CONVERSION AGREEMENT
Exhibit
10.1
This
Conversion Agreement (the “Agreement”)
is
entered into as of the 9th
day of
May, 2008, by and between I.C. Xxxxxx & Company, Inc., a Delaware company
(referred to herein as the “Company”
or
“Borrower”,
as the
context requires), and Textile Investment International S.A., a Luxembourg
company (referred to herein as the “Purchaser”
or
“Lender”,
as the
context requires).
WITNESSETH:
WHEREAS,
the Borrower and Lender are parties to that certain 8% Amended and Restated
Subordinated Secured Promissory Note (the “Note”),
dated
as of December 30, 2004;
WHERERAS,
the principal amount of $2,103,461, remains outstanding under the Note on the
date hereof, together with accrued and unpaid interest in the amount of
$761,579, as of May 9, 2008 (the “Debt”);
WHEREAS,
the Company desires to issue and sell and the Purchaser desires to purchase
from
the Company, in the aggregate 14,325,200 of newly issued shares of common stock
of the Company (the “Common
Stock”);
WHEREAS,
Purchaser agrees, in consideration for the purchase of the Shares, to forgive
in
its entirety the Debt under the Note; and
WHEREAS,
the parties hereto desire to set forth certain agreements and certain terms
and
conditions regarding the sale and purchase of the shares of Common Stock and
the
forgiveness of the Debt under the Note;
NOW,
THEREFORE, the parties hereto hereby agree as follows:
ARTICLE
I
Sale
and
Purchase of Shares; Closing
Section
1.1. Sale
and Purchase of Shares; Purchase Price.
(a) Upon
the
terms and subject to the conditions of this Agreement, the Purchaser agrees
to
purchase from the Company, and the Company agrees to issue and sell to the
Purchaser, on the “Closing
Date”
(as
defined herein), 14,325,200 shares of Common Stock (the “Company
Shares”)
in
consideration for the forgiveness of the Debt under the Note (the “Purchase
Price”)
pursuant to that certain Debt Forgiveness Agreement (a copy of which is attached
as Annex
A
hereto).
Section
1.2. Closing.
(a) The
closing of the transactions under this Agreement (the “Closing”)
shall
take place at the offices of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. (NY time) on
the
date hereof (the “Closing
Date”).
Section
1.3.
Deliveries
at Closing.
At the
Closing:
(a) The
Company shall deliver to the Purchaser a certificate representing the Company
Shares; except that a certificate for 4,675 of the Company Shares deliverable
to
the Purchaser shall be delivered pursuant to Section
1.4
hereof.
(b) The
Purchaser shall deliver to the Company the Debt Forgiveness Agreement.
(c) The
Company shall provide evidence reasonably satisfactory to the Purchasers that
the following agreements have been or will be concurrently herewith entered
into
(and in the case of (ii) and (iv) below, the transactions thereunder consummated
at Closing): (i) that certain notice of election of extension of employment
agreement, (ii) that certain stock purchase agreement by and between the
Company, Textile Investment International S.A. and the other parties thereto
(the “Investor
Stock Purchase Agreement”);
(iii)
that certain investor rights agreement between the Company, the Purchasers
and
Wurzburg Holding, S.A. (the “XXX”);
(iv)
that certain stock purchase agreement by and between the Company and Xxxxxx.
X.
Xxxx and (v) those two certain license amendment agreements to the men’s and
women’s collections, respectively (copies of all such agreements which are
attached hereto as Annex
B,
collectively with the Debt Forgiveness Agreement, the “Related
Documents”).
(d) The
Company shall provide evidence reasonably satisfactory to the Purchasers that
the Wachovia consent (consenting to the transactions contemplated by and the
terms of this Agreement and the Related Documents and confirming that the Third
Amendment to Loan and Security Agreement remains in full force and effect)
has
been or will be concurrently with the Closing received.
Section
1.4. Additional
Share Certificate.
The
Company shall deliver to the Purchaser within three (3) business days after
the
date hereof a certificate for the 4,675 Company Shares which were not delivered
to the Purchaser at Closing.
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ARTICLE
II
Representations
and Warranties of the Company
The
Company, represents and warrants to, and covenants and agrees with the Purchaser
as follows:
Section
2.1. Organization
and Good Standing.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has no subsidiaries other
than I.C. Xxxxxx & Company L.P. and Xxxxxx Design, Inc. of which both are
operating subsidiaries. The subsidiaries are duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company and
each of its subsidiaries have all requisite corporate power or limited
partnership power, as the case may be, and authority to own their properties
and
assets and carry on their businesses as now conducted, and are duly qualified
and in good standing as foreign corporations in each jurisdiction in which
the
location or nature of their property or the character of their businesses make
such qualification necessary, except where the failure to be so qualified would
not have a material adverse affect, financial or otherwise, on the business,
condition, assets, properties, liabilities or results of operations of the
Company or its subsidiaries.
Section
2.2. Corporate
Power; Authorization; Binding Agreements.
The
Company has the corporate power and authority to execute and deliver this
Agreement and the Related Documents and to perform its obligations hereunder
and
thereunder. The execution, delivery and performance of this Agreement and the
Related Documents, the issuance and sale by the Company of the Company Shares
hereunder and the consummation by the Company of the transactions contemplated
hereby and by the Related Documents have been duly authorized by all necessary
action, corporate or otherwise, on the part of the Company. This Agreement,
the
Related Documents and the other agreements of the Company required to consummate
the transactions contemplated hereunder and thereunder have been duly executed
and delivered by, and constitute valid and binding obligations of, the Company
and are enforceable in accordance with their terms subject to the qualifications
that enforcement of the rights and remedies created hereby is subject to (i)
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting rights and remedies of creditors, and (ii) general
principals of equity (regardless of whether such enforcement is considered
in a
proceeding in equity or at law).
Section
2.3. Capitalization;
Valid Issuance.
The
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, of which 13,740,127 shares are issued and 12,563,418 are outstanding
on
the date hereof, and 5,000,000 shares of Preferred Stock, of which no shares
are
issued and outstanding on the date hereof. Except as disclosed in the Form
10-K
(as defined herein), there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Company or any subsidiary
to issue, sell, or otherwise cause to become outstanding any of its capital
stock. The aggregate number of shares of common stock of the Company reserved
or
required to be reserved by the Company for all such derivative securities,
contracts and commitments is 3,250,000. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with
respect to the Company. There are no preemptive rights with respect to the
issuance or sale of the Company Shares or registration rights. All of the
presently outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and non-assessable. The Company Shares
to be issued hereunder have been duly and validly authorized and, when delivered
and paid for pursuant to this Agreement, will be validly issued, fully paid and
non-assessable. Assuming the accuracy of the Purchasers’ representations and
warranties in Article
III,
the
Company Shares are being offered and sold pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
“Act”).
In
connection with the offer and sale of the Company Shares, neither the Company,
any affiliate of the Company nor any person acting on the Company’s or such
affiliates’ behalf has engaged in any form of general solicitation or general
advertising, as those terms are used in Rule 502(c) of the Act.
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Section
2.4. Compliance
with Other Instruments.
The
execution, delivery and performance of this Agreement and the Related Documents
will not conflict with or, with or without notice or the lapse of time, result
in any default or in any modification of (i) any provision of the articles
of incorporation or by-laws or comparable organizational instruments of the
Company or any subsidiary thereof or (ii) the terms of any contract, agreement,
obligation, commitment, license, indenture, mortgage, deed of trust, loan or
credit agreement or any other agreement or instrument to which the Company
or
any subsidiary thereof is a party or any of their assets are bound, or the
creation of any lien, charge or encumbrance of any nature upon any of the
properties or assets of the Company or any subsidiary thereof. The execution,
delivery and performance of this Agreement by the Company will not violate
any
judgment, decree, statute, rule or regulation of any federal, state or local
government or agency having jurisdiction over the Company or any subsidiary
thereof or any of their assets.
Section
2.5. Brokerage.
No
broker, finder, agent or similar intermediary has acted on the Company’s behalf
in connection with the transactions contemplated by this Agreement and there
are
no brokerage commissions, finder’s fees or similar items of compensation payable
in connection therewith based on any agreement made by or on behalf of the
Company. The Company will indemnify and hold the Purchasers harmless from and
against any liability or any expense arising out of any such claim.
Section
2.6. Consents,
etc.
No
consent, approval, waiver or authorization of or designation, declaration or
filing with any governmental or regulatory authority or any other person is
required in connection with the valid execution and delivery of this Agreement
or the Related Documents, the offer, sale and issuance of the Company Shares
or
the consummation of the transactions contemplated by this Agreement or the
Related Documents, except for filings that may be required to comply with
applicable federal and state securities laws.
Section
2.7. No
Governmental Proceeding or Litigation.
No
suit, action, investigation, inquiry or other proceeding by any governmental
body or other person or legal or administrative proceeding has been instituted
or, to the Company’s knowledge, threatened which questions the validity or
legality of the transactions contemplated hereby or by the Related Documents
or
would reasonably be expected to have a material adverse effect on the
Company.
Section
2.8. Special
Committee.
The
transactions contemplated by this Agreement, the XXX and the Investor Stock
Purchase Agreement have been unanimously approved by the Special Committee
of
the Board of Directors. The Special Committee has determined, after receiving
and based upon the advice of its financial and legal advisors and after
consideration of the Company’s limited options for raising external capital and
the impact on the Company’s net operating losses, that the consideration to be
paid for the Company Shares pursuant to, and the transactions contemplated
by,
this Agreement, the XXX and the Investor Stock Purchase Agreement, are fair
to
and in the best interests of the Company’s stockholders and the transactions
contemplated by this Agreement, the XXX and the Investor Purchase Agreement
are
in the best interests of the Company’s creditors. The foregoing determination is
reflected in all material respects in the minutes of the meetings of the Special
Committee held on April 29, 2008, May 2, 2008 and May 5, 2008, certified copies
of which have been provided to the Purchasers.
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Section
2.9. Form
10-K.
The
Company’s Annual Report on Form 10-K for the year ended December 31, 2007, in
the form delivered to the Purchasers on May 6, 2008 (the “Form
10-K”),
has
been completed (subject to immaterial non-substantive language changes that
might be made prior to filing), except for the Part III information which will
be completed prior to May 15, 2008, is in form ready to be filed with the
Securities and Exchange Commission (the “SEC”).
The
Company’s independent registered public accounting firm has confirmed to the
Company that such firm’s audit report for the fiscal year ended December 31,
2007 is released to the Company and that such firm will consent to the filing
of
the Form 10-K with the SEC when the Part III information is inserted. The Form
10-K at the time it is filed will comply as to form in all material respects
with the applicable requirements of the Act and the Securities Exchange Act
of
1934, as amended, as the case may be, the Xxxxxxxx-Xxxxx Act and the rules
and
regulations of the SEC thereunder applicable to such Company SEC reports. The
Form 10-K does not contain any untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary in order to
make the statements in such Form 10-K, in the light of the circumstances under
which they were made, not misleading.
Section
2.10. Financial
Statements.
Each of
the consolidated financial statements (including, in each case, any related
notes and schedules) contained in the Form 10-K (i) complies as to form in
all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto and (ii) were prepared
in
accordance with United States generally accepted accounting principles
(“GAAP”)
applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements). The consolidated balance
sheets (including, in each case, any related notes and schedules) contained
in
the Form 10-K fairly presents in all material respects the consolidated
financial position of the Company and its subsidiaries as of the dates indicated
and each of the consolidated statements of income and of changes in financial
position contained in the Form 10-K (including, in each case, any related notes
and schedules) fairly presents in all material respects the consolidated results
of operations, retained earnings and changes in financial position, as the
case
may be, of the Company and its subsidiaries for the periods set forth
therein.
Section
2.11. Loan
Agreement; No Default.
There
are
no outstanding Defaults or Events of Default (as such terms are defined in
the
Loan Agreement) under that certain Loan and Security Agreement dated December
30, 2004 (as amended or otherwise modified from time to time, including but
not
limited to the Third Amendment thereto, the “Loan
Agreement”)
by and
among I.C. Xxxxxx & Company, L.P., as borrower, the Company and Xxxxxx
Design, Inc., as guarantors, and Wachovia.
Section
2.12. Royalty
Deferrals.
There
are no deferred royalty payments (or interest thereon) owing under the men’s or
women’s license agreements between the Company or its subsidiaries and Latitude
Licensing Corp. other than the four months of 2008 royalty payments being
deferred pursuant to the license amendments which are a part of the Related
Documents.
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ARTICLE
III
Representations
and Warranties of the Purchaser
The
Purchaser represents and warrants to, and covenants and agrees with the Company
as follows:
Section
3.1. Authorization;
Power; Binding Agreements.
The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action of the Purchaser. The Purchaser has the full right,
power and authority to enter into this Agreement. This Agreement constitutes
the
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms subject to the qualifications that enforcement of the rights and
remedies hereby is subject to (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting rights and remedies
of creditors, and (ii) general principles of equity (regardless of whether
such
enforcement is considered in a proceeding in equity or at law).
Section
3.2. Purchase
for Investment.
The
Purchaser is purchasing the Company Shares for its own account, for investment
purposes and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Act.
Section
3.3. Unregistered
Securities; Legend.
The
Purchaser understands that the securities to be acquired by it pursuant to
this
Agreement have not been registered under the Act, and will be issued in reliance
upon an exemption from the registration requirements thereof. The Purchaser
acknowledge that the certificate issued representing the Company Shares shall
bear a restrictive legend substantially as follows:
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or any applicable state securities laws
and
may not be offered for sale, sold, transferred or conveyed without registration
or an opinion of counsel in form and substance satisfactory to the Company
to
the effect that such registration is not required.”
Section
3.4. Access
to Data; Experience; Accredited Investor.
The
Purchaser has had an opportunity to discuss the Company’s business plans with
the management of the Company, and to ask questions of officers of the Company
and to make an independent assessment of its investment in the Company Shares.
The Purchaser has substantial experience in evaluating and investing in a
nonliquid investment such as the Company Shares and is capable of evaluating
the
merits and risks of its investment in the Company. The Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D under
the Act, and understands that the offer and sale of the Company Shares has
been
and is being made in reliance upon an exemption from registration under the
Act.
The Purchaser is able to withstand the loss of its entire
investment.
Section
3.5. Brokerage.
No
broker, finder, agent or similar intermediary has acted on the Purchaser’s
behalf in connection with the transactions contemplated by this Agreement and
there are no brokerage commissions, finder’s fees or similar items of
compensation in connection therewith based on any arrangement or agreement
made
by or on behalf of the Purchaser. The Purchaser will indemnify and hold the
Company harmless against any liability or expense arising out of any such
claim.
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Section
3.6. Organization
and Good Standing. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of Luxembourg and has all requisite corporate power and authority
to carry on its business as now conducted.
Section
3.7. Corporate
Power; Authorization.
The
Purchaser has the corporate power and authority to execute and deliver this
Agreement and to perform fully its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Purchaser.
Section
3.8. No
Conflicts or Violations.
The
execution, delivery and performance of this Agreement will not conflict with
or,
with or without notice or the lapse of time, result in any material default
or
in any material modification of (i) any provision of the certificate of
incorporation or by-laws of the Purchaser or (ii) the terms of any contract,
agreement, obligation, commitment, license, indenture, mortgage, deed of trust,
loan or credit agreement or any other agreement or instrument to which the
Purchaser is a party or any of its assets are bound, or the creation of any
lien, charge or encumbrance of any nature upon any of the properties or assets
of the Purchaser. The execution, delivery and performance of this Agreement
by
the Purchaser will not violate any judgment, decree, statute, rule or regulation
of any federal, state or local government or agency having jurisdiction over
the
Purchaser or its assets.
ARTICLE
IV
Miscellaneous
Section
4.1. Survival
of Representations.
The
representations, warranties, covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall survive the
execution and delivery hereof and thereof and the acquisition by the Purchaser
of the Company Shares for a period of 36 months following the
Closing.
Section
4.2. Parties
in Interest.
All
agreements, representations and warranties contained in this Agreement by and
on
behalf of any of the parties hereto shall bind and inure to the benefit of
the
respective successors and assigns of the parties hereto, whether so expressed
or
not.
Section
4.3. Entire
Agreement; Amendments and Waivers.
This
Agreement (including Annex
A)
and the
Related Documents contain the entire agreement among the parties with respect
to
the transactions contemplated hereby and thereby, and supersede all prior
agreements, written or oral, with respect thereto. Changes in or additions
to
this Agreement may be made only upon written consent of the Company and the
Purchaser.
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Section
4.4. Governing
Law.
This
Agreement and the rights and obligations of the parties hereunder are to be
governed and construed in accordance with the laws of the State of New York,
without regard to conflicts of law principles.
Section
4.5. Notices.
Any
notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally or sent by electronic mail or
facsimile transmission, overnight courier, or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by electronic mail or facsimile transmission during normal
business hours of the recipient, and if not sent during normal business hours,
then on the recipient’s next business day, one day after deposit with an
overnight courier, or if mailed, five (5) days after the date of deposit in
the
mails, as follows:
if
to the
Purchaser, to:
Textile
Investment International S.A.
00,
Xxxxxx xx xx Xxxx
Xxxxxxxxxx
X-0000
Xxxxx
Xxxxx of Luxembourg
Fax:
000
000 0000 0000
Attention:
Xxxx Xxxxx, Managing Director
with
a
copy to:
Xxxxxxxx
Xxxxxx Xxxxxx & Xxxxxxx LLP
0000
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxxx, Esq.
if
to the
Company, to:
I.C.
Xxxxxx & Company, Inc.
000
00xx
Xxxxxx,
0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
____________________
Attention:
Xxxxxx X. Xxxx
with
a
copy to:
Xxxxxx
Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
(000) 000-0000
Attention:
Xxxxxxxx X. Xxxx, Esq.
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Any
party
may by notice given in accordance with this section to the other parties
designate another address or person for receipt of notices
hereunder.
Section
4.6. Counterparts.
This
Agreement may be executed in multiple counterparts and by facsimile, each of
which when so executed and delivered shall be an original, but all of such
counterparts shall together constitute one and the same instrument.
Section
4.7. Effect
of Headings.
The
section and paragraph headings herein are for convenience only and shall not
affect the construction hereof.
Section
4.8. Severability.
This
Agreement shall be deemed severable, and the invalidity or unenforceability
of
any term or provision hereof shall not affect the validity or enforceability
of
this Agreement or of any other term or provisions hereof. Furthermore, in lieu
of any such invalid or unenforceable term or provision, the parties hereto
intend that there shall be added as a part of this Agreement a provision as
similar in terms to such invalid or unenforceable provisions as may be possible
and be valid and enforceable.
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IN
WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of
the date first set forth above.
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I.C.
Xxxxxx & Company, Inc.
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By:
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/s/ Xxxxxx X. Xxxx | |
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Name:
Xxxxxx X. Xxxx
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Title:
Chief Executive Officer
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Textile
Investment International S.A.
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By:
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/s/ Xxxx Xxxxx /s/ Xxx Xxxxxx | |
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Name:
Xxxx
Xxxxx & Xxx Xxxxxx
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Title:
Managing Directors
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[Signature
Page to Conversion Agreement]
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