AGREEMENT
AGREEMENT dated as of March 31, 1995 by and among
Signal Apparel Company, Inc. (the "COMPANY"), W G Trading
Company Limited Partnership ("WG TRADING"), Walsh Greenwood
& Co. ("WALSH GREENWOOD"), FS Signal Associates, L.P. and FS
Signal Associates II, L.P. (collectively, "FS SIGNAL").
WHEREAS, the Company, certain of the Company's
subsidiaries and Walsh Greenwood propose to enter a Credit
Agreement, dated as of March 31, 1995 (the "CREDIT
AGREEMENT"), pursuant to which Walsh Greenwood will extend
to the Company a line of credit of up to $15,000,000 (the
"LOAN") which shall be evidenced by one or more promissory
notes maturing three years from the date of issuance (the
"NOTES");
WHEREAS, pursuant to the Credit Agreement and as
consideration for committing to make the Loan, the Company
will issue to Walsh Greenwood certain Warrants to purchase
shares of the Company's Common Stock (collectively, the
"WARRANTS");
WHEREAS, Walsh Greenwood, W G Trading and FS Signal
each hold shares of the Company's voting stock;
WHEREAS, Walsh Greenwood, W G Trading and FS Signal
hold all of the outstanding shares of the Company's Series C
Preferred Stock, $100,000 stated value per share and FS
Signal Associates II, L.P. holds all of the outstanding
shares of the Company's Series A Preferred Stock, $100,000
stated value per share;
WHEREAS, the Loan is necessary for the Company's
continued operations; and
WHEREAS, the Notes evidencing the Loan and the Warrants
are transferable and either may be transferred in exchange
for participation in the Loan;
NOW, THEREFORE, for and in consideration of the
foregoing and of the agreement of Walsh Greenwood to make
the Loan, the parties agree as follows:
1. Waiver of Preferred Dividends. Walsh Greenwood,
WG Trading and FS Signal agree on behalf of themselves and
any future holders of the Company's Series A Preferred Stock
and Series C Preferred Stock that they will waive accrual
and payment of all future dividends and dividend
accumulations with respect to such preferred stock for the
period from January 1, 1995 until the earlier of January 1,
2001, or such time as all outstanding principal amount of
the Notes and all accrued interest thereon has been paid in
full or the Credit Agreement has been terminated; provided,
however, that if the Company should file for bankruptcy
protection then the waivers provided for by this Section
shall be of no force and effect.
2. Right of Redemption. Walsh Greenwood, WG L.P. and
FS Signal on behalf of themselves and any future holders of
the Company's Series A Preferred Stock and Series C
Preferred Stock grant the Company the right, upon payment in
full of all principal and accrued interest due under the
Notes and upon repayment of the $6,500,000 currently owed by
a subsidiary of the Company to Greyrock Capital Group, Inc.,
an affiliate of NationsBank, N.A., which obligation has been
guaranteed by the Company, to redeem all of the Company's
then outstanding Series A and Series C Preferred Stock using
Common Stock of Signal whose shares shall be priced at $7.00
per share. For example, $100,000 of Preferred Stock with
$15,000 of accrued dividends could be redeemed with 16,428.6
shares of Signal Common Stock. The Series C Preferred Stock,
however, must be fully redeemed before Series A Preferred
Stock may be redeemed. Such right of redemption must be
exercised by the Company before the close of business on
June 30, 1998. Should Signal file for bankruptcy prior to
June 30, 1998, Signal may not exercise the rights outlined
in this Section 2.
3. Transfer of Preferred to Facilitate Exercise of
Warrants. Upon the request of Walsh Greenwood, from time to
time, and in consideration of $1.00 to be paid by Walsh
Greenwood to FS Signal and other good and valuable
consideration, the receipt and sufficiency of which hereby
is acknowledged, FS Signal agrees promptly to transfer
shares of the Company's Series C Preferred Stock to Walsh
Greenwood as agent for the holders of the Warrants to be
used solely by Walsh Greenwood or transferees of Walsh
Greenwood for the payment of the exercise price stipulated
in the Warrants. The face value of the Company's Series C
Preferred Stock that FS Signal shall be obligated to
transfer to Walsh Greenwood from time to time pursuant to
this Section 3 shall not exceed $3,375,000 in the aggregate.
Should Signal file for bankruptcy, any of FS Signal's
Series C Preferred shares not theretofore used to exercise
Warrants shall be returned to FS Signal. Additionally, FS
Signal's Series C Preferred shares, referred to above, not
used in the exercise of the Warrants are and shall continue
to be the property of FS Signal until used.
4. Agreement to Restrict Transfer of Preferred. The
parties hereto represent that they are the holders of all
outstanding shares of the Preferred Stock on the attached
Schedule A. Until termination of this Agreement, the
Parties hereto agree that they shall not transfer any shares
of such Preferred Stock unless and until the proposed
transferee shall have agreed to be bound by the terms and
conditions of this Agreement. The parties hereto also agree
to surrender their certificates representing the Preferred
Stock and to request that the Company legend each such
certificate as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE THE SUBJECT
OF A SHAREHOLDER'S AGREEMENT DATED AS OF MARCH 31, 1995 AND
MAY NOT BE TRANSFERRED UNLESS THE TRANSFEREE AGREES TO BE
BOUND BY THE TERMS AND CONDITIONS OF THE SAID AGREEMENT.
5. Observer Rights; Right to Nominate Directors. FS
Signal shall have the right, from and after the date hereof,
to designate a representative who shall be entitled to
receive notice of all regular and special meetings of the
Company's Board of Directors and who shall be entitled to
receive all materials and information otherwise provided to
Directors of the Company for such meetings and who shall be
entitled to sit in on and observe any and all such meetings
of the Board of Directors. FS Signal agrees to maintain the
confidentiality of any and all such materials and
information received from the Company, or from its officers
and directors, pursuant to the rights created by this
section 5 and any other information received in the exercise
of its rights hereunder. Additionally, the Company shall
grant FS Signal the right, beginning with the Company's
annual meeting in 1996, and continuing until the annual
meeting in 2001, to nominate 2 directors, who shall be
included in the slate of nominees submitted to the Company's
shareholders in the Company's proxy solicitation materials
for such annual meeting of shareholders.
6. Amendments and Modifications. This Agreement may
not be amended or modified without the consent in writing of
all parties and of all holders of outstanding Notes or
Warrants.
7. Governing Law. This Agreement shall be governed
in all respects by the laws of the State of New York, and
any enforcement of the terms hereof shall be brought in the
state or federal courts located in New York City, New York,
to the jurisdiction of which all parties accede.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed on the day and date first above
written.
WG TRADING COMPANY LIMITED PARTNERSHIP
BY /s/ Paul R. Greenwood
WALSH GREENWOOD & CO.
BY: /s/ Paul R. Greenwood
SIGNAL APPAREL COMPANY, INC.
BY: /s/ William H. Watts
FS SIGNAL ASSOCIATES, L.P.
BY: /s/ Kevin S. Penn
FS SIGNAL ASSOCIATES II, L.P.
BY: /s/ Kevin S. Penn