WARRANT CERTIFICATE
THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE WARRANTS AND SUCH SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES MAY
NOT BE TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT
CERTIFICATE, AND NO TRANSFER OF THESE WARRANTS OR SUCH SHARES SHALL BE VALID OR
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
WARRANT CERTIFICATE
To Purchase Shares of Common Stock of
SIGNAL APPAREL COMPANY, INC.
4,500,000 Warrants
THIS CERTIFIES THAT, for good and valuable consideration, the receipt of
which is hereby acknowledged, WGI, LLC or its registered assignees (the "Holder"
or, together with one or more such registered assignees, the "Holders"), is the
registered owner of the number of Warrants specified above, each of which
Warrants entitles the holder hereof, subject to the vesting schedule and the
additional conditions and limitations hereinafter set forth, to purchase from
SIGNAL APPAREL COMPANY, INC. (the "Company"), a corporation organized and
existing under the laws of the State of Indiana, one share of the Company's
Common Stock, $.01 par value (the "Common Stock"), at a purchase price of $1.75
per share until the Expiration Date (as defined in Section 2 hereof) (the
"Exercise Price"). The Warrants shall not be terminable by the Company. The
shares of Common Stock issuable upon exercise of the Warrants (and any other or
additional shares, securities or property that may hereafter be issuable upon
exercise of the Warrants) are sometimes referred to herein as the "Warrant
Shares", and the number of shares so issuable at any given time are sometimes
referred to as the "Aggregate Number" as such number may be increased or
decreased, as more fully set forth herein.
The warrants represented hereby are issued as of December 30, 1997
("Issuance Date")(such warrants issued hereunder, or such lesser number thereof
as shall from time to time remain unexercised, being herein collectively called
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the "Warrants"). The Warrants are being issued in connection with (i) the waiver
by WGI, LLC of certain conditions contained in a credit agreement dated March
13, 1995, between the Company and WGI, LLC (the "WGI Credit Agreement") and (ii)
additional extensions of credit to the Company pursuant to the WGI Credit
Agreement.
Certain terms used in this Warrant Certificate are defined in Section 11
hereof. Terms and expressions in this Warrant Certificate having a defined or
generally accepted meaning under the securities laws of the United States of
America shall have the same meaning in this Warrant Certificate, unless the
contrary intention appears.
The Warrants are subject to the following provisions, terms and conditions:
1. Vesting and Exercise of Warrants. The Warrants are fully vested and are
immediately exercisable.
2. Expiration of Warrants. The Warrants shall, in any event, be void and
all rights represented hereby shall cease on and as of December 30, 2002 (the
"Expiration Date").
3. Exercise; Issue of Certificates; Payment for Shares. The rights
represented by this Warrant Certificate may be exercised by the Holder, in whole
or in part (but not as to fractional shares of Common Stock), to purchase a
total of up to 4,500,000 shares (subject to the expiration date described in
Section 2 and to the adjustments described in Section 6 hereof), by the
surrender of this Warrant Certificate (with the Exercise Form annexed hereto as
Schedule 1 properly completed and executed) to the Company at its principal
office specified in Section 18, or its then current address, and upon payment to
the Company of the Exercise Price for the Warrant Shares being purchased.
Payment of the Exercise Price may be (i) by cash, check or bank draft in New
York Clearing House funds; (ii) by cancellation of any indebtedness which may
from time to time be owing from the Company to Holder; (iii) by cancellation of
Warrants with such Warrants valued, for such purposes, at the difference between
the Prevailing Market Price at the time of exercise and the Exercise Price, as
adjusted; or (iv) through delivery of other Company securities, including shares
of Preferred Stock, valued for such purposes at the stated value per share
prescribed for the applicable series of Preferred Stock plus any accumulated and
unpaid dividends thereon, or at its then Prevailing Market Price for any other
Company securities which are publicly traded. The shares so purchased shall be
and will be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant Certificate
shall have been surrendered and payment made for
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such shares as aforesaid. Certificates for the shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding ten days, after
this Warrant Certificate shall have been so exercised, and unless the Warrants
have expired, a new Warrant Certificate representing the number of shares, if
any, with respect to which this Warrant Certificate shall not then have been
exercised shall also be delivered to the Holder within such time. Such
certificate or certificates shall be deemed to have been issued, and any Person
which may be designated as an assignee therein shall be deemed for all purposes
to have become a holder of record of such certificate, as of the close of
business on the date of the surrender of this Warrant Certificate and payment of
the Exercise Price as aforesaid. The Warrant Shares initially issued upon the
exercise hereof shall be shares of Common Stock.
4. Shares to be Fully Paid; Reservation of Shares; Listing. The Company
covenants and agrees that: (a) all Warrant Shares will, upon issuance, be
original-issue shares (and not treasury stock) fully paid and nonassessable and
free from all taxes, claims, liens, charges and other encumbrances with respect
to the issue thereof; (b) without limiting the generality of the foregoing, the
Company will from time to time take all such action as may be required to assure
that the par value per share of Common Stock shall at all times be less than or
equal to the Exercise Price; (c) during the period within which the rights
represented by this Warrant Certificate may be exercised, the Company will at
all times have authorized and reserved for the purpose of issue or transfer upon
exercise of the Warrants a sufficient number of original-issue shares of its
Common Stock to provide for the exercise of all the Warrants; (d) upon the
exercise of the Warrants represented by this Warrant Certificate, the Company
will, at its expense, promptly notify each securities exchange on which any
shares of Common Stock are at the time listed of such issuance, and maintain a
listing of all shares of Common Stock from time to time issuable upon the
exercise of the Warrants to the extent such shares can be listed.
5. Registration Rights.
(a) Demand Registration Rights.
On any three occasions after the Issuance Date and prior to the Expiration
Date, upon the request of Holders of at least 51% of the Warrant Shares
originally issued pursuant to this Warrant Certificate which are then
outstanding, which Holders shall request the registration of such shares
under the United States Securities Act of 1933, as amended (provided that
such request covers an aggregate of at least 100,000 Warrant Shares), the
Company shall file with the Commission and
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use its best efforts to cause to become effective as promptly as
practicable (subject to the following sentence) a registration statement
covering at least all of the Warrant Shares requested to be registered by
such requesting Holders (any Holders of Warrant Shares requesting
registration under this Section 5(a) are "Selling Holders"), all to the
extent requisite to permit the exercise or disposition in the United
States, as the case may be, by the Selling Holders of the Warrant Shares so
registered ("Demand Registration"); provided, however, that the Company
shall not be obligated to effect a Demand Registration (i) prior to the
date which is 90 calendar days after the closing date of a previous United
States public offering, (ii) if the Company has given notice to the Holders
of Warrants that the Company expects to file a registration statement
within 30 days and while the Company has a public offering in registration,
or (iii) if three such Demand Registrations with respect to all or a
portion of the Warrant Shares have previously been requested. Should the
Company refuse to effect a Demand Registration pursuant to subsections (i)
or (ii) above, such request shall not be considered on of the three rights
to demand registration granted by this Section. The Company shall promptly
give written notice to all Holders of the Warrants and the Warrant Shares
of the receipt by it of a request for a Demand Registration pursuant to
this Section. If other selling shareholders or the Company shall also
propose to include shares of Common Stock in a Demand Registration, and if
the number of includable shares shall exceed the total number of shares of
Common Stock proposed to be registered and/or Warrant Shares proposed to be
registered (all such securities proposed to be registered, the "Registrable
Securities"), the Registrable Securities shall be included in the Demand
Registration in the following priority: first, the Registrable Securities
held by the Holders of Warrant Shares in proportion to the respective
numbers of Registrable Securities proposed to be sold by them, and second,
the Registrable Securities proposed to be registered by the Company or
other selling shareholders, allocated among them in such manner as they
shall determine. If a Holder or Holders shall have requested a Demand
Registration and the Company shall have thereafter withdrawn such
registration statement, in addition to such other rights and remedies that
the Holders may be entitled to, such withdrawn registration shall not be
deemed to be one of the registration statements that may be requested
pursuant to this Section 5(a). The Holder agrees to exercise all Warrants
for which it has demanded
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registration of Warrant Shares on the effective date of such registration.
(b) Piggy Back Registration Rights.
(i) If at any time the Company proposes to file a registration
statement with the Commission (other than in connection with a rights
offering to shareholders, an exchange offer, a registration statement
on Form S-8 or Form S-4 or any successor forms relating to employee
benefit plans, an acquisition of another entity or merger in
connection with a dividend reinvestment plan, the conversion of any
convertible securities, or a stand-by underwriting with respect to the
call of a warrant, option, right or convertible securities for
redemption) with respect to shares of Common Stock which becomes, or
which the Company believes will become, effective at any time prior to
the Expiration Date, then the Company shall in each case give written
notice of such proposed filing to the Holders of the Warrants at least
fifteen (15) calendar days before the anticipated filing date of such
registration statement. Such notice shall offer to such Holders the
opportunity to include in such registration statement such number of
Warrant Shares as such Holders may request. The Company shall not be
required to honor any such request (A) if, in the opinion of counsel
to the Company reasonably acceptable to such Selling Holder who wishes
to have such Warrant Shares included in such registration statement,
registration under the Securities Act is not required for the transfer
of the Warrant Shares in the manner proposed by such Selling Holder;
or (B) to register in the aggregate fewer than 10,000 Warrant Shares
held by the Holders. The Company shall permit, or shall use its best
efforts to cause the managing underwriter of a proposed offering to
permit, the Selling Holders whose Warrant Shares are requested to be
included in the registration (the "Piggy-Back Shares") to include such
Piggy-Back Shares in the proposed offering on the same terms and
conditions as applicable to the shares of Common Stock offered by the
Company and for the account of any person other than the Company, as
the case may be.
(ii) Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that, in its opinion,
the distribution of all or a portion of the Warrant Shares requested
to be included in the registration
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concurrently with the shares of Common Stock being registered by the
Company would materially adversely affect the distribution of such
securities by the Company for its own account, then such Warrant
Shares shall be excluded from the registration. The securities of the
Company held by officers and directors of the Company shall first be
excluded from such registration and underwriting to the extent
required by such limitation. If after such exclusion a limitation on
the number of Warrant Shares is still required, then such inclusion of
Piggy-Back Shares shall be made pro rata among the aggregate of the
Piggy-Back Shares for which a proper request was made under this
Subsection 5(a). If other shareholders of the Company are entitled to
piggy back registration rights and the number of includable shares
exceeds the total number of shares that may be registered, the shares
shall be included in the registration in proportion to the number of
shares proposed to be sold by the Selling Holders, and the number of
shares of stock proposed to be registered by such other selling
shareholders.
(c) United States Federal and State Approval. The Company shall effect
the registration or qualification of the Warrant Shares registered pursuant
to Sections 5(a) or 5(b) and give such notifications to, or receive
approvals of, any governmental authority under United States federal or, if
reasonably requested by the Selling Holders, any United States state
securities laws, or any other applicable law, or effect listing with any
securities exchange on which the Common Stock is listed at such time, as
may be necessary to permit the exercise of the Warrants and the sale of
Warrant Shares in the manner proposed by the Selling Holders, provided that
the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified, to subject itself to taxation in any such jurisdiction or
to consent to general service of process in any such jurisdiction.
(d) Expenses. Subject to the limitations contained in this paragraph
(d), and except as otherwise specifically provided in this Section 5, the
entire costs and expenses of each registration and qualification pursuant
to this Section 5, whether or not any such registration shall become
effective or shall be consummated, shall be borne by the Company. Such
costs and expenses shall include the fees and expenses of counsel for the
Company and of its accountants (including the cost of any special audit
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required by or incidental to such registration), all other costs and
expenses of the Company incident to the preparation, printing and filing
under the Securities Act of the registration statement and all amendments
and supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto
to underwriters, dealers and other purchasers of the Warrant Shares, and
the costs and expenses (including fees and disbursements of counsel)
incurred by the Company in connection with the qualification of the Warrant
Shares under the Blue Sky Laws of various jurisdictions; provided, however,
that if registration under the Blue Sky Laws of any jurisdiction requires
selling shareholders to pay a proportionate share of the expenses of
registration, the Selling Holders shall pay for such expense to the extent
required by the applicable law. The Company shall not be required to pay
underwriting discounts or selling commissions in connection with the sale
of Warrant Shares sold in any such registration and qualification pursuant
to this Section 5.
(e) Procedures.
(i) In the case of each registration or qualification pursuant to
Section 5(a) or Section 5(b), the Company will keep all Holders of
Warrants advised in writing as to the initiation of proceedings for
such registration and qualification and as to the completion thereof,
and will advise any such Holders, upon request, of the progress of
such proceedings. At its expense the Company will promptly prepare
(and in any event, except as otherwise expressly provided herein,
within 90 days after the end of the period within which requests for
registration may be given to the Company) and file with the Commission
a registration statement with respect to the securities to be
registered and use its best efforts to cause such registration
statement to become effective and keep such registration and
qualification in effect by such action as may be necessary or
appropriate, including, without limitation, the filing of
post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement
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current and further qualification under any applicable Blue Sky or
other state securities laws to permit such sale or distribution, all
as reasonably requested by the Selling Holders, for the lesser of (A)
completion of the offering or (B) 180 days after the effective date of
such registration statement; provided, however, that the Company will
keep such registration and qualification effective for longer than 180
days if the costs and expenses associated with such extended
registration period are borne by the Selling Holders.
(ii) At its expense the Company will furnish to each Selling
Holder whose Warrants and/or Warrant Shares are included therein such
number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement and covering such Selling Holder's Warrants
and/or Warrant Shares (including each preliminary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents as such Selling Holder may reasonable request in order to
facilitate the disposition of such Selling Holder's Warrants and/or
Warrant Shares contemplated in such registration statement. The
Company will notify each Selling Holder of any securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, or of any other occurrence which, under applicable
securities laws, requires the prospectus to be revised or updated.
Upon receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, each Selling Holder will
cease to offer or sell any securities covered by the registration
statement and will return all copies of the prospectus to the Company
if requested to do so by it and will not sell any security of the
Company until provided with a current prospectus and notice from the
Company that it may resume its selling efforts. At the request of any
such Selling Holder, the Company shall furnish to such Selling Holder
a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or
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necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(iii) Notwithstanding anything to the contrary herein, any
prospective Selling Holder may withdraw from a registration under this
Section 5 any or all of its Warrant Shares, upon written notice to the
Company given prior to the execution and delivery by such Selling
Holder of a binding underwriting agreement with the prospective
underwriters.
(f) Cross-Indemnity and Contribution Agreements. In connection with
the registration of Warrant Shares in accordance with Section 5(a) or
Section 5(b) above, the Company hereby agrees to enter into an appropriate
cross-indemnity agreement and a contribution agreement, each in customary
form, with each underwriter, if any, and each Holder of Warrant Shares
included in such registration statement; and, if requested, to enter into
an underwriting agreement containing conventional representations,
warranties, allocation of expenses, and customary closing conditions
including, but not limited to, opinions of counsel and accountants' comfort
letters, with any underwriter who acquires the registerable securities.
(g) Cooperation of Selling Holders. Every Selling Holder who has any
Warrant Shares included in a registration statement shall be required to do
the following:
(i) To furnish the Company, in writing, such appropriate
information and covenants regarding the proposed methods of sale or
other disposition of the Warrant Shares as the Company, any
underwriter, the Commission and/or any state or other regulatory
authority may request;
(ii) To execute, deliver and/or file with or supply to the
Company, any underwriter, the Commission and/or any state or other
regulatory authority such information, documents, representations,
undertakings and/or agreements (A) necessary to carry out the
provisions of this Warrant Certificate, (B) necessary to effect the
registration or qualification of the Warrant Shares under the
Securities Act and/or any of the laws and regulations of any
jurisdiction, and (C) as the Company may reasonably require to ensure
that the transfer or disposition of the Warrant Shares is not in
violation of the Securities Act or any applicable state securities
laws;
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(iii) To furnish to the Company, not later than every thirty (30)
days after the date of effectiveness of the registration statement, a
report of the number of Warrant Shares sold during such thirty-day
period; and
(iv) To cancel any orders to sell and/or to reverse any sale of
Warrant Shares which, in the reasonable belief of the Company, based
upon the opinion of legal counsel experienced in securities law
matters, were effected in violation of the Securities Act or any
applicable State securities laws.
6. Adjustments to Aggregate Number.
Under certain conditions, the Aggregate Number is subject to adjustment as
set forth herein.
The Aggregate Number shall be subject to adjustment from time to time as
follows and thereafter as adjusted shall be deemed to be the Aggregate Number
hereunder.
(a) In case at any time or from time to time the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the Aggregate Number in effect immediately prior thereto shall be
adjusted so that the Holder or Holders of Warrants shall thereafter be
entitled to receive, upon exercise thereof, the number of shares of Common
Stock that such Holder or Holders would have owned or have been entitled to
receive after the occurrence of such event had such Warrants been exercised
immediately prior to the occurrence of such event.
(b) In case at any time or from time to time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
to
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receive any dividend or other distribution (collectively, a "Distribution")
of:
(i) cash (other than dividends payable out of earnings or any
surplus legally available for the payment of dividends under the laws
of the state of incorporation of the Company);
(ii) any evidences of its indebtedness (other than Convertible
Securities), any shares of its capital stock (other than additional
shares of Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever (other than cash); or
(iii) any options or warrants or other rights to subscribe for or
purchase any of the following: any evidences of its indebtedness
(other than Convertible Securities), any shares of its capital stock
(other than additional shares of Common Stock or Convertible
Securities) or any other securities or property of any nature
whatsoever,
then the Holder or Holders of Warrants shall be entitled to receive upon
the exercise thereof at any time on or after the taking of such record the
number of shares of Common Stock to be received upon exercise of such
Warrants determined as stated herein and, in addition and without further
payment, the cash, stock, securities, other property, options, warrants
and/or other rights to which such Holder or Holders would have been
entitled by way of the Distribution and subsequent dividends and
distributions if such Holder or Holders (x) had exercised such Warrants
immediately prior to such Distribution, and (y) had retained the
Distribution in respect of the Common Stock and all subsequent dividends
and distributions of any nature whatsoever in respect of any stock or
securities paid as dividends and distributions and originating directly or
indirectly from such Common Stock. A reclassification of the Common Stock
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this
paragraph (b) and, if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a part
of such reclassification, such event shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of paragraph (a) of this Section 6.
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(c) In case at any time or from time to time the Company shall (except
as hereinafter provided) issue or sell any additional shares of Common
Stock for a consideration per share less than the Prevailing Market Price
to any Affiliate, Associate or related party, then the Aggregate Number in
effect immediately prior thereto shall be adjusted so that the Aggregate
Number thereafter shall be determined by multiplying the Aggregate Number
immediately prior to such action by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock plus the number
of such additional shares of Common Stock so issued and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common Stock plus the
number of shares of Common Stock which the aggregate consideration for the
total number of such additional shares of Common Stock so issued would
purchase at a price equal to the Prevailing Market Price. The provisions of
this paragraph (c) shall not apply to any issuance of additional shares of
Common Stock for which an adjustment is provided under Section 6(a). No
adjustment of the Aggregate Number shall be made under this paragraph (c)
upon the issuance of any additional shares of Common Stock which are issued
pursuant to (1) the exercise of any Warrants, and (2) the exercise of stock
options to purchase shares of Common Stock pursuant to any outstanding
stock options granted by contract to present or former employees of the
Company or its subsidiaries or pursuant to the Company's 1985 Stock Option
Plan, as amended (collectively, (1) and (2) the "Options").
(d) In case at any time or from time to time the Company shall (except
as hereinafter provided) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a distribution of, or shall in
any manner issue or sell any warrants or other rights to subscribe for or
purchase (x) any share of Common Stock or (y) any Convertible Securities,
whether or not the rights to subscribe, purchase, exchange or convert
thereunder are immediately exercisable, and the consideration per share for
which additional shares of Common Stock may at any time thereafter be
issuable pursuant to such warrants or other rights or pursuant to the terms
of such Convertible Securities shall be less than the Prevailing Market
Price, then the Aggregate Number in effect immediately prior thereto shall
be adjusted so that the Aggregate Number thereafter shall be
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determined by multiplying the Aggregate Number immediately prior to such
action by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such
warrants or other rights plus the maximum number of additional shares of
Common Stock issuable pursuant to all such warrants or rights and/or
necessary to effect the conversion or exchange of all such Convertible
Securities and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such warrants
or other rights plus the number of shares of Common Stock which the
aggregate consideration for such maximum number of additional shares of
Common Stock would purchase at a price equal to the Prevailing Market
Price. For purposes of this paragraph (d), the aggregate consideration for
such maximum number of additional shares of Common Stock shall be deemed to
be the minimum consideration received and receivable by the Company for the
issuance of such additional shares of Common Stock pursuant to the terms of
such warrants or other rights or such Convertible Securities. No adjustment
of the Aggregate Number shall be made under this paragraph (d) upon the
issuance of any of the Options.
(e) In case at any time or from time to time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
to receive a distribution of, or shall in any manner issue or sell
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the consideration per share for
the additional shares of Common Stock which may at any time thereafter be
issuable pursuant to the terms of such Convertible Securities shall be less
than the Prevailing Market Price, then the Aggregate Number in effect
immediately prior thereto shall be adjusted so that the Aggregate Number
thereafter shall be determined by multiplying the Aggregate number
immediately prior to such action by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior
to the issuance of such Convertible Securities plus the maximum number of
additional shares of Common Stock necessary to effect the conversion or
exchange of all such Convertible Securities and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior
to the taking of such action plus the number of shares of Common Stock
which the aggregate consideration for such maximum number of additional
shares of Common Stock would purchase at a price equal to the Prevailing
Market Price. For purposes of this paragraph (e), (x) the aggregate
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consideration for such maximum number of additional shares of Common Stock
shall be deemed to be the minimum consideration received and receivable by
the Company for the issuance of such additional shares of Common Stock
pursuant to the terms of such Convertible Securities. No adjustment of the
Aggregate Number shall be made under this paragraph (e) upon the issuance
of any Convertible Securities which are issued pursuant to the exercise of
any warrants or other subscription or purchase rights if an adjustment
shall previously have been made or if no such adjustment shall have been
required upon the issuance of such warrants or other rights pursuant to
paragraph (d) of this Section 6.
(f) If, at any time after any adjustment of the Aggregate Number shall
have been made pursuant to paragraphs (d) or (e) of this Section 6 on the
basis of the issuance of warrants or other rights or the issuance of
Convertible Securities, or after any new adjustments of the Aggregate
Number shall have been made pursuant to this paragraph (f),
(i) such warrants or rights or the right of conversion or
exchange in respect of such Convertible Securities shall expire, and
all or a portion of such warrants or rights, or the right of
conversion or exchange in respect of all or a portion of such
Convertible Securities, as the case may be, shall not have been
exercised, and/or
(ii) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights or the terms of such
Convertible Securities shall be irrevocably increased solely by virtue
of provisions therein contained for an automatic increase in such
consideration per share upon the arrival of a specified date or the
happening of a specified event, or such warrants or rights shall have
been exercised or such Convertible Securities converted at a price in
excess of the minimum consideration used in the calculation of the
adjustment to the Aggregate Number,
such previous adjustment shall be rescinded and annulled and the additional
shares of Common Stock which were deemed to have been issued by virtue of
the computation made in connection with such adjustment shall no longer be
deemed to have been issued by virtue of such computation. Thereupon, a
recomputation shall be made of the effect of such warrants or rights or
Convertible Securities on the basis of:
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(x) treating the number of additional shares of Common Stock, if
any, theretofore actually issued or issuable pursuant to the previous
exercise of such warrants or rights or such right of conversion or
exchange as having been issued on the date or dates of such exercise
and for the consideration actually received and receivable therefor,
and
(y) treating any such warrants or rights or any such Convertible
Securities which then remain outstanding as having been granted or
issued immediately after the time of such irrevocable increase of the
consideration per share for which shares of Common Stock are issuable
under such warrants or rights or Convertible Securities; and, if and
to the extent called for by the foregoing provisions of this paragraph
(f) on the basis aforesaid, a new adjustment of the Aggregate Number
shall be made, such new adjustment shall supersede the previous
adjustments rescinded and annulled.
(g) The following provisions shall be applicable to the making of
adjustments of the Aggregate Number hereinbefore provided for in this
Section 6:
(i) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Company shall be
deemed an issuance thereof for the purposes of this Section 6.
(ii) To the extent that any additional shares of Common Stock or
any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities (x) are issued solely for cash consideration,
the consideration received by the Company therefor shall be deemed to
be the amount of the cash received by the Company therefor, or (y) are
offered by the Company for subscription, the consideration received by
the Company shall be deemed to be the subscription price.
(iii) The adjustments required by the preceding paragraphs of
this Section 6 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
15
(iv) In computing adjustments under this Section 6 fractional
interests of Common Stock shall be taken into account to the nearest
one-thousandth (.001) of a share and shall be aggregated until they
equal one whole share.
(v) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution or subscription or purchase rights, but shall abandon
its plan to pay or deliver such dividend, distribution, subscription
or purchase rights, then no adjustment shall be required by reason of
the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
(h) If any event occurs as to which the other provisions of this
Section 6 are not strictly applicable but the lack of any provision for the
exercise of the rights of a Holder or Holders of Warrants would not fairly
protect the purchase rights of such Holder or Holders of Warrants in
accordance with the essential intent and principles of such provisions, or,
if strictly applicable, would not fairly protect the conversion rights of
the Holder or Holders of Warrants in accordance with the essential intent
and principles of such provisions, then the Company shall appoint a firm of
independent certified public accountants in the United States (which may be
the regular auditors of the Company) of recognized national standing in the
United States satisfactory to the Holders, which shall give their opinion
acting as an expert and not as an arbitrator as to the adjustments, if any,
necessary to preserve, without dilution, on a basis consistent with the
essential intent and principles established in the other provisions of this
Section 6, the exercise rights of the Holders of Warrants. Upon receipt of
such opinion, the Company shall forthwith make the adjustments described
therein.
(i) Within forty-five (45) days after the end of each fiscal quarter
during which an event occurred that resulted in an adjustment pursuant to
this Section 6, and at any time upon the request of any Holder of Warrants,
the Company shall cause to be promptly mailed to each Holder of Warrants by
first-class mail, postage prepaid, notice of each adjustment or adjustments
to the Aggregate Number effected since the date of the last such notice and
a certificate of the Company's Chief Financial Officer or, in the case of
any such notice delivered within forty-five (45) days after the end of a
fiscal year, a firm of independent public
16
accountants in the United States selected by the Company and acceptable to
the Holder(s) (who may be the regular accountants employed by the Company),
in each case, setting forth the Aggregate Number after such adjustment, a
brief statement of the facts requiring such adjustment and the computation
by which such adjustment was made. The fees and expenses of such
accountants shall be paid by the Company.
(j) The occurrence of a single event shall not trigger an adjustment
of the Aggregate Number under more than one paragraph of this Section 6.
7. Taxes on Conversion. The issuance of certificates for Warrant Shares
upon the exercise of the Warrants shall be made without charge to the Holder
exercising any such Warrant for any issue or stamp tax in respect of the
issuance of such certificates, and such certificates shall be issued in the
respective names of, or in such names as may be directed by, the Holder;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in a name other than that of the Holder, and the Company
shall not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
8. Limitation of Liability. No provision hereof in the absence of the
exercise of the Warrants by the Holder and no enumeration herein of the rights
or privileges of the Holder shall give rise to any liability on the part of the
Holder for the Exercise Price of the Warrant Shares or as a stockholder of the
Company, whether such liability is asserted by the Company or by any creditor of
the Company.
9. Closing of Books. The Company will at no time close its transfer books
against the transfer of any Warrant or of any shares of Common Stock issued or
issuable upon the exercise of any Warrant in any manner that interferes with the
timely exercise of the Warrants.
10. Availability of Information. The Company will use its best efforts to
comply with the reporting requirements of the United States Securities Exchange
Act of 1934, as amended, if applicable, and will use its best efforts to comply
with all other public information reporting requirements of the Commission
(including rules and regulations promulgated by the Commission under the
Securities Act) from time to time in effect and relating to the availability of
an exemption from the Securities Act for the sale of any Warrant Shares. The
Company will also
17
cooperate with each Holder of any Warrants in supplying such information as may
be necessary for such Holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
Shares. The Company will deliver to any Holder, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its shareholders,
and copies of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange or with the
Commission.
11. Restrictions on Transfer.
11.1 Restrictive Legends. Each certificate for any Warrant Shares issued
upon the exercise of any Warrant, and each stock certificate issued upon the
transfer of any such Warrant Shares (except as otherwise permitted by this
Section 11) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION, OR ANY EXEMPTION THEREFROM, UNDER SUCH ACT AND LAWS.
Each Warrant Certificate issued in substitution for any Warrant Certificate
pursuant to Sections 14, 15 or 16 and each Warrant Certificate issued upon the
transfer of any Warrant (except as otherwise permitted by this Section 11) shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE WARRANTS AND SUCH SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES MAY
NOT BE TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT
CERTIFICATE, AND NO TRANSFER OF THESE WARRANTS OR SUCH SHARES SHALL BE VALID OR
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
18
11.2 Termination of Restrictions. The restrictions imposed by this Section
11 upon the transferability of Warrants and Warrant Shares shall cease and
terminate as to any particular Warrants or Warrant Shares (a) when such
securities shall have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering such
securities, or (b) when in the reasonable opinion of counsel for the Holder
thereof (subject to concurrence in such opinion by counsel for the Company) such
restrictions are no longer required in order to comply with the Securities Act.
Whenever such restrictions shall terminate as to any Warrants or Warrant Shares,
the holder thereof shall be entitled to receive from the Company or its transfer
agent, without expense, new certificates of like tenor not bearing the
restrictive legends set forth in Section 11.1.
12. Definitions. As used in this Warrant Certificate, unless the context
otherwise requires, the following terms have the following respective meanings:
Aggregate Number: as set forth in the first paragraph of this Warrant
Certificate and as subsequently varied pursuant to Section 6.
Commission: the United States Securities and Exchange Commission and any
other similar or successor agency of the United States federal government
administering the United States Securities Act or the Securities Exchange Act of
1934, as amended.
Common Stock: the shares of Common Stock, $.01 par value per share, of the
Company, currently provided for in the Company's Restated Articles of
Incorporation, as amended, and any other capital stock of the Company into which
such shares of Common Stock may be converted or reclassified or that may be
issued in respect of, in exchange for, or in substitution of, such Common Stock
by reason of any stock splits, stock dividends, distributions, mergers,
consolidations or like events.
Company: Signal Apparel Company, Inc., an Indiana corporation, and its
successors and assigns.
Convertible Securities: securities convertible into or exchangeable for
Common Stock.
Distribution: shall have the meaning specified in Section 6(b).
Expiration Date: December 29, 2003.
Options: as set forth in Section 6(c).
19
Person: an individual, corporation, partnership, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
Prevailing Market Price: The average of the daily closing prices of the
Common Stock for 30 consecutive trading days immediately preceding the day in
question after appropriate adjustment for stock dividends, subdivisions,
combinations or reclassifications occurring within said 30-day period. The
closing price for each day shall be the average of the closing bid and asked
prices as furnished by a New York Stock Exchange member firm or National
Association of Securities Dealers, Inc. member firm, selected from time to time
by the Corporation for that purpose, or, in the event that the Common Stock is
listed or admitted to trading on one or more national securities exchanges (or
as a NASDAQ National Market System security), the last sale price on the NASDAQ
system or on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, in case no reported sale takes place
on such day, the average of the reported closing bid and asked prices on the
NASDAQ system or such principal exchange.
Recapitalization: any reorganization or recapitalization in which the total
consideration received by shareholders of the Company, including cash, debt,
equity and any other property, in addition to any remaining equity in the
Company such shareholders may retain, exceeds the value received by the holders
of the Warrants for their Warrants, each calculated on a per share basis.
Securities Act: the United States Securities Act of 1933, as amended (or
any successor statute).
Warrants: as set forth in the first paragraph of this Warrant Certificate.
Warrant Shares: as set forth in the first paragraph of this Warrant
Certificate.
13. Acquisition of Warrants. The Holder represents that it is acquiring the
Warrants represented by this Warrant Certificate and, upon any exercise of such
Warrants, will acquire Common Stock hereunder for its own account for the
purpose of investment, and not with a view to the public distribution thereof
within the meaning of the Securities Act, subject to any requirement of law that
the disposition thereof shall at all times be within the control of the Holder.
The Holder further represents and acknowledges that it is an "Accredited
Investor" within the meaning of Regulation D under the Securities Act.
20
14. Warrants Transferable. Subject to the provisions of Section 11, the
transfer of any Warrants and all rights hereunder, in whole or in part, is
registerable at the office or agency of the Company referred to in Section 1
hereof by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant Certificate with the properly completed Form of
Assignment in the form annexed hereto as Schedule 2. The transfer of any Warrant
or any rights thereunder may be effected only by the surrender of such Warrant
at the office or agency of the Company and until due presentment for
registration of transfer on the Company's books, the Company may treat the
registered holder hereof as the owner for all purposes, and the Company shall
not be affected by notice to the contrary. No transfer shall be effective until
the replacement Warrant Certificate issued to the transferee has been duly
executed by the transferee as the new holder thereof, and such evidence of due
execution as the Company may reasonably require has been furnished to the
Company.
15. Warrant Certificates Exchangeable for Different Denominations. This
Warrant Certificate is exchangeable, upon the surrender hereof by the Holder
hereof at the office or agency of the Company referred to in Section 1 hereof,
for new warrant certificates of like tenor representing in the aggregate the
right to purchase the number of shares that may be purchased hereunder, each of
such new warrant certificates to represent the right to purchase such number of
shares as shall be designated by such Holder at the time of such surrender. Such
warrant certificate shall not be valid until duly executed by the Holder
thereof.
16. Replacement of Warrant Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity bond (or, in the case of the
original Holder hereof or any substantial financial institution to which any
Warrants represented by this Warrant Certificate may be transferred, an
unsecured indemnity agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant Certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor. Such Warrant
Certificate shall not be valid until duly executed by the holder thereof.
17. Certificate Rights and Obligations Survive Exercise of Warrants. The
rights and obligations of the Company contained herein shall survive until the
exercise of all of the Warrants or until the Expiration Date, whichever is
earlier.
21
18. Notices. All notices, requests or other communications required or
permitted to be given or delivered to the Holders of Warrants shall be in
writing, and shall be delivered or shall be sent certified or registered mail
(or, if overseas, by airmail), postage prepaid, and addressed to each Holder at
the address shown on such Holder's Warrant certificate, or at such other address
as shall have been furnished to the Company by notice from such Holder. All
notices, requests and other communications required or permitted to be given or
delivered to the Company shall be in writing, and shall be delivered, or shall
be sent by certified or registered mail, postage prepaid and addressed to the
principal executive office of the Company (return receipt requested), 200-A
Manufacturers Road, Chattanooga, Tennessee 37405, Attention: Treasurer, with a
copy to Witt, Gaither & Whitaker, P.C., 1100 SunTrust Bank Building,
Chattanooga, Tennessee 37402-2608, Attention: John F. Henry, Jr., Esquire, or at
such other address as shall have been furnished to the Holders of Warrants by
notice from the Company. Any such notice, request or other communication may be
sent by telegram or telex, but shall in such case be subsequently confirmed by a
writing delivered or sent by certified or registered mail as provided above. All
notices shall be deemed to have been given either at the time of the delivery
thereof to (or the receipt by, in the case of a telegram or telex) any officer
or employee of the person entitled to receive such notice at the address of such
person for purposes of this Section 18, or, if mailed, at the completion of the
third full day following the time of such mailing thereof to such address, as
the case may be.
19. Amendments. Neither this Warrant Certificate nor any term or provision
hereof may be changed, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, provided that any change or
waiver of any term or provision hereof, and any consent or direction given
hereunder by the Holders may be effected by the Holders of 51% in interest of
the Warrants originally issued pursuant to this Warrant Certificate on the
Issuance Date, except that no change or waiver that would (i) increase the
Exercise Price of any Warrant or reduce the Aggregate Number, (ii) change or
waive any of the provisions of Section 5 in connection with the registration
rights of Holders of Warrants or (iii) change or waive any of the provisions of
this Section 19 as to the requisite percentage of the Holders of the Warrants
required to effect any change or wavier of any provision of this Warrant
Certificate, shall be effective as to any Holder without the consent of such
Holder.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of
22
New York, without regard to principles of conflicts of laws thereunder.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed by its duly authorized officer and to be dated December 30, 1997.
SIGNAL APPAREL COMPANY, INC.
/s/ Robert J. Powell
--------------------
By: Robert J. Powell
Vice President
ACCEPTED AND AGREED TO this 30th day
of December, 1997.
/s/ Stephen Walsh
- ------------------------------------
WGI, LLC
By: Stephen Walsh, Manager
23
Schedule 1
EXERCISE FORM
[To be executed only upon exercise of Warrant]
To: SIGNAL APPAREL COMPANY, INC.
The undersigned irrevocably exercises ________________ of the Warrants for
the purchase of one share (subject to adjustment) of Common Stock, $.01 par
value per share, of SIGNAL APPAREL COMPANY, INC. for each Warrant represented by
the within Warrant Certificate and herewith makes payment of $______ (such
payment being in cash or by check or bank draft in New York Clearing House funds
payable to the order of Signal Apparel Company, Inc.), or by cancellation of
indebtedness, surrender and exchange of securities, or surrender and exchange of
Warrants all at the exercise price and on the terms and conditions specified in
the within Warrant Certificate, surrenders the within Warrant Certificate and
all right, title and interest therein (except as to any unexercised Warrants) to
Signal Apparel Company, Inc. and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date:_______________________
------------------------------(1)
(Signature of Owner)
------------------------------
------------------------------
(Address)
- ----------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
24
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Address:
25
Schedule 2
FORM OF TRANSFER
FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant
Certificate hereby transfers to the Assignee(s) named below the following number
of Warrants:
Names of Number of
Assignees Address Warrants
- --------- ------- ---------
Date:_______________________
-----------------------------(1)
(Signature of Holder)
------------------------------
------------------------------
(Address)
- ----------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
26