EXHIBIT 10.9
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 1.01 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.
(a) 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).
(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:
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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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(f) 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.
(g) 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:
(a) The Noteholder is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which it
was incorporated.
(b) 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.
(c) 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.
(d) 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.
(e) 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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(f) 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):
(a) 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.
(b) Each of the Noteholders will have fulfilled in all materials
respects all its obligations under this Agreement required to have been
fulfilled prior to or at the Closing.
(c) 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):
(a) 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.
(b) 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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(c) 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
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communications should be sent to the Company or to a Noteholder may be changed
by a notice given as provided in this Section.
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: /s/ Xxxxxxxx X. Xxxxx
_______________________________________________
Title: Executive Vice President
FAMILY BARGAIN: FAMILY BARGAIN CORPORATION
By:/s/ Xxxxxxxx X. Xxxxx
_________________________________________________
Title: Executive Vice President
NOTEHOLDERS: AMERICAN ENDEAVOUR FUND LIMITED
By:_________________________________________________
Title: Liquidator
c/o Kleinwort Xxxxxx (US) 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:/s/ Xxxxx X. Xxxxxxx
________________________________________________
Title: Treasurer
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
