SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-K/A
Amendment No. 1
(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, 1998
[ ] 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.
(Exact name of Registrant as specified in its charter)
Indiana 62-0641635
(State of Incorporation) (I.R.S. Employer
Identification Number)
34 Englehard Avenue, Avenel, New Jersey 07001
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (732) 382-2882
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock: Par value $.01 a share New York Stock Exchange
Indicate by a 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: $16,139,878, calculated by using the closing price on the New
York Stock Exchange on April 26, 1999 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 April 26, 1999
----- --------------------------------
Common Stock, $.01 par value 44,771,977 shares
<PAGE>
6
The registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10-K for the year ended December
31, 1998, which was filed with the Commission on April 15, 1999:
Part III, Item 10:
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
The following is a list of the names, ages, positions held with the Company
and business experience during the past five years of all nominees for director:
<TABLE>
<CAPTION>
Year First
Became A
Name and Address Age Business Experience and Directorships Director
- ---------------- --- --------------------------------------- ----------
<S> <C> <C> <C>
Henry L. Aaron 64 Senior Vice President of Atlanta National 1998
c/o Cohen Pollock Merlin League Baseball Club, Inc., since October
Axelrod & Tanenbaum 1998. Vice President of Atlanta National
2100 Riveredge Parkway League Baseball Club, Inc., from 1976 through
Suite 300 October 1998.
Atlanta, GA 30328
Zvi Ben-Haim 39 President and Chief Executive Officer of Tahiti 1999
Signal Apparel Company, Inc. Apparel, Inc., a designer and marketer of
500 7th Avenue, 7th Floor swimwear, body wear and active wear for ladies
New York, NY 10018 and girls, from 1992 until its acquisition by
the Company in March 1999. Executive Vice
President and Director of the Company, President
and CEO of the Company's Tahiti Apparel Division
and President of the Company's Signal Branded
Division, since March 1999.
Barry F. Cohen 53 Executive Vice President of Parametrics 1998
Parametrics Technology Corp. Technology Corporation, a computer software
128 Technology Drive company, since January 1998; Senior Vice
Waltham, MA 02154 President of Computer Vision, Inc., 1993 to
January 1998.
Jacob I. Feigenbaum 50 President of Miracle Suit by Swim Shaper since 1994
c/o Miracle Suit February 1996; President and owner of Sea Q.
1411 Broadway, 30th Floor America, August 1994 to 1996; President of
New York, NY 10018 Robby Len Swimwear division of Apparel America,
1980 to 1994.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Year First
Became A
Name and Address Age Business Experience and Directorships Director
- ---------------- --- --------------------------------------- ----------
<S> <C> <C> <C>
Paul R. Greenwood 51 Managing General Partner of Walsh, Greenwood & 1990
One East Putnam Avenue Co., a broker-dealer engaged in effecting
Greenwich, CT 06830 transactions in securities for others and for
its own account.
Michael Harary 43 Senior Vice President of Tahiti Apparel, Inc., Nominee
Signal Apparel Company, Inc. a designer and marketer of swimwear, body wear for
500 7th Avenue, 7th Floor and active wear for ladies and girls, from 1992 election
New York, NY 10018 until its acquisition by the Company in March at
1999. Executive Vice President of the Company's Annual
Tahiti Apparel Division and Executive Vice Meeting
President of the Company's Signal Branded
Division since March 1999.
Thomas A. McFall 44 Chief Executive Officer since June 1998. 1997
Signal Apparel Company, Inc. Chairman, Weatherly Financial Companies, since
34 Englehard Avenue 1984 (currently inactive).
Avenel, NJ 07001
John W. Prutch 46 President of the Company since October 1997; 1997
1088 National Parkway President, GIDI Holdings, Inc., imprinted
Schaumburg, IL 60173 activewear manufacturer, from July 1994 to
October 1997; President, Merchant Capital
Group, Ltd., 1984 to January 1993.
Stephen Walsh 53 Chairman of the Board of Directors since 1990
3333 New Hyde Park Road September 1997; Chief Executive Officer June
North Hills, NY 11040 1998 to January 1999. General Partner of
Walsh, Greenwood & Co., broker-dealer engaged in
effecting transactions in securities for others
and for its own account.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Year First
Became A
Name and Address Age Business Experience and Directorships Director
- ---------------- --- --------------------------------------- ----------
<S> <C> <C> <C>
Howard N. Weinberg 38 Executive Vice President and Chief Financial 1998
34 Englehard Avenue Officer of the Company since September 1998.
Avenel, NJ 07001 Associate Attorney, Skadden, Arps, Slate,
Meagher & Flom LLP, 1997 through September 1998.
Co-Owner of Louise's Trattoria, Inc., a
privately held restaurant company, 1989 through
1997.
</TABLE>
The information set forth above with respect to the principal occupation or
employment of each nominee during the past five years has been furnished to the
Company by the respective nominee.
Pursuant to an agreement among the Company and certain shareholders (a
predecessor to WGI, LLC, FS Signal Associates, L.P. and FS Signal Associates II,
L.P.), FS Signal Associates, L.P. and FS Signal Associates II, L.P., together,
have the right until 2001 to nominate two directors to be included in the slate
of nominees. As of the date of this Report, neither FS Signal Associates, L.P.
nor FS Signal Associates II, L.P. has exercised this right by nominating any
individuals for election to the Board of Directors.
WGI, LLC also has the right, under the terms of the Credit Agreement dated
as of May 8, 1998 between the Company and WGI, LLC, until such time as all of
the Company's indebtedness to WGI, LLC under the terms of the agreement is paid
in full, to nominate two directors to be included in the slate of nominees. The
nomination of Messrs. Walsh and Greenwood for election to the Board of Directors
satisfies this requirement.
Mr. Ben-Haim was appointed as a director of the Company and was employed as
Executive Vice President of the Company pursuant to the terms of an Employment
Agreement (as described herein) entered into simultaneously with the Company's
acquisition of Tahiti Apparel, Inc. Under the terms of that agreement, the
Company agreed to use its reasonable best efforts (subject to the fiduciary
duties of its Board of Directors) to cause Mr. Ben-Haim to be nominated for
election as a director of the Company at its 1999 Annual Meeting of
Shareholders.
The Board of Directors held six meetings in 1998.
Executive Officers
The following is a list of the names, ages, positions with the Company and
business experience during the past five years of the executive officers of the
Company:
4
<PAGE>
Name Age Office and Business Experience
- ---- --- ------------------------------
Zvi Ben-Haim 39 President of Tahiti Apparel, Inc., a designer
and marketer of swimwear, body wear and
active wear for ladies and girls, from 1992
until its acquisition by the Company in March
1999. Executive Vice President and Director
of the Company, President and CEO of the
Company's Tahiti Apparel division and
President of the Company's Signal Branded
Division, since March 1999.
Thomas A. McFall 44 Chief Executive Officer since June 1998.
Chairman, Weatherly Financial Companies,
since 1984 (currently inactive).
Robert J. Powell 50 Vice President of Licensing and General
Counsel since September 1992; Secretary since
January 1993.
John W. Prutch 46 President of the Company since October 1997.
President, GIDI Holdings, Inc., imprinted
activewear manufacturer, from July 1994 to
October 1997; President, Merchant Capital
Group, Ltd., 1984 to January 1993.
Stephen Walsh 53 Chairman of the Board of Directors since
September 1997; Chief Executive Officer from
June 1998 to January 1999. General Partner of
Walsh, Greenwood & Co., broker-dealer engaged
in effecting transactions in securities for
others and for its own account.
Howard N. Weinberg 38 Executive Vice President and Chief Financial
Officer of the Company since September 1998.
Associate Attorney, Skadden, Arps, Slate,
Meagher & Flom LLP, 1997 through September
1998. Co-Owner of Louise's Trattoria, Inc., a
privately held restaurant company, 1989
through 1997.
Officers are elected annually and serve at the pleasure of the Board of
Directors. There is no family relationship between any of the above executive
officers, directors and nominees for director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange Commission thereunder require the Company's executive
officers and directors and persons who own more than ten percent of the
Company's Common Stock, as well as certain
5
<PAGE>
affiliates of such persons, to file initial reports of ownership and monthly
transaction reports covering any changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
directors and persons owning more than ten percent of the Company's Common Stock
are required by Securities and Exchange Commission regulations to furnish the
Company with copies of all such reports they file. Based solely on its review of
the copies of such reports received by it and written representations that no
other reports were required for those persons, the Company believes that during
1998 all filing requirements applicable to its executive officers, directors and
owners of more then ten percent of the Company's Common Stock were complied with
except for one filing by Mr. Paul R. Greenwood (a director and ten percent
beneficial owner) reporting late a purchase of securities by his spouse and one
filing by Mr. Stephen Walsh (a director, Chairman of the Board and ten percent
beneficial owner) reporting late ten purchases of securities by two trusts
established for the benefit of his minor children.
[This space intentionally left blank]
6
<PAGE>
Part III, Item 11:
EXECUTIVE COMPENSATION
Set forth below is a summary of the annual and long-term compensation for
each of the last three fiscal years paid to and/or earned by the following
Company executives: (i) Thomas A. McFall, Co-Chief Executive Officer from June
1998 until January 1999 and Chief Executive Officer since January 1999; (ii)
Stephen Walsh, Chief Executive Officer from June 1998 until January 1999; (iii)
David E. Houseman, Chief Executive Officer until May 1998; and (iv) the
Company's other four most highly compensated executive officers serving as of
December 31, 1998 (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Long-Term
Compensation
Awards
Other Securities All
Annual Underlying Other
Name and Principal Position Salary Bonus Compensation Options/SARs Compensation
Year ($) ($)(1) ($) (#)(3) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David E. Houseman, 1998 203,620 82,500 37,688(2) 275,000 6,465
Chief Executive 1997 90,805 -- 104,226 300,000 562
Officer (until May 1998), 1996 -- -- -- -- --
Chief Operating Officer
(until May 1998) and
Chief Financial Officer
(until September, 1998)
Stephen Walsh, 1998 -- -- -- -- --
Chief Executive Officer 1997 -- -- -- -- --
(from June 1998 until 1996 -- -- -- -- --
January 1999)
Thomas A. McFall 1998 -- 37,500 -- -- 150,000(4)
Chief Executive Officer 1997 -- -- -- -- --
(since June 1998) (1) 1996 -- -- -- -- --
Robert J. Powell, 1998 143,654 7,500 -- 350,000 4,331
Vice President 1997 180,418 -- -- 150,000 4,868
and Secretary (1) 1996 185,000 -- -- 50,000 5,645
John W. Prutch, 1998 155,769 50,000 -- -- 365
President (1) 1997 31,705 -- -- 150,000 87
1996 -- -- -- -- --
Howard N. Weinberg 1998 135,000 -- -- -- --
Executive Vice President 1997 -- -- -- -- --
and Chief Financial 1996 -- -- -- -- --
Officer (since September
1998)(1)
</TABLE>
7
<PAGE>
NOTES TO SUMMARY COMPENSATION TABLE
(1) Bonus amounts reported in the table for Messrs. McFall, Powell, Prutch and
Weinberg do not include $579,098 of bonuses earned by such officers as a
group for transactions completed during fiscal 1998 but not yet paid and
not yet allocated among such officers on an individual basis.
(2) $35,000 of this amount consisted of certain educational tuition payments
for Mr. Houseman's children.
(3) Reflects the number of shares of the Company's Common Stock subject to
options granted to the Named Executive Officers for the periods presented.
(4) In the case of Mr. McFall, the amount reported represents a draw paid to
Mr. McFall that is offset against compensation earned under the agreement
described below in Part III, Item 13 under the heading "Certain
Relationships and Related Transactions." For certain other Named
Executives, these amounts include the portion of life insurance premiums
paid by the Company that represents term life insurance on each of the
Named Executives. In 1998, these amounts were as follows: Mr. Houseman,
$4,094; Mr. Walsh, none; Mr. Powell, $1,312; Mr. Prutch, $365; and Mr.
Weinberg, none. All other amounts represent Company matching contributions
to a 401(k) plan maintained by the Company for the accounts of the Named
Executives. In 1998, these amounts were as follows: Mr. Houseman, $2,371;
Mr. Walsh, none; Mr. Powell, $3,019; Mr. Prutch, none; and Mr. Weinberg,
none.
The table below sets forth certain information concerning grants of options
during the year ended December 31, 1998, to the Company's Named Executives. The
Company's 1985 Stock Option Plan does not provide for the granting of stock
appreciation rights, and the Company has not yet granted any awards under its
new 1998 Stock Incentive Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------- Potential Realizable Value
% of Total at Assumed Annual Rates of
Options Stock Price Appreciation
Granted to Exercise or for Option Term*
Options Employees In Base Price --------------------------
Name granted (#) Fiscal Year ($/Share) Expiration Date 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David E. Houseman(1) 275,000 35.26% 1.75 9/17/01 85,200 180,914
Robert J. Powell(2) 350,000 44.87% 1.75 8/17/03 141,304 338,707
</TABLE>
* The dollar gains under these columns result from calculations assuming 5% and
10% growth rates as required by the Securities and Exchange Commission and are
not intended to forecast future price appreciation of Company Common Stock. The
gains reflect a future value based upon growth at these prescribed rates.
(1) Options were issued in connection with Mr. Houseman's severance agreement
with the Company, with all of such options vesting one year from the date
of the grant, May 8, 1998. The options were issued with an exercise price
that was equal to the market price on the date of grant.
8
<PAGE>
(2) Options were issued under the Company's 1985 Stock Option Plan as a
component of Mr. Powell's compensation. Options with respect to 200,000
shares vest one year after the date of grant, options with respect to
75,000 shares vest two years after the date of grant and the remaining
75,000 options vest three years after the date of grant. The options were
issued with an exercise price that was $0.0625 above the market price on
the date of grant.
The following table provides information about options held by the Named
Executives. The 1985 Stock Option Plan does not provide for the granting of
stock appreciation rights, and the Company has not yet granted any awards under
its new 1998 Stock Incentive Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End($)(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
David E. Houseman -- -- 0 exer./ --
275,000 unexer. --
Stephen Walsh -- -- 0 exer./ --
0 unexer. --
Thomas A. McFall -- -- 0 exer./ --
0 unexer. --
Robert J. Powell -- -- 0 exer./ --
350,000 unexer. --
John W. Prutch -- -- 0 exer./ --
150,000 unexer. --
Howard N. Weinberg -- -- 0 exer./ --
0 unexer. --
</TABLE>
(1) Value of unexercised in-the-money options based on a fair market value of a
share of the Company's Common Stock of $1.375 as of December 31, 1998.
Based on such value, none of the options held by any of the Named
Executives were "in-the-money" at December 31, 1998.
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jacob I. Feigenbaum, Paul R. Greenwood and Stephen Walsh are the current
members of the Board's Compensation Committee. As previously stated, Paul R.
Greenwood and Stephen Walsh are Managers of WGI, LLC, the Company's principal
shareholder.
In connection with the Company's 1997 Restructuring Plan for its
outstanding subordinated debt and preferred stock, the Company agreed with WGI,
LLC, that all funds advanced to the Company by WGI, LLC after August 21, 1997
(which indebtedness was not part of the Restructuring Plan) would be documented
in the form of a new Credit Agreement with interest payable quarterly at a rate
of 10% per annum and with other terms to be agreed upon between the Company and
WGI. As of August 10, 1998, the Company was indebted to WGI in an aggregate
principal amount of $19,360,000 pursuant to such advances.
On August 10, 1998, the Company's Board of Directors approved a new Credit
Agreement between the Company and WGI, to be effective as of May 8, 1998 (the
"WGI Credit Agreement"), pursuant to which WGI will lend the Company up to
$25,000,000 on a revolving basis for a three-year term ending May 8, 2001.
Additional material terms of the WGI Credit Agreement are as follows:
o Maximum funding of $25,000,000, available in increments of $100,000 in
excess of the minimum funding of $100,000.
o Secured by a security interest in all of the Company's assets (except for
the assets of its Heritage division and certain former plant locations
which were held for sale), subordinate to the security interests of the
Company's senior lender.
o Funds borrowed may be used for any purpose approved by the Company's
directors and executive officers, including repayment of any other existing
indebtedness of the Company.
o During the term of the WGI Credit Agreement, WGI, LLC is entitled to have
two designees nominated by the Company for election to its Board of
Directors at the Company's Annual Meeting of Shareholders; Messrs. Walsh
and Greenwood are the Board nominees designated by WGI, LLC pursuant to
this provision.
Pursuant to the WGI Credit Agreement, WGI will receive warrants to purchase
up to 5,000,000 shares of the Company's Common Stock at $1.75 per share, with
the following additional terms:
(1) the warrants vest at the rate of 200,000 warrants for each $1,000,000
increase in the largest balance owed at any one time over the life of
the credit agreement (as of December 31, 1998, the largest outstanding
balance
10
<PAGE>
to date has been $19,985,000, which means that warrants to acquire
3,997,000 shares of Common Stock would have been vested as of such
date)
(2) 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 such rights include
three demand registrations; and
(3) the warrants contain antidilution provisions which require that the
number of shares subject to such warrants shall be adjusted in
connection with any future issuance of the Company's Common Stock (or
of other securities exercisable for or convertible into Common Stock)
such the aggregate number of shares issued or issuable subject to
these Warrants (assuming eventual vesting as to the full 5,000,000
shares) will always represent ten percent (10%) of the total number of
shares of the Company's Common Stock on a fully diluted basis.
In compliance with the rules of the New York Stock Exchange, these warrants were
subject to approval by the Company's shareholders, which was obtained at the
1998 Annual Meeting.
As of March 31, 1999, the Company was indebted to WGI, LLC in the principal
amount of $19,460,000 pursuant to this Credit Agreement.
EMPLOYMENT AGREEMENTS
David E. Houseman was employed as the Company's Chief Executive Officer and
Chief Operating Officer through May 1998, and as the Company's Chief Financial
Officer through his resignation in September 1998. Pursuant to the terms of a
severance agreement between the Company and Mr. Houseman, Mr. Houseman will
receive severance payments in the aggregate amount of $100,000, with $60,000
having been paid upon execution and the remainder payable in four equal monthly
installments, together with continuation of his health benefits through
September 1999 and payments for unused vacation time and certain expenses
totaling less than $20,000. Mr. Houseman also was permitted to retain an option
to purchase 275,000 shares of the Company's Common Stock at $1.75 per share
which was granted effective May 8, 1998. Under Mr. Houseman's severance
agreement, such option will vest in full on May 8, 1999 and may be exercised by
Mr. Houseman through September 17, 2001.
John W. Prutch is employed as the Company's President under the terms of an
employment agreement extending through December 31, 1999. Pursuant to the terms
of his employment agreement Mr. Prutch's base salary is $150,000 with the right
to receive an annual bonus. As a further inducement to employment, the Company
granted Mr. Prutch options pursuant to the Company's 1985 Stock Option Plan to
purchase 150,000 shares of the Company's
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<PAGE>
Common Stock at an exercise price of $2.375 per share, subject to adjustment
($.625 above the market price on the date of grant), with such options vesting
at the rate of 100,000 shares two years after the date of grant and the
remaining 50,000 shares three years after the date of grant. All such options
expire five years from the date of grant. Additionally, Mr. Prutch is entitled
to participate in all other incentive bonus, stock option, savings and
retirement programs and benefit programs maintained for the Company's executive
officers from time to time. In the event that Mr. Prutch's employment is
terminated for cause or, under certain circumstances, Mr. Prutch voluntarily
terminates his employment, the Company shall pay Mr. Prutch (or his legal
representative) only those amounts of compensation attributable to periods prior
to the termination. If the termination is for cause, all outstanding stock
options held by Mr. Prutch shall expire. If Mr. Prutch voluntarily terminates
his employment, all options vested as of the date of termination shall expire
ninety days after the date of termination. In the event that Mr. Prutch's
employment is terminated without cause (as defined in his employment agreement)
then he will be entitled to payments equal to one year's base salary.
Furthermore, all unvested options shall become immediately exercisable. Any
vested Incentive Stock Options will expire three months from the date of
termination, and any vested Non-Incentive Stock Options will expire one year
from the date of termination.
In addition to Mr. Prutch's employment agreement with the Company in
his capacity as President, both John W. Prutch and Thomas A. McFall are parties
to separate agreements with the Company involving financial advisory services
provided by Messrs. Prutch and McFall, as described below in Part III, Item 13
under the heading "Certain Relationships and Related Transactions."
[This space intentionally left blank]
12
<PAGE>
Part III, Item 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's equity securities as of April 26, 1999, by each
shareholder that the Company knows to own beneficially more than 5% of the
issued and outstanding shares of the Company's Common Stock, director of the
Company, nominee for director, Named Executive (as defined herein) and by the
directors and Named Executives of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Title of Class Beneficial Ownership(1) Percent of Class
- ------------------------------------ -------------- ----------------------- ----------------
<S> <C> <C> <C>
FS Signal Associates, L.P.; FS Signal Common Stock 11,940,002 26.5%
Associates II, L.P.; FS Signal, Inc.; and $.01 par value
Kevin S. Penn, as a group
65 E. 55th St., 32nd Floor
New York, New York 10022 (2)
Kevin S. Penn Common Stock 11,940,002 26.5%
65 E. 55th St., 32nd Floor $.01 par value
New York, New York 10022 (2)
FS Signal, Inc. Common Stock $.01 11,640,002 26.0%
65 E. 55th St., 32nd Floor par value
New York, New York 10022(2)(3)
FS Signal Associates, L.P. Common Stock 4,645,013 10.4%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(4)
FS Signal Associates II, L.P. Common Stock 6,994,989 15.6%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(5)
Walsh Greenwood & Co.; Stephen Walsh; Paul Common Stock 25,325,849 47.5%
R. Greenwood; and WGI, LLC, as a group $.01 par value
One East Putnam Avenue
Greenwich, Connecticut 06830 (6) Series H 443.16 100%
Preferred Stock
$100,000 stated
value
Walsh Greenwood & Co. Common Stock 788,800 1.8%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830 (6)(7)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Title of Class Beneficial Ownership(1) Percent of Class
- ------------------------------------ -------------- ----------------------- ----------------
<S> <C> <C> <C>
WGI, LLC Common Stock 24,518,649 46.0%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830 (6)(7)
Series H 443.16 100%
Preferred Stock
$100,000 stated
value
Ming-Yiu Chan Common Stock 3,656,666 8.2%
c/o Manley, Ltd., 8/F $.01 par value
HK Spinners International Building
818 Cheung Sha Wan Road
Kowloon, Hong Kong (8)
Henry L. Aaron (9) Common Stock 75,000 *
$.01 par value
Barry F. Cohen Common Stock -- --
$.01 par value
Zvi Ben-Haim Common Stock 2,506,667 5.6%
$.01 par value
Jacob I. Feigenbaum (10) Common Stock 10,000 *
$.01 par value
Paul R. Greenwood (6)(7) Common Stock 25,320,849 47.5%
$.01 par value
Series H 443.16 100%
Preferred Stock
$100,000 stated
value
Michael Harary Common Stock 885,557 2.0%
$.01 par value
Thomas A. McFall (11) Common Stock $.01 769,793 1.7%
par value
John W. Prutch (12) Common Stock 769,793 1.7%
$.01 par value
Stephen Walsh (6)(7) Common Stock 25,312,449 47.5%
$.01 par value
Series H 443.16 100%
Preferred Stock
$100,000 stated
value
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Title of Class Beneficial Ownership(1) Percent of Class
- ------------------------------------ -------------- ----------------------- ----------------
<S> <C> <C> <C>
Howard N. Weinberg Common Stock -- --
$.01 par value
Robert J. Powell Common Stock -- --
$.01 par value
David E. Houseman (13) Common Stock 280,000 *
$.01 par value
All directors and executive Common Stock 30,341,659 58.4%
officers as a group [11 individuals] (14) $.01 par value
Series H 443.16 100%
Preferred Stock
$100,000 stated
value
</TABLE>
- ----------
* Less than 1%
NOTES TO TABLE OF BENEFICIAL OWNERSHIP
(1) As of April 26, 1999, the Company had issued and outstanding 44,771,977
shares of Common Stock and 443.16 shares of Series H Preferred Stock. In
general, a person is deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which includes the power to vote
or direct the voting of such security, or "investment power," which
includes the power to dispose of or to direct the disposition of such
security, or if a person has the right to acquire either voting power or
investment power over such security through the exercise of an option or
the conversion of another security within 60 days. More than one person may
be a beneficial owner of the same security, and a person may be deemed to
be a beneficial owner of securities as to which he has no personal economic
interest or which he may not vote. In the case of persons who hold options
or warrants to purchase shares of Common Stock that are exercisable either
immediately or within 60 days of April 26, 1999, the shares of Common Stock
represented thereby have been treated as outstanding for purposes of
calculating the ownership totals and percentages (and the percentage of
voting power) for only the persons holding such options and warrants, and
have not otherwise been treated as outstanding shares.
(2) FS Signal Associates, L.P. ("FS Signal"); FS Signal Associates II, L.P.
("FS Signal II"); FS Signal, Inc. ("FSSI"); and Kevin S. Penn ("Penn") have
filed a report, as a group, on Schedule 13D disclosing their various
relationships. Such persons may be deemed to be a group for purposes of the
beneficial ownership of the securities disclosed in the table, although
they disclaim membership in a group. The 11,940,002 shares of Common Stock
include (i) 4,645,013 shares of Common Stock held directly by FS Signal;
(ii) 6,994,989 shares of Common Stock held directly by FS Signal II; and
(iii) warrants held directly by Penn to acquire 300,000 shares of Common
Stock. The reporting persons may be deemed to be members of a group and,
accordingly, could each be deemed to have beneficial ownership (by virtue
of Rule 13(d)-5) of all shares of Common Stock held directly by the various
members of the group. Except as disclosed herein, no other entity or person
that may be deemed to be a member of the group holds direct beneficial
ownership of such
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Common Stock. Penn is the President of FSSI, which is the general partner
of both FS Signal and FS Signal II. Both FS Signal and FS Signal II are
limited partnerships. Pursuant to both the bylaws of FSSI and an
understanding among the limited partners of FS Signal and FS Signal II,
Penn, as President of FSSI, has the sole voting and investment power over
the securities held by both limited partnerships.
(3) As the general partner of both FS Signal and FS Signal II, FSSI may be
deemed to be the beneficial owner of (i) 4,645,013 shares of Common Stock
held directly by FS Signal and (ii) 6,994,989 shares of Common Stock held
directly by FS Signal II. Kevin S. Penn is the President of FSSI. Pursuant
to both the bylaws of FSSI and an understanding among the limited partners
of FS Signal and FS Signal II, Penn, as President of FSSI, has the sole
voting and investment power over the securities held by both limited
partnerships.
(4) FS Signal, a Connecticut limited partnership, owns directly 4,645,013
shares of Common Stock. Kevin S. Penn, in his capacity as President of FS
Signal, Inc., the general partner of FS Signal, may be deemed to own
beneficially all shares of Common Stock held by FS Signal.
(5) FS Signal II, a Connecticut limited partnership, owns directly 6,994,989
shares of Common Stock. Kevin S. Penn, in his capacity as the President of
FS Signal, Inc., the general partner of FS Signal II, may be deemed to own
beneficially all shares of Common Stock held by FS Signal II.
(6) Walsh Greenwood & Co., a New York limited partnership ("Walsh Greenwood"),
Walsh Greenwood's sole general partners, Stephen Walsh and Paul R.
Greenwood, and WGI,LLC, a Connecticut limited liability company whose
Managers are Stephen Walsh and Paul R. Greenwood ("WGI") have filed a
report, as a group, on Schedule 13D disclosing their various relationships.
Such persons may be deemed to be a group for purposes of the beneficial
ownership of the securities disclosed in the table, although they disclaim
membership in a group. The 25,325,849 shares of Common Stock include (i)
788,800 shares of Common Stock held directly by Walsh Greenwood on behalf
of certain managed accounts (as to which Walsh Greenwood has voting power
and investment power but does not have any pecuniary interest therein);
(ii) 16,021,649 shares of Common Stock owned directly by WGI; (iii) 12,400
shares of Common Stock owned by two trusts for the benefit of the minor
children of Stephen Walsh, as to which Paul R. Greenwood serves as trustee;
(iv) 1,000 shares of Common Stock owned by Mr. Greenwood's spouse; (v)
5,000 shares of Common Stock owned by Mr. Walsh's spouse; and (vi)
presently exercisable warrants to acquire a total of 8,497,000 shares of
Common Stock held by WGI. All 443.16 shares of Series H Preferred Stock are
held directly by WGI.
(7) Walsh Greenwood has the sole power to vote and dispose of 788,800 shares of
Common Stock (all of which shares are held by Walsh Greenwood on behalf of
certain managed accounts and as to which Walsh Greenwood has voting power
and investment power but does not have any pecuniary interest therein). WGI
has (i) the sole power to vote and dispose of the 16,021,649 shares of
Common Stock it owns directly; (ii) the sole power to dispose of the
presently exercisable warrants to acquire a total of 8,497,000 shares of
Common Stock, which warrants are exercisable by WGI's Managers, Stephen
Walsh and Paul R. Greenwood; and (iii) the sole power to vote and dispose
of the 443.16 shares of Series H Preferred Stock that it owns directly.
Both Messrs. Walsh and Greenwood, in their individual capacities as general
partners of Walsh Greenwood and as Managers of WGI, may be deemed to share
the power to vote and direct the disposition of the shares of Common Stock
and Series H Preferred Stock beneficially owned by Walsh Greenwood and WGI.
Paul R. Greenwood, in his capacity as trustee, has sole power to vote and
to direct the disposition of the 12,400 shares of Common Stock held in two
trusts for the benefit of Mr. Walsh's minor children (but Mr. Greenwood has
no financial interest in such shares). Under S.E.C. rules, Mr. Greenwood
may be deemed to share voting and investment power with respect to the
1,000 shares of Common Stock held by his wife, and Mr. Walsh may be deemed
to share voting and investment power with respect to the 5,000 shares of
Common Stock held by his wife; however, Messrs. Greenwood and Walsh
disclaim any beneficial ownership with respect to such shares.
(8) Beneficial ownership reported for Ming-Yiu Chan consists of 3,656,666
shares of Common Stock issued to Mr. Chan in connection with the Company's
recent acquisition of substantially all of the assets and
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business of Tahiti Apparel, Inc. To date, the Company has not received a
report of beneficial ownership on Schedule 13D from Mr. Chan.
(9) Beneficial ownership reported for Mr. Aaron consists of warrants to
purchase 75,000 shares of Common Stock which were granted in connection
with a licensing transaction between the Company and Mr. Aaron prior to Mr.
Aaron becoming a director. These Warrants became exercisable on December
31, 1998. Mr. Aaron also holds warrants to purchase an additional 75,000
shares (granted in connection with the same license) which become
exercisable on December 31, 1999.
(10) Beneficial ownership reported for Mr. Feigenbaum consists of presently
exercisable warrants to purchase 10,000 shares of Common Stock.
(11) Beneficial ownership reported for Mr. McFall consists of presently
exercisable warrants to purchase 769,793 shares of Common Stock.
(12) Beneficial ownership reported for Mr. Prutch consists of presently
exercisable warrants to purchase 769,793 shares of Common Stock.
(13) Beneficial ownership reported for Mr. Houseman includes options to purchase
275,000 shares of Common Stock which become exercisable as of May 8, 1999.
(14) This figure includes shares held by certain entities for which indirect
beneficial ownership may be attributed to Messrs. Walsh and Greenwood,
directors of the Company, as discussed in Notes (6) and (7) above. The
figure includes warrants to acquire 10,121,586 shares of Common Stock. All
such warrants are exercisable either immediately or within 60 days of April
26, 1999 and, consequently, have been treated as outstanding shares of
Common Stock for calculations of share ownership and voting power for the
group of directors and executive officers. See Note (1) above.
Part III, Item 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to the information presented below, see also discussion under
heading "Compensation Committee Interlocks and Insider Participation" in Part
III, Item 11.
Effective May 9, 1997, the Company contracted with Weatherly Financial
("Weatherly") for Weatherly to act as financial advisor to the Company on an
exclusive basis with respect to evaluating, pricing, negotiating and closing
mergers and acquisitions and other investments and arranging financing on the
Company's behalf. Weatherly was to be compensated for these services through
prescribed fees and, in addition, Weatherly was granted Warrants, effective May
9, 1997, to purchase 805,000 shares of the Company's Common Stock at $2.50 per
share. These warrants were to vest upon the achievement of certain objectives
with respect to the Company's business performance and were part of a complex
overall arrangement that also included additional warrant opportunities.
All of the parties to the Weatherly Agreement anticipated that Thomas A.
McFall and John W. Prutch, in their capacities as associates of Weatherly, would
play a significant role in performing the services under the agreement and would
receive a significant portion of the compensation payable under the Weatherly
Agreement. When it later employed Mr. McFall as
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its CEO and Mr. Prutch as its President, the Company replaced the former
arrangement with Weatherly with an agreement, approved by the Board of Directors
on August 10, 1998 to be effective as of May 8, 1998, directly with Messrs.
McFall and Prutch. Under the terms of the new agreement, the warrants previously
issued to Weatherly have been assigned 50% to Mr. McFall and 50% to Mr. Prutch,
the exercise price of these warrants has been reset to $1.75 per share (the
closing market price for the Common Stock on May 8, 1998).
Each of Messrs. McFall and Prutch also have been issued additional
warrants, with a term of 10 years for the purchase of up to 1,902,273 shares of
Common Stock at an exercise price of $1.75 per share. All of the warrants held
by Messrs. McFall and Prutch (including those originally issued to Weatherly)
now will be subject to a new vesting schedule as follows:
o Warrants to purchase 33.4% of the total number of shares of Common Stock
(769,793 shares for each of Messrs. McFall and Prutch) will be vested
immediately upon obtaining shareholder approval.
o Warrants to purchase the remaining shares will vest in incremental
installments of 22.2% each, based on achievement by the Company (including
its subsidiaries) of each of the following goals:
Goal 1:
$4.0 million in annual pre-tax earnings or an average daily closing
price of at least $2.75 per share for the Company's Common Stock over
any period of 120 consecutive calendar days (Approx. 511,660
additional shares vest for each of Messrs. McFall and Prutch)
Goal 2:
$5.0 million in annual pre-tax earnings or an average daily closing
price of at least $4.00 per share for the Company's Common Stock over
any period of 120 consecutive calendar days (Approx. 511,660
additional shares vest for each of Messrs. McFall and Prutch)
Goal 3:
$6.0 million in annual pre-tax earnings or an average daily closing
price of at least $5.00 per share for the Company's Common Stock over
any period of 120 consecutive calendar days (Approx. 511,660
additional shares vest for each of Messrs. McFall and Prutch)
o More than one of the preceding goals may be met simultaneously, provided
that the threshold of the higher goal is met.
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The Warrants contain customary antidilution provisions and piggyback
registration rights and, subject to certain exceptions, Messrs. McFall and
Prutch may not dispose of the Common Stock issuable under the Warrants without
the prior consent of WGI, LLC. The new 3,804,546 warrants issued to Messrs.
McFall and Prutch after they became directors of the Company were subject to
approval by the Company's shareholders, which approval was obtained at the
Company's Annual Meeting of Shareholders on January 27, 1999.
The new agreement also provides that Messrs. McFall and Prutch,
collectively, will receive a success fee in connection with identifying,
negotiating and closing any Acquisition Transaction (defined in the agreement as
any transaction involving a sale or purchase of a target company, a merger,
joint venture, or any other acquisition of all or any portion of the stock or
assets of any other company), equal to three percent (3%) of the Aggregate
Consideration (as defined in the agreement) paid in connection with an
Acquisition Transaction.
The new agreement also provides that Messrs. McFall and Prutch
(collectively) will receive a success fee equal to three percent (3%) of the
proceeds of any financing transactions which they participate in developing,
negotiating and closing with third parties for the benefit of the Company. If
the financing transaction raises cash for the Company (regardless of the
Company's use of the proceeds), then this fee will be payable entirely in cash
upon the closing of the transaction. If a Financing occurs in connection with an
Acquisition Transaction, however, and a portion of the Aggregate Consideration
paid by the Company in connection with the Acquisition Transaction consists of
Common Stock, then the agreement provides that a portion of the applicable
success fee may be paid to Messrs. McFall and Prutch in the form of additional
shares of Common Stock. (The agreement defines a "Financing" broadly as
including any combination of committed senior term or revolving debt,
subordinated debt, preferred or common equity or equivalents, trade financing,
debt guarantees, any relief or assumption of debt or debt guarantees, any sale
and leaseback or other leasing arrangement, any restructuring, earnout or other
contingent payment, or any other debt or equity financing vehicle, but excluding
the Company's existing financing with its senior lender and any stock options or
warrants outstanding on May 8, 1998). In this situation, the agreement provides
that Messrs. McFall and Prutch (collectively) would be entitled to receive both
the acquisition success fee (equal to 3% of the Aggregate Consideration (as
defined) payable in the Acquisition Transaction) and the financing success fee
(equal to 3% of the applicable Financing). Under these circumstances, a portion
of the financing success fee would be payable to Messrs. McFall and Prutch in
the form of additional shares of the Company's Common Stock, determined as
follows:
(A) If the Financing raises sufficient cash to pay the cash portion of the
Aggregate Consideration for the Acquisition Transaction PLUS at least
some portion of the financing success fee, then up to one half (1/2)
of the 3% financing success fee collectively paid to Messrs. McFall
and Prutch will be paid in cash, with the remainder of such fee being
paid in shares of the Company's Common Stock (valued as described
below). The agreement also provides that, under these
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circumstances, either Mr. McFall or Mr. Prutch individually could
elect to receive a portion of his respective financing success fee (up
to 100% of the entire fee) in shares of Common Stock rather than cash.
(B) If the Financing does not raise cash in excess of the cash portion of
the Aggregate Consideration for the Acquisition Transaction, then all
of the 3% financing success fee would be paid to Messrs. McFall and
Prutch in the form of shares of the Company's Common Stock.
The number of shares of the Company's Common Stock issuable in payment of a
given dollar amount of fees due under either (A) or (B) above will be determined
by valuing the Common Stock at its closing market price on the day immediately
prior to the closing of the Financing in question. Thus, the precise number of
shares that would be issuable under the terms of the agreement in payment of a
given dollar amount of fees will depend upon the then-current market price for
the Company's Common Stock.
Under this provision of the agreement regarding financing transactions,
Messrs. McFall and Prutch each received a cash payment of $50,000 in connection
with the Company's private placement of $5,000,000 of its 5% Series G1
Convertible Preferred Stock in September 1998.
All cash payments to Messrs. McFall and Prutch called for performance under
the terms of this agreement will be subject to offset against an annual draw of
$150,000 which they each receive from the Company.
The agreement also provides that Messrs. McFall and Prutch will abide by
certain restrictions concerning the use of the Company's confidential business
information and provides that, subject to the fiduciary duties of its Board of
Directors, the Company will use its best efforts to cause Messrs. McFall and
Prutch to be nominated for election as directors of the Company at each annual
meeting during the term of the agreement.
Henry Aaron, a director of the Company, is a principal of Henry-Aaron,
Inc., a corporation that holds various licenses from Major League Baseball
Properties. Pursuant to an agreement between the Company and Henry-Aaron, Inc.,
the Company is authorized to manufacture, market and sell various products
bearing the logos and trademarks of Major League Baseball pursuant to the
license held directly by Henry-Aaron, Inc. In connection with the execution of
this agreement, the Company granted Henry Aaron and another principal of
Henry-Aaron, Inc. warrants to purchase a total of 200,000 shares of Common Stock
at $1.75 per share, effective May 8, 1998, and vesting as to 100,000 shares on
December 31, 1998 and as to the remaining 100,000 shares on December 31, 1999;
all of such warrants expire December 31, 2003. Mr. Aaron holds 150,000 of such
warrants. In addition to paying royalties due to Major League Baseball
Properties under the arrangement with Henry-Aaron, Inc., the Company also pays
an override to Henry-Aaron, Inc. on its sales of Major League Baseball products.
These payments to Henry-Aaron, Inc. totaled $270,000 in 1997, $167,326 in 1998
and $69,610 through the first three months of 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNAL APPAREL COMPANY, INC.
By: /s/ Robert J. Powell
------------------------------------
Robert J. Powell
Vice President and
Secretary
Date: April 30, 1999
