AGREEMENT
Agreement, dated as of March 15, 1999, by and between Tahiti Apparel, Inc.,
a New Jersey corporation with its principal executive offices at 500 Seventh
Avenue, New York, New York 10018 (the "Company"), and Ming-Yiu Chan, with
offices c/o Manley, Ltd. 8/F, HK Spinners International Building 818 Cheung Sha
Wan Road, Kowloon, Hong Kong ("Chan").
RECITALS:
WHEREAS, Chan is a stockholder of the Company and currently owns fifty (50)
shares (the "Chan Shares") of common stock, of the Company (the "Common Stock")
representing 33% of the issued and outstanding shares of Common Stock;
WHEREAS, as of the date hereof, the Company has an aggregate of Six Million
Seven Hundred and Seventy Thousand ($6,770,000) Dollars of outstanding
indebtedness owed to Chan (the "Company Debt");
WHEREAS, the Company has entered into an asset purchase agreement (the
"Purchase Agreement") with Signal Apparel Company, Inc., an Indiana corporation
("Signal"), providing for Signal's, or its subsidiary's, purchase of
substantially all of the assets, and assumption of certain of the liabilities,
of the Company;
WHEREAS, the parties desire to settle certain differences between them,
including but not limited to, the management of the business of Tahiti and the
repayment of the Company Debt; and
WHEREAS, the execution of this Agreement as of the date hereof and the
consummation of the transactions contemplated hereby on or prior to the closing
of the transactions contemplated by the Purchase Agreement (the "Closing") is a
condition precedent to Signal's execution of the Purchase Agreement and
consummation of the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
1. Company Debt.
(a) Upon execution of this Agreement the Company shall execute that certain
promissory note (the "Note"), in the form and substance attached hereto as
Exhibit 1, for the benefit of Chan, which Note shall be delivered to the escrow
agent (the "Escrow Agent") who shall hold the Note in accordance with the terms
of the escrow agreement (the "Escrow Agreement") annexed hereto as Exhibit 2,
evidencing the obligation to repay Chan the Company Debt in accordance with the
terms of the Note.
Additionally, upon the execution of this Agreement, the Company shall
execute a general release (the "Company Release"), in the form attached hereto
as Exhibit 3 releasing Chan from any liability to the Company which may have
arisen through the date thereof which Company Release shall be shall be
deposited in escrow with the Escrow Agent and released in accordance with the
Escrow Agreement.
2. Chan Release.
(a) In consideration for the delivery of the Note and the Company Release
to the Escrow Agent, upon execution of this Agreement, Chan shall simultaneously
deliver to the Escrow Agent a general release executed by Chan (the "Chan
Release"), in the form attached hereto as Exhibit 4 whereby, in consideration
for repayment of the Company Debt Chan agrees to release Tahiti, its
stockholders, officers, directors, successors and assigns from any and all
liability which may have arisen through the date thereof.
3. Documents to be Held in Escrow.
(a) The Chan Release, the Note and the Company Release shall be held in
escrow pending the Closing and shall be released by the Escrow Agent in
accordance with the terms set forth in the Escrow Agreement. At the Closing, the
Escrow Agent shall (i) deliver the Note and Company Release to Chan and (ii) the
Chan Release to the Company.
4. Termination.
(a) This Agreement may be terminated and the transactions contemplated
herein abandoned at any time prior to the Closing (i) by written agreement of
Chan, the Company and/or its successors and/or assigns or (ii) by Chan or the
Company if the Closing shall not have occurred on or before March 31, 1999.
(b) In the event that this Agreement shall be terminated pursuant to the
foregoing provisions, all obligations of the parties hereto under this Agreement
shall terminate and there shall be no liability of any party hereto to any other
party except as expressly provided herein and the parties shall direct the
Escrow Agent to deliver the Chan Release to Chan and the Note and the Company
Release to the Company. Notwithstanding the foregoing, nothing herein shall
relieve any party from liability for any breach of this Agreement.
6. Representations.
(a) Chan hereby represents and warrants to the Company as follows: (i) the
Company has no debt, liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, to him or any of his affiliates other than
for the Company Debt or in his capacity as a stockholder of the Company, or the
Time Deposit in the face amount of $142,000 plus accrued and unpaid interest,
(ii) this Agreement has been, and the agreements, documents and instruments
contemplated hereby (the "Related Documents") being executed by him will be,
duly executed and delivered by him and, assuming this Agreement and the Related
Documents
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constitute valid and binding obligations of the other parties thereto, this
Agreement constitutes, and the Related Documents being executed by him will
constitute, valid and binding obligations of his, enforceable against him in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting rights of creditors generally or equitable principles, and (iii)
except for this Agreement, he has not bound or committed the Company to any
agreement of any kind nor incurred any debt, obligation or liability or entered
into any contract or commitment on behalf of the Company.
(b) The Company hereby represents and warrants to Chan that it has the
requisite corporate power and authority to execute and deliver this Agreement
and the Related Agreements being executed by it, and to consummate the
transactions contemplated hereby and thereby; the execution, delivery and
performance of this Agreement and the Related Agreements by the Company and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Related Agreements or to consummate the
transactions so contemplated; this Agreement has been, and the Related
Agreements will be, duly executed and delivered by the Company and, assuming
this Agreement and the Related Agreements constitute valid and binding
obligations of Chan, this Agreement constitutes, and the Related Agreements
being executed by it will constitute, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms; this Agreement will not result in the breach of, or constitute a default
under any agreement, contract, indenture or order to which the Company is a
party, including its Certificate of Incorporation and By-Laws.
7. Miscellaneous.
(a) From and after the Closing, neither the Company nor Signal shall have
any further liability or obligation to Chan with respect to either the Chan
Shares or the Company Debt or otherwise, except as expressly provided herein or
in the Note.
(b) Any fees and costs of the Escrow Agent shall be the responsibility of
the Company.
(c) Subject headings are included for convenience only and shall not affect
the interpretation of any provision of this Agreement.
(d) Any notice, demand, request, waiver, or other communication under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served or sent by telecopy, on the business day
after notice is delivered to a courier or mailed by express mail if sent by
courier delivery service or express mail for next day delivery, and on the third
day after mailing if mailed to the party to whom notice is to be given, by first
class mail, registered, return receipt requested, postage prepaid and addressed
as follows:
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If to the Company, to:
Tahiti Apparel, Inc.
500 Seventh Avenue
New York, NY 10018
Attention: Zvi Ben-Haim
Telecopy: (212) 354-5314
Telephone: (212) 944-7117
with a copy to:
Wachtel & Masyr, LLP
110 East 59th Street
New York, NY 10022
Attention: Morris Missry, Esq.
Telecopy: (212) 909-9448
Telephone: (212) 909-9557
If to Chan, to:
c/o Manley, Ltd. 8/F
HK Spinners International Building
818 Cheung Sha Wan Road, Kowloon, Hong Kong
Telecopy: 011-852-2742-2352
with a copy to:
Robert T. Lincoln, Esq.
Dunnington, Barthlow & Miller, LLP
666 Third Avenue
New York, New York 10017
Telecopy: (212) 661-7769
Telephone: (212) 682-8811
Any party may change its address for the purposes of this Section by giving
written notice to the other parties hereto in accordance with the provisions
hereof.
(e) None of the parties hereto shall assign any rights or delegate any
duties hereunder without the prior written consent of the other, except that in
connection with the Closing under the Asset Purchase Agreement, Signal has
agreed to fulfill the Company's obligations hereunder. Signal shall be deemed a
third party beneficiary of this Agreement and may assert the rights of any party
hereunder without such other party's consent. A true copy of the Agreement
pursuant to which Signal assumes the Company's obligations hereunder will be
delivered to Chan on the Closing Date.
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(f) This Agreement shall be binding upon and inure to the benefit of the
permitted successors and assigns of the parties, and shall further inure to the
benefit of Signal.
(g) This Agreement shall be construed in accordance with, and governed by,
the laws of the State of New York as applied to contracts made and to be
performed entirely in the State of New York without regard to principles of
conflicts of law. Each of the parties hereto hereby irrevocably and
unconditionally submits to the exclusive jurisdiction of any court of the State
of New York or any federal court sitting in the State of New York for purposes
of any suit, action or other proceeding arising out of this Agreement (and
agrees not to commence any action, suit or proceedings relating hereto except in
such courts). Each of the parties hereto agrees that service of any process,
summons, notice or document by U.S. registered mail at its address set forth
herein shall be effective service of process for any action, suit or proceeding
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement, which is brought
by or against it, in the courts of the State of New York or any federal court
sitting in the State of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(h) This Agreement, including the exhibits hereto, sets forth the entire
understanding and agreement and supersedes any and all other understandings,
negotiations or agreements between Chan and the Company relating to the Chan
Shares and/or the Company Debt.
(i) This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute a single
agreement.
(j) In the event that any one or more of the immaterial provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable, the same shall not affect any other provision of this
Agreement, but this Agreement shall be construed in a manner which, as nearly as
possible, reflects the original intent of the parties.
(k) Nothing expressed or implied in this Agreement is intended or shall be
construed to confer upon or give to any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby except for Signal.
(l) This Agreement may be amended or modified only by written agreement
executed by Chan, the Company and Signal.
(m) Each party hereto agrees to execute and deliver such documents as may
be reasonably requested in order to consummate the transactions contemplated
hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
TAHITI APPAREL, INC.
By: /s/ Zvi Ben-Haim
---------------------------------------
Name: Zvi Ben-Haim
Title: President
/s/ Ming-Yiu Chan,
---------------------------------------
By Robert T. Lincoln, Attorney-in-Fact
---------------------------------------
Ming-Yiu Chan
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EXHIBIT 1 -- NOTE
PROMISSORY NOTE
$6,770,000 March 15, 1999
FOR VALUE RECEIVED, Tahiti Apparel, Inc. ("Borrower"), a New Jersey
corporation with its principal executive offices at 500 Seventh Avenue, New
York, New York 10018, promises to pay to the order of Ming-Yiu Chan, with
offices c/o Manley, Ltd. 8/F, HK Spinners International Building 818 Cheung Sha
Wan Road, Kowloon, Hong Kong ("Holder"), or registered assigns, the principal
sum of Six Million Seven Hundred Seventy Thousand Dollars ($6,770,000) and,
together with such amount, all interest accrued under the terms of this Note as
provided herein.
1. Loan and Terms of Payment.
1.1 The Loan. Borrower acknowledges receipt of Six Million Seven Hundred
Seventy Thousand Dollars ($6,770,000) loaned from Holder (the "Loan").
1.2 Interest. The Loan shall accrue interest from the date hereof at a rate
equal to eight percent (8%) per annum (based on a three hundred and sixty five
(365) day year) until the Loan is paid in full, and the interest shall be
payable as set forth below in Section 1.3.
1.3 Principal Repayment. The principal amount of this Note shall be due and
payable as follows: (a) Three Million Five Hundred Thousand Dollars
($3,500,000), plus any accrued interest thereon, shall be due and payable on the
following dates: (i) $250,000 on the date which is ninety (90) days following
the Closing Date, (ii) $250,000 on the date which is one hundred eighty (180)
days following the Closing Date; (iii) $250,000 on the date which is two hundred
seventy (270) days following the Closing Date; (iv) $250,000 on the date which
is 360 days following the Closing Date,, as that term is defined in that certain
Asset Purchase Agreement dated December 18, 1998, between the Borrower and
Signal Apparel Company, Inc. ("Signal"), (v) $312,500 on June 1, 2000, (vi)
$312,500 on September 1, 2000, (vii) $312,500 on December 1, 2000, (viii)
$312,500 on March 1, 2001, (ix) $312,500 on June 1, 2001, (x) $312,500 on
September 1, 2001, (xi) $312,500 on December 1, 2001, and (xii) $312,500 on
March 1, 2002, all of the foregoing principal installments will be accompanied
by accrued and unpaid interest to the date of such installment; all of the
foregoing installments will include accrued and unpaid interest to the date of
such installment; and (b) Three Million Two Hundred Seventy Thousand
($3,270,000) Dollars, payable at any time, by the delivery of One Million Common
Shares of Signal (which shares shall be subject to the same lockup provisions as
set forth in that certain Stock Resale Agreement of even date herewith, except
that the lockup period shall only be extended for a period of two (2) years from
the Closing Date), within five (5) business days of the Closing Date under the
Asset Purchase Agreement dated December 18, 1998 or in Eight (8) quarterly
installments beginning on the first anniversary of the Closing Date which shall
be accompanied by interest at an annual rate of eight (8%) percent, which
interest shall accrue from the Closing Date.
1.4 Form of Payment.
(a) Except for the issuance of Common Shares of Signal as provided in 1.3
herein, both the principal amount of this Note and all interest accrued thereon
shall be paid in such currency of the United States of America as shall be legal
tender at the time of payment. All payments or prepayments of principal and
interest and other sums due pursuant to this Note shall be made by certified
check to Holder at his address set forth above, or in immediately available
funds by wire transfer to Holder's account at such bank as Holder shall have
previously designated to Borrower. When any date on which principal and interest
are due and payable falls on a Saturday, Sunday or legal holiday, then such
payment shall be due and payable on the first business day immediately following
such date and interest shall be payable at the rate set forth herein for the
period of such extension.
1.5 Optional Prepayment. This Note may be prepaid by Borrower, in whole or
in part, at any time or from time to time, without premium or penalty. All
prepayments made on this Note shall be applied first to the payment of all
unpaid interest accrued on this Note, and then to the outstanding and unpaid
principal amount of this Note as of the date of the payment. The amount of
interest payable as part of each quarterly payment of interest shall be adjusted
to reflect any prepayment of principal made prior to the date of such quarterly
payment of interest.
2. Events of Default.
2.1 Definition of Event of Default. Any one or more of the following events
shall constitute an Event of Default:
(a) Borrower fails to make any payment of principal or interest on
this Note, or any other amount payable by Borrower under this Note, within
fifteen (15) days after the date any such payment is due by the provisions
of this Note, by acceleration or otherwise;
(b) Borrower becomes insolvent; fails or ceases to pay its debts as
they mature; makes an assignment for the benefit of creditors; files a
petition in bankruptcy; is adjudicated insolvent or bankrupt; petitions or
applies to any tribunal for the appointment of any receiver or trustee; or
commences any proceeding under law or statutes of any jurisdiction, whether
now or hereafter in effect, relating to reorganization, arrangement,
readjustment of debt, dissolution or liquidation, or there is commenced
against Borrower any such proceeding which shall not be dismissed within a
period of sixty (60) days, or Borrower by any act indicates its consent to,
approval of, or acquiescence in any such proceeding or the appointment of
any receiver of or any trustee for it or any substantial part of its
property, or suffers any such receivership or trusteeship to continue
undischarged for a period of sixty (60) days; or
(c) Borrower admits in writing its inability to, or generally becomes
unable to, pay its debts as such debts become due.
2.2 Rights upon Event of Default. Upon the occurrence of any Event of
Default, Holder, at his option, may declare the entire principal amount of this
Note then outstanding, together with accrued and unpaid interest thereon,
immediately due and payable without presentment, demand, protest or notice or
other formality of any kind. Holder also may exercise from time to time any
rights and remedies available to him by law and under any agreement or other
instrument relating to the amounts owed under this Note.
2.3 Collection Costs; Attorney's Fees. Borrower shall pay, on demand, all
of the reasonable costs and expenses of Holder incurred in the collection of
this Note, including reasonable attorney's fees and expenses, whether or not a
suit to enforce such rights is actually instituted.
3. Miscellaneous.
3.1 Unconditional Obligation; Waivers. The obligations of Borrower to make
the payments provided for in this Note are absolute and unconditional and not
subject to any defense, set-off, counterclaim, rescission, recoupment or
adjustment whatsoever. Borrower hereby waives presentment and demand for
payment, notice of non-payment, notice of dishonor, protest, notice of protest,
bringing of suit and diligence in taking any action to collect any amount called
for under this Note, and shall be directly and primarily liable for the payment
of all amounts owing and to be owing hereon, regardless of and without any
notice, diligence, act or omission with respect to the collection of any amount
called for hereunder. No waiver of any provision of this Note made by agreement
of Holder and any other person shall constitute a waiver of any other terms
hereof, or otherwise release or discharge the liability of Borrower under this
Note. No failure to exercise and no delay in exercising, on the part of Holder,
any right, power or privilege under this Note shall operate as a waiver thereof
nor shall partial exercise of any right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies provided by law.
3.2 Notices and Addresses. Any notice, demand, request, waiver, or other
communication under this Note shall be in writing and shall be deemed to have
been duly given on the date of service, if personally served or sent by
telecopy; on the business day after notice is delivered to a courier or mailed
by express mail, if sent by courier delivery service or express mail for next
day delivery; and on the third day after mailing, if mailed to the party to whom
notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
To Holder: Ming-Yiu Chan
c/o Manley, Ltd. 8/F,
HK Spinners International Building
818 Cheung Sha Wan Road, Kowloon, Hong Kong
Telecopy: 011-852-2742-2352
With a copy to: Robert T. Lincoln, Esq.
Dunnington, Barthlow & Miller, LLP
666 Third Avenue
New York, New York 10017
Telecopy: (212) 661-7769
Telephone: (212) 682-8811
To Borrower: Tahiti Apparel, Inc.
500 Seventh Avenue
New York, NY 10018
Attention: Zvi Ben-Haim
Fax: (212) 354-5314
With a copy to Wachtel & Masyr, LLP
110 East 59th Street
New York, New York 10022
Attention: Morris Missry
Fax: (212) 909-9448
Any party may change its address for the purposes of this Section by giving
written notice to the other parties hereto in accordance with the provisions
hereof.
3.3 Lost, Stolen or Mutilated Note. Upon receipt by Borrower of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note or
any Note exchanged for it, and (in the case of loss, theft or destruction) of
indemnity satisfactory to it, and upon reimbursement to Borrower of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
such Note, if mutilated, Borrower will make and deliver in lieu of such Note a
new Note of like tenor and unpaid principal amount and dated as of the original
date of the Note.
3.4 Severability; Binding Effect; Assignment. Any provision of this Note
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Note or affecting the validity or unenforceability of any
of the terms and provisions of this Note in any other jurisdiction. This Note
shall be binding upon and inure to the benefit of the parties hereto and their
legal representatives, successors and assigns. Neither this Note nor any rights
hereunder may be assigned by either party hereto without the other party's
consent, which consent shall not be unreasonably withheld or delayed; provided,
however, that Borrower will assign this Note and delegate its duties hereunder
to Signal Apparel Company, Inc., an Indiana corporation ("Signal"), and Signal
will assume the Borrower's obligations hereunder, in connection with Signal's
purchase of substantially all of the assets, and assumption of certain of the
liabilities, of Borrower. From and after the assumption of this Note by Signal,
the term "Borrower" shall be deemed to mean Signal, and thereafter Tahiti shall
be released and relieved of any liability under the Note.
3.5 Governing Law; Forum. This Note and any dispute, disagreement, or issue
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed and interpreted according to the internal laws of the State of New
York, without giving effect to the principles of conflicts of laws thereof. Each
of the parties hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of any court of the State of New York or any federal
court sitting in the State of New York for purposes of any suit, action or other
proceeding arising out of this Note (and agrees not to commence any action, suit
or proceedings relating hereto except in such courts). Each of the parties
hereto agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Note, which is brought by or against it, in the courts of the State of
New York or any federal court sitting in the State of New York and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
3.6 Amendments. This Note cannot be changed orally or terminated orally.
Any amendment of, or supplement to, or other modification of, this Note must be
in a written instrument executed by both parties hereto.
3.7 Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Note.
IN WITNESS WHEREOF, this Note has been executed and delivered as of the
date specified above.
TAHITI APPAREL, INC.
By __________________________________
Name:
Title: