WARRANT CERTIFICATE
THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE WARRANTS AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES MAY NOT BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT
CERTIFICATE, AND NO TRANSFER OF THESE WARRANTS OR SUCH SHARES SHALL
BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
WARRANT CERTIFICATE
TO PURCHASE SHARES OF COMMON STOCK OF
SIGNAL APPAREL COMPANY, INC.
1,500,000 Warrants
THIS CERTIFIES THAT, for good and valuable consideration, the
receipt of which is hereby acknowledged, WALSH GREENWOOD & CO. or
its registered assigns (the "HOLDER"), is the registered owner of
the number of Warrants specified above, each of which Warrants
entitles the Holder, subject to the conditions and limitations
hereinafter set forth, to purchase from SIGNAL APPAREL COMPANY,
INC., a corporation organized and existing under the laws of the
State of Indiana (the "COMPANY"), one share of the Company's Common
Stock, $.01 par value (the "COMMON STOCK"), at a purchase price per
share (the "EXERCISE PRICE") equal to seventy-five percent (75%) of
the of "PREVAILING MARKET PRICE" as defined in Section 11
(calculated, however, over a period of twenty (20) consecutive
trading days beginning on Monday, December 2, 1996, rather than
over a period of 30 consecutive trading days preceding such date).
The Warrants shall not be terminable by the Company. The shares
of Common Stock issuable upon exercise of the Warrants (and any
other or additional shares, securities or property that may
hereafter be issuable upon exercise of the Warrants) are sometimes
referred to herein as the "WARRANT SHARES", and the number of
shares so issuable are sometimes referred to as the "AGGREGATE
NUMBER" as such number may be increased or decreased, as more fully
set forth herein.
The Warrants shall be void and all rights represented hereby
shall cease on the Expiration Date (as defined in Section 11).
The Warrants represented hereby are issued on March 31, 1995
(the "ISSUANCE DATE") (such Warrants, or such lesser number thereof
as shall from time to time remain unexercised, being herein
1
collectively called the "WARRANTS"). The Warrants are being issued
pursuant to a Credit Agreement, dated as of March , 1995 among the
Company, Walsh Greenwood & Co. and certain of the Company's
subsidiaries (the "CREDIT AGREEMENT").
Certain terms used in this Warrant Certificate are defined in
Section 11 hereof. Terms and expressions in this Warrant
Certificate having a defined or generally accepted meaning under
the securities laws of the United States of America shall have the
same meaning in this Warrant Certificate, unless the express
contrary intention appears.
The Warrants are subject to the following provisions, terms
and conditions:
1. EXERCISE; ISSUE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant Certificate may be exercised
by the Holder hereof, in whole or in part (but not as to fractional
shares of Common Stock), to purchase a total of up to 1,500,000
shares, (subject to the adjustments described in Section 5 hereof),
by the surrender of this Warrant Certificate (with the Exercise
Form annexed hereto as Schedule 1 properly completed and executed)
to the Company at its principal office specified in Section 17, or
its then current address, and upon payment to the Company of the
Exercise Price for the Warrant Shares being purchased (i) by cash
or check or bank draft in New York Clearing House funds, (ii) by
tender of shares of the Company's Preferred Stock valued at
$100,000 per share plus any accrued but unpaid dividends, or (iii)
by the total and complete reduction of obligations of the Company
under the Credit Agreement in a dollar amount equal to the Exercise
Price. The shares so purchased shall be and will be deemed to be
issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant
Certificate shall have been surrendered and payment made for such
shares as aforesaid. Certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable
time, not exceeding ten days, after this Warrant Certificate shall
have been so exercised, and unless the Warrants have expired, a new
Warrant Certificate representing the number of shares, if any, with
respect to which this Warrant Certificate shall not then have been
exercised shall also be delivered to the Holder hereof within such
time. Such certificate or certificates shall be deemed to have
been issued and any Person so designated to be named therein shall
be deemed for all purposes to have become a holder of record of
such Warrant Shares as of the close of business on the date on
which this Warrant Certificate shall have been surrendered and
payment of the Exercise Price made as aforesaid. The Warrant
Shares initially issued upon the exercise hereof shall be Common
Stock. The foregoing right of exercise will vest immediately upon
the execution by the Company of this Warrant Certificate on the
2
Issuance Date; PROVIDED, HOWEVER, that the Warrants represented
hereby shall be exercisable by the Holder during a period
commencing on January 1, 1997 and expiring at the close of business
on the Expiration Date (provided, if such date should not be a
Business Day, such expiration will not occur until the close of
business on the next Business Day).
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES; LISTING.
The Company covenants and agrees that: (a) all Warrant Shares
will, upon issuance, be original-issue shares (and not treasury
stock) fully paid and nonassessable and free from all taxes,
claims, liens, charges and other encumbrances with respect to the
issuance thereof; (b) without limiting the generality of the
foregoing, it will from time to time take all such action as may be
required to assure that the par value per share of Common Stock
shall at all times be less than or equal to the Exercise Price; (c)
during the period within which the rights represented by this
Warrant Certificate may be exercised, the Company will at all times
have authorized and reserved for the purpose of issue or transfer
upon exercise of the Warrants a sufficient number of original-issue
shares of its Common Stock to provide for the exercise of all the
Warrants; (d) upon the exercise of the Warrants represented by this
Warrant Certificate, it will, at its expense, promptly notify each
securities exchange on which any Common Stock is at the time listed
of such issuance and maintain a listing of all shares of Common
Stock from time to time issuable upon the exercise of the Warrants
to the extent such shares can be listed.
3. REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in Section 5 of the Credit Agreement are true
and correct and incorporated herein as if made by the Company to
the Holders of the Warrants.
4. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. On any 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 500,000
Warrant Shares), the Company shall file with the Commission and use
its best efforts to cause to become effective as promptly as
practicable (subject to the following sentence) a registration
statement covering at least all of the Warrant Shares requested to
be registered by such requesting Holders (any Holders of Warrant
Shares requesting registration under this Section 4(a) are "SELLING
HOLDERS"), all to the extent requisite to permit the exercise or
disposition in the United States, as the case may be, by the
3
Selling Holders of the Warrant Shares so registered ("DEMAND
REGISTRATION"); provided, however, that the Company shall not be
obligated to effect a Demand Registration (i) prior to the date
which is 90 calendar days after the closing date of a previous
United States public offering, (ii) if the Company has given notice
to the Holders of Warrants that the Company expects to file a
registration statement within 30 days and while the Company has a
public offering in registration, (iii) at any time or in any manner
which is in conflict with the rights granted to Holders of
registrable securities pursuant to that certain Registration Rights
Agreement dated as of November 22, 1994 by and between the Company
and Kidd, Kamm Equity Partners, L.P., as nominee (the "KKEP
AGREEMENT"), unless the holders of such rights have explicitly
waived any such conflict in writing, or (iv) if three such Demand
Registrations with respect to all or a portion of the Warrant
Shares have previously been requested. Should the Company refuse to
effect a Demand Registration pursuant to subsections (i), (ii) or
(iii) above, such request shall not be considered on of the three
rights to demand registration grnated by this Section.
The Company shall promptly give written notice to all Holders of
the Warrants and the Warrant Shares of the receipt by it of a
request for a Demand Registration pursuant to this section. If
other selling shareholders or the Company shall also propose to
include shares of Common Stock in a Demand Registration, and if the
number of includable shares shall exceed the total number of shares
of Common Stock proposed to be registered and/or Warrant Shares
proposed to be registered (all such securities proposed to be
registered, the "REGISTRABLE SECURITIES"), the Registrable
Securities shall be included in the Demand Registration in the
following priority: first, the Registrable Securities held by the
Holders of Warrant Shares in proportion to the respective numbers
of Registrable Securities proposed to be sold by them, and second,
the Registrable Securities proposed to be registered by the Company
or other selling shareholders, allocated among them in such manner
as they shall determine. If a Holder or Holders shall have
requested a Demand Registration and the Company shall have
thereafter withdrawn such registration statement, in addition to
such other rights and remedies that the Holders may be entitled to,
such withdrawn registration shall not be deemed to be one of the
registration statements that may be requested pursuant to this
Section 4(a). The Holder agrees to exercise all Warrants for which
it has demanded registration of Warrant Shares on the effective
date of such registration.
(b) UNITED STATES FEDERAL AND STATE APPROVAL. The Company
shall effect the registration or qualification of the Warrant
Shares registered pursuant to this Section 4(a) and shall give such
notifications to, or receive approvals of, any governmental
authority under United States federal or, if reasonably requested
by the Selling Holders, any United States state securities laws, or
4
any other applicable law, or effect listing with any securities
exchange on which the Common Stock is listed at such time, as may
be necessary to permit the sale of the Warrants and/or the exercise
of the Warrants and the sale of Warrant Shares in the manner
proposed by the Selling Holders; provided, the Company shall not
for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is
not so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any
such jurisdiction.
(c) EXPENSES. Subject to the limitations contained in this
paragraph (c) and except as otherwise specifically provided in this
Section 4, the entire costs and expenses of each registration and
qualification pursuant to this Section 4, whether or not any such
registration shall become effective or shall be consummated, shall
be borne by the Company. Such costs and expenses shall include the
fees and expenses of counsel for the Company and of its accountants
(including the cost of any special audit required by or incidental
to such registration), all other costs and expenses of the Company
incident to the preparation, printing and filing under the
Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each
preliminary prospectus, each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers of
the Warrant Shares and the costs and expenses (including fees and
disbursements of counsel) incurred by the Company in connection
with the qualification of the Warrant Shares under the Blue Sky
laws of various jurisdictions.
(d) PROCEDURES. In the case of each registration or
qualification pursuant to this Section 4, the Company will keep all
Holders of Warrants advised in writing as to the initiation of
proceedings for such registration and qualification and as to the
completion thereof, and will advise any such Holders, upon request,
of the progress of such proceedings. At its expense, the Company
will promptly prepare and in any event, except as otherwise
expressly provided herein, within 90 days after the end of the
period within which requests for registration may be given to the
Company, file with the Commission a registration statement with
respect to the securities to be registered and use its best efforts
to cause such registration statement to become effective and keep
such registration and qualification in effect by such action as may
be necessary or appropriate, including, without limitation, the
filing of post-effective amendments and supplements to any
registration statement or prospectus necessary to keep the
registration statement current and further qualification under any
applicable Blue Sky or other state securities laws to permit such
sale or distribution, all as reasonably requested by such Holder or
Holders. At its expense, the Company will furnish to each Holder
5
whose Warrants and/or Warrant Shares are included therein such
number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement and covering such Holder's Warrant Shares
(including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as
such Holder may reasonably request in order to facilitate the
disposition of such Holder's Warrant Shares contemplated in such
registration statement. The Company will notify each Selling
Holder of any securities covered by such registration statement, at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, or of
any other occurrence which, under applicable securities laws,
requires the prospectus to be revised or updated (and upon receipt
of such notice and until a supplemented or amended prospectus as
set forth below is available, each Selling Holder will cease to
offer or sell any securities covered by the registration statement
and will return all copies of the prospectus to the Company if
requested to do so by it and will not sell any security of the
Company until provided with a current prospectus and notice for the
Company that it may resume its selling efforts). At the request of
any such Selling Holder, the Company shall furnish to such Selling
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statement therein not misleading in the light
of the circumstances then existing. Notwithstanding anything to
the contrary herein, any prospective Selling Holder may withdraw
from a registration under this Section 4 any or all of his Warrant
Shares, upon written notice to the Company given prior to the
execution and delivery by such Selling Holder of a binding
underwriting agreement with the prospective underwriters.
(e) CROSS-INDEMNITY AND CONTRIBUTION AGREEMENTS. In
connection with the registration of Warrant Shares in accordance
with this Section 4, the Company agrees to enter into an
appropriate cross-indemnity agreement and a contribution agreement,
each in customary form, with each underwriter, if any, and each
Holder of Warrant Shares included in such registration statement;
and, if requested, enter into an underwriting agreement containing
conventional representations, warranties, allocation of expenses,
and customary closing conditions including, but not limited to,
6
opinions of counsel and accountants' comfort letters, with any
underwriter who acquires the Warrant Shares.
(f) COOPERATION OF SELLING HOLDERS. Every Selling Holder
who has any Warrant Shares included in a registration statement
agrees as follows:
(i) To furnish the Company, in writing, such
appropriate information and covenants regarding the proposed
methods of sale or other disposition of the Warrant Shares as
the Company, any underwriter, the Commission and/or any state
or other regulatory authority may request;
(ii) To execute, deliver and/or file with or supply to
the Company, any underwriter, the Commission and/or any state
or other regulatory authority such information, documents,
representations, undertakings and/or agreements as are (A)
necessary to carry out the provisions of this Warrant
Certificate, (B) necessary to effect the registration or
qualification of the Warrant Shares under the Securities Act
and/or any of the laws and regulations of any jurisdiction,
and (C) as the Company may reasonably require to ensure the
transfer or disposition of the Warrant Shares is not in
violation of the Securities Act or any applicable state
securities laws;
(iii) To furnish to the Company, not later than every
thirty (30) days after the date of effectiveness of the
registration statement, a report of the number of Warrant
Shares sold during such thirty (30) day period; and
(iv) To cancel any orders to sell and/or to reverse any
sale of Warrant Shares which, in the reasonable belief of the
Company, based upon the opinion of legal counsel experienced
in securities law matters, orders and/or sales were effected
in violation of the Securities Act or any applicable State
securities laws.
5. ADJUSTMENTS TO AGGREGATE NUMBER.
Under certain conditions, the Aggregate Number is subject to
adjustment as set forth herein.
The Aggregate Number shall be subject to adjustment from time
to time as follows and thereafter as adjusted shall be deemed to be
the Aggregate Number hereunder.
(a) In case at any time or from time to time the Company
shall:
7
(i) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock,
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or
(iv) issue its Common Stock in redemption of any of the
outstanding shares of the Company's Preferred Stock, stated
value $100,000,
then the Aggregate Number in effect immediately prior thereto shall
be adjusted so that the Holder or Holders of Warrants shall
thereafter be entitled to receive, upon exercise thereof, the
number of shares of Common Stock that such Holder or Holders would
have owned or have been entitled to receive after the occurrence of
such event had such Warrants been exercised immediately prior to
the occurrence of such event.
(b) In case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other
distribution (collectively, a "DISTRIBUTION") of:
(i) cash (other than dividends payable out of earnings
or any surplus legally available for the payment of dividends
under the laws of the state of incorporation of the Company),
(ii) any evidences of its indebtedness (other than
Convertible Securities), any shares of its capital stock
(other than additional shares of Common Stock or Convertible
Securities) or any other securities or property of any nature
whatsoever (other than cash), or
(iii) any options or warrants or other rights to
subscribe for or purchase any of the following: any evidences
of its indebtedness (other than Convertible Securities), any
shares of its capital stock (other than additional shares of
Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever,
then the Holder or Holders of Warrants shall be entitled to receive
upon the exercise thereof at any time on or after the taking of
such record the number of shares of Common Stock to be received
upon exercise of such Warrants determined as stated herein and, in
addition and without further payment, the cash, stock, securities,
other property, options, warrants and/or other rights to which such
8
Holder or Holders would have been entitled by way of the
Distribution and subsequent dividends and distributions if such
Holder or Holders (x) had exercised such Warrants immediately prior
to such Distribution, and (y) had retained the Distribution in
respect of the Common Stock and all subsequent dividends and
distributions of any nature whatsoever in respect of any stock or
securities paid as dividends and distributions and originating
directly or indirectly from such Common Stock. A reclassification
of the Common Stock into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company
to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this paragraph (b) and, if the
outstanding shares of Common Stock shall be changed into a larger
or smaller number of shares of Common Stock as a part of such
reclassification, such event shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of paragraph (a) of this Section 5.
(c) In case at any time or from time to time the Company
shall (except as hereinafter provided) issue or sell any additional
shares of Common Stock for a consideration per share less than the
Prevailing Market Price, then the Aggregate Number in effect
immediately prior thereto shall be adjusted so that the Aggregate
Number thereafter shall be determined by multiplying the Aggregate
Number immediately prior to such action by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional
shares of Common Stock plus the number of such additional shares of
Common Stock so issued and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock plus the
number of shares of Common Stock which the aggregate consideration
for the total number of such additional shares of Common Stock so
issued would purchase at a price equal to the Prevailing Market
Price. The provisions of this paragraph (c) shall not apply to any
issuance of additional shares of Common Stock for which an
adjustment is provided under Section 5(a). No adjustment of the
Aggregate Number shall be made under this paragraph (c) upon the
issuance of any additional shares of Common Stock which are issued
pursuant to (1) the exercise of any of the Warrants or of any other
warrant or option to purchase Common Stock outstanding as of the
date of this Warrant Certificate, (2) the exercise of any Floating
Rate Warrants issued pursuant to the Credit Agreement, and (3) the
exercise of stock options to purchase shares of Common Stock
pursuant to any stock options granted to employees of the Company
or its subsidiaries pursuant to the Company's 1985 Stock Option
Plan, as amended (collectively, (1), (2) and (3) the "OPTIONS").
(d) In case at any time or from time to time the Company
shall (except as hereinafter provided) take a record of the holders
9
of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner issue or sell any warrants
or other rights to subscribe for or purchase (x) any share of
Common Stock or (y) any Convertible Securities, whether or not the
rights to subscribe, purchase, exchange or convert thereunder are
immediately exercisable, and the consideration per share for which
additional shares of Common Stock may at any time thereafter be
issuable pursuant to such warrants or other rights or pursuant to
the terms of such Convertible Securities shall be less than the
Prevailing Market Price, then the Aggregate Number in effect
immediately prior thereto shall be adjusted so that the Aggregate
Number thereafter shall be determined by multiplying the Aggregate
Number immediately prior to such action by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such warrants or
other rights plus the maximum number of additional shares of Common
Stock issuable pursuant to all such warrants or rights and/or
necessary to effect the conversion or exchange of all such
Convertible Securities and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such warrants or other rights plus the number of
shares of Common Stock which the aggregate consideration for such
maximum number of additional shares of Common Stock would purchase
at a price equal to the Prevailing Market Price. For purposes of
this paragraph (d), the aggregate consideration for such maximum
number of additional shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Company
for the issuance of such additional shares of Common Stock pursuant
to the terms of such warrants or other rights or such Convertible
Securities. No adjustment of the Aggregate Number shall be made
under this paragraph (d) upon the issuance of the Options.
(e) In case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in
any manner issue or sell Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately
exercisable, and the consideration per share for the additional
shares of Common Stock which may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less
than the Prevailing Market Price, then the Aggregate Number in
effect immediately prior thereto shall be adjusted so that the
Aggregate Number thereafter shall be determined by multiplying the
Aggregate number immediately prior to such action by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such
Convertible Securities plus the maximum number of additional shares
of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities and the denominator of which shall
be the number of shares of Common Stock outstanding immediately
10
prior to the taking of such action plus the number of Common Stock
which the aggregate consideration for such maximum number of
additional shares of Common Stock would purchase at a price equal
to the Prevailing Market Price. For purposes of this paragraph
(e), (x) the aggregate consideration for such maximum number of
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Corporation for the
issuance of such additional shares of Common Stock pursuant to the
terms of such Convertible Securities. No adjustment of the
Aggregate Number shall be made under this paragraph (e) upon the
issuance of any Convertible Securities which are issued pursuant to
the exercise of any warrants or other subscription or purchase
rights if an adjustment shall previously have been made or if no
such adjustment shall have been required upon the issuance of such
warrants or other rights pursuant to paragraph (d) of this Section
5.
(f) If, at any time after any adjustment of the Aggregate
Number shall have been made pursuant to paragraph (d) or (e) of
this Section 5 on the basis of the issuance of warrants or other
rights or the issuance of Convertible Securities, or after any new
adjustments of the Aggregate Number shall have been made pursuant
to this paragraph (f),
(i) such warrants or rights or the right of conversion
or exchange in such Convertible Securities shall expire, and
all or a portion of such warrants or rights, or the right of
conversion or exchange in respect of all or a portion of such
Convertible Securities, as the case may be, shall not have
been exercised, and/or
(ii) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights
or the terms of such Convertible Securities shall be
irrevocably increased solely by virtue of provisions therein
contained for an automatic increase in such consideration per
share upon the arrival of a specified date or the happening of
a specified event, or such warrants or rights shall have been
exercised or such convertible Securities converted at a price
in excess of the minimum consideration used in the calculation
of the adjustment to the Aggregate Number,
such previous adjustment shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been
issued by virtue of the computation made in connection with such
adjustment shall no longer be deemed to have been issued by virtue
of such computation. Thereupon, a recomputation shall be made of
the effect of such warrants or rights or Convertible Securities on
the basis of:
11
(x) treating the number of additional shares of
Common Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise of such
warrants or rights or such right of conversion or
exchange as having been issued on the date or dates of
such exercise and for the consideration actually
received and receivable therefor, and
(y) treating any such warrants or rights or any
such Convertible Securities which then remain
outstanding as having been granted or issued immediately
after the time of such irrevocable increase of the
consideration per share for which shares of Common Stock
are issuable under such warrants or rights or
Convertible Securities;
and, if and to the extent called for by the foregoing provisions of
this paragraph (f) on the basis aforesaid, a new adjustment of the
Aggregate Number shall be made, such new adjustment shall supersede
the previous adjustments rescinded and annulled.
(g) If the Company redeems or exchanges all or any portion
of its Series A or Series C Preferred Stock through the issuance or
exchange of the Company's Common Stock, the Aggregate Number shall
be adjusted by multiplying such Aggregate Number by a fraction the
numerator of which is the total number of issued and outstanding
shares of the Company's Common Stock immediately prior to such
redemption or exchange plus the total of all shares of the
Company's Common Stock issued in exchange for the redeemed or
exchanged Preferred Stock and the denominator of which is the total
number of issued and outstanding shares of the Company's Common
Stock immediately prior to such redemption or exchange.
(h) The following provisions shall be applicable to the
making of adjustments of the Aggregate Number hereinbefore provided
for in this Section 5:
(i) The sale or other disposition of any issued share
of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof for the purposes
of this Section 5.
(ii) To the extent that any additional shares of Common
Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any additional shares of
Common Stock or any Convertible Securities (x) are issued
solely for cash consideration, the consideration received by
the Company therefor shall be deemed to be the amount of the
cash received by the Company therefor, or (y) are offered by
12
the Company for subscription, the consideration received by
the Company shall be deemed to be the subscription price.
(iii) The adjustments required by the preceding
paragraphs of this Section 5 shall be made whenever and as
often as any specified event requiring an adjustment shall
occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on
the date of its occurrence.
(iv) In computing adjustments under this Section 5
fractional interests in Common Stock shall be taken into
account to the nearest one-thousandth (.001) of a share and
shall be aggregated until they equal one whole share.
(v) If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase
rights to stockholders thereof, but abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase
rights, then no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(i) If any event occurs as to which the other provisions of
this Section 5 are not strictly applicable but the lack of any
provision for the exercise of the rights of a Holder or Holders of
Warrants would not fairly protect the purchase rights of such
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, or, if strictly
applicable, would not fairly protect the conversion rights of the
Holder or Holders of Warrants in accordance with the essential
intent and principles of such provisions, then the Company shall
appoint a firm or independent certified public accountants in the
United States (which may be the regular auditors of the Company) of
recognized national standing in the United States satisfactory to
the Holder, which shall give their opinion acting as an expert and
not as an arbitrator as to the adjustments, if any, necessary to
preserve, without dilution, on a basis consistent with the
essential intent and principles established in the other provisions
of this Section 5, the exercise rights of the Holders of Warrants.
Upon receipt of such opinion, the Company shall forthwith make the
adjustments described therein.
(j) Within forty-five (45) days after the end of each fiscal
quarter during which an event occurred that resulted in an
adjustment pursuant to this Section 5, and at any time upon the
request of any Holder of Warrants, the Company shall cause to be
promptly mailed to each Holder by first-class mail, postage
prepaid, notice of each adjustment or adjustments to the Aggregate
13
Number effected since the date of the last such notice and a
certificate of the Company's Chief Financial Officer or, in the
case of any such notice delivered within forty-five (45) days after
the end of a fiscal year, a firm of independent public accountants
in the United States selected by the Company and acceptable to the
Holder(s) (who may be the regular accountants employed by the
Company), in each case, setting forth the Aggregate Number after
such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
The fees and expenses of such accountants shall be paid by the
Company.
(k) The occurrence of a single event shall not trigger an
adjustment of the Aggregate Number under more than one paragraph of
this Section 5.
6. TAXES ON CONVERSION. The issuance of certificates for
Warrant Shares upon the exercise of the Warrants shall be made
without charge to the Holder exercising any such Warrant for any
issue or stamp tax in respect of the issuance of such certificates,
and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the Holder; provided,
however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of
the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
7. LIMITATION OF LIABILITY. No provision hereof in the
absence of the exercise of the Warrants by the Holder and no
enumeration herein of the rights or privileges of the Holder shall
give rise to any liability on the part of the Holder for the
Exercise Price of the Warrant Shares or as a stockholder of the
Company, whether such liability is asserted by the Company or by
any creditor of the Company.
8. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any Warrant or of any shares
of Common Stock issued or issuable upon the exercise of any warrant
in any manner that interferes with the timely exercise of the
Warrants.
9. AVAILABILITY OF INFORMATION. The Company will use its
best efforts to comply with the reporting requirements of the
United States Securities Exchange Act of 1934, as amended, if
applicable, and will use its best efforts to comply with all other
public information reporting requirements of the Commission
14
(including rules and regulations promulgated by the Commission
under the Securities Act) from time to time in effect and relating
to the availability of an exemption from the Securities Act for the
sale of any Warrant Shares. The Company will also cooperate with
each Holder of any Warrants in supplying such information as may be
necessary for such Holder to complete and file any information
reporting forms presently or hereafter required by the Commission
as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant Shares. The Company
will deliver to any Holder, promptly upon their becoming available,
copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its
shareholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company
with any securities exchange or with the Commission.
10. RESTRICTIONS ON TRANSFER.
10.1 RESTRICTIVE LEGENDS. Each certificate for any Warrant
Shares issued upon the exercise of any Warrant, and each stock
certificate issued upon the transfer of any such Warrant Shares
(except as otherwise permitted by this Section 10) shall be stamped
or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT AND LAWS."
Each Warrant Certificate issued in substitution for any
Warrant Certificate pursuant to Section 13, 14 or 15 and each
Warrant Certificate issued upon the transfer of any Warrant (except
as otherwise permitted by this Section 10) shall be stamped or
otherwise imprinted with a legend in substantially the following
form:
"THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE WARRANTS
AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES
MAY NOT BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT CERTIFICATE, AND NO TRANSFER
OF THESE WARRANTS OR SUCH SHARES SHALL BE VALID OR
15
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH."
10.2 TERMINATION OF RESTRICTIONS. The restrictions imposed
by this Section 10 upon the transferability of Warrants and Warrant
Shares shall cease and terminate as to any particular Warrants or
Warrant Shares, (a) as to Warrant Shares, when such securities
shall have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering
such securities, or (b) when in the reasonable opinion of counsel
for the Holder thereof such restrictions are no longer required in
order to comply with the Securities Act. Whenever such
restrictions shall terminate as to any Warrants or Warrant Shares,
the Holder thereof shall be entitled to receive from the Company,
without expense, new certificates of like tenor not bearing the
restrictive legends set forth in Section 10.1.
11. DEFINITIONS. As used in this Warrant Certificate, unless
the context otherwise requires, the following terms have the
following respective meanings:
AGGREGATE NUMBER: as set forth in the first paragraph of
this Warrant Certificate and as subsequently varied pursuant
to Section 5.
BUSINESS DAY: any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are
authorized or required by law to close.
COMMISSION: the United States Securities and Exchange
Commission and any other similar or successor agency of the
United States federal government administering the United
States Securities Act or the Securities Exchange Act of 1934,
as amended.
COMMON STOCK: the shares of Common Stock, $.01 par
value per share, of the Company, currently provided for in the
Restated Articles of Incorporation of the Company, as amended,
and any other capital stock of the Company into which such
shares of Common Stock may be converted or reclassified or
that may be issued in respect of, in exchange for, or in
substitution of, such Common Stock by reason of any stock
splits, stock dividends, distributions, mergers,
consolidations or like events.
COMPANY: Signal Apparel Company, Inc., an Indiana
corporation, and its successors and assigns.
CONVERTIBLE SECURITIES: securities which by their terms
are convertible into or exchangeable for Common Stock.
16
CREDIT AGREEMENT: the Credit Agreement, dated as of
March 31, 1995, among the Company, Walsh Greenwood & Co. and
certain of the Company's subsidiaries and the original Holder
hereof on the Issuance Date.
DEMAND REGISTRATION: as set forth in Section 4(a)
hereof.
DISTRIBUTION: shall have the meaning specified in
Section 5(b).
EXERCISE PRICE: as set forth in the first paragraph of
this Warrant Certificate.
EXPIRATION DATE: January 1, 2000.
ISSUANCE DATE: March 31, 1995.
HOLDER OR HOLDERS: as set forth in the first paragraph
of this Warrant Certificate.
KKEP AGREEMENT: as set forth in Section 4(a) hereof.
OPTIONS: as set forth in Section 5(c) hereof.
PERSON: an individual, corporation, partnership, trust
or unincorporated organization, or a government or any agency
or political subdivision thereof.
PREVAILING MARKET PRICE: The average of the daily
closing prices of 30 consecutive trading days immediately
preceding the day in question after appropriate adjustment for
stock dividends, subdivisions, combinations or
reclassifications occurring within said 30-day period. The
closing price for each day shall be the average of the closing
bid and asked prices as furnished by a New York Stock Exchange
member firm or National Association of Securities Dealers,
Inc. member firm, selected from time to time by the Company
for that purpose, or, in the event that the Common Stock is
listed or admitted to trading on one or more national
securities exchanges (or as a NASDAQ National Market System
security), the last sale price on the NASDAQ system or on the
principal national securities exchange on which the Common
Stock is listed or admitted to trading or, in case no reported
sale takes place on such day, the average of the reported
closing bid and asked prices on the NASDAQ system or such
principal exchange.
17
REGISTRABLE SECURITIES: as set forth in Section 4(a)
hereof.
SECURITIES ACT: the United States Securities Act of
1933, as amended (or any successor statute).
SELLING HOLDERS: as set forth in Section 4(a) hereof.
WARRANTS: as set forth in the third paragraph of this
Warrant Certificate.
WARRANT SHARES: as set forth in the first paragraph of
this Warrant Certificate.
12. ACQUISITION OF WARRANTS. Holder represents that it is
acquiring the Warrants represented by this Warrant Certificate and,
upon any exercise of such Warrants, will acquire Common Stock
hereunder for its own account for the purpose of investment, and
not with a view to the public distribution thereof within the
meaning of the Securities Act, subject to any requirement of law
that the disposition thereof shall at all times be within the
control of the Holder. The Holder further represents and
acknowledges that it is an "ACCREDITED INVESTOR" within the meaning
of Regulation D under the Securities Act.
13. WARRANTS TRANSFERABLE. These Warrants are issued as
registered Warrants. Subject to the provisions of Section 10, the
transfer of any Warrant and all rights hereunder, in whole or in
part, is registrable at the office of agency of the Company
referred to in Section 1 hereof by the Holder hereof in person or
by duly authorized attorney, upon surrender of this Warrant
Certificate with the properly completed Form of Assignment in the
form annexed hereto as Schedule 2. The transfer of any Warrant or
any rights thereunder may be effected only by the surrender of such
Warrant at the office or agency of the Company and until due
presentment for registration of transfer on such books, the Company
may treat the registered Holder hereof as the owner for all
purposes, and the Company shall not be affected by notice to the
contrary. No transfer shall be effective until this Warrant
Certificate has been surrendered to the Company as provided herein
and the replacement Warrant Certificate issued to the transferee
has been duly executed by the Company.
14. WARRANT CERTIFICATES EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Warrant Certificate is exchangeable, upon the
surrender hereof by the Holder at such office or agency of the
Company, for a new Warrant Certificate of like tenor representing
in the aggregate the right to purchase the number of shares that
may be purchased hereunder, each of such new Warrant Certificates
to represent the right to purchase such number of shares as shall
18
be designated by such Holder at the time of such surrender. Such
Warrant Certificate shall not be valid until duly executed by the
Company.
15. REPLACEMENT OF WARRANT CERTIFICATES. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant Certificate and, in the
case of any such loss, theft or destruction, upon delivery of an
indemnity bond (or, in the case of the original Holder hereof or
any substantial financial institution to which any Warrants
represented by this Warrant Certificate may be transferred, an
unsecured indemnity agreement) reasonably satisfactory in form and
amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant Certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor. Such Warrant Certificate shall
not be valid until duly executed by the Company.
16. CERTIFICATE RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF
WARRANTS. The rights and obligations of the Company contained
herein shall survive until the exercise of all of the Warrants or
the Expiration Date, whichever is earlier.
17. NOTICES. All notices, requests and other communications
required or permitted to be given or delivered to the Holders of
Warrants shall be in writing, and shall be delivered or shall be
sent by airmail, if overseas, certified or registered mail postage
prepaid and addressed, to each Holder at the address shown on such
Holder's Warrant certificate, or at such other address as shall
have been furnished to the Company by notice from such holder. All
notices, requests and other communications required or permitted to
be given or delivered to the Company shall be in writing, and shall
be delivered, or shall be sent by certified or registered mail,
postage prepaid and addressed to the office of the Company, (return
receipt requested) P. O. Box 4296, Manufacturer's Road,
Chattanooga, Tennessee 37405, Attention: Treasurer, with a copy to
Witt, Gaither & Whitaker, P.C., 1100 American National Bank
Building, Chattanooga, Tennessee 37402-2608, Attention: John F.
Henry, Jr., Esquire, or at such other address as shall have been
furnished to the Holders of Warrants by notice from the Company.
Any such notice, request or other communication may be sent by
telegram or telex, but shall in such case be subsequently confirmed
by a writing delivered or sent by certified or registered mail as
provided above. All notices shall be deemed to have been given
either at the time of the delivery thereof to (or the receipt by,
in the case of a telegram or telex) any officer or employee of the
person entitled to receive such notice at the address of such
person for purposes of this Section 17, or, if mailed, at the
completion of the third full day following the time of such mailing
thereof to such address, as the case may be.
19
18. AMENDMENTS. Neither this Warrant Certificate nor any
term or provision may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought, provided that any change or waiver of any
term or provision hereof, and any consent or direction given
hereunder by the Holders may be effected by the Holders of 51% in
interest of the Warrants originally issued pursuant to this Warrant
Certificate on the Issuance Date, except that no change or waiver
that would (i) increase the Exercise Price of any Warrant or reduce
the Aggregate Number, (ii) change or waive any of the provisions of
Section 4 in connection with the registration rights of Holders of
Warrants or (iii) change or waive any of the provisions of this
Section 18 as to the requisite percentage of the Holders of the
Warrants required to effect any change or wavier of any provision
of this Warrant Certificate, shall be effective as to any Holder
without the consent of such Holder.
19. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws thereunder.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officer and this
Warrant Certificate to be dated March 31, 1995.
SIGNAL APPAREL COMPANY, INC.
By /s/ William H. Watts
20
LIST OF OMITTED EXHIBITS AND SCHEDULES
Schedule 1 Exercise Form for Cash Exercise
Exercise Form for Exercise with Preferred Shares
Exercise Form for Exercise through Debt Cancellation
Schedule 2 Form of Transfer
The Registrant hereby agrees to furnish a copy of any of such omitted Schedules
or Exhbits supplementally upon request of the Commission's staff.