAN
MARKETING WORKS, INC. ("AMW"), hereby jointly and severally
unconditionally promises to pay on the Maturity Date to the order
of WALSH GREENWOOD & CO. (the "Lender"), at its office located at
One East Putnam Avenue, Greenwich, Connecticut 06830, in lawful
money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a) TWENTY
MILLION DOLLARS ($20,000,000) and (b) the aggregate unpaid
principal amount of all Loans made pursuant to Section 2.1 of the
Credit Agreement referred to below, and to pay interest in like
money at such office on the unpaid principal amount hereof from
time to time on the dates and in the manner as provided in
Section 2.5 of the Credit Agreement, at the rate which is the
lesser of (a) the applicable rate per annum set forth in Section
2.5 of the Credit Agreement, and (b) the maximum rate of interest
which may be charged or collected by the Lender under applicable
law, until paid in full (both before and after judgment).
The holder of this Note is authorized to, and so long as it
holds this Note shall, record the date and amount of each Loan
made by the Lender pursuant to Section 2.1 of the Credit
Agreement, the date and amount of each payment of prepayment of
principal thereof, and any such recordation shall constitute
prima facie evidence of the accuracy of the information so
recorded; provided that failure of the Lender to make any such
recordation (or any error in such recordation) shall not affect
the joint and several obligations of the undersigned under this
Note or under the Credit Agreement.
This Note is the Replacement Note referred to in the First
Amendment to Credit Agreement, dated as of August 10, 1995 (which
together with the Credit Agreement, dated as of March 31, 1995,
and as subsequently amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among the undersigned
and the Lender, is entitled to the benefits thereof, is secured
as provided therein and is subject to optional prepayment in
whole or in part as provided therein. Terms used herein which
are defined in the Credit Agreement shall have such defined
meanings unless otherwise defined herein or unless the context
otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then
remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided therein. The
Borrower expressly waives diligence, presentment, protest, demand
and other notices of any kind.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New
York.
SIGNAL APPAREL COMPANY, INC.
By: /s/William Watts
---------------------------
Name: William Watts
Title: Chief Financial Officer
THE SHIRT SHED, INC.
By: /s/William Watts
---------------------------
Name: William Watts
Title: Chief Financial Officer
AMERICAN MARKETING WORKS, INC.
By: /s/William Watts
---------------------------
Name: William Watts
Title: Vice President - Finance
THIS NOTE IS SUBJECT IN ITS ENTIRETY TO THE INTERCREDITOR
AGREEMENT DATED AS OF THE DATE HEREOF AMONG THE MAKER, WALSH
GREENWOOD & CO., BNY FINANCIAL CORPORATION AND GREYROCK CAPITAL
GROUP, INC., AND NO PAYMENTS MAY BE RECEIVED BY WALSH GREENWOOD &
CO. OR ANY HOLDER HEREOF UNLESS EXPLICITLY PERMITTED THEREBY.
16058V.01!
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.
500,000 Warrants
THIS CERTIFIES THAT, for good and valuable consideration,
the receipt of which is hereby acknowledged, WALSH GREENWOOD &
CO. or its 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 $2.25 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 11).
The Warrants represented hereby are issued on August 10,
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 a Credit Agreement, dated as of March
31, 1995 among the Company, Walsh Greenwood & Co. and certain of
the Company's subsidiaries, as amended by a First Amendment to
Credit Agreement dated as of the date hereof (collectively, the
"Credit Agreement").
Certain terms used in this Warrant Certificate are defined
in Section 11 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 500,000 shares, vesting at the rate of 100,000 shares for each
$1 million in advances drawn by the Company upon the loan
extended under the Credit Agreement (subject to the adjustments
described in Section 5 hereof), 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 17, or its then current address, and
upon payment to the Company of the Exercise Price for the Warrant
Shares being purchased (i) by cash or check or bank draft in New
York Clearing House funds, (ii) by tender of shares of the
Company's Preferred Stock valued at $100,000 per share plus any
accrued but unpaid dividends, or (iii) by the total and complete
reduction of obligations of the Company under the Credit
Agreement in a dollar amount equal to the Exercise Price. 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 expire at the close of business on the Expiration Date;
provided, if such date should not be a Business Day, such
expiration will not occur until the close of business on the next
Business Day.
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; (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. Representations and Warranties. All representations
and warranties contained in Section 5 of the Credit Agreement are
true and correct and incorporated herein as if made by the
Company to the Holders of the Warrants.
4. Registration Rights.
(a) Demand Registration Rights. On any two occasions after
the Issuance Date and prior to the Expiration Date, upon the
request of Holders of at least 51% of the Warrant Shares
originally issued pursuant to this Warrant Certificate which are
then outstanding, which Holders shall request the registration of
such shares under the United States Securities Act of 1933, as
amended (provided that such request covers an aggregate of at
least 250,000 Warrant Shares), the Company shall file with the
Commission and use its best efforts to cause to become effective
as promptly as practicable (subject to the following sentence) a
registration statement covering at least all of the Warrant
Shares requested to be registered by such requesting Holders (any
Holders of Warrant Shares requesting registration under this
Section 4(a) are "Selling Holders"), all to the extent requisite
to permit the exercise or disposition in the United States, as
the case may be, by the Selling Holders of the Warrant 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 a previous United States public offering, (ii) if the
Company has given notice to the Holders of Warrants that the
Company expects to file a registration statement within 30 days
and 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 three such Demand Registrations with
respect to all or a portion of the Warrant 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 on of the three rights to
demand registration grnated by this Section. The Company shall
promptly give written notice to all Holders of the Warrants and
the Warrant Shares of the receipt by it of a request for a Demand
Registration pursuant to 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 and/or Warrant Shares
proposed to be registered (all such securities proposed to be
registered, the "Registrable Securities"), the Registrable
Securities shall be included in the Demand Registration in the
following priority: first, the Registrable Securities held by
the Holders of Warrant Shares in proportion to the respective
numbers of Registrable Securities proposed to be sold by them,
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 a Holder or
Holders shall have requested a Demand Registration and the
Company shall have thereafter withdrawn such registration
statement, in addition to such other rights and remedies that the
Holders may be entitled to, such withdrawn registration shall not
be deemed to be one of the registration statements that may be
requested pursuant to this Section 4(a). The Holder agrees to
exercise all Warrants for which it has demanded registration of
Warrant Shares on the effective date of such registration.
(b) United States Federal and State Approval. The Company
shall effect the registration or qualification of the Warrant
Shares registered pursuant to this Section 4(a) and shall give
such notifications to, or receive approvals of, any governmental
authority under United States federal or, if reasonably requested
by the Selling Holders, any United States state securities laws,
or any other applicable law, or effect listing with any
securities exchange on which the Common Stock is listed at such
time, as may be necessary to permit the sale of the Warrants
and/or the exercise of the Warrants and the sale of Warrant
Shares in the manner proposed by the Selling Holders; provided,
the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, to subject itself to
taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction.
(c) Expenses. Subject to the limitations contained in this
paragraph (c) and except as otherwise specifically provided in
this Section 4, the entire costs and expenses of each
registration and qualification pursuant to this Section 4,
whether or not such registration shall become effective or shall
be consummated, shall be borne by the Company. Such costs and
expenses shall include the fees and expenses of counsel for the
Company and of its accountants (including the cost of any special
audit required by or incidental to such registration), all other
costs and expenses of the Company incident to the preparation,
printing and filing under the Securities Act of the registration
statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of the Warrant Shares
and the costs and expenses (including fees and disbursements of
counsel) incurred by the Company in connection with the
qualification of the Warrant Shares under the Blue Sky laws of
various jurisdictions.
(d) Procedures. In the case of each registration or
qualification pursuant to this Section 4, the Company will keep
all Holders of Warrants advised in writing as to the initiation
of proceedings for such registration and qualification and as to
the completion thereof, and will advise any such Holders, upon
request, of the progress of such proceedings. At its expense, the
Company will promptly prepare and in any event, except as
otherwise expressly provided herein, within 90 days after the end
of the period within which requests for registration may be given
to the Company, file with the Commission a registration statement
with respect to the securities to be registered and use its best
efforts to cause such registration statement to become effective
and keep such registration and qualification in effect by such
action as may be necessary or appropriate, including, without
limitation, the filing of post-effective amendments and
supplements to any registration statement or prospectus necessary
to keep the registration statement current and further
qualification under any applicable Blue Sky or other state
securities laws to permit such sale or distribution, all as
reasonably requested by such Holder or Holders. At its expense,
the Company will furnish to each Holder whose Warrants and/or
Warrant Shares are included therein, at such Holder's
expense,such number of copies of such registration statement and
of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
included in such registration statement and covering such
Holder's Warrant Shares (including each preliminary prospectus),
in conformity with the requirements of the Securities Act, and
such other documents as such Holder may reasonably request in
order to facilitate the disposition of such Holder's Warrant
Shares contemplated in such registration statement. The Company
will notify each Selling Holder of any securities covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, or of any other occurrence which,
under applicable securities laws, requires the prospectus to be
revised or updated (and upon receipt of such notice and until a
supplemented or amended prospectus as set forth below is
available, each Selling Holder will cease to offer or sell any
securities covered by the registration statement and will return
all copies of the prospectus to the Company if requested to do so
by it and will not sell any security of the Company until
provided with a current prospectus and notice for the Company
that it may resume its selling efforts). At the request of any
such Selling Holder, the Company shall furnish to such Selling
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing. Notwithstanding
anything to the contrary herein, any prospective Selling Holder
may withdraw from a registration under this Section 4 any or all
of his Warrant Shares, upon written notice to the Company given
prior to the execution and delivery by such Selling Holder of a
binding underwriting agreement with the prospective underwriters.
(e) Cross-Indemnity and Contribution Agreements. In
connection with the registration of Warrant Shares in accordance
with this Section 4, the Company agrees to enter into an
appropriate cross-indemnity agreement and a contribution
agreement, each in customary form, with each underwriter, if any,
and each Holder of Warrant Shares included in such registration
statement; and, if requested, enter into an underwriting
agreement containing conventional representations, warranties,
allocation of expenses, and customary closing conditions
including, but not limited to, opinions of counsel and
accountants' comfort letters, with any underwriter who acquires
the Warrant Shares.
(f) Cooperation of Selling Holders. Every Selling Holder
who has any Warrant Shares included in a registration statement
agrees as follows:
(i) To furnish the Company, in writing, such
appropriate information and covenants regarding the proposed
methods of sale or other disposition of the Warrant Shares
as the Company, any underwriter, the Commission and/or any
state or other regulatory authority may request;
(ii) To execute, deliver and/or file with or supply to
the Company, any underwriter, the Commission and/or any
state or other regulatory authority such information,
documents, representations, undertakings and/or agreements
as are (A) necessary to carry out the provisions of this
Warrant Certificate, (B) necessary to effect the
registration or qualification of the Warrant Shares under
the Securities Act and/or any of the laws and regulations of
any jurisdiction, and (C) as the Company may reasonably
require to ensure the transfer or disposition of the Warrant
Shares is not in violation of the Securities Act or any
applicable state securities laws;
(iii) To furnish to the Company, not later than every
thirty (30) days after the date of effectiveness of the
registration statement, a report of the number of Warrant
Shares sold during such thirty (30) day period; and
(iv) To cancel any orders to sell and/or to reverse
any sale of Warrant Shares which, in the reasonable belief
of the Company, based upon the opinion of legal counsel
experienced in securities law matters, orders and/or sales
were effected in violation of the Securities Act or any
applicable State securities laws.
5. 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 the Aggregate Number shall
be deemed to be the Aggregate Number hereunder as adjusted.
(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 the Holder or Holders of Warrants shall
thereafter be entitled to receive, upon exercise thereof, the
number of shares of Common Stock that such Holder or Holders
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 the Holder or Holders of Warrants 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 such Holder or Holders (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 5.
(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 5(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 Floating Rate
Warrants issued pursuant to the Credit Agreement, and (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 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 Corporation 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 5.
(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 5 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 on the basis of:
(x) treating the number of additional shares
of Common Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise of such
warrants or rights or such right of conversion or
exchange as having been issued on the date or dates of
such exercise and for the consideration actually
received and receivable therefor, 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, such new adjustment shall
supersede the previous adjustments rescinded and annulled.
(g) If the Company redeems or exchanges all or any portion
of its Series A or Series C Preferred Stock through the issuance
or exchange of the Company's Common Stock, the Aggregate Number
shall be adjusted by multiplying such Aggregate Number by a
fraction the numerator of which is the total number of issued and
outstanding shares of the Company's Common Stock immediately
prior to such redemption or exchange plus the total of all shares
of the Company's Common Stock issued in exchange for the redeemed
or exchanged Preferred Stock and the denominator of which is the
total number of issued and outstanding shares of the Company's
Common Stock immediately prior to such redemption or exchange.
(h) The following provisions shall be applicable to the
making of adjustments of the Aggregate Number hereinbefore
provided for in this Section 5:
(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 5.
(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 solely 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, or (y)
are offered by the Company for subscription, the
consideration received by the Company shall be deemed to be
the subscription price.
(iii) The adjustments required by the preceding
paragraphs of this Section 5 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 5
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.
(i) If any event occurs as to which the other provisions of
this Section 5 are not strictly applicable but the lack of any
provision for the exercise of the rights of a Holder or Holders
of Warrants would not fairly protect the purchase rights of such
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, or, if strictly
applicable, would not fairly protect the conversion rights of the
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, then the Company shall
appoint a firm or 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 the 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 5, the exercise rights of the Holders
of Warrants. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
(j) 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 5, and at any time upon the
request of any Holder of Warrants, the Company shall cause to be
promptly mailed to each 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 the Holder(s) (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.
(k) The occurrence of a single event shall not trigger an
adjustment of the Aggregate Number under more than one paragraph
of this Section 5.
6. Taxes on Conversion. The issuance of certificates for
Warrant Shares upon the exercise of the Warrants shall be made
without charge to the 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, the
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 the 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.
7. Limitation of Liability. No provision hereof in the
absence of the exercise of the Warrants by the Holder and no
enumeration herein of the rights or privileges of the Holder
shall give rise to any liability on the part of the 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.
8. 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.
9. 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 each Holder of any Warrants in supplying such
information as may be necessary for such 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 any 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.
10. Restrictions on Transfer.
10.1 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 10) 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 13, 14 or 15 and each
Warrant Certificate issued upon the transfer of any Warrant
(except as otherwise permitted by this Section 10) 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."
10.2 Termination of Restrictions. The restrictions imposed
by this Section 10 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 the Holder thereof 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, the Holder thereof shall be
entitled to receive from the Company, without expense, new
certificates of like tenor not bearing the restrictive legends
set forth in Section 10.1.
11. 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 5.
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, con-solidations 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.
Credit Agreement: the Credit Agreement, dated as of
March 31, 1995, among the Company, Walsh Greenwood & Co. and
certain of the Company's subsidiaries as amended by the
First Amendment to Credit Agreement, dated as of August 10,
1995.
Demand Registration: as set forth in Section 4.1(a)
hereof.
Distribution: shall have the meaning specified in
Section 5(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 earlier of three years from the date the last Warrants
vest or three years from the Termination Date of the Credit
Agreement.
Issuance Date: August 10, 1995.
Holder or Holders: as set forth in the first paragraph
of this Warrant Certificate.
KKEP Agreement: as set forth in Section 4(a) hereof.
Options: as set forth in Section 5(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 reclas-
sifications 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 4(a)
hereof.
Securities Act: the United States Securities Act of
1933, as amended (or any successor statute).
Selling Holders: as set forth in Section 4(a) hereof.
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.
12. Acquisition of Warrants. Holder represents that it is
acquiring the Warrants represented by this Warrant Certificate
and, upon any exercise of such Warrants, will acquire Common
Stock hereunder for its 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 the Holder. The Holder further
represents and acknowledges that it is an "Accredited Investor"
within the meaning of Regulation D under the Securities Act.
13. Warrants Transferable. These Warrants are issued as
unregistered Warrants. Subject to the provisions of Section 10,
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 the Holder hereof 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 Paragraph 1 shall be
transferable, and the replacement Warrant Certificate(s) shall
indicate that such Warrants are fully vested.
14. Warrant Certificates Exchangeable for Different
Denominations. This Warrant Certificate is exchangeable, upon
the surrender hereof by the 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 such Holder at the
time of such surrender. Such Warrant Certificate shall not be
valid until duly executed by the Company.
15. 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.
16. Certificate Rights and Obligations Survive Exercise of
Warrants. The rights and obligations of the Company contained
herein shall survive until the exercise of all of the Warrants or
the Expiration Date, whichever is earlier.
17. Notices. All notices, requests and other
communications required or permitted to be given or delivered to
the Holders of Warrants 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 each Holder at
the address shown on such Holder's Warrant certificate, or at
such other address as shall have been furnished to the Company by
notice from such 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 the Holders of Warrants 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 17,
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.
18. 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, provided that any change or
waiver of any term or provision hereof, and any consent or
direction given hereunder by the Holders may be effected by the
Holders of 51% in interest of the Warrants originally issued
pursuant to this Warrant Certificate on the Issuance Date, except
that no change or waiver that would (i) increase the Exercise
Price of any Warrant or reduce the Aggregate Number, (ii)
change or waive any of the provisions of Section 4 in
connection with the registration rights of Holders of Warrants
or (iii) change or waive any of the provisions of this Section
18 as to the requisite percentage of the Holders of the
Warrants required to effect any change or wavier of any
provision of this Warrant Certificate, shall be effective as to
any Holder without the consent of such Holder.
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 August 10, 1995.
SIGNAL APPAREL COMPANY, INC.
By /s/William H. Watts, CFO
--------------------------
Schedule 1
EXERCISE FORM FOR CASH EXERCISE
[To be executed only upon exercise of Warrant with cash payment
of exercise price]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being in cash or by check or bank draft in New York
Clearing House funds payable to the order of Signal Apparel
Company, Inc., all at the exercise price and on the terms and
conditions specified in the within Warrant Certificate,
surrenders the within Warrant Certificate and all right, title
and interest therein (except as to any unexercised Warrants) to
Signal Apparel Company, Inc. and directs that the shares of
Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified
below and delivered thereto.
Date:_______________________
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
EXERCISE FORM FOR EXERCISE WITH PREFERRED SHARES
[To be executed only upon exercise of Warrant with payment of
exercise price in shares of the Company's Preferred Stock]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being made through surrender of shares of the
Preferred Stock of SIGNAL APPAREL COMPANY, INC., having a stated
value equal to such amount plus all accrued but unpiad dividends)
all at the exercise price and on the terms and conditions
specified in the within Warrant Certificate, surrenders the
within Warrant Certificate and all right, title and interest
therein (except as to any unexercised Warrants) to SIGNAL APPAREL
COMPANY, INC. and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or
placed in the name and at the address specified below and
delivered thereto.
Date:_______________________
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
EXERCISE FORM FOR EXERCISE THROUGH DEBT CANCELLATION
[To be executed only upon exercise of Warrant with payment of
exercise price through cancellation of the Company's indebtedness
under the related Credit Agreement]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being made through extinguishment of an equal
amount of the principal debt due to the undersigned pursuant to
that certain Credit Agreement dated as of March ___, 1995 among
SIGNAL APPAREL COMPANY, INC., WALSH GREENWOOD & CO. and certain
subsidiaries of Signal Apparel Company, Inc.), all at the
exercise price and on the terms and conditions specified in the
within Warrant Certificate, surrenders the within Warrant
Certificate and all right, title and interest therein (except as
to any unexercised Warrants) to SIGNAL APPAREL COMPANY, INC. and
directs that the shares of Common Stock deliverable upon the
exercise of such Warrants be registered or placed in the name and
at the address specified below and delivered thereto.
Date:_______________________
WALSH GREENWOOD & CO.
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
Schedule 2
FORM OF TRANSFER
FOR VALUE RECEIVED the undersigned registered Holder of the
within Warrant Certificate hereby transfers to the Assignee(s)
named below the following number of Warrants:
Names of Number of
Assignees Address Warrants
Date:_______________________
___________________________(1)
(Signature of Holder)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
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.
500,000 Warrants
THIS CERTIFIES THAT, for good and valuable consideration,
the receipt of which is hereby acknowledged, WALSH GREENWOOD &
CO. or its 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 per share (the "EXERCISE PRICE") equal to
seventy-five percent (75%) of the of "Prevailing Market Price" as
defined in Section 11 (calculated, however, over a period of
twenty (20) consecutive trading days beginning on Monday,
December 2, 1996, rather than over a period of 30 consecutive
trading days preceding such date). 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 11).
The Warrants represented hereby are issued on August 10,
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 a Credit Agreement, dated as of March
31, 1995 among the Company, Walsh Greenwood & Co. and certain of
the Company's subsidiaries as amended by the First Amendment to
Credit Agreement, dated as of the dated hereof (collectively, the
"CREDIT AGREEMENT").
Certain terms used in this Warrant Certificate are defined
in Section 11 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 500,000 shares, (subject to the adjustments described in
Section 5 hereof), 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 17, or its then current address, and upon
payment to the Company of the Exercise Price for the Warrant
Shares being purchased (i) by cash or check or bank draft in New
York Clearing House funds, (ii) by tender of shares of the
Company's Preferred Stock valued at $100,000 per share plus any
accrued but unpaid dividends, or (iii) by the total and complete
reduction of obligations of the Company under the Credit
Agreement in a dollar amount equal to the Exercise Price. 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 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 immediately upon the execution by the Company of this
Warrant Certificate on the Issuance Date; PROVIDED, HOWEVER, that
the Warrants represented hereby shall be exercisable by the
Holder during a period commencing on January 1, 1997 and expiring
at the close of business on the Expiration Date (provided, if
such date should not be a Business Day, such expiration will not
occur until the close of business on the next Business Day).
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; (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. REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in Section 5 of the Credit Agreement are
true and correct and incorporated herein as if made by the
Company to the Holders of the Warrants.
4. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. On any two occasions after
the Issuance Date and prior to the Expiration Date, upon the
request of Holders of at least 51% of the Warrant Shares
originally issued pursuant to this Warrant Certificate which are
then outstanding, which Holders shall request the registration of
such shares under the United States Securities Act of 1933, as
amended (provided that such request covers an aggregate of at
least 250,000 Warrant Shares), the Company shall file with the
Commission and use its best efforts to cause to become effective
as promptly as practicable (subject to the following sentence) a
registration statement covering at least all of the Warrant
Shares requested to be registered by such requesting Holders (any
Holders of Warrant Shares requesting registration under this
Section 4(a) are "SELLING HOLDERS"), all to the extent requisite
to permit the exercise or disposition in the United States, as
the case may be, by the Selling Holders of the Warrant 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 a previous United States public offering, (ii) if the
Company has given notice to the Holders of Warrants that the
Company expects to file a registration statement within 30 days
and 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 three such Demand Registrations with
respect to all or a portion of the Warrant 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 on of the three rights to
demand registration grnated by this Section.
The Company shall promptly give written notice to all Holders of
the Warrants and the Warrant Shares of the receipt by it of a
request for a Demand Registration pursuant to 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 and/or Warrant
Shares proposed to be registered (all such securities proposed to
be registered, the "REGISTRABLE SECURITIES"), the Registrable
Securities shall be included in the Demand Registration in the
following priority: first, the Registrable Securities held by
the Holders of Warrant Shares in proportion to the respective
numbers of Registrable Securities proposed to be sold by them,
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 a Holder or
Holders shall have requested a Demand Registration and the
Company shall have thereafter withdrawn such registration
statement, in addition to such other rights and remedies that the
Holders may be entitled to, such withdrawn registration shall not
be deemed to be one of the registration statements that may be
requested pursuant to this Section 4(a). The Holder agrees to
exercise all Warrants for which it has demanded registration of
Warrant Shares on the effective date of such registration.
(b) UNITED STATES FEDERAL AND STATE APPROVAL. The Company
shall effect the registration or qualification of the Warrant
Shares registered pursuant to this Section 4(a) and shall give
such notifications to, or receive approvals of, any governmental
authority under United States federal or, if reasonably requested
by the Selling Holders, any United States state securities laws,
or any other applicable law, or effect listing with any
securities exchange on which the Common Stock is listed at such
time, as may be necessary to permit the sale of the Warrants
and/or the exercise of the Warrants and the sale of Warrant
Shares in the manner proposed by the Selling Holders; provided,
the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, to subject itself to
taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction.
(c) EXPENSES. Subject to the limitations contained in this
paragraph (c) and except as otherwise specifically provided in
this Section 4, the entire costs and expenses of each
registration and qualification pursuant to this Section 4,
whether or not any such registration shall become effective or
shall be consummated, shall be borne by the Company. Such costs
and expenses shall include the fees and expenses of counsel for
the Company and of its accountants (including the cost of any
special audit required by or incidental to such registration),
all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the
registration statement and all amendments and supplements
thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers
of the Warrant Shares and the costs and expenses (including fees
and disbursements of counsel) incurred by the Company in
connection with the qualification of the Warrant Shares under the
Blue Sky laws of various jurisdictions.
(d) PROCEDURES. In the case of each registration or
qualification pursuant to this Section 4, the Company will keep
all Holders of Warrants advised in writing as to the initiation
of proceedings for such registration and qualification and as to
the completion thereof, and will advise any such Holders, upon
request, of the progress of such proceedings. At its expense, the
Company will promptly prepare and in any event, except as
otherwise expressly provided herein, within 90 days after the end
of the period within which requests for registration may be given
to the Company, file with the Commission a registration statement
with respect to the securities to be registered and use its best
efforts to cause such registration statement to become effective
and keep such registration and qualification in effect by such
action as may be necessary or appropriate, including, without
limitation, the filing of post-effective amendments and
supplements to any registration statement or prospectus necessary
to keep the registration statement current and further
qualification under any applicable Blue Sky or other state
securities laws to permit such sale or distribution, all as
reasonably requested by such Holder or Holders. At its expense,
the Company will furnish to each Holder whose Warrants and/or
Warrant Shares are included therein such number of copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement
and covering such Holder's Warrant Shares (including each
preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the disposition of such
Holder's Warrant Shares contemplated in such registration
statement. The Company will notify each Selling Holder of any
securities covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, or of
any other occurrence which, under applicable securities laws,
requires the prospectus to be revised or updated (and upon
receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, each Selling Holder
will cease to offer or sell any securities covered by the
registration statement and will return all copies of the
prospectus to the Company if requested to do so by it and will
not sell any security of the Company until provided with a
current prospectus and notice for the Company that it may resume
its selling efforts). At the request of any such Selling Holder,
the Company shall furnish to such Selling Holder a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statement therein not misleading in the light of the
circumstances then existing. Notwithstanding anything to the
contrary herein, any prospective Selling Holder may withdraw from
a registration under this Section 4 any or all of his Warrant
Shares, upon written notice to the Company given prior to the
execution and delivery by such Selling Holder of a binding
underwriting agreement with the prospective underwriters.
(e) CROSS-INDEMNITY AND CONTRIBUTION AGREEMENTS. In
connection with the registration of Warrant Shares in accordance
with this Section 4, the Company agrees to enter into an
appropriate cross-indemnity agreement and a contribution
agreement, each in customary form, with each underwriter, if any,
and each Holder of Warrant Shares included in such registration
statement; and, if requested, enter into an underwriting
agreement containing conventional representations, warranties,
allocation of expenses, and customary closing conditions
including, but not limited to, opinions of counsel and
accountants' comfort letters, with any underwriter who acquires
the Warrant Shares.
(f) COOPERATION OF SELLING HOLDERS. Every Selling Holder
who has any Warrant Shares included in a registration statement
agrees as follows:
(i) To furnish the Company, in writing, such
appropriate information and covenants regarding the proposed
methods of sale or other disposition of the Warrant Shares
as the Company, any underwriter, the Commission and/or any
state or other regulatory authority may request;
(ii) To execute, deliver and/or file with or supply to
the Company, any underwriter, the Commission and/or any
state or other regulatory authority such information,
documents, representations, undertakings and/or agreements
as are (A) necessary to carry out the provisions of this
Warrant Certificate, (B) necessary to effect the
registration or qualification of the Warrant Shares under
the Securities Act and/or any of the laws and regulations of
any jurisdiction, and (C) as the Company may reasonably
require to ensure the transfer or disposition of the Warrant
Shares is not in violation of the Securities Act or any
applicable state securities laws;
(iii) To furnish to the Company, not later than every
thirty (30) days after the date of effectiveness of the
registration statement, a report of the number of Warrant
Shares sold during such thirty (30) day period; and
(iv) To cancel any orders to sell and/or to reverse
any sale of Warrant Shares which, in the reasonable belief
of the Company, based upon the opinion of legal counsel
experienced in securities law matters, orders and/or sales
were effected in violation of the Securities Act or any
applicable State securities laws.
5. 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,
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or
(iv) issue its Common Stock in redemption of any of the
outstanding shares of the Company's Preferred Stock, stated
value $100,000,
then the Aggregate Number in effect immediately prior thereto
shall be adjusted so that the Holder or Holders of Warrants shall
thereafter be entitled to receive, upon exercise thereof, the
number of shares of Common Stock that such Holder or Holders
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 the Holder or Holders of Warrants 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 such Holder or Holders (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 5.
(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 5(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 Floating Rate
Warrants issued pursuant to the Credit Agreement, and (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 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 Corporation 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 5.
(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 5 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 on the basis of:
(x) treating the number of additional shares
of Common Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise of such
warrants or rights or such right of conversion or
exchange as having been issued on the date or dates of
such exercise and for the consideration actually
received and receivable therefor, 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, such new adjustment shall
supersede the previous adjustments rescinded and annulled.
(g) If the Company redeems or exchanges all or any portion
of its Series A or Series C Preferred Stock through the issuance
or exchange of the Company's Common Stock, the Aggregate Number
shall be adjusted by multiplying such Aggregate Number by a
fraction the numerator of which is the total number of issued and
outstanding shares of the Company's Common Stock immediately
prior to such redemption or exchange plus the total of all shares
of the Company's Common Stock issued in exchange for the redeemed
or exchanged Preferred Stock and the denominator of which is the
total number of issued and outstanding shares of the Company's
Common Stock immediately prior to such redemption or exchange.
(h) The following provisions shall be applicable to the
making of adjustments of the Aggregate Number hereinbefore
provided for in this Section 5:
(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 5.
(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 solely 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, or (y)
are offered by the Company for subscription, the
consideration received by the Company shall be deemed to be
the subscription price.
(iii) The adjustments required by the preceding
paragraphs of this Section 5 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 5
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.
(i) If any event occurs as to which the other provisions of
this Section 5 are not strictly applicable but the lack of any
provision for the exercise of the rights of a Holder or Holders
of Warrants would not fairly protect the purchase rights of such
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, or, if strictly
applicable, would not fairly protect the conversion rights of the
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, then the Company shall
appoint a firm or 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 the 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 5, the exercise rights of the Holders
of Warrants. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
(j) 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 5, and at any time upon the
request of any Holder of Warrants, the Company shall cause to be
promptly mailed to each 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 the Holder(s) (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.
(k) The occurrence of a single event shall not trigger an
adjustment of the Aggregate Number under more than one paragraph
of this Section 5.
6. TAXES ON CONVERSION. The issuance of certificates for
Warrant Shares upon the exercise of the Warrants shall be made
without charge to the 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, the
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 the 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.
7. LIMITATION OF LIABILITY. No provision hereof in the
absence of the exercise of the Warrants by the Holder and no
enumeration herein of the rights or privileges of the Holder
shall give rise to any liability on the part of the 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.
8. 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.
9. 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 each Holder of any Warrants in supplying such
information as may be necessary for such 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 any 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.
10. RESTRICTIONS ON TRANSFER.
10.1 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 10) 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 13, 14 or 15 and each
Warrant Certificate issued upon the transfer of any Warrant
(except as otherwise permitted by this Section 10) 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."
10.2 TERMINATION OF RESTRICTIONS. The restrictions imposed
by this Section 10 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 the Holder thereof 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, the Holder thereof shall be
entitled to receive from the Company, without expense, new
certificates of like tenor not bearing the restrictive legends
set forth in Section 10.1.
11. 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 5.
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.
CREDIT AGREEMENT: the Credit Agreement, dated as of
March 31, 1995, among the Company, Walsh Greenwood & Co. and
certain of the Company's subsidiaries and the original
Holder hereof on the Issuance Date, as amended by the First
Amendment to Credit Agreement, dated as of August 10, 1995.
DEMAND REGISTRATION: as set forth in Section 4(a)
hereof.
DISTRIBUTION: shall have the meaning specified in
Section 5(b).
EXERCISE PRICE: as set forth in the first paragraph of
this Warrant Certificate.
EXPIRATION DATE: January 1, 2000.
ISSUANCE DATE: August 10, 1995.
HOLDER OR HOLDERS: as set forth in the first paragraph
of this Warrant Certificate.
KKEP AGREEMENT: as set forth in Section 4(a) hereof.
OPTIONS: as set forth in Section 5(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 Company 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 4(a)
hereof.
SECURITIES ACT: the United States Securities Act of
1933, as amended (or any successor statute).
SELLING HOLDERS: as set forth in Section 4(a) hereof.
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.
12. ACQUISITION OF WARRANTS. Holder represents that it is
acquiring the Warrants represented by this Warrant Certificate
and, upon any exercise of such Warrants, will acquire Common
Stock hereunder for its 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 the Holder. The Holder further
represents and acknowledges that it is an "ACCREDITED INVESTOR"
within the meaning of Regulation D under the Securities Act.
13. WARRANTS TRANSFERABLE. These Warrants are issued as
registered Warrants. Subject to the provisions of Section 10,
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 the Holder hereof 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.
14. WARRANT CERTIFICATES EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Warrant Certificate is exchangeable, upon
the surrender hereof by the 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 such Holder at the
time of such surrender. Such Warrant Certificate shall not be
valid until duly executed by the Company.
15. 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.
16. CERTIFICATE RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF
WARRANTS. The rights and obligations of the Company contained
herein shall survive until the exercise of all of the Warrants or
the Expiration Date, whichever is earlier.
17. NOTICES. All notices, requests and other
communications required or permitted to be given or delivered to
the Holders of Warrants 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 each Holder at
the address shown on such Holder's Warrant certificate, or at
such other address as shall have been furnished to the Company by
notice from such 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 the Holders of Warrants 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 17,
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.
18. 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, provided that any change or
waiver of any term or provision hereof, and any consent or
direction given hereunder by the Holders may be effected by the
Holders of 51% in interest of the Warrants originally issued
pursuant to this Warrant Certificate on the Issuance Date, except
that no change or waiver that would (i) increase the Exercise
Price of any Warrant or reduce the Aggregate Number, (ii) change
or waive any of the provisions of Section 4 in connection with
the registration rights of Holders of Warrants or (iii) change or
waive any of the provisions of this Section 18 as to the
requisite percentage of the Holders of the Warrants required to
effect any change or wavier of any provision of this Warrant
Certificate, shall be effective as to any Holder without the
consent of such Holder.
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 August , 1995.
SIGNAL APPAREL COMPANY, INC.
By /s/William Watts, CFO
-------------------------
SCHEDULE 1
EXERCISE FORM FOR CASH EXERCISE
[To be executed only upon exercise of Warrant with cash payment
of exercise price]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being in cash or by check or bank draft in New York
Clearing House funds payable to the order of Signal Apparel
Company, Inc., all at the exercise price and on the terms and
conditions specified in the within Warrant Certificate,
surrenders the within Warrant Certificate and all right, title
and interest therein (except as to any unexercised Warrants) to
Signal Apparel Company, Inc. and directs that the shares of
Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified
below and delivered thereto.
Date:_______________________
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
EXERCISE FORM FOR EXERCISE WITH PREFERRED SHARES
[To be executed only upon exercise of Warrant with payment of
exercise price in shares of the Company's Preferred Stock]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being made through surrender of shares of the
Preferred Stock of SIGNAL APPAREL COMPANY, INC., having a stated
value equal to such amount plus all accrued but unpaid dividends
thereon) all at the exercise price and on the terms and
conditions specified in the within Warrant Certificate,
surrenders the within Warrant Certificate and all right, title
and interest therein (except as to any unexercised Warrants) to
SIGNAL APPAREL COMPANY, INC. and directs that the shares of
Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified
below and delivered thereto.
Date:_______________________
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
EXERCISE FORM FOR EXERCISE THROUGH DEBT CANCELLATION
[To be executed only upon exercise of Warrant with payment of
exercise price through cancellation of the Company's indebtedness
under the related Credit Agreement]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of
the Warrants for the purchase of one share (subject to
adjustment) of Common Stock, $.01 par value per share, of SIGNAL
APPAREL COMPANY, INC. for each Warrant represented by the within
Warrant Certificate and herewith makes payment of $_________
(such payment being made through extinguishment of an equal
amount of the principal debt due to the undersigned pursuant to
that certain Credit Agreement dated as of March ___, 1995 among
SIGNAL APPAREL COMPANY, INC., WALSH GREENWOOD & CO. and certain
subsidiaries of Signal Apparel Company, Inc.), all at the
exercise price and on the terms and conditions specified in the
within Warrant Certificate, surrenders the within Warrant
Certificate and all right, title and interest therein (except as
to any unexercised Warrants) to SIGNAL APPAREL COMPANY, INC. and
directs that the shares of Common Stock deliverable upon the
exercise of such Warrants be registered or placed in the name and
at the address specified below and delivered thereto.
Date:_______________________
______________________________
(Signature of Owner)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Address:
SCHEDULE 2
FORM OF TRANSFER
FOR VALUE RECEIVED the undersigned registered Holder of the
within Warrant Certificate hereby transfers to the Assignee(s)
named below the following number of Warrants:
NAMES OF NUMBER OF
ASSIGNEES ADDRESS WARRANTS
Date:_______________________
___________________________(1)
(Signature of Holder)
______________________________
______________________________
(Address)
________________________
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
Prepared by and Return To:
Geoffrey G. Young
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, Tennessee 37402
FIRST AMENDMENT TO TENNESSEE DEED OF TRUST AND
SECURITY AGREEMENT
STATE OF TENNESSEE
COUNTY OF HAMILTON
THIS FIRST AMENDMENT TO TENNESSEE DEED OF TRUST AND
SECURITY AGREEMENT (hereinafter referred to as this
"Amendment"), made this the 10th day of August, 1995,
between SIGNAL APPAREL COMPANY, INC., an Indiana
corporation, as Grantor, and WALSH GREENWOOD & CO., as
Grantee, whose address is One East Putnam Avenue,
Greenwich, Connecticut 06830.
WITNESSETH:
THIS IS AN AMENDMENT TO A TENNESSEE DEED OF TRUST
AND SECURITY AGREEMENT RECORDED AT DEED OF TRUST
BOOK 182 BEGINNING AT PAGE 434.
AS A RESULT OF THIS AMENDMENT, THE MAXIMUM
PRINCIPAL INDEBTEDNESS FOR TENNESSEE RECORDING TAX
PURPOSES IS $20,000,000.00.
WHEREAS, the parties entered a Credit Agreement,
dated as of March 31, 1995, pursuant to which Grantee
agreed to loan to Grantor a maximum principal amount of
$15,000,000 (the "Credit Agreement"), which borrowing was
evidenced by a Term Promissory Note in the face amount of
$15,000,000 (the "Note"); and
WHEREAS, all obligations of Grantor under the Credit
Agreement and the Note were secured by a Tennessee Deed of
Trust and Security Agreement recorded in Deed of Trust
Book 182 beginning at Page 434 in the Office of the
Register of Deeds of Claiborne County, Tennessee (the
"Deed of Trust"); and
WHEREAS, the parties have executed a First Amendment
to Credit Agreement, dated as of August 10, 1995 (the
"Amendment"), by which, among other things, the Credit
Agreement was amended to increase the maximum borrowing
amount to $20,000,000 and pursuant to which Grantor has
executed and delivered to Grantee a Replacement Promissory
Note in the face amount of $20,000,000 (the "Replacement
Note") which replaces the Note; and
WHEREAS, the parties desire to amend the Deed of
Trust to reflect the terms of the Amendment and the
additional borrowing under the Replacement Note.
NOW, THEREFORE, for and in consideration of the
foregoing, the parties agree as follows:
1. The Credit Agreement shall be amended in
accordance with the terms of the Amendment.
2. The Deed of Trust shall be amended to reflect
the terms of the Amendment, including the increase of the
maximum principal amount of authorized borrowing to
$20,000,000.
3. All references in the Deed of Trust to the
Credit Agreement shall mean the Credit Agreement as
amended by the Amendment.
4. All references in the Deed of Trust to
Indebtedness shall mean indebtedness under the Credit
Agreement as amended by the Amendment.
5. All references to a maximum principal amount of
borrowing of $15,000,000 shall be amended to reference a
maximum principal amount of borrowing of $20,000,000.
6. All other provisions of the Deed of Trust not
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, Grantor has executed this Deed
of Trust under seal the day and year first above written.
SIGNAL APPAREL COMPANY, INC.,
By:/s/William H. Watts
--------------------
Title: CFO
-----------------
STATE OF TENNESSEE]
COUNTY OF HAMILTON]
Personally appeared before me, a Notary Public in and for
the County aforesaid, William Watts, with whom
I am personally acquainted (or proved to me on the basis
of satisfactory evidence), and who upon oath acknowledged
such person to be the Chief Financial Officer of Signal
Apparel Company, Inc., the within named Grantee, a
corporation, and that he executed the within instrument
for the purposes therein contained by personally signing
on behalf of such corporation as such officer.
Witness my hand, at office, this the 10th day of August,
1995.
/s/Pamela B. Clingan
- ----------------------
Notary Public
My Commission Expires: 5/18/99
-------------
AFFIDAVIT OF VALUE
STATE OF TENNESSEE}
COUNTY OF HAMILTON}
DEBTOR: SIGNAL APPAREL COMPANY, INC.
SECURED PARTY: WALSH GREENWOOD & CO.
Personally appeared before me, a Notary Public in and
for the County aforesaid, William Watts, with whom I am
personally acquainted (or proved to me on the basis of
satisfactory evidence), and who upon oath acknowledged himself
to be the Chief Financial Officer of Signal Apparel Company,
Inc., and who did depose and state as follows:
1. Debtor owns real property located in Claiborne
County, Tennessee subject to the encumbrances, security
interest or lien evidenced by a Deed of Trust recorded at
Book 182, Page 434, Register's Office of Claiborne County
and by the instrument being filed herewith. This instrument
amends the previous Deed of Trust, for which the transfer
tax has been paid.
2. THE MAXIMUM PRINCIPAL INDEBTEDNESS FOR
TENNESSEE RECORDING TAX PURPOSES is $20,000,000. The
value of the collateral everywhere is $37,341,000.
3. If further advances are made or if contingent
liabilities mature which result in the maximum principal
indebtedness secured by said property exceeding the amount set
forth in Paragraph 2 above, then an amended filing shall be
made and the additional tax shall be paid. The priority of
the encumbrance, security interest or lien covering all advances
and contingent liabilities shall, in any event, be no later
than the time of filing of the instruments referred to in
Paragraph 1 above.
4. The amount of indebtedness stated above is made in
good faith and for the sole purpose of determining
privilege tax liability under TCA 67-4-409. it is to be
understood clearly by any persons to discover this Affidavit
among the public records of the State of Tennessee or of any
County thereof, or otherwise discover this Affidavit, that
this statement is solely for the determination of any such
tax. Third parties are instructed that they are not to
rely upon this Affidavit for any purpose whatsoever.
5. The security agreement or other document or
documents evidencing the security interest granted Secured
Party by Debtor secures future advances and other and
contingent liabilities of every kind and character. The
amount of indebtedness stated herein shall in no way be
construed to limit the amount of indebtedness secured by
such agreements and should not be considered by any
third party to be a representation of the actual
indebtedness currently or from time to time owed by Debtor to
Secured Party.
6. The transfer tax on the previous Deed of Trust in
the maximum principal amount of $15,000,000.00 has been paid
(amount already paid: $6,897.70). New advances under this
amendment increase the maximum principal indebtedness to
$20,000,000.00, leaving a difference of $5,000,000.00.
7. The total amount of Tennessee recording tax
is calculated as follows:
$14,937,500 (value of collateral in Tennessee) = 40%
-----------------------------------------------
$37,341,000 (value of total collateral)
$5,000,000 (new principal indebtedness) x 40% = $2,000,000
Portion of indebtedness on which tax is payable =$2,000,000
Computation of tax:
$2,000,000 X $.115 per $100 = $2,300.00
Balance due: $2,300.00
This the 10th day of August, 1995
/s/William H. Watts
- -------------------------
William Watts
Witness my hand, at office, this the 10th day of
August, 1995.
/s/Pamela B. Clingan
- ------------------
Notary Public
My Commission Expires: 5/18/99
--------
STATE OF TENNESSEE, CLAIBORNE COUNTY
THE FOREGOING INSTRUMENT AND CERTIFICATE WERE NOTED.
NOTE BOOK 16 PAGE 28 AT 11:30 O'CLOCK AM
MONDAY 11 MONTH SEPT 1995 AND RECORDED IN
TD BOOK 185 SERIES PAGE 626 - 629
TAX PAID 2,300 FEE 5.25 RECORDING 17.00
TOTAL $2322.25 WITNESS MY HAND RECEIPT NO 54022
REGISTER 25 /S/KIM REESE
Prepared by and Return To:
Geoffrey G. Young
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, Tennessee 37402
FIRST AMENDMENT TO DEED TO SECURE DEBT AND
SECURITY AGREEMENT
STATE OF GEORGIA
COUNTY OF TROUP
THIS FIRST AMENDMENT DEED TO SECURE DEBT AND
SECURITY AGREEMENT (hereinafter referred to as this
"Amendment"), made this the 10th day of August, 1995,
between SIGNAL APPAREL COMPANY, INC. (hereinafter
referred to as "BORROWER"), an Indiana corporation, as
Grantor, and WALSH GREENWOOD & CO. (hereinafter
referred to as "WALSH GREENWOOD"), as
Grantee, whose address is One East Putnam
Avenue, Greenwich, Connecticut 06830.
WITNESSETH:
- ----------------------------------------------------------
THIS AMENDMENT IS TO BE FILED AND INDEXED IN THE REAL
ESTATE RECORDS AND IS ALSO TO BE INDEXED IN THE INDEX OF
FINANCING STATEMENTS. THE NAMES OF THE DEBTOR AND THE
SECURED PARTY, THE MAILING ADDRESS OF THE SECURED
PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY
INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE
DEBTOR AND A STATEMENT INDICATING THE TYPES, OR
DESCRIBING THE ITEMS, OF COLLATERAL, ARE AS
DESCRIBED IN PARAGRAPH 1.08 OF THE DEED TO SECURE DEBT
AND SECURITY AGREEMENT RECORDED IN BOOK 689 BEGINNING AT
PAGE 21 IN THE OFFICE OF THE SUPERIOR COURT CLERK OF
TROUP COUNTY, GEORGIA, IN COMPLIANCE WITH THE
REQUIREMENTS OF ARTICLE 9, SECTION 402(4) OF THE
UNIFORM COMMERCIAL CODE, SECTION 11-9-402(4) OF THE
OFFICIAL CODE OF GEORGIA ANNOTATED.
- ------------------------------------------------------------
WHEREAS, the parties entered a Credit Agreement,
dated as of March 31, 1995, pursuant to which Walsh
Greenwood agreed to loan to Borrower a maximum principal
amount of $15,000,000 (the "Credit Agreement"), which
borrowing was evidenced by a Term Promissory Note in the
face amount of $15,000,000 (the "Note"); and
WHEREAS, all obligations of Borrower under the Credit
Agreement and the Note were secured by a Deed to Secure
Debt and Security Agreement recorded in Book 689 beginning
at Page 21 in the Office of the Superior Court Clerk of
Troup County, Georgia (the "Deed"); and
WHEREAS, the parties have executed a First Amendment
to Credit Agreement, dated as of August 10, 1995 (the
"Amendment"), by which, among other things, the Credit
Agreement was amended to increase the maximum borrowing
amount to $20,000,000 and pursuant to which Borrower has
executed and delivered to Walsh Greenwood a Replacement
Promissory Note in the face amount of $20,000,000 (the
"Replacement Note") which replaces the Note; and
WHEREAS, the parties desire to amend the Deed to
reflect the terms of the Amendment and the additional
borrowing under the Replacement Note.
NOW, THEREFORE, for and in consideration of the
foregoing, the parties agree as follows:
1. The Credit Agreement shall be amended in
accordance with the terms of the Amendment.
2. The Deed shall be amended to reflect the terms
of the Amendment, including the increase of the maximum
principal amount of authorized borrowing to $20,000,000.
3. All references in the Deed to the Credit
Agreement shall mean the Credit Agreement as amended by the
Amendment.
4. All references in the Deed to the Note shall
mean the Replacement Note.
5. All references to a maximum principal amount of
borrowing of $15,000,000 shall be amended to reference a
maximum principal amount of borrowing of $20,000,000.
6. The Deed as amended hereby refers to the real
property described on Exhibit A hereto.
7. The name and address of the Borrower is changed
to: Signal Apparel Company, Inc., P. O. Box 4296,
Manufacturers Road, Chattanooga, Tennessee 37405, and
Schedule 2 to the Deed is amended as provided on Exhibit B
hereto.
8. All provisions of the Deed not amended hereby
shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower has executed this
Deed under seal the day and year first above written.
Signed, sealed and delivered SIGNAL APPAREL COMPANY, INC.,
in the presence of: an Indiana corporation
/s/Geoffrey G. Young Name:/s/William H. Watts
- ----------------------- --------------------
Title: CFO
---------------------
/s/Pamela B. Clingan
- -----------------------
Notary Public Name: /s/Robert J. Powell
----------------------
(NOTARY SEAL) Title: Secretary
---------------------
My Commission Expires: (CORPORATE SEAL)
5/18/99
- -----------------------
EXHIBIT A
PROPERTY DESCRIPTION
All that tract or parcel of land containing 30.944 acres,
more or less, situate lying and being in the City
of LaGrange, Troup County, Georgia, and more
particularly described as follows:
COMMENCING at a point marking the Northeast corner of the
intersection of Whitesville Street and Industrial Drive
in the City of LaGrange, and from said point of
commencement running thence East along the North margin
of Industrial Drive for a distance of 870 feet to an iron
pin which is the POINT OF BEGINNING of the tract of land
herein conveyed; thence continuing North for a distance
of 488.36 feet to an iron pin; thence North 88 28' West
for a distance of 151.86 feet to an iron pin; thence North
00 50' East for a distance of 923.04 feet to an iron pin
located on the South margin of Webster Street; thence South 88
28' East along the South margin of Webster Street for a distance
of 373.80 feet to an iron pin; thence South 01 32' West for a
distance of 210.0 feet to an iron pin; thence South 88 28' East
for a distance of 239.42 feet to an iron pin; thence South 01
32' West for a distance of 24.18 feet to an iron pin;
thence South 88 28' East for a distance of 334.00 feet
to an iron pin; thence South 04 37' East for a distance
of 234.00 feet to an iron pin; thence South 83 39' East
for a distance of 150.00 feet to an iron pin; thence
South 28 29' East for a distance of 328.63 feet to an
iron pin; thence South 27 56' East for a distance of
347.99 feet to an iron pin located on the North margin
of Industrial Drive; thence South 78 58' 50" West along
the North margin of Industrial Drive for a distance of
126.57 feet to an iron pin; thence along the arc of a
curve having a chord bearing of South 74 52' 50" West
for a distance of 186.74 feet to an iron pin; thence
continuing along Industrial Drive along the arc of a
curve having a chord bearing of South 57 41' 40" West
for a distance of 319.70 feet to an iron pin; thence
along the arc of a curve having a chord bearing of
South 71 46' 00" West for a distance of 187.35 feet to
an iron pin; thence along the arc of a curve having a
chord bearing of South 85 51' West for a distance of
100.79 feet to an iron pin; thence West along the North
margin of Industrial Drive for a distance of 435.36
feet to an iron, which is the Point of Beginning.
This is the same tract of land as shown on a plat of
survey prepared by J. Hugh Camp, Professional Land
Surveyor, on October 1, 1968, a copy of which is recorded
in Plat Book 7, Page 97, of the Deed Records of Troup
County, Georgia, and which plat as so recorded is, by
reference, incorporated herein and made a part hereof.
This conveyance is subject to all easements of record
as shown and recorded in Plat Book 7, Page 97, Records of
Troup County, Georgia.
EXHIBIT B
SCHEDULE 1
(DESCRIPTION OF "DEBTOR" AND "SECURED PARTY")
A. DEBTOR:
1. Name and Identity of
Corporate Structure: an Indiana corporation.
2. The principal place of business
of Debtor in the State of Georgia is located at
c/o CT Corporation System, Suite 1240, 1201
Peachtree Street, N. E., Atlanta, Georgia
30361.
3. Debtor has only place of business in
the State of Georgia, on the Premises.
4. Debtor has been using or operating
under said name and identity without
change since February 11, 1987.
B. Secured Party: Walsh Greenwood & Co..
SCHEDULE 2
(Notice Mailing Addresses of "DEBTOR" and "SECURED PARTY")
A. The mailing address of Debtor is:
Signal Apparel Company, Inc.
P.O. Box 4296
Manufacturers Road
Chattanooga, TN 37405
B. The mailing address of Secured Party
is:
Walsh Greenwood & Co.
One East Putnam Avenue
Greenwich, CT. 06830
AFFIDAVIT OF
INTANGIBLE RECORDING TAX APPORTIONMENT
BASED UPON INCREASED AMOUNT OF LOAN
STATE OF CONNECTICUT)
COUNTY OF FAIRFIELD)
Personally appeared before me, the undersigned
officer duly authorized to administer oaths in the
foregoing state and county, Paul R. Greenwood, who,
first being duly sworn, deposes and says on oath as
follows:
1. I am the Managing General Partner of
Walsh Greenwood & Co. ("WALSH GREENWOOD"), and in such capacity
I am authorized to make this Affidavit on behalf of
Walsh Greenwood. This Affidavit is given pursuant to O.C.G.A
Section 48-6-69.
2. The principal place of business of Walsh
Greenwood is outside the state of Georgia.
3. In March 1995, Walsh Greenwood made, executed
and delivered a loan ("LOAN") to Signal Apparel Company,
Inc. (the "BORROWER") in the aggregate principal
amount of $15,000,000.00, secured by a Deed to
Secure Debt and Security Agreement recorded at Book
689, Page 21 of the Office of the Superior Court of
Troup County, Georgia (the "Deed to Secure Debt").
Georgia intangible recording tax was paid based on the
maximum tax payable under O.C.G.A. 486-61, as prorated
according to the value of the real property locatd
within the state of Georgia.
4. Subsequently, Walsh Greenwood increased the
amount of the Loan to the Borrower secured by the Deed to
Secure Debt to $20,000,000.00, and has filed the First
Amendment to Deed to Secure Debt and Security Agreement
attached hereto (the "Amendment").
5. The Amendment is secured by
instruments encumbering properties located within and without the
state of Georgia.
6. To the best of the knowledge of the affiant on
the basis of an Affidavit from the Borrower, the value of
the real property within Georgia securing the Loan and the
value of the real property outside Georgia securing the
Loan are as follows:
STATE $ VALUE % VALUE
Georgia 1,320,900.00 34.88
Indiana 1,109,000.00 29.29
Tennessee 1,356,700.00 35.83
TOTAL 3,786,600.00 100.00
7. The amount of intangible tax otherwise
payable (i.e., without apportionment) with respect to the
total indebtedness would be Twenty-five Thousand
Dollars ($25,000.00), the maximum amount of intangibles tax
payable under O.C.G.A. 48-6-61.
8. The total amount of intangible tax therefore
due in the state of Georgia, based upon that proportion of
the tax which would otherwise be required under this
article that the value of the real property within Georgia
bears to the total value of all the real property within
or outside Georgia as described in the security
instrument is Eight Thousand Seven Hundred Twenty
Dollars ($8,720.00).
9. In connection with the recording of the
initial Deed to Secure Debt, the sum of $8,720.00 was
paid as an intangible recording tax.
10. Because the total amount of intangible
recording tax otherwise due on the initial Deed to
Secure Debt exceeded the maximum amount of intangible
tax payable, and this amount has already been paid,
there is no further intangible tax due.
Further, this affiant sayeth not.
This 10th day of August, 1995.
WALSH GREENWOOD & CO.
/s/Paul R. Greenwood
-----------------------
Paul R. Greenwood
Title: Managing General
Partner
Sworn to and subscribed before me this
10th day of August, 1995
/s/Pamela B. Clingan
- ---------------------
Notary Public
(NOTARY SEAL)
My Commission Expires: 5/18/99
----------
TROUP COUNTY GEORGIA
FILED IN OFFICE
'95 SEP 8 AM 10 34
DEED BOOK 701 PAGE 429
RAMONA S. WARD
CLERK OF SUPERIOR COURT
Vol 105 Page 87 308697 Recorded Sept. 8, 1995 at
10:22 a.m.
Donna Friedersdorf,
Recorder Wabash County
Prepared by and Return To:
Geoffrey G. Young
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, Tennessee 37402
FIRST AMENDMENT TO REAL ESTATE MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
STATE OF TENNESSEE
COUNTY OF HAMILTON
THIS FIRST FIRST AMENDMENT TO REAL ESTATE MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
(hereinafter referred to as this "Amendment"), made this the
10th day of August, 1995, between THE SHIRT SHED, INC., a
Delaware corporation, as Mortgagor, and WALSH GREENWOOD &
CO., as Mortgagee, whose address is
One East Putnam Avenue, Greenwich, Connecticut 06830.
WITNESSETH:
THIS IS AN AMENDMENT TO A FIRST AMENDMENT TO REAL
ESTATE MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES
AND RENTS AND FIXTURE FILING RECORDED IN VOLUME 351
BEGINNING AT PAGE 151 RECORDER'S OFFICE OF WABASH COUNTY,
INDIANA.
WHEREAS, the parties entered a Credit Agreement, dated
as of March 31, 1995, pursuant to which Mortgagee agreed to
loan to Mortgagor a maximum principal amount of $15,000,000
(the "Credit Agreement"), which borrowing was evidenced by a
Term Promissory Note in the face amount of $15,000,000 (the
"Note"); and
WHEREAS, all obligations of Mortgagor under the Credit
Agreement and the Note were secured by a First Amendment to
Real Estate Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Filing recorded in Volume 351
beginning at Page 151 in the Office of the Recorder of
Wabash County, Indiana (the "Mortgage"); and
WHEREAS, the parties have executed a First Amendment to
Credit Agreement, dated as of August 10, 1995 (the
"Amendment"), by which, among other things, the Credit
Agreement was amended to increase the maximum borrowing
amount to $20,000,000 and pursuant to which Mortgagor has
executed and delivered to Mortgagee a Replacement Promissory
Note in the face amount of $20,000,000 (the "Replacement
Note") which replaces the Note; and
WHEREAS, the parties desire to amend the Mortgage to
reflect the terms of the Amendment and the additional
borrowing under the Replacement Note.
NOW, THEREFORE, for and in consideration of the
foregoing, the parties agree as follows:
1. The Credit Agreement shall be amended in
accordance with the terms of the Amendment.
2. The Mortgage shall be amended to reflect the terms
of the Amendment, including the increase of the maximum
principal amount of authorized borrowing to $20,000,000.
3. All references in the Mortgage to the Credit
Agreement shall mean the Credit Agreement as amended by the
Amendment.
4. All references in the Mortgage to Indebtedness
shall mean indebtedness under the Credit Agreement as
amended by the Amendment.
5. All references to a maximum principal amount of
borrowing of $15,000,000 shall be amended to reference a
maximum principal amount of borrowing of $20,000,000.
6. All other provisions of the Mortgage not amended
hereby shall remain in full force and effect.
IN WITNESS WHEREOF, Mortgagor has executed this
Mortgage under seal the day and year first above written.
THE SHIRT SHED, INC.
By: /s/William H. Watts
-----------------------
Title: CFO
-----------------------
STATE OF TENNESSEE]
COUNTY OF HAMILTON]
Personally appeared before me, a Notary Public in and for
the County aforesaid, William Watts, with whom I
am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who upon oath acknowledged
such person to be the Chief Financial Officer of The Shirt
Shed, Inc., the within named Mortgagee, a corporation, and
that he executed the within instrument for the purposes
therein contained by personally signing on behalf of such
corporation as such officer.
Witness my hand, at office, this the 10th day of August,
1995.
/s/ Pamela B. Clingan
- ----------------------
Notary Public
My Commission Expires: 5/18/99
---------
WAIVER
AGREEMENT, dated as of March 27, 1996 by and among Walsh
Greenwood & Co. ("Lender"), Signal Apparel Company, Inc., The
Shirt Shed, Inc. and American Marketing Works, Inc. (collectively
"Borrowers").
WHEREAS, Lender and Borrowers entered a Credit Agreement
dated as of March 31, 1995, as amended by a First Amendment to
Credit Agreement dated as of August 10, 1995 (the "Credit
Agreement") by which Borrowers have borrowed from Lenders
approximately $20 million; and
WHEREAS, Borrowers have defaulted and anticipate that they
may become or continue in default under certain provisions of the
Credit Agreement, in particular the payment of interest pursuant
to Section 2.5 of the Credit Agreement; and
WHEREAS, Borrowers have requested of Lender a waiver of any
default under the Credit Agreement which may exist currently or
which may arise prior to January 1, 1997, subject to the terms
hereof.
NOW, THEREFORE, for and in consideration of the foregoing,
the sufficiency of which is acknowledged, the parties agree as
follows:
1. Lender hereby waives any default by Borrowers of its
payment obligations and of its financial representations and
warranties under the Credit Agreement, including its affirmative
covenants to maintain payments to senior lenders and to comply
with certain financial covenants pursuant to Sections 7.3 and
8.13, respectively, of the Credit Agreement, which defaults
currently exist or may arise prior to January 1, 1997, subject in
all respects to the terms and conditions of Paragraphs 2 and 3
hereof. In particular, the foregoing waiver shall include those
Events of Default described in Sections 9(a),(c),(d) and (h) of
the Credit Agreement. The foregoing waiver shall apply equally to
Borrowers' obligation under the Note executed in connection with
the Credit Agreement.
2. The foregoing waiver shall in no respect relieve
Borrowers from the right of Lenders to accrue late payment
penalties or interest pursuant to Section 2.5(a) of the Credit
Agreement, nor shall it apply to the Affirmative Covenants of
Section 7 or the Negative Covenants of Section 8, other than
Sections 7.3 and 8.13 and those covenants which pertain solely to
the payment of money to Lender or the Borrowers' senior lenders.
In particular, this agreement and the foregoing waiver shall
become null, void and of no effect upon the occurrence of the
Event of Default described in Section 9(e) and (f) of the Credit
Agreement or upon the exercise by any of Borrowers' senior
lenders of any rights in and to the Collateral, as defined in the
Credit Agreement.
3. Upon entering the Credit Agreement, Lender and Borrowers
also executed an Intercreditor Agreement, dated as of March 31,
1995, with BNY Financial Corporation and Greyrock Capital Group,
Inc., and this Waiver is granted pursuant to section 4.7 of such
Agreement. To the extent that the existence of this Waiver should
adversely affect Lender's rights under such Intercreditor
Agreement or cause the other parties to such Agreement to obtain
additional rights in and to the Collateral, as defined in the
Credit Agreement, then this Waiver shall immediately become null,
void and of no effect.
4. This Waiver in no respect shall constitute an amendment
of the Credit Agreement but merely shall be a temporary waiver by
Lender of its rights to exercise its powers thereunder. All terms
of the Credit Agreement shall remain in full force and effect.
IN WITNESS WHEREOF the parties have caused this Waiver to be
executed on the day and date first above written.
SIGNAL APPAREL COMPANY, INC.
BY: /s/ William S. Watts
THE SHIRT SHED, INC.
BY: /s/ William S. Watts
AMERICAN MARKETING WORKS, INC.
BY: /s/William S. Watts
WALSH GREENWOOD & CO.
BY: /s/Paul R. Greenwood
SIGNAL APPAREL COMPANY, INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF MARCH 26, 1996
Name State of Incorporation
- ---- ----------------------
American Marketing Works, Inc. Delaware
The Shirt Shed, Inc. Delaware
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included (or incorporated by
reference) in this Form 10-K into the Company's previously filed
Registration Statements on Form S-8 (File No. 33-27325, File No.
33-43808 and File No. 33-84106).
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,495
<SECURITIES> 0
<RECEIVABLES> 9,193
<ALLOWANCES> 4,835
<INVENTORY> 22,122
<CURRENT-ASSETS> 29,321
<PP&E> 50,068
<DEPRECIATION> 36,431
<TOTAL-ASSETS> 43,229
<CURRENT-LIABILITIES> 50,275
<BONDS> 995
0
76,202
<COMMON> 115
<OTHER-SE> (108,154)
<TOTAL-LIABILITY-AND-EQUITY> 43,229
<SALES> 89,883
<TOTAL-REVENUES> 89,883
<CGS> 75,896
<TOTAL-COSTS> 75,896
<OTHER-EXPENSES> 12,050
<LOSS-PROVISION> 1,147
<INTEREST-EXPENSE> 8,255
<INCOME-PRETAX> (39,959)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,959)
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<CHANGES> 0
<NET-INCOME> (39,959)
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