SIGNAL APPAREL COMPANY, INC.
SUBSCRIPTION AND STOCK PURCHASE AGREEMENT
This Subscription and Stock Purchase Agreement (this "Agreement") is
entered into as of the 12th day of March, 1999, by and between Signal Apparel
Company, Inc., an Indiana corporation (the "Company") and BNY Financial
Corporation, an Indiana corporation ABNY@).
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of the
representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
1. Initial Shares. The Company agrees to issue and sell to BNY, and
BNY agrees to purchase from the Company, on the Closing Date specified in
Section 2 hereof, 1,166,667 newly issued shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), at a purchase price
equal to ONE CENT ($0.01) per share. The shares of Common Stock purchased
pursuant to this Section 1.a. are referred to herein as the "Initial
Shares".
2. Additional Stock. The Company agrees to issue and sell to BNY, and
BNY agrees to purchase from the Company, on the Closing Date specified in
Section 2 hereof, 625,000 newly issued shares of the Company's Common
Stock, at a purchase price equal to ONE CENT ($0.01) per share. The shares
of Common Stock purchased pursuant to this Section 1.b. are referred to
herein as the "New Shares" and the New Shares together with the Initial
Shares are referred to herein as the "Shares". Without limiting the
transfer restrictions set forth in this Agreement, BNY may not offer, sell,
transfer or otherwise dispose of more than 208,333 of the New Shares per
each succeeding year commencing on December 31, 1999.
3. Warrant. In consideration of the purchase of the New Shares by BNY,
the Company will issue to BNY on the Closing Date a warrant (the "Warrant")
having the terms set forth in the Warrant Certificate in the form attached
hereto as Exhibit A, to purchase shares of Common Stock (the "Warrant
Certificate"). The shares of Common Stock issuable pursuant to the Warrant
are referred to herein as the "Warrant Shares".
2. Closing Date Purchase. The delivery of the Initial Shares, the New
Shares and the Warrant shall occur at a closing (the AClosing@) to be held at
10:00 a.m., New York time, on March 12, 1999 at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or on
such other date or at such other location as agreed to by the Company and BNY
(such date of the Closing referred to hereinafter as the "Closing Date").
Payment shall be made at the Closing by delivery of a wire transfer of same day
funds denominated in U.S. dollars, unless otherwise agreed in writing with the
Company. 1.
3. Representations and Warranties of the Company. The Company represents
and warrants to BNY as follows:
1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Indiana and has all requisite corporate power and authority to own
or lease and operate its properties and assets and to carry on its business
as now conducted and as proposed to be conducted. The Company is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in all jurisdictions in which it owns or leases property or in
which the conduct of its business requires it to be so qualified or
licensed, except where the failure to be so qualified or licensed would
not, individually or in the aggregate, have a material adverse effect on
the business, assets, results of operations or condition (financial or
otherwise) of the Company.
2. Authorization. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of
this Agreement by the Company, and for the authorization, issuance and
delivery of the Shares and the Warrant being sold under this Agreement, has
been taken. This Agreement has been duly executed and delivered by the
Company, and assuming that this Agreement has been duly executed and
delivered by each of the other parties hereto, shall constitute the valid
and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent the
enforceability thereof may be limited by bankruptcy laws, insolvency laws,
reorganization laws, moratorium laws or other laws affecting creditors'
rights generally or by general equitable principles.
3. Validity of Shares. The Shares and the Warrant, when issued, sold
and delivered in accordance with the terms of this Agreement, shall be duly
and validly issued, and fully paid and the Shares shall be nonassessable.
4. Securities Act. The sale of Shares and the Warrant in accordance
with the terms of this Agreement (assuming the accuracy of the
representations and warranties of BNY contained in Section 5 hereof) is
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act").
5. The Company has reserved 375,000 shares for issuance pursuant to
the Warrant. When issued to BNY against payment therefor in accordance with
the terms of this Agreement and the Warrant Certificate, the Warrant and
each Warrant Share:
(1) will have been duly and validly authorized, duly and validly
issued, fully paid and non-assessable;
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(2) will be free and clear of any security interests, liens, claims
or other encumbrances (other than those resulting solely from
actions by BNY); and
(3) will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the
Company.
4. Registration Provisions.
a. The Company shall at its own expense, file a registration statement
(the "Registration Statement") under the Securities Act covering the sale
or resale of the Initial Shares and the Warrant Shares, and shall use its
commercially reasonable best efforts to cause such Registration Statement
to be declared effective not later than 270 calendar days after the Closing
Date, provided that BNY shall have provided such information and
cooperation in connection therewith as the Company may request.
b. The Company shall, by each of December 31, 1999, December 31, 2000
and December 31, 2001 (each a "Filing Date"), at its own expense, file a
Registration Statement under the Securities Act covering the sale or resale
of 208,333 New Shares (as such number may be adjusted pursuant to Section 8
hereof), and shall use its commercially reasonable best efforts to cause
such Registration Statement to be declared effective not later than 270
calendar days after the Filing Date, provided that BNY shall have provided
such information and cooperation in connection therewith as the Company may
request.
b. The Company shall use its commercially reasonable best efforts to
cause any Registration Statement filed pursuant to this Section 4 to remain
effective for so long as BNY is the owner of the Shares or the Warrant
Shares.
c. The Company will use its commercially reasonable best efforts to:
(i) provide a transfer agent and registrar for all Shares and Warrant
Shares and a CUSIP number for all Shares and Warrant Shares; (ii) use its
commercially reasonable best efforts to comply with all applicable rules
and regulations of the Security and Exchange Commission (the "SEC"); and
(iii) file the documents required of the Company.
d. The Company may postpone, for up to three (3) months, the filing or
the effectiveness of any registration required by Sections 4.a. or 4.b. if
the board of directors of the Company determines in good faith that such
registration would have a material adverse effect on any proposal or plan
of the Company to engage in any extraordinary transaction.
e. The Company may include in any registration pursuant to Sections
4.a. or 4.b. newly-issued shares of Common Stock to be sold by the Company
on a primary basis.
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f. It shall be a condition precedent to the obligation of the Company
to take any action pursuant to this Section 4 in respect of the securities
which are to be registered that BNY shall furnish to the Company such
information regarding the securities held by BNY and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
g. Notwithstanding any other provisions of this Section 4, the Company
shall not be obligated to register any Warrant Shares of any holder after
such Warrant Shares are deemed to be freely tradable securities pursuant to
Rule 144(k) under the Securities Act.
4. Representations, Warranties and Agreements of BNY. BNY represents and
warrants to the Company as follows:
1. Authorization. The execution and delivery by BNY of this Agreement
and the consummation by BNY of this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary action on
the part of BNY. BNY represents and warrants that this Agreement, when
executed and delivered by it, will constitute its valid and legally binding
obligation, enforceable against BNY in accordance with its terms, except to
the extent the enforceability thereof may be limited by bankruptcy laws,
insolvency laws, reorganization laws, moratorium laws or other laws
affecting creditors= rights generally or by general equitable principles.
2. Investment Representations.
1. This Agreement is made in reliance upon BNY's representations
to the Company, which by execution hereof BNY hereby confirms, that
(A) the Shares and the Warrant to be received by it will be acquired
by it for investment for its own account, not as a nominee or agent,
and not with a view to the sale or distribution of any part thereof in
violation of applicable federal or state securities laws, and (B) it
has no current intention of selling, granting participation in or
otherwise distributing the same in violation of applicable federal or
state securities laws. By executing this Agreement, BNY further
represents that it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with respect to
any of the Shares or the Warrant in violation of applicable federal or
state securities laws.
2. BNY understands that neither the Shares nor the Warrant has
been registered under the Securities Act on the basis that the sale
provided for in this Agreement and the issuance of securities
hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof and regulations issued thereunder,
and that the reliance of the Company on such exemption is predicated
on representations of BNY set forth herein.
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5. Legends.
1. BNY acknowledges that all certificates evidencing the Shares and
the Warrant shall bear the following legend:
"TRANSFER RESTRICTED
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT".
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend if, unless otherwise required by
state securities laws, (a) such shares are sold pursuant to an effective
registration statement under the Securities Act, or (b) such holder
provides the Company with assurances satisfactory to the Company that such
shares may be publicly sold pursuant to Rule 144 (or similar regulation
hereinafter adopted) without restriction.
2. The certificates evidencing the Shares and the Warrant shall also
bear any legend required by any applicable state securities law.
3. The Company shall make a notation regarding the restrictions on
transfer of the Shares in its stock books, and the Shares shall be
transferred on the books of the Company only if such Shares are transferred
or sold pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption therefrom.
6. Sale and Repurchase Option.
1. Beginning on December 31, 1999, once each calendar year thereafter
for three such years, BNY shall have the right, but not the obligation, to
have the Company purchase up to 388,889 Initial Shares from BNY at a
purchase price of $1.50 per Share (the "Put Option"); provided, however,
that such Put Option may only be exercised if the average closing bid price
of the Company's Common Stock for the five trading days prior to the date
of the exercise of the Put Option is less than $1.50. When and as permitted
under this Section 7.a., BNY may exercise the Put Option by delivering
written notice (the "Put Notice") to the
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Company which shall include the following: (i) the number of Initial Shares
to be purchased by the Company from BNY (the "Put Shares"), (ii) the
aggregate consideration to be paid for the Put Shares and (iii) the date
and time fixed for the consummation of such sale, which such date shall not
be less than ten business days nor more than thirty business days following
the date of the Put Option Notice.
2. The Company shall have the right, but not the obligation (the "Call
Option"), at any time while BNY is the holder of all or any of the Initial
Shares, to purchase all or any portion of the Initial Shares from BNY for a
purchase price of $3.00 per share. When and as permitted under this Section
7.b., WG Trading Company, LP ("WG") may exercise the Call Option on behalf
of the Company by delivering written notice (the "Call Notice") to BNY and
such notice shall contain the following: (i) the number of Initial Shares
to be acquired by WG from BNY (the "Call Shares"), (ii) the aggregate
consideration to be paid for the Call Shares and (iii) the date and time
fixed for the consummation of such purchase, which such date shall not be
less than ten business days nor more than thirty business days following
the date of the Call Notice.
7. Adjustments. In the event that the Company shall declare a dividend or
make a distribution on or with respect to the outstanding shares of its Common
Stock in the form of shares of its Common Stock, subdivide its outstanding
shares of Common Stock into a greater number of shares, combine its outstanding
shares of Common Stock into a smaller number of shares or sell shares of Common
Stock for a price less than the fair market value for such shares, then, in each
such event, the number of New Shares and Warrant Shares issuable and the per
share price of such New Shares and Warrant Shares stated in this Agreement in
effect at the time of the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be proportionately
adjusted, if necessary, as determined in good faith by the Board of Directors of
the Company, so that BNY shall be entitled to receive the aggregate number of
shares of Common Stock that BNY would have received immediately following such
action if BNY had exercised its rights immediately prior to such action. Such
adjustment shall be made successively whenever any event specified above shall
occur.
8. Conditions to the Obligations of BNY at Closing. The obligations of BNY
under this Agreement are subject to the fulfillment of each of the following
conditions:
1. Representations and Warranties. The representations and warranties
of the Company contained in Section 5 hereof shall be true and correct as
of the date of this Agreement and as of the Closing Date, with the same
force and effect as if they had been made on and as of the Closing Date.
2. Performance. The Company shall have performed in all material
respects and materially complied with each and all of its covenants and
agreements contained in this Agreement required to be performed or complied
with by it on or before the Closing Date.
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3. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale
of the Shares and the Warrant pursuant to this Agreement shall have been
obtained and shall be effective on and as of the Closing Date.
9. Conditions to the Obligations of the Company at Closing. The obligations
of the Company under this Agreement are subject to the fulfillment of each of
the following conditions:
1. Representations and Warranties. The representations and warranties
of BNY contained in Section 5 hereof shall be true and correct as of the
date of this Agreement and as of the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date.
2. Performance. BNY shall have performed in all material respects all
of its obligations and materially complied with each and all of its
covenants and agreements contained in this Agreement required to be
performed or complied with on or prior to the Closing, including without
limitation the execution and delivery of the agreements and undertakings
provided for in this Agreement.
3. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale
of the Shares and the Warrant pursuant to this Agreement shall have been
obtained and shall be effective on and as of the Closing Date.
10. Covenants.
1. Financial Statement. The Company will, and at any time when the
Company has subsidiaries will cause each of its subsidiaries to, maintain a
standard system of accounts in accordance with generally accepted
accounting principles consistently applied, and the Company will, and will
cause each of its subsidiaries to, keep full and complete financial
records.
2. Offer or Sale. Neither BNY nor any of its affiliates nor any person
acting on its or their behalf will at any time offer or sell any of the
Shares or Warrant Shares other than pursuant to registration under the
Securities Act or pursuant to an available exemption therefrom.
3. Restriction on Re-Sale of New Shares. BNY shall not offer, sell or
transfer the New Shares, except as provided in Section 1.b. hereof.
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4. Further Assurances. Each party hereto shall cooperate with the
others, and execute and deliver, or use all reasonable efforts to cause to
be executed and delivered, all such other instruments, including
instruments of conveyance, assignment and transfer, and to make all filings
with and to obtain all consents, approvals or authorizations of any
governmental or regulatory authority or any other person or entity under
any permit, license, agreement, indenture or other instrument, and take all
such other actions as such party may reasonably be requested to take by the
other parties hereto from time to time, consistent with the terms of this
Agreement, in order to effectuate the provisions and purposes of this
Agreement and the transactions contemplated hereby.
11. Miscellaneous
1. No Waiver; Modifications in Writing. This Agreement, together with
the Exhibits hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications,
whether oral or written, with respect to the subject matter hereof. No
waiver of or consent to any departure from any provision of this Agreement
shall be effective unless such waiver or consent is signed in writing by
the party entitled to the benefit thereof and written notice of any such
waiver or consent is given to each party hereto as set forth below. Except
as otherwise provided herein, no amendment, supplement, modification or
termination of any provision of this Agreement shall be effective unless
signed in writing by or on behalf of the Company and BNY. Any amendment,
supplement or modification of or to any provision of this Agreement, any
waiver of any provision of this Agreement, and any consent to any departure
by the Company from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for
which made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company or BNY in any case shall
entitle the Company or BNY to any other or further notice or demand in
similar or other circumstances.
2. Notices. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be
delivered in the manner specified herein or, in the absence of such
specification, shall be deemed to have been duly given when delivered by
hand, one day after sending by overnight delivery service, upon receipt of
written confirmation if sent by telecopy, or three days after sending by
certified mail, postage prepaid, return receipt requested to the respective
addresses of the parties set forth below:
If to BNY: BNY Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxxxxx
If to the Company: Signal Apparel Company, Inc.
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000 0xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxxxxx
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 0xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
By notice complying with the foregoing provisions of this Section 12.b.,
each party shall have the right to change the mailing address for future
notices and communications to such party.
3. Execution of Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement.
4. Binding Effect; Assignment. The rights and obligations of BNY under
this Agreement may only be assigned to another person with the prior
written consent of the Company. Except as expressly provided in this
Agreement, this Agreement shall not be construed so as to confer any right
or benefit upon any person other than the parties to this Agreement and
their respective successors and assigns. This Agreement shall be binding
upon the Company and BNY and their respective successors and assigns.
5. Governing Law. This Agreement shall be governed by the laws of the
State of New York as to all matters, including but not limited to matters
of validity, construction, effect, performance and remedies.
6. Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
7. Exhibits and Headings. All Exhibits to this Agreement shall be
deemed to be a part of this Agreement. The Section headings used or
contained in this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
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8. Consent to Jurisdiction. Each of the Company and BNY, by its
execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of the State of New York for the purposes
of any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof, (ii) hereby waives, to the extent
not prohibited by applicable law, and agrees not to assert by way of
motion, as a defense or otherwise, in any such claim or action, any claim
that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution,
that any such proceeding brought in the above-named court is improper, or
that this Agreement or the subject matter hereof may not be enforced in or
by such court, and (iii) hereby agrees not to commence any claim or action
arising out of or based upon this Agreement or relating to the subject
matter hereof other than before the above-named courts nor to make any
motion or take any other action seeking or intending to cause the transfer
or removal of any such claim or action to any court other than the
above-named courts whether on the grounds of inconvenient forum or
otherwise. The Company and BNY hereby consent to service of process in any
such proceeding in any manner permitted by New York law, and agrees that
service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 12.b. hereof is
reasonably calculated to give actual notice.
9. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE COMPANY AND BNY, BY ITS
EXECUTION HEREOF, WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
COMPANY AND BNY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF THE COMPANY AND BNY
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN
THE EVENT OF LITIGATION, THIS AGREE-
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MENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIGNAL APPAREL COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxx
---------------------------
Title: Chief Financial Officer
---------------------------
BNY FINANCIAL CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
---------------------------
Title: President
-------------------------
