EXHIBIT 10.1
NOTE CONVERSION AGREEMENT
This Agreement is entered into as of the 29th day of
September, 1995 by and between Xxxxxx & Xxxxxxx Capital Group, Inc.
(the "Company") and Confia, S.A., Institucion de Banca Multiple,
Abaco Grupo Financiero, a banking corporation incorporated under
the laws of the United Mexican States ("Confia").
WHEREAS, Confia has loaned the Company $14,000,000, all of
which is outstanding, and the Company has requested that Confia
lend the Company an additional $2,500,000 on or prior to September
30, 1995 to fund the payment of such amount which is due to a third
party lender on or before such date, and to issue a standby letter
of credit for the account of the Company in the amount of
$6,000,000 to make available sale/leaseback financing from a third
party (the "Letter of Credit");
WHEREAS, the additional credit requested by the Company would
cause the aggregate credit to exceed the amount of the line of
credit Confia had committed to the Company;
WHEREAS, all of the credit provided by Confia to the Company
is unsecured and the loans have been effectively subordinated as a
result of the Company lending the proceeds of the loans to its
wholly-owned subsidiary, Xxxxxx & Xxxxxxx, Inc., on a subordinated
basis;
WHEREAS, the Company is in urgent need of the requested
additional financing to continue the operations of Xxxxxx &
Xxxxxxx, Inc., the Company's principal subsidiary;
WHEREAS, the Company has determined that no reasonable
alternative source of financing currently is available;
WHEREAS, Abaco Casa de Bolsa, S.A. de C.V., Abaco Grupo
Financiero, Confia's sister company ("Abaco"), owns 67% of the
issued and outstanding shares of the Company;
WHEREAS, to induce Confia to provide the requested financing
the Company is agreeing on the terms and conditions set forth
herein to grant Confia the right to convert the outstanding amount
of credit referred to above in addition to the credit to be
extended pursuant to the request of the Company, into shares of the
Company's common stock at a conversion price equal to the book
value per share of the common stock determined on the date of
conversion in accordance with this Agreement; and
WHEREAS, the Company would derive substantial benefit from the
conversion of its indebtedness to Confia into equity.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties agree as follows:
1. Certain Definitions. The terms defined in this Section
1 shall have the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of any class of Common Stock of the
Company and any other stock of the Company howsoever designated,
authorized after the date hereof, which has the right (subject
always to prior rights of any class or series of preferred stock)
to participate in the distribution of the assets and earnings of
the Company without limit as to per share amount.
Conversion Price. The term "Conversion Price" shall mean the
price per share of Common Stock used to determine the number of
shares of Common Stock deliverable upon conversion of the Notes,
which price shall be determined on a floating basis and shall equal
the book value per share of Common Stock from time to time
determined in accordance with generally accepted accounting
principles from the Company's financial statements for the most
recent fiscal quarter (or fiscal year end if more recent) as to
which financial statements have been filed with a governmental or
regulatory authority prior to the date of the conversion, subject
to further adjustment in accordance with the provisions of Section
7 below.
Holder. The term "Holder" shall mean any person who at the
time shall be the registered holder of a Note, provided that such
person is Confia, Abaco or an affiliated company.
Letter of Credit. The term "Letter of Credit" shall have the
meaning set forth in the first "WHEREAS" clause.
Note. The term "Note" shall mean (i) any promissory note
issued by the Company to Confia on or prior to September 30, 1995
and representing indebtedness for borrowed money and (ii) the
promissory note to be issued by the Company representing potential
indebtedness for reimbursement from any drawdown of the Letter of
Credit, provided that the obligations under such promissory note
are contingent upon, and such promissory note shall not be deemed
outstanding for purposes of this Agreement until, payment by Confia
to the beneficiary of the Letter of Credit upon a drawdown, and in
such event the outstanding principal amount thereof shall be equal
to the aggregate of such payments by Confia.
2. Additional Financing. Confia agrees to lend the Company
$2,500,000 on or prior to September 30, 1995 for the purpose of
funding the repayment of subordinated indebtedness to a third party
which is due on such date. Confia further agrees to issue a
standby letter of credit for the account of the Company in the
amount of $6,000,000 for the purpose of making available to the
Company the Letter of Credit.
3. Aggregate Financing. Including the amount of the Letter
of Credit and the amount to be loaned pursuant to the terms hereof,
the aggregate principal amount of the credit outstanding from
Confia to the Company is $22,500,000.
4. Book Value of Shares. The book value per share of Common
Stock determined in accordance with this Agreement as of June 30,
1995 and, accordingly, the Conversion Price as of the date hereof,
subject to adjustment, is $3.04.
5. Conversion Privilege.
5.1. Conversion. Upon and after satisfaction of the condition
set forth in Section 5.2 below, any Holder has the right, at its
option, at any time prior to payment in full of the principal
payment of any Note, to convert such Note, in accordance with the
provisions of Section 6 hereof, in whole or in part, to the extent
outstanding and convertible under Section 5.2, into fully paid and
nonassessable shares of Common Stock of the Company. The number of
shares of Common Stock into which a Note may be converted
("Conversion Shares") shall be determined by dividing the aggregate
outstanding principal amount of a Note together with any accrued
interest to the date of conversion by the Conversion Price in
effect at the time of such conversion; provided, however, that the
number, character and Conversion Price of such shares of Common
Stock are subject to adjustment as provided in Section 7 below.
5.2. Conversion Condition. So long as the New York Stock
Exchange Inc. ("NYSE") stockholder approval requirements shall be
applicable, a Note shall be convertible only to the extent that
such conversion is approved by the stockholders of the Company, if
so required. The parties understand that no stockholder approval
would be required for any conversion of Notes made in connection
with a rights offering to all stockholders at a per share cash
price equal to the Conversion Price pursuant to which the
stockholders (other than Abaco whose rights to purchase shares in
the offering would be deemed exercised and consummated by the
conversion) could purchase the number of shares proportional to the
number of shares issued upon conversion ("Rights Offering").
6. Conversion Procedure.
6.1 Notice of Conversion. Before the Holder shall be
entitled to convert a Note into shares of Common Stock it shall
give written notice to the Company at the principal corporate
office of the Company, of the election to convert a Note in whole
or in part, as the case may be, pursuant to Section 5, shall
surrender the Note, duly endorsed, and shall designate in writing
the name or names in which the certificate or certificates for
shares of Common Stock are to be issued, provided that such person
must be Confia, Abaco or an affiliated company thereof. Such
conversion shall be deemed to have been made immediately upon the
date of surrender of the Note and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock as of such date.
6.2 Delivery of Stock Certificates and Replacement Note. As
promptly as practicable after the conversion of a Note pursuant to
Section 5, the Company at its expense will issue and deliver to the
Holder of a Note at the registered address of the Holder a
certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the
opinion of counsel to the Company), together with any other
securities and property to which the Holder is entitled upon such
conversion under the terms of this Agreement. If less than the
entire outstanding portion of the Note is converted, then the
Company at its expense together with the share certificates will
deliver to the Holder a replacement note identical to the Note
surrendered except in the principal amount of the remaining
principal balance.
6.3 Mechanics and Effect of Conversion. No fractional shares
of Common Stock shall be issued upon conversion of a Note. In lieu
of the Company issuing any fractional shares to the Holder upon the
conversion of a Note, the Company shall pay to the Holder the
amount of outstanding principal that is not so converted, such
payment to be made as soon as practicable after conversion of a
Note by wire transfer to an account designated by the Holder. Upon
conversion of the entire principal amount of a Note, the Company
shall be forever released from all its obligations and liabilities
under such Note, except that the Company shall be obligated to pay
the Holder, within ten (10) days after the date of such conversion,
any interest accrued and unpaid or unconverted to and including the
date of such conversion, and no more.
7. Merger, Sale of Assets, etc. If at any time while any
Note, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination,
reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company
with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in
the form of securities, cash, or otherwise, or (iii) a sale or
transfer of the Company's properties and assets as, or substan-
tially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, the
Conversion Price shall be appropriately adjusted so that the Holder
shall thereafter be entitled to receive upon conversion of a Note,
during the period specified herein, the number of shares of stock
or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or
transfer that a holder of the shares deliverable upon conversion of
a Note would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if the Note had been
converted immediately before such reorganization, merger, xxxxxxx-
dation, sale or transfer. The foregoing provisions of this
Section 7 shall similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to the stock or
securities of any other corporation that are at the time receivable
upon the conversion of a Note. If the per-share consideration
payable to the Holder hereof for shares in connection with any such
transaction is in a form other than cash or marketable securities,
then the value of such consideration shall be determined in good
faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the
Company's Board of Directors) shall be made in the application of
the provisions of this Agreement with respect to the rights and
interests of the Holder after the transaction, to the end that the
provisions of this Agreement shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other
property deliverable after that event upon conversion of a Note.
8. Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the
purpose of effecting the conversion of the Notes such number of its
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of the Notes; and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the entire outstanding
principal amount of the Notes, together with accrued interest
thereon, in addition to such other remedies as shall be available
to the holder of the Notes, the Company will use its best efforts
to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
9. Notices.
(a) Whenever the Conversion Price or number of shares
into which the Notes are convertible shall be adjusted pursuant to
Section 7 hereof, the Company shall issue a certificate signed by
its Chief Financial Officer setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment,
the method by which such adjustment was calculated, and the
Conversion Price and number of shares into which the Notes are
convertible after giving effect to such adjustment, and shall cause
a copy of such certificate to be mailed (by first-class mail,
postage prepaid) to the Holder.
(b) In the event of:
(i) any taking by the Company of a record of the
holders of any class of securities of the Company for the purpose
of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of earned surplus
at the same rate as that of the last such cash dividend theretofore
paid) or other distribution, or any right to subscribe for, pur-
chase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets
of the Company to any other person or any consolidation or merger
involving the Company, or
(iii) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to the holder of the Notes at least ten (10)
days prior to the earliest date specified therein, a notice
specifying:
(A) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, and
the amount and character of such dividend, distribution or right,
and
(B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the
record date for determining stockholders entitled to vote thereon.
10. Assignment. Subject to the restrictions on transfer
imposed by applicable law, the rights and obligations of the
Company and Confia shall be binding upon and benefit the successors
and permitted assigns of the parties, provided, however, that the
rights of Confia may be assigned only to Abaco or another affili-
ated company thereof.
11. No Stockholder Rights. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or any
other person the right to vote or to consent or to receive notice
as a stockholder in respect of meetings of stockholders for the
election of directors of the Company or any other matters or any
rights whatsoever as a stockholder of the Company; and no dividends
shall be payable or accrued in respect of any Note or the shares of
Common Stock obtainable hereunder until, and only to the extent
that, the Note shall have been converted.
12. Stockholder Approval/Rights Offering. On one or more
occasions, the Holder may at its election require the Company (i)
to call a special meeting of its stockholders as soon as
practicable after such request to approve the conversion of Notes
into shares of Common Stock in accordance with the terms hereof,
(ii) include such approval on the agenda of the next annual meeting
of stockholders, or (iii) conduct a Rights Offering as soon as
practicable after such request, and in any such case to promptly
cause the shares issued upon conversion to be listed on the NYSE.
In the case of clauses (i) or (ii) above, Confia agrees to cause
Abaco and all of its affiliated companies to vote all of the shares
of the Company held by it for such approval. In the event that any
Notes are converted and clause (iii) is not elected in connection
therewith, Confia and the Company agree that a Rights Offering will
be made within one year after the conversion of the Notes at a
price per share equal to the Conversion Price used in such
conversion.
13. Investment Intent. Any shares of Common Stock which may
be acquired upon conversion of the Notes will be acquired by Confia
or its assigns or designees for their own account and not with a
view to, or for resale in connection with, any distribution.
Confia acknowledges that it is aware of the applicable limitations
under the Securities Act of 1933, as amended, upon the sale of any
such shares of Common Stock and that accordingly, certificates
representing such shares may bear an appropriate legend.
14. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of Delaware,
excluding that body of law relating to conflict of laws.
15. Miscellaneous Provisions.
A. Amendment, Modification and Waiver. This Agreement may
be amended, modified and supplemented, in writing only, by mutual
consent of the parties hereto. No failure on the part of any party
to exercise any right, power or privilege hereunder shall operate
as a waiver.
B. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
both of which together shall constitute one and the same
instrument.
C. Headings; References. All headings used herein are used
for convenience only and shall not be used to construe or interpret
this Agreement. Except where otherwise indicated, all references
herein to sections refer to sections hereof.
D. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.
XXXXXX & XXXXXXX CAPITAL GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx, III
__________________________
Name: Xxxxxxx X. Xxxxx, III
Title: President &
Chief Executive Officer
CONFIA, S.A., INSTITUCION DE BANCA
MULTIPLE, ABACO GRUPO FINANCIERO
By: /s/ Xxxxx X. Xxxxxxx Coppel
____________________________
Name: Xxxxx X. Xxxxxxx Xxxxxx
Title: Responsible Regional - Monterrey
