[SIGNAL APPAREL LETTERHEAD]
September 14, 1999
Xx. Xxxx Xxxxxx
Xxxxx Xxxxxxx
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: $5 Million Convertible Debt
Dear Xx. Xxxxxx:
Reference is made to that certain Securities Purchase Agreement, dated as
of March 3, 1999 (the "Purchase Agreement"), executed between Signal Apparel
Company, Inc. ("Signal") and Xxxxx Xxxxxxx Strategic Growth Fund, L.P. and Brown
Xxxxxxx Strategic Growth Fund, Ltd. (the "Holders"). Reference is also made to
those certain 5% Convertible Debentures, each dated March 3, 1999, in the
original principal amounts of $1,750,000 and $ 3,250,000 (collectively, the
"Debenture") issued to the Holders by Signal in connection with the Purchase
Agreement. All capitalized terms used in this agreement and not otherwise
defined herein shall have the same meaning ascribed to such terms in the
Debenture and in the Purchase Agreement.
An Event of Default exists under Section 3.1 of the Debenture as a result
of the failure by Signal to pay the interest thereon that became due and payable
on July 1, 1999. Holders have certain rights under the Debenture in connection
with such Event of Default.
The Holders and Signal desire to amend the Debenture in certain respects.
In consideration of the waiver by Holders of the existing Event of Default
described above, the mutual promises set forth in this agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Holders and Signal hereby agree as follows:
Page 1
1. The last paragraph on page 2 of the Debenture which begins with the words
"The principal of..." shall be amended in its entirety to read as follows:
"The principal of, and interest on, this Security are payable in coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public or private debts, at the last address of the
Holder last appearing on the Register."
2. Concurrently with execution of this agreement, Signal shall pay to Holders
the sum of $62,000 as payment in full of all interest due under the
Debenture as of July 1, 1999. Holders have not received any common stock
certificates representing payment of such interest.
3. Notwithstanding any provision in the Debenture or the Purchase Agreement to
the contrary, the Conversion Price shall remain at Two Dollars ($2.00) and
shall not be adjusted (except as otherwise provided in the Debenture) until
December 31, 1999 (the "Adjustment Date"). On the Adjustment Date, at the
option of Signal (to be exercised in writing), the Conversion Price shall
be adjusted to One Dollar and Twenty Five Cents ($1.25); provided that, on
or before the Adjustment Date, a third party shall have provided to
Signal's lender not less than $10 million as collateral for new loans made
to Signal on or before the Adjustment Date. If Signal has not, on or before
the Adjustment, exercised the Conversion Price option in accordance with
the previous sentence, then, at the option of Holders (to be exercised in
writing at any time after November 1, 1999), the Conversion Price shall be
adjusted to One Dollar ($1.00).
4. Holders each hereby waive the existing Event of Default described above and
any Default which may now exist under the Debenture or the Purchase
Agreement; provided that Signal shall have made the payment required by
paragraph 2.
5. Except as specifically set forth herein, no other changes or modifications
to the Purchase Agreement or the Debenture are intended or implied, and, in
other respects, the Purchase Agreement and the Debenture shall continue to
remain in full force and effect in accordance with its terms as of the date
hereof.
6. The terms and provisions of this agreement shall be for the benefit of the
parties hereto and their respective successors and assigns; no other
person, firm, entity or corporation shall have any right, benefit or
interest under this agreement.
Page 2
7. This agreement may be signed in counterparts, each of which shall be an
original and all of which taken together constitute one amendment. In
making proof of this agreement, it shall not be necessary to produce or
account for more than one counterpart signed by the party to be charged.
8. This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
9. This agreement sets forth the entire agreement and understanding of the
parties with respect to the matters set forth herein. This agreement cannot
be changed, modified, amended or terminated except in writing executed by
the part to be changed.
Very truly yours,
SIGNAL APPAREL COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxx
----------------------------
Xxxxxx Xxxxxxxx
CFO
ACKNOWLEDGED AND AGREED:
BROWN XXXXXXX STRATEGIC GROWTH FUND, L.P.
By: Brown Xxxxxxx Asset Management LLC
By: /s/ Xxxx Xxxxxx
-----------------------
Xxxx Xxxxxx
Principal
BROWN XXXXXXX STRATEGIC GROWTH FUND, Ltd.
By: Brown Xxxxxxx Capital, LLC
Its General Partner
By: /s/ Xxxx Xxxxxx
-----------------------
Xxxx Xxxxxx
Principal
