NOTE EXCHANGE AGREEMENT
This is an agreement dated April 27, 1998 among General Textiles (the
"Company"), a California corporation, Family Bargain Corporation ("Family
Bargain") American Endeavour Fund Ltd., a Jersey corporation ("Endeavour") and
London Pacific Life Annuity Company ("London Pacific," and together with
Endeavour, the "Noteholders"), a North Carolina joint stock life insurer,
regarding the exchange by the Noteholders (a) of $4,900,000 principal amount of
Subordinated Reorganization Notes (the "Old Subordinated Notes") for $3,250,000
principal amount of Subordinated Notes due 2003 ("New Subordinated Notes"), and
(b) a total of $17,335,097.65 principal amount of Junior Subordinate
Reorganization Notes (the "Old Junior Notes") for (i) $17,335,097.65 principal
amount of Junior Subordinated Notes due 2005 ("New Junior Notes"), warrants
("Warrants") entitling the holders to purchase a total of 274,418 shares of
common stock, par value $.01 per share, of the Company ("Common Stock") and
75,000 shares of Common Stock (the "Shares"). The agreement of the parties is as
follows:
ARTICLE I
EXCHANGE OF NOTES
SECTION 01 Exchange of Notes. At the Closing described in Paragraph
2.01, each of the Noteholders will Exchange the principal amount of Old
Subordinated Notes and Old Junior Notes listed next to the name of that
Noteholder on Exhibit 1.01 for the principal amounts of New Subordinated Notes,
Junior Notes and Warrants or shares Common Stock shown opposite that
Noteholder's name on Exhibit 1.01.
ARTICLE II
THE CLOSING
SECTION 2.01 Place and Time of the Closing. The closing of the exchange
of Old Subordinated Notes and Old Junior Notes for New Subordinated Notes, New
Junior Notes, Warrants and Shares (the "Closing") will take place at the offices
of Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 11:00 A.M., New York
City time, on April 30, 1998 (the "Closing Date").
SECTION 2.02 Occurrences at the Closing.
At the Closing, the Company will deliver to each Noteholder
the following:
(i)A copy, executed by the Company, of a Subordinated Note Agreement (the
"Subordinated Note Agreement") substantially in the form of Exhibit 2.02-A(1).
(ii) A New Subordinated Note, in the principal amount shown on Exhibit
1.01.
(iii) A copy, executed by the Company, of a Junior Subordinated Note
Agreement (the "Junior Note Agreement') substantially in the form of Exhibit
2.02-A(3).
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(iv) A New Junior Subordinated Note in the principal
amount shown on Exhibit 1.01.
The New Subordinated Notes will be in the form of Exhibit A to the Subordinated
Note Agreement and the New Junior Notes will be in the form of Exhibit A to the
Junior Note Agreement. The New Subordinated Note and the New Junior Note issued
to a Noteholder each will be registered in the name of that Noteholder, and each
may bear a legend to the effect that it was issued in a transaction which was
not registered under the Securities Act of 1933, as amended, and it may not be
sold or transferred except in a transaction which is registered under that Act
or is exempt from the registration requirements of that Act.
(b) At the Closing, Family Bargain will deliver to the
Noteholders the following:
(i) To Endeavour, a certificate, registered in the name of Endeavour,
representing the Shares.
(ii)To London Pacific, a Warrant, substantially in the form of Exhibit
2.02-B(2), registered in the name of London Pacific, relating to 274,418 shares
of Common Stock.
(iii)To each of the Noteholders, a copy, executed by Family Bargain,
of a Registration Rights Agreement (the "Registration Rights Agreement")
substantially in the form of Exhibit 2.02-B(3).
The certificates representing the Shares and the Warrant
delivered at the Closing each may bear a legend to the effect that the Shares
were, or the Warrant was, issued in a transaction which was not registered under
the Securities Act of 1933, as amended, and may not be sold or transferred
except in a transaction which is registered under that Act or is exempt from the
registration requirements of that Act.
(c) At the Closing, each Noteholder will deliver to the
Company the following:
(i)Old Subordinated Notes and Old Junior Notes in the aggregate principal amount
shown on Exhibit 1.01, in proper form for transfer to the Company in accordance
with Article 8 of the Uniform Commercial Code as in effect in New York (or, if
Old Subordinated Notes or Old Junior Notes have been lost, an affidavit of lost
notes in the form of Exhibit 2.02-C relating to the lost Old Subordinated Notes
or Old Junior Notes, accompanied by a document assigning the lost Old
Subordinated Notes or Old Junior Notes to the Company).
(ii) A copy, executed by the Noteholder, of the
Subordinated Note Agreement.
(iii) A copy, executed by the Noteholder, of the
Junior Note Agreement.
(iv) A document, executed by the Noteholder, in
which the Noteholder states that
the New Subordinated Notes, New Junior Notes and Warrants or Shares the
Noteholder receives at the Closing are in full satisfaction of all obligations
of the Company with regard to the Old Subordinated Notes and the Old Junior
Notes being delivered, or which are the subject of the affidavit of lost notes
being delivered, by the Noteholder at the Closing, and with regard to the
indebtedness which resulted in the issuance of the Old Subordinated Notes and
the Old Junior Notes to the Noteholder or its predecessor in interest.
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(v)A letter stating that the Noteholder will be acquiring New Subordinated Note,
the New Junior Note and the Warrant or Shares which are being issued to it at
the Closing for investment, and not with a view to the resale or distribution of
any of them.
(vi) A letter in which the Noteholder consents to any and all of (i) a merger of
the Company for the sole purpose of reincorporating in Delaware, (ii) a merger
of the Company with Factory 2-U and (iii) a merger of the Company with Family
Bargain.
(vii) A copy, executed by the Noteholder of the Registration Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Company and Family
Bargain. The Company and Family Bargain jointly and severally represent and
warrant to each Noteholder as follows:
The Company and Family Bargain each is a corporation duly incorporated, validly
existing and in good standing under the laws of the state in which it was
incorporated.
The Company and Family Bargain each has all corporate power and authority
necessary to enable it to enter into this Agreement and carry out the
transactions contemplated by this Agreement. All corporate actions necessary to
authorize each of the Company and Family Bargain to enter into this Agreement
and carry out the transactions contemplated by it have been taken. This
Agreement has been duly executed by the Company and by Family Bargain and is a
valid and binding agreement of each of them, enforceable against each of them in
accordance with its terms.
Neither the execution or delivery of this Agreement or of any document to be
delivered in accordance with this Agreement, nor the consummation of the
transactions contemplated by this Agreement or by any document to be delivered
in accordance with this Agreement, will violate, result in a breach of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, the Articles or Certificate of Incorporation
or by-laws of the Company or Family Bargain, any agreement or instrument to
which the Company or Family Bargain or any of their respective subsidiaries is a
party or by which any of them is bound, any law, or any order, rule or
regulation of any court or governmental agency or any other regulatory
organization having jurisdiction over the Company, Family Bargain or any of
their respective subsidiaries.
When executed and delivered at the Closing, (i) the Subordinate Note Agreement
and the Junior Note Agreement each will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, (ii) each
of the New Subordinated Notes and New Junior Notes which the Company is required
to deliver at the Closing will be a valid and binding debt instrument of the
Company, enforceable against the Company in accordance with its terms and (iii)
the Warrant issued at the Closing and the Registration Rights Agreement each
will be a valid and binding agreement of Family Bargain, enforceable against
Family Bargain in accordance with its terms.
When issued at the Closing, the Shares will be, and when shares of Common Stock
are issued upon exercise of Warrants, those shares will be, validly authorized,
duly
issued, fully paid and non-assessable.
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No governmental filings, authorizations, approvals or consents, or other
governmental actions, are required to permit the Company or Family Bargain to
fulfill all its obligations under this Agreement.
When it is filed with the Securities and Exchange Commission, Family Bargain's
Annual Report on Form 10-K for the fiscal period ended January 31, 1998 (the
"Family Bargain 10-K") will (i) comply in all material respects with the
requirements for a report on Form 10-K, (ii) not contain a misstatement of a
material fact or omit to state any material fact necessary to make the
statements in it not misleading, and (iii) not differ materially from the draft
which is Exhibit 3.01-G to this Agreement. Since the dates as of which
information is provided in the Family Bargain 10-K, there has been no material
adverse change (other than as a result of normal seasonal factors) in the
business, financial condition or results of operations of Family Bargain and its
subsidiaries taken as a whole.
SECTION 3.02 Noteholders' Representations and Warranties. Each Noteholder, for
itself but not for any other Noteholder, represents and warrants to the Company
and to Family Bargain as follows:
The Noteholder is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated.
The Noteholder has all corporate power and authority necessary to enable it to
enter into this Agreement and carry out the transactions contemplated by this
Agreement. All corporate actions necessary to authorize the Noteholder to enter
into this Agreement and carry out the transactions contemplated by it and have
been taken. This Agreement has been duly executed by the Noteholder and is a
valid and binding agreement of the Noteholder, enforceable against the
Noteholder in accordance with its terms.
Neither the execution of this Agreement or any document to be delivered in
accordance with this Agreement nor the consummation of the transactions
contemplated by this Agreement or by any document to be delivered in accordance
with this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under the Certificate or Articles of Incorporation or by-laws (or
comparable organic documents) of the Noteholder, any agreement or instrument to
which the Noteholder is a party or by which it is bound, any law or any order,
rule or regulation of any court or governmental agency or other regulatory
organization having jurisdiction over the Noteholder.
When executed and delivered at the Closing, the Subordinated Note Agreement, the
Junior Note Agreement and the Registration Rights Agreement each will be a valid
and binding agreement of the Noteholder, enforceable against the Noteholder in
accordance with its terms.
The Noteholder owns the Old Subordinated Notes and the Old Junior Notes listed
opposite the Noteholder's name on Exhibit 1.01, free and clear of any liens,
encumbrances or claims by anyone else, the Noteholder has not transferred to
anyone else any interest in those Old Subordinated Notes or Old Junior Notes,
the Noteholder has full power and authority to transfer those Old Subordinated
Notes and the Old Junior Notes to the Company, and when the Noteholder transfers
those Old Subordinated Notes and Old Junior Notes to the Company, the Noteholder
will have no further interest in those Old Subordinated Notes and Old Junior
Notes, and neither the Noteholder nor anyone else will be entitled to receive
any sum (including any sum which may be due at the time of the transfer) with
regard to them.
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No governmental filings, authorizations, approvals or consents, or other
governmental actions, are required to permit the Noteholder to fulfill all its
obligations under this Agreement.
ARTICLE IV
COVENANT
SECTION 4.01 Effort to Prepay New Subordinated Notes. Family Bargain
and General Textiles will use their best efforts to complete by June 30, 1998,
or as soon as practicable after that, a sale of equity securities of Family
Bargain or General Textiles which will provide funds sufficient to enable
General Textiles to prepay the principal of the New Subordinated Notes in full,
and promptly after completion of that sale of equity securities, General
Textiles will prepay the principal of the New Subordinated Notes in full.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.01 Conditions to Company's Obligations. The obligations of
the Company and Family Bargain at the Closing are subject to satisfaction of the
following conditions (any or all of which may be waived by Family Bargain):
The representations and warranties of each of the Noteholders contained in this
Agreement will, except as contemplated by this Agreement, be true and correct in
all material respects at the Closing Date with the same effect as through made
on that date.
Each of the Noteholders will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled prior to or at
the Closing.
No order will have been entered by any court or governmental authority and be in
force which invalidates this Agreement or restrains the Company or Family
Bargain from completing the transactions which are the subject of this
Agreement.
SECTION 5.02 Conditions to Noteholders' Obligations. The obligations of
each of the Noteholders at the Closing are subject to the following conditions
(any or all of which may be waived by any Noteholder as to itself):
The representations and warranties of the Company and Family Bargain contained
in this Agreement will, except as contemplated by this agreement, be true and
correct in all material respects at the Closing Date, with the same effect as
though made on that date.
The Company and Family Bargain each will have fulfilled in all material respects
all its obligations to that Noteholder under this Agreement required to have
been fulfilled prior to or at the Closing.
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No order will have been entered by any court or governmental authority and be in
force which invalidates this Agreement or restrains that Noteholder from
completing the transactions which are the subject of this Agreement.
ARTICLE VI
ABSENCE OF BROKERS
SECTION 6.01 Representations and Warranties Regarding Brokers and
Others. The Company and Family Bargain jointly and severally represent to each
of the Noteholders, and each Noteholder represents to the Company and Family
Bargain,as to that Noteholder but not as to any other Noteholder, that nobody
acted as a broker, a finder or in any similar capacity on its behalf in
connection with the transactions which are the subject of this Agreement. The
Company and Family Bargain jointly and severally indemnify each of the
Noteholders against and agree to hold each of the Noteholders harmless from, and
each of the Noteholders indemnifies each of the Company and Family Bargain
against and agrees to hold each of the Company and Family Bargain harmless from,
all losses, liabilities and expenses, including, but not limited to, reasonable
fees and expenses of counsel and costs of investigation) incurred because of any
claim by anyone for compensation as a broker, a finder or in any similar
capacity by reason of services allegedly rendered to the indemnifying party in
connection with the transactions which are the subject of this Agreement.
ARTICLE VII
GENERAL
SECTION 7.01 Expenses. The Company, Family Bargain and each of the
Noteholders will pay its own expenses in connection with transactions which are
the subject of this Agreement, except that the Company will reimburse Endeavour
for fees and expenses of legal counsel up to a maximum of $15,000.
SECTION 7.02 Entire Agreement. This Agreement and the documents to be
delivered in accordance with this Agreement contain the entire agreement among
the Company, Family Bargain and the respective Noteholders relating to the
transactions which are the subject of this Agreement and those other documents,
all prior negotiations, understandings and agreements among the Company, Family
Bargain and the respective Noteholders are superseded by this Agreement and
those other documents, and there are no representations, warranties,
understandings or agreements concerning the transactions which are the subject
of this Agreement or those other documents other than those expressly set forth
in this Agreement or those other documents.
SECTION 7.03 Captions.The captions of the articles and sections of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
SECTION 7.04 Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent) or on the third business day after
the day on which mail by first class mail from within the United States of
America, addressed if to the Company or Family Bargain, at 0000 Xxxxxx Xxxx, Xxx
Xxxxx, XX 00000, Facsimile No. (000) 000-0000, and if to any Noteholder, at the
address or facsimile number shown under that Noteholder's name on the signature
page of this Agreement or as otherwise shown on the Company's register of
Noteholders. The address or facsimile number to which communications should be
sent to the Company or to a Noteholder may be changed by a notice given as
provided in this Section.
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SECTION 7.05 Governing Law. This Agreement will be governed by, and
construed under, the substantive laws of the State of New York.
SECTION 7.06 Amendments. This Agreement may be amended only by a
document in writing signed by the Company and, if an amendment affects any
Noteholder, signed by that Noteholder.
SECTION 7.07 Counterparts. This Agreement may be executed in two or
more counterparts, some of which may be signed by fewer than all the parties and
may be delivered by facsimile transmission, each of which will be deemed an
original, but all of which together will constitute one and the same agreement.
IN WITNESS WHEREOF, the Company, Family Bargain and the Noteholders
have executed this Agreement, intending to be legally bound by it, on the date
shown on the first page of this Agreement.
THE COMPANY: GENERAL TEXTILES
By:
Title:
FAMILY BARGAIN: FAMILY BARGAIN CORPORATION
By:
Title:
NOTEHOLDERS:
AMERICAN ENDEAVOUR FUND LIMITED
By:
Title:
x/x Xxxxxxxxx Xxxxxx (XX) Asset Managers LLC
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
LONDON PACIFIC LIFE & ANNUITY COMPANY
By:
Title:
0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
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EXHIBIT 1.01
---------------------- --------------------------- ----------------------------
Noteholder Endeavour London Pacific
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Old Subordinated Notes 2,338,978.56 2,561,021.44
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Old Junior Notes 8,274,779.95 9,060,317.70
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
New Subordinated Notes 1,551,363.33 1,698,636.67
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
New Junior Notes 8,274,779.94 9,060,317.71
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Shares 75,000 0
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Warrants 0 274,418
---------------------- --------------------------- ----------------------------
