As filed with the Securities and Exchange Commission on April 20, 1999
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Signal Apparel Company, Inc.
(Exact name of Registrant as specified in its charter)
INDIANA 62-0641635
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34 Engelhard Avenue, Avenel, New Jersey 07001
(732) 382-2882
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
----------------------------
Robert J. Powell, Esq.
Vice President of International & Licensing, General
Counsel and Secretary Signal Apparel Company, Inc.
34 Engelhard Avenue, Avenel, New Jersey 07001
(732) 382-2882
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With Copy To:
Steven R. Barrett, Esq.
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building, Chattanooga, Tennessee 37402
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
-----------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to offering price aggregate Amount of
Securities to be registered be registered(1) per unit(1) offering price(1) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value $7,218,750 $1.3125 $7,218,750 $2,007
====================================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 (c) on the basis of the average of the high and low reported
sales prices on the New York Stock Exchange on April 16, 1999.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
================================================================================
Prospectus
SIGNAL APPAREL COMPANY, INC.
34 Engelhard Avenue, Avenel, New Jersey 07001
Telephone: (732) 382-2882
5,500,000 Shares of Common Stock, $.01 par value per share
This Prospectus relates to the offer and sale of an aggregate of 5,500,000
shares of Common Stock, par value $.01 per share ("Common Stock") of Signal
Apparel Company, Inc. (the "Company") by two selling stockholders of the
Company.
The selling stockholders are institutional investors who received or may receive
their shares of Common Stock through (1) the conversion of the Company's 5%
Convertible Debentures due March 3, 2002, (2) the payment of interest on such
Debentures (which the Company may elect to pay in Common Stock) or (3) the
exercise of warrants which they received for investing in such Debentures.
Market for the Common Stock.
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "SIA".
On April 16, 1999, the reported last sale price of the Common Stock on the NYSE
was $1.3125 per share.
Offering Price of the Shares.
The selling stockholders may offer their Common Stock through public or private
transactions, on or off the NYSE, at prevailing market prices or at privately
negotiated prices. For a more detailed discussion of the potential methods of
sale by the selling stockholders, see "Plan of Distribution" on page 12 of this
Prospectus.
Proceeds from the sale of shares.
The Company will not receive any proceeds from the sale of shares under this
Prospectus by the selling stockholders.
Expenses from the sale of shares.
The Company will pay all expenses of registering the Shares for resale under
this Prospectus. The selling stockholders will pay all discounts, commissions,
fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals, and any other selling expenses which they incur in
selling the shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is a
criminal offense.
See "Risk Factors," beginning on page 2 of this Prospectus, for a discussion of
certain factors which should be considered by prospective purchasers of the
Common Stock offered hereby.
The date of this Prospectus is April 20, 1999.
RISK FACTORS
You should carefully read and consider the matters set forth below, in addition
to the other information in this Prospectus, before you invest in shares of the
Company's Common Stock. Any of these factors may cause the Company's actual
financial results during any period to differ materially from historical
results. These factors also may impact the outcome of the developments
anticipated in any forward-looking statements made by or on behalf of the
Company.
Operating Losses and Accumulated Deficit.
The Company has experienced operating losses for each of its past ten fiscal
years. As of December 31, 1998, the Company had an accumulated deficit of $284.9
million and a total shareholders' deficit of $67.7 million. The Company may
experience additional losses in the future. If additional losses occur, the
Company may not be able to eliminate its accumulated deficit. You should refer
to the Company's Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K
for periods subsequent to the date of this Prospectus, which are incorporated
herein by reference, for information concerning the Company's results of
operations and financial condition for future periods.
Liquidity and Going Concern Qualification.
The Company's consolidated financial statements for the fiscal year ended
December 31, 1998 were prepared under the assumption that the Company will
continue as a going concern. The Company's recurring losses from operations have
adversely affected its liquidity. In addition, the Company has a working capital
deficit and an accumulated deficit. In the opinion of the Company's independent
public accountants, this raises substantial doubt about the Company's ability to
continue as a going concern.
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 planned improvements in operations. The Company has no
assurances it will be able to raise additional funds. The Company believes its
continued existence is dependent upon its ability to substantially improve its
operating results. The Company estimates its cash needs based on, among other
things, projections of its sales and profit margins. The Company's sales and
profit margins may not meet projected levels. If sales and profit margins fall
significantly short of projected levels, the Company's ability to continue as a
going concern may be jeopardized.
On March 3, 1999, the Company completed the private placement of $5 million of
5% Convertible Debentures due March 3, 2002 with two institutional investors who
are selling stockholders under this Prospectus. The Company utilized the net
proceeds from issuance of these Debentures to redeem all of the remaining
outstanding shares of the Company's 5% Series G1 Convertible Preferred Stock
(following the conversion of $260,772.92 stated value (including accrued
dividends) of such stock into 248,355 shares of the Company's Common Stock
effective February 26, 1999, by two other institutional investors). This
transaction effectively replaced a security convertible into the Company's
Common Stock at a floating rate (the 5% Series G1 Preferred Stock) with a
security (the Debentures) convertible into Common Stock at a fixed conversion
price of $2.00 per share. The transaction also reflects the Company's decision
to
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forego the private placement of an additional $5 million of 5% Series G2
Preferred Stock under the original purchase agreement with the Series G1
Preferred investors.
The Company also has taken other actions to improve its operations and
liquidity. In the third quarter of 1998, the Company completed the formal
documentation of a new $25 million credit facility with WGI, LLC, its principal
shareholder. Effective March 22, 1999, the Company completed a new financing
arrangement with its senior lender, BNY Financial Corporation (in its own behalf
and as agent for other participating lenders), which provides the Company with
funding of up to $98,000,000 (the "Maximum Facility Amount") under a combined
facility that includes two Term Loans aggregating $50,000,000 (supported in part
by $25,500,000 of collateral pledged by an affiliate of WGI, LLC, the Company's
principal shareholder) and a Revolving Credit Line of up to $48,000,000 (the
"Maximum Revolving Advance Amount"). Subject to the lenders' approval and to
continued compliance with the terms of the original facility, the Company may
elect to increase the Maximum Revolving Advance Amount from $48,000,000 up to
$65,000,000, in increments of not less than $5,000,000. The Company intends to
utilize the funds available under both of these arrangements for working capital
purposes.
Throughout 1998 and during the first quarter of 1999, the Company experienced
liquidity shortfalls from operations that were resolved through additional
advances against the Company's available borrowing capacity. These shortfalls
bring into question whether the Company will be in compliance with the financial
covenants of its new Revolving Credit Agreement and Term Loan at the end of the
first quarter for fiscal 1999 or have sufficient capacity under its available
borrowings to fund its operating needs. Accordingly, all debt due the senior
lender has been classified as a current liability in the Company's consolidated
balance sheet as of December 31, 1998. If the senior lender were to accelerate
the maturity of such debt, the Company would not have funds available to repay
the debt.
The Company believes that its continued existence is dependent upon its ability
to raise additional debt or equity financing and to substantially improve its
operating results during 1999. Plans to improve operations include: (i) reducing
general and administrative costs, (ii) focusing the Company's efforts on the
embellished activewear business, including licensed products and various cartoon
characters, (iii) reducing costs of sales through outsourcing and other
measures, (iv) seeking appropriate additional acquisitions to enhance the
Company's sales and profitability, (v) the sale of idle facilities, and (vi)
integration of the acquisition of Tahiti Apparel, Inc. to increase sales and
gross margins. The Company believes that these steps and other planned
improvements in operations will provide sufficient liquidity for it to continue
as a going concern in its present form. The Company cannot guarantee, however,
that it will be able to return its operations to profitability.
Possible Failure to Maintain Listing on the New York Stock Exchange.
The Company is required to satisfy both quantitative and qualitative standards
adopted by the NYSE in order for the NYSE to continue to list the Company's
Common Stock. Whenever the Company fails to satisfy any of these criteria, the
NYSE may review the Company's listing. Two of these requirements are (1) the
Company's tangible assets available to Common Stock must be at least $8,000,000
and (2) the Company's average net income after taxes for the past three years
must be at least $600,000. The NYSE has contacted the Company about failing to
meet these requirements. Based on discussions with the NYSE, the Company does
not believe
3
that the NYSE will institute any delisting proceedings for the Company's Common
Stock in the near future, provided that the Company's operational results
substantially meet management's projections as discussed with the NYSE. The NYSE
presently has not taken any further action to delist the Company's Common Stock.
If the Company's Common Stock is delisted from the NYSE, the Company will apply
for the listing of its Common Stock for trading on the automated quotation
system of the Nasdaq Stock Market maintained by the National Association of
Securities Dealers, Inc. ("NASD") if the Company is then able to meet the
initial qualification requirements for inclusion in the Nasdaq system. If the
Company is not able to meet such requirements, it would then take the necessary
actions to have transactions in its Common Stock reported on the OTC Bulletin
Board of the NASD.
Fashion and Apparel Industry Risks.
The Company believes that its success depends in substantial part on its ability
to identify product and graphic trends as well as to anticipate, gauge and react
to changing consumer demands in a timely manner. There can be no assurance that
the Company will be successful in this regard. If the Company misjudges the
market for its products, it may be faced with significant excess inventories for
some products and missed opportunities with others. In addition, weak sales and
resulting markdown requests from customers could have a material adverse effect
on the Company's business, results of operations and financial condition.
The industry in which the Company operates is cyclical. Purchases of apparel and
related merchandise tend to decline during recessionary periods and also may
decline at other times. Further, uncertainties regarding future economic
prospects could affect consumer spending habits and have an adverse effect on
the Company's results of operations.
The Company's license with the National Football League expired, subject to
certain sell-off rights, on March 31, 1999 and will not be renewed. During the
year ended December 31, 1998, licensed NFL product sales were approximately 15%
of consolidated revenue. The loss of this license could also affect the
Company's ability to sell other professional sports apparel to its customers.
Increasing Dependence on Sales to Large Customers
During fiscal 1998, the Company sold its products to over 1,600 customers,
including department stores, specialty stores, mass merchandisers and other
retailers, wholesalers, distributors, screenprinters, and other manufacturers.
Current trends in the Company's sales data, however, indicate that a shift in
demand has occurred in the market for its embellished apparel products away from
smaller specialty retailers and towards larger chain stores. In 1998, Wal-Mart
and Kmart accounted for 19% and 10% of the Company's net sales, respectively. In
1997, Wal-Mart accounted for 20% and Kmart for 10% of net sales, and in 1996,
Wal-Mart accounted for 14% and Kmart for 12% of net sales. The Company had no
other customer which accounted for more than 10% of its net sales during any of
the last three fiscal years.
These larger chain store customers possess significant negotiating power with
regard to the terms of sale and the circumstances under which merchandise may be
returned to the Company. The Company generally enters into a number of order
commitments with its customers for each of its lines every season and does not
enter into long-term agreements with any of its customers. A decision by any
significant customer or group of customers, whether motivated by competitive
conditions, financial difficulties or otherwise, to decrease the amount of
merchandise purchased from the Company, or to change its manner of doing
business with the Company, could have a material adverse effect on the Company's
financial condition and results of operations.
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Risks Associated With Consolidations, Restructurings and Other Ownership Changes
in the Retail Industry.
In recent years, the retail industry has experienced consolidation and other
ownership changes. In addition, some of the Company's customers have operated
under the protection of the federal bankruptcy laws. In the future, retailers in
the United States may consolidate, undergo restructurings or reorganizations, or
realign their affiliations, any of which could decrease the number of stores
that carry the Company's products or increase the ownership concentration within
the retail industry. While such changes in the retail industry to date have not
had a material adverse effect on the Company's business or financial condition,
the future effect of any such changes is unknown.
Competition.
Competition is strong in the segments of the apparel industry in which the
Company operates. The Company competes with numerous domestic and foreign brands
and manufacturers of apparel, some of which are significantly larger and more
diversified and have greater resources than the Company. The Company's business
depends on its ability to respond to changing consumer tastes and demands by
producing fashionable and graphically innovative products, as well as on its
ability to remain competitive in the areas of quality, price and service.
Uncertainty of the Success of the Company's Acquisition Strategy.
As part of its strategy for the growth and improvement of its operations, the
Company currently is seeking to identify and consummate the acquisition of both
other businesses and individual licenses that will enhance the Company's
profitability through the addition of new product categories, brands and
channels of distribution. The Company may not be able to obtain all of the
financing necessary to fully implement this strategy. Even if adequate financing
is obtained, the Company's growth strategies may not be successful, and the
Company's total net revenues may not increase as a result of the implementation
of these strategies.
No Dividends.
The Company currently is operating under various restrictions that prohibit the
payment of any dividends on shares of its Common Stock. Those restrictions
include:
o The Company's new financing agreement with its senior lender prohibits it
from paying any cash dividends on its Common Stock so long as any
indebtedness to the senior lender under such agreement remains outstanding.
o The Company has agreed not to declare any dividends on its Common Stock
until both the principal borrowings and related interest under its $25
million subordinated credit agreement with WGI, LLC, its principal
shareholder, have been paid in full.
5
o The Company will not be able to declare or pay any dividends on its Common
Stock so long as any of its 5% Convertible Debentures due March 3, 2002 or
its Series H Preferred Stock remain issued and outstanding.
Control by Principal Shareholders.
As of March 31, 1999, WGI, LLC and related entities beneficially own: (1)
16,822,849 shares of Common Stock and (2) warrants to purchase 8,497,000 shares
of Common Stock. Accordingly, under SEC rules, WGI, LLC and related entities may
be deemed to beneficially own 25,319,849 shares, or approximately 47.5%, of the
Company's outstanding Common Stock. Under the terms of the Company's
subordinated Credit Agreement with WGI, LLC and the related Warrant issued to
WGI, LLC, the Company has a contractual obligation to issue additional warrants
to WGI, LLC such that the number of shares of Common Stock subject to such
Warrant (assuming full vesting in accordance with its terms) will always equal
10% of the Company's outstanding Common Stock on a fully diluted basis. As of
March 31, 1999, the issuance of approximately 1,415,000 additional warrants (of
which approximately 1,131,150 would have been vested at such date) was pending
pursuant to these contractual provisions. Assuming the issuance of such
additional warrants to purchase Common Stock, WGI, LLC would have been deemed to
beneficially own 26,450,999 shares, or approximately 48.6%, of the Company's
outstanding Common Stock as of March 31, 1999. The two managers of WGI, LLC,
Paul R. Greenwood and Stephen Walsh, are members of the Company's Board of
Directors. Mr. Walsh also serves as Chairman of the Board of the Company.
Accordingly, WGI, LLC is likely, under present circumstances, to retain the
practical power to elect all the directors of, and otherwise control, the
Company.
BUSINESS OF THE COMPANY AND RECENT DEVELOPMENTS
During 1998 and the first quarter of 1999, the Company has undergone a strategic
change from a manufacturing orientation to a sales and marketing focus.
Effective March 22, 1999, Signal Apparel Company, Inc. purchased the business
and assets of Tahiti Apparel Company, Inc., a leading supplier of ladies and
girls activewear, bodywear and swimwear primarily to the mass market as well as
to the mid-tier and upstairs retail channels. Tahiti's products are marketed
pursuant to various licensed properties and brands as well as proprietary brands
of Tahiti. During the fourth quarter of 1998, Signal also acquired the license
and certain assets for the world recognized Umbro soccer brand in the United
States for the department, sporting goods and sports specialty store retail
channels. The acquisition of Tahiti Apparel and the Umbro license initiative
both are part of the Company's ongoing efforts to improve its operating results.
Following these developments, Signal and its wholly owned subsidiaries, Big Ball
Sports, Inc. and Grand Illusion Sportswear, manufacture and market activewear,
bodywear and swimwear in juvenile, youth and adult size ranges. The Company's
products are sold principally to retail accounts under the Company's proprietary
brands, licensed character brands, licensed sports brands, and other licensed
brands. The Company's principal proprietary brands include G.I.R.L., Bermuda
Beachwear, Big Ball and Signal Sport. Licensed brands include Hanes Sport, BUM
Equipment, Jones New York and Umbro. Licensed character brands include Mickey
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Unlimited, Winnie the Pooh, Looney Tunes, Scooby-Doo and Sesame Street; and
licensed sports brands include the logos of Major League Baseball, the National
Basketball Association, and the National Hockey League. The Company's license
with the National Football League expired, subject to certain sell-off rights,
on March 31, 1999 and will not be renewed. During the year ended December 31,
1998, licensed NFL product sales were approximately 15% of consolidated revenue.
The loss of this license could also affect the Company's ability to sell other
professional sports apparel to its customers.
Currently, a significant 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.
Year 2000 Issues.
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. Software failures due to processing
errors potentially arising from calculations using the year 2000 date are a
known risk. The Company is in the process of developing a plan to ensure its
systems are compliant with the requirements to process transactions in the year
2000. The following is a status report of the Company's efforts to date for
fulfilling those compliance requirements:
The Company is in the process of updating its current software, developed for
the apparel industry, which will make the information technology ("IT") systems
year 2000 compliant. This software modification, purchased from a third party
vendor, is expected to be installed, tested and completed on or before September
30, 1999, giving the Company additional time to test the integrity of the
system.
Although the Company believes that the modification to the software which runs
its core operations is year 2000 compliant, the Company does utilize other third
party equipment and software that may not be year 2000 compliant. If any of this
software or equipment does not operate properly in the year 2000 and thereafter,
the Company could be forced to make unanticipated expenditures to cure these
problems, which could adversely affect the Company's business.
The total cost of the new software and implementation necessary to upgrade the
Company's current IT system plus address the year 2000 issues is estimated to be
approximately $100,000. Planned costs have been budgeted in the Company's
operating budget. The projected costs are based on management's best estimates
and actual results could differ as the new system is implemented. Approximately
$20,000 has been expended as of December 31, 1998.
While the Company was aware of and was in the process of addressing all known
and anticipated year 2000 issues, no formal plan had been adopted. Accordingly,
the Company is in the process of, and has adopted, a formal year 2000 compliance
plan and expects to achieve implementation on or before September 30, 1999. This
effort will be headed by a new MIS manager and include members of various
operational and functional units of the Company.
The Company is cognizant of the risk associated with the year 2000 and has begun
a series of activities to reduce the inherent risk associated with
non-compliance.
The Company has planned to hire a new MIS manager whose primary responsibility
will be to insure that all Company systems are Year 2000 compliant. Among the
activities which the Company has not performed to date include: software
(operating systems, business application systems and EDI system) must be
upgraded and tested (although these systems are integrated and
7
are included in the Company's core accounting system); PC's must be assessed and
upgraded for compliance, letters/inquiries have not been sent to suppliers,
vendors, and others to determine their compliance status (although the Company's
principal customers, Wal-Mart, Target and K-Mart, have indicated that they are
Year 2000 compliant).
In the event that the Company or any of its significant customers or suppliers
does not successfully and timely achieve year 2000 compliance, the Company's
business or operations could be adversely affected. Thus, the Company is in the
process of adopting a contingency plan.
The Company is currently developing a "Worst Case Contingency Plan" which will
include generally an environment of utilizing spreadsheets and other "work
around" programming and procedures. This contingency system will be activated if
the current plans are not successfully implemented and tested by October
31,1999. The cost of these alternative measures are estimated to be less than
$25,000.
The Company believes that its current operating systems are fully capable
(except for year 2000 data handling) of processing all present and future
transactions of the business. Accordingly, no major efforts have been delayed or
avoided which affect normal business operations as a result of the incomplete
implementation of the year 2000 IT systems. These current systems will become
the foundation of the Company's contingency system.
FORWARD-LOOKING STATEMENTS
This Prospectus, including the information incorporated by reference herein,
information included in, or incorporated by reference from, future filings by
the Company with the Commission, as well as information contained in written
material, press releases and oral statements issued by or on behalf of the
Company, contains, or may contain, certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such "forward looking statements"
include information relating to, among other matters, the Company's future
prospects, developments and business strategies for its operations. These
forward-looking statements are identified by their use of terms and phrases such
as "expect", "estimate", "project", "believe", and similar terms and phrases.
Such forward-looking statements are contained in various sections of this
Prospectus and in the documents incorporated herein by reference. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and perception of historical trends, current conditions,
expected future developments and other factors they believe are appropriate
under the circumstances, and involve risks and uncertainties that may cause
actual future activities and results of operations to be materially different
from that suggested or described in this Prospectus or in such other documents.
These risks include, but are not limited to (A) risks identified in the "Risk
Factors" section of this Prospectus, (B) risks associated with interruptions in
the Company's business operations as a result of any failure to adequately
correct the Year 2000 computer problem in any systems of the Company or one of
its major suppliers or customers and (C) other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission. Investors
are cautioned that any such statements are not guarantees of future performance.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary from those
expected, estimated or projected.
8
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
The Company's Restated Articles of Incorporation, as amended to date, authorize
the issuance of up to 80,000,000 shares of Common Stock, $.01 par value per
share, and 1,600,000 shares of preferred stock, no par value per share.
Common Stock.
As of April 16, 1999 there were 44,771,977 shares of Common Stock outstanding.
As a holder of Common Stock, you are entitled to one vote for each share on all
matters submitted to a vote of the stockholders. Generally, when a quorum is
present at any meeting, the vote of the holders of a majority of the shares of
Common Stock present in person or by proxy decides all questions properly
brought before such meeting. Subject to the preferential rights of any
outstanding Preferred Stock, you will be entitled as a holder of Common Stock to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor (see "Risk Factors" above).
In the event of a liquidation, dissolution or winding up of the Company, you
would be entitled to share ratably in all assets remaining after payments of
liabilities and satisfaction of all distribution rights of preferred
stockholders. You will not have any right as a holder of Common Stock to convert
your Common Stock into any other securities of the Company. All shares of Common
Stock have equal, non-cumulative voting rights, and have no preference,
conversion, exchange, preemptive or redemption rights. All of the outstanding
shares of the Company's Common Stock, including the shares offered for sale
under this Prospectus, are fully paid and nonassessable.
Preferred Stock.
The Company's Board of Directors is authorized to issue the Preferred Stock in
one or more series. The Restated Articles provide that the Board of Directors
shall fix the designations, rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, rights and
terms of redemption, redemption price or prices, liquidation preferences, as
well as the number of shares constituting any series of preferred stock, without
any further vote or action by the stockholders.
The Board has authorized Series A, Series B, Series C, Series D, Series E,
Series F, and Series H Preferred Stock, as well as the 5% Series G1 Convertible
Preferred Stock.
As of April 16, 1999, there were no outstanding shares of Series A, Series B,
Series C, Series D, Series E or Series F Preferred Stock, or of 5% Series G1
Convertible Preferred Stock, and the Company presently has no plans to issue any
shares of any of these series of preferred stock in the future. As of such date,
there were issued and outstanding 443.16 shares of Series H Preferred Stock.
Each share of Series H Preferred Stock has a stated value of $100,000.
9
Series H Preferred Stock
Additional key terms of the Series H Preferred Stock are as follows:
o Junior to the 5% Series G1 and 5% Series G2 Convertible Preferred
Stock, equal to Series A and Series F Preferred Stock, and senior to
all other classes of the Company's equity securities (both Common
Stock and preferred stock) with respect to dividend priorities and
liquidation rights.
o No dividends may be declared or paid on the Company's Common Stock
while any shares of Series H Convertible Preferred Stock are issued
and outstanding.
o Accrues dividends at an annual rate of 9%, payable annually in cash.
o No conversion, exchange, preemptive or redemption rights.
o No voting rights, except that holders of Series H Preferred Stock have
the right to vote on any merger or consolidation of the Company, or on
any proposed dissolution of the Company. Also, without approval by the
holders of 2/3 of the outstanding shares of Series H Preferred Stock,
the Company may not: (1) amend, repeal or add to any provision of its
Restated Articles of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, the Series H Preferred
Stock; (2) reclassify any Common Stock into shares having a preference
or priority equal or superior to the Series H Preferred Stock; (3)
apply 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 of shares of Common Stock, except for purchases of
the Company's Common Stock on the open market or purchases from
employees of the Company upon termination of employment or pursuant to
any rights of first refusal held by the Company; or (4) create,
authorize or issue any equity security having any preference or
priority superior to the Series H Preferred Stock.
USE OF PROCEEDS
All net proceeds from the sale of the Common Stock offered under this Prospectus
will go to the shareholders who offer and sell their shares. Accordingly, the
Company will not receive any proceeds from the sales of such shares.
SELLING STOCKHOLDERS
This Prospectus covers the offer and sale by the selling stockholders identified
below of the shares listed in the table for each selling stockholder. Our
registration of these shares for resale does not necessarily mean that the
selling stockholders will sell all or any of the shares.
Under a Registration Rights Agreement dated March 3, 1999 among the Company and
the purchasers of its 5% Convertible Debentures due March 3, 2002 identified in
the table below, we
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agreed to register the shares of Common Stock issued (or issuable) to such
selling stockholders upon: (1) the conversion of 5% Convertible Debentures due
March 3, 2002, (2) the payment of interest on such Debentures (if paid in Common
Stock) or (3) the exercise of warrants which they received for investing in such
Debentures. We also agreed to use our best efforts to keep the registration
statement effective for five (5) years, or until such earlier date when all of
the shares have been sold or may be sold without volume restrictions pursuant to
SEC Rule 144, whichever comes first.
Number of Number of Number of Shares
Shares Owned Shares Owned/% of Class
Name of Selling Stockholder and Prior to the Being Owned
Relationship to the Company Offering Offered After Offering (1)
--------------------------- -------- ------- ------------------
Brown Simpson Strategic Growth Fund, Ltd. 3,575,000 (2) 3,575,000 None/0%
Purchaser of certain of the Company's
5% Convertible Debentures due March 3, 2002
Brown Simpson Strategic Growth Fund, L.P. 1,925,000 (3) 1,925,000 None/0%
Purchaser of certain of the Company's
5% Convertible Debentures due March 3, 2002
(1) Assumes that all of the shares held by the selling stockholders and being
offered under this Prospectus are sold, and that the selling stockholders
acquire no additional shares of Common Stock before the completion of this
offering.
(2) Includes assumed acquisition from the Company of: (A) up to 1,950,000
shares of Common Stock which are (or may become) issuable upon the
conversion of, or upon the payment of interest with respect to, the 5%
Convertible Debentures due March 3, 2002 Stock held by Brown Simpson
Strategic Growth Fund, L.P. and (B) 1,625,000 shares of Common Stock
issuable upon the exercise of warrants held by the fund.
(3) Includes assumed acquisition from the Company of: (A) up to 1,050,000
shares of Common Stock which are (or may become) issuable upon the
conversion of, or upon the payment of interest with respect to, the 5%
Convertible Debentures due March 3, 2002 Stock held by Brown Simpson
Strategic Growth Fund, Ltd. and (B) 875,000 shares of Common Stock issuable
upon the exercise of warrants held by the fund.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of Common Stock at various times
in one or more of the following transactions:
o on the New York Stock Exchange, where the Common Stock is listed;
o in the over-the-counter market;
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o in negotiated or other transactions other than on such exchanges or in
the over-the-counter market;
o in connection with short sales of their shares of Common Stock;
o by pledge to secure debts and other obligations;
o in block trades in which the broker or dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as
principal;
o to a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may engage in short sales, short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives thereof. They may sell the shares of Common Stock offered under this
Prospectus in connection with any of such transactions or in settlement of
securities loans. The selling stockholders also may pledge their shares of
Common Stock pursuant to the margin provisions of their customer agreements with
their brokers. If any selling stockholder defaults on such a pledge, that
selling stockholder's broker may offer and sell the pledged shares.
The selling stockholders may sell the shares to or through broker-dealers or
underwriters. The broker-dealers or underwriters could be compensated for any
such sale through discounts, concessions or commissions. They may receive such
compensation from the selling stockholders and/or from the purchasers of the
shares for which such broker-dealers may act as agent or to whom they may sell
as principal, or both. Such compensation could exceed customary compensation for
any particular broker-dealer.
The selling stockholders and any broker-dealers that act in connection with the
sale of the shares offered pursuant to this Prospectus might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by such broker-dealers and any profit on the resale of
such shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. The Company has
agreed to indemnify each selling stockholder against certain liabilities,
including liabilities arising under the Securities Act. The selling stockholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of such shares against certain liabilities,
including liabilities arising under the Securities Act.
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The selling stockholders also may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act.
The selling stockholders will be subject to the prospectus delivery requirements
of the Securities Act. The Company has informed the selling stockholders that
the anti-manipulative provisions of Regulation M promulgated under the Exchange
Act may apply to their sales in the market.
The selling stockholders also may choose to sell their shares of Common Stock in
accordance with Rule 144 under the Securities Act, rather than pursuant to this
Prospectus.
The Company will not receive any of the proceeds of the sale of shares by the
selling stockholders. The Company has agreed to bear all expenses (other than
all discounts, commissions and fees of underwriters and underwriters' counsel,
selling brokers, dealer managers or similar securities industry professionals,
and all transfer taxes, if any, applicable to the distribution of shares) in
connection with the registration and sale of the shares of Common Stock being
offered by the selling stockholders.
EXPERTS
The consolidated financial statements and schedule of the Company appearing in
the Company's Annual Report on Form 10-K for each of the three years in the
period ended December 31, 1998 incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. Reference is made to
said reports, which include an explanatory paragraph with respect to the
uncertainty regarding the Company's ability to continue as a going concern as
discussed in Note 1 to the consolidated financial statements.
LEGAL OPINIONS
The validity of the Common Stock offered hereby has been passed upon for the
Company by Witt, Gaither & Whitaker, P.C., Chattanooga, Tennessee.
WHERE YOU CAN GET MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The Company also files such reports and other
information with the NYSE, on which the Common Stock is traded. Copies of such
material can be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005. Our SEC filings also are available to the public from the SEC's
worldwide web site at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this Prospectus, and information that we file later with the SEC
will automatically update and supersede this information. The "file number" used
by the SEC to identify documents filed by the Company is 1-2782. We
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incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
(1) the Company's Current Reports on Form 8-K dated March 3, 1999 and
March 22, 1999;
(2) the Company's Notification of Late Filing on Form 12b-25 dated March
31, 1999; and
(3) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
You may request a copy of these filings, at no cost, by writing or telephoning
the Company's Secretary at the following address:
Robert J. Powell, Secretary
Signal Apparel Company, Inc.
34 Engelhard Avenue
Avenel, NJ 07001
Telephone: (732) 382-2882
This Prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
Prospectus. We have not authorized anyone to provide you with different
information. You may obtain copies of the registration statement, or of any
document which we have filed as an exhibit to the registration statement or to
any other SEC filing, either from the SEC or from the Secretary of the Company
as described above. We are not making an offer of these securities in any state
where the offer is not permitted. You should not assume that the information in
this Prospectus is accurate as of any date other than the date on the front of
the document.
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Table of Contents
Page
----
Risk Factors .............................................................. 2
Business of the Company
and Recent Developments ................................................ 6
Forward-Looking Statements ................................................ 8
Description of the Company's Capital Stock ................................ 9
Use of Proceeds ........................................................... 11
Selling Stockholders ...................................................... 11
Plan of Distribution ...................................................... 12
Experts ................................................................... 13
Legal Opinions ............................................................ 14
Where You Can Get More Information ........................................ 14
--------------
5,500,000 Shares
Signal Apparel
Company, Inc.
Common Stock
----------------
PROSPECTUS
----------------
April 20, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the securities being
registered, other than brokers' discounts or commissions to be paid by the
selling stockholders. All of the amounts shown are estimates, except the
applicable Securities and Exchange Commission registration fee and the NYSE
filing fee.
SEC Registration Fee .................................. $ 2,007
New York Stock Exchange Listing Fee ................... 19,250
Printing, engraving and postage expenses .............. 3,000
Legal fees and expenses ............................... 20,000
Accounting fees and expenses .......................... 5,000
Miscellaneous expenses ................................ 2,000
-------
Total ............................................ $51,257
=======
Item 15. Indemnification of Directors and Officers.
Article Eighth of the Company's Restated Articles of Incorporation, as amended
(the "Articles") governs indemnification and insurance of the Company's
directors, officers, employees and agents. Paragraph (a) of such Article
provides that each person who was or is made a party to or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director or officer of the Company or is or was serving at the request of the
Company 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 Company to the fullest
extent authorized by the Indiana Business Corporation Law (the "IBCL"), as the
same exists as of the date of adoption of the Articles or as later amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than the IBCL
permitted the Company 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 heirs,
executors and administrators. However, except as provided in the Articles with
respect to the right of a claimant to bring suit to enforce the indemnification
rights provided under the Articles, the Company shall indemnify any such person
seeking indemnification in connection with a
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Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Company's Board of Directors. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company, the Company
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification would be against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Item 16. Exhibits.
(1) Listing of Exhibits incorporated by reference (Commission File No. 1-2782):
(3.1) Restated Articles of Incorporation of Signal Apparel Company, Inc.,
as amended. Incorporated by reference to Exhibit (3.1) to the
Company's Current Report on Form 8-K dated September 17, 1998.
(4.1) Form of 5% Convertible Debentures, due March 3, 2002, of Signal
Apparel Company, Inc. Incorporated by reference to Exhibit (4.1) to
the Company's Current Report on Form 8-K dated March 3, 1999.
(10.1) Securities Purchase Agreement dated March 3, 1999. Incorporated by
reference to Exhibit (10.1) to the Company's Current Report on Form
8-K dated March 3, 1999.
(10.2) Registration Rights Agreement dated March 3, 1999, among Signal
Apparel Company, Inc., and the purchasers of the Company's 5%
Convertible Debentures, due March 3, 2002. Incorporated by reference
to Exhibit (10.2) to the Company's Current Report on Form 8-K dated
March 3, 1999.
(10.3) Form of Warrants to purchase Common Stock issued to purchasers of
the Company's 5% Convertible Debentures, dated March 3, 1999.
Incorporated by reference to Exhibit (10.3) to the Company's Current
Report on Form 8-K dated March 3, 1999.
(2) Listing of Exhibits filed herewith:
(5.1) Opinion of Witt, Gaither & Whitaker, P.C.
(23.1) Consent of Witt, Gaither & Whitaker, P.C. (included in Exhibit
(5.1)).
(23.2) Consent of Arthur Andersen LLP
(24) Power of Attorney (included in Signatures page of this Registration
Statement).
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Item 17. Undertakings.
I. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that the Registrant need not file a post-effective amendment
to include the information required to be included by subsection (i) or (ii)
above if such information is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, which are incorporated by reference in the Registration Statement;
and
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
III. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action
suit or proceeding) is asserted by such director, officer or controlling person
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in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chattanooga, State of Tennessee on April 20, 1999.
SIGNAL APPAREL COMPANY, INC.
By /s/ Robert J. Powell
--------------------------------
Robert J. Powell
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated. Each person whose signature appears below
hereby authorizes and appoints Howard Weinberg and Robert J. Powell, and each of
them, as attorneys-in-fact, to sign on his behalf individually and in the
capacity designated below, and to file, any amendments, including post effective
amendments, to this Registration Statement.
/s/ Stephen Walsh Chairman of the Board and Director April 20, 1999
- ------------------------
Stephen Walsh
/s/ Thomas A. McFall Chief Executive Officer and Director April 20, 1999
- ------------------------
Thomas A. McFall
/s/ Howard Weinberg Chief Financial Officer April 20, 1999
- ------------------------ (Chief Accounting Officer) and
Howard Weinberg Director
/s/ Henry L. Aaron Director April 20, 1999
- ------------------------
Henry L. Aaron
/s/ Zvi Ben-Haim Director April 20, 1999
- ------------------------
Zvi Ben-Haim
/s/ Barry Cohen Director April 20, 1999
- ------------------------
Barry Cohen
/s/ Jacob I. Feigenbaum Director April 20, 1999
- ------------------------
Jacob I. Feigenbaum
/s/ Paul R. Greenwood Director April 20, 1999
- ------------------------
Paul R. Greenwood
/s/ John W. Prutch President and Director April 20, 1999
- ------------------------
John W. Prutch
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