SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 21, 2000
SIGNAL APPAREL COMPANY, INC.
(Exact name of Registrant as specified in its charter)
Indiana 1-2782 62-0641635
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
34 Englehard Avenue, Avenel, New Jersey 07001
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (732) 382-2882
Item 5. Other Events
On August 25, 2000, Signal Apparel Company, Inc. (the "Company") issued the
following statement concerning (i) the status of its senior indebtedness and of
the indebtedness under its 5% Convertible Debentures due March 3, 2002 and (ii)
a notice received from Messrs. Zvi Ben-Haim and Michael Harary, directors and
executive officers of the Company, purporting to exercise certain rights in
their capacity as former shareholders of Tahiti Apparel, Inc. under the Asset
Purchase Agreement pursuant to which the Company acquired substantially all of
the assets of Tahiti Apparel, Inc. effective March 22, 1999:
SIGNAL APPAREL PROVIDES FINANCING UPDATE
Signal Apparel Company, Inc. (OTCBB:SIAY) announced today that its senior
lender has extended until August 30, 2000 the period in which the Company
must reduce its permitted overadvance facility to the level required by the
Company's Revolving Credit, Term Loan and Security Agreement with the
senior lender. The Company previously reported in its Form 10-Q for the
quarter ended June 30, 2000 that the Company's senior lender had extended
until August 15, 2000 the period in which the Company must reduce its
permitted overadvance facility to the level required by the credit
agreement.
The Company also announced that it has received a letter dated August 21,
2000 from Messrs. Zvi Ben-Haim and Michael Harary, formerly shareholders of
Tahiti Apparel, Inc. and presently Directors of the Company and the
President and Executive Vice President of the Company, respectively,
alleging that a "financing default" has occurred under the Asset Purchase
Agreement whereby the Company acquired the business and assets of Tahiti
Apparel, Inc. in March 1999. Specifically, Messrs. Ben-Haim and Harary
allege that the Company has failed to provide sufficient financing to
finance the sales of its Tahiti Apparel division to the level called for by
the Asset Purchase Agreement. The Asset Purchase Agreement provides that in
the event of such a "financing default", these former stockholders of
Tahiti Apparel have the option to purchase the assets of Tahiti Apparel as
they presently exist within Signal by tendering shares of the Company's
Common Stock received in the initial acquisition of the assets and business
of Tahiti Apparel and assuming the liabilities of the Tahiti Apparel
division incurred in the ordinary course. By their August 21 letter,
Messrs. Ben-Haim and Harary purport to exercise this option. The Company is
presently determining whether or not a "financing default" has occurred.
The Company also continues to be in default under its $5 million of 5%
convertible debentures placed with two institutional investment groups as a
result of the previously announced delisting of the Company's Common Stock
from the New York Stock Exchange as of June 8, 2000. The holders of the
debentures have not provided notice to the Company of any intent to
accelerate repayment of the debentures.
The Company is presently exploring a number of alternatives with respect to
the above matters.
As stated in the announcement, the Company is exploring a number of
possible responses to these developments and not yet settled on a definitive
course of action. There can be no guarantee
that the senior lender will provide any additional extension beyond August 30,
2000 if the Company is not able to reduce its permitted overadvance facility to
the level required by the Company's Revolving Credit, Term Loan and Security
Agreement. At present, the Company does not have funds available to meet this
requirement. If the senior lender were to accelerate the maturity of the
Company's indebtedness under its factoring agreement, or if the holders of the
Company's 5% Convertible Debentures due March 3, 2002 were to accelerate
repayment of the debentures, the Company would not have funds available to repay
either of such debts.
Item 7. EXHIBITS.
Exhibit 10.1 Letter agreement dated August 23, 2000 extending the time period
for compliance with certain terms, between the Company and its
senior lender, GMAC Commercial Credit LLC, as successor to BNY
Financial Corporation, in its own behalf and as agent for other
participating lenders.
Exhibit 99.1 Letter dated August 21, 2000 addressed to the Company from
Messrs. Zvi Ben-Haim and Michael Harary, purporting to exercise
certain rights under the Asset Purchase Agreement dated as of
December 17, 1998, by and among the Company, Tahiti Apparel, Inc.
and the stockholders of Tahiti Apparel, Inc. (as amended by
Amendment No. 1 thereto dated March 16, 1999 and Amendment No. 2
thereto dated April 15, 1999).
Exhibit 99.2 Letter dated August 24, 2000 addressed to the Company from
counsel to Messrs. Zvi Ben-Haim and Michael Harary, requesting
certain records in connection with their purported exercise of
certain contract rights by letter dated August 21, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 29, 2000 SIGNAL APPAREL COMPANY, INC.
By: /s/ Robert J. Powell
-----------------------------
Robert J. Powell
Vice President,
General Counsel & Secretary