EXHIBIT 10.74
AGREEMENT FOR PURCHASE OF STOCK
THIS AGREEMENT FOR PURCHASE OF STOCK is made and effective as of the first
day of August, 1999, by and among those individuals whose names appear on the
signature pages under the caption "Shareholders" (collectively, the
"Shareholders"), TAG MEX, INC., a California corporation, and NO! JEANS, INC., a
California corporation (collectively, the "Purchasers"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
as the paying agent for the Shareholders (the "Paying Agent") and, with respect
only to Section 6.19, TARRANT APPAREL GROUP, a California corporation (the
"Parent"), with respect to the following facts:
A. Industrial Exportadora Famian, S.A. de C.V. and Coordinados Elite,
S.A. de C.V., corporations formed under the laws of the United Mexican
States (the "Companies"), are engaged in the production of apparel.
B. The Shareholders own all the issued and outstanding capital stock of
the Companies.
C. The Purchasers are wholly-owned subsidiaries of the Parent.
D. The Purchasers desire to purchase from the Shareholders, and the
Shareholders desire to sell to the Purchasers, all of the issued and
outstanding shares of the capital stock of the Companies (the
"Shares"), all upon the terms and conditions contained herein.
ACCORDINGLY, subject to the terms and conditions of this Agreement,
and on the basis of the premises, representations, warranties and agreements
contained herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK
1.1. Purchase and Sale. The Shareholders shall sell, assign, transfer,
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convey and deliver to the Purchasers, and the Purchasers shall purchase and take
from the Shareholders, on the Closing Date (as defined below) all the Shares.
Each of the Purchasers shall purchase from each of the Shareholders the number
of Shares set forth on Schedule 1.1(a).
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1.2. Purchase Price.
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As full payment for the Shares, the Purchasers shall pay to the
Shareholders the following (the "Purchase Price") (subject to adjustment as
provided below):
(i) the sum of U.S. $1,000,000 shall be paid in cash on the Closing
Date; and
(ii) the sum of U.S. $3,000,000 shall be evidenced by a Non-
Negotiable Promissory Note in the form attached hereto as Exhibit A (the
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"Note").
The Purchase Price shall be allocated among the Shareholders as set forth
on Schedule 1.2(b).
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Each of the Shareholders hereby irrevocably constitutes and appoints the
Paying Agent as the agent of such Shareholder to receive any portion of the
Purchase Price payable to such Shareholder hereunder and to hold or disburse
the same as directed by such Shareholder. The Purchasers shall be entitled to
rely on any notice, certificate, affidavit, letter, document or other
communication which they believe to be genuine and to have been signed or sent
by the Paying Agent with respect to the payment of any portion of the Purchase
Price, and may rely on statements contained therein without further inquiry
or investigation.
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Notwithstanding anything to the contrary contained herein, the Purchasers
shall have the right to set-off against any amount otherwise due pursuant to
Section 1.2(a) any obligation of the Shareholders to the Purchasers under this
Agreement or any agreement or instrument delivered pursuant hereto, including,
but not limited to, a claim for indemnification or contribution under Section
6.2 (a "claim"); provided, however, that the Purchasers first shall have
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delivered to the Shareholders in writing a summary description of the factual
and legal bases for such claim and an estimate of the amount thereof. In the
event that a claim is based upon the demand of a person other than the
Purchasers, which demand is finally determined by a decision from which no
appeal may be taken, the amount of such claim shall be deemed to have been
finally determined thereby and not to be subject to further arbitration.
The Purchasers shall have the right, but not the obligation, to pay any
amount or to perform any obligation of any of the Shareholders if the
Purchasers, in their sole and absolute discretion, determines that the failure
to pay such amount or to perform such obligation could have a material adverse
effect on the Companies or the business of the Purchasers associated therewith;
provided, however, that before the Purchasers shall pay any such amount or
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perform any such obligation they first shall notify the respective Shareholder
in writing of their intention to do so and shall give such Shareholder ten (10)
days to cure or contest such failure. The Purchase Price shall be reduced by
the cost to the Purchasers of any such amount paid or obligation performed.
The Purchasers shall have the right (i) to set off any such amount or cost
against any portion of the Purchase Price then payable or (ii) to demand that
the Shareholders, jointly and severally, reimburse the Purchasers therefor
promptly on demand, and the Shareholders, jointly and severally, shall do so.
The Purchasers' rights under this Section 1.2(f) shall be in addition to any
other rights or remedies of the Purchasers under this Agreement or applicable
law.
1.3. Closing. The purchase and sale of the Shares contemplated by this
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Agreement shall take place at 10:00 A.M. (local time) on August 24, 1999 at the
offices of Sheppard, Mullin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time or
place as may be mutually agreed upon by the parties in writing. The date on
which the purchase and sale of the Shares contemplated by this Agreement shall
take place is referred to herein as the "Closing Date." The obligation of any
party to consummate the purchase and sale of the Shares contemplated by this
Agreement may be terminated by such party after August 31, 1999, if such
purchase and sale shall not have occurred by the close of business on that date,
providing the terminating party is not in default of any of its obligations
hereunder. On the Closing Date, the Shareholders shall deliver to the Purchasers
the certificates evidencing all the Shares, duly endorsed for transfer to the
Purchasers in proportion to their respective interests therein or accompanied by
stock assignments separate from certificates duly executed in favor of the
Purchasers, against receipt of the Purchase Price then payable pursuant to
Section 1.2(a)(i) and the Note. All deliveries shall be considered to have
taken place simultaneously as a single transaction, and no delivery shall be
considered to have been made until all deliveries are completed.
1.4. Employees. On the date hereof, Tag Mex, Inc. shall offer to each of
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the key employees of the Companies listed on Schedule 1.4 (the "Key Employees")
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employment on an "at will" basis and with such annual salary as are set forth
thereon, all on the terms and conditions set forth in the Employment Agreements
(as defined below).
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
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The Shareholders, jointly and severally, hereby represent and warrant
to the Purchasers that the statements set forth in Sections 2.1 through 2.20 are
true and correct.
2.1. Authority to Enter Agreement and Enforceability. Each of the
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Shareholders has all requisite right, power and authority to execute, deliver
and perform his or her respective obligations under this Agreement and the other
agreements and instruments contemplated hereby, including, but not limited to,
the sale, assignment, transfer, conveyance and delivery to the Purchasers of the
Shares owned by such Shareholder, without obtaining the approval or consent of
any other party, governmental body or authority; all proceedings have been taken
and all authorizations have been secured by each of the Shareholders which are
necessary to authorize the execution, delivery and performance of this Agreement
and the other agreements and instruments contemplated hereby; and this Agreement
and each of the other agreements
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and instruments contemplated hereby to which any Shareholder is a party is a
legal, valid and binding agreement of such Shareholder and is enforceable
against such Shareholder in accordance with its terms.
2.2. Organization and Standing. Each of the Companies is a corporation
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duly organized, validly existing and in good standing under the laws of the
United Mexican States, with all requisite power and authority (corporate and
other) to own, lease and operate its property and assets as now owned, leased or
operated and to carry on its businesses as now conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the conduct
of its businesses or the ownership, lease or use of its properties makes such
qualification necessary.
2.3. Ownership of Shares. The Shareholders own all the issued and
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outstanding shares of the capital stock of the Companies free and clear of any
liens, claims, encumbrances, security interests, equities, restrictions on
transfer, preemptive rights or other defects in title of any kind or description
(a "lien"). There are no options, warrants, rights or other agreements or
commitments outstanding or in existence which provide for the issuance of
capital stock or other securities of the Companies, and there are no securities
outstanding or in existence which are convertible into or exchangeable for
capital stock or other securities of the Companies. Upon the Closing Date, the
Purchasers shall receive from the Shareholders good and marketable title to the
Shares free and clear of all liens. The number of shares of the capital stock of
each of the Companies owned by each of the Shareholders is set forth on Schedule
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2.3.
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2.4. Trademarks, Patents, Etc. The Companies use and own no trade names,
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trademarks, patents, copyrights or registrations or applications therefore in
connection with, and none is required for, the businesses of the Companies as
presently conducted. The Companies are not infringing any trade name,
trademark, patent, copyright or other similar right of any third party in
connection with their businesses.
2.5. Financial Statements. Schedule 2.5A hereto contains (i) the audited
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combined balance sheet of the Companies as of December 31, 1998, the audited
combined statements of income, changes in shareholders' equity and changes in
financial position of the Companies for the twelve month period then ended and
the notes thereto and the report of independent auditors (▇▇▇▇▇▇▇, S.C.) thereon
and (ii) the unaudited combined balance sheet of the Companies as of June 30,
1999 and the unaudited combined statements of income of each of the Companies
for the six months then ended. Except as set forth on Schedule 2.5B, the
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foregoing financial statements (i) were prepared in accordance with generally
accepted accounting principles consistently applied throughout the period and
(ii) fairly present the Companies' consolidated financial condition and results
of operations as at the dates and for the periods therein specified, subject, in
the case of such unaudited financial statements, to normal year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes. On the date hereof, the Companies have no
material liabilities or obligations, whether contingent or absolute, direct or
indirect, or matured or unmatured, which are not shown or provided for on the
June 30, 1999 balance sheet or set forth on Schedule 2.5B hereto, and the
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Shareholders do not know of any basis for the assertion of any such liabilities
or obligations.
2.6. Tax Matters. The Companies have properly prepared and filed returns
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for and paid in full all federal, state, local and foreign taxes, assessments
and penalties to the extent such filings and payments are required prior to the
date hereof, and there is no outstanding or proposed deficiency by any federal,
state, local or foreign government with respect to any tax period. As of the
date hereof, the Companies are not the beneficiary of any extension of time to
file any tax return or pay any taxes and have no liability with respect to taxes
of any kind, whether or not assessed. The Companies have properly registered
before all federal, state and local tax authorities and the Sistema Unico de
Aportaciones ("SUA"), including the Instituto Mexicano del Seguro Social
("IMSS"), Instituto del Fondo Nacional para la Vivienda de los Trabajadores
("Infonavit"), and Sistema de Ahorro Para El Retiro ("SAR"). The term "taxes"
shall include, but is not limited to, income taxes, value added taxes, asset
taxes, payroll taxes, import duties, real property taxes, contributions payments
and assessments regarding IMSS, Infonavit and SAR.
2.7. Insurance. The Companies maintain in full force and effect insurance
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policies with financially sound and reputable insurers of a character usually
insured by companies engaged in the same
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or similar businesses against loss or damage of the kinds and in the amounts
customarily insured against by such companies.
2.8. Litigation. There are no suits, actions or legal, administrative,
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arbitration or other proceedings or investigations pending or threatened by,
against or involving the Companies or the Shareholders or any of the Companies'
officers, directors, shareholders, employees or agents.
2.9. Compliance with Laws and Other Instruments. The Companies'
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businesses have been and are being conducted in accordance with all applicable
laws, ordinances, rules and regulations of all authorities. The Companies are
not in violation of, or in default under, any term or provision of their
respective Escritura Constitutiva or Estatutos Sociales (as amended or revised)
or of any lien, indenture, mortgage, lease, agreement, instrument, contract,
commitment or other arrangement, or subject to any restriction of any kind or
character, which could have a material adverse effect on the Companies'
businesses or assets. The execution and delivery of this Agreement and the other
agreements and instruments contemplated hereby, and the consummation of the
transactions contemplated herein and therein, will not conflict with or result
in the breach of any term or provision of, or constitute a default under, the
respective Escritura Constitutiva or Estatutos Sociales (as amended or revised)
of the Companies, or any statute, order, judgment, writ, injunction, decree,
license, permit, approval, authorization, rule or regulation of any court or any
governmental or regulatory body, or any agreement, lease, contract, document,
instrument, commitment, obligation or arrangement of any kind or nature to which
any of the Companies or the Shareholders is a party or by which it, he or she is
bound.
2.10. Brokerage and Finder's Fees. The Companies and the Shareholders
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have not incurred any liability to any broker, finder or agent for any brokerage
fees, finder's fees or commissions with respect to the transactions contemplated
by this Agreement.
2.11. Employees.
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The Companies have fully complied with their obligations under the Ley
Federal de Trabajo, including, but not limited to, the timely payment in full
of all wages, salaries, overtime payments, vacation and vacation bonus
payments, seventh day payments, severance payments, holiday payments, Sunday
work bonuses, seniority bonuses and annual bonuses ("▇▇▇▇▇▇▇▇▇") and the timely
performance in full of all obligations relating to health and safety, training,
internal regulations, working conditions and any other legally or contractually
mandated fringe benefits or obligations.
Schedule 2.11 contains a complete and correct list of all agreements with
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employees or independent contractors not cancelable at will and all employee
benefit plans, including, but not limited to, (i) any collective bargaining
agreement, (ii) any agreement or plan which contains any obligation, liability
or commitment for any vacation pay, severance or termination pay, sick or
disability pay, pension or retirement benefits, bonuses or profit sharing,
deferred or delayed wages of any kind, commissions or incentive compensation or
(iii) any group medical, dental, vision, health, hospitalization or disability
insurance plan relating to the Companies' businesses. The Companies have
performed all of their respective obligations required to be performed under
all such agreements and plans, and are not in default or in arrears under any
of the respective terms thereof. The Companies' relationships with all
employees or independent contractors are satisfactory.
2.12. Assets. Schedule 2.12A contains a true and complete list of all
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tangible assets as of June 30, 1999 (including, but not limited to, all real
property, furniture, fixtures, leasehold improvements, machinery, instruments,
equipment, computers, motor vehicles, tooling, spare parts, inventory, supplies,
and other tangible personal property and assets) used in, or necessary for the
conduct of the Companies' businesses as presently conducted. Except as set forth
on Schedule 2.12B, all such assets are owned by the Companies free and clear of
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all liens, claims, charges, encumbrances, security interests, equities or
restrictions on use of any kind or nature (collectively, "Liens") and are in
good working condition and repair (subject to normal wear and tear) and are
adequate for their intended uses. Each of the leases pursuant to which the
Companies hold any such assets is in full force and effect and is a legal, valid
and binding agreement of each party thereto and is enforceable against each
party thereto in accordance with its
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terms; each party to any such lease is in compliance thereunder; and no event
has occurred which through the giving of notice or the lapse of time could cause
or constitute a default or the acceleration of any obligation of any party
thereto or the creation of a Lien upon any such asset.
2.13. Absence of Certain Changes. Since January 1, 1999, there has not
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been any material adverse change in the condition (financial or other), net
worth, property, assets, earnings, liabilities, capitalization, business,
results of operations or prospects of any of the Companies. Since January 1,
1999, the Companies have operated their respective businesses as now operated
and only in the ordinary course.
2.14. Inventories. All inventory of the Companies, including, but not
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limited to, raw materials, are of good, usable and merchantable quality.
2.15. Environmental Matters.
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Except as set forth on Schedule 4.4, the Companies have not (i) breached or
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been notified by any governmental or regulatory authority that they have
breached any Environmental Law (as defined below), (ii) released any Hazardous
Substance (as defined below) or (iii) become aware of the release or presence
of any Hazardous Substance on any property owned, leased or occupied by the
Companies. There are no underground storage tanks on property owned, leased or
occupied by the Companies.
For purposes of this Section 2.15, (i) "Environmental Law" means all laws
relating to the protection of the environment, to human health and safety or to
any environmental activity, including, without limitation, (x) Ley General del
Equilibrio Ecologico y La Proteccion al Ambiente, its related regulations and
administrative orders or provisions, including, but not limited to, those
pertaining to environmental impact, hazardous waste, air pollution, water
pollution or noise pollution, and any other specific laws, regulations or
administrative orders or provisions relating to air, soil, ground or water
pollution or contamination, (y) all other requirements pertaining to the
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of any Hazardous Substance into the
air, surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of any Hazardous Substance and (z) all other requirements
pertaining to the protection of the health and safety of employees or the
public, and (ii) "Hazardous Substance" means any substance that (x) is or
contains asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum or petroleum-derived substances or wastes, radon gas or
related materials, (y) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous waste"
or "hazardous substance" thereunder or (z) is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous or is regulated by any governmental authority or Environmental Law.
2.16. Agreements. Schedule 2.16 contains a complete and correct list of
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all leases, contracts, agreements and commitments, whether written or oral, to
which any of the Companies is a party or by which it is bound. Each such
agreement is in full force and effect and is a legal, valid and binding
agreement of each party thereto and is enforceable against each party thereto in
accordance with its terms; each party thereto is in compliance thereunder; and
no event has occurred which through the giving of notice or the lapse of time
could cause or constitute a default or the acceleration of any obligation of any
party thereto or the creation of a lien or encumbrance upon any assets of the
Companies.
2.17. Customer Orders. Schedule 2.17 sets forth a true and complete list
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of (i) all customer orders for apparel pending on the date hereof and (ii) all
Vendor Orders (as defined in Schedule 1.1(a)) pending on the date hereof. All
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such orders represent bona fide obligations of the customer to purchase and take
the goods subject thereto, arise from bona fide transactions in the ordinary
course of business and are not subject to any defense, claim or right of setoff
(other than chargebacks arising in the ordinary course of business).
2.18. Facilities. All real property and the building and improvements
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thereon used by the Companies (the "Facilities") are sufficient for the conduct
of the businesses of the Companies as now
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conducted. On the Closing Date, the Companies will have the right under valid
existing leases or other agreements to occupy and use all Facilities. Neither
the whole nor any portion of the Facilities has been condemned, requisitioned or
otherwise taken by any governmental authority, and the Companies have not
received any notice that any such condemnation, requisition or taking is
threatened, which condemnation, requisition or taking would preclude or
materially impair the current use thereof. All Facilities are in satisfactory
condition and have been reasonably maintained, normal wear and tear excepted.
All Facilities have received all required approval of governmental authorities
(including, without limitation, permits and a certificate of occupancy or other
similar certificate permitting lawful occupancy of the Facilities) required in
connection with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations. All Facilities are
supplied with utilities (including, without limitation, water, sewage, disposal,
electricity, gas and telephone) and other services necessary for the operation
of such Facilities as currently operated. The improvements constructed on the
Facilities, including, without limitation, all leasehold improvement, and all
fixtures, equipment and other tangible assets owned, leased or used by the
Companies at the Facilities are (i) insured to the extent and in a manner
customary in the industry, (ii) structurally sound with no known material
defect, (iii) in good operation, condition and repair, subject to ordinary wear
and tear, (iv) not in need of maintenance or repair except for ordinary routine
maintenance and repair the cost of which would not be material, (v) sufficient
for the operation of the Companies' businesses as presently conducted and (vi)
in conformity with all applicable laws, ordinances, orders, regulations and
other requirements relating thereto currently in effect.
2.19. Affiliate Transactions. Since January 1, 1999, there has been no
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transaction (an "affiliate transaction") between either of the Companies and any
of their officers, directors or shareholders (or any person in which any of them
has a financial interest), including, but not limited to, any loan or any
distribution.
2.20. Material Misstatements or Omissions. No representations, warranties
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or information furnished by the Companies or the Shareholders to the Purchasers
or any of their employees or agents, including, but not limited to, ▇▇▇▇▇▇▇,
S.C., in connection with the transactions contemplated hereby contain any untrue
statement of a material fact or omit to state a material fact known to the
Companies or the Shareholders necessary to make the statements and facts
contained therein not misleading. The English translations of all documents
provided by the Companies or the Shareholders to the Purchasers or any of their
employees or agents, including, but not limited to, ▇▇▇▇▇▇▇, S.C., are true and
correct.
3. REPRESENTATION AND WARRANTIES OF THE PURCHASERS
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The Purchasers, jointly and severally, represent and warrant to the
Shareholders that the statements set forth in Sections 3.1 through 3.3 hereof
are true and correct.
3.1. Authority to Enter Agreement and Enforceability. Each of the
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Purchasers has all requisite right, power and authority to execute, deliver and
perform its obligations under this Agreement and the other agreements and
instruments contemplated hereby without obtaining the approval or consent of any
other party, governmental body or authority; all proceedings have been taken and
all authorizations have been secured by each of the Purchasers which are
necessary to authorize the execution, delivery and performance of this Agreement
and the other agreements and instruments contemplated hereby; and this Agreement
and each of the other agreements and instruments contemplated hereby to which it
is a party is a legal, valid and binding agreement of each of the Purchasers and
is enforceable against it in accordance with its terms.
3.2. Compliance with Laws and Other Instruments. The execution and
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delivery of this Agreement and the other agreements and instruments contemplated
hereby, and the consummation of the transactions contemplated herein and
therein, will not conflict with or result in the breach of any term or provision
of, or constitute a default under, any statute, order, judgment, writ,
injunction, decree, license, permit, approval, authorization, rule or regulation
of any court or any governmental or regulatory body, or any agreement, lease,
contract, document, instrument, commitment, obligation or arrangement of any
kind or nature to which either of the Purchasers is a party or by which it is
bound, unless such breach will not have a material adverse effect on the
business or operations of the Purchasers.
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3.3. Brokerage and Finder's Fees. The Purchasers have not incurred any
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liability to any broker, finder or agent for any brokerage fees, finder's fees
or commissions with respect to the transactions contemplated by this Agreement.
4. COVENANTS
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4.1. Operation of the Companies.
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During the period from the date of this Agreement to the Closing Date, the
Shareholders shall cause the Companies to operate their businesses as now
operated and only in the ordinary course except as otherwise provided in
Section 4.1(b). By way of illustration only and not limitation, the
Shareholders shall cause the Companies to take each such action as is set forth
in Schedule 4.1 hereto.
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On or before the Closing Date the Companies shall transfer to the
Shareholders all real property currently owned by the Companies subject to the
leases described in Section 5.1(f). In the event that the Companies are not
able to transfer all real property currently owned by them to the Shareholders
on or before August 31, 1999, but all conditions precedent to the obligation of
the parties to consummate the transactions contemplated by this Agreement have
been satisfied (other than such transfer and the execution and delivery of the
leases relating to such real property described in Section 5.1(f)), the
Purchasers may elect to consummate such transactions notwithstanding anything
to the contrary contained herein; provided, however, that (i) after the Closing
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Date the Purchasers shall use all reasonable commercial efforts to cause the
Companies to transfer such real property to the Shareholders as quickly as
practicable and (ii) concurrently with such transfer the Shareholders shall
cause to be executed and delivered the leases thereon described in Section
5.1(f). All costs and expenses relating to the transfer of real property
pursuant to this Section 4.1(b), including, but not limited to, any transfer
tax payable on the value of land and buildings, shall be borne by the
Shareholders.
4.2. Access to Information. The Shareholders shall cause the Companies to
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give to the Purchasers and their counsel, accountants and other representatives
full access during normal business hours throughout the period from the date of
this Agreement to the Closing Date to all of their property, assets, books and
records and all employees, independent contractors and agents, and to furnish
the Purchasers during such period with all such information concerning their
businesses as the Purchasers may reasonably request. No investigation or inquiry
made by or on behalf of the Purchasers hereunder shall in any way affect or
lessen the representations and warranties made by the Shareholders under this
Agreement.
4.3. Release of Liens. On or before August 31, 1999, the Shareholders
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shall cause those Liens set forth on Schedule 2.12B to be released.
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4.4. Environmental Matters.
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The Shareholders promptly after the Closing Date shall commence, and shall
cause to be performed, at the Shareholders' sole cost and expense, all
preventative and corrective actions required by any governmental or regulatory
authority in connection with, relating to or affecting the businesses of the
Companies, including, but not limited to, those preventative and corrective
actions described on Schedule 4.4 and the various audit reports, audit plans,
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administrative resolutions, minutes, executive summaries and other books,
records and documents referred to therein. The Purchasers shall cause the
Companies to reimburse the Shareholders for such costs and expenses incurred by
them in performing, or causing to be performed, any preventative or corrective
actions described on Schedule 4.4.
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(b) The Shareholders promptly from time to time after the Closing Date at
the request of the Purchasers, at the Shareholders' sole cost and expense,
shall (i) remedy any breach of any Environmental Law arising before the date
hereof in connection with or related to the businesses of the Companies or (ii)
obtain the release of any liability therefor from the appropriate governmental
or regulatory authority, in each case without any material condition or
restriction on the operation of the businesses of the Companies, which remedy
or release shall be acceptable to the Purchasers in all material respects.
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5. CONDITIONS PRECEDENT
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5.1. Conditions Precedent to the Obligations of the Purchaser. The
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obligation of the Purchasers to consummate the transactions contemplated by this
Agreement is expressly subject to the following conditions (compliance with
which or the occurrence of which may be waived in whole or in part by the
Purchasers in writing):
(a) All representations and warranties of the Shareholders contained in
this Agreement shall be true and correct in all respects on the date hereof and
as of the Closing Date as if made at and as of such date.
(b) Each of the Shareholders shall have performed and satisfied in all
respects all covenants and conditions required by this Agreement to be
performed or satisfied by him or her on or prior to the Closing Date.
(c) No action or proceeding shall have been instituted or threatened prior
to or at the Closing Date or, in the reasonable opinion of counsel to the
Purchasers, is likely to be instituted before any court or governmental body or
authority the result of which could prevent or make illegal the consummation of
the transactions contemplated hereunder, or which could adversely affect the
Purchasers' operation of the businesses of the Companies.
(d) Each of the Key Employees shall have executed and delivered to Tag Mex,
Inc. an employment agreement in the form of and containing the terms and
conditions set forth in Exhibit B hereto (an "Employment Agreement").
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(e) There shall not have occurred any material adverse change in the
business, property, assets, operations, condition (financial or other) or
prospects of either of the Companies since January 1, 1999.
(f) The owner of each of the premises listed on Schedule 5.1(f) shall have
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executed and delivered to the Companies a lease of such premises, in the form
and containing the terms and conditions set forth in Exhibit C hereto;
---------
provided, however, that the rent on such premises and other selected terms of
--------
such leases shall be as set forth on Schedule 5.1(f).
------
8
5.2. Conditions Precedent to the Obligations of the Shareholders. The
-----------------------------------------------------------
obligation of the Shareholders to consummate the transactions contemplated by
this Agreement is expressly subject to the following conditions (compliance with
which or the occurrence of which may be waived in whole or in part by the
Shareholders in writing):
(a) All representations and warranties of the Purchasers contained in this
Agreement shall be true and correct in all respect on the date hereof and as of
the Closing Date as if made at and as of such date.
(b) The Purchasers shall have performed and satisfied in all respects all
covenants and conditions required by this Agreement to be performed or
satisfied by them on or prior to the Closing Date.
(c) No action or proceeding shall have been instituted or threatened prior
to or at the Closing Date or, in the reasonable opinion of counsel to the
Shareholders, is likely to be instituted before any court or governmental body
or authority the result of which could prevent or make illegal the consummation
of the transactions contemplated hereunder.
(d) Tag Mex, Inc. shall have executed and delivered to the Key Employees
the Employment Agreements.
(e) The Purchasers shall have executed and delivered to the Shareholders a
pledge agreement in the form of and containing the terms and conditions set
forth in Exhibit E hereto.
---------
6. MISCELLANEOUS
-------------
6.1. Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations, warranties and agreements made by the parties in this Agreement
(including, but not limited to, statements contained in any exhibit, schedule
or certificate or other instrument delivered by or on behalf of any party hereto
or in connection with the transactions contemplated hereby) shall survive the
consummation of the transaction contemplated hereby notwithstanding any
investigations, inspections, examinations or audits made by or on behalf of any
party.
6.2. Indemnification.
---------------
The Shareholders (the "Indemnifying Parties"), jointly and severally, shall
indemnify, defend and hold harmless the Purchasers and their officers,
directors, shareholders, employees, affiliates, agents, successors and assigns,
and any person who controls or is deemed to control any of them (the
"Indemnified Parties"), from, against and in respect of any and all payments,
damages, claims, demands, losses, expenses, costs, obligations and liabilities
(including, but not limited to, reasonable attorneys' fees and costs, and the
costs of investigation and preparation) (a "Loss") which, directly or
indirectly, arise or result from or are related to (i) any breach by any of the
Indemnifying Parties of any of his or her representations, warranties,
covenants or commitments under this Agreement or any agreement or instrument
delivered in connection herewith, (ii) the conduct of the Companies' businesses
prior to the date hereof, (iii) any chargebacks or returns by any customer for
products sold by the Companies, or (iv) any preventative or corrective actions
described in Section 4.4(a) or any breach of any Environmental Law or release
described in Section 4.4(b). Consummation of the transactions contemplated
hereunder shall not be deemed or construed to be a waiver of any right or
remedy of any Indemnified Party, nor shall this section or any other provision
of this Agreement be deemed or construed to be a waiver of any ground of
defense by it. The Indemnifying Parties' obligations hereunder shall be in
addition to
9
any liability that they or any other person otherwise may have to the
Indemnified Parties, and shall be binding upon, and inure to the benefit of,
their heirs, representatives, successors and assigns, and shall inure to the
benefit of the heirs, representatives, successors and assigns of each
Indemnified Party. The obligation to advance or pay promptly on demand all
amounts as they are incurred shall exist irrespective of the ultimate final
judicial determination, and in the event of a dispute about amounts owed, such
amounts shall be advanced as they are incurred pending resolution and final
judicial determination.
The Purchasers (the "Indemnifying Parties") shall indemnify, defend and
hold harmless, the Shareholders and their respective employees, affiliates,
agents, successors and assigns (the "Indemnified Parties"), from, against and
in respect of any and all payments, damages, claims, demands, losses, expenses,
costs, obligations and liabilities (including, but not limited to, reasonable
attorneys' fees and costs, and the costs of investigation and preparation) (a
"Loss") which, directly or indirectly, arise or result from or are related to
(i) any breach by any of the Indemnifying Parties of any of its
representations, warranties, covenants or commitments under this Agreement or
(ii) the conduct of the Purchasers' business after the Closing Date.
Third-Party Claims. The Indemnified Party shall promptly notify the
------------------
Indemnifying Parties of the existence of any claim, demand or other matter
involving liabilities to third parties to which the Indemnifying Parties'
indemnification obligations could apply and shall give the Indemnifying Parties
a reasonable opportunity to defend the same at their expense and with counsel
of their own selection (who shall be approved by the Indemnified Party, which
approval shall not be withheld unreasonably); provided, however, that (i) the
--------
Indemnified Party shall at all times also have the right to fully participate
in the defense at its own expense, (ii) if, in the reasonable judgment of the
Indemnified Party, based upon the written advice of counsel, a conflict of
interest may exist between the Indemnified Party and any of the Indemnifying
Parties, the Indemnifying Parties shall not have the right to assume such
defense on behalf of such Indemnified Party, and (iii) the failure to so notify
the Indemnifying Parties shall not relieve the Indemnifying Parties from any
liabilities that they may have hereunder or otherwise, except to the extent
that such failure so to notify the Indemnifying Parties materially prejudices
the rights of the Indemnifying Parties. If the Indemnifying Parties shall,
within a reasonable time after such notice, fail to defend, the Indemnified
Party shall have the right, but not the obligation, to undertake the defense
of, and to compromise or settle the claim or other matter on behalf, for the
account and at the risk and expense of the Indemnifying Parties. The
Indemnifying Parties shall not compromise or settle the claim or other matter
for any consideration other than the payment of money without the prior written
consent of the Indemnified Parties. The Indemnified Parties shall make
available all information and assistance that the Indemnifying Parties may
reasonably request; provided, however, that any associated expenses shall be
--------
paid by the Indemnifying Parties as incurred.
6.3. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing in the English language and shall be deemed to
have been given (i) if personally delivered, when so delivered, (ii) if mailed,
one (1) week after being placed in the United States mail, registered or
certified, postage prepaid, addressed to the party to whom it is directed at the
address set forth on the signature page hereof or (iii) if given by telecopier,
when such notice or communication is transmitted to the telecopier number set
forth on the signature page hereof and written confirmation of receipt is
received. Each of the parties shall be entitled to specify a different address
by giving the other parties notice as aforesaid.
6.4. Entire Agreement. This Agreement and the schedules and exhibits
----------------
hereto (which are incorporated herein by reference) constitute the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, relating to the subject matter of this Agreement. No
supplement, modification, waiver or termination of this Agreement shall be valid
unless executed by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver, unless otherwise expressly provided.
10
6.5. Headings. Section and subsection headings are not to be considered
--------
part of this Agreement and are included solely for convenience and reference and
in no way define, limit or describe the scope of this Agreement or the intent of
any provisions hereof.
6.6. Successors and Assigns. All of the terms, provisions and obligations
----------------------
of this Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, representatives, successors and
assigns.
6.7. Governing Law. The validity, construction and interpretation of this
-------------
Agreement shall be governed in all respects by the laws of the State of
California applicable to contracts made and to be performed wholly within that
State.
6.8. Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each one of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
6.9. Third Parties. Nothing in this Agreement, expressed or implied, is
-------------
intended to confer upon any person other than the parties hereto and their
respective heirs, representatives, successors and assigns any rights or remedies
under or by reason of this Agreement.
6.10. Attorneys' Fees. In the event any party takes legal action to
---------------
enforce any of the terms of this Agreement, the unsuccessful party to such
action shall pay the successful party's expenses (including, but not limited to,
reasonable attorneys' fees and costs) incurred in such action.
6.11. Further Assurances. Each party hereto shall, from time to time at
------------------
and after the date hereof, execute and deliver such instruments, documents and
assurances and take such further actions as the other parties reasonably may
request to carry out the purpose and intent of this Agreement.
6.12. Arbitration. Any controversy arising out of or relating to this
-----------
Agreement or the transactions contemplated hereby shall be referred to
arbitration before the American Arbitration Association strictly in accordance
with the terms of this Agreement and the substantive law of the State of
California. The board of arbitrators shall convene at a place mutually
acceptable to the parties in the State of California and, if the place of
arbitration cannot be agreed upon, arbitration shall be conducted in Los
Angeles. The parties hereto agree to accept the decision of the board of
arbitrators, and judgment upon any award rendered hereunder may be entered in
any court having jurisdiction thereof. Neither party shall institute a
proceeding hereunder until that party has furnished to the other party, by
registered mail, at least thirty (30) days prior written notice of its intent to
do so.
6.13. Construction. This Agreement was reviewed by legal counsel for each
------------
party hereto and is the product of informed negotiations between the parties
hereto. If any part of this Agreement is deemed to be unclear or ambiguous, it
shall be construed as if it were drafted jointly by the parties. Each party
hereto acknowledges that no party was in a superior bargaining position
regarding the substantive terms of this Agreement.
6.14. Consent to Jurisdiction. Subject to Section 6.12, each party hereto,
-----------------------
to the fullest extent it may effectively do so under applicable law, irrevocably
(i) submits to the exclusive jurisdiction of any court of the State of
California or the United States of America sitting in the City of Los Angeles
over any suit, action or proceeding arising out of or relating to this
Agreement, (ii) waives and agrees not to assert, by way of motion, as a defense
or otherwise, any claim that it is not subject to the jurisdiction of any such
court, any objection that it may now or hereafter have to the establishment of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum, (iii) agrees that a final judgment in any
such suit, action or proceeding brought in any such court shall be conclusive
and binding upon such party and may be enforced in the courts of the United
States of America, the State of California or the United Mexican States (or any
other courts to the jurisdiction of which such party is or may be subject) by
11
a suit upon such judgment and (iv) consents to process being served in any such
suit, action or proceeding by mailing a copy thereof by United States mail,
registered or certified, postage prepaid, return receipt requested, to CT
Corporation at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (and each
party hereby irrevocably appoints CT Corporation as its lawful agent to accept
such service of process on behalf of such party). Each party agrees that such
service (i) shall be deemed in every respect effective service of process upon
such party in any such suit, action or proceeding and (ii) shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon and
personal delivery to such party.
6.15. Expenses. Each party shall bear the expenses incurred by it in
--------
connection with the negotiation, execution and delivery of this Agreement and
the other agreements and instruments contemplated hereby and the consummation of
the transactions contemplated hereby and thereby.
6.16. Severable Provisions. The provisions of this Agreement are
--------------------
severable, and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.
6.17. Taxes. The Shareholders shall pay timely any transfer, sales or
-----
other taxes which may become due or payable by virtue of the transactions
contemplated by this Agreement.
6.18. Obligation of the Parent. The Parent shall cause the Purchasers to
------------------------
timely perform their obligations under the Note.
12
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first set forth above.
Purchasers: TAG MEX, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Authorized Representative
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
NO! JEANS, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Authorized Representative
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Shareholders:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Calle ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ No. 200
Fraccionamiento Reforma, C.P. 75770
Tehuacan, Puebla
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Tehuacan, Puebla
/s/ Mario ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
MARIO ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ No. 200
Fraccionamiento Reforma, C.P. 75770
Tehuacan, Puebla
/s/ Marco ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
MARCO ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Tehuacan, Puebla
▇▇
/▇/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Calle ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ No. 200
Fraccionamiento Reforma, C.P. 75770
Tehuacan, Puebla
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ YUNES
Calle ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ No. 200
Fraccionamiento Reforma, C.P. 75770
Tehuacan, Puebla
Parent: TARRANT APPAREL GROUP
By /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Authorized Representative
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
14
SCHEDULES INTENTIONALLY OMITTED.
