REIMBURSEMENT AGREEMENT
This Reimbursement Agreement dated this 30th day of January,
1997 is by and between: Signal Apparel Company, Inc. ("Signal"),
an Indiana Corporation having a place of business in Chattanooga,
Tennessee; FS Signal Associates Limited Partnership, a limited
partnership with a principal place of business in New York, New
York ("FSSA"); and FS Signal Associates II Limited Partnership, a
limited partnership with a principal place of business in New
York, New York ("FSSA II") (FSSA and FSSA II are hereinafter
collectively referred to as the "Limited Partnerships").
W I T N E S S E T H
WHEREAS, certain Letters of Credit, (the "Original LC's"),
identified on Exhibit A hereto, in the aggregate amount of Four
Million Four Hundred Twelve Thousand One Hundred Seventy-one
Dollars ($4,412,171.00) have been issued by the Bank of Montreal
("BOM");
WHEREAS, all of the Original LC's were issued by BOM on the
accounts of the Saidye Rosner Bronfman Ruby Trust and the Saidye
Rosner Bronfman Topaz Trust (collectively, "Trusts"), and the
Trusts and Signal have agreed, INTER ALIA, to reimburse BOM for
any draw on any of the LC's;
WHEREAS, on or about May 16, 1996, the Limited Partnerships
executed and delivered to the Trusts a certain Indemnification
Agreement ("Indemnification Agreement") wherein the Limited
Partnerships have agreed, INTER ALIA, to indemnify and hold
harmless the Trusts from its respective reimbursement obligations
to BOM for any draws on any of the Original LC's;
WHEREAS, in consideration of the benefit to Signal of the
issuance of the Original LC's on the account of the Trusts and
the Limited Partnerships' Indemnification of the Trusts'
obligations under the Original LC's, Signal has agreed to
reimburse the Limited Partnerships for any amounts drawn under
the Original LC's and/or under any replacements or substitute
letters of credit for the Original LC's.
WHEREAS, certain of the Original LC's have been drawn upon,
and other of the Original LC's have been cancelled, amended or
modified;
WHEREAS, Signal has asked the Trusts and the Limited
Partnerships to cause BOM to issue substitute or replacement
letters of credit for the Original LC's which have been
cancelled, amended or modified (the "New LC's), and the Trusts
and Limited Partnerships are willing to cause issuance of the New
LC's, but only upon the terms and conditions hereof; and
WHEREAS, Signal acknowledges that any draw under any of the
LC's the New LC's, or any additional, substitute, replacement or
modified letter of creditor with respect to the Original LC's,
the New LC's and/or which the Limited Partnerships and/or the
Trusts caused to be issued for Signal's benefit or for the
benefit of a creditor of Signal (collectively the "LC's") shall
be deemed an advance in the amount of any draw, plus any interest
or fees charged by BOM under the respective LC's, under a certain
demand Promissory Note ("Promissory Note") of even date herewith
in the total principal amount of Four Million Five Hundred
Thousand Dollars ($4,500,000.00) by Signal to the Limited
Partnerships.
NOW THEREFORE, in consideration of One Dollar and the mutual
covenants and agreements herein contained, Signal and the Limited
Partnerships agree as follows:
1. Signal agrees and understands that any draws under the
LC's shall be deemed advances of funds to Signal by the Limited
Partnerships under and pursuant to the Promissory Note and shall
be repaid to the Limited Partnerships in accordance with the
terms and conditions set forth therein.
2. The obligations of Signal under this Agreement shall be
absolute and unconditional and shall remain in full force and
effect until the later of: (a) the expiration of all of the LC's
plus 150 days, or (b) payment in full of all amounts due under
the Promissory Note; provided, however, that all of the
obligations of Signal under this Agreement and under the
Promissory Note, except any obligations arising out of the letter
of credit issued for the benefit of Bank of New York and/or BNY
Financial Corporation (or any successor or assignee of Bank of
New York and/or BNY Financial Corporation) and any replacement,
modified or substitute letter therefor (collectively the "BNY
LC"), shall be subordinated in priority of payment to (i) full
payment of all of the obligations of Signal and its subsidiaries
under all agreements with Signal's senior lender, BNY Financial
Corporation and (ii) full payment of Six Million Five Hundred
Thousand Dollars ($6,500,000.00), plus all accrued interest
thereon, currently owed by Signal and certain of its subsidiaries
under agreements with Greyrock Capital Group, Inc. (f/k/a Nations
Financial Capital Corporation), as agent; and further provided,
that the obligations of Signal under this Agreement, except any
obligations arising as a result of partial or total draws upon
the BNY LC, shall be equal in priority of payment to all of the
obligations of Signal to Walsh Greenwood & Co. ("Walsh
Greenwood") pursuant to that certain Credit Agreement dated as of
March 31, 1995 (together with all amendments thereto) between
Signal, The Shirt Shed, Inc., American Marketing Works, Inc. and
Walsh Greenwood. Notwithstanding any other provision of this
Agreement to the contrary, nothing herein shall affect, reduce,
modify, or discharge any rights of subrogation or other rights or
claims (and/or the priority of or security or collateral for any
such rights or claims) by way of subrogation or otherwise which
the Trusts and/or the Limited Partnerships, or any of them, shall
have or shall hereafter acquire as a consequence of a partial or
total draw upon the BNY LC.
3. Signal Covenants and agrees that a default under any
one or more of any outstanding obligations of Signal to the
Limited Partnerships, the Trusts and BOM, including, without
limitation, under the Promissory Note or this Reimbursement
Agreement, all whether now existing or hereafter arising shall,
at the Limited Partnerships' option, constitute a default
hereunder and under the Promissory Note.
4. No amendment or waiver of any provision of this
Reimbursement Agreement nor consent to any departure by the
Limited Partnerships therefrom shall be effective unless the same
shall be in writing and signed by the parties hereto and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
5. The rights and remedies of the Limited Partnerships
under this Reimbursement Agreement shall be cumulative and not
exclusive of any rights or remedies which it would otherwise
have, and no failure or delay by the Limited Partnerships in
exercising any right shall operate as a waiver of it, nor shall
any single or partial exercise of any power or right preclude its
other or further exercise or the exercise of any other power or
right.
6. This Reimbursement Agreement is a continuing obligation
and shall be binding upon Signal, the Limited Partnerships and
their successors and assigns; provided, that Signal may not
assign all or any part of this Reimbursement Agreement without
the prior written consent of the Limited Partnerships.
7. Signal assumes all risks of the acts or omissions of
BOM in reimbursing draws under the LC's.
8. To the extent that Signal makes a payment or payments
to the Limited Partnerships, which payment or payments, or any
part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be
repaid to any person or party under any bankruptcy or insolvency
law, state or federal law, common law or equitable cause, then to
the extent such payment or repayment, the liability or part
thereof which has been paid, reduced or satisfied by the amount
so repaid shall be reinstated and included with the obligations
as of the date that such initial payment reduction or
satisfaction occurred.
9. Signal agrees to pay on demand all costs and expenses,
if any, in connection with the administration or enforcement of
this Reimbursement Agreement, the Promissory Note and such other
documents which may be delivered in connection with this
Reimbursement Agreement.
10. Any provision of this Reimbursement 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 and the remaining portion of
such provision and all other remaining provisions will be
construed to render them enforceable to the fullest extent.
11. This Reimbursement Agreement shall be governed by and
construed in accordance with the law of the State of New York.
Any judicial proceeding brought against Signal with respect to
this Reimbursement Agreement or Promissory Note may be brought in
any court of competent jurisdiction in the State of New York and,
by execution and delivery of this Reimbursement Agreement, Signal
(a) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Reimbursement Agreement or the Promissory
Note and (b) irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an
inconvenient forum. Signal hereby waives personal service of
process and consent that service of process upon it, and service
so made shall be deemed completed on the third business day after
such service is deposited in the mail. Nothing herein shall
affect the right to serve process in any other manner permitted
by law or shall limit the right of the Limited Partnerships to
bring proceedings against Signal in the courts of any other
jurisdiction. Any judicial proceeding brought by Signal against
the Limited Partnerships involving, directly or indirectly, any
matter in any way arising out of, related to, or connected with
this Reimbursement Agreement or the Promissory Note shall be
brought only in a court located in the State of New York.
12. This Reimbursement Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and constitute one and the same instrument, and shall be
binding upon the parties, their successor and assigns.
IN WITNESS WHEREOF, the parties hereto have set their hands
and
seals as of the date above set forth.
WITNESS: SIGNAL APPAREL COMPANY, INC.
/s/ Robert Powell By: /s/ William H. Watts
Name: Robert Powell Name: William H. Watts
Its: CFO
FS SIGNAL ASSOCIATES LIMITED
PARTNERSHIP
/s/ Jan David By: /s/ Kevin S. Penn
Name: Jan David Name: Kevin S. Penn
Its: President, FS Signal, Inc.
General Partner of FS Signal
Associates, LP
FS SIGNAL ASSOCIATES II LIMITED
PARTNERSHIP
/s/ Jan David By: /s/ Kevin S. Penn
Name: Jan David Name: Kevin S. Penn
Its: President, FS Signal, Inc.
General Partner of FS Signal
Associates, LP
LETTER OF CREDIT
SIGNAL APPAREL COMPANY, INC.
AUGUST 26, 1996
Bank of Montreal
L.C. ISSUE ACTIVE POLICY EXP.
NUMBER DATE L.C. YEAR DATE
AMOUNT
911185 12/14/93 Home Insurance Company 12/10/93-94 December 10, 1996 $ 480,000
911198 12/31/93 Unifi, Inc. June 30, 1997 $ 300,000
911356 06/04/94 IBM July 14, 1996 $ 112,171
911401 08/31/94 Bank of New York June 28, 1997 $2,000,000
911436 10/07/94 Warner Brothers Batman (R) December 31,1998 $ 220,000
911871 07/31/95 Parkdale Hills July 31, 1997 $ 200,000
911851 04/09/96 Indiana Knitwear April 2, 1997 $ 300,000
Pending Pending Unifi, Inc. August 31, 1997 $ 800,000
----------
$4,412,171
PROMISSORY NOTE
$4,500,000.00 Chattanooga, TN
January , 1997
FOR VALUE RECEIVED, ON DEMAND, the undersigned promises to
pay to the order of FS SIGNAL ASSOCIATES LIMITED PARTNERSHIP and
FS SIGNAL ASSOCIATES II LIMITED PARTNERSHIP (collectively "FS
Signal"), the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND
DOLLARS ($4,500,000.00) or so much thereof as may be advanced,
with interest to accrue upon the principal sum thereof from time
to time advanced, computed from the date of each advance at the
rate of 5.55% per annum, until this promissory note is paid in
full.
The maker and all other parties liable herefor, whether
principal guarantor, endorser or otherwise, hereby severally
waive presentment, notice and protest, and waive all recourse to
suretyship and guarantorship defenses generally, including, but
not limited to, any extensions of time for payment or performance
which may be granted to the makers or to any other liable party,
any modifications or amendments to this promissory note or any
documents securing payment and performance hereof, any act or
omission to act by or on behalf of the holder hereof, any
invalidity or unenforceability of any security given herefor, any
release of security, any release of any liable party or parties,
whether any such release is intentional, unintentional or by
operation of law, and all other indulgences of any type which may
be granted by the holder hereof to the maker or any other liable
party herefor, and does also agree to pay all costs of collection
of the indebtedness evidenced hereby, including reasonable
attorneys' fees which may be incurred in connection therewith.
All payments due hereunder shall be made to FS Signal at 499
Park Avenue, New York, NY 10022, or to such other parties or
addresses as the holder hereof may from time to time designate in
writing to the maker or other parties liable herefor. This note
evidences a loan for business and commercial purposes, and not
for personal, family or household purposes.
No invalidity or unenforceability of any provision of this
promissory note shall affect in any way the validity or
enforceability of the remaining obligations or portions hereof.
This promissory note shall be construed in accordance with the
laws of the State of New York.
This demand Promissory Note is executed and delivered in
accordance with a certain Reimbursement Agreement of near or even
date herewith between the undersigned, FS Signal, and is subject
to the terms, conditions and limitations contained in said
Reimbursement Agreement.
WITNESS: SIGNAL APPAREL COMPANY, INC.
/s/ Robert Powell By: /s/ William H. Watts
Its: CFO , duly authorized