SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) March 31, 1995
SIGNAL APPAREL COMPANY, INC.
(Exact Name of Registrant as specified in its Charter)
Indiana 1-2782 62-0641635
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) No.)
200-A MANUFACTURERS ROAD, CHATTANOOGA, TN 37405
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (615) 752-2032
<PAGE>
Item 5. OTHER EVENTS
Effective March 31, 1995, Signal Apparel Company, Inc. (the
"COMPANY") entered into a credit agreement with Walsh Greenwood &
Co. ("WALSH GREENWOOD") (the "CREDIT AGREEMENT"). Walsh Greenwood
is a principal shareholder of the Company and Paul R. Greenwood and
Stephen Walsh, directors of the Company, are each general partners
of Walsh Greenwood. Under the Credit Agreement, Walsh Greenwood
will lend the Company up to $15,000,000 for a three-year term. The
material terms of the Credit Agreement are: (i) a maximum
borrowing of $15,000,000, which shall be drawn in increments of
$1,000,000 upon notice received two business days prior to each
draw (as of the date hereof, the Company has drawn approximately
$12,000,000; (ii) the issuance to Walsh Greenwood of warrants to
purchase 1,500,000 shares of the Company's Common Stock at $2.25
per share, which warrants vest on the basis of 100,000 warrants for
each $1,000,000 drawn and which are exercisable for three years
from vesting, such warrants containing antidilution provisions no
more favorable than the equivalent provisions in the currently
outstanding warrants issued to principal shareholders of the
Company (as of the date hereof, 1,200,000 of such warrants have
vested); (iii) the issuance to Walsh Greenwood of warrants to
purchase 1,500,000 shares of the Company's Common Stock at a 25%
discount to the 20 day average trade price in December 1996, which
warrants vested immediately upon the commitment by Walsh Greenwood
of the full amount of the credit and which will be exercisable for
three years beginning January 1, 1997, such warrants containing
antidilution provisions no more favorable than the equivalent
provisions in the currently outstanding warrants issued to
principal shareholders of the Company; (iv) all warrants issued
have registration rights no more favorable than the equivalent
provisions in the currently outstanding warrants issued to
principal shareholders of the Company, except that such rights
include three demand registrations; (v) interest upon the
outstanding balance of the credit is at the rate of 25% per annum,
payable on December 31, 1995 and quarterly thereafter (the Company
is obligated only to pay interest at the rate of 15% per annum
until maturity, with the balance being due at maturity); (vi) all
borrowings are secured by a security interest in all assets of the
Company currently pledged to its senior lenders, but said security
interest is subordinate to the security interests of the senior
lenders; and (vii) all borrowings may be used for only working
capital and may not be used to repay any principal of any bank
debt.
As additional conditions to the foregoing extension of credit, the
Company obtained the agreement of the holders of its preferred
stock (1) to forego all future dividends from January 1, 1995 until
the principal and interest of all the borrowing under the Credit
Agreement has been paid in full and (2) to grant the Company the
right, after repayment of a $6,500,000 NationsBank loan and the
borrowing from Walsh Greenwood, to redeem the outstanding shares of
preferred stock with shares of its Common Stock valued for such
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purpose at $7.00 per share, which right of redemption will extend
until June 30, 1998.
Walsh Greenwood's ability to exercise any of the warrants to
purchase up to 3,000,000 shares of the Company's Common Stock, as
described above, is contingent upon the approval of the issuance of
such warrants by the shareholders of the Company. Such vote will
occur on May 11, 1995 at the Annual Meeting of Shareholders.
Item 7. EXHIBITS
(1) Listing of Exhibits Incorporated by Reference:
None.
(2) Listing of Exhibits Filed with this Report:
(4-1) Credit Agreement dated as of March 31, 1995 between the
Company and Walsh Greenwood & Co.
(4-2) Promissory Note in face amount of $15,000,000 dated
March 31, 1995 issued to Walsh Greenwood by the Company
(4-3) Fixed Rate Warrant Certificate for 1,500,000 Warrants
dated March 31, 1995 issued to Walsh Greenwood by the
Company
(4-4) Discount Rate Warrant Certificate for 1,500,000
Warrants dated March 31, 1995 issued to Walsh Greenwood
by the Company
(10-1) Agreement among Signal Apparel Company, Inc. and
certain shareholders of Signal Apparel Company, Inc.
(10-2) Tennessee Deed of Trust and Security Agreement dated
March 31, 1995 between the Company and Walsh Greenwood
(10-3) Deed to Secure Debt and Security Agreement dated March
31, 1995 between the Company and Walsh Greenwood
(10-4) Real Estate Mortgage, Security Agreement, Assignment of
Lease and Rents and Fixture Filing dated March 31, 1995
between Shirt Shed and Walsh Greenwood
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
SIGNAL APPAREL COMPANY, INC.
(Registrant)
By: /s/ William H. Watts
William H. Watts
Senior Vice President and
Chief Financial Officer
Date: May 11, 1995
<PAGE>
SIGNAL APPAREL COMPANY, INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
(4-1) Credit Agreement dated as
of March 31, 1995 between
the Company and Walsh
Greenwood & Co.
(4-2) Promissory Note in face
amount of $15,000,000
dated March 31, 1995
issued to Walsh Greenwood
by the Company
(4-3) Fixed Rate Warrant Certificate
for 1,500,000 Warrants
dated March 31, 1995
issued to Walsh Greenwood
by the Company
(4-4) Discount Rate Warrant Certificate
for 1,500,000 Warrants
dated March 31, 1995
issued to Walsh Greenwood
by the Company
(10-1) Agreement among Signal Apparel
Company, Inc. and certain
shareholders of Signal Apparel
Company, Inc.
(10-2) Tennessee Deed of Trust and
Security Agreement dated March
31, 1995 between the Company
and Walsh Greenwood
(10-3) Deed to Secure Debt and Security
Agreement dated March 31, 1995
between the Company and Walsh
Greenwood
(10-4) Real Estate Mortgage, Security
Agreement, Assignment of Leases
and Rents and Fixture Filing
dated March 31, 1995 between
Shirt Shed and Walsh Greenwood
<PAGE>
CREDIT AGREEMENT
DATED AS OF MARCH 31, 1995
AMONG
SIGNAL APPAREL COMPANY, INC.,
THE SHIRT SHED, INC.,
AMERICAN MARKETING WORKS, INC.
and
WALSH GREENWOOD & CO.
_____________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
Section 1 Definitions
Section 1.1 Defined Terms . . . . . . . . . . . . . . 5
Section 1.2 Other Definitional Provisions . . . . . . 10
Section 2 Amount and Terms of Loan
Commitment
Section 2.1 Commitment . . . . . . . . . . . . . . . 10
Section 2.2 Note; Borrowing . . . . . . . . . . . . . 10
Section 2.3 Use of Proceeds of Loan . . . . . . . . 11
Section 2.4 Optional Prepayments . . . . . . . . . . 11
Section 2.5 Interest Rate and Payment Dates . . . . . 12
Section 2.6 Computation of Interest . . . . . . . . . 12
Section 3 Grant of Security Interest
Section 3.1 Security for the Loan . . . . . . . . . . 12
Section 3.2 Use of Collateral . . . . . . . . . . . . 13
Section 3.3 Subordination of Security Interest. . . . 13
Section 4 Warrants
Section 4.1 Fixed Rate Warrants . . . . . . . . . . . 14
Section 4.2 Discount Rate Warrants. . . . . . . . . . 14
Section 4.3 Exercise of Warrants. . . . . . . . . . . 14
Section 4.4 Registration Rights . . . . . . . . . . . 15
Section 5 Representations and Warranties
Section 5.1 Financial Condition . . . . . . . . . . . 15
Section 5.2 No Change . . . . . . . . . . . . . . . . 15
Section 5.3 Corporate Existence; Compliance with
Law . . . . . . . . . . . . . . . . . . . 15
Section 5.4 Corporate Power; Authorization;
Enforceable Obligations . . . . . . . . 16
Section 5.5 No Legal Bar . . . . . . . . . . . . . . 16
Section 5.6 No Material Litigation . . . . . . . . . 16
Section 5.7 No Default . . . . . . . . . . . . . . . 16
Section 5.8 Ownership of Property; Liens . . . . . . 17
Section 5.9 Taxes . . . . . . . . . . . . . . . . . . 17
Section 5.10 Federal Regulations . . . . . . . . . . . 17
Section 5.11 Hazardous Substances. . . . . . . . . . . 17
Section 5.12 Investment Company Act . . . . . . . . . 18
Section 5.13 Subsidiaries. . . . . . . . . . . . . . . 18
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Section 6 Conditions Precedent
Section 6.1 Conditions to Initial Loan . . . . . . . 18
(a) Loan Documents . . . . . . . . . . . . . . . . 18
(b) Corporate Proceedings of the Company . . . . . 18
(c) Corporate Documents . . . . . . . . . . . . . 19
(d) Good Standing Certificates . . . . . . . . . . 19
(e) Financial Information . . . . . . . . . . . . 19
(f) Litigation . . . . . . . . . . . . . . . . . . 19
(g) No Violation . . . . . . . . . . . . . . . . . 19
(h) Consents, Licenses, Approvals, Etc.. . . . . . 19
(i) Representations and Warranties . . . . . . . . 20
(j) No Default . . . . . . . . . . . . . . . . . . 20
(k) Security Interest. . . . . . . . . . . . . . . 20
(l) Legal Opinion. . . . . . . . . . . . . . . . . 20
Section 6.2 Conditions to Each Loan. . . . . . . . . . . . 20
(a) Representations and Warranties . . . . . . . . 20
(b) No Default . . . . . . . . . . . . . . . . . . 20
(c) Additional Matters . . . . . . . . . . . . . . 20
(d) Additional Documents . . . . . . . . . . . . . 21
(e) Extension of Greyrock Loan . . . . . . . . . . 21
Section 7 Affirmative Covenants
Section 7.1 Financial Statements . . . . . . . . . . 21
Section 7.2 Certificates; Other Information . . . . . 22
Section 7.3 Payment of Obligations . . . . . . . . . 22
Section 7.4 Conduct of Business and
Maintenance of Existence . . . . . . . 22
Section 7.5 Maintenance of Property; Insurance . . . 23
Section 7.6 Inspection of Property; Books and
Records; Discussions . . . . . . . . . 23
Section 7.7 Taxes and Other Liens . . . . . . . . . . 23
Section 7.8 Further Assurances. . . . . . . . . . . . 23
Section 7.9 Notices . . . . . . . . . . . . . . . . . 24
Section 7.10 Nomination of Directors . . . . . . . . . 25
Section 8 Negative Covenants
Section 8.1 Limitation on Indebtedness . . . . . . . 25
Section 8.2 Limitations on Liens . . . . . . . . . . 25
Section 8.3 Limitations on Guarantee Obligation . . . 27
Section 8.4 Limitations on Fundamental Changes . . . 27
Section 8.5 Limitations on Sale of Assets . . . . . . 27
Section 8.6 Limitation on Dividends . . . . . . . . . 28
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Section 8.7 Limitation on Investments, Loans and
Advances . . . . . . . . . . . . . . . 28
Section 8.8 Transactions with Affiliates . . . . . . 29
Section 8.9 Sale and Leaseback . . . . . . . . . . . 29
Section 8.10 Fiscal Year . . . . . . . . . . . . . . . 29
Section 8.11 Subsidiary Formation. . . . . . . . . . . 29
Section 8.12 Change in Location, Name, etc.. . . . . . 29
Section 8.13 Financial Condition. . . . . . . . . . . 29
Section 9 Events of Default . . . . . . 30
Section 10 Miscellaneous
Section 10.1 Amendments and Waivers . . . . . . . . . 32
Section 10.2 Notices . . . . . . . . . . . . . . . . . 33
Section 10.3 No Waiver; Cumulative Remedies . . . . . 33
Section 10.4 Survival of Representations and Warranties 33
Section 10.5 Payments of Expenses and Taxes . . . . . 33
Section 10.6 Successors and Assigns . . . . . . . . . 34
Section 10.7 Counterparts . . . . . . . . . . . . . . 35
Section 10.8 Governing Law . . . . . . . . . . . . . . 35
Section 10.9 Submission to Jurisdiction; Waivers . . . 35
Section 10.10 Waiver of Jury Trial. . . . . . . . . . . 36
EXHIBITS
Exhibit A Note (subsection 2.2)
Exhibit B Form of Fixed Rate Warrant (subsection 4.1)
Exhibit C Form of Discount Rate Warrant (subsection 4.2)
Schedule 5.2 Material Adverse Changes (subsection 5.2)
Schedule 5.6 Material Litigation (subsection 5.6)
Schedule 5.7 Default (subsection 5.7)
Schedule 5.11 Environmental (subsection 5.11)
Schedule 6.1(h) Closing Certificate (subsection 6.1(h))
Schedule 8.1(c) Outstanding Indebtedness (subsection 8.1(c))
Schedule 8.2(f) Existing Liens (subsection 8.2(f))
Schedule 8.3 Existing Guarantees (subsection 8.3)
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CREDIT AGREEMENT, dated as of March 31, 1995 by and among
SIGNAL APPAREL COMPANY, INC., an Indiana corporation ( "SIGNAL"),
The Shirt Shed, Inc., a Delaware corporation ("SSI"), American
Marketing Works, Inc., a Delaware corporation ("AMW") and Walsh
Greenwood & Co., a New York limited partnership (the "LENDER"). SSI
and AMW are wholly owned subsidiaries of Signal. Signal, SSI and
AMW, individually and collectively, shall mean the "COMPANY"
herein, and unless specifically stated to the contrary, shall be
jointly and severally liable for all obligations of the Company
hereunder.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings:
AFFILIATE: any Person (other than a Subsidiary) which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, Signal. For purposes of this
definition, a Person shall be deemed to be "controlled by" Signal
if Signal possesses, directly of indirectly, power either to: (i)
vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person, or (ii) direct or cause
the direction of the management and policies of such Person whether
by contract or otherwise.
AGREEMENT: this CREDIT AGREEMENT, as amended, supplemented or
modified from time to time.
AVAILABLE COMMITMENT: at any time, an amount equal to the
amount by which (a) the Commitment at such time EXCEEDS (b) the
aggregate principal amount of all Loans made by the Lender (whether
or not then outstanding).
BORROWING DATE: the date of any borrowing hereunder.
BUSINESS DAY: a 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.
CASH EQUIVALENTS: (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more
than three months from the date of acquisition; (ii) time deposits
and certificates of deposit having maturities of not more than
three months from the date of acquisition of any domestic
commercial bank having capital and surplus in excess of
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$500,000,000, which has, or the holding company of which has, a
commercial paper rating meeting the requirements specified in
clause (iv) below; (iii) repurchase obligations with a term of not
more than seven days for underlying securities of the types
described in clauses (i) and (ii) entered into with any bank
meeting the qualifications specified in clause (ii) above; and (iv)
commercial paper rated at least A2 or the equivalent thereof by
Standard & Poor's Corporation or P2 or the equivalent thereof by
Moody's Investors Service, Inc. and in either case maturing within
nine months after the date of acquisition.
CLOSING DATE: the date on which the Lender makes its initial
Loan.
CODE: the Internal Revenue Code of 1986, as amended from time
to time.
COLLATERAL: as defined in Section 3.1.
COMMITMENT: the obligation of the Lender to make Loans to
Signal pursuant to Section 2.1, in a maximum principal amount of
$15,000,000, as such amount may be reduced from time pursuant to
this Agreement.
COMMITMENT PERIOD. the period from and including the Closing
Date to and including the close of business on the sixth Business
Day prior to the Maturity Date.
COMMON STOCK: shall mean Signal's common stock, par value
$0.01.
CONTRACTUAL OBLIGATION: as to any Person, any provision of
any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or
any of its property is bound.
DEED TO SECURE DEBT AND SECURITY INTEREST: security interest
granted by Signal in its real property located in Troup County,
Georgia granted pursuant to Section 3.1(a).
DEFAULT: any of the events specified in Section 9, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
DISCOUNT RATE WARRANTS: warrants issued pursuant to Section
4.2.
DOLLARS AND $: dollars in lawful currency of the United
States of America.
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EVENT OF DEFAULT: any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, event or act has been
satisfied.
FINANCING LEASE: (a) any lease of property, real or personal,
the then present value of the minimum rental commitment of which
should, in accordance with GAAP, be capitalized on a balance sheet
of the lessee, and (b) any other such lease the obligations under
which are capitalized on a consolidated balance sheet of Signal and
its Subsidiaries.
FIXED RATE WARRANTS: warrants issued pursuant to Section 4.1.
GAAP: generally accepted accounting principles in the United
States of America in effect from time to time.
GOVERNMENTAL AUTHORITY: any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
GUARANTEE OBLIGATION: as to any Person, any obligation of
such Person guaranteeing any Indebtedness, leases, dividends or
other obligations (the "PRIMARY OBLIGATIONS") of any other Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such
Person, whether or not contingent: (a) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor; (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor; (c) to
purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation;
or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guarantee
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
INDEBTEDNESS: of a Person, at a particular date, the sum
(without duplication) at such date of: (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of
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property or services other than trade payables in the ordinary
course of business; (b) all obligations of such Person under
Financing Leases; and (c) all obligations of such Person in respect
of letters of credit, acceptances, or similar obligations issued or
created for the account of such Person, including without
limitation all indebtedness of Signal, AMW or SSI under their
respective factoring arrangements with BNY Financial Corporation
("BNY").
INTERCREDITOR AGREEMENT: shall mean the Intercreditor
Agreement, dated as of March 31, 1995, among Lender, BNY Financial
Corporation ("BNY"), Greyrock Capital Group, Inc. ("GREYROCK"),
Signal, SSI and AMW.
INTEREST PAYMENT DATE: as to any Loan, the last day of 1995
and the last day of each calendar quarter thereafter while such
Loan is outstanding.
LIEN: any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction in respect of any of the foregoing).
LOAN: as defined in Section 2.1.
LOAN DOCUMENTS: this Agreement; the Fixed Rate Warrants; the
Discount Rate Warrant; the Note; the Real Estate Mortgage, Security
Agreement, Assignment of Leases, Rents and Fixture Filing; the
Tennessee Deed of Trust and Security Agreement; the Deed to Secure
Debt and Security Interest; UCC financing statements covering both
personalty and fixtures; the Intercreditor Agreement; the
Shareholders' Agreement and other documents, agreements,
certificates, schedules or exhibits called for in any of the
foregoing or otherwise required of the Company to effect the
purposes hereof.
MATURITY DATE: March 31, 1998.
NOTE: as defined in Section 2.2.
OBLIGATIONS. the unpaid principal amount of, and interest
(including, without limitation, interest accruing after the
maturity of the Loans and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization of like proceeding, relating to the Company, whether
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or not a claim for post-filing or post-petition interest is allowed
in such proceeding) on the Note, and all other obligations and
liabilities of the Company to the Lender, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or
in connection with, this Agreement, the Note, the Discount Rate
Warrant, the Fixed Rate Warrants, any other Loan Document any other
document made, delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to the Lender) or
otherwise.
PERSON: an individual, partnership, corporation, business
trust, joint stock company, limited liability company, trust,
unincorporated association, joint venture, Governmental Authority
or other entity of whatever nature.
PREFERRED STOCK: shall mean Signal's preferred stock, stated
value $100,000 per share, of which shares of only Series A and
Series C are outstanding as of the date hereof.
PRINCIPAL or PRINCIPAL AMOUNT: shall mean, at any time, an
amount equal to the principal amount of all outstanding Loans at
such time.
REAL ESTATE MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES, RENTS AND FIXTURE FILING: security interest granted by SSI
in its real property located in Wabash County, Indiana granted
pursuant to Section 3.1(a).
REQUIREMENT OF LAW: as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its
property is subject.
RESPONSIBLE OFFICER: as to any Person, the chief executive
officer, president or the chief financial officer of such Person.
SENIOR DEBT: Indebtedness, including Guarantee Obligations
relating thereto, of the Company to BNY Financial Corporation and
Greyrock Capital Group, Inc.
SHAREHOLDERS' AGREEMENT: the Agreement dated as of March 31,
1995 among Signal and certain of its shareholders, including
Lender.
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SUBSIDIARY: as to any Person, a corporation as to which
shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of
such corporation are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "SUBSIDIARY" or the "SUBSIDIARIES"
in this Agreement shall refer to a Subsidiary or Subsidiaries of
Signal.
TENNESSEE DEED OF TRUST AND SECURITY AGREEMENT: security
interest granted by Signal in its real property located in Hamilton
County, Tennessee granted pursuant to Section 3.1(a).
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the Note or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Note, and any certificate
or other document made or delivered pursuant hereto, accounting
terms relating to Signal and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to
them under GAAP.
(c) The words "HEREOF," "HEREIN" and "HEREUNDER" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement, and section and exhibit references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT
2.1 COMMITMENT. Subject to the terms and conditions hereof,
the Lender agrees to make loans (each, a "LOAN"; collectively, the
"LOANS") to Signal from time to time during the Commitment Period
in an aggregate principal amount not to exceed the Available
Commitment.
2.2 NOTE; BORROWING. (a) The Loans made by the Lender shall
be evidenced collectively by a promissory note of the Company,
substantially in the form of EXHIBIT A (the "NOTE"), payable to the
order of the Lender and evidencing the obligation of the Company to
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pay a principal amount equal to the lesser of (a) the amount of the
initial Commitment and (b) the Principal Amount, on the Maturity
Date, together with any accrued and unpaid interest. The Lender is
hereby authorized to record the date and amount of each Loan made
by the Lender, and the date and amount of each payment or
prepayment of principal thereof, on the schedule annexed to and
constituting a part of the Note, and any such recordation shall
constitute PRIMA FACIE evidence of the accuracy of the information
so recorded. The Note shall (x) be dated the Closing Date, (y) be
stated to mature on the Maturity Date and (z) bear interest on the
unpaid Principal Amount thereof from time to time outstanding as
provided in Section 2.5. Interest on the Note shall be payable on
the dates specified in Section 2.5(c).
(b) Signal may borrow under the Commitment during the
Commitment Period on any Business Day; PROVIDED that a Responsible
Officer of Signal shall give the Lender irrevocable notice in
writing (which notice must be received by the Lender prior to 10:00
A.M., New York City time) not less than two Business Days prior to
the requested Borrowing Date, specifying (i) the amount to be
borrowed and (ii) the requested Borrowing Date. Each borrowing
pursuant to the Commitment shall be in an aggregate principal
amount of not less than $1,000,000.
(c) Each request for borrowing shall be accompanied by a
certificate of a Responsible Officer of Signal stating that the
Company is not then in Default, that the representations and
warranties of Section 5 (with the consolidated balance sheet of
Signal referenced in Section 5.1 being the most recent published
consolidated year end balance sheet reported on by Signal's
independent certified public accountants as of the date of such
request) are accurate as of the date of the request, and that the
Loan requested will not cause a Default.
2.3 USE OF PROCEEDS OF LOANS. The Loans shall be used to
finance the working capital needs of the Company and for general
corporate purposes including business acquisitions; provided,
however, that no portion of the Loans shall be used to pay the
principal due upon any bank debt of the Company.
2.4 OPTIONAL PREPAYMENTS. With the written consent of BNY
and Greyrock, the Company may at any time and from time to time
prepay the Loan, in whole or in part, without premium or penalty,
upon at least two Business Days' irrevocable notice to the Lender,
specifying the date and amount of prepayment. If such notice is
given, the amount specified therein shall be due and payable on the
date specified therein. Partial prepayments shall be in an
aggregate principal amount of $100,000 or a whole multiple thereof.
The Principal Amount shall be reduced by the amount prepaid, and
Signal shall not be entitled to reborrow such amount.
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2.5 INTEREST RATE AND PAYMENT DATES. (a) Interest on each
Loan shall accrue for the period commencing on and including the
Borrowing Date thereof at a rate per annum equal to 25%.
(b) If all or a portion of the Principal Amount of any
Loan, the interest payable thereon or any other amount payable
hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum which is 2% above the rate which
would otherwise be applicable pursuant to Section 2.5(a) from the
date of such non-payment until paid in full (after as well as
before judgment).
(c) Interest shall be payable in arrears on each
Interest Payment Date provided, however, that, prior to the
Maturity Date, Signal shall be required to pay on each Interest
Payment Date, for the period commencing on the previous Interest
Payment Date, or commencing on the Closing Date for the first
Interest Payment Date and ending on such Interest Payment Date,
interest on the Principal Amount at a rate of 15% per annum with
the balance of the interest accruing as of each such Interest
Payment Date being due and payable on the Maturity Date; and
provided, further, that interest accruing pursuant to the preceding
Section 2.5(b) shall by payable on demand.
2.6 COMPUTATION OF INTEREST. (a) Interest in respect of the
Loan shall be calculated on the basis of a 360 day year for the
actual days elapsed.
SECTION 3. GRANT OF SECURITY INTEREST
3.1. SECURITY FOR THE LOAN. As security for the payment in
full of the Obligations, the Company hereby assigns to Lender and
grants to Lender a security interest in all of the following assets
of the Company now owned or hereafter acquired by the Company or in
which the Company now has or at any time in the future may acquire
any right, title or interest ( collectively, the "COLLATERAL"):
(a) all the Company's land and buildings located in
Troup County, Georgia; Wabash County, Indiana and Claiborne County,
Tennessee, together with all improvements and appurtenances or
additions thereto ("REAL PROPERTY");
(b) all inventory, equipment, instruments, chattel
paper, accounts, general intangibles (other than rights to
trademarks, patents, tradenames or service marks held by the
Company under licenses the terms of which licenses do not allow the
transfer or assignment by Company of the rights granted), contract
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rights and goods, together with all products, proceeds, accessions,
improvements and appurtenances thereto;
(c) all machinery, furniture, fixtures, equipment and
other property located, installed (or to be installed) or used in
or about the buildings on the Real Property, including, but not
limited to, all heating, plumbing, lighting, water-heating,
refrigerating, air-conditioning and ventilating equipment, storm
doors and windows, shades, rugs, carpeting, awnings, blinds, drapes
and linoleum, signs and property of like nature, all of which are
hereby declared to be permanent accessions to the Real Property and
part of the realty described in the Mortgages, Deeds of Trust, and
Deeds to Secure Debt and Security Interests evidencing the security
interest granted hereby and are to be considered fixtures as such
term is defined in the Uniform Commercial Code adopted and in
effect in the States of Georgia, Indiana or Tennessee, as
applicable;
(d) all proceeds and products of any of the foregoing,
including, without limitation, all accounts receivable, accounts,
contract rights, instruments, documents, chattel paper and/or
general intangibles arising out of or in connection with any of the
foregoing, all rights of the Company in and to all Collateral
securing or otherwise relating to any obligations of third parties
to the Company in connection with any of the foregoing, cash
proceeds, non-cash proceeds, and insurance proceeds payable by
reason of loss or damage to any of the foregoing, whether now
existing or hereafter arising;
(e) all capital stock, instruments, or documents
evidencing the Company's ownership of Ocean Pacific Apparel Corp.
in the event of an acquisition of such company;
(f) all ledgers, journals, books and records of the
Company relating to any and all of the foregoing.
3.2. USE OF COLLATERAL. So long as an Event of Default has
not occurred, the Company shall have the right, in the ordinary
course of its business, to sell all items of Collateral listed in
Section 3.1 above or any additions or replacements thereto.
Lender's security interest hereunder shall automatically attach to
all proceeds of all sales and other dispositions of such items of
Collateral.
3.3. SUBORDINATION OF SECURITY INTEREST. The security
interest granted by this Section 3 shall in every respect be
subordinate to the security interests previously granted to the
Company's senior bank lenders, BNY Financial Corporation and
Greyrock Capital Group, Inc., until such time as such interests are
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released and to secure interests hereafter created or perfected
pursuant to existing agreements with such senior lenders, as such
agreements may be amended. The respective rights of the Lender and
such senior bank lenders in and to the Collateral shall be governed
by the Intercreditor Agreement which is to be executed and
delivered contemporaneously herewith.
SECTION 4. WARRANTS
In order to induce the Lender to make its Loans and to enter
into this Agreement, Signal agrees to issue to Lender the following
warrants to purchase Signal's Common Stock:
4.1 FIXED RATE WARRANTS. Signal shall issue to Lender
1,500,000 warrants to purchase Common Stock at an exercise price of
$2.25 per share ("FIXED RATE WARRANTS"). The Fixed Rate Warrants
will be issued on the Closing Date and will thereafter vest and
become exercisable at the rate of 100,000 warrants for each
$1,000,000 in Loans borrowed by Signal. Any Fixed Rate Warrants not
so vested will expire upon the termination of this Agreement. All
vested Fixed Rate Warrants shall be exercisable within three years
of the date of vesting. The Fixed Rate Warrants shall be adjusted
for dilution resulting from certain recapitalizations of, certain
distributions by and certain issuances by Signal of Common Stock in
accordance with the terms of the Warrant Certificate evidencing the
Fixed Rate Warrants.
4.2 DISCOUNT RATE WARRANTS. On the Closing Date, Signal
shall issue to the Lender additional warrants to purchase 1,500,000
shares of Signal's Common Stock at a 25% discount to the twenty day
average trading price in December, 1996 ("DISCOUNT RATE WARRANTS").
Such warrants will be issued and will vest upon the execution
hereof by Lender and upon the commitment by Lender to the Loan. The
Discount Rate Warrants will be exercisable during a period of three
years commencing January 1, 1997. The Discount Rate Warrants will
be adjusted for any dilution resulting from certain
recapitalizations of, certain distributions by and certain
issuances by Signal of Common Stock in accordance with the terms of
the Warrant Certificate evidencing the Discount Rate Warrants.
4.3 EXERCISE OF WARRANTS. Signal shall execute and deliver
to the Lender certificates evidencing the Fixed Rate Warrants in
the form of EXHIBIT B and the Discount Rate Warrants in the form of
EXHIBIT C (the "WARRANT CERTIFICATES"). Each warrant shall be
exercised in accordance with the terms of its respective Warrant
Certificate.
4.4 REGISTRATION RIGHTS. The Fixed Rate and Discount Rate
Warrants and the Common Stock issued pursuant to the exercise of
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the Fixed Rate and Discount Rate Warrants will not be registered
under the United States Securities Act of 1933, as amended. Lender
shall have the rights to demand registration specified in the
respective Warrant Certificates.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and
to make the Loans herein provided for, the Company hereby
represents and warrants to the Lender that, except as reflected in
the most recent Form 10-K and the two most recent Forms 10-Q filed
by Signal with the United States Securities and Exchange
Commission, and except for matters related to the indebtedness of
the Company to BNY Financial Corporation and to Greyrock Capital
Group, Inc.:
5.1 FINANCIAL CONDITION. The consolidated balance sheet of
Signal and its consolidated Subsidiaries at December 31, 1993 and
the related consolidated statements of income and retained earnings
and changes in financial position for the fiscal year ended on such
date, reported on by Arthur Andersen & Co., copies of which have
heretofore been furnished to the Lender, in all material respects
are complete and correct and present fairly the consolidated
financial condition of Signal and its consolidated Subsidiaries as
at such date, and the consolidated results of their operations and
changes in financial position for the fiscal year then ended.
5.2 NO CHANGE. Except as disclosed in SCHEDULE 5.2 there has
been no material adverse change in the business, operations,
property, prospects or financial or other condition of the Company,
taken as a whole, since December 31, 1993 or the latest audited
year end financial statement.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of Signal
and its Subsidiaries: (a) is validly existing and in good standing
under the laws of the jurisdiction of its incorporation; (b) has
the corporate power and authority and the legal right to own and
operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged; (c)
is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not
have a material adverse effect on the business, operations,
properties, prospects or financial or other condition of Signal and
its Subsidiaries taken as a whole; and (d) is in compliance with
all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, have a material
adverse effect on the business, operations, property or financial
or other condition of Signal and its Subsidiaries taken as a whole
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and could not materially adversely effect on the ability of the
Company to perform its obligations under this Agreement, the Note
or any other Loan Document.
5.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The Company has the corporate power and authority and the legal
right to make, deliver and perform each Loan Document and to borrow
under this Agreement and has taken all necessary corporate action
to authorize such borrowing on the terms and conditions of this
Agreement and the Note and to authorize the execution, delivery and
performance of each Loan Document. No consent or authorization of,
filing with or other act by or in respect of any Governmental
Authority is required in connection with the borrowing hereunder or
with the execution, delivery, performance, validity or
enforceability of each Loan Document. Each Loan Document has been
duly executed and delivered on behalf of the Company. Each Loan
Document constitutes the legal, valid and binding obligations of
the Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
5.5 NO LEGAL BAR. The execution, delivery and performance of
each Loan Document, the borrowing under this Agreement and the use
of the proceeds thereof, will not violate any Requirement of Law or
any Contractual Obligation of the Company or of any of its
Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties
or revenues pursuant to any Requirement of Law or Contractual
Obligation.
5.6 NO MATERIAL LITIGATION. Except as disclosed in SCHEDULE
5.6, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or
any of its Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any Loan Document or any
of the transactions contemplated hereby or thereby, or (b) which
could have a material adverse effect on the business, operations,
property or financial or other condition of the Company and its
Subsidiaries taken as a whole.
5.7 NO DEFAULT. Except as disclosed in SCHEDULE 5.7, neither
Signal nor any of its Subsidiaries is now in default under or with
respect to any Contractual Obligation in any respect which could be
materially adverse to the business, operations, property, prospects
or financial or other condition of the Company and its Subsidiaries
taken as a whole or which could materially adversely affect the
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ability of the Company to perform its obligations under any Loan
Document which default has not been waived by agreement signed by
the party or parties empowered to enforce such default.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of Signal, SSI and
AMW has good record and marketable title in fee simple to or valid
leasehold interests in all its respective Real Property, and good
title to all its other property, including the Collateral, and none
of such property is subject to any Lien, except as discussed in
Section 3.3 or as permitted in Section 8.2.
5.9 TAXES. The Company has filed or caused to be filed all
tax returns which to the knowledge of the Company are required to
be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its
property and has paid all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority
(other than those the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been
provided on the books of the Company or its Subsidiaries, as the
case may be); no tax liens have been filed; and, to the knowledge
of the Company, no claims are being asserted with respect to any
such taxes, fees or other charges.
5.10 FEDERAL REGULATIONS. No part of the proceeds of any
Loan hereunder will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted
terms under Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates, or which would be
inconsistent with, the provisions of the Regulations of such Board
of Governors.
5.11 HAZARDOUS SUBSTANCES. To the best of the Company's
knowledge, after reasonable inquiry, the Company, and those holding
the Real Property under the Company, are in substantial compliance
with all laws and regulations relating to pollution and
environmental control. The Company will comply with all such laws
and regulations which may be imposed in the future other than those
which would not have a material adverse effect on the business,
assets properties or condition (financial or otherwise) of the
Company. Except as disclosed on SCHEDULE 5.11, the Real Property is
free from "hazardous substances" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601, et seq., as amended, and the regulations
promulgated thereunder (other than substances reported to agencies
in the normal course of business in material safety data sheets or
the like); no portion of the Real Property is subject to federal,
state, or local regulation or liability because of the presence or
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stored, leaked or spilled petroleum products, waste materials or
debris, "PCB's" or PCB items (as defined in 40 C.F.R. Section
763.63) underground storage tanks, "asbestos" (as defined in 40
C.F.R. Section 763.63) or the past or present accumulation,
spillage or leakage of any such substance; and the Company is in
substantial compliance with all federal, state and local
requirements relating to protection of health or the environment in
connection with the operation of their business; and the Company
knows of no complaint or investigation regarding the Real Property.
Further, the Company is unaware of any investigation, threat or
concern by any entity regarding environmental issues involving the
Real Property. There are not now any outstanding citations, notices
or orders of violation or noncompliance issued to the Company or
relating to its business assets, property or leaseholds under any
such laws, rules or regulations, nor any conditions which, if known
by the proper authorities, could result in any of the foregoing.
5.12 INVESTMENT COMPANY ACT. The Company is not an
"investment company", within the meaning of the Investment Company
Act of 1940, as amended.
5.13 SUBSIDIARIES. On the Closing Date, SSI and AMW are
the only Subsidiaries of Signal.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO INITIAL LOAN. The agreement of the Lender
to make the Loan requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making
of such Loan on the Closing Date, of the following conditions
precedent:
(a) LOAN DOCUMENTS. The Lender shall have received
each Loan Document, including, without limitation, this
Agreement and the Note, in each case executed and delivered by
a duly authorized officer of the Company.
(b) CORPORATE PROCEEDINGS OF THE COMPANY. The Lender
shall have received a copy of the resolutions in form and
substance reasonably satisfactory to the Lender, of the Board
of Directors of each of Signal, SSI and AMW authorizing (i)
the execution, delivery and performance of each Loan Document
and all other documents and agreements required of the Company
hereunder and (ii) the borrowing contemplated hereunder,
certified by the Secretary of SSI, AMW and Signal, as of the
Closing Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate.
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(c) CORPORATE DOCUMENTS. The Lender shall have
received true and complete copies of the Restated Articles of
Incorporation and By-Laws of Signal, SSI and AMW certified as
of the Closing Date as true, complete and correct copies
thereof by the Secretary or an Assistant Secretary of each
such party.
(d) GOOD STANDING CERTIFICATES. The Lender shall have
received copies of certificates dated as of a recent date from
the Secretary of State or other appropriate authority of such
jurisdiction, evidencing the good standing of Signal and each
of its Subsidiaries in each State where the ownership, lease
or operation of property or the conduct of business requires
it to qualify as a foreign corporation except where the
failure to so qualify would not have a material adverse effect
on the business, operations, properties, prospects or
financial or other condition of Signal and its Subsidiaries
taken as a whole.
(e) FINANCIAL INFORMATION. The Lender shall have
received a copy of each of the financial statements referred
to in Section 5.1.
(f) LITIGATION. No suit, action, investigation,
inquiry or other proceeding except as disclosed herein
(including, without limitation, the enactment or promulgation
of a statute or rule) by or before any arbitrator or any
Governmental Authority shall be pending and no preliminary or
permanent injunction or order by a state or federal court
shall have been entered (i) in connection with this Agreement,
or (ii) which, in any such case, in the reasonable judgment of
the Lender, would have a material adverse effect on (A) the
transactions contemplated by this Agreement or (B) the
business, operations, properties, prospects or financial or
other condition of Signal and its Subsidiaries taken as a
whole.
(g) NO VIOLATION. The consummation of the transactions
contemplated hereby shall not contravene, violate or conflict
with, nor involve the Lender in a violation of, any
Requirement of Law.
(h) CONSENTS, LICENSES, APPROVALS, ETC. The Lender
shall have received a certificate of a Responsible Officer of
Signal either (i) attaching copies of all consents, licenses
and approvals required in connection with the execution,
delivery and performance by Signal and its Subsidiaries of
each Loan Document, including, but not limited to, consents of
the Company's senior bank lenders, and such consents, licenses
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and approvals shall be in full force and effect, or (ii)
stating that no such consents, license or approval are so
required (SCHEDULE 6.1(h)).
(i) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Company herein
shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date.
(j) NO DEFAULT. No Default or Event of Default shall
have occurred and be continuing on such date or after giving
effect to such Loan.
(k) SECURITY INTEREST. The security interests in
personal property granted herein shall be duly perfected in
accordance with applicable state law, and Signal and SSI shall
have delivered mortgages, deeds of trust or deeds to secure
debt duly executed by the record owner in recordable form
granting Lender a lien on the Real Property, including the
land, buildings, furnishings, equipment, improvements and
fixtures.
(l) LEGAL OPINION. Lender shall have received the legal
opinion of Witt, Gaither & Whitaker, P.C., counsel to Signal,
AMW and SSI, in form and substance satisfactory to the Lender.
6.2 CONDITIONS TO EACH LOAN. The agreement of the Lender to
make any Loan requested to be made by it on any date (including,
without limitation, the initial Loan) is subject to the
satisfaction of the following conditions precedent as of the date
such Loan is requested to be made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Company in or
pursuant to any Loan Document shall be true and correct in all
material respects on and as of such date as if made on and as
of such date.
(b) NO DEFAULT. No Default or Event of Default shall
have occurred and be continuing on such date or after giving
effect to the Loans requested to be made on such date.
(c) ADDITIONAL MATTERS. All corporate and other legal
proceedings, and all documents, instruments and other legal
matters in connection with the transactions contemplated by
this Agreement and the other Loan Documents shall be
reasonably satisfactory in form and substance to the Lender.
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(d) ADDITIONAL DOCUMENTS. The Lender shall have
received each additional document, instrument, legal opinion
or item of information reasonably requested by the Lender.
(e) EXTENSION OF GREYROCK LOAN. Evidence satisfactory to
Lender that the maturity dates of the $6,500,000 in loans by
Greyrock to AMW have been extended to December 31, 1996.
SECTION 7. AFFIRMATIVE COVENANTS
Signal hereby agrees that, so long as the Commitment is in
effect, the Note remains outstanding and unpaid or any other amount
is owing to the Lender hereunder, the Company shall do the
following:
7.1 FINANCIAL STATEMENTS. Furnish to the Lender:
(a) as soon as available, but in any event within 90
days after the end of each fiscal year of Signal, a copy of
the consolidated balance sheet of Signal and its consolidated
Subsidiaries as at the end of such year and the related
consolidated statements of income and retained earnings and
changes in financial position for such year, reported on by
independent certified public accountants, setting forth in
comparative form the figures for the previous year; and
(b) as soon as available, but in any event not later
than 45 days after the end of each of the first three
quarterly periods of each fiscal year of Signal, the unaudited
consolidated balance sheet of Signal and its consolidated
Subsidiaries as at the end of each such quarter and the
related unaudited consolidated statements of income and
retained earnings and changes in financial position of Signal
and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through such date, setting forth in
each case in comparative form the figures for the previous
year;
all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Lender:
(a) concurrently with the delivery of the financial
statements referred to in Section 7.1(a) above, a certificate
of the independent certified public accountants reporting on
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such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in Sections 7.1(a) and (b), a
certificate of a Responsible Officer stating that during such
period, to the best of such officer's knowledge, Signal has
observed or performed all of its covenants and other
agreements and satisfied every condition contained in this
Agreement and in the Note to be observed, performed or
satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as
specified in such certificate;
(c) within five days after the same are sent, copies of
all financial statements and reports which Signal sends to its
stockholders, and within five days after the same are filed,
copies of all financial statements and reports which Signal
may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental
Authority; and
(d) promptly, such additional financial and other
information as the Lender may from time to time reasonably
request.
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as
the case may be, all its obligations for borrowed money to the
Company's senior lenders or other commercial lenders except when
the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of Signal
or its Subsidiaries, as the case may be.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Cause
Signal and each of its Subsidiaries to continue to engage in
business of the same general type as now conducted by it; preserve,
renew and keep in full force and effect its corporate existence;
take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to subsection 8.5;
and comply with all Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, have a
material adverse effect on the business, operations, property or
financial or other condition of Signal and its Subsidiaries taken
as a whole. The foregoing notwithstanding, Signal shall be entitled
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to sell its Heritage Division for a price not less than its fair
market value.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Cause Signal and
each of its Subsidiaries to keep all property useful and necessary
in its business in good working order and condition, reasonable
wear and tear excepted; and maintain with financially sound and
reputable insurance companies insurance on all its property in at
least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in
the same or a similar business (PROVIDED that such insurance is
available at commercially reasonable rates); and furnish to the
Lender, upon written request, full information as to the insurance
carried.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Cause Signal and each of its Subsidiaries to keep books and records
of account in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and
permit representatives of the Lender to visit and inspect any of
its properties and examine and make abstracts from any of its books
and records at any reasonable time during business hours on
reasonable notice and as often as may reasonably be desired, and to
discuss the business, operations, properties and financial and
other condition of Signal and its Subsidiaries with officers and
employees of Signal and its Subsidiaries and with its independent
certified public accountants.
7.7 TAXES AND OTHER LIENS. Pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed upon
the Company or upon the income or any of the Real Property as well
as all claims of any kind (including claims for labor, materials,
supplies and rent) which, if unpaid, might become a Lien upon any
or all of the Real Property or Collateral; provided, however, that
the Company shall not be required to pay any such tax, assessment,
charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate
proceedings diligently conducted and if the Company shall have set
up reserves therefor adequate under GAAP.
7.8 FURTHER ASSURANCES. Promptly cure any defects in the
creation and issuance of the Note and the execution and delivery of
the Loan Documents, including this Agreement and the perfection of
any Liens in favor of the Lender. The Company, at its expense,
will promptly execute and deliver to the Lender upon request all
such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements
of the Company in the Loan Documents, including this Agreement, or
to evidence further and describe more fully any collateral intended
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as security for the Note, or to correct any omissions in the Loan
Documents, or to state more fully the obligation set out herein or
in any of the Loan Documents, or to perfect, protect or preserve
any Liens created pursuant to any of the Loan Documents, or to make
any recordings, to file any notices, or obtain any consents, all as
may be necessary or appropriate in connection therewith.
7.9 NOTICES. Promptly give notice to the Lender:
(a) of the occurrence of any Default or Event of
Default;
(b) of any (i) default or event of default under any
Contractual Obligation of Signal or any of its Subsidiaries or
(ii) litigation, investigation or proceeding which may exist
at any time between Signal or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or
if adversely determined, as the case may be, would have a
material adverse effect on the business, operations, property
or financial or other condition of Signal and its Subsidiaries
taken as a whole;
(c) of any litigation or proceeding affecting Signal or
any of its Subsidiaries in which the amount involved is
$100,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(d) of a material adverse change in the business
operations, property or financial or other condition of Signal
and its Subsidiaries taken as a whole; and
(e) of the institution of any proceeding or
investigations against, or the receipt of any notice of
potential liability for violation, or alleged violation, of
any federal, state or local law, rule or regulation, including
but not limited to regulations promulgated under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
ET SEQ., regulating the generation, handling or disposal of
any toxic or hazardous waste or substance, the violation of
which could give rise to a material liability against the
business, assets, properties, condition or prospects of Signal
taken as a whole.
Each notice pursuant to this subsection shall be accompanied
by a statement of a Responsible Officer setting forth details of
the occurrence referred to therein and stating what action the
Company proposes to take with respect thereto.
7.10 NOMINATION OF DIRECTORS. Until such time as all
Obligations have been paid in full and this Agreement has expired
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or been terminated, and so long as Lender is a shareholder of
Signal, Signal shall place the names of any two persons specified
by Lender in nomination for election to Signal's board of directors
at each annual meeting of Signal's shareholders; provided, Lender
shall provide the names of such nominees to Signal within
sufficient time to comply with applicable rules regarding the
submission of proxies, and Lender shall provide such other
information as may be required by such proxy rules. The right
granted in the preceding sentence shall be in addition to any other
right Lender may have as a shareholder of Signal to nominate
directors of Signal.
SECTION 8. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitment is
in effect, the Note remains outstanding and unpaid or any other
amount is owing to the Lender hereunder, Signal shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly
except as reflected in the most recent Form 10-K and the two most
recent Forms 10-Q filed by Signal with the United States Securities
and Exchange Commission, and except for indebtedness of the
Company, whether now existing or hereafter incurred, to BNY
Financial Corporation or Greyrock Capital Group, Inc., their
successors and assigns:
8.1 LIMITATION ON INDEBTEDNESS. Create, incur, assume or
suffer to exist any Indebtedness, except for:
(a) Indebtedness in respect of the Loans and the Note;
(b) Indebtedness of Signal to any Subsidiary and of any
Subsidiary to Signal or any other Subsidiary;
(c) Indebtedness outstanding on the Closing Date and
listed on SCHEDULE 8.1(c) including any extensions or renewals
thereof.
8.2 LIMITATION ON LIENS. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings; provided
that adequate reserves with respect thereto are maintained on
the books of Signal or its Subsidiaries, as the case may be,
in conformity with GAAP;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the
ordinary course of business and not overdue for a period of
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more than 60 days or which are being contested in good faith
by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liabilities to insurance
carriers under insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from
the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of Signal
or such Subsidiary;
(f) Liens in existence on the Closing Date listed on
SCHEDULE 8.2(f), including Liens attaching after the date
hereof pursuant to after acquired property clauses, Liens in
the Company's "Receivables" as defined in and as contemplated
by the Company's factoring agreements with BNY;
(g) Liens securing or created in connection with
Indebtedness of Signal and its Subsidiaries permitted by
Section 8.1(c); PROVIDED that (i) such Liens shall be created
substantially simultaneously with the purchase of such fixed
or capital assets; (ii) such Liens do not at any time encumber
any property other than the property financed by such
Indebtedness; (iii) the amount of Indebtedness secured thereby
is not increased; and (iv) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed
the purchase price of such property at the time it was
acquired; and
(h) Liens on the property or assets of a corporation
which becomes a Subsidiary after the date hereof; PROVIDED
that (i) such Liens existed at the time such corporation
became a Subsidiary and were not created in anticipation
thereof; (ii) any such Lien is not spread to cover any
property or assets of Signal after the time such corporation
becomes a Subsidiary; and (iii) the amount of Indebtedness
secured thereby (other than accrued interest) is not
increased.
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8.3 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur,
assume or suffer to exist any Guarantee Obligation except Guarantee
Obligations outstanding on the Closing Date and set forth on
SCHEDULE 8.3.
8.4 LIMITATIONS OF FUNDAMENTAL CHANGES. Enter into any
transaction of acquisition or merger or consolidation or
amalgamation (except with any of its Subsidiaries), or liquidate,
wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise
dispose of, all or substantially all of its property, business or
assets, or make any material change in the present method of
conducting business except as otherwise permitted hereunder and
except:
(a) any Subsidiaries of Signal may be merged or
consolidated with or into Signal (provided that Signal shall
be the continuing or surviving corporation) or with or into
any one or more wholly-owned Subsidiaries of Signal (provided
that the wholly-owned Subsidiary shall be the continuing or
surviving corporation);
(b) any wholly-owned Subsidiary may sell, lease,
transfer or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to Signal or a
wholly-owned Subsidiary of Signal; and
(c) subject to Section 8.11, any acquisition of Ocean
Pacific Apparel Corporation.
8.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease,
assign, transfer or otherwise dispose of, any of its property,
business or assets (including, without limitation, receivables and
leasehold interests) whether now owned or hereafter acquired
except:
(a) obsolete, worn out or no longer in use property
disposed of in the ordinary course of business;
(b) the sale or other disposition of any property in the
ordinary course of business;
(c) the sale of inventory in the ordinary course of
business;
(d) the sale of accounts receivable to BNY under the
Company's factoring arrangements with BNY;
(e) as permitted by SECTION 8.4(b); and
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(f) the sale of Signal's Heritage Division and all
assets generally used in the operation thereof for a price not
less than its fair market value.
8.6 LIMITATION ON DIVIDENDS. Except for the declaration and
payment of required dividends on its Preferred Stock, declare any
dividend (other than dividends payable solely in common stock of
Signal) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of any shares of any
class of stock of Signal, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of Signal
or any Subsidiary.
8.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities
of, or make any other investment in, any of the foregoing, an
"Investment", any Person, except:
(a) extensions of trade credit in the ordinary course
of business;
(b) Investments in Cash Equivalents;
(c) Investments by Signal in its Subsidiaries and
Investments by such Subsidiaries in Signal and in other
Subsidiaries;
(d) Investments permitted by subsection 8.4(c); and
(e) loans which refinance or restructure existing,
disclosed indebtedness but which do not increase the principal
amount of such existing indebtedness or change the terms of
such existing indebtedness in a manner which is materially
adverse to Lender.
8.8 TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with
any Subsidiary unless such transactions are otherwise permitted
under this Agreement, or are in the ordinary course of Signal's or
such Subsidiary's business and are upon fair and reasonable terms
no less favorable to Signal or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with
a Person not an Affiliate.
8.9 SALE AND LEASEBACK. Enter into any arrangement with any
Person providing for the leasing by Signal or any Subsidiary of
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real or personal property which has been or is to be sold or
transferred by Signal or such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of
Signal or such Subsidiary; except for a sale and leaseback of
equipment no later than three months following the date of initial
purchase of such equipment.
8.10 FISCAL YEAR. Permit the fiscal year of Signal to end on
a day other than December 31.
8.11 SUBSIDIARY FORMATION. Form or acquire any Subsidiary
unless such Subsidiary shall have become a party to this Agreement
or shall have guaranteed the Obligations hereunder in favor of the
Lender.
8.12 CHANGES IN LOCATIONS, NAME, ETC. Unless it shall have
given the Lender at least 30 days prior written notice thereof, the
Company will not (i) change the location of its chief executive
office/chief place of business or remove its books and records
therefrom, (ii) permit any of the inventory or equipment to be kept
at a location other than that on the date hereof, or (iii) change
its name, identity or corporate structure to such an extent that
any financing statement filed by Lender in connection with this
Agreement would become seriously misleading.
8.13 FINANCIAL CONDITION. At any time fail to comply with the
financial covenants contained in paragraph 11 of the Factoring
Agreement entered into between BNY and Signal, dated May 23, 1991,
as amended from time to time (the "FACTORING AGREEMENT") or if the
Factoring Agreement shall have terminated such covenants as were in
effect immediately prior to such termination. To the extent such
covenants require the Company to meet specific dollar amounts as of
specific periods (for example, the end of each quarter) the last
stated dollar amount for the last period contained in such
covenants shall apply to each succeeding similar period.
SECTION 9. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay any principal of the
Note when due in accordance with the terms thereof or hereof;
or to pay any interest on the Note, or any other amount
payable hereunder, within five days after any such amount
becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made
by the Company in any of the Loan Documents or which is
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contained in any certificate, document or financial or other
statement furnished at any time under or in connection with
this Agreement or the Note, including the most recent Form 10K
and the two most recent Forms 10Q filed by Signal with the
United States Securities and Exchange Commission, shall prove
to have been incorrect in any material respect on or as of the
date made or deemed made; or
(c) The Company shall default in the observance or
performance of any agreement contained in Section 8; or
(d) The Company shall default in the observance or
performance of any other agreement contained in this Agreement
or the Loan Documents, and such default shall continue
unremedied for the lesser of a period of 30 days or the cure
period applicable to such default in the pertinent Loan
Document; or
(e) Signal or any of its Subsidiaries shall (i) default
in any payment of principal or interest on any Indebtedness
(other than the Notes) or in the payment of any Guarantee
Obligation which default has not been waived and which
continues beyond the period of grace (not to exceed 30 days),
if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist without waiver and
beyond any applicable grace period, the effect of which
default or other event or condition is to cause such
Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
(f)(i) Signal or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its
assets, or Signal or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or
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(ii) there shall be commenced against Signal or any of
its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or
(iii) there shall be commenced against Signal or any of
its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its
assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry
thereof; or
(iv) Signal or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or
(v) Signal or any of its Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) One or more judgments or decrees shall be entered
against Signal or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of
$100,000 or more and all such judgments or decrees shall not have
been vacated, 30 days from the entry thereof;
(h) any of Marvin Winkler, the Chief Executive Officer
of Signal, Leon Ruchlamer, the President of Signal, or William
Watts, the chief financial officer of Signal, ceases to be employed
by Signal in his current position or in a position of equal or
greater responsibility with Signal, and a replacement for such
person (including any replacement of such replacement) reasonably
satisfactory to the Lender has not been hired to replace such
person within 30 days of the date such employment ceases; provided,
however, this provision shall not apply if Lender, Stephen Walsh,
Paul Greenwood or any director of Signal nominated by Lender should
support or not oppose a decision by the Board of Directors of the
Company to terminate any such officer or otherwise to cause such
officer to cease to be employed.
(i) The two persons whom Lender is entitled to nominate
to serve on Signal's Board of Directors pursuant to Section 7.10
shall not have been elected at the duly called meeting of the
shareholders of Signal at which their nominations were presented.
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then, and in any such event, (A) if such event is an Event of
Default specified in clause (i) or (ii) of paragraph (f) above with
respect of the Company, the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the
Note shall immediately become due and payable; (B) if such event is
an Event of Default specified in paragraph (a) above or in
paragraph (e) with respect to the Senior Debt which default shall
not have been waived, the Lender, at its option and in its sole
discretion, may by notice to Signal declare the Loans hereunder
(with accrued interest thereon) and all other amounts owing under
this Agreement and the Note to be due and payable forthwith,
whereupon the same shall immediately become due and payable; and
(C) if the Senior Debt shall have been repaid and if such event is
any other Event of Default, the Lender, at its option and in its
sole discretion, may by notice to Signal declare the Loan hereunder
(with accrued interest thereon) and all other amounts owing under
this Agreement and the Note to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section 9, presentment, demand,
protest and all other notices of any kind are hereby expressly
waived. The obligations of each Company in respect of the Loans are
subordinated to the obligations of each Company in respect of the
Senior Debt as provided in the Intercreditor Agreement.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement, the
Note, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this
Section 10.1. The Lender and the Company may, from time to time,
enter into written amendments, supplements or modifications hereto
for the purpose of adding any provisions to this Agreement or the
Note or changing in any manner the rights of the Lender or of the
Company hereunder or thereunder or waiving, on such terms and
conditions as the Lender may specify in such instrument, any of the
requirements of this Agreement or the Note or any Default or Event
of Default and its consequences. In the case of any waiver, the
Company and the Lender shall be restored to their former positions
and rights hereunder and under the Note, and any Default or Event
of Default waived shall be deemed to be cured and not continuing;
but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the mail,
postage prepaid, or, in the case of notice by telecopy or facsimile
transmission, when sent and telephonically or electronically
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confirmed, addressed as follows or to such other address as may be
hereafter notified by the respective parties hereto and any future
holder of the Note:
The Company:
Signal Apparel Company, Inc.
P. O. Box 4296
Manufacturer's Road
Chattanooga, TN 37405
Attention: Marvin Winkler
The Lender:
Walsh Greenwood & Co.
One East Putnam Avenue
Greenwich, Connecticut 06830
Attention: Paul R. Greenwood
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power
or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement
and the Note.
10.5 PAYMENT OF EXPENSES AND TAXES. Signal agrees (a) to pay
or reimburse the Lender in an amount up to, but not exceeding,
$250,000 for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of the
Loan Documents and any other documents prepared in connection
therewith, and the consummation of the transactions contemplated
hereby and thereby, including the fees and disbursements of counsel
to the Lender, (b) to pay or reimburse the Lender for all its costs
and expenses incurred in connection with the development,
preparation and execution of any amendment, supplement or
modification thereto, or the enforcement or preservation of any
rights under any Loan Document and any other such documents and any
such amendment, supplement or modification thereto, including,
without limitation, reasonable fees and disbursements of counsel to
the Lender, (c) to pay, indemnify, and hold the Lender harmless
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from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying,
stamp, excise, franchise and other taxes, if any, which may be
payable or determined to be payable in connection with the
execution and delivery of, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of
any Loan Document and any such other documents (provided that
Signal shall have the right to contest before the relevant
Governmental Authority any such tax that may be assessed), and (d)
to pay, indemnify, and hold the Lender harmless from and against
any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of
any Loan Document and the transactions contemplated hereby and any
such other documents (all the foregoing, collectively, the
"indemnified liabilities"), provided, that Signal shall have no
obligation hereunder to the Lender with respect to willful
misconduct of the Lender. The agreements in this Section shall
survive repayment of the Note and all other amounts payable
hereunder.
10.6 SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and inure to the benefit of the Company and the
Lender, all future holders of the Note and their respective
successors and assigns, except that the Company may not assign or
transfer any of its rights under this Agreement without the prior
written consent of the Lender.
(b) The Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or
more lenders or other entities ("PARTICIPANTS") participating
interests in any Loan, the Note, the Commitment or any other
interest of the Lender hereunder and under the other Loan
Documents. In the event of any such sale by the Lender of
participating interests to a Participant, the Lender's obligations
under this Agreement to Signal shall remain unchanged, the Lender
shall remain solely responsible for the performance thereof, the
Lender shall remain the holder of the Note for all purposes under
this Agreement and the other Loan Documents, and Signal shall
continue to deal solely and directly with the Lender in connection
with the Lender's rights and obligations under this Agreement and
the other Loan Documents. The Company agrees that if amounts
outstanding under this Agreement and the Note are due or unpaid, or
shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be
deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement and the Note to the
same extent as if the amount of its participating interest were
owing directly to it as the Lender under this Agreement or the
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Note; PROVIDED, that such Participant shall only be entitled to
such right of set-off if it shall have agreed in the agreement
pursuant to which it shall have acquired its participating interest
to share with the Lender the proceeds thereof. The Company also
agrees that each Participant shall be entitled to the benefits of
Section 10.5 with respect to its participation in the Commitment
and the Loans outstanding from time to time; PROVIDED FURTHER, that
no Participant shall be entitled to receive any greater amount
pursuant to such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no
such transfer occurred.
10.7 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
10.8 GOVERNING LAW. THIS AGREEMENT AND THE NOTE AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.9 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF SIGNAL,
SSI AND AMW HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-
EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED
OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO SUCH BORROWER AT ITS ADDRESS SET FORTH IN
SECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;
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(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(E) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
10.10 WAIVER OF JURY TRIAL. EACH OF SIGNAL, SSI, AMW AND THE
LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
NOTE, OR OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY
COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York by their
proper and duly authorized officers as of the day and year first
above written.
SIGNAL APPAREL COMPANY, INC.
By /s/ William H. Watts
Title Executive VP and CFO
THE SHIRT SHED, INC.
By /s/ William H. Watts
Title Executive VP and CFO
AMERICAN MARKETING WORKS, INC.
By /s/ William H. Watts
Title Executive VP and CFO
WALSH GREENWOOD & COMPANY
By /s/ Paul R. Greenwood
Title Managing Partner
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LIST OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Note
Exhibit B Form of Fixed Rate Warrant
Exhibit C Form of Discount Rate Warrant
Schedule 5.2 Material Adverse Changes
Schedule 5.6 Material Litigation
Schedule 5.7 Default
Schedule 5.11 Environmental
Schedule 6.1(h) Closing Certificate
Schedule 8.1(c) Outstanding Indebtedness
Schedule 8.2(f) Existing Liens
Schedule 8.3 Existing Guarantees
The Registrant hereby agrees to furnish a copy of any of such omitted
Schedules or Exhibits supplementally upon request of the Commission's staff.
PROMISSORY NOTE
$15,000,000 New York, New York
March 31, 1995
FOR VALUED RECEIVED, each of the undersigned, SIGNAL
APPAREL COMPANY, INC., an Indiana corporation ("SIGNAL"),
THE SHIRT SHED, INC., a Delaware corporation ("SSI") and
AMERICAN MARKETING WORKS, INC. ("AMW"), hereby jointly and
severally unconditionally promises to pay on the Maturity
Date to the order of WALSH GREENWOOD & CO. (the "LENDER"),
at its office located at One East Putnam Avenue, Greenwich,
Connecticut 06830, in lawful money of the United States of
America and in immediately available funds, the principal
amount of the lesser of (a) FIFTEEN MILLION DOLLARS
($15,000,000) and (b) the aggregate unpaid principal amount
of all Loans made pursuant to Section 2.1 of the Credit
Agreement referred to below, and to pay interest in like
money at such office on the unpaid principal amount hereof
from time to time, on the dates and in the manner as
provided in Section 2.5 of the Credit Agreement, at the rate
which is the lesser of (a) the applicable rate per annum set
forth in Section 2.5 of the Credit Agreement, and (b) the
maximum rate of interest which may be charged or collected
by the Lender under applicable law, until paid in full (both
before and after judgment).
The holder of this Note is authorized to, and so long
as it holds this Note shall, record the date and amount of
each Loan made by the Lender pursuant to Section 2.1 of the
Credit Agreement, the date and amount of each payment or
prepayment of principal thereof, and any such recordation
shall constitute PRIMA FACIE evidence of the accuracy of the
information so recorded; PROVIDED that failure of the Lender
to make any such recordation (or any error in such
recordation) shall not affect the joint and several
obligations of the undersigned under this Note or under the
Credit Agreement.
The Note is the Note referred to in the Credit
Agreement, dated as of March 31, 1995 (as amended,
supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among the undersigned and the Lender,
is entitled to the benefits thereof, if secured as provided
therein and is subject to optional prepayment in whole or in
part as provided therein. Terms used herein which are
defined in the Credit Agreement shall have such defined
meanings unless otherwise defined herein or unless the
context otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then
remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, all as provided
<PAGE>
therein. The Borrower expressly waives diligence,
presentment, protest, demand and other notices of any kind.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New
York,
SIGNAL APPAREL COMPANY, INC.
By: /s/ William H. Watts
Name: William H. Watts
Title: Executive VP and CFO
THE SHIRT SHED, INC.
By: /s/ William H. Watts
Name: William H. Watts
Title: Exececutive VP and CFO
AMERICAN MARKETING WORKS, INC.
By: /s/ William H. Watts
Name: William H. Watts
Title: Executive VP and CFO
THIS NOTE IS SUBJECT IN ITS ENTIRETY TO THE INTERCREDITOR
AGREEMENT DATED AS OF THE DATE HEREOF AMONG THE MAKER, WALSH
GREENWOOD & CO., BNY FINANCIAL CORPORATION AND GREYROCK
CAPITAL GROUP, INC., AND NO PAYMENTS MAY BE RECEIVED BY
WALSH GREENWOOD & CO. OR ANY HOLDER HEREOF UNLESS EXPLICITLY
PERMITTED THEREBY.
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 of
$2.25 per share (the "EXERCISE PRICE"). The Warrants shall not be
terminable by the Company. The shares of Common Stock issuable
upon exercise of the Warrants (and any other or additional shares,
securities or property that may hereafter be issuable upon exercise
of the Warrants) are sometimes referred to herein as the "WARRANT
SHARES", and the number of shares so issuable 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
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").
1
<PAGE>
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, vesting at the rate of 100,000 shares for each $1 million
in advances drawn by the Company upon the loan extended under the
Credit Agreement (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 (10) 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 expire 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
<PAGE>
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
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
3
<PAGE>
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
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
4
<PAGE>
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 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
whose Warrants and/or Warrant Shares are included therein, at such
Holder's expense,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
5
<PAGE>
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,
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:
6
<PAGE>
(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 the Aggregate Number shall be
deemed to be the Aggregate Number hereunder as adjusted.
(a) In case at any time or from time to time the Company
shall:
(i) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
7
<PAGE>
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then the Aggregate Number in effect immediately prior thereto shall
be adjusted so that the Holder or Holders of Warrants shall
thereafter be entitled to receive, upon exercise thereof, the
number of shares of Common Stock that such Holder or Holders would
have owned or have been entitled to receive after the occurrence of
such event had such Warrants been exercised immediately prior to
the occurrence of such event.
(b) In case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other
distribution (collectively, a "DISTRIBUTION") of:
(i) cash (other than dividends payable out of earnings
or any surplus legally available for the payment of dividends
under the laws of the state of incorporation of the Company),
(ii) any evidences of its indebtedness (other than
Convertible Securities), any shares of its capital stock
(other than additional shares of Common Stock or Convertible
Securities) or any other securities or property of any nature
whatsoever (other than cash), or
(iii) any options or warrants or other rights to
subscribe for or purchase any of the following: any evidences
of its indebtedness (other than Convertible Securities), any
shares of its capital stock (other than additional shares of
Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever,
then the Holder or Holders of Warrants shall be entitled to receive
upon the exercise thereof at any time on or after the taking of
such record the number of shares of Common Stock to be received
upon exercise of such Warrants determined as stated herein and, in
addition and without further payment, the cash, stock, securities,
other property, options, warrants and/or other rights to which such
Holder or Holders would have been entitled by way of the
Distribution and subsequent dividends and distributions if such
Holder or Holders (x) had exercised such Warrants immediately prior
to such Distribution, and (y) had retained the Distribution in
respect of the Common Stock and all subsequent dividends and
distributions of any nature whatsoever in respect of any stock or
securities paid as dividends and distributions and originating
directly or indirectly from such Common Stock. A reclassification
of the Common Stock into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company
to the holders of its Common Stock of such shares of such other
8
<PAGE>
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
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
9
<PAGE>
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
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
10
<PAGE>
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:
(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
11
<PAGE>
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
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
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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
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.
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(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
(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
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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
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,
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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.
CREDIT AGREEMENT: the Credit Agreement, dated as of
March 31, 1995, among the Company, Walsh Greenwood & Co. and
certain of the Company's subsidiaries.
DEMAND REGISTRATION: as set forth in Section 4.1(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.
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EXPIRATION DATE: this Warrant Certificate will expire
and the Warrants issued hereby will become null and void on
the earlier of three years from the date the last Warrants
vest or three years from the Termination Date of the Credit
Agreement.
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 Corporation for
that purpose, or, in the event that the Common Stock is listed
or admitted to trading on one or more national securities
exchanges (or as a NASDAQ National Market System security),
the last sale price on the NASDAQ system or on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading or, in case no reported sale
takes place on such day, the average of the reported closing
bid and asked prices on the NASDAQ system or such principal
exchange.
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.
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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
unregistered 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. Only Warrants which shall
have vested in accordance with Paragraph 1 shall be transferable,
and the replacement Warrant Certificate(s) shall indicate that such
Warrants are fully vested.
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
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
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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.
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
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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
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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 Exhibits supplementally upon requested of the Commission's
staff.
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
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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
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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
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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
<PAGE>
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
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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,
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<PAGE>
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:
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(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
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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
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<PAGE>
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
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<PAGE>
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:
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(x) treating the number of additional shares of
Common Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise of such
warrants or rights or such right of conversion or
exchange as having been issued on the date or dates of
such exercise and for the consideration actually
received and receivable therefor, and
(y) treating any such warrants or rights or any
such Convertible Securities which then remain
outstanding as having been granted or issued immediately
after the time of such irrevocable increase of the
consideration per share for which shares of Common Stock
are issuable under such warrants or rights or
Convertible Securities;
and, if and to the extent called for by the foregoing provisions of
this paragraph (f) on the basis aforesaid, a new adjustment of the
Aggregate Number shall be made, such new adjustment shall supersede
the previous adjustments rescinded and annulled.
(g) 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
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<PAGE>
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
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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
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(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
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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.
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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.
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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
<PAGE>
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
<PAGE>
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
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<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
THIS INSTRUMENT PREPARED BY
AND RETURN TO:
Geoffrey G. Young, Esquire
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, Tennessee 37402
TENNESSEE DEED OF TRUST AND SECURITY AGREEMENT
THIS INSTRUMENT ALSO IS A UNIFORM COMMERCIAL CODE FINANCING
STATEMENT WHICH IS BEING FILED AS A FIXTURE FILING IN ACCORDANCE
WITH T.C.A. 47-9-402(6). SIGNAL APPAREL COMPANY, Inc. IS THE
RECORD OWNER OF THE REAL ESTATE DESCRIBED HEREIN. THE COLLATERAL
IS DESCRIBED IN THIS INSTRUMENT, AND SOME OF THE COLLATERAL
DESCRIBED HEREIN IS OR IS TO BECOME FIXTURES ON THE REAL ESTATE.
THE NAME AND ADDRESS OF THE DEBTOR ("GRANTOR" HEREIN) AND SECURED
PARTY ("GRANTEE" HEREIN) ARE:
NAME AND ADDRESS OF DEBTOR
Signal Apparel Company, Inc.
200 Manufacturers Road
P. 0. Box 4296
Chattanooga, Tennessee 37405
NAME AND ADDRESS OF SECURED PARTY
Walsh Greenwood & Co.,
One East Putnam Avenue
Greenwich, Connecticut 06830
THE MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSEE RECORDING
TAX PURPOSES IS $15,000,000.00.
THIS TENNESSEE DEED OF TRUST AND SECURITY AGREEMENT IS GIVEN
FOR COMMERCIAL PURPOSES AND SECURES OBLIGATORY ADVANCES OF
CREDITOR PURSUANT TO T.C.A. 47-28-101, ETC.
THIS TENNESSEE DEED OF TRUST AND SECURITY AGREEMENT (the
"DEED OF TRUST") is made and entered into on this nd day of
March , 1995, by and between SIGNAL APPAREL COMPANY, INC.,
having an address at 200 Manufacturers Road, Chattanooga,
Tennessee 37405, parties of the first part (hereinafter sometimes
collectively called "GRANTOR"), MILLIGAN-REYNOLDS TITLE GUARANTY,
INC., a Tennessee, corporation, located at 724 Cherry Street,
Chattanooga, Tennessee 37402 ("TRUSTEE") , and WALSH GREENWOOD &
CO., a New York limited partnership, located at
One East Putnam Avenue, Greenwich, CT 06830, individually and as
Agent for certain other Lenders, ("GRANTEE").
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<PAGE>
WITNESSETH, that for and in consideration of the sum of Ten
and 00/100 Dollars ($10.00), and other valuable considerations,
the receipt and sufficiency of which are hereby acknowledged, and
in order to secure the indebtedness and other obligations
hereinafter set forth, Grantor does hereby grant, bargain, sell,
convey, assign, transfer, pledge, and set over unto Trustee, and
the successors and assigns of Trustee, all of its right, title,
and interest with respect to the following described property
located in Hamilton County, Tennessee and all other interests of
Grantor in such land, including without limitation all estates,
easements, rights, improvements and fixtures, relating to,
arising from or now or hereafter located on such land
(hereinafter referred to collectively as the "MORTGAGED
PROPERTY"):
1. All right, title and interest of Grantor in, under and to
those certain tracts of land more particularly described in
EXHIBIT A attached hereto and by this reference made a part
hereof (hereinafter collectively referred to as the "LAND"); and
2. All buildings, structures and improvements of every nature
whatsoever now or hereafter situated on the Land, and all gas and
electric fixtures, radiators, heaters, engines and machinery,
boilers, lifts, elevators and motors, plumbing and heating
fixtures, carpeting and other floor coverings, water heaters, air
conditioning apparatus, refrigerating plants, which are or shall
be attached to said buildings, structures or improvements and all
other fixtures of every kind and nature whatsoever now or
hereafter owned by Grantor and located in, on or about, or used
or intended to be used with or in connection with the use,
operation or enjoyment of the Mortgaged Property, including all
extensions, accessions, additions, improvements, betterments,
renewals and replacements, substitutions, or proceeds from a
permitted sale of any of the foregoing, and all building material
and supplies of every kind now or hereafter placed or located on
the Land, all of which are hereby declared and shall be deemed to
be fixtures and accessions to the Land and a part of the
Mortgaged Property as between the parties hereto and all persons
claiming by, through or under them, and which shall be deemed to
be a portion of the security for the indebtedness herein
described (hereinafter referred to as the "IMPROVEMENTS") and to
be secured by this Deed of Trust; and
3. All right, title and interest of the Grantor in, under and
to all easements, rights-of-way, strips of land, vaults, streets,
ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, minerals, flowers, shrubs, crops, trees,
timber and other emblements now or hereafter located on the Land
2
<PAGE>
or under or above the same or any part or parcel thereof, and all
estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances, reversions, and
remainders whatsoever, in any way belonging, relating or
appertaining to the Mortgaged Property or any part thereof, or
which hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Grantor; and
4. All present and future leases, rents, issues, profits and
revenues of the Mortgaged Property from time to time accruing
(including without limitation all payments under leases or
tenancies, proceeds of insurance, condemnation payments, tenant
security deposits and escrow funds), and all of the estate, right
title, interest, property, possession, claim and demand
whatsoever at law, as well as in equity, of Grantor, in and to
the same, reserving only the right to Grantor to collect the same
so long as Grantor is not in default hereunder; and
5. All awards, compensation and settlements in lieu thereof
made as a result of (i) the taking by power of eminent domain of
the whole or any part of the Mortgaged Property, including any
awards for damages sustained to the Mortgaged Property, for a
temporary taking, change of grade of streets or taking of access,
or (ii) any other injury to, taking of, or decrease in the value
of the Mortgaged Property; and
6. All proceeds of hazard or other insurance policies
maintained with respect to the Mortgaged Property or the
Improvements (whether or not Grantee is the loss payee thereof).
TO HAVE AND TO HOLD, the Mortgaged Property, together with
all the hereditaments and appurtenances thereto belonging or in
anyway appertaining unto the said Trustee, its successors in
trust and assigns, in fee simple forever, and the said Grantor
does hereby covenant with the said Trustee, its successors in
trust and assigns, that Grantor is lawfully seized in fee of the
estate described in EXHIBIT "A," hereto attached, that Grantor
has a good right to sell and convey the same; that the same is
EXHIBIT "A," hereto attached; that Grantor has a good right to
sell and convey the same; that the same is unencumbered, except
by a Deed of Trust granted to BNY Financial Corporation and
recorded in the Register's Office of Claiborne, County, Tennessee
at Book and Page to which this Deed of Trust and the
rights of Grantee are in all respects subordinate, and that the
title and quiet possession thereto Grantor will and Grantor's
successors shall warrant and forever defend against the lawful
claims of all persons whomsoever, except those of BNY Financial
Corporation.
3
<PAGE>
BUT THIS IS A TRUST DEED, and is made for the following uses
and purposes, and none other; that is to say:
(a) to secure the full performance by the Grantor of all
covenants and agreements contained herein;
(b) to secure the full performance of all terms, conditions and
agreements contained in that certain Credit Agreement dated as of
March , 1995, among the Grantee, the Grantor and certain of
Grantor's subsidiaries (the "CREDIT AGREEMENT") (to which Credit
Agreement reference is hereby made for all of its terms,
provisions and conditions), in particular: (i) that all payments
of principal and interest due under the Credit Agreement shall be
payable at the address provided in the Credit Agreement or at
such other place as the Grantee or his successors or assigns may
designate in writing; (ii) that the balance of the indebtedness
payable under the Credit Agreement, if not sooner paid, is due
and payable as specified therein; and (iii) that the foregoing
and all rights and obligations of Grantee hereunder are subject
in all respects to a certain Intercreditor Agreement, dated March
, 1995 among Grantor, certain subsidiaries of Grantor, Grantee,
BNY Financial Corporation ("BNY") and Greyrock Capital Group,
Inc. ("GREYROCK")(the "INTERCREDITOR AGREEMENT") (capitalized
terms not defined herein shall have the meanings attributed to
them in the Credit Agreement and the Intercreditor Agreement);
(c) subject to the Intercreditor Agreement, to secure the full
and prompt payment of all sums now owing, and all sums which at
any time hereafter may be owing by the Grantor to Grantee under
this Deed of Trust, whether such sums are advanced by Grantee to
the Grantor or expended by Grantee for the Grantor's account or
benefit; and
(d) to secure the payment of all court costs, expenses and costs
of whatever kind incident to the collection of any indebtedness
secured hereby and the enforcement or protection of the lien of
this conveyance and the enforcement of any judgment arising
therefrom, including reasonable attorneys' fees.
(All of the, indebtedness and obligations set forth in (a)
through (d) above are sometimes hereinafter referred to as the
"INDEBTEDNESS").
NOW, THEREFORE, so long as any part of the Indebtedness
shall remain unpaid, Grantor covenants, agrees, represents and
warrants as follows:
4
<PAGE>
ARTICLE I
COVENANTS AND AGREEMENTS
Subject in all respects to the requirements of the Intercreditor
Agreement, Grantor does hereby covenant, warrant and represent to
and agree with Grantee as follows:
1.1 PAYMENT AND PERFORMANCE. Grantor shall punctually and
properly pay all of Grantor's Indebtedness when due and shall
perform, keep, observe and meet all of its covenants, agreements,
liabilities, obligations and undertakings under the Credit
Agreement in accordance with its terms.
1.2 INSURANCE. Grantor will procure and maintain in effect at
all times fire, extended coverage, vandalism, malicious mischief
and other hazard insurance with respect to the Mortgaged Property
and public liability insurance with such insurance companies and
in forms and amounts as are reasonably acceptable to and approved
by Grantee against loss or destruction on account of fire,
windstorm or other such hazards, casualties and contingencies
customarily insured against, and injury to the person or
property, including, without limiting the generality thereof,
business interruption insurance in an amount equal to one (1)
year's overhead and net profit. All insurance policies are to
list Grantee as an additional named insured as to the Mortgaged
Property only, and at any time and from time to time, Grantor
shall deliver certificates of the insurers evidencing the
coverage required by this Section 1.2 and the expiration dates of
such coverage. Grantor shall obtain a new policy as replacement
for any expiring policy at least thirty (30) days before the date
of such expiration. Upon the payment in full of the Indebtedness
and the termination of this Deed of Trust, Grantee agrees to
execute and deliver to Grantor any and all documents required by
Grantor's insurers to effect a termination of Grantee's interest.
All such policies of insurance shall contain waiver of
subrogation clauses, and shall have attached thereto a
noncontributory grantee clause or its equivalent in favor of
Grantee with cancellation only upon at least thirty (30) days'
prior written notice to Grantee.
Subject to the rights of the BNY and Greyrock under the
Intercreditor Agreement, each insurance company hereby is
authorized and directed to make payment for all losses to Grantee
and Grantor jointly, unless an Event of Default exists (or any
other event which with the giving of notice or the lapse of time
or both would constitute an Event of Default), in which case each
insurance company is hereby authorized and directed to make
payment directly to Grantee upon certification from Grantee that
5
<PAGE>
an Event of Default (or any other event which ,with the giving of
notice or the lapse of time or both would constitute an Event of
Default) has occurred. If an Event of Default does not exist (or
any other event which with the giving of notice or the lapse of
time or both would constitute an Event of Default) and if the
Grantor provides Grantee with evidence reasonably satisfactory to
Grantee that all payments due to Grantee under the Credit
Agreement and this Deed of Trust punctually can be made and
satisfied during the period of such restoration, the Grantee
agrees to endorse and transfer such proceeds to an escrow account
from which, at the option of Grantor, such proceeds shall be
disbursed for the restoration of the Mortgaged Property to the
reasonable satisfaction of Grantee or for payment of all or any
part of the Indebtedness. If Grantor cannot provide such evidence
to Grantee or if an Event of Default exists (or any other event
which with the giving of notice or the lapse of time or both
would constitute an Event of Default), the Grantee, at its sole
option, may (a) apply such payment to the Indebtedness,
including, without limitation, his expenses in collecting and
administering such payment, whether or not such Indebtedness is
then due and payable, with any remaining balance to be paid to
the Grantor or the person or entity lawfully entitled thereto, or
(b) deposit such payment into an escrow account from which such
proceeds shall be disbursed solely for the restoration of the
Mortgaged Property to the reasonable satisfaction of Grantee.
The Grantor will not do or suffer to be done or allow or permit
any other user of the Mortgaged Property to do anything which
will increase the risk of fire or other hazard to the Mortgaged
Property or any part thereof without first causing such increased
risk to be fully and adequately covered by insurance. In the
event of foreclosure of this Deed of Trust, or other transfer of
title of the Mortgaged Property in extinguishment of the
Indebtedness secured hereby, all right, title and interest of the
Grantor in and to any insurance policies then in force shall pass
to the purchaser or grantee of the Mortgaged Property.
In the event that, prior to the extinguishment of the
Indebtedness, there exists any claim under any hazard insurance
policies which shall not have been paid and distributed in
accordance with the terms of this Deed of Trust, and any such
claims shall be paid after the extinguishment of the Indebtedness
secured hereby, and the foreclosure of this Deed of Trust,
transfer of title to the Mortgaged Property, or extinguishment of
the Indebtedness secured hereby for an amount less than the total
of the unpaid principal balance together with accrued interest
plus costs of litigation, reasonable attorneys' fees, title
insurance and all other costs and expenses incurred by Grantee in
any action involving such extinguishment then, without
limitation, that portion of the payment in satisfaction of the
6
<PAGE>
claim which is equal to the difference between the total amount
of the aforementioned amounts due Grantee and the amount in
extinguishment of the Indebtedness secured hereby received by
Grantee shall belong to and be the property of the Grantee and
shall be paid to the Grantee, and the Grantor hereby assigns,
transfers and sets over to the Grantee all of the Grantor's
right, title and interest in and to such sum. The balance, if
any, shall belong to Grantor. Notwithstanding the above, Grantor
shall retain an interest in the insurance policies described
above during any redemption period.
1.3 TAXES AND ASSESSMENTS. Grantor will promptly pay when due
all taxes, assessments, levies, dues and charges of every type or
nature assessed against the Mortgaged Property, and any claim,
lien or encumbrance against the Mortgaged Property which may be
or become prior to the lien of this Deed of Trust, other than the
liens for the benefit of BNY and Greyrock as to which they shall
have priority over Grantee under the Intercreditor Agreement.
1.4 TAXES ON DEED OF TRUST. If at any time any law shall be
enacted imposing or authorizing the imposition of any tax upon
the Grantee or Trustee as a result of the existence the Credit
Agreement (other than relating to income derived therefrom), or
this Deed of Trust, or upon any rights, titles, liens, or
security interests created hereby, or any part thereof, Grantor
shall immediately pay all such taxes; provided that, if it is
unlawful for Grantor to pay such taxes, Grantee may pay such
taxes and further, that if it shall be unlawful for Grantor
either to pay such taxes or to reimburse Grantee therefor, or if
such payment or reimbursement would be usurious, or would subject
the Grantee to any penalty, Grantor shall not be required to make
such payments or reimbursement.
1.5 EMINENT DOMAIN. Grantor hereby transfers, sets over, and
assigns to Grantee all judgments, awards of damages and
settlements hereafter made as a result or in lieu of any taking
of the Mortgaged Property or any part thereof under the power of
eminent domain, or for any damage (whether caused by such taking
or otherwise) to the Mortgaged Property or any part thereof, or
to any rights appurtenances thereto, including any award for
change of grade of streets. Subject to the rights of BNY and
Greyrock under the Intercreditor Agreement, Grantee is hereby
authorized, but not required, in behalf and in the name of
Grantor, to execute and deliver valid acquittances for, and to
appeal from, any such judgments or awards. Grantee may apply all
such sums or any part thereof so received, after the payment of
all of its expenses, including costs and reasonable attorney's
fees, on the Indebtedness secured hereby, whether due or not,
in such manner as it elects or, at its option, the entire amount
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or any part therefor so received may be released to the Grantor
or other party lawfully entitled thereto.
1.6 REPAIR, WASTE, ALTERATIONS, ETC. Grantor shall keep the
Mortgaged Property in good operating order, repair and condition
and shall not commit or permit any removal or waste thereof,
normal wear and tear excepted. Grantor shall make promptly all
necessary repairs, renewals and replacements to the Mortgaged
Property.
1.7 ADVANCES BY GRANTEE TO PROTECT COLLATERAL. If the Grantor
shall default in paying taxes, maintaining insurance or making
repairs, the Grantee may, at its discretion, but is not required
to, advance and pay such sums as may be proper to satisfy taxes,
maintain insurance and make repairs, and protect and preserve the
Mortgaged Property, and such amounts so paid shall be treated as
part of the expense of administering this trust, shall be repaid
by Grantor on demand with interest at the Default Rate
(hereinafter defined), and shall be secured by the lien hereof;
however, the making of any such payment by Grantee shall not be
construed as a waiver of any default of Grantor.
1.8 NO MECHANICS' LIENS. Grantor shall promptly discharge all
claims for labor performed and material furnished to the
Mortgaged Property, and shall not suffer any lien of mechanics or
materialmen to be filed against any part of the Mortgaged
Property. Grantee has not consented and will not consent to any
contract or to any work or to the furnishing of any materials
which might be deemed to create a lien or liens superior to the
lien of this instrument, either under Section* 66-11-108 of
Tennessee Code Annotated or otherwise.
1.9 PROTECTION AND PRIORITY OF LIEN. Grantor shall not do
anything or suffer or permit anything to be done whereby the lien
and security interest of this Deed of Trust could be impaired.
Grantor shall pay such reasonable expenses and fees as may be
necessary in the protection of the Mortgaged Property and the
maintenance and execution of liens and security interests herein
granted. Any agreement hereafter made by Grantor and Grantee
pursuant to or regarding this Deed of Trust shall be superior to
the rights of the holder of any intervening lien or encumbrance.
1.10 COMPLIANCE WITH LAWS. Grantor, the Mortgaged Property and
the use thereof by Grantor shall comply with all laws, rules,
ordinances, regulations, covenants, conditions, restrictions,
orders and decrees of any governmental authority or court
applicable to Grantor or the Mortgaged Property and its use;
Grantor will not suffer or permit any violation thereof, and
Grantor shall pay all fees or charges of any kind in connection
therewith.
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1.11 FURTHER ASSURANCES. Grantor, upon the request of Grantee,
shall execute, acknowledge, deliver, and record such further
instruments and do such further acts as may be necessary,
desirable or proper to carry out the purposes of this instrument
and the Credit Agreement and to subject to the liens and security
interests created thereby any property intended by the terms
thereof to be covered thereby, including specifically, but
without limitation any renewals, additions, substitutions,
replacements, improvements, or appurtenances to the Mortgaged
Property.
1.12 NO PRIOR LIENS. This Deed of Trust shall not be
subordinate to any other lien, security interest, assignment of
leases or rents, or any other encumbrance affecting any of the
Mortgaged Property (each a "PRIOR LIEN"), other than to the
Grantee, a Deed of Trust granted to BNY Financial Corporation and
recorded in the Register's Office of Claiborne, County, Tennessee
at Book and Page and any other documents perfecting the
security interest of BNY in and to the Mortgaged Property, and as
provided in the Intercreditor Agreement. Should any such Prior
Lien exist at any time, in addition to any other rights of
Grantee hereunder or under the Credit Agreement, Grantee may, but
shall not be obligated to, pay any such indebtedness or to
perform any such obligations for the account of Grantor and any
sum so expended plus interest shall be added to the Indebtedness
secured hereby. Grantor shall pay to Grantee on demand all
amounts so expended by Grantee with interest on such amounts at
the Default Rate (hereinafter defined).
1.13 HAZARDOUS WASTES. (a) Grantor warrants, represents and
covenants:
(i) To the best of Grantor's knowledge, after
reasonable inquiry, but subject to all matters disclosed to
Grantee in the Phase I Site Assessment No. 54898.07 performed by
Clayton Environmental Consultants, Inc., dated May 20, 1994,
copies of which have been furnished Grantee, the Grantor, and
those holding the Mortgaged Property under Grantor, are in
substantial compliance with all laws and regulations relating to
pollution and environmental control applicable to the Mortgaged
Property. The Grantor will comply with all such laws and
regulations in the future the noncompliance with which would have
a material adverse effect on the business, assets properties or
condition (financial or otherwise) of the Grantor. Specifically,
the Mortgaged Property is free from "HAZARDOUS SUBSTANCES" as
defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as
amended, and the regulations promulgated thereunder (other than
substances reported to agencies in the normal course of business
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in material safety data sheets or the like) ("HAZARDOUS
SUBSTANCES"); no portion of the Mortgaged Property is subject to
federal, state, or local regulation or liability because of the
presence Of stored, leaked or spilled petroleum products, waste
materials or debris, "PCB's" or PCB items (as defined in 40
C.F.R. Section 763.63) underground storage tanks, "ASBESTOS" (as
defined in 40 C.F.R. Section 763.63) or the past or present
accumulation, spillage or leakage of any such substances; and the
Grantor is in substantial compliance with all federal, state and
local requirements relating to protection of health or the
environment in connection with the operation of its business; and
the Grantor knows of no complaint or investigation regarding the
Mortgaged Property. Further, the Grantor is unaware of any
investigation, threat or concern by any entity regarding
environmental issues involving the Mortgaged Property. There are
not now any outstanding citations, notices or orders of violation
or noncompliance issued to Grantor or relating to their business
assets, property or leaseholds under any such laws, rules or
regulations, nor any conditions which, if known by the proper
authorities, could result in any of the foregoing.
(ii) If Grantee receives any notice of (A) the
happening of an event involving the use, spill, discharge or
cleanup of any Hazardous Substance or known hazardous or toxic
waste, including, but not limited to any oil or other petroleum
products, asbestos, PCB'S, PCB items, or pesticide on or about
any property of Grantor or caused by the Grantor, (a "HAZARDOUS
DISCHARGE") or (B) any complaint, order, citation or notice with
regard to air emissions, water discharges, noise omissions or any
other environmental, health or safety matter affecting the
Grantor or the Mortgaged Property or Grantor's operations or the
operations of any person holding the Mortgaged Property by or
through Grantor (an "ENVIRONMENTAL COMPLAINT") from any person or
property, including without limitation the Department of
Environmental Protection of the State in which the Mortgaged
Property is located ("DEP"), the United States Environmental
Protection Agency ("EPA"), the United States Army Corps of
Engineers (the "CORPS"), or the United States Coast Guard (the
"COAST GUARD"), then Grantor will give written notice of same to
Grantee within ten (10) days of receipt thereof and shall
promptly comply with its obligations under law with regard to
such Hazardous Discharge or Environmental Complaint.
(iii) Grantor and those holding the Mortgaged Property
under Grantor have, and will continue to have, all necessary
federal, state and local licenses, certificates and permits
relating to the Grantor, the persons holding the Mortgaged
Property and the Mortgaged Property, and they are in compliance
with all applicable federal, state and local laws, rules and
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regulations relating to air emissions, water discharges, noise
emissions, solid or liquid storage and disposal, hazardous or
toxic waste or substances and other environmental, health and
safety matters, the noncompliance with which would have a
material adverse effect on the business, assets properties or
condition (financial or otherwise) of the Grantor.
(b) Grantee shall have the right but not the obligation,
prior or subsequent to an Event of Default, without limiting
Grantee's other rights and remedies under this Deed of Trust, to
enter onto the Mortgaged Property or to take such other actions
as it deems necessary or advisable to clean up, move, resolve or
minimize the impact of, or otherwise deal with, any Hazardous
Substances on the Mortgaged Property following receipt of any
notice from any person or entity asserting the existence of any
Hazardous Substance pertaining to the Mortgaged Property or any
part thereof which, if true, could result in an order, suit,
imposition of a lien on the Mortgaged Property, or other action
and/or which, in Grantee's sole opinion, could jeopardize
Grantee's security under this Deed of Trust. All reasonable costs
and expenses paid or incurred by Grantee in the exercise of any
such rights shall be Indebtedness secured by this Deed of Trust
and shall be payable by Grantor upon demand.
(c) Grantor hereby agrees to defend, indemnify and hold the
Grantee harmless from and against any and all claims, losses,
liabilities, damages and expenses (including, without limitation,
cleanup costs and reasonable attorney's fees, including those
arising by reason of any of the aforesaid or an action against
the Grantee under this indemnity) arising directly or indirectly
from, out of, or by reason of, any Hazardous Discharge,
Environmental Complaint, or any environmental, health or safety
law governing the Grantor, its operations or the Mortgaged
Property or from any inaccuracy in the representation and
warranties given herein relating to environmental matters. This
indemnification shall survive the repayment of the Indebtedness
and satisfaction or release of this Deed of Trust.
(d) All warranties and representations above shall be deemed
to be continuing and shall remain true and correct in all
material respects until all of the Indebtedness has been paid in
full and any limitations period expires. Grantor's covenants
above shall survive any exercise of any remedy by Grantee under
the Credit Agreement or this Deed of Trust, including foreclosure
of this Deed of Trust (or deed in lieu thereof), even if, as a
part of such foreclosure or deed in lieu of foreclosure, the
Indebtedness is satisfied in full and/or this Deed of Trust shall
have been released.
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1.14 CONVEYANCE OF PREMISES: ACCELERATION OF MATURITY. Subject
to the rights of BNY and Greyrock under the Intercreditor
Agreement, in the event the Mortgaged Property or any part
thereof, or any interest therein, are sold, conveyed,
transferred, mortgaged, hypothecated, leased, encumbered or
disposed of without the prior written consent of Grantee, or if
any interest in Grantor is sold, conveyed, assigned, pledged or
transferred without the prior written consent of Grantee, then at
the sole option of Grantee, the Grantee may declare the entire
Indebtedness immediately due and payable without prior notice to
Grantor and Grantee may invoke any of the default remedies
provided in this Deed of Trust. Grantee shall not be obligated to
consent to any encumbrance, sale, contract, lease, or other
transfer (all said encumbrances, sales, contracts, leases, and
other transfers described hereinabove being collectively referred
to as a "PROHIBITED TRANSFER"), and Grantee's consent may be
withheld regardless of whether any Prohibited Transfer may or may
not impair Grantee's security or whether or not it may or may not
be reasonable (commercially or otherwise) for Grantee to consent
to any Prohibited Transfer. Without limiting the foregoing,
Grantee's consent may, at the sole option of Grantee, be
conditioned upon (by way of illustration only and not being
limited to): the payment of an assumption fee, an increase in the
interest rate payable under the Credit Agreement, an approval of
the credit of any such grantee, vendee, optionee, or transferee,
a management contract acceptable to Grantee, with a manager
acceptable to Grantee, an assignment to Grantee of any security
given to Grantor in connection with the transaction, including
without limitation, any purchase money second mortgage, and/or a
change in any of the, other terms and condition of this Deed of
Trust or in any of the Credit Agreement. Consent as to any one
transaction shall not be deemed to be a waiver of the right to
require consent to future or successive transactions. Any change
in the legal or equitable title of the Mortgaged Property or in
the ownership of any interest in the Grantor, whether or not of
record and whether or not for consideration, shall be deemed a
transfer of an interest in the Mortgaged Property and a
Prohibited Transfer.
1.15 SUITS TO PROTECT THE MORTGAGED PROPERTY. Subject to the
terms of the Intercreditor Agreement, Grantee shall have power to
institute and maintain such suits and proceedings as it may deem
expedient (a) to prevent any impairment of the Mortgaged Property
by any acts which may be unlawful or constitute a default under
this Deed of Trust (b) to preserve of protect its interest in the
Mortgaged Property and in the rents, issues, proceeds and profits
thereof, and (c) to contest the enforcement of or compliance with
any legislation of other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid, if the
enforcement of or compliance with such enactment, rule or order
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would impair the security hereunder or be prejudicial to the
interest of Grantee.
ARTICLE II
EVENTS OF DEFAULT
The occurrence of any one or more of the following events
shall be deemed to be an Event of Default under this Deed of
Trust notwithstanding any applicable grace period or notice and
cure period. A "DEFAULT" under this Deed of Trust shall mean the
continued existence of an Event of Default beyond the expiration
of any (applicable grace period or notice and cure period
2.1 FAILURE TO PAY INDEBTEDNESS. If Grantor shall fail to pay
the Indebtedness promptly when the same become due, or if the
Grantor shall fail to pay any sum necessary to satisfy and
discharge taxes and assessments promptly when due, or to maintain
insurance or repairs, or the necessary expense of protecting the
Mortgaged Property and executing this trust; or
2.2 DEFAULT UNDER OTHER LIENS. If any of the Mortgaged Property
be levied upon or attached by any legal process, or if there
shall occur any default under or with respect to any Prior Lien,
or if the holder of any lien or security interest on the
Mortgaged Property institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder; or
2.3 BANKRUPTCY OR INSOLVENCY. If Grantor, or any other owner of
the Mortgaged Property, or any guarantor of any of the
Indebtedness, shall voluntarily become a party to any insolvency,
bankruptcy, composition or reorganization procedure, or makes any
assignment for the benefit of creditors, or if any involuntary
bankruptcy, insolvency, composition, or other reorganization
proceedings be filed against Grantor, any other owner of the
Mortgaged Property, or any guarantor of the Indebtedness, and the
same shall not be dismissed within thirty (30) days after the
commencement of any such involuntary proceedings; or
2.4 ABANDONMENT. If Grantor abandons any material portion of
the Mortgaged Property; or
2.5 FALSE REPRESENTATION. If any statement, representation or
warranty in the Credit Agreement or this Deed of Trust, any
financial statement or any other writing delivered to Grantee in
connection with the Indebtedness or the loans or advances made to
Borrower is false, misleading or erroneous in any material
respect; or
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2.6 NONPERFORMANCE OF COVENANTS. If there shall occur any other
default in Grantor's covenants, warranties, agreements,
liabilities, obligations and undertakings as contained in this
Deed of Trust or the Credit Agreement, or contained in any other
instrument which now or hereafter secures the Indebtedness.
ARTICLE III
REMEDIES
Subject to the terms of the Intercreditor Agreement, if a
Default shall occur, Grantee may exercise any one or more of the
following remedies:
3.1 ACCELERATION. Grantee may declare the entire Indebtedness
immediately due and payable without notice or demand, the same
being hereby expressly waived.
3.2 POWER OF SALE. Grantee may require the Trustee and the
Trustee is hereby authorized and empowered, to enter and take
possession of the Mortgaged Property and to sell all or part of
the Mortgaged Property, at public auction, to the highest bidder
of cash, free from equity of redemption, and any statutory or
common law right of redemption, homestead, dower, marital share,
and all other exemptions, after giving notice of the time, place
and terms of such sale and of the Mortgaged Property to be sold,
by advertising the sale of the property for twenty-one (21) days
by three (3) weekly notices in some newspaper published in the
county and state where the Mortgaged Property is situated, which
notice may be given before or after entry by the Trustee.
The Trustee shall execute a conveyance to the purchaser in fee
simple and deliver possession to the purchaser, which the Grantor
warrants shall be given without obstruction, hindrance or delay.
Trustee may sell all or any portion of the Mortgaged Property,
together or in lots or parcels, and may execute and deliver to
the purchaser or purchasers of such property a conveyance in fee
simple. Trustee making such sale shall receive the proceeds
thereof and shall apply the same as follows: (a) first, the
payment of the expenses of making, maintaining and prosecuting
this trust, protection of the Mortgaged Property, including the
expense of any litigation and reasonable attorneys' fees, and
reasonable compensation to the Trustee; (b) second, to any
advancements made by the Trustee or the Grantee pursuant hereto,
with interest thereon; (c) third, to the payment of the
Indebtedness herein secured or intended so to be, in such order
as beneficiary shall elect, and any balance of said Indebtedness
may be the subject to immediate suit; and (d) fourth, should
there be any surplus, Trustee will pay it to the Grantor, or to
such person as may be legally entitled thereto. The sale or sales
by Trustee of less than the whole of the Mortgaged Property shall
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not exhaust the power of sale herein granted, and Trustee is
specifically empowered to make successive sale or sales under
such power until the whole of the Mortgaged Property shall be
sold; and if the proceeds of such sale or sales of less than the
whole of the Mortgaged Property shall be less than the aggregate
of the Indebtedness and the expenses thereof, this Deed of Trust
and the lien, security interest and assignment hereof shall
remain in full force and effect as to the unsold portion of the
Mortgaged Property; provided, however, that Grantor shall never
have any right to require the sale or sales of less than the
whole of the Mortgaged Property, but Grantee shall have the right
at its sole election, to request Trustee to sell less than the
whole of the Mortgaged Property. Grantee may bid and become the
purchaser of all or any part of the Mortgaged Property at any
such sale, and the amount of the Grantee's successful bid may be
credited on the Indebtedness.
3.3 JUDICIAL END OTHER RELIEF. Grantee or Trustee may proceed
by a suit or suits in equity or at law, whether for the specific
performance of any covenant or agreement herein contained or in
aid of the execution of any power herein granted, or for any
foreclosure hereunder or for the sale of the Mortgaged Property
under the judgment or decree of any court or courts of competent
jurisdiction.
3.4 ENTRY ON MORTGAGED PROPERTY; TENANCY AT WILL.
(a) Grantee may enter into and upon, inspect and/or take
possession of all or any part of the Mortgaged Property, and may
exclude Grantor, and all persons claiming under Grantor, and its
agents or servants, wholly or partly therefrom; and, holding the
same, Grantee may use, administer, manage, operate, and control
the Mortgaged Property and may exercise all rights and powers of
Grantor in the name, place and stead of Grantor, or otherwise, as
the Grantee shall deem best; and in the exercise of any of the
foregoing rights and powers Grantee shall not be liable to
Grantor for any loss or damage thereby sustained unless due
solely to the willful misconduct or gross negligence of Grantee.
(b) In the event of a trustee's or other foreclosure sale
hereunder and if at the time of such sale Grantor or any other
party (other than a tenant under a lease as to which the Grantee
shall have expressly subordinated the lien of this Deed of Trust
as hereinabove set out) occupies the portion of the Mortgaged
Property so sold or any part thereof, such occupant shall
immediately become the tenant of the purchaser at such sale,
which tenancy shall be a tenancy from day-to-day, terminable at
the will of such purchaser, at a reasonable rental per day based
upon the value of the portion of the Mortgaged Property so
occupied (but not less than any rental theretofore paid by such
tenant, computed on a daily basis). An action of forcible
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detainer shall lie if any such tenant holds over after a demand
in writing for possession of such portion of the Mortgaged
Property.
3.5 RECEIVER. Grantee may make applicable to a court of
competent jurisdiction, as a matter of strict right and without
notice to Grantor or regard to the adequacy of the Mortgaged
Property for the repayment of the Indebtedness, for appointment
of a receiver of the Mortgaged Property, and Grantor does hereby
irrevocably consent to such appointment. Any such receiver shall
have all necessary and proper powers and duties of receivers in
similar cases, including the full power to rent, maintain and
otherwise operate the Mortgaged Property upon such terms as may
be approved by the court.
3.6 GRANTEE'S RIGHT TO PERFORM. Upon Grantor's failure to make
a payment or perform any act required by the Credit Agreement or
the Indebtedness, then at any time thereafter, and without notice
to or demand upon Grantor and without waiving or releasing any
other right, remedy or recourse. Grantee may (but shall not be
obligated to) make such payment or perform such act, for the
account of and at the expense of Grantor, and shall have the
right to enter upon the Mortgaged Property for such purpose and
to take all such action as Grantee may deem necessary or
appropriate.
3.7 REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE. If the
Indebtedness is now or hereafter further secured by chattel
mortgages, deeds of trust, security agreements, pledges,
contracts of guaranty, assignments of leases, or other security,
Grantee may, at its option, exhaust its remedies under any one or
more of said instruments and this Deed of Trust, either
concurrently or independently, and in such order as Grantee may
determine. Grantee shall have all rights, remedies and recourse
granted in the Credit Agreement or the Indebtedness and
available to it at law or equity (including, without limitation,
those granted by the Uniform Commercial Code), and same (a) shall
be cumulative, concurrent, and nonexclusive, (b) may be pursued
separately, successively or concurrently against Grantor or
others obligated for the Indebtedness, or any part thereof or
against any one or more of them, or against the Mortgaged
Property, at the sole discretion of Grantee, and (c) may be
exercised as often as occasion therefor shall arise, it being
agreed by Grantor that the exercise of or failure to exercise any
of same shall in no event be construed as a waiver or release
thereof or of any other right, remedy or recourse.
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ARTICLE IV
TRUSTEE
4.1 ACTION BY EITHER TRUSTEE. The Trustee named herein shall be
clothed with full power to act when action hereunder shall be
required, and to execute any conveyance of the Mortgaged
Property. In the event that the substitution of a Trustee shall
become necessary for any reason, the substitution of one trustee
in the place of those or any of those named herein shall be
sufficient. The term "TRUSTEE" shall be construed to mean
"TRUSTEE" whenever the sense requires. The necessity of the
Trustee herein named, or any successor in trust, making oath or
giving bond, is expressly waived.
4.2 EMPLOYMENT OF AGENTS. The Trustee, or any one acting in
their stead, shall have, in their discretion, authority to employ
all proper agents and attorneys in the execution of this trust
and/or in the conducting of any sale made pursuant to the terms
hereof, and to pay for such services rendered out of the proceeds
of the sale of the Mortgaged Property, should any be realized,
and if no sale be made or if the proceeds of sale be insufficient
to pay the same, then Grantor hereby undertakes and agrees to pay
the cost of such services rendered to said Trustee. Trustee
may rely on any document believed by them in good faith to be
genuine. All money received by Trustee shall, until used or
applied as herein provided, be held in trust, but need not be
segregated (except to the extent required by law), and Trustee
shall not be liable for interest thereon.
4.3 INDEMNIFICATION OF TRUSTEE. If the Trustee shall be made a
party to or shall intervene in any action or proceeding affecting
the Mortgaged Property or the title thereto, or the interest of
the Trustee or Grantee under this Deed of Trust, the Trustee and
Grantee shall be reimbursed by Grantor, immediately and without
demand, for all reasonable costs, charges and attorneys fees
incurred by them or either of them in any such case, and the same
shall be secured hereby as a further charge and lien upon the
Mortgaged Property.
4.4 SUCCESSOR TRUSTEE. In the event of the death, refusal, or
of inability for any cause, on the part of the Trustee named
herein, or of any successor trustee, to act at any time when
acting under the foregoing powers and trust may be required, or
for any other reason satisfactory to the Grantee, the Grantee is
authorized, either in its own name or through an attorney or
attorneys in fact appointed for that purpose, by written
instrument duly registered, to name and appoint a successor or
successors to execute this trust, such appointment to be
evidenced by a writing, duly acknowledged; and when such writing
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shall have been registered, the substituted trustee named therein
shall thereupon be vested with all the right and title, and
clothed with all the power of the Trustee named herein and such
like power of substitution shall continue so long as any part of
the debt secured hereby remains unpaid.
ARTICLE V
MISCELLANEOUS
5.1 WAIVER OF MARSHALING AND CERTAIN RIGHTS. To the extent
that Grantor may lawfully do so, Grantor hereby expressly waives
any right pertaining to the marshaling of assets or marshaling of
liens, the equity of redemption, any statutory or common law
right of redemption, homestead, dower, marital share, and all
other exemptions, or other matter which might defeat, reduce or
affect the right of Grantee to sell the Mortgaged Property for
the collection of the Indebtedness, or the right of Grantee to
the payment of the Indebtedness out of the proceeds of sale of
the Mortgaged Property in preference to every other person and
claimant.
5.2 WAIVER OF IMPAIRMENT OF RECOURSE DEFENSES. Without
affecting the liability of Grantor or any other person (except
any person expressly released in writing) for the payment or
performance of any of the Indebtedness, and without affecting the
rights of Grantee with respect to any security not expressly
released in writing, Grantee may, at any time, and from time-to-
time, either before or after the maturity of the Indebtedness,
and without notice or consent:
(a) release any person liable for payment or
performance of all or any part of the Indebtedness;
(b) make any agreement extending the time or otherwise
altering the terms of payment or of all or any part of the
Indebtedness (without limit as to the number of such extensions
or the period or periods thereof), or modifying or waiving any
obligation, or subordinating, modifying or otherwise dealing with
the lien or charge hereof;
(c) exercise or refrain from exercising any right
Grantee may have;
(d) accept additional security of any kind; or
(e) release or otherwise deal with any property, real
or personal, securing the Indebtedness, including all or any part
of the Mortgaged Property herein described.
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Furthermore, the failure of the Grantee to perfect any lien
granted herein or elsewhere, to take any action to obtain payment
or performance of the Indebtedness or to exercise any rights or
remedies available hereunder shall not relieve Grantor or any
other person from liability for the payment or performance of the
Indebtedness nor effect a discharge of the lien, security
interest or assignment herein granted; it being intended that all
"IMPAIRMENT OF RECOURSE" and "IMPAIRMENT OF COLLATERAL" defenses
are hereby waived.
5.3 NO WAIVER. No waiver by the Trustee or the Grantee shall
be construed as a waiver of a subsequent similar default or any
other default by the Grantor. No delay by Grantee or by the
Trustee in exercising any right or remedy hereunder or otherwise
afforded by law, shall operate as a waiver thereof or preclude
the exercise thereof during the continuance of any default
hereunder. No failure of Grantee to exercise any option herein
given to declare the maturity of the debt hereby secured, no
forbearance by Grantee after the exercise of such option, and no
Withdrawal or abandonment of foreclosure proceedings by the
Grantee after the exercise of such option, shall be taken or
construed as a waiver of its right to exercise such option or to
declare such maturity by reason of any past, present, or future
default on the part of the Grantor. Acceptance by Grantee of
partial payments shall not constitute a waiver of the default by
failure to make full payments.
5.4 GRANTEE'S CONSENT. Except as otherwise expressly provided
herein, in any instance hereunder where Grantee's approval or
consent is required or the exercise of Grantee's judgment is
required, the granting or denial of such approval or consent and
the exercise of such judgment shall be within the sole discretion
of Grantee, and Grantee shall not, for any reason or to any
extent, be required to grant such approval or consent or exercise
such judgment. Grantee may consult with counsel, and the written
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon.
5.5 ESTOPPEL CERTIFICATE. At the request of the Grantee, the
Grantor shall furnish promptly a written statement or affidavit,
in such form as may be required by Grantee, confirming the unpaid
balance of the Indebtedness, the date to which interest has been
paid and that there are no offsets to or defenses against any
payment or performance of the Indebtedness or, if there are any
such offsets or defenses, specifying them.
5.6 EXPENSES OF GRANTEE. The Grantor will upon demand pay to
the Grantee the amount of any and all costs and expenses,
19
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including without limitation all fees and disbursements of the
Grantee's counsel and of any experts and agents, which Grantee
may incur in connection with (a) the preparation of this Deed of
Trust (only to the extent Grantee is entitled to reimbursement of
such expenses under the Credit Agreement), (b) the recording of
this Deed of Trust, (c) the administration of this Deed of Trust,
(d) the sale of, collection from or other realization upon the
Mortgaged Property, (e) the exercise or enforcement of any of the
rights of Grantee hereunder, or (f) the failure of Grantor to
perform or observe any of the provisions hereof.
5.7 INDEMNIFICATION. The Grantor agrees to indemnify and hold
the Grantee harmless from and against any and all claims, losses,
and liabilities arising out of or resulting from this Deed of
Trust (including, without limitation, enforcement of this Deed of
Trust), and or arising out of or in connection with the
Indebtedness, except claims, losses or liabilities resulting
solely and directly from the Grantee's gross negligence or
willful misconduct. In the event that Grantee shall assign or
transfer its rights hereunder or under the Credit Agreement, the
rights of the Grantee under this section and under the
immediately preceding section, which require the Grantor to
indemnify or pay expenses of the Grantee shall continue in favor
of the Grantee originally named herein as well as any successor
or assignee of the Grantee, and any such provision may be
enforced severally by the original Grantee named herein or any
such successor or assignee, at their option, by all of such
parties acting jointly.
5.8 DEFAULT RATE. If Grantee shall expend any money chargeable
to Grantor or subject to reimbursement by Grantor under the terms
of this Deed of Trust, the Credit Agreement or the Indebtedness,
Grantor shall repay the same to Grantee immediately at the place
where payments under the Credit Agreement are payable, together
with interest thereon from the date due (or, if there is no
specified due date, from the date of demand therefor by Grantee)
until paid at a rate (herein the "DEFAULT RATE") equal to the
lesser of (a) ten percent (10%) per annum, or (b) the maximum
effective contract rate of interest allowed by applicable law.
5.9 PAYMENT IN FULL. If the Grantor shall pay and perform all
the Indebtedness promptly when due, and shall pay such sums as
shall be necessary to discharge taxes and maintain insurance and
perform repairs and the costs, fees and expenses of making,
enforcing and executing this trust, when they shall severally be
due and payable, and shall comply with all of the covenants,
terms and conditions of the Credit Agreement, this Deed of Trust,
and any other instrument which also now or hereafter secures the
Indebtedness secured hereby, then this conveyance shall become
void, the Trustee shall reconvey by quitclaim the Mortgaged
20
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Property herein described at the expense of the Grantor, and the
Grantee shall execute and deliver to Grantor, at Grantor's
request, such documents as may be necessary to evidence the
termination of the security interests and assignments herein
granted.
5.10 NO PARTNERSHIP. Nothing contained in this Deed of Trust is
intended to create any partnership, joint venture or association
between Grantor and Grantee, or in any way make Grantee a co-
principal with Grantor with reference to the Mortgaged Property,
and any inferences to the contrary are hereby expressly negated.
5.11 HEADINGS, USE OF TERMS. The article, paragraph and
subparagraph headings hereof are inserted for convenience of
reference only and shall not alter, define, or be used in
construing the extent of such articles, paragraphs or
subparagraphs. Whenever used, the singular number shall include
the plural and the plural the singular, and the use of any gender
shall be applicable to all genders. The term "GRANTOR" shall
include in their individual capacities and jointly all parties
hereinabove named a Grantor. The term "GRANTEE" shall include any
lawful owner, holder, pledgee, or assignee of any of the
Indebtedness. The duties, covenants, conditions, obligations, and
warranties of Grantor in this Deed of Trust shall be joint and
several obligations of Grantor and each Grantor, if more than
one, and each Grantor's heirs, personal representatives,
successors and assigns.
5.12 SEVERABILITY. If any provision of this Deed of Trust is
held to be illegal, invalid, or unenforceable under present or
future laws effective while this Deed of Trust is in effect, the
legality, validity and enforceability of the remaining provisions
of this Deed of Trust shall not be affected thereby, and in lieu
of each such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Deed of Trust a
provision that is legal, valid and enforceable and as similar in
terms to such illegal, invalid or unenforceable provision as may
be possible. If any of the Indebtedness shall be unsecured, the
unsecured portion of the Indebtedness shall be completely paid
prior to the payment of the secured portion of such Indebtedness,
and all payments made on account of the Indebtedness shall be
considered to have been paid on and applied first to the complete
payment of the unsecured portion of the Indebtedness.
5.13 BURDEN AND BENEFIT. This instrument shall be binding on
Grantor and Grantor's successors and assigns, and shall inure to
be the benefit of the Grantee and Trustee and their respective
successors and assigns.
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5.14 APPLICABLE LAW. This Deed of Trust shall be governed and
construed in accordance with the internal laws of the State of
Tennessee without regard to principles of conflicts of laws.
5.15 LIMITATION ON SECURITY FOR INDEBTEDNESS. Notwithstanding
ally provision to the contrary contained herein, it is expressly
understood and agreed that the maximum amount which the Grantee
shall be entitled to realize pursuant to the provisions hereof
from the Mortgaged Property, pledged, mortgaged, and hypothecated
by this instrument, is and shall be limited to the aggregate of:
(a) the sum of all amounts due under the Credit
Agreement;
(b) any advances made by the Grantee hereunder,
including, without limitation, to preserve and protect the
Mortgaged Property, payments for taxes, insurance, and repairs,
and payments made with respect to any Prior Liens; plus
(c) any and all reasonable costs, fees and expenses
incurred by the Grantee in enforcing the provisions of this Deed
of Trust, including its reasonable attorney's fees, and any fees
paid or payable to the Trustee;
(all of which are herein sometimes collectively called the
"MAXIMUM SECURED INDEBTEDNESS"). Upon payment in full of the
Maximum Secured Indebtedness, the Grantor shall be entitled to
have this instrument released of record, at the Grantor's sole
cost and expense. Further, in the event that a foreclosure sale
held pursuant to the provisions of Section 3.2 hereof should
result in proceeds from such foreclosure sale in excess of the
Maximum Secured Indebtedness, such excess shall be paid to the
Grantor, or to such other person as may be legally entitled
thereto, free and clear of any claim of the Grantee. In
no event and under no circumstances, however, shall the
provisions of this Section 5. 15 serve to limit the unconditional
and unlimited liability of the Grantor under and pursuant to the
Credit Agreement, the limitation in this Section 5.15 being
solely a limitation on the amount which the Grantee may recover
out of the Mortgaged Property by exercise of its rights and
remedies set forth in this instrument.
5.16 VENUE OF ACTIONS. It is expressly understood and agreed
that no suit or action shall be commenced by the Grantor, or by
any successor, personal representative or assignee of Grantor,
with respect to the indebtedness secured hereby with respect to
this Deed of Trust, the Indebtedness, other than in a state court
of competent jurisdiction in and for Hamilton County, Tennessee,
or in the United States District Court for the Eastern District
of Tennessee, Southern Division, and not elsewhere.
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Nothing in this paragraph contained shall prohibit Grantee from
instituting suit in any court of competent jurisdiction for the
enforcement of its rights hereunder, in the Credit Agreement, or
in the Indebtedness.
5.17 WAIVER OF RIGHT TO TRIAL BY JURY. GRANTOR HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (a) ARISING UNDER THIS INSTRUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS INSTRUMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WITH THEIR NOW EXISTING OR HEREAFTER ARISING; AND FURTHER
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
TO THE WAIVER OF THE TRIAL BY JURY.
IN WITNESS WHEREOF, the Grantor has executed this Deed of
Trust on this the day and year first above written.
SIGNAL APPAREL COMPANY, INC.
BY: /s/ William H. Watts
Title: Executive VP and CFO
STATE OF TENNESSEE]
COUNTY OF HAMILTON]
Personally appeared before me, a Notary Public in and for
the County aforesaid, William Watts, with whom I am
personally acquainted (or proved to me on the basis of
satisfactory evidence), and who upon oath acknowledged such
person to be the Exec. Vice President of Signal Apparel Company,
Inc., the within named Grantee, a corporation, and that such
William Watts executed the within instrument for the purposes
therein contained by personally signing on behalf of such
corporation as such officer.
Witness my hand, at office, this the 31st day of March, 1995.
/s/ Geoffrey G. Young
Notary Public
My Commission Expires:
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LIST OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Deed of Trust by and Among Signal Apparel Company,
Inc. and Walsh Greenwood & Co.
The Registrant hereby agrees to furnish a copy of any such omitted Schedules
or Exhibits supplementally upon the request of the Commission's staff.
PREPARED BY AND RETURN TO:
Geoffrey G. Young
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, Tennessee 37402
DEED TO SECURE DEBT AND SECURITY AGREEMENT
STATE OF GEORGIA
COUNTY OF TROUP
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (hereinafter
referred to as this "DEED"), made this the 31st day of March,
1995, between SIGNAL APPAREL COMPANY, INC. (hereinafter referred
to as "BORROWER"), an Indiana corporation, as Grantor, and WALSH
GREENWOOD & CO. (hereinafter referred to as "WALSH GREENWOOD"),
as Grantee, whose address is One East Putnam Avenue, Greenwich, Connecticut
06830.
WITNESSETH:
THAT FOR AND IN CONSIDERATION OF the sum of ONE HUNDRED AND
NO/100 DOLLARS ($100.00) in hand paid by Walsh Greenwood to
Borrower and other good and valuable consideration, the receipt
and sufficiency whereof are hereby acknowledged by Borrower, and
in order to secure the indebtedness and the other obligations of
Borrower hereinafter set forth, Borrower does hereby bargain,
sell, grant, convey, assign, transfer, pledge and set over to
Walsh Greenwood and the successors, successors-in-title and
assigns of Walsh Greenwood , all of the following described land,
interests in land, estates, easements, rights, appurtenances,
buildings, improvements, fixtures, furniture and appliances and
other personal property (hereinafter sometimes collectively
referred to as the "PREMISES"), to wit:
- ----------------------------------------------------------------
THIS DEED IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS
AND IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS.
THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING
ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION CONCERNING
THE SECURITY INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE
DEBTOR AND A STATEMENT INDICATING THE TYPES, OR DESCRIBING THE
ITEMS, OF COLLATERAL, ARE AS DESCRIBED IN PARAGRAPH 1.08 HEREOF,
IN COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE 9, SECTION 402 OF
THE UNIFORM COMMERCIAL CODE, SECTION 11-9-402 OF THE OFFICIAL
CODE OF GEORGIA ANNOTATED.
<PAGE>
(a) All those tracts or parcels of land more particularly
described in EXHIBIT A attached hereto and by this reference made
a part hereof (the "LAND") and all buildings and other structures
and improvements whatsoever now or hereafter constructed, placed
or located thereon, the Land together with such buildings,
structures and improvements being hereinafter referred to as the
"REAL PROPERTY";
(b) All gas and electric fixtures, radiators, heaters,
engines and machinery, boilers, ranges, elevators and motors,
plumbing and heating, fixtures, carpeting and other floor
coverings, fire extinguishers and any other safety equipment
required by Governmental regulation or law, washers, dryers,
water heaters, mirrors, mantels, air conditioning apparatus,
refrigerating plants, refrigerators, cooking apparatus and
appurtenances, window screens, awnings and storm sashes, which
are or shall be attached to said buildings, structures or
improvements and all other furnishings, furniture, fixtures,
machinery, equipment, appliances, vehicles, building supplies and
materials, warranties and other rights under construction,
service and other contracts, books and records, chattels,
inventory, accounts, farm products, consumer goods, general
intangibles and personal property of every kind and nature
whatsoever now or hereafter owned by Borrower and located in, on
or about, and used or intended to be used with or in connection
with the use, operation or enjoyment of the Real Property (other
than fixtures, equipment, machinery or other property of tenants
under any lease of or rental agreement for space in the Real
Property), including all extensions, additions, improvements,
betterments, after-acquired property, renewals, replacements and
substitutions or proceeds from a permitted sale of any of the
foregoing, and all the right, title and interest of Borrower in
any such furnishings, furniture, fixtures, machinery, equipment,
appliances, vehicles and personal property subject to or covered
by any prior security agreement, conditional sales contract,
chattel mortgage or similar lien or claim, together with the
benefit of any deposits or payments now or hereafter made by
Borrower or on behalf of Borrower, all tradenames, trademarks,
servicemarks, logos and goodwill related thereto which in any way
now or hereafter belong, relate or appertain to the Real Property
or any part thereof or are now or hereafter acquired by Borrower;
and all inventory, accounts, chattel paper, documents, equipment,
fixtures, farm products, consumer goods and general intangibles
constituting proceeds acquired with cash proceeds of any of the
property described hereinabove, all of which are hereby declared
and shall be deemed to be fixtures and accessions to the Land and
a part of the Premises as between the parties hereto and all
persons claiming by, through or under them, and which shall be
deemed to be a portion of the security for the indebtedness
herein described and to be secured by this Deed, and which shall
<PAGE>
hereinafter be referred to as the "FIXTURES"; the location of the
above-described collateral is also the location of the Land;
(c) All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, sidewalks, passages, sewer rights,
waters, water courses, water rights and powers, minerals,
flowers, shrubs, crops, trees, timber and other emblements now or
hereafter located on the Land or under or above the same or
any part or parcel thereof, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and
appurtenances, reversion and reversions, remainder and
remainders, whatsoever, in any way belonging, relating, or
appertaining to the Real Property or any part thereof, or which
hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Borrower;
(d) All of the interest of Borrower as landlord under each
and every lease of, or rental agreement for, space in the Real
Property or any part thereof, if any, and absolutely and
presently all income, rents, issues, profits, cash collateral,
revenues, royalties and benefits of the Real Property and
Fixtures from time to time accruing (including without limitation
all payments under leases or tenancies, proceeds of insurance,
tenant security deposits whether held by Borrower or in a trust
account, and escrow funds), and all the estate, right, title,
interests property, possession, claim and demand whatsoever at
law, as well as in equity, of Borrower of, in and to the same;
reserving only the right, power and authority given to Borrower
as a license to collect and apply the same prior to the
occurrence of an Event of Default hereunder and so long as the
same are not subjected to garnishment, levy, attachment or lien;
(e) All of the right, title and interest of Borrower in any
and all awards or payments, including interest thereon, and the
right to receive the same, as a result of (i) the exercise of the
right of eminent domain or condemnation, (ii) the alteration of
the grade of any street, or (iii) any other injury to, taking,
of, or decrease in the value of, the Real Property and Fixtures
to the extent of all amounts which may be secured by this Deed at
the date of receipt of any such award or payment by Walsh
Greenwood and of the reasonable attorney's fees, costs and
disbursements incurred by Walsh Greenwood in connection with the
collection of such award or payment;
(f) All right, title and interest of Borrower in and to any
and all fees, obligations, debts and accounts arising out of the
use of the Real Property and Fixtures or any part thereof,
however the same may be denominated;
<PAGE>
(g) All right, title and interest of Borrower in and to all
options and contracts to purchase or lease the Real Property and
Fixtures or any portion thereof or interest therein, and any
greater estate in the Real Property and Fixtures owned or
hereafter acquired by Borrower;
(h) All right, title and interest of Borrower in any and
all leases, tenant contracts, rental agreements, franchise
agreements, management contracts, construction contracts,
architectural contracts, and other contracts, and permits now or
hereafter affecting the Real Property and Fixtures, which
Borrower now has or may hereafter acquire in the Premises;
(i) All proceeds of and any unearned premiums on any
insurance policies covering the Real Property and Fixtures,
including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Real Property and Fixtures;
(j) All the estate, interest, right, title and other claim
or demand which Borrower now has or may hereafter acquire against
anyone with respect to any damage to all or any part of the Real
Property and Fixtures, including without limitation, damage
arising from any defect in or with respect to the design or
construction of all or any part of the improvements and any
damage resulting therefrom;
(k) To the extent permitted by law, all deposits or other
security or advance payments, including rental payments made by
or on behalf of Borrower to others, with respect to: (i)
insurance policies relating to all or any part of the Real
Property and Fixtures; (ii) utility service for all or any part
of the Real Property and Fixtures; (iii) cleaning, maintenance,
repair or similar services for all or any part of the Real
Property and Fixtures; (iv) refuse removal or server service for
all or any part of the Real Property and Fixtures; (v) rental of
equipment, if any, used in the operation by or on behalf of
Borrower of all or any part of the Real Property and Fixtures;
and (vi) parking or similar services or rights afforded to all or
any part of the Real Property and Fixtures; and
(l) All and singular the rights, members and appurtenances
whatsoever, in any way belonging, relating or appertaining to any
of the Real Property and Fixtures hereinabove mentioned or which
hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Borrower.
TO HAVE AND TO HOLD the Premises, and all parts, rights,
members and appurtenances thereof, to the use, benefit and behoof
of Walsh Greenwood and the successors and assigns of Walsh
<PAGE>
Greenwood , IN FEE SIMPLE forever; and Borrower covenants that
Borrower is lawfully seized and possessed of the Premises as
aforesaid and has good right to convey the same, that the same
are unencumbered except for those matters (the "PERMITTED TITLE
EXCEPTIONS") set forth on EXHIBIT B attached hereto and by this
reference made a part hereof, and that Borrower will warrant and
will forever defend the title thereto against the claims of all
persons whomsoever, except as to the Permitted Title Exceptions.
THIS CONVEYANCE is intended: (i) to operate and to be
construed as a deed passing the title to the Premises to Walsh
Greenwood and is made under those provisions of the existing
laws of the State of Georgia relating to deeds to secure debt,
and not as a mortgage, and (ii) to constitute a security
agreement pursuant to the Uniform Commercial Code of Georgia, and
this Deed is given to secure the following:
(a) a debt evidenced by that certain Term Promissory Note
(which Note is incorporated herein by reference and to which
reference is made for all purposes) of even date herewith
executed by Borrower, payable to the order of Walsh Greenwood at
its office as set forth in such Term Promissory Note in the
principal sum of Fifteen Million Dollars ($15,000,000.00),
together with interest at the rate or rates as provided for in
such Term Promissory Note, and together with all late charges,
default interest, prepayment premiums and all other fees or
charges as therein set forth (hereinafter referred to as the
"NOTE");
(b) any and all renewals, modifications, consolidations,
replacements and extensions of the Note and the indebtedness
evidenced thereby;
(c) each and every covenant, obligation and undertaking of
Borrower in this Deed and in any other documents executed by
Borrower in connection herewith or therewith or to further
evidence or secure the Note or Notes;
(d) each and every covenant, obligation and undertaking of
Borrower in that certain Credit Agreement dated as of March ,
1995 executed by Borrower and Walsh Greenwood (the "CREDIT
AGREEMENT"), said Credit Agreement, the Note, this Deed and all
such other documents executed in connection herewith are
sometimes hereinafter referred to individually as a "LOAN
DOCUMENT" and collectively as the "LOAN DOCUMENTS");
(e) Any and all advances made by Walsh Greenwood to or on
behalf of or for the account of Borrower and to protect or
preserve the Premises or the security interest created hereby in
<PAGE>
the Premises, or for taxes, assessments, insurance premiums or
other charges as hereinafter provided or for performance of any
of Borrower's obligations hereunder or for any other purpose
provided or permitted herein or in any other Loan Document
(whether or not the original Borrower remains the owner of the
Premises at the time of such advances); and
(f) payment of all sums advanced and costs and expenses
incurred by Walsh Greenwood in connection with the Secured
Indebtedness (as hereinafter defined) or any part thereof, any
renewal, extension or change of or substitution for the Secured
Indebtedness or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at
the request of Borrower or Walsh Greenwood .
All of the items referred to hereinabove in sections (a), (b),
(c), (d), (e) and (f) of this paragraph are sometimes hereinafter
referred to collectively as the "SECURED INDEBTEDNESS", and the
Secured Indebtedness is due and payable in full on or before the
maturity date specified in the Credit Agreement and the Note,
unless the maturity thereof is accelerated by Walsh Greenwood
as provided in the Note.
The foregoing or any other provisions of this Deed
notwithstanding, the Real Property, the Fixtures and any other
property of Borrower pledged hereunder as collateral to secure
payment of the Secured Indebtedness shall be subject to the terms
of a certain Deed to Secure Debt and Security Agreement, dated as
of July 29, 1994, between Borrower and BNY Financial Corporation
("BNY") recorded in Book 670 Page 609, Troup County, Georgia and
to an Intercreditor Agreement, dated as of March , 1995 by and
among, BNY, Greyrock Capital Group, Inc. ("GREYROCK"), Walsh
Greenwood , Borrower and certain of Borrower's subsidiaries (the
"INTERCREDITOR AGREEMENT").
SHOULD THE SECURED INDEBTEDNESS BE PAID according to the tenor
and effect thereof when the same shall become due and payable and
should Borrower assume all obligations of Walsh Greenwood , if
any, which are undertaken or incurred by Walsh Greenwood with
respect to the Premises pursuant to the rights and remedies of
Walsh Greenwood under this Deed and the Loan Documents, then
this Deed shall be canceled and surrendered.
ARTICLE I
COVENANTS
<PAGE>
Subject in all respects to the terms of the Intercreditor
Agreement, Borrower hereby covenants with Walsh Greenwood as
follows:
1.01 PAYMENT OF INDEBTEDNESS. Borrower shall pay the Note
according to the tenor thereof and all other Secured Indebtedness
promptly as the same shall become due.
1.02 TAXES, LIENS AND OTHER CHARGES.
(a) PAYMENT WHEN DUE. Borrower shall pay, on or
before the due date thereof, all taxes, liens, general and
special assessments, levies, license fees, permit fees, water
rates, sewer charges and all other charges (in each case whether
general or specific, ordinary or extraordinary, or foreseen or
unforeseen) of every character whatsoever (including all
penalties and interest thereon) now or hereafter levied,
assessed, imposed or confirmed on, upon, against or with respect
to, or which may be or become a lien upon the Premises or any
part thereof or any estate, right or interest therein or upon the
rents, issues and profits thereof, and all utility charges,
whether public or private (all of the foregoing are hereinafter
sometimes collectively referred to as "TAXES" and individually as
a "TAX"); and upon demand therefor Borrower will furnish Walsh
Greenwood receipted bills evidencing such payment.
(b) CONTESTS. Nothing in this paragraph herein
contained shall require the payment or discharge of any such Tax
by Borrower so long as Borrower shall in good faith and at its
own expense diligently contest the same or the validity thereof
by appropriate legal proceedings and so long as such contest
shall operate to prevent (i) the collection of such Tax or levy
upon and sale or forfeiture of the Premises or any part thereof
to satisfy such Tax or (ii) the enforcement thereof against
Borrower, Walsh Greenwood or the Premises or any part thereof;
provided that during such contest Borrower shall at the option of
Walsh Greenwood provide security reasonably satisfactory to
Walsh Greenwood, securing the discharge of Borrower's obligation
to pay any Tax finally found to be due and any additional charge,
penalty or expense arising from or incurred as a result of such
contest.
(c) SUBSEQUENT ASSESSMENTS. In the event of the
passage of any state, federal, municipal or other governmental
law, order, rule or regulation, subsequent to the date hereof, in
any manner changing or modifying the laws now in force governing
the taxation of debts secured by deeds to secure debt or the
manner of collecting taxes so as to affect Walsh Greenwood
adversely, Borrower will promptly pay any such tax; if Borrower
<PAGE>
fails to make such prompt payment or if any such state, federal,
municipal or other Governmental law, order, rule or regulation
prohibits Borrower from making such payment or would penalize
Walsh Greenwood if Borrower makes such payment, then the entire
Secured Indebtedness shall become due and payable at the option
of Walsh Greenwood without any prepayment fee after notice to
Borrower from Walsh Greenwood demanding payment on the earlier
of (i) sixty (60) days after notice to Borrower from Walsh
Greenwood demanding payment or (ii) the date such payment would
be required to be paid by Walsh Greenwood .
(d) ASSESSMENTS ON THE LOAN. Borrower shall pay, on
or before the due date thereof, all taxes, assessments, charges,
expenses, costs and fees which may now or hereafter be levied
upon, or assessed or charged against, or incurred in connection
with, the Note, the other Secured Indebtedness, this Deed or any
other instrument now or hereafter evidencing, securing or
otherwise relating to the Secured Indebtedness, and shall submit
to Walsh Greenwood such evidence of the due and punctual payment
of all such taxes, assessments, charges, expenses, costs and fees
as Walsh Greenwood may require.
(e) PAYMENT OF INSURANCE PREMIUMS. Borrower shall
pay, on or before the due date there of, (i) all premiums on
policies of insurance covering, affecting or relating to the
Premises, as required pursuant to Paragraph 1.04 hereof, (ii) all
premiums on life insurance policies, if any, collaterally
assigned or to be collaterally assigned to Walsh Greenwood ;
(iii) all premiums for mortgage insurance, if this Deed and the
Note are so insured; and (iv) all ground rentals, other lease
rentals and other sums, if any, owing by Borrower and becoming
due under any lease or rental contract affecting the Premises.
Borrower shall submit to Walsh Greenwood such evidence of the
due and punctual payment of all such premiums, rentals and other
sums as Walsh Greenwood may require.
(f) NO LIENS. Borrower will not suffer any
mechanic's, materialmen's, laborer's, statutory or other lien to
be created and to remain outstanding or unbonded upon any part of
the Premises.
1.03 MONTHLY DEPOSITS. At the option of Walsh Greenwood , to
secure further the payment of the taxes, assessments and
insurance premiums hereinafter referred to, Borrower will deposit
with Walsh Greenwood on the first day of each and every month,
together with and in addition to the monthly payments required
under the Note, a sum which, in the estimation of Walsh Greenwood
, shall be equal to one-twelfth of said annual real property
taxes, general and special assessments and Premiums (as
<PAGE>
hereinafter defined); said deposits shall be held by Walsh
Greenwood , free of any interest (unless required by law) and
free of any liens or claims on the part of creditors of Borrower
and as part of the security of Walsh Greenwood , and shall be
used by Walsh Greenwood to pay current real property taxes,
general and special assessments and Premiums with respect to the
Premises as the same accrue and are payable. Said deposits shall
not be, nor be deemed to be, trust funds, but may be commingled
with the general funds of Walsh Greenwood . If said deposits are
insufficient to pay the taxes and assessments in full as the same
become payable, Borrower will deposit with Walsh Greenwood ,
within ten (10) days after notice for Walsh Greenwood of said
deficiency, such additional sum or sums as may be required in
order for Walsh Greenwood to pay such real property taxes,
general and special assessments and Premiums in full. Upon any
Default hereunder or under the Note, Walsh Greenwood may, at its
option, apply any money in the fund resulting from said deposits
to the payment of the Secured Indebtedness in such manner as
Walsh Greenwood may effect. The collection of such deposits by
Walsh Greenwood shall not relieve Borrower of any of the
obligations of Borrower under any provision of this Deed; and
under no circumstances shall Walsh Greenwood be liable for
failure to make any payment on behalf of Borrower, including,
without limitation, payments of real property taxes, general and
special assessments or Premiums.
The foregoing shall be subject to the rights of BNY under
its Deed to Secure Debt and Security Agreement and option of
Walsh Greenwood granted in this paragraph shall not arise while
such Deed to Secure Debt and Security Interest is in effect.
1.04 INSURANCE. Borrower will procure and maintain in
effect at all times Fire, Extended Coverage, Vandalism, Malicious
Mischief and other hazard insurance with respect to the Premises
and public liability insurance with such insurance companies and
in forms and amounts as are reasonably acceptable to and approved
by Walsh Greenwood against loss or destruction on account (if
fire, windstorm or other such hazards, casualties and
contingencies customarily insured against, and injury to the
person or property, including without limiting the generality
thereof, business interruption insurance in an amount equal to
one (1) year's overhead and net profit, and such flood and/or
earthquake insurance as may be reasonably required by Walsh
Greenwood . All insurance policies are to be held by and, to the
extent of its interests, for the benefit of and first payable in
case of loss to Walsh Greenwood , and Borrower shall deliver to
Walsh Greenwood a new policy as replacement for any expiring
policy at least thirty (30) days before the date of such
expiration.
<PAGE>
All such policies of insurance shall contain waiver of
subrogation clauses and shall have attached thereto the non-
contributory New York Standard Borrower clause or its equivalent
in favor of Walsh Greenwood with cancellation only upon at least
thirty (30) days' prior written notice to Walsh Greenwood . All
amounts recoverable under any policy are hereby assigned to Walsh
Greenwood and, in the event of a loss, Borrower will give
immediate notice by mail to Walsh Greenwood , and Walsh Greenwood
may make proof of loss if not made promptly by the Borrower.
Walsh Greenwood is hereby authorized and empowered, at its
option, to adjust or compromise any loss under any insurance
policies on the Premises, and to collect and receive the proceeds
from any such policy or policies. Each insurance company
concerned is hereby authorized and directed to make payment for
such loss directly to Walsh Greenwood rather than to Walsh
Greenwood and Borrower jointly, and Walsh Greenwood may, at its
option, apply the amount collected in any one or more of the
following ways: (a) to the payment of the Secured Indebtedness,
whether or not the Secured Indebtedness is then due and payable,
and in whatever order Walsh Greenwood elects, (b) to the repair
and/or restoration of the Premises to a condition satisfactory to
Walsh Greenwood , and/or (d) for any other purposes or objects
for which Walsh Greenwood is entitled to advance funds under
this Deed, all without affecting the security interest created by
this Deed; any balance of such monies then remaining shall be
paid to Borrower or the person or entity lawfully entitled
thereto. In the event any insurance company fails to disburse
directly and solely to Walsh Greenwood but disburses instead
either solely to Borrower or to Borrower and Walsh Greenwood
jointly, Borrower agrees immediately to endorse and transfer such
proceeds to Walsh Greenwood . Upon the failure of Borrower to
endorse and transfer such proceeds as aforesaid, Walsh Greenwood
may execute such endorsement or transfers for and in the name of
Borrower and Borrower hereby irrevocably appoints Walsh Greenwood
as Borrower's agent and attorney-in-fact so to do.
In the event of a casualty, Walsh Greenwood shall make the
net amount of all insurance proceeds received by Walsh Greenwood
pursuant to the provisions of this Deed (the "NET PROCEEDS")
available to Borrower for the repair and restoration of the
Improvements, provided that (i) the Net Proceeds, together with
any additional funds provided by Borrower, if necessary, are
sufficient to reconstruct or restore all improvements according
to plans and specifications approved by Walsh Greenwood ; (ii)
proceeds or awards disbursed shall not be more than 100% of the
cost actually incurred in connection therewith; (iii) no Event of
Default shall exist under the Note or this Deed or the Credit
Agreement at the time of the casualty or at the time of any
requested disbursement hereunder; (iv) Walsh Greenwood shall be
<PAGE>
satisfied that upon completion of the repair and restoration of
the improvements the improvements located on the property will be
economically viable and necessary for the operation of Borrower's
business; and (v) the improvements may be restored in compliance
with applicable laws and regulations, including zoning
ordinances. Upon satisfaction of the provisions of the preceding
subparagraphs, the Net Proceeds will be disbursed by Walsh
Greenwood to Borrower pursuant to such disbursement provisions
as Walsh Greenwood may reasonably require, including but not
limited to, provisions similar to those for disbursement of money
center bank construction loans.
The Borrower will not do or suffer to be done or allow or
permit any other user of the Premises to do anything which will
increase the risk of fire or other hazard to the Premises or any
part thereof without first causing such increased risk to be
fully and adequately covered by insurance. In the event of
foreclosure of this Deed, or other transfer of title of the
Premises in extinguishment of the Secured Indebtedness, all
right, title and interest of the Borrower in and to any insurance
policies then in force shall pass to the purchaser or Walsh
Greenwood of the Premises.
In the event that, prior to the extinguishment of the Secured
Indebtedness, there exists any claim under any hazard insurance
policies which shall not have been paid and distributed in
accordance with the terms of this Deed, and any such claims shall
be paid after the extinguishment of the Secured Indebtedness, and
the foreclosure of this Deed, transfer of title to the Premises,
or extinguishment of the Secured Indebtedness for an amount less
than the total of the unpaid principal balance together with
accrued interest plus costs of litigation, reasonable attorneys'
fees, title insurance and all other costs and expenses incurred
by Walsh Greenwood in any action involving such extinguishment,
then, without notation, that portion of the payment in
satisfaction of the claim which is equal to the difference
between the total amount of the aforementioned amounts due Walsh
Greenwood and the amount in extinguishment of the Secured
Indebtedness received by Walsh Greenwood shall belong, to and be
the property of Walsh Greenwood and shall be paid to Walsh
Greenwood , and the Borrower hereby assigns, transfers and sets
over to Walsh Greenwood all of the Borrower's right, title and
interest in and to such sum. The balance, if any, shall belong
to Borrower. Notwithstanding the above, Borrower shall retain an
interest in the insurance policies described above during any
redemption period.
1.05 CARE OF PREMISES.
<PAGE>
(a) CONDITION. Borrower will keep the Premises and all
improvements, buildings, structures, parking areas, roads,
walkways, recreational facilities, landscaping, signage and all
other portions of the Premises now or hereafter located or
erected on the Land in good condition and repair, will not commit
or suffer any waste and will not do or suffer to be done anything
which will increase the risk of fire or other hazard to the
Premises or any part thereof or which would result in the
cancellation or termination of any insurance policy carried with
respect to the Premises.
(b) DEMOLITION, ALTERATION. Borrower will not, without the
prior written consent of Walsh Greenwood , (i) remove or demolish
any building, or structure (now or hereafter erected) or (ii)
remove or replace (except in the ordinary course of business and
with replacements of good and serviceable quality) any fixture,
chattel or other property of any description now or hereafter
comprising a portion of the Premises, or (iii) alter the design
or structural character of any such building or structure,
fixture, chattel or other property or the use thereof.
(c) NOTICE OF DAMAGE. If the Premises or any part thereof
is damaged by fire or any other cause, Borrower will give
immediate written notice thereof to Walsh Greenwood .
(d) INSPECTION. Walsh Greenwood or its representative is
hereby authorized to enter upon and inspect the Premises at any
time during normal business hours.
(e) COMPLIANCE WITH LAWS. Borrower shall operate the
Premises in compliance with all present and future laws,
ordinances, rules and regulations of any governmental authority
affecting the Premises or any part thereof whether municipal,
county, state, regional or federal, including, without
limitation, compliance in full with all of the aforesaid with
respect to handicapped persons and environmental protection.
(f) CASUALTY. If all or part of the Premises shall be
damaged by fire or other casualty, Borrower will promptly restore
and repair the Premises to the equivalent of its condition
immediately prior to such damage. The repair and restoration
shall be done and completed by Borrower in an expeditious and
diligent fashion and in compliance with all applicable laws,
rules and regulations, and all plans and specifications required
in connection with the repair and restoration shall be subject to
review and approval in all respects by an independent inspecting
engineer selected by Walsh Greenwood (the "INSPECTING
ENGINEER"). Subject to the terms of Section 1.04 hereof, all
insurance proceeds received by Walsh Greenwood may be retained
<PAGE>
and applied by Walsh Greenwood toward the payment of the Secured
Indebtedness whether or not then due and payable in such priority
and proportions as Walsh Greenwood in its discretion shall deem
proper or, at the discretion of Walsh Greenwood, the same may be
paid, either in whole or in part, to Borrower for such purposes
as Walsh Greenwood shall designate.
(g) CONDEMNATION. If all of the Premises shall be taken or
damaged through condemnation (which term when used in this Deed
shall include any damage or taking, either temporarily or
permanently, by any governmental authority and any transfer by
private sale in lieu thereof) or if so much of the Premises (but
less than all) is so taken or damaged that the untaken or
undamaged portion does not have substantial commercial value as
determined by Walsh Greenwood in the exercise of its judgment,
then the Note shall, at the option of Walsh Greenwood , become
immediately due and payable without notice or demand, time being
of the essence of this provision but without charging any
prepayment fee. Walsh Greenwood shall be entitled to all
compensation, awards, and other payments or relief thereof, and
is hereby authorized, at its option, to commence, appear in and
prosecute, in its own or Borrower's name, any action or
proceeding relating to any condemnation, and to settle or
compromise any claim in connection therewith. All such
compensation, awards, damages, claims, rights of action and
proceeds and the right thereto are hereby assigned by Borrower to
Walsh Greenwood, who after deducting therefrom all its expenses,
including reasonable attorney's fees, may release any monies so
received by it without affecting the security interest of this
Deed and may apply the same in such manner as Walsh Greenwood
shall determine to the reduction of the sum secured hereby, and
any balance of such monies then remaining shall be paid to
Borrower. Borrower agrees to execute such further assignment of
any compensation, awards, damages, claims, rights of action and
proceeds as Walsh Greenwood may require. The amount of any
award received by Walsh Greenwood as a result of said
condemnation shall be applied toward the payment of the Secured
Indebtedness, but without charging any prepayment fee.
If less than all of the Premises is so taken or damaged and
the untaken or undamaged portion has substantial commercial value
as determined by Walsh Greenwood in the exercise of its
judgment, then Walsh Greenwood may require that the net award
which has been received as a result of said condemnation be
applied toward the payment of the Secured Indebtedness, whether
due or not, but without charging, any prepayment fee; provided,
however, that Borrower will, upon request of Walsh Greenwood ,
promptly restore, repair and alter the remaining part of the
Premises in a manner and pursuant to plans, specifications, cost
breakdowns and contracts satisfactory to Walsh Greenwood and, in
<PAGE>
the event of such a request by Walsh Greenwood , Borrower shall
be entitled to use in and for such restoration, repair and
alteration the net award which has been so received as a result
of said condemnation; should the actual cost of such restoration,
repair and alteration be less than the net award so received,
then after such restoration, repair and alteration have been
completed to the satisfaction of Walsh Greenwood , any excess of
such proceeds shall be applied toward the payment of the Secured
Indebtedness, whether due or not, but without payment of any
prepayment fee; provided further, however, that, should the cost
of such restoration, repair and alteration (as estimated with
Walsh Greenwood 's approval prior to commencement of such
restoration, repair and alteration) exceed such net award, then
prior to such commencement Borrower shall deposit with Walsh
Greenwood 100% of the amount by which such estimated cost
exceeds such net award; should the cost of such restoration,
repair and alteration be less than the combined amount of such
net award plus the additional amount so deposited by Borrower,
then, after such restoration, repair and alteration have been
completed to the satisfaction of Walsh Greenwood , any excess of
such portion of such combined amount shall be applied toward the
payment of the Secured Indebtedness, whether due or not, but
without payment of any prepayment fee.
Subject to the foregoing provisions of this subparagraph (g)
Walsh Greenwood shall disburse those funds (such portion of such
net award and the deposit, if any, made by Borrower) to which
Borrower is entitled under this subparagraph (g) as, and to the
extent, progress is made toward the completion of such
restoration and repair and in accordance with the practices of
institutional construction Walsh Greenwood in the Atlanta,
Georgia area.
1.06 FURTHER ASSURANCES; AFTER-ACQUIRED PROPERTY. At any
time, and from time to time, upon request by Walsh Greenwood ,
Borrower will make, execute and deliver or cause to be made,
executed and delivered, to Walsh Greenwood , and, where
appropriate, cause to be recorded and/or filed and from time to
time thereafter to be re-recorded and/or refiled at such time and
in such offices and places as shall be deemed desirable by Walsh
Greenwood , any and all such other and further deeds to secure
debt, mortgages, deeds of trust, security agreements, financial
statements, continuation statements, instruments of further
assurances, certificates and other documents as may, in the
opinion of Walsh Greenwood , be necessary or desirable in order
to effectuate, complete, or perfect or to continue and preserve
(a) the obligations of Borrower under the Note and under this
Deed and (b) the security interest created by this Deed as a
first and prior security interest in and upon and security title
in and to all of the Premises, whether now owned or hereafter
<PAGE>
acquired by Borrower. Upon any failure by Borrower so to do,
Walsh Greenwood may make, execute, record, file, re-record
and/or refile any and all such deeds to secure (debt, security
agreements, financing statements, continuation statements,
instruments, certificates and documents for and in the name of
Borrower, and Borrower hereby irrevocably appoints Walsh
Greenwood the agent and attorney-in-fact of Borrower so to do.
The security title of this Deed and the security interest created
hereby will automatically attach, without further act, to all
after-acquired property attached to and/or used in the operation
of the Premises or any part thereof.
<PAGE>
1.07 LEASES AND CONTRACTS.
(a) APPROVAL OF WALSH GREENWOOD REQUIRED. From and
after the date hereof, Borrower shall not make any lease covering
all or any part of the Premises without first submitting the
proposed lease to Walsh Greenwood and obtaining Walsh
Greenwood's approval of the form and substance thereof. Borrower
shall perform all covenants to be performed by the lessor and
landlord under any and all such leases now or hereafter
affecting, the Premises or any part thereof. The terms "LEASE"
and "LEASES" as used in this Paragraph 1.07 shall include all
tenancies, whether under a lease or a rental agreement or tenant
contract or otherwise.
(b) ASSIGNMENT. With respect to Borrower's interest
in any and all leases, tenant contracts, rental agreements,
franchise agreements, development agreements, management
contracts, property management agreements, construction
contracts, architectural contracts, loan commitments and other
contracts, licenses and permits now or hereafter affecting the
Premises or any part thereof (said items are hereinafter referred
to collectively as the "AGREEMENTS" and individually as a
"AGREEMENT"), Borrower agrees to execute and deliver to Walsh
Greenwood such additional instruments, in form and substance
satisfactory to Walsh Greenwood , as may hereafter be requested
by Walsh Greenwood further to evidence and confirm the
assignment thereof set forth herein and in the other Loan
Documents; provided, however, that acceptance of any such
assignment shall not be construed as a consent by Walsh Greenwood
to any Agreement or to impose upon Walsh Greenwood any
obligation with respect thereto. Without first obtaining on each
occasion the written approval of Walsh Greenwood , Borrower shall
not cancel or permit the cancellation of any such Agreement or
modify any of said Agreements, or accept, or permit to be made,
any prepayment of any installment of rent or fees thereunder
(except for security deposits and the usual prepayment of rent
which results from the acceptance by a landlord on the first day
of each month of the rent for that month); provided, however,
that the consent of Walsh Greenwood shall not be required if any
such cancellation is made after default under the terms thereof.
Borrower shall faithfully keep and perform, or cause to be kept
and performed, all of the covenants, conditions and agreements
contained in each of said instruments, now or hereafter existing,
on the part of Borrower to be kept and, performed and shall at
all times do all things reasonably necessary to compel
performance by each other party to said instruments of all
obligations, covenants and agreements by such other party to be
performed thereunder. In the event that any lease of the
Premises contains provisions allowing the lessee or tenant
thereof to cancel or terminate such lease, to vacate or cease
<PAGE>
operations in the demised premises or to reduce the rent payable
thereunder, then any act of or attributable to Borrower, whether
through its agents or employees, causing, directly or indirectly,
the triggering of any such termination or abatement provisions
shall constitute a default hereunder.
(c) NO FURTHER ASSIGNMENTS. Borrower shall not
execute an assignment of the income, rents, issues or profits, or
any part thereof, from the Premises unless Walsh Greenwood shall
first consent in writing to such assignment; in any event, any
such assignment shall be, and shall expressly provide that it is,
subordinate to the assignment contained in this Deed and any
assignment executed pursuant thereto or concerning the Secured
Indebtedness.
1.08 SECURITY AGREEMENT.
(a) With respect to the machinery, apparatus,
equipment, fittings, furniture, furnishings, fixtures, building
supplies and materials, articles of personal property, chattels,
chattel paper, documents, contracts (including, without
limitation, construction contracts, architectural contracts, loan
commitments and other Agreements), inventory, consumer goods and
general intangibles referred to or described in this Deed as a
portion of the Premises or in any way connected with the use and
enjoyment of the Premises, this Deed is hereby made and declared
to be a security agreement encumbering each and every item of
such property included herein as a part of the Premises, in
compliance with the provisions of the Uniform Commercial Code as
enacted in the State of Georgia. Upon request by Walsh Greenwood
, at any time and from time to time, a financing statement or
statements reciting this Deed to be a security agreement
affecting all of such property shall be executed by Borrower and
Walsh Greenwood and appropriately filed. The remedies for any
violation of the covenants, terms and conditions of the security
agreement contained in this Deed shall be (i) as prescribed
herein, or (ii) as prescribed by general law, or (iii) as
prescribed by the specific statutory consequences now or
hereafter enacted and specified in said Uniform Commercial Code,
all at Walsh Greenwood 's sole election. Borrower and Walsh
Greenwood agree that the filing of any such financing statement
or statements in the records normally having to do with personal
property shall not in any way affect the agreement of Borrower
and Walsh Greenwood that everything used in connection with the
production of income from the Premises or adapted for use therein
or which is described or reflected in this Deed, is, and at all
times and for all purposes and in all proceedings, both legal or
equitable, shall be, regarded as part of the real estate conveyed
hereby regardless of whether (A) any such item is physically
attached to the improvements, (B) serial numbers are used for the
<PAGE>
better identification of certain items capable of being thus
identified in an exhibit to this Deed or elsewhere, or (C) any
such item is referred to or reflected in any such financing
statement or statements so filed at any time. Similarly, the
mention in any such financing statement or statements of the
rights in and to (1) the proceeds of any fire and hazard
insurance policy, or (2) any award in eminent domain proceedings
for a taking or for loss of value, or (3) Borrower's interest as
lessor or landlord in any present or future lease or rights to
income growing out of the use and occupancy of the Premises,
whether pursuant to lease or otherwise, shall not in any way
alter any of the rights of Walsh Greenwood as determined by this
Deed or affect the priority of Walsh Greenwood 's security
interest granted hereby or by any other recorded document, it
being understood and agreed that such mention in such financing
statement or statements is solely for the protection of Walsh
Greenwood in the event any court shall at any time hold, with
respect to the foregoing clauses (1), (2) or (3) of this
sentence, that notice of Walsh Greenwood 's priority of interest,
to be effective against a particular class of persons, must be
filed in the Uniform Commercial Code records.
(b) Borrower warrants that (i) Borrower's (that is,
"DEBTOR'S") name, identity or corporate structure and residence
or principal place of business are as set forth in Paragraph
1.08(c) hereof; (ii) Borrower (that is, "DEBTOR") has been using
or operating under said name, identity or corporate structure
without change for the time period set forth in Paragraph 1.08(c)
hereof; and (iii) the location of the collateral is upon the
Land. Borrower covenants and agrees that Borrower will furnish
Walsh Greenwood with notice of any change in the matters
addressed by clauses (i) or (iii) of this Paragraph 1.08(b)
within thirty (30) days of the effective date of any such change
and Borrower will promptly execute any financing statements or
other instruments deemed necessary by Walsh Greenwood to prevent
any filed financing statement from becoming misleading or losing
its perfected status.
(c) The information contained in this Paragraph
1.08(c) is provided in order that this Deed shall comply with the
requirements of the Uniform Commercial Code, as enacted in the
State of Georgia, for instruments to be filed as financing
statements. The names of the "DEBTOR" and the "SECURED PARTY,"
the identity or corporate structure and residence or principal
place of business of "DEBTOR," and the time period for which
"DEBTOR" has been using or operating under said name and identity
or corporate structure without change, are as set forth in
Schedule I of EXHIBIT C attached hereto and by this reference
made a part hereof; the mailing address of the "SECURED PARTY"
from which information concerning, the security interest may be
<PAGE>
obtained, and the mailing address of "DEBTOR," are as set forth
in Schedule 2 of said EXHIBIT C attached hereto; and a statement
indicating the types, or describing the items, of collateral is
set forth hereinabove.
1.09 EXPENSES. Borrower will pay or reimburse Walsh
Greenwood for all costs and expenses, including, but not limited
to, all attorney's fees and expenses, incurred by Walsh Greenwood
in any suit, action, legal proceeding, dispute or state of facts
of any kind in which Walsh Greenwood is made a party, or appears
as party plaintiff or defendant, or which suit, action,
proceeding, dispute or state of facts affects the Secured
Indebtedness, this Deed or the interest created hereby, any other
Loan Document or the Premises, including, but not limited to,
proceedings regarding the exercise of the power of sale of this
Deed, any proposed transfer of the Premises, any proposed
modification of the Loan Documents or waiver with respect
thereto, any condemnation action involving the Premises, any
proceedings involving the estate of a decedent or an insolvent,
any federal bankruptcy proceeding or state insolvency proceeding
or other proceeding involving the priorities or rights of
creditors, any site inspection or evaluation of the Premises
(including environmental inspections and assessments) with
respect to the Loan Documents and any modification or renewal
thereof and any exercise of remedies thereunder, any proceeding
involving any other remedies hereunder or any action to protect
the security hereof, and any costs or expenses of Borrower as
provided in the Note or the other Loan Documents; and any such
amounts paid by Walsh Greenwood shall be added to, and shall
become a portion of, the Secured Indebtedness, shall bear
interest the Increased Rate (as hereinafter defined) and shall be
secured by this Deed.
1.10 ESTOPPEL AFFIDAVITS. Borrower, upon ten (10) days'
prior written notice from Walsh Greenwood , shall furnish to
Walsh Greenwood a written statement, duly acknowledged, setting
forth (a) the unpaid principal amount of the Secured
Indebtedness, (b) the amount of the interest thereon, (c) any
other amounts of Secured Indebtedness, and (d) whether or not, to
the actual knowledge of the individual signing, such statement,
any off-sets or defenses exist against such Secured Indebtedness,
and, if such offsets or defenses exist, stating in detail the
specific facts which relate to each such offset or defense.
1.11 SUBROGATION. To the full extent of the Secured
Indebtedness, Walsh Greenwood is hereby subrogated to the liens,
claims, demands and other encumbrances, and to the rights of the
owners and holders of each and every lien, claim, demand and
other encumbrance on the Premises which is paid or satisfied, in
whole or in part, out of the proceeds of the Secured
<PAGE>
Indebtedness, and the respective liens, claims, demands and other
encumbrances shall be, and each of them is hereby, preserved and
shall pass to and be held by Walsh Greenwood as additional
collateral and further security for the Secured Indebtedness, to
the same extent they would have been preserved and would have
been passed to and held by Walsh Greenwood had they been duly
and legally assigned, transferred, set over and delivered unto
Walsh Greenwood by assignment, notwithstanding the fact that any
instrument providing public notice of the same may be satisfied
and canceled of record.
1.12 PERFORMANCE BY WALSH GREENWOOD OF DEFAULTS BY BORROWER.
If Borrower shall default in the payment of any tax, lien,
assessment or charge levied or assessed against the Premises; in
the payment of any utility charge, whether public or private; in
the payment of any insurance premium; in the procurement of
insurance coverage and the delivery of the insurance policies or
certificates required hereunder; in the performance of any
covenant, term or condition of any Agreement affecting all or any
part of the Premises; in the performance or observance of any
other covenant, condition, term or undertaking of this Deed or of
any of the Loan Documents; or in the performance of any covenant,
obligation, term or undertaking of Borrower in any other
instrument now or hereafter evidencing or securing the Secured
Indebtedness, unless such payment or performance is not then
required on account of a contest being carried on by Borrower
pursuant to and in accordance with the provisions of Paragraph
1.03(b) hereof, then Walsh Greenwood , at its option, may perform
or observe the same or any part thereof, and all payments made or
costs incurred by Walsh Greenwood in connection therewith, shall
be secured hereby and shall be, without demand, immediately
repaid by Borrower to Walsh Greenwood with interest thereon at
the interest rate set forth in the Note as the rate applicable
after a Default (said rate of interest is herein referred to in
this Deed as the "INCREASED RATE"). Walsh Greenwood shall be
the sole judge of the legality, validity and priority of any such
tax, lien, assessment, charge, claim, premium and obligation, of
the necessity for any such actions and of the amount necessary to
be paid in satisfaction thereof. Walsh Greenwood is hereby
empowered, subject to the rights of tenants in possession under
leases approved by Walsh Greenwood , to enter and to authorize
others to enter upon the Premises or any part thereof for the
purpose of performing or observing any such defaulted covenant,
condition or term, without thereby becoming liable to Borrower or
any other person in possession holding under Borrower.
1.13 FINANCIAL RECORDS AND STATEMENTS. Borrower shall keep
and maintain and shall provide to Walsh Greenwood financial
records and statements, as provided in the Credit Agreement.
<PAGE>
1.14 LIMIT OF VALIDITY. If from any circumstances
whatsoever, fulfillment of any provision of this Deed or of the
Note, at the time performance of such provision shall be due,
shall involve transcending the limit of validity presently
prescribed by any applicable usury statute or any other
applicable law, with regard to obligations of like character and
amount, then, IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall
any exaction be possible under this Deed or under the Note that
is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity. The
provisions of this Paragraph 1.14 shall control every other
provision of this Deed and of the Note.
1.15 CONVEYANCE OR ENCUMBRANCE OF PREMISES.
(a) Borrower hereby acknowledges to Walsh Greenwood that
(i) the identity and expertise of Borrower were and continue to
be material circumstances upon which Walsh Greenwood has relied
in connection with, and which constitute valuable consideration
to Walsh Greenwood for, the extending to Borrower of the
indebtedness evidenced by the Note and (ii) any change in such
identity or expertise could materially impair or jeopardize the
security for the payment of the Note granted to Walsh Greenwood
by this Deed. Borrower hereby covenants and agrees with Walsh
Greenwood , as part of the consideration for the extending to
Borrower of the indebtedness evidenced by the Note, that Borrower
shall not, without first obtaining the written consent of Walsh
Greenwood , directly or indirectly, sell, encumber, mortgage,
charge, pledge, convey, transfer, assign or dispose of the
premises, or any part thereof or interest therein. In addition,
without the prior written consent of Walsh Greenwood , Borrower
shall not suffer or permit to exist any lien or charge whatsoever
on or with respect to the Premises or any part thereof or
interest therein. If Borrower is a corporation, partnership or
other artificial entity, there shall be no sale, encumbrance,
pledge, charge, conveyance, transfer, assignment or disposal of a
controlling interest in Borrower without the prior written
consent of Walsh Greenwood . Any consent of Walsh Greenwood may
be given or withheld by Walsh Greenwood at its sole discretion.
(b) In the event of the violation of the aforesaid
covenants, Walsh Greenwood shall have the right, at its sole
option, to declare forthwith due and payable the entire Secured
Indebtedness, including, but not limited to, any prepayment
premium as and to the extent set forth in the Note. The decision
to accelerate the Secured Indebtedness shall be at the sole
option of Walsh Greenwood . The consent to one such transfer
shall not be deemed to be a waiver of the right to require
<PAGE>
consent to future or successive transactions or of the right to
deny consent in any future or successive transactions.
1.16 ACQUISITION OF COLLATERAL. Borrower shall not acquire
any portion of the personal property covered by this Deed subject
to any security interest, conditional sales contract, title
retention arrangement or other charge or lien taking precedence
over the security title and lien of this Deed.
1.17 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND
COVENANTS.
(a) Borrower warrants, represents and covenants as
follows:
(i) To the best of Borrower's knowledge, after
reasonable inquiry, but subject to all matters disclosed to Walsh
Greenwood in the Phase I Site Assessment performed by Clayton
Environmental Consultants, Inc., dated May 20, 1994 (Reference
Number 54898.02) (the "ENVIRONMENTAL ASSESSMENT"), copies of
which have been furnished to Walsh Greenwood and those holding
the Premises under Borrower, are in substantial compliance with
all laws and regulations relating to pollution and environmental
control applicable to the Premises. The Borrower will comply
with all such laws and regulations which may be imposed in the
future other than those which would not have a material adverse
effect on the business, assets properties or condition (financial
or otherwise) of the Borrower. Specifically, the Premises is
free from "HAZARDOUS SUBSTANCES" as defined under any applicable,
municipal, county, regional, state or federal law, ordinance or
regulation (an "ENVIRONMENTAL REGULATION") including, without
limitation the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601, et. seq., as
amended, and the regulations promulgated thereunder (other than
substances reported to agencies in the normal course of business
in material safety data sheets or the like) ("HAZARDOUS
SUBSTANCES"); no portion of the Premises is subject to federal,
state, or local regulation or liability because of the presence
of stored, leaked or spilled petroleum products, waste materials
or debris, "PCB'S" or PCB items (as defined in 40 C.F.R. Section
763.63) underground storage tanks, "ASBESTOS" (as defined in 40
C.F.R. Section 763.63) or the past or present accumulation,
spillage or leakage of any such substances, and the Borrower is
in substantial compliance with all federal, state and local
requirements relating to protection of health or the environment
in connection with the operation of their business; and the
Borrower knows of no complaint or investigation regarding the
Premises. Further, the Borrower is unaware of any investigation,
threat or concern by any entity regarding, environmental issues
involving the
<PAGE>
Premises. There are not now any outstanding
citations, notices or orders of violation or noncompliance issued
to Borrower or relating to Borrower's business assets, property
or leaseholds under any such laws, rules or relations, nor any
conditions which, if known by the proper authorities, could
result in any of the foregoing.
(ii) If Borrower receives any notice or otherwise
acquires knowledge of (1) the happening of an event involving the
use, spill, discharge or cleanup of any Hazardous Substance or
known hazardous or toxic waste, including, but not limited to any
oil or pesticide on or about any property of Borrower or caused
by the Borrower, (a "HAZARDOUS DISCHARGE") or (ii) any complaint,
order, citation or notice with regard to air emissions, water
discharges, noise omissions or any other environmental, health or
safety matter affecting the Borrower or the Premises or
Borrower's operations or the operations of any person holding the
Premises by or through Borrower (an "ENVIRONMENTAL COMPLAINT")
from any person or entity, including without limitation the
Department of Environmental Protection of the State in which the
Premises is located ("DEP"), the United States Environmental
Protection Agency ("EPA"), the United States Army Corps of
Engineers (the "CORPS"), or the United States Coast Guard (the
"COAST GUARD"), then Borrower will give written notice of same to
Walsh Greenwood within ten (10) days thereafter and shall
promptly comply with its obligations under law with regard to
such Hazardous Discharge or Environmental Complaint.
(iii) Borrower and those holding the Premises
under Borrower have, and will continue to have, all necessary
federal, state and local licenses, certificates and permits
relating to the Borrower, the persons holding the Premises and
the Premises, and they are in compliance with all applicable
federal, state and local laws, rules and regulations relating to
air emissions, water discharges, noise emissions, solid or liquid
storage and disposal, hazardous or toxic waste or substances and
other environmental, health and safety matters, other than those
which would not have a material adverse effect on the business,
assets properties or condition (financial or otherwise) of the
Borrower.
(iv) As set forth in that certain letter from
Clayton Environmental Consultants to Walsh Greenwood dated June
17, 1994, Borrower shall, at Borrower's sole cost and expense,
comply with all recommendations of Clayton Environmental
Consultants, including, but not limited to reporting, on not less
than a quarterly basis, of the progress of the clean-up as
required under the Clayton Project Number referenced in such
letter, which reports shall be in such detail as Walsh Greenwood
may require.
<PAGE>
(b) Walsh Greenwood shall have the right but not the
obligation, prior to or subsequent to an Event of Default,
without limiting Walsh Greenwood 's other rights and remedies
under this Deed, to enter onto the Premises or to take such other
actions as it deems necessary or advisable to clean up, move,
resolve or minimize the impact of, or otherwise deal with, any
Hazardous Substances on the Premises following receipt of any
notice from any person or entity asserting the existence of any
Hazardous Substance pertaining to the Premises or any part
thereof which, if true, could result in an order, suit,
imposition of a lien on the Premises, or other action an/or
which, in Walsh Greenwood 's sole opinion, could jeopardize Walsh
Greenwood 's security under this Deed. All reasonable costs and
expenses paid or incurred by Walsh Greenwood in the exercise of
any such rights shall be included in the definition of the
Secured Indebtedness secured by this Deed and shall be payable by
Borrower upon demand.
(c) Borrower hereby agrees to defend, indemnify and
hold Walsh Greenwood harmless from and against any and all
claims, losses, liabilities, damages and expenses (including
without limitation, cleanup costs and reasonable attorney's fees,
including those arising by reason of any of the aforesaid or an
action against Walsh Greenwood under this indemnity) arising
directly or indirectly from, out of, or by reason of any
Hazardous Discharge, Environmental Complaint, or any
environmental, health or safety law governing the Borrower, their
operations or the Premises or from any inaccuracy in the
representations and warranties given herein relating to
environmental matters. This indemnification shall survive the
repayment of the Secured Indebtedness and satisfaction or release
of this Deed.
(d) All warranties and representations above shall be
deemed to be continuing and shall remain true and correct in all
material respects until all of the Secured Indebtedness has been
paid in full and any limitations period expires. Borrower's
covenants above shall survive any exercise of any remedy by Walsh
Greenwood under the Note, or this Deed, or the other Loan
Documents including foreclosure of this Deed (or deed in lieu
thereof, even if, as a part of such foreclosure or deed in lieu
of foreclosure, the Secured Indebtedness is satisfied in full
and/or this Deed shall have been released.
1.18 NO PENDING MATERIAL LITIGATION OR PROCEEDING. To the
best knowledge and belief of Borrower, as of the date hereof,
there are no actions, suits, investigations or proceedings
pending or, to the knowledge and belief of Borrower, threatened
against or affecting Borrower, or the business, operations,
<PAGE>
properties or assets of Borrower, or before or by any
governmental department, commission, board, regulatory authority,
bureau, agency, or instrumentality, domestic, foreign, federal,
state or municipal, or any court, arbitrator or grand jury
(herein collectively called "GOVERNMNETAL AGENCY"), which may
result in any material adverse change in the business,
operations, properties or assets or in the condition, financial
or otherwise, of Borrower, or in the ability of Borrower to
perform its covenants and obligations under this Deed. Borrower
is not, to the best knowledge and belief of Borrower, in default
with respect to any judgment, order, writ, injunction decree,
demand, rule or regulation of any court, arbitrator, grand jury
or of any Governmental Agency, default under which might have
consequences which would materially and adversely affect the
business, operations, properties or assets or the condition,
financial or otherwise, of Borrower.
1.19 AUTHORIZATION: NO LEGAL RESTRICTIONS ON PERFORMANCE.
Borrower (and the undersigned representative of Borrower, if any)
additionally represents and warrants that: (i) it has full-power,
authority and legal right to execute this Deed, and to give,
grant, bargain, sell, alien, convey, confirm and assign the
Premises pursuant to the terms hereof and to keep and observe all
of the terms of this Deed on Borrower's part to be performed,
(ii) if Borrower is a corporation, Borrower is a duly organized
and presently existing corporation and this Deed has been
executed by authority of its Board of Directors and with the
requisite consent of the holders of the outstanding shares of its
capital stock entitled to vote thereon, if such consent is
required under the provisions of the certificate of incorporation
of Borrower, (iii) if Borrower is a partnership, Borrower is a
duly authorized and validly existing limited partnership and this
Deed has been executed by a duly authorized general partner, (iv)
neither the execution and delivery by Borrower of this Deed or
any of the other Loan Documents to which it is a party nor the
consummation of the transactions contemplated herein or therein,
nor compliance with the terms and conditions hereof or thereof,
will conflict with or result in a breach of, or constitute a
default under, any of the terms, obligations, covenants,
conditions or provisions of any partnership or corporate
restriction or of any indenture, mortgage, deed to secure debt,
deed of trust, pledge, bank loan or credit agreement, corporate
charter, by-law or any other agreement or instrument to which
Borrower is now a party or by which its properties may be bound
or affected, or any judgment, order, writ, injunction, decree or
demand of any court, arbitrator, grand jury, or governmental
agency, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any property
or asset of Borrower under the terms or provisions of any of the
foregoing, (v) to the best of Borrower's knowledge, as of the
<PAGE>
date hereof, Borrower is not in default in the performance,
observance or fulfillment of any of the terms, obligations,
covenants, conditions or provisions contained in any indenture or
other agreement creating, evidencing or securing indebtedness of
Borrower or pursuant to which Borrower is a party or by which
Borrower or its properties may be bound or affected.
1.20 COMPLIANCE WITH LAWS. Borrower has, to the best of
Borrower's knowledge and belief, after due and diligent inquiry,
as of the date hereof, complied with all applicable statutes,
rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof, in
respect of the conduct of its business and ownership of its
properties (including, without limitation, applicable statutes,
rules, regulations, orders and restrictions relating to equal
employment opportunities and, except only to the extent, if any,
set forth in the Environmental Assessment, environmental
standards or controls). To the best of Borrower's knowledge and
belief, after due and diligent inquiry, no governmental orders,
permissions, consents, approvals or authorizations are required
to be obtained and no registrations or declarations are required
to be filed in connection with the execution and delivery or
performance of the covenants and obligations under this Deed or
under any of the Loan Documents.
1.21 TAX STATUS. Borrower has filed all required United
States income tax informational returns and all state and
municipal tax returns which are required to be filed, and has
paid, or made provision for the payment of, any taxes which have
become due pursuant to said returns or pursuant to any assessment
received by Borrower, except such filings and taxes, if any, as
are being contested in good faith and as to which adequate
reserves have been provided.
1.22 WARRANTY OF TITLE. Borrower represents, warrants and
covenants that it is, and shall remain during the term of this
Deed, the lawful owner of all right, title and interest in and to
the Premises free and clear of all deeds of trust, mortgages,
liens and other encumbrances except for the Permitted Title
Exceptions; that this Deed is and shall remain at all times a
lien upon the Premises subordinate only to the Permitted Title
Exceptions, and that Borrower shall not grant, allow or suffer
any deed of trust, mortgage, easement, restriction, encroachment
or other liens or encumbrances on the Premises without the prior
written consent of Walsh Greenwood in each instance; that
Borrower shall immediately notify Walsh Greenwood in writing of
any mechanic's liens or other liens asserted against the Premises
of which it becomes aware, and shall eliminate such liens by
bonding, or otherwise providing such security as may be necessary
to ensure that the lien will not affect title to the Premises and
<PAGE>
to remove the lien as an encumbrance on title, within thirty (30)
days of the date Borrower becomes aware of such liens.
1.23 FINANCIAL STATUS. Borrower also represents and
warrants that: (i) Borrower is now, and after giving effect to
this Deed, will be in a solvent condition, (ii) there has been no
material adverse chance in the financial condition of Borrower,
any general partners of a partnership Borrower, any guarantor of
the Secured Indebtedness or of the performance by Borrower of any
of the terms of the Loan Documents or any part thereof (a
"GUARANTOR") or of any party liable for payment of any part of
the Secured Indebtedness since the date of Borrower's application
for the loan secured hereby, (iii) Borrower is not in default
under any note, loan or security agreement to which it is a
party, (iv) the execution and delivery of this Deed by Borrower
does not constitute a "FRAUDULENT CONVEYANCE" within the meaning
of Title 11 of the United States Code as now constituted or under
any other applicable statute, (v) no bankruptcy or insolvency
proceedings are pending or contemplated by or against Borrower,
and (vi) there are no existing, or pending actions or proceedings
effecting, any portion of the Premises except for possible
negligence actions or proceedings which are fully covered by
insurance, and, to Borrower's knowledge, none are threatened.
ARTICLE II
2.01 EVENTS OF DEFAULT. The occurrence of any one or more
of the following events shall be deemed to be an Event of Default
under this Deed notwithstanding any applicable grace period or
notice and cure period. A "DEFAULT" under this Deed shall mean
the continued existence of an Event of Default beyond the
expiration of any applicable grace period or notice and cure
period:
(a) Failure to pay the Note according to its terms;
(b) Failure to pay any other amounts payable under
this Deed;
(c) Failure to comply with any of the terms or
covenants of this Deed (other than as covered by subparagraphs
(a) and (b) of this Section);
(d) The occurrence of a Default under the Credit
Agreement or any of the Loan Documents or any other writing
executed by Borrower in connection with the Secured Indebtedness;
(e) The breach of any covenant or agreement contained
herein, or if any representation or warranty contained herein
<PAGE>
should prove to have been false or misleading in any material
respect at the time made or deemed to be made;
(f) The filing by Borrower of a petition in voluntary
bankruptcy or under any chapter of the federal Bankruptcy Code or
other similar law, state or federal, whether now or hereafter
existing, or of an answer admitting insolvency or inability to
pay its debts;
(g) The adjudication of Borrower as a bankrupt, or
the appointment of a trustee or receiver for Borrower or for all
or a major portion of its property in any involuntary proceeding,
or the taking of jurisdiction by any court over the property of
Borrower or of the major part thereof in any involuntary
proceeding, for the reorganization, dissolution, liquidation or
winding up of Borrower and the failure to discharge such trustee
or receiver or relinquish such jurisdiction or vacate or stay
such adjudication or action within sixty (60) days;
(h) The making by Borrower of an assignment for the
benefit of creditors or the admitting by Borrower in writing of
its inability to pay its debts generally as they become due, or
the consent by Borrower to the appointment of a receiver or
trustee or liquidator of all of its properties or the major part
thereof;
(i) Default, including foreclosure and/or sale of any
collateral or other security, under or with respect to any other
obligations secured by all or any part of the Premises, whether
or not such obligation or security interest was consented to by
Walsh Greenwood prior to such default; or
(j) Abandonment of the Premises by the Borrower.
2.02 ACCELERATION OF MATURITY. If a Default shall have
occurred hereunder, then the whole amount of the Secured
Indebtedness, with the exception of debt evidenced by the Credit
Agreement and any items defined as "OBLIGATIONS" in the Credit
Agreement (except to the extent that such "OBLIGATIONS" may
include the Note secured by this Deed or items which are also
contained in subparagraphs (a), (b), (c), (e) and (f) of the
definition of Secured Indebtedness in this Deed), shall, at the
option of Walsh Greenwood, become immediately due and payable
without notice or demand, time being of the essence of this Deed
and of the Note secured hereby; and no omission on the part Walsh
Greenwood to exercise such option when entitled so to do shall
be considered as a waiver of such right. Notwithstanding that
the debt and obligations evidenced by the Credit Agreement may
not be accelerated if a Default shall have occurred hereunder,
the amounts collected by Walsh Greenwood pursuant to the
<PAGE>
exercise of Walsh Greenwood's rights and remedies hereunder may
be applied to the Secured Indebtedness, including debt and
obligations evidenced by the Credit Agreement, in such priority
and proportions as Walsh Greenwood shall elect in its sole and
absolute discretion. In addition, notwithstanding the foregoing,
the debt and "OBLIGATIONS" under the Credit Agreement may be
accelerated upon the occurrence of a default thereunder or if
such Default described above is also a default under the Credit
Agreement.
2.03 RIGHT OF WALSH GREENWOOD TO ENTER AND TAKE POSSESSION.
(a) If any Default shall have occurred, Borrower, upon
demand of Walsh Greenwood , shall forthwith surrender to Walsh
Greenwood the actual possession of the Premises and if, and to
the extent, permitted by law, Walsh Greenwood may enter and take
possession of the Premises and may exclude Borrower and Borrowers
agents and employees wholly therefrom. In addition, if any
Default shall have occurred, Borrower, upon demand of Walsh
Greenwood , shall allow Walsh Greenwood or its agents or
engineers to enter onto the Premises, without taking possession
thereof, to conduct testing (including the taking of samples of
the Premises and underlying Land) for the presence of hazardous
materials and other environmental risks, to such extent as Walsh
Greenwood may require.
(b) Upon every such entering and taking of possession,
Walsh Greenwood may hold, store, use, operate, manage, control,
and maintain the Premises and conduct the business thereof and,
from time to time, (i) make all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements
thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property, (ii) insure or keep the
Premises insured; (iii) manage and operate the Premises and
exercise all the rights and powers of Borrower, in its name or
otherwise, with respect to the same and (iv) enter into any and
a11 agreements with respect to the exercise by others of any of
the powers herein granted Walsh Greenwood , all as Walsh
Greenwood may from time to time determine to be to its best
advantage; and Walsh Greenwood may collect and receive all of
the income, rents, profits, issues and revenues of the Premises,
including those past due as well as those accruing thereafter
and, after deducting (aa) all expenses of taking, holding,
managing and operating the Premises (including compensation for
the services of all persons employed for such purposes); (bb) the
cost of all such maintenance, repairs, renewals, replacements,
additions, betterments, improvements, purchases, and
acquisitions; (cc) the cost of such insurance, (dd) such taxes,
assessments and other charges prior to the title of this Deed as
<PAGE>
Walsh Greenwood may determine to pay; (ee) other proper charges
upon the Premises or any part thereof and (ff) the reasonable
compensation and expenses of attorneys and agents of Walsh
Greenwood , shall apply the remainder of the money so received by
Walsh Greenwood , first, to the payment of accrued interest on
the outstanding principal balance of the Note; second, to the
payment of late charges and costs of collection as provided in
the Note; third, to the payment of escrow deposits required in
Paragraph 1.02 hereof and finally to the payment of overdue
installments of principal.
(c) For the purpose of carrying out the provisions of
this paragraph 2.03, Borrower hereby constitutes and appoints
Walsh Greenwood the true and lawful attorney in fact of Borrower
to do and perform, from time to time, any and all actions
necessary and incidental to such purpose and does, by these
presents, ratify and confirm any and all actions of said attorney
in fact in the Premises.
(d) Whenever all such Defaults have been cured and
satisfied, Walsh Greenwood shall surrender possession of the
Premises to Borrower and upon such surrender, Borrower shall
retake possession thereof, provided that the right of Walsh
Greenwood to take possession from time to time, pursuant to
Subparagraph 2.03(a) shall exist if any subsequent Default shall
occur and be continuing
2.04 APPOINTMENT OF A RECEIVER.
(a) If a Default shall have occurred hereunder, then Walsh
Greenwood , upon application to a court of competent
jurisdiction, shall be entitled, without notice and without
regard to the adequacy of any security for the Secured
Indebtedness or the solvency of any party bound for its payment,
to the appointment of a receiver to take possession of and to
operate the Premises and to collect the rents, profits, issues
and revenues thereof.
(b) Borrower will pay to Walsh Greenwood upon demand all
reasonable expenses, including receiver's fees, reasonable
attorney's fees, costs and agent's compensation, incurred
pursuant to the provisions contained in this Paragraph 2.04; and
all such expenses shall be secured by this Deed.
2.05 POWER OF SALE. If a Default shall occur hereunder and,
as a result thereof, the Secured Indebtedness is accelerated as
aforesaid in Paragraph 2.02 and is due and payable in full, Walsh
Greenwood , at its option, may sell the Premises or any part of
the Premises at public sale or sales before the door of the
courthouse of the County in which the Premises or any part of the
<PAGE>
Premises is situated, to the highest bidder for cash, in order to
pay the Secured Indebtedness and insurance premiums, liens,
assessments, taxes and charges, including utility charges, if
any, with accrued interest thereon, and all expenses of the sale
and of all proceedings in connection therewith, including
reasonable attorney's fees, if incurred, after advertising the
time, place and terms of sale once a week for four (4) weeks
immediately preceding such sale (but without regard to the number
of days) in a newspaper in which Sheriff's sales are advertised
in said County. The foregoing notwithstanding, Walsh Greenwood
may sell, or cause to be sold, any tangible or intangible
personal property, or any part thereof, and which constitutes a
part of the security hereunder, in the foregoing manner, or as
may otherwise be provided by law. Walsh Greenwood may bid and
purchase at any such sale and may satisfy Walsh Greenwood 's
obligation to purchase pursuant to Walsh Greenwood 's bid by
canceling an equivalent portion of any indebtedness then
outstanding and secured hereby.
2.06 AUTHORITY TO CONVEY. At any such sale, Walsh Greenwood
may execute and deliver to the purchaser a conveyance of the
Premises or any part of the Premises in fee simple with full
warranties of title and to this end, Borrower hereby constitutes
and appoints Walsh Greenwood the agent and attorney in fact of
Borrower to make such sale and conveyance, and thereby to divest
Borrower of all right, title and equity that Borrower may have in
and to the Premises and to vest the same in the purchaser or
purchasers at such sale or sales, and all the acts and doings of
said agent and attorney in fact are hereby ratified and confirmed
and any recitals in said conveyance or conveyances as to facts
essential to a valid sale shall be binding on Borrower. The
aforesaid power of sale and agency hereby granted are coupled
with an interest and are irrevocable by death or otherwise, are
granted as cumulative of the other remedies provided by law for
collection of the indebtedness secured hereby and shall not be
exhausted by one exercise thereof but may be exercised until full
payment of all sums secured hereby.
2.07 APPLICATION OF THE PROCEEDS OF SALE. Upon any such
sale pursuant to the aforementioned power of sale and agency, the
proceeds of said sale shall be applied first to payment of the
expenses of such sale and of all proceedings in connection
therewith, including, reasonable attorney's fees, then to said
insurance premiums, liens, assessments, taxes and charges
including utility charges with accrued interest thereon and then
to payment of the Secured Indebtedness, and finally, the
remainder, if any, shall be paid to Borrower.
2.08 BORROWER AS TENANT HOLDING OVER. In the event of any
such public sale pursuant to the aforesaid power of sale and
<PAGE>
agency, Borrower shall be deemed a tenant holding over and shall
forthwith deliver possession of the Premises to the purchaser or
purchasers at such sale or be summarily dispossessed according to
provisions of law applicable to tenants holding over.
2.09 DISCONTINUANCE OF PROCEEDINGS AND RESTORATION OF THE
PARTIES. In case Walsh Greenwood shall have proceeded to
enforce any fight or remedy under this Deed by receiver, entry or
otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely
to Walsh Greenwood , then and in every such case Borrower and
Walsh Greenwood shall be restored to their former positions and
rights hereunder, and all rights, powers and remedies of Walsh
Greenwood shall continue as if no such proceeding had been
taken.
2.10 WAIVER. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY
HAVE UNDER THE CONSTITUTION OR THE LAWS OF THE STATE OF GEORGIA
OR THE CONSTITUTION OR THE LAWS OF THE UNITED STATES OF AMERICA
TO NOTICE, OTHER THAN EXPRESSLY PROVIDED FOR IN THIS DEED, OR TO
A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY
PROVIDED BY THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT TO
WALSH GREENWOOD AND BORROWER WAIVES BORROWER'S RIGHTS, IF ANY,
TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THIS DEED TO SECURE DEBT AND
SECURITY AGREEMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE
SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL
WAIVERS BY BORROWER IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER HAS BY BORROWER'S
ATTORNEY BEEN FIRST APPRISED OF AND COUNSELED WITH RESPECT TO
BORROWER'S POSSIBLE ALTERNATIVE RIGHTS.
BORROWER'S INITIALS: /s/ WHW
2.11 REMEDIES CUMULATIVE: APPLICABLE LAW: EXCLUSIVE FORUM.
No right, power or remedy conferred upon or reserved by Walsh
Greenwood by this Deed is intended to be exclusive of any other
right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
Borrower and Walsh Greenwood agree that this Deed shall be
governed by and construed in accordance with the Laws of the
State of Georgia.
<PAGE>
ARTICLE III
3.01 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever
in this Deed one of the parties hereto is named or referred to,
the heirs, executors, legal representatives, successors and
permitted assigns of such parties shall be included and all
covenants and agreements contained in this indenture by or on
behalf of Borrower and by or on behalf of Walsh Greenwood shall
bind and inure to the benefit of their respective heirs,
executors, legal representatives, successors and assigns, whether
so expressed or not. The provisions of this Paragraph 3.01 are
subject to the restrictions on transfer contained elsewhere in
this Deed. This Deed is assignable by Walsh Greenwood , and any
assignment hereof by Walsh Greenwood shall operate to vest in
the assignee all rights and powers herein conferred upon and
granted to Walsh Greenwood .
3.02 NO PARTNERSHIP OR JOINT VENTURE. The relationship of
Borrower and Walsh Greenwood is solely and strictly that of
debtor and creditor. Borrower and Walsh Greenwood have not by
this Deed, by any other Loan Documents or otherwise created a
partnership or joint venture and do hereby expressly negate any
intent to do so.
3.03 HEADINGS. The headings of the sections, paragraphs and
subdivisions of this Deed are for the convenience of reference
only, are not to be considered a part hereof and shall not limit
or otherwise affect any of the terms hereof.
3.04 INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment
of any provision hereof or any transaction related hereto or to
the Note, at the time performance of such provisions shall be
due, shall involve transcending the limit of validity prescribed
by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or
provisions herein contained operates or would prospectively
operate to invalidate this Deed in whole or in part, then such
clause or provision only shall be held for naught, as though not
herein contained, and the remainder of this Deed shall remain
operative and in full force and effect.
3.05 NUMBER AND GENDER. Whenever the singular or plural
number, masculine or feminine or neuter gender is used herein, it
shall equally include the other.
3.06 NOTICE. All notices, requests, demands and other
communications required or permitted to be given thereunder shall
be sufficient if in writing and either (a) hand delivered, (b)
sent by United States Certified Mail or Registered Mail, Return
Receipt Requested, postage prepaid, or (c) sent by a nationally
recognized courier service (such as Federal Express or Airborne),
<PAGE>
to the parties being given such notice at the following
addresses:
Borrower: Signal Apparel Company, Inc.
P.O. Box 4296
200 Manufacturers Road
Chattanooga, TN 37405
Attn: President
<PAGE>
Walsh Greenwood : Walsh Greenwood & Co.
One East Putnam Avenue
Greenwich, CT 06830
With a copy to: Richard Aborn
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Either party may change said address by giving the other party
hereto notice of such change of address. Notice giving as
hereinabove provided shall be deemed given on the date of hand
delivery, if delivered by hand, or on the date of its deposit in
the United States mail or with such nationally recognized courier
service, if so sent, and, unless such notice is sooner received,
such notice shall be deemed received (i) on the date of personal
delivery, if delivered by hand, (ii) on the third business day
(excluding Saturday, Sunday and legal holidays) after the date of
its deposit in the United States mail, if sent by United States
mail as aforesaid, or (iii) on the second business day (excluding
Saturday, Sunday and legal holidays), if sent by such nationally
recognized courier service.
3.07 THIS DEED. Walsh Greenwood shall have no obligation
to cancel this Deed or mark same "SATISFIED" until all
obligations of Borrower under the Loan Documents have been fully
performed by Borrower.
3.08 TIME OF THE ESSENCE. Time is of the essence with
respect to each and every covenant, agreement and obligation of
Borrower under this Deed, the Note and any and all other
instruments now or hereafter evidencing, securing or otherwise
relating to the Secured Indebtedness.
3.09 WAIVER OF JURY TRIAL. BORROWER AND WALSH GREENWOOD
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE INDEBTEDNESS, THE
PREMISES, THIS DEED, THE NOTE OR ANY OTHER LOAN DOCUMENTS
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR
RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATED
TO THE PREMISES; THIS WAIVER BEING A MATERIAL INDUCEMENT FOR
WALSH GREENWOOD TO ADVANCE THE LOAN EVIDENCED BY THE NOTE.
3.10 ADDITIONAL RELEASE RIGHT. Notwithstanding that this
Deed secures all of the Secured Indebtedness as defined herein,
in the event that Borrower pays the Note in full and Walsh
<PAGE>
Greenwood has no further obligations to advance to Borrower any
amounts under such Note, and, if, at such time, there exists no
Event of Default under the Note, the Credit Agreement or any
other Loan Document, then, upon written request of Borrower,
Walsh Greenwood will release and reconvey the Premises from the
security title and security interest of this Deed.
IN WITNESS WHEREOF, Borrower has executed this Deed under
seal the day and year first above written.
Signed, sealed and delivered SIGNAL APPAREL COMPANY, INC.,
in the presence of: an Indiana corporation
/s/Pamela B. Clingan
Witness By:/s/ William H. Watts
Name: William H. Watts
Title:Exec. Vice President
/s/ Geoffrey G. Young
Notary Public
Attest:/s/ Robert J. Powell
Name: Robert J. Powell
(NOTARY SEAL) Title: Secretary
My Commission Expires: (CORPORATE SEAL)
7/26/95
<PAGE>
LIST OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Property Description
Exhibit B Permitted Exceptions
Exhibit C
Schedule 1 Description of "Debtor" and "Secured Party"
Walsh Greenwood's Tax Apportionment Affidavit
The Registrant hereby agrees to furnish a copy of any of such omitted Schedules
or Exhibits supplementally upon request of the Commission's staff.
REAL ESTATE MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
FOR PURPOSES OF THE SECURITY AGREEMENT
CONTAINED IN THIS INSTRUMENT,
THE "SECURED PARTY" AND THE "DEBTOR" AND THEIR RESPECTIVE
ADDRESSES ARE AS FOLLOWS:
SECURED PARTY: Walsh Greenwood & Co.
One East Putnam Avenue
Greenwich, Connecticut 06830
DEBTOR: The Shirt Shed, Inc.
c/o Signal Apparel Company, Inc.
P.O. Box 4296
Manufacturer's Road
Chattanooga,TN 37405
THE ADDRESS OF THE SECURED PARTY SHOWN ABOVE IS THE ADDRESS
AT WHICH INFORMATION CONCERNING THE SECURED PARTY'S SECURITY
INTEREST MAY BE OBTAINED.
THIS INDENTURE WITNESSETH, THAT THE SHIRT SHED, INC.
("MORTGAGOR") MORTGAGES AND WARRANTS TO
WALSH GREENWOOD & CO.
a New York limited partnership ("MORTGAGEE"), the real estate
located in Wabash County, Indiana which has a common address of
570 South Miami Street, Wabash, Wabash County, Indiana 46992 and
which is more particularly described in EXHIBIT A, attached
hereto and incorporated herein ("REAL ESTATE"),
TOGETHER WITH all tenements, hereditaments, rights, privileges,
interests, easements and appurtenances belonging to or in any way
appertaining to such Real Estate, and all rents, issues, income
and profits thereof, and all buildings and improvements now or
hereafter situated on such Real Estate and all fixtures and
equipment now or hereafter attached to, situated on or used in
the operation of the Real Estate and owned by Mortgagor
including, but not in limitation of the preceding, all personal
property of every kind and nature whatsoever now or hereafter
owned by Mortgagor and located in, on or about, or used in
connection with the Real Estate, whether physically attached to
the Real Estate or not (hereinafter collectively, with the Real
Estate, referred to as the "MORTGAGED PREMISES"), and it is
agreed that all similar fixtures and equipment hereafter placed
on such Mortgaged Premises by the Mortgagor, and owned by
Mortgagor, its successors or assigns, including all replacements
or substitutions therefor, shall be considered as constituting
part of such Mortgaged Premises, all to the use and benefit of
Mortgagee, its successors and assigns, and Mortgagor transfers
and grants to Mortgagee a security interest in all such fixtures
and equipment
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now or hereafter owned by Mortgagor and located on
or at the Mortgaged Premises and all personal property of
Mortgagor which is described in Section 13 herein (hereinafter
collectively referred to as the "CHATTEL PROPERTY").
MORTGAGOR HEREBY COVENANTS AND AGREES AS FOLLOWS:
1. SECURITY. This Mortgage is given as a security for the
performance and observance of the covenants and agreements herein
contained ("OBLIGATIONS"), in connection with the indebtedness
owing from Mortgagor to Mortgagee pursuant to that certain Credit
Agreement dated as of March 31, 1995 among Signal Apparel
Company, Inc., American Marketing Works, Inc., Mortgagor and
Mortgagee (the "CREDIT AGREEMENT"), which are secured hereby,
including, without limitation, such Obligations arising under (i)
the Credit Agreement and that certain Term Promissory Note dated
March 31, 1995 (the "NOTE") in the original principal amount
of Fifteen Million and No/100 Dollars from Mortgagor to Mortgagee
and (ii) all future advances pursuant thereto up to a maximum
amount of Fifteen Million and No/100 Dollars ($15,000,000.00)
(provided that nothing herein shall obligate Mortgagee to make
any such future advances). All of the Obligations are secured as
they now exist and as they may be revised or amended by any
amendment to the Credit Agreement, the Note or any other
agreement executed in connection therewith or this Mortgage.
This Mortgage shall also secure the prompt repayment of any and
all advances for expenses which shall be paid by Mortgagee with
respect to the Mortgaged Premises, any interest and late charges
due and payable under this Mortgage. For purposes of this
Mortgage "LOAN DOCUMENTS" mean the Credit Agreement, the Note and
any other agreement between Mortgagee and either Mortgagor or
Signal Apparel Company, Inc. relating thereto.
2. SUBORDINATION. Any provisions of this Mortgage
notwithstanding, the lien and security interest granted Mortgagee
by Mortgagor hereunder shall in all respects be subject and
subordinate to that certain Mortgage granted by Mortgagor to BNY
Financial Corporation ("BNY") dated July 29, 1994 and recorded in
Wabash County, Indiana at Book and Page (the "BNY MORTGAGE")
and to the terms of a certain Intercreditor Agreement among
Mortgagor, Mortgagee, Signal Apparel Company, Inc., American
Marketing Works, Inc., BNY and Greyrock Capital Group, Inc.
("GREYROCK"), dated March 31, 1995 (the "INTERCREDITOR
AGREEMENT").
3. PROMISE TO PAY. The Mortgagor promises to pay the
principal and all installments of the principal of and interest
on the indebtedness and the Obligations secured hereby as and
when the same respectively become due, as provided in this
Mortgage, all without relief from valuation and appraisement laws
and with reasonable attorneys' fees and other costs of
collection.
4. TITLE TO MORTGAGED PREMISES AND LIEN OF MORTGAGE.
Mortgagor is the owner in fee simple of the Mortgaged Premises
and has full power to
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mortgage the same. Mortgagor has good, marketable and valid
title to the Chattel Property free and clear
of all security interests and encumbrances, other than the BNY
Mortgage to which this Mortgage is subordinate in all respects,
and has full power to grant a security interest in the same. The
Mortgaged Premises are free and clear of any and all liens and
encumbrances, other than the BNY Mortgage, use restrictions of
record, zoning ordinances, rights-of-way and easements of record,
and the lien of current taxes and assessments not delinquent.
Mortgagor will make any further assurances of title that
Mortgagee may require and will warrant and defend the Mortgaged
Premises and the Chattel Property against all adverse claims and
demands whatsoever. This Mortgage creates a continuing lien to
secure the full and final payment of all obligations under the
Credit Agreement and the performance of other obligations of
Mortgagor under this Mortgage and the Loan Documents executed by
Mortgagor in connection with the indebtedness secured hereby.
5. INSURANCE. Mortgagor will procure and maintain in
effect at all times Fire, Extended Coverage, Vandalism, Malicious
Mischief and other hazard insurance with respect to the Mortgaged
Premises and the Chattel Property and public liability insurance
with such insurance companies and in forms and amounts as are
acceptable to and approved by Mortgagee against loss or
destruction on account of fire, windstorm or other such hazards,
casualties and contingencies customarily insured against, and
injury to the person or property, including, without limiting the
generality thereof, business interruption insurance in an amount
equal to one (1) year's overhead and net profit, and such flood
and/or earthquake insurance as may be reasonably required by
Mortgagee. All insurance policies are to be held by and, to the
extent of its interests, for the benefit of and first payable in
case of loss to Mortgagee, and Mortgagor shall deliver to
Mortgagee a new policy as replacement for any expiring policy at
least thirty (30) days before the date of such expiration.
All such policies of insurance shall contain waiver of
subrogation clauses and shall have attached thereto the non-
contributory New York Standard Mortgagee clause or its equivalent
in favor of Mortgagee with cancellation only upon at least thirty
(30) days' prior written notice to Mortgagee. All amounts
recoverable under any policy are hereby assigned to Mortgagee
and, in the event of a loss, Mortgagor will give immediate notice
to Mortgagee, and Mortgagee may make proof of loss if not made
promptly by the Mortgagor. If an Event of Default exists at the
time of any loss, each insurance company concerned is hereby
authorized and directed to make payment for such loss directly to
Mortgagee rather than to Mortgagee and Mortgagor jointly, and the
amount collected may, at the option of Mortgagee, be used in any
one or more of the following ways in a manner consistent with the
requirements of the Credit Agreement: (a) applied upon the
indebtedness secured hereby, whether or not such indebtedness is
then due and payable, (b) used to fulfill any of the covenants
contained herein as Mortgagee may determine, (c) used to replace
or restore the Mortgaged Premises or Chattel Property to the
condition satisfactory to Mortgagee, or (d) released to
Mortgagor. So long as no Event of Default exists at the
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<PAGE>
time of any loss, any payments made by any insurance company for such
loss in an amount less than Seventy-Five Thousand and No/100
Dollars ($75,000.00) shall be paid to Mortgagee and Mortgagor
jointly to be used to replace or restore the Mortgaged Premises
or Chattel Property, and shall be released upon the joint
signature of Mortgagor and Mortgagee, and for any such loss which
equals or exceeds Seventy-Five Thousand and No/100 Dollars
($75,000.00), shall be paid to Mortgagee to be applied upon the
indebtedness secured hereby, whether or not such indebtedness is
then due and payable or, at Mortgagee's sole discretion, in such
other manner as Mortgagor may request in writing and is
acceptable to Mortgagee.
The Mortgagor will not do or suffer to be done or allow or permit
any tenant or other user of the Mortgaged Premises to do anything
which will increase the risk of fire or other hazard to the
Mortgaged Premises or any part thereof without first causing such
increased risk to be fully and adequately covered by insurance.
Insurance as above-described shall also be obtained on all
fixtures and personal property used by Mortgagor in connection
with the Real Estate to the extent that the value thereof is not
otherwise included in the insurance on the Real Estate. In the
event of foreclosure of this Mortgage, or other transfer of title
of the Mortgaged Premises in extinguishment of the Obligations
secured hereby, all right, title and interest of the Mortgagor in
and to any insurance policies then in force shall pass to the
purchaser or grantee of the Mortgaged Premises.
In the event that, prior to the extinguishment of the
Obligations, there exists any claim under any hazard insurance
policies which shall not have been paid and distributed in
accordance with the terms of this Mortgage, and any such claims
shall be paid after the extinguishment of the Obligations secured
hereby, and the foreclosure of this Mortgage, transfer of title
to the Mortgaged Premises, or extinguishment of the Obligations
secured hereby for an amount less than the total of the unpaid
principal balance together with accrued interest plus costs of
litigation, reasonable attorneys' fees, title insurance and all
other costs and expenses incurred by Mortgagee in any action
involving such extinguishment then, without limitation, that
portion of the payment in satisfaction of the claim which is
equal to the difference between the total amount of the
aforementioned amounts due Mortgagee and the amount in
extinguishment of the Obligations secured hereby received by
Mortgagee shall belong to and be the property of the Mortgagee
and shall be paid to the Mortgagee, and the Mortgagor hereby
assigns, transfers and sets over to the Mortgagee all of the
Mortgagor's right, title and interest in and to such sum. The
balance, if any, shall belong to Mortgagor. Notwithstanding the
above, Mortgagor shall retain an interest in the insurance
policies described above during any redemption period.
The provisions of this paragraph shall be subject in all
respects to BNY's rights and to Mortgagor's obligations under the
BNY Mortgage.
6. TAXES. Mortgagor will pay, before the same become
delinquent or any penalty for non-payment attaches thereto, all
taxes, assessments and
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<PAGE>
charges of every nature now or hereafter
levied or assessed against or upon the Mortgaged Premises or the
Chattel Property, or any part thereof or upon the rents, issues,
income or profits therefrom, which by reason of non-payment could
become a lien prior or junior to this Mortgage, whether any or
all of the taxes, assessments or charges be levied directly or
indirectly or as excise taxes or as income taxes, and will submit
to Mortgagee such evidence of the timely payment of such taxes,
assessments and charges as Mortgagee may require, and Mortgagor
will also pay all taxes, assessments or charges which may be
levied on this Mortgage or the Obligations secured hereby,
excepting any state or federal income taxes or state intangibles
taxes assessed against Mortgagee: provided, however, that
Mortgagor shall be entitled to contest such taxes, assessments or
charges in good faith by appropriate proceedings and shall
diligently pursue the resolution thereof. In default thereof,
Mortgagee may pay such taxes, assessments and other similar
charges, of which payment, amount and validity thereof the
receipt of the proper officer shall be conclusive evidence, and
all sums so paid shall bear interest at the highest rate set
forth in the Loan Documents, shall be payable on demand and shall
be fully secured by this Mortgage.
7. CARE OF MORTGAGED PREMISES. Mortgagor will keep the
Mortgaged Premises and the Chattel Property in good order, repair
and condition at all times and will not commit waste or allow
waste to be committed against or on the Mortgaged Premises or the
Chattel Property. Mortgagor will not commit or allow the
commission of any violation of any law, regulation. ordinance or
contract affecting the Mortgaged Premises and will not commit or
allow any demolition, removal or material alteration of any of
the buildings or site improvements (including fixtures thereon)
constituting a part of the Mortgaged Premises and the Chattel
Property without the prior written consent of Mortgagee, which
Mortgagee may give or withhold at its discretion. Mortgagee
convenants in giving or withholding such consent with respect to
material alterations, Mortgagee will act in good faith in
accordance with its commercial lending practices then in effect.
Mortgagee shall at all times have free access to the Mortgaged
Premises for the purposes of inspection and the exercise of its
rights hereunder.
8. ADVANCEMENTS TO PROTECT SECURITY. If Mortgagor shall
neglect or refuse to keep the Mortgaged Premises and the Chattel
Property in good repair, to maintain and to pay the premiums for
insurance which may be required, or to pay and discharge all
taxes, assessments and charges of every nature assessed against
Mortgagor, the Mortgaged Premises or the Chattel Property, so as
to protect and preserve the security intended by this Mortgage,
all as provided for under the terms of this Mortgage, or to pay
all liens and encumbrances when due, whether such liens or
encumbrances are permitted by Mortgagee or not, or if Mortgagor
shall permit any lien or encumbrance on the Mortgaged Premises or
Chattel Property to be in default, Mortgagee may, at its option,
cause such repairs or replacements to be made, obtain such
insurance or pay such taxes, assessments and charges and pay such
liens and encumbrances and cure such defaults thereunder. Any
amounts paid as a result thereof, together with interest at the
per annum
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<PAGE>
rate equal to the highest default rate of interest
under the Loan Documents from the date of payment, shall be
immediately due and payable by Mortgagor to Mortgagee, and until
paid shall be added to and become a part of the Obligations
evidenced by the Guaranty and secured hereby. Further, the same
may be collected by Mortgagee in any suit hereon or upon the
Obligations, or Mortgagee, by payment of any tax, assessment or
charge may, in its discretion, be subrogated to the rights of the
governmental subdivision levying such tax, assessment or charge.
No such advances shall be deemed to relieve Mortgagor from any
default hereunder or impair any rights or remedy of Mortgagee,
and the exercise by Mortgagee of the right to make advances shall
be optional with Mortgagee and not be obligatory and Mortgagee
shall not, in any case, be liable to Mortgagor for a failure to
exercise any such right. Any and all such advances shall,
without exception, be superior and prior to any other claims
against the Mortgaged Premises unless such claimant shall have
provided to Mortgagee written notice at least ten (10) business
days prior to such advancement by Mortgagee of such claimant's
intent that its claim or claims shall be superior to the claims
of Mortgagee with respect to Mortgagee's future advances.
9. CONDEMNATION. Subject to the terms of the BNY
Mortgage, all awards made by any public or quasi-public authority
for damages to the Mortgaged Premises by virtue of an exercise of
the right or threat of eminent domain by such authority,
including any award for a taking of title, possession or right of
access to a public way, or for any change of grade of streets
affecting the Mortgaged Premises, are hereby assigned to
Mortgagee and Mortgagee, at its option, is hereby authorized,
directed and empowered to collect and receive the proceeds of any
such award to the extent of the Obligations secured by or payable
under this Mortgage from the authorities making the same and to
give proper receipts and acquittances therefor. Mortgagee may
use such proceeds in any one or more of the following ways: (i)
it may apply the same or any part thereof to the last maturing
installments of the Obligations secured hereby or payable
hereunder, whether or not such Obligations are then due and
payable, (ii) use the same or any part thereof to replace or
restore the Mortgaged Premises to a condition satisfactory to
Mortgagee, or (iii) release the same to Mortgagor. Mortgagee is
authorized, at its option, to appear in and prosecute in its own
name any action or proceeding or to make any compromise or
settlement in connection with such taking or damage to the extent
of to the Mortgagee's interest and, with consent and joinder of
Mortgagor, to make any compromise or settlement in connection
with such taking or damage. Mortgagor will, upon request by
Mortgagee, execute and deliver any and all assignments and other
instruments sufficient for the purpose of assigning all proceeds
from such awards to Mortgagee free and clear and discharged of
any and all encumbrances or claims of any kind or nature
whatsoever.
10. COVENANT AGAINST SALE, LIENS AND OTHER SECURITY
INTERESTS, VIOLATION OF LAWS AND ENVIRONMENTAL MATTERS AND
INDEMNIFICATION.
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A. Mortgagor covenants and agrees not to sell or
transfer all or any part of the legal or equitable title or
ownership of the Mortgaged Premises in any manner, or to
lease or otherwise grant or permit the use of the
Mortgagee's Premises by any other persons (other than
employees, agents and licensees), without the prior written
consent of Mortgagee, which Mortgagee may give or withhold
at its discretion, unless in connection with such sale or
transfer the Mortgagee is repaid in full for all Obligations
under the Loan Documents. Mortgagee covenants such
discretion will be exercised in good faith in accordance
with its commercial lending practices then in effect.
Mortgagor agrees that Mortgagee shall have no liability for
withholding of such consent other than for bad faith or
willful disparate treatment of Mortgagor. In the event
Mortgagee elects to consent to such sale, Mortgagee may
require payment of a transfer fee equal to one percent
(1.0%) of the then outstanding principal balance of the
Obligations, and may, at its option, increase the highest
interest rate set forth in the Loan Documents to the then
prevailing interest rate charged by Mortgagee for mortgage
loans secured by property which are both similar to this
mortgage loan and these Mortgaged Premises and the credit
and other risks associated therewith and with such purchaser
or transferee. In the event of any such sale or transfer of
all or any part of the Mortgaged Premises, the purchaser or
transferee shall be deemed to have assumed and agreed to pay
the indebtedness and Obligations owing to Mortgagee
hereunder, whether or not an instrument evidencing such sale
or transfer expressly so provides, and the Mortgagee may
deal with such new owner or owners with reference to the
obligations secured hereby in the same manner as if the new
purchaser or transferee were the Mortgagor; provided,
however, that no such dealings shall in any way discharge
the Mortgagor's liability hereunder or upon the Obligations
secured hereby. In the event Mortgagee elects to consent to
any lease or use right, Mortgagor covenants to provide such
assignment of leases and rents and other documents as
Mortgagee may require, and to pay any applicable fees
imposed by Mortgagee in connection therewith.
B. Mortgagor hereby covenants that no lien of any
mechanic or materialman is attached, or at the time of
execution hereof may validly attach, to the Mortgaged
Premises or any part thereof; that Mortgagor will pay all
sums which if not paid may result in the acquisition or
creation of a lien prior to or of equal priority with or
junior to the lien of this Mortgage, or which may result in
conferring upon a tenant of any part of the Mortgaged
Premises a right to recover such sums as prepaid rent or as
a credit or offset against any future rental obligation;
that Mortgagor will not use the Mortgaged Premises for any
purpose which violates any federal or state law,
governmental regulation or local ordinance; and, that
Mortgagor will not grant any other lien or security interest
on any part of the Mortgaged Premises or Chattel Property
without full disclosure to and the prior written consent by
Mortgagee, which consent the Mortgagee may give or withhold
in its discretion, and Mortgagee covenants such
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<PAGE>
discretion
will be exercised in good faith in accordance with its
commercial lending practices then in effect. Mortgagor
agrees that Mortgagee shall have no liability for the
withholding of such consent other than for bad faith or
willful disparate treatment of Mortgagor. Mortgagor
will operate the Mortgaged Premises at all times as a
facility for the imprinting and finishing of sportswear and
other clothing products. Mortgagor shall not acquire any
equipment or fixtures covered by this Mortgage or the Loan
Documents subject to any security interest or other charge
or lien having priority over the lien or security interest
granted under this Mortgage or the Loan Documents.
C. Mortgagor covenants and agrees that in the
ownership, operation and management of the Mortgaged
Premises, Mortgagor will observe and comply with all
applicable federal, state and local statutes, ordinances,
regulations, orders and restrictions, including, without
limitation, all zoning, building code, medical, health care,
environmental protection and equal employment opportunities
statutes, ordinances, regulations, orders aid restrictions.
D. Mortgagor covenants and agrees that Mortgagor will
not grant, consent to, or allow to remain unpaid any liens,
encumbrances, judgments, taxes, or other claims against the
Mortgaged Premises, whether prior or subordinate to the
rights of Mortgagee therein, without the prior written
consent of Mortgagee.
11. ESCROW DEPOSITS. Upon request by Mortgagee, Mortgagor
shall pay to Mortgagee, on dates upon which interest is payable,
such amounts as Mortgagee from time to time estimates as
necessary to create and maintain a reserve fund from which to pay
at least thirty (30) days before the same become due all rental
payments, real property taxes, personal property taxes,
assessments, liens and charges on or against the Mortgaged
Premises and the Chattel Property and premiums for insurance as
herein covenanted to be furnished by Mortgagor. Mortgagee
covenants such a request will be made in good faith in accordance
with its commercial lending practices then in effect. Payments
from such reserve fund for such purposes may be made by Mortgagee
in its discretion and any deficiency in such reserve fund shall
be immediately due and payable to Mortgagee by Mortgagor. Such
payments shall not be, nor deemed to be, trust funds but may be
commingled with the general funds of Mortgagee, and no interest
shall be payable in respect thereof. Mortgagor shall furnish
Mortgagee with all bills, statements and invoices with respect to
such taxes, insurance premiums and other items for the payment of
which the escrow is created, at least ten (10) days prior to the
due date thereof. Upon the occurrence of an Event of Default
under the terms of this Mortgage or the Loan Documents, any part
or all of the reserve fund may be applied to the Obligations
secured hereby and, in refunding any part of the reserve fund.
Mortgagee may deal with any person or party represented to be the
owner of the Mortgaged Premises at that time.
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12. ASSIGNMENT OF LEASES AND RENTS. Mortgagor hereby
assigns and transfers to Mortgagee all the rents and revenues of
the Mortgaged Premises, including those now due, or to become due
by virtue of any lease or other agreement for the occupancy or
use of all or any part of the Mortgaged Premises, regardless of
to whom the rents and revenues of the Mortgaged Premises are
payable. Mortgagor hereby authorizes Mortgagee or Mortgagee's
agents to collect the aforesaid rents and revenues and hereby
directs each tenant of the Mortgaged Premises to pay such rents
to Mortgagee or Mortgagee's agents; provided, however, that prior
to written notice given by Mortgagee to Mortgagor of the
occurrence of an Event of Default by Mortgagor of any covenant or
agreement in this Mortgage, Mortgagor may collect and receive all
rents and revenues of the Mortgaged Premises. Upon delivery of
written notice by Mortgagee to Mortgagor of the occurrence of an
Event of Default by Mortgagor of any covenant or agreement of
Mortgagor in this Mortgage, and without the necessity of
Mortgagee entering upon and taking and maintaining full control
of the Mortgaged Premises in person, by agent or by a court-
appointed receiver, Mortgagee shall immediately be entitled to
possession of all rents and revenues of the Mortgaged Premises as
specified in this Section 11 as the same become due and payable,
including, but not limited to, rents then due and unpaid, and all
such rents shall immediately upon delivery of such notice be held
by Mortgagor as trustee for the benefit of Mortgagee only;
provided however, that the written notice by Mortgagee to
Mortgagor of the breach by Mortgagor shall contain a statement
that Mortgagee exercises its rights to such rents. Mortgagor
agrees that commencing upon delivery by the Mortgagee of such
written notice of Mortgagor's breach, each tenant of the
Mortgaged Premises shall make such rents payable to and pay such
rents to Mortgagee or Mortgagee's agents on Mortgagee's written
demand to each tenant therefor, delivered to each tenant
personally or by mail, without any liability on the part of each
or any tenant to inquire further as to the existence of a default
by Mortgagor.
Upon request by Mortgagee, Mortgagor will assign to
Mortgagee, as further security for the Obligations secured
hereby, its interest, as lessor, in any or all leases of all or
any portion of the Mortgaged Premises and in any licenses,
permits, agreements or contracts pertaining to the Mortgaged
Premises. Such assignments are to be made by instruments in form
satisfactory to Mortgagee, but no such assignment shall be
construed as a consent by Mortgagee to any lease, license,
permit, agreement or contract so assigned or impose upon
Mortgagee any obligations with respect thereto. Mortgagor will
not cancel any of the leases now or hereafter assigned to
Mortgagee nor terminate or accept a surrender thereof or reduce
the payment of the rent thereunder or modify any of the leases or
accept any prepayment of rent (except any amount which may be
required to be prepaid by the terms of any such lease) without
first obtaining, on each occasion, the prior written consent of
Mortgagee, which Mortgagee may give or withhold at its
discretion. Mortgagee convenants in giving or withholding such
consent, Mortgagee will act in good faith in accordance with its
commercial lending practices then in effect. Mortgagor will
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perform all of its obligations as lessor under all of the leases
now or hereafter assigned to Mortgagee.
13. SUBROGATION. If the proceeds of the Obligations
secured hereby, or any part thereof, or any amount paid out or
advanced by the Mortgagee, be used directly or indirectly to pay
off, discharge, or satisfy, in whole or in part, any prior lien
or encumbrance upon the Mortgaged Premises or any part thereof,
then the Mortgagee shall be subrogated to the rights of the
holder of such lien or encumbrance, although such lien or
encumbrance may have been released of record.
14. SECURITY INTEREST. Subject to the Intercreditor
Agreement, Mortgagor hereby grants and transfers to Mortgagee a
security interest in all fixtures, equipment, improvements,
furniture, and other intangible personal property now owned or
hereafter acquired by Mortgagor attached to, located on, forming
a part of, or used in connection with the Real Estate, in such
leasehold or other use rights which Mortgagor may in any such
property not owned by Mortgagor, and in all property of like kind
or type hereafter acquired by Mortgagor in substitution or
replacement thereof, together with all equipment and accessions
now in, attached to, or which may hereafter at any time be placed
in or added to the above-described property and owned by
Mortgagor or in which Mortgagor has any leasehold or other use
rights, including all after-acquired property, replacements, and
proceeds thereof (including tort claims and insurance) ("TANGIBLE
COLLATERAL"); and, subject to the Factoring Agreement and other
agreements between Mortgagee and either Signal or Mortgagor, all
of Mortgagor's present and future receivables; and all rents,
royalties, income, security deposits, funds, proceeds and/or
profits received or receivable by Mortgagor from all leases,
rental agreements, or occupancies of the Real Estate ("CASH
COLLATERAL") (said Tangible Collateral and Cash Collateral being
collectively referred to as the "CHATTEL PROPERTY"); to secure
the payment of the Obligations and any extensions or renewals
thereof and any other liabilities of the Mortgagor in favor of
Mortgagee, direct or indirect, absolute or contingent, now
existing or hereafter arising, all of which the Mortgagor agrees
to pay without relief from valuation or appraisement laws and
with reasonable attorneys fees; and the payment of any and all
future advances that may be made by Mortgagee to Mortgagor during
the term of this Mortgage shall likewise be secured by the
Chattel Property, equally with and to the same extent as monies
originally advanced under this Mortgage. The Chattel Property
has been or is being acquired for business use. Mortgagor now
has or will acquire clear and unencumbered title to the Chattel
Property now in its possession or to be acquired subject to prior
interests granted Mortgagee, and, except for such prior interests
and for the security interest granted herein, Mortgagor will at
all times keep the Chattel Property free from any adverse lien,
security interest, or encumbrance. The security interest hereby
granted stall continue until full performance by the Mortgagor of
all conditions and obligations of the Obligations and this
Mortgage. Mortgagor shall be entitled to possession of the
Chattel Property until default, but shall use the Chattel
Property in a careful and prudent manner, maintain the Chattel
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Property in good repair, pay all taxes and other charges thereon
when due, and defend the Chattel Property at all times against
any claims during the duration of this Mortgage. Except for
removal to repair the Chattel Property, Mortgagor shall not
permit the Chattel Property to be removed from the Mortgaged
Premises without the prior written consent of Mortgagee. Upon
any default, Mortgagee, at its option and without notice or
demand, shall be entitled to enter upon the Mortgaged Premises to
take immediate possession of the Chattel Property or to render
the same unusable. Upon request, Mortgagor shall assemble and
make the Chattel Property available to Mortgagee at a place to be
designated by Mortgagee which is reasonably convenient to both
parties. Upon repossession, Mortgagee may propose to retain the
Chattel Property in partial satisfaction of the Obligations of
Mortgagor secured hereby or sell all or any portion of the
Chattel Property at public or private sale in accordance with the
Uniform Commercial Code as adopted in Indiana or and other
applicable statute. In the further event that Mortgagee shall
dispose of any or all of the Chattel Property after default, the
proceeds of disposition shall be first applied in the following
order: (a) to the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, (b) to the reasonable
attorneys' fees and legal expenses incurred by Mortgagee, and (c)
to the satisfaction of the Obligations secured hereby. Mortgagor
agrees to release and hold harmless Mortgagee and its employees,
agents, officers and directors from and against any and all
claims arising out of the repossession of the Chattel Property so
long as such repossession is lawfully exercised. Mortgagor
hereby authorizes Mortgagee to execute and file financing
statements and any construction statements or other filings
signed only by a representative of Mortgagee covering the
security interest of Mortgagee in the Chattel Property.
15. EXPENSES OF MORTGAGEE. Mortgagor hereby indemnities
Mortgagee and agrees to save it harmless from any and all loss,
damage or expense, including reasonable attorneys' fees and
disbursements, resulting from or arising out of the execution and
delivery of this Mortgage and the terms hereof and the same is
made a part of the Obligations secured hereby. All sums paid by
Mortgagee, including reasonable attorneys' fees and
disbursements, to cure default by Mortgagor hereunder, to amend
or otherwise modify this Mortgage, or the expense of any
litigation or threatened litigation action (or any settlement,
arbitration, or other actions or dispute resolution mechanism) to
prosecute or defend the rights and lien created hereby in any
action or proceeding to which Mortgagee is made a party by reason
of this Mortgage or the Loan Documents, or in which it becomes
necessary to defend or uphold the lien of this Mortgage or the
Loan Documents, shall be paid by Mortgagor to Mortgagee, together
with interest thereon from date of payment at a per annum rate
equal to the highest default rate of interest under the Loan
Documents, and any such sums and interest thereon shall be
immediately due and payable and secured hereby, having the
benefit of the lien hereby created as a part thereof and with its
priority, all without relief from valuation or appraisement laws.
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16. CHANGE OF LAWS. In the event of the enactment after
the date hereof of any law of the State in which the Mortgaged
Premises are located imposing upon Mortgagee the payment of the
whole or any part of the taxes or assessments for charges and
liens herein required to be paid by Mortgagor, or the passing or
creation of any law deducting from the value of the Mortgaged
Premises any lien thereon for the purpose of taxation of
Mortgagee, or changing in any way the laws now in force for the
taxation of mortgages, or the Obligations secured hereby, or
changing the manner of collection of any such taxation from
Mortgagor so as to affect this Mortgage or the Obligations
secured hereby, then in such event Mortgagor, upon demand by
Mortgagee, shall pay such taxes or assessments or reimburse
Mortgagee therefor; provided, however, that if it is unlawful for
Mortgagor to make such payment, or the making of such payment
would impose a rate of interest beyond the maximum permitted by
law, then and in such event, such payments by the Mortgagor shall
be delayed until the earliest interest payment dates under the
Loan Documents on which the receipt thereof would be permissible
under the laws applicable to the Mortgagee limiting rates of
interest which may be charged or collected by the Mortgagee.
17. EVENTS OF DEFAULT. The occurrence of any one or more
of the following events shall be deemed to be an Event of Default
under this Mortgage notwithstanding any applicable grace period
or notice and cure period:
(a) Failure to pay the Note according to its terms;
(b) Failure to pay any other amounts payable under this
Mortgage;
(c) Failure to comply with any of the terms or covenants of
this Mortgage (other than as covered by subparagraphs
(a) and (b) of this Section 16);
(d) The occurrence of an Event of Default under the
Factoring Agreement or any of the Loan Documents or any
other writing executed by Mortgagor in connection with
the Obligations secured hereby;
(e) The breach of any covenant or agreement contained
herein, or if any representation or warranty contained
herein should prove to have been false or misleading in
any material respect at the time made or deemed to be
made;
(f) The filing by Mortgagor of a petition in voluntary
bankruptcy or under any chapter of the Federal
Bankruptcy Law or other similar law, state or federal,
whether now or hereafter existing, or an answer
admitting insolvency or inability to pay its debts;
(g) The adjudication of Mortgagor as a bankrupt, or the
appointment of a trustee or receiver for Mortgagor or
for all or a major portion of its property in any
involuntary proceeding, or the
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taking of jurisdiction by any court over the property of
Mortgagor or of the major part thereof in any involuntary
proceeding for the reorganization, dissolution, liquidation
or winding up of Mortgagor and the failure to discharge such
trustee or receiver or relinquish such jurisdiction or
vacate or stay on appeal;
(h) The making by Mortgagor of an assignment for the
benefit of creditors or the admitting by Mortgagor in
writing of its inability to pay its debts generally as
they become due, or the consent by Mortgagor to the
appointment of a receiver or trustee or liquidator of
all of its properties or the major part thereof;
(i) Default, including foreclosure and/or sale of any
collateral or other security, under or with respect to
any other obligations secured by all or any part of the
Mortgaged Premises or Chattel Property, whether or not
such obligation has been consented to by Mortgagee
prior to such default; or
(j) Abandonment of the Mortgaged Premises or Chattel
Property by the Mortgagor.
18. REMEDIES FOLLOWING A DEFAULT. (a) A "DEFAULT" under
this Mortgage shall mean the continued existence of an Event of
Default beyond the expiration of any applicable grace period or
notice and cure period.
(b) In the event of the occurrence of a Default, Mortgagee
may, in its sole discretion:
(i) Withhold Disbursement of any undisbursed loan
proceeds; and/or
(ii) Declare all of the Obligations secured hereby to
be immediately due and payable, without notice or
demand; provided, however, if the Event of
Default, the continued existence of which has
created the Default, is the result of a default by
Mortgagor of its obligations under Paragraphs 3,
4, 5, 6, 8, 9, or 23 hereof, Mortgagee may only
accelerate the Note, unless such Event of Default
shall also be a default under the terms of the
documents creating the other debts and obligations
included in the Obligations; and/or
(iii) Foreclose this Mortgage without relief under
valuation and appraisement laws; and/or
(iv) Apply for and be entitled to the appointment of a
receiver and such receiver is hereby authorized to
take possession of the Mortgaged Premises, collect
any rental, accrued or to accrue, whether in money
or in kind, for the use or
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occupancy of the Mortgaged Premises by any persons,
firm or corporation, and may let or lease the Mortgaged
Premises or any part thereof, receive the rents,
income and profits therefrom, and hold the
proceeds subject to the orders of the court, or
the judge thereof, for the benefit of the
Mortgagee, pending the final decree in the
proceedings pursuant to which the receiver has
been appointed, and during any period allowed by
law for the redemption from any sale ordered in
foreclosure proceedings, and such receiver may be
appointed irrespective of the value of the
Mortgaged Premises or its adequacy to secure or
discharge the Obligations due or to become due or
the solvency of the Mortgagor; and/or
(v) Take possession of and hold the Mortgaged Promises
with or without process of law and collect the
rents and profits therefrom, applying same to the
charges and payments due under the conditions of
this Mortgage so long as default shall continue
which such taking of possession shall in no way
waive the right of Mortgagee to exercise the other
remedies set forth herein because of a default.
(c) In the event Mortgagee elects one or more of the above
remedies upon default, Mortgagor agrees to pay all of the costs
and expenses of Mortgagee incurred in pursuance of such remedy or
remedies, including, without limiting the generality thereof,
reasonable attorneys' fees, all costs of collection, late payment
penalties, abstracts of title or title insurance, hazard
insurance on the Mortgaged Premises and Chattel Property, real
property taxes on the Mortgaged Premises and personal property
taxes on the Chattel Property which are paid or incurred by
Mortgagee, repairs, maintenance, and replacements of the
Mortgaged Premises and Chattel Property which are paid or
incurred by Mortgagee, repairs, maintenance and replacements of
the Mortgaged Premises and Chattel Property which are advanced by
the Mortgagee, payments by Mortgagee to holders of liens or
encumbrances on the Mortgaged Premises and/or Chattel Property
which are then due and payable, and all costs and expenses of
preparing the Real Estate, the Mortgaged Premises or the Chattel
Property for sale, including, without limitation, appraisals,
surveys and environmental site assessments, and interest
commencing with the date of default, calculated at the then
applicable rate of interest under the Note plus two hundred (200)
basis points, compounded monthly, on the sum of the above costs
and expenses plus the unpaid principal balance of the Obligations
secured hereby, and interest unpaid prior to the date of default,
which shall become a part of the Obligations secured hereby and
collectible as such. In the event of the foreclosure of this
Mortgage, the abstracts of title or title insurance policies and
the policies of hazard insurance shall become the absolute
property of the Mortgagee.
(d) In the event the Mortgaged Premises and/or Chattel
Property are sold under foreclosure and the proceeds together
with the rents, issues,
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income and profits collected by Mortgagee are insufficient to pay the
total Obligations evidenced and secured by this Mortgage, the Mortgagee
shall be entitled to a deficiency judgment against the Mortgagor.
19. NON-WAIVER OF DEFAULT. No failure by Mortgagee in the
exercise of any of its rights under this Mortgage shall preclude
Mortgagee from the exercise thereof in the event of subsequent
default by Mortgagor hereunder, and no delay by Mortgagee in the
exercise of its rights under this Mortgage shall preclude the
Mortgagee from the exercise thereof so long as Mortgagor is in
default hereunder. Mortgagee may enforce any one or more of its
rights or remedies hereunder successively or concurrently.
20. MODIFICATION OF OBLIGATIONS AND RELEASE OF COLLATERAL.
Mortgagee at its option may extend, change, or modify the time
for the payment of the Obligations or release all or part of the
Mortgaged Premises and Chattel Property without the consent of
any junior lienholder or the Mortgagor if Mortgagor has then
parted with title to the Mortgaged Premises and no sale of the
Mortgaged Premises or forbearance on the part of the Mortgagee or
its assigns, or extension of the time for the payment of the
Obligations hereby secured or reduction in payments, or
acceptance of renewals or release of all or part of the Mortgaged
Premises and Chattel Property shall affect the priority of this
Mortgage or Loan Documents or the security hereof or shall
operate to release, modify, change or affect the original
liability of the Mortgagor herein or a subsequent mortgagor,
surety or guarantor, either in whole or in part, nor shall the
full force and effect of the security of this Mortgage and Loan
Documents be altered thereby.
21. RIGHTS OF SUCCESSORS. The covenants herein contained
shall bind, and the benefits and advantages shall inure to, the
respective heirs, executors, administrators, successors and
assigns of the parties hereto.
22. INTERPRETATION. In the event this Mortgage is executed
by more than one person, firm or corporation, the liability of
the undersigned parties shall be joint and several. Whenever
used, the singular shall include the plural, the plural the
singular, and the use of any gender shall include all genders.
The term "MORTGAGEE" shall include any payee of the Obligations
hereby secured or any transferee thereof whether by operation of
law or otherwise. Descriptive readings are for convenience only
and shall be deemed to not affect the meaning of or construction
of any provision hereof. This Mortgage is being executed as part
of the credit facilities contemplated by the Loan Documents and
is to be construed consistent therewith. To the extent of any
conflict between the terms hereof and of any other Loan Document,
this Mortgage shall control as to any matters affecting the Real
Estate.
23. MORTGAGOR. The Mortgagor represents and warrants that
(i) the Mortgagor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, being the jurisdiction of its incorporation, and is
duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the conduct of
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its business requires it to be so qualified, (ii) the Mortgagor has
full power, authority and legal right to execute, deliver and
perform this Mortgage and the transactions contemplated hereby,
(iii) the execution, delivery and performance of this Mortgage
and the transactions contemplated hereby by Mortgagor have been
duly authorized by all necessary corporate action, (iv) this
Mortgage has been duly executed and delivered on behalf of the
Mortgagor by its duly authorized officers, (v) this Mortgage
constitutes the legal, valid and binding obligations of the
Mortgagor enforceable against it in accordance with their terms,
(vi) the execution, delivery and performance of this Mortgage by
the Mortgagor do not and will not violate, conflict with, or
result in the breach of, any term, condition or provision of, or
require the consent of any other person under, (a) any existing
law or governmental regulation to which the Mortgagor is subject,
(b) any judgment, order, injunction. decree or award of any
court, arbitrator or governmental official, body or authority
which is applicable to the Mortgagor, (c) the Articles of
Incorporation or By-laws of the Mortgagor or (d) any mortgage,
agreement, commitment, lease, or other instrument, document or
understanding to which the Mortgagor is a party or by which it
may be bound or affected, or give any party with rights
thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of the
Mortgagor, and (vii) no other authorization, approval or consent
of, and no filing with any governmental official or authority is
required in connection with the execution, delivery or
performance of this Mortgage by the Mortgagor. The
representative of Mortgagor executing this mortgage on its behalf
hereby represents that he is such representative and that he has
been duly authorized and empowered by appropriate resolutions
duly adopted by Mortgagor to execute and deliver this Mortgage
and the Guaranty secured thereby for and on behalf of Mortgagor.
24. HAZARDOUS WASTE. (a) Mortgagor warrants, represents
and covenants:
(i) Subject to all matters disclosed to Mortgagee in the
Phase I Site Assessment No. 54898.01 performed by Clayton
Environmental Consultants, Inc., dated May 20, 1994, copies of
which have been furnished Mortgagee, the Mortgagor, and those
holding the Mortgaged Premises under Mortgagor, are in compliance
with all laws and regulations relating to pollution and
environmental control applicable to the Mortgaged Premises except
where any non-compliance is immaterial and would have no adverse
affect upon the Mortgaged Premises. The Mortgagor will comply
with all such laws and regulations which may be imposed in the
future other than for any non-compliance which is immaterial and
would have no adverse affect upon the Mortgaged Premises and
those which would not have a material adverse effect on the
business, assets, properties or condition (financial or
otherwise) of the Mortgagor. Without limiting the generality of
the foregoing, the Mortgaged Premises are free from "HAZARDOUS
SUBSTANCES," which for purposes of this Mortgage includes,
without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or
toxic substances or related materials defined in the
Comprehensive
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Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Section 1801, ET SEQ.), the Resource, Conservation and Recovery
Act, as amended (42 U.S.C. Section 6901, ET SEQ.), and the Clean
Air Act, as amended (42 U.S.C. Section 7401, ET SEQ.) and
includes oil, waste oil, and used oil as those terms are defined
in the Clean Water Act, as amended (33 U.S.C. 1251 ET SEQ.), and
the Oil Pollution Act of 1990, as amended (33 U.S.C. 2701 ET
SEQ.) and in the rules and regulations adopted and publications
promulgated pursuant thereto and shall include any other
pollutant or contaminant designated as such by Congress or the
United States Environmental Protection Agency (EPA), or defined
by any other federal, state or local governmental law, ordinance,
rule or regulation having jurisdiction over the Mortgaged
Premises regulating, relating to, or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, as now or at any time in effect
("HAZARDOUS SUBSTANCES") (other than Hazardous Substances used by
the Mortgagor in the normal and ordinary course of business and
reported to agencies in the normal and ordinary course of
business in material safety data sheets or the like); no portion
of the Mortgaged Premises is subject to federal, state, or local
regulation or liability because of the presence of stored, leaked
or spilled Hazardous Substances, including without limitation
petroleum products, waste materials or debris, "PCB's" or PCB
items (as defined in 40 C.F.R. 763.63), underground storage
tanks, "ASBESTOS" (as defined in 40 C.F.R. 763.63) or the past or
present accumulation, spillage or leakage of any such substances;
and the Mortgagor is in compliance with all federal, state and
local requirements relating to protection of health or the
environment in connection with the operation of their business[,
except where any non-compliance is immaterial and would have no
adverse affect upon the Mortgaged Premises]: and the Mortgagor
has received no complaint regarding the Mortgaged Premises, has
received no notice of any investigation regarding the Mortgaged
Premises, and has no knowledge of any facts or conditions that
could serve as the basis for any such complaint or investigation.
Further, the Mortgagor is unaware of any investigation, threat or
concern by any entity regarding environmental issues involving
the Mortgaged Premises. There are not now any outstanding
citations, notices or orders of violation or noncompliance issued
to Mortgagor or relating to its business assets, property or
leaseholds under any such laws, rules or regulations, nor any
conditions which, if known by the proper authorities, could
result in any of the foregoing. Mortgagor shall permit no
release of Hazardous Substances on, to or from the Mortgaged
Premises, shall not use any Hazardous Substances on the Mortgaged
Premises (other than Hazardous Substances used by the Mortgagor
in the normal and ordinary course of business and reported to
agencies in the normal and ordinary course of business in
material safety data sheets or the like), and, without limiting
any other provision of this Mortgage, shall keep the Mortgaged
Premises free and clear from any liens or other encumbrances
imposed pursuant to any applicable environmental laws or other
rights or claims relating to the environmental condition of the
Mortgaged Premises or
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the conduct of the Mortgagor's business
thereon with respect to any air, water, noise or other pollution
or contamination.
(ii) If Mortgagor receives any notice of (a) the happening
of an event involving the use, spill, discharge, release or
cleanup of any Hazardous Substance or known hazardous or toxic
waste, including, but not limited to any oil or pesticide, on or
about any property of Mortgagor or caused by the Mortgagor (a
"HAZARDOUS DISCHARGE") or (b) any complaint, order, citation or
notice with regard to air emissions, water discharges, noise
emissions or any other environmental, health or safety matter
affecting the Mortgagor or the Mortgaged Premises or Mortgagor's
operations or the operations of any person holding the Mortgaged
Premises by or through Mortgagor (an "ENVIRONMENTAL COMPLAINT")
from any person or entity, including without limitation the
Department of Environmental Management of the State of Indiana
("DEM"), the United States Environmental Protection Agency
("EPA"), the United States Army Corps of Engineers (the "CORPS"),
or the United States Coast Guard (the "COAST GUARD"), then
Mortgagor will give prompt written notice of same to Mortgagee
(but not later than five (5) days of receipt thereof) and shall
promptly comply with its obligations under law with regard to
such Hazardous Discharge or Environmental Complaint, which
compliance shall include at a minimum the immediate commencement,
and the diligent pursuit, of any remedial action required
thereby. Such remedial action shall be completed within the
requirements established by any order or other directive binding
on the Mortgagor or, if no such requirements are set forth
therein, then within sixty (60) days of the Mortgagor's receipt
thereof or such longer time as may be necessary and appropriate
to effectuate such remediation in a diligent manner.
(iii) Mortgagor and those holding the Mortgaged Premises
under Mortgagor have, and will continue to have, all necessary
federal, state and local licenses, certificates and permits
relating to the Mortgagor and the persons holding the Mortgaged
Premises and to the Mortgaged Premises and the operations
conducted thereon, and they are in compliance with all applicable
federal, state and local laws, rules and regulations relating to
air emissions, water discharges, noise emissions, solid or liquid
storage and disposal, hazardous or toxic waste or substances and
other environmental, health and safety matters, other than for
any non-compliance which is immaterial and would have no adverse
affect upon the Mortgaged Premises and those which would not have
a material adverse effect on the business, assets properties or
condition (financial or otherwise) of the Mortgagor.
(iv) The Mortgagor shall conduct and complete all
investigations, including a comprehensive environmental audit,
studies, sampling and testing, and all remedial, removal and
other actions necessary to clean up and remove all Hazardous
Substances on, under, from or affecting the Real Estate and the
Mortgaged Premises as required by all applicable federal, state
and local laws, ordinances, rules, regulations and policies (all
of the foregoing herein referred to as "ENVIRONMENTAL AUDIT
ACTIVITIES"), to the satisfaction of the Mortgagee, and in
accordance with the orders and
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directives of all federal, state
and local governmental authorities and at such time, or from time
to time, as the Mortgagee may reasonably request. If the
Mortgagor fails to conduct such Environmental Audit Activities
required by such laws, ordinances, rules, regulations or policies
or by the Mortgagee, then the Mortgagee may at its option and at
the expense of the Mortgagor, conduct such audit and shall give
prior notice thereof to Mortgagor.
(v) In the event this Mortgage is foreclosed or the
Mortgagor tenders a deed in lieu of foreclosure, the Mortgagor
shall deliver the Real Estate and the Mortgaged Premises to the
Mortgagee free of any and all Hazardous Substances which are then
required to be removed (whether over time or immediately)
pursuant to applicable federal, state and local laws, ordinances,
rules or regulations affecting the Real Estate and the Mortgaged
Premises.
(b) Mortgagee shall have the right but not the obligation,
prior or subsequent to an Event of Default, without limiting
Mortgagee's other rights and remedies under this Mortgage, to
enter onto the Mortgaged Premises or to take such other actions
as it deems necessary or advisable to clean up, move, resolve or
minimize the impact of, or otherwise deal with, any Hazardous
Substances on the Mortgaged Premises following receipt of any
notice from any person or entity asserting the existence of any
Hazardous Substance pertaining to the Mortgaged Premises or any
part thereof which, if true, could result in an order, suit,
imposition of a lien on the Mortgaged Premises, or other action
and/or which, in Mortgagee's sole opinion, could jeopardize
Mortgagee's security under this Mortgage. All reasonable costs
and expenses paid or incurred by Mortgagee in the exercise of any
such rights shall be Indebtedness secured by this Mortgage and
shall be payable by Mortgagor upon demand.
(c) Mortgagor hereby agrees to defend, indemnify and hold
the Mortgagee harmless from and against any and all claims,
losses, liabilities, damages and expenses (including, without
limitation, cleanup costs and reasonable attorney's fees,
including those arising by reason of any of the aforesaid or an
action against the Lender under this indemnity) arising directly
or indirectly from, out of, or by reason of any Hazardous
Discharge, Environmental Complaint, or any environmental, health
or safety law governing the Mortgagor, their operations or the
Mortgaged Premises or from any inaccuracy in the representations
and warranties given herein relating to environmental matters.
This indemnification shall survive the repayment of the
Indebtedness and satisfaction or release of this Mortgage.
(d) All warranties and representations above shall be
deemed to be continuing and shall remain true and correct in all
material respects until all of the Indebtedness has been paid in
full and any limitations period expires. Mortgagor's covenants
above shall survive any exercise of any remedy by Mortgagee under
the Loan Agreement or Note, or this Mortgage, including
Foreclosure of this Mortgage (or deed in lieu thereof), even if,
as a part of such foreclosure or deed in lieu of foreclosure, the
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Indebtedness is satisfied in full and/or this Mortgage shall have
been released.
25. GOVERNING LAW; WAIVERS. THE VALIDITY OF THIS
AGREEMENT, ITS CONSTRUCTION, INTERPRETATION AND ENFORCEMENT AND
THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF INDIANA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. MORTGAGOR AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT, THE GUARANTY AND THE LOAN
DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS
LOCATED IN THE COUNTY OF MARION, STATE OF INDIANA, OR THE FEDERAL
COURTS WHOSE VENUE INCLUDES THE COUNTY OF MARION, STATE OF
INDIANA, THE STATE COURTS LOCATED IN THE COUNTY OF NEW YORK,
STATE OF NEW YORK, OR THE FEDERAL COURTS WHOSE VENUE INCLUDES THE
COUNTY OF NEW YORK, STATE OF NEW YORK, OR, AT THE SOLE OPTION OF
LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. MORTGAGOR WAIVES,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A
TRIAL BY JURY AND ANY RIGHT MORTGAGOR MAY HAVE TO ASSERT THE
DOCTRINE 0F "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
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IN WITNESS WHEREOF, Mortgagor has executed this instrument
this 31st day of March, 1995.
THE SHIRT SHED, INC.
By: /s/ William H. Watts
By: /s/ Robert J. Powell_
STATE OF TENNESSEE
COUNTY OF HAMILTON
Personally appeared before me, a Notary Public in and for
the county aforesaid, William Watts, with whom I am personally
acquainted (or proved to me on the basis of satisfactory
evidence), and who upon oath acknowledged such person to be the
President of The Shirt Shed, Inc., the within named bargainer, a
Delaware corporation, and that he executed the within instrument
for the purposes therein contained by personally signing on
behalf of such corporation as Vice President.
Witness my hand, at office, this the 31st day of March, 1995.
/s/ Geoffrey G. Young
Notary Public
My Commission Expires: 7/26/95
This Instrument Prepared By: Geoffrey G. Young, Witt, Gaither &
Whitaker, P.C., 1100 American National Bank Building,
Chattanooga, TN 37402
Exhibit: A: Legal Description of the Mortgaged Premises
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LIST OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Property Description
The Registrant hereby agrees to furnish a copy of any of such omitted Schedules
or Exhibits supplementally upon request of the Comission's staff.
