EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of the 21st day of December, 2001, by and among TAG-IT PACIFIC, INC., a
Delaware corporation ("Buyer"), and GRUPO INDUSTRIAL CIERRES IDEAL, S.A. DE
C.V., a Mexican corporation ("GRUPO"), TALON, INC., a Delaware corporation
("TALON"), and INDUSTRIAS UNIDAS, S.A. DE C.V. ("IUSA") (Grupo and Talon may be
collectively referred to herein as the "SELLERS" and each as a "SELLER").
RECITALS
A. The Sellers, which are direct or indirect subsidiaries of IUSA,
collectively own all right, title and interest in and to certain assets used in
the operation of the Sellers' Talon zipper business, as more fully described
herein.
B. On the terms and subject to the conditions set forth in this Agreement,
the Sellers desire to sell such assets to Buyer, and Buyer desires to purchase
such assets from the Sellers.
AGREEMENT
NOW, THEREFORE, with reference to the foregoing facts, the parties agree as
follows:
1. PURCHASE AND SALE OF ASSETS; NO ASSUMED LIABILITIES.
1.1 ASSETS. On the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined herein) the Sellers shall sell, assign,
transfer, convey and deliver to Buyer, and Buyer shall purchase from the
Sellers, all of Sellers' right, title and interest in and to the following
assets, and none other (collectively, the "ASSETS"):
1.1.1 all rights in and to the trademarks, service marks, trade names,
Internet domain names, service names, assumed names and other marks listed on
SCHEDULE 1.1.1 attached hereto and all applications and registrations with
respect to any of the foregoing and all associated goodwill symbolized thereby
or connected therewith (the "MARKS"), including all rights under any agreements
with respect to the foregoing including without limitation those agreements
listed on SCHEDULE 1.3;
1.1.2 all machinery and equipment, including all drawings, schematics and
blueprints related thereto, owned by Talon and located (i) on the premises of
past and present customers of Buyer or Talon or (ii) on the premises of the
Sellers or any of their respective affiliates or subsidiaries to the extent such
equipment is similar to the equipment located on the premises of customers;
PROVIDED, HOWEVER, that any "quick service" or "assembly" equipment located on
the premises of the Sellers or any of their respective affiliates or
subsidiaries shall not be included in the machinery and equipment being
transferred to Buyer hereunder (the "EQUIPMENT") including all rights under any
agreements with respect to the foregoing;
1.1.3 all rights in and to all patent applications and issued patents owned
by Talon, including but not limited to those listed on SCHEDULE 1.1.3 (the
"PATENTS") and all drawings, schematics and blueprints related thereto and all
rights under any agreements with respect to the foregoing;
1.1.4 all inventories of Talon zippers and Talon zipper components owned by
the Sellers except for inventories listed on SCHEDULE 1.1.4 (the "INVENTORY"),
including, without limitation, Inventory placed on consignment by the Sellers
with Buyer or otherwise in possession of Buyer; and
1.1.5 all rights of the Sellers obtained from any third party to
manufacture, distribute and/or sell zippers and zipper components, including all
rights under any agreements with respect to the foregoing.
1.2 DELIVERY OF POSSESSION OF ASSETS. At the Closing, the Sellers shall at
their expense deliver possession of the Equipment and Inventory being
transferred by the Sellers to Buyer at locations designated by Buyer to the
Sellers prior to the Closing. If at any time after the Closing Date any Seller
comes into possession of any Assets, such Seller shall promptly notify Buyer and
promptly deliver possession of the Assets to Buyer at locations designated by
Buyer. Notwithstanding the foregoing, if any Equipment or Inventory is in the
possession or control of any third party, in lieu of delivering possession of
such Equipment or Inventory to Buyer at locations designated by Buyer, the
Sellers shall, within five (5) days following the Closing, provide written
notice to such third party of the sale and assignment of such Equipment and
Inventory to Buyer hereunder and authorize and direct such third party to
thereafter transact with Buyer as the owner of such Equipment and Inventory. The
Sellers hereby authorize Buyer from and after the Closing to deliver to these
third parties on behalf of the Sellers the notice set forth as EXHIBIT A
attached hereto.
1.3 NO ASSUMED LIABILITIES. Except for the executory obligations of each
Seller to be performed on or after the Closing Date under those agreements
listed on SCHEDULE 1.3, excluding any obligations or liabilities arising from
any breach or default thereunder or noncompliance therewith by any Seller on or
before the Closing Date, the Sellers acknowledge and agree that Buyer shall not
and does not assume any liabilities, obligations or commitments of any Seller of
any kind, known or unknown, contingent or otherwise, of whatsoever kind or
nature, relating to the Assets or otherwise, and the same shall remain the sole
responsibility of such Seller. From and after the Closing, any liabilities,
obligations or commitments of any party arising from the operation of such
party's business or otherwise after the Closing shall be the sole responsibility
of such party, subject to any claims a party may have against another party for
breach of representations, warranties or covenants hereunder.
2. CONSIDERATION FOR PURCHASE OF ASSETS, CANCELLATION OF PREFERRED STOCK
AND OTHER OBLIGATIONS; ESCROW.
2.1 PURCHASE PRICE. In consideration for the transfer, sale and delivery to
Buyer of the Assets, cancellation of the Preferred Shares and any and all of the
Sellers' other obligations herein, Buyer will deliver and issue to Talon or, in
the case of the Escrow Shares, to the Escrow Agent, the following (collectively,
the "PURCHASE PRICE"): (a) a promissory note of
Page 2
Buyer in the principal amount of $4,900,000, which promissory note shall be in
the form of EXHIBIT B attached hereto (the "NOTE"); (b) $100,000 in cash (the
"ESCROW CASH"), which amount will be delivered into escrow as contemplated by
SECTION 2.2; and (c) five hundred thousand (500,000) shares (the "SHARES") of
the Common Stock, par value $0.001 per share, of Buyer, of which fifty thousand
(50,000) shares (the "ESCROW SHARES" and, together with the Escrow Cash, the
"ESCROW CONSIDERATION") will be delivered into escrow as contemplated by SECTION
2.2.
2.2 ESCROW. On the Closing Date, Buyer shall deliver the Escrow
Consideration into the escrow established pursuant to this SECTION 2.2. On or
prior to the Closing Date, Buyer and Talon will enter into an escrow agreement
with an escrow agent (the "ESCROW AGENT") in substantially the form attached
hereto as EXHIBIT G, with such changes thereto as may be reasonably requested by
the Escrow Agent (the "ESCROW AGREEMENT"). The Escrow Agent shall be Wells Fargo
Bank, National Association, or such other nationally recognized financial
institution mutually acceptable to Buyer and Talon. The Escrow Agreement shall
provide for, among other things, (a) the payment from escrow of all or any
portion of the Escrow Consideration deposited into escrow to Buyer pursuant to
any rights of offset of Buyer as provided in this Agreement, and (b) the payment
from escrow to Talon on the first anniversary of the Closing of the remaining
amount of the Escrow Consideration, subject to any holdback for pending claims.
Each of Buyer and Talon shall pay one-half of the costs and fees of the escrow.
3. CLOSING MATTERS.
3.1 CLOSING DATE. The closing of the purchase and sale of the Assets and
the other transaction contemplated by this Agreement (the "CLOSING") shall take
place at the offices of Akin, Gump, Strauss, Hauer & Feld, LLP, 2029 Century
Park East, twenty-fourth floor, Los Angeles, California 90067, commencing at
10:00 a.m., local time, as soon as practicable but in any event within three (3)
business days following the time all of the conditions to Closing set forth in
SECTION 8 of this Agreement are satisfied or waived by the party entitled to
waive the same (other than the conditions with respect to actions the respective
parties will take at the Closing itself) or at such other place and date as
Buyer and Grupo may mutually determine (the "CLOSING DATE").
3.2 THE SELLERS' OBLIGATIONS AT CLOSING. At the Closing, the Sellers shall
deliver, or cause to be delivered, to Buyer the following:
3.2.1 such bills of sale, endorsements, assignments, and other good and
sufficient instruments of conveyance, transfer and assignment as shall be
necessary to vest in Buyer, or any nominee of Buyer, good title in and to the
Assets, free and clear of any and all Liens (as defined below), including,
without limitation, (a) a duly executed Bill of Sale in substantially the form
of EXHIBIT C to this Agreement (the "BILL OF SALE"), (b) duly executed trademark
assignments in form acceptable to the Buyer (collectively, the "TRADEMARK
ASSIGNMENTS"), and (c) duly executed patent assignments in a form acceptable to
Buyer (the "PATENT ASSIGNMENT"); and
3.2.2 (a) a duly executed Subordination Agreement in substantially the form
of EXHIBIT D to this Agreement (the "SUBORDINATION AGREEMENT"), (b) a stock
certificate
Page 3
or certificates representing the Preferred Shares being cancelled by Buyer at
the Closing, accompanied by duly executed instruments of transfer or assignment
in blank, sufficient to transfer to Buyer all of Grupo's right, title and
interest in and to the Shares, as contemplated by SECTION 6.4 of this Agreement;
(c) a duly executed Stockholders Agreement among Buyer and the Sellers in
substantially the form of EXHIBIT E to this Agreement (the "STOCKHOLDERS
AGREEMENT"); (d) a duly executed (on behalf of all parties other than Buyer)
Mutual Release between Buyer, Etic Art S.A. de C.V. and Cierres Ideal de Mexico,
S.A. de C.V. in substantially the form of EXHIBIT F to this Agreement (the
"AFFILIATE RELEASE"), (e) a duly executed Escrow Agreement; and (f) such other
documents and instruments as Buyer may reasonably request to evidence the
satisfaction of all conditions precedent set forth in SECTION 8.1 of this
Agreement.
3.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall deliver, or
cause to be delivered, (i) to Talon: (a) a duly executed Note; (b) a stock
certificate in the name of Talon representing 450,000 of the Shares; (c) a duly
executed Subordination Agreement; (d) a duly executed Stockholders Agreement;
(e) a duly executed Affiliate Release; (f) a duly executed (on behalf of all
parties other than Talon) Escrow Agreement, and (g) such documents and
instruments as Grupo may reasonably request to evidence the satisfaction of all
conditions precedent set forth in SECTION 8.2 of this Agreement; and (ii) to the
Escrow Agent, the Escrow Consideration.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly and
severally, and IUSA with respect to SECTIONS 4.2 and 4.7 only, represent and
warrant to Buyer as follows:
4.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its creation, formation or organization and has the
corporate power and corporate authority to own, lease and operate its assets,
properties and business and to carry on its business as now conducted. Each
Seller is qualified to transact business and is in good standing in each
jurisdiction in which the nature of its business or location of its properties
requires such qualification, except in those jurisdictions where the failure to
be so qualified will not have a material adverse effect on its business or
result in a material delay of the transactions contemplated by this Agreement.
4.2 AUTHORIZATION OF TRANSACTION. Each Seller and IUSA has the corporate
power and corporate authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement,
the performance by each Seller and IUSA of this Agreement and the consummation
by each Seller and IUSA of the transactions contemplated hereby have been duly
and validly authorized by the necessary action on the part of each Seller and
IUSA. This Agreement has been duly and validly executed and delivered by each
Seller and IUSA and, assuming the due authorization, execution and delivery by
Buyer, constitutes a valid and binding obligation of each Seller and IUSA,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights and remedies generally.
4.3 NON-CONTRAVENTION. Neither the execution and delivery of this Agreement
by the Sellers, nor the consummation by the Sellers of the transactions
contemplated hereby, will: (a) conflict with or violate any provision of the
Certificate of Incorporation, Bylaws and/or
Page 4
other charter documents of either Seller; (b) require on the part of either
Seller any filing with, or any permit, authorization, consent or approval of,
any foreign, United States federal or state court, arbitral tribunal,
administrative agency or commission or other foreign, United States federal or
state governmental or regulatory authority or agency (a "GOVERNMENTAL ENTITY");
(c) conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or require
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness or other arrangement to which either Seller is
a party or by which either Seller is bound or to which any of the Assets are
subject; or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to either Seller or any of the Assets.
4.4 ASSETS. The Sellers have good and marketable title to all of the Assets
being transferred hereunder, free and clear of all Liens. For purposes of this
Agreement, "LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, license, grants of rights under contract or
otherwise, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or preferential arrangement,
claim, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention arrangement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing). To the best knowledge of the Sellers, no Seller has any liability
relating to or affecting any of the Assets, whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due or to
become due.
4.5 INTELLECTUAL PROPERTY.
4.5.1 The Marks listed on SCHEDULE 1.1.1 set forth a true, complete and
accurate list of (i) all common law trademarks, service marks, trade names,
service names, assumed names and other marks incorporating or including the mark
"Talon" that are owned by the Sellers or used by the Sellers in the operation of
the Talon zipper business, and (ii) all applications to register trademarks,
trade names or service marks filed by or on behalf of the Sellers that
incorporate or include the mark "Talon" or any other Mark used by the Sellers in
the operation of the Talon zipper business and all registrations issuing
therefrom. SCHEDULE 1.1.1 also sets for a true, complete and accurate list of
all countries, states or jurisdictions in which the Sellers claim ownership
rights in each Mark, the filing dates and application numbers of any and all
trademark applications, issue dates and registration numbers of all trademark
registrations and the registered owner.
4.5.2 All such Marks that have been registered with any foreign
Governmental Entity, the United States Patent and Trademark Office or with a
corresponding state office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
90 days after the Closing Date. No such Mark has been or is now involved in any
opposition, invalidation, or cancellation and no such action is threatened with
the respect to any
Page 5
such Mark. No Mark has been assigned, pledged or otherwise transferred by any
Seller prior to the date hereof.
4.5.3 The Sellers own all right, title and interest in and to the Marks
listed on SCHEDULE 1.1.1 including the goodwill attached thereto and have the
unrestricted right to transfer the Marks to Buyer as contemplated herein. The
Sellers have taken reasonable measures to protect the value and proprietary
nature of the Marks. Additionally, the Sellers have not committed any act or
omission that would jeopardize their ownership right in, or the validity, of the
Marks. By reason of this assignment and Buyer's subsequent use of the Marks,
Buyer shall not be liable to any third party for any royalties, honoraria,
damages or fees resulting therefrom.
4.5.4 Except for those rights granted in any agreements listed in SCHEDULE
1.3, no Seller has granted to any third party (excluding Buyer) any rights with
respect to any of the Marks. With respect to each Mark, (i) a Seller possesses
all right, title, and interest in and to the Mark, free and clear of any Liens;
(ii) the Mark is not subject to any outstanding order, writ, injunction or
decree; (iii) no action, appeal, petition, plea, charge, complaint, claim, suit,
demand, litigation, arbitration, mediation, hearing, inquiry, investigation or
similar event, occurrence or proceeding is pending or threatened (and there is
no basis therefor) which challenges the enforceability, use, or ownership of the
Mark; and (iv) no Seller has ever agreed to indemnify any person for or against
any interference, infringement, misappropriation, or other conflict with respect
to the Mark.
4.5.5 No Seller has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any other person's Intellectual Property
Rights in connection with the operation of the Talon zipper business, and no
Seller has ever received any notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Seller must license or refrain from using any other person's marks). No third
person has any Intellectual Property Rights that interferes or would be likely
to interfere with the Buyer's use of any of the Marks immediately after the
Closing. To each Seller's knowledge, after the Closing Buyer will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property Rights of any other person as a result of the continued
operation of the Talon zipper business as currently conducted by the Sellers.
For purposes of this Agreement, "INTELLECTUAL PROPERTY RIGHTS" means copyrights,
patents, trademarks, service marks, trade secrets, know-how, right of publicity,
authors' rights, and the associated goodwill; and all other intellectual
property rights as may exist now and/or hereafter come into existence and all
renewals and extensions thereof, regardless of whether such rights arise under
the laws of the United States, or any other state, country or jurisdiction.
4.6 LITIGATION. There is no (a) unsatisfied judgment, order, decree,
stipulation or injunction, or (b) claim, complaint, action, suit, proceeding,
hearing or investigation of or in any Governmental Entity or before any
arbitrator affecting the Assets or the Sellers' ability to consummate the
transactions contemplated by this Agreement and, to the best knowledge of the
Sellers, no such action is threatened.
4.7 SOLVENCY. After taking into account the effect of the transactions
contemplated by this Agreement, (a) the present fair saleable value of the
assets and property of each Seller if sold with reasonable promptness under
existing (not theoretical) market conditions,
Page 6
exceeds the total amount of the indebtedness of the Seller, (b) each Seller is
able to realize upon its assets and pay its indebtedness as such indebtedness
matures in the normal course of business, (c) the Purchase Price for the Assets
equals or exceeds the fair value of the Assets as of the Closing, and (d) in
consummating the transactions contemplated by this Agreement, the Sellers do not
intend to delay, hinder or defraud either present or future creditors or other
persons to which either of them is or will become, on or after the date hereof,
indebted.
4.8 INVESTMENT INTENT. The Sellers understand and acknowledge, and
represents and warrants to Buyer, that (a) such party must bear the economic
risk of its investment in the Shares; (b) the Shares have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or any state
securities laws and are being offered and sold in reliance upon exemptions
provided in the Securities Act and state securities laws for transactions not
involving any public offering and, therefore, cannot be resold or transferred
unless they are subsequently registered under the Securities Act and applicable
state laws or unless an exemption from such registration is available; (c) such
party is purchasing the Shares for investment purposes only for such party's own
account and not with any view toward a distribution thereof; (d) such party does
not have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or pledge the Shares to such person or anyone else, and such
party does not have any present plans to enter into any such contract,
undertaking, agreement or arrangement; (e) such party is an "accredited
investor" as that term is defined in Rule 501(a) of the General Rules and
regulations under the Securities Act; (f) the purchase and sale of the Shares
and all offers with respect thereto will take place and have taken place in Los
Angeles County, California; and (g) the certificate(s) representing the Shares
shall bear legends in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE ACT AND THE RULES AND REGULATIONS OF THE SECURITIES
AND EXCHANGE COMMISSION THEREUNDER, AND THE SECURITIES LAWS OF ANY SUCH
STATE."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER LIMITATIONS AND RESTRICTIONS SET FORTH IN A STOCKHOLDERS
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY."
4.9 PREFERRED SHARES. Grupo holds of record and owns beneficially 850,000
shares of Series B Convertible Preferred Stock, par value $.001 per share, of
Buyer (the "PREFERRED SHARES"), free and clear of any Liens (other than any
restrictions under the Securities Act and state securities Laws). Grupo is not a
party to any agreement with any party other than Buyer that could require Grupo
to sell, transfer, or otherwise dispose of any Preferred Shares.
Page 7
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to the Sellers and IUSA as follows:
5.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and corporate authority to own,
lease and operate its assets, properties and business and to carry on its
business as now conducted. Buyer is qualified to transact business and is in
good standing in each jurisdiction in which the nature of its business or
location of its properties requires such qualification, except in those
jurisdictions where the failure to be so qualified will not have a material
adverse effect on its business or result in a material delay of the transactions
contemplated by this Agreement.
5.2 AUTHORIZATION OF TRANSACTION. Buyer has the corporate power and
corporate authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement, the
performance by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby have been duly and validly authorized by the
necessary action on the part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer and, assuming the due authorization, execution
and delivery by the Sellers and IUSA, constitutes a valid and binding obligation
of Buyer, enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights and remedies generally.
5.3 NON-CONTRAVENTION. Neither the execution and delivery of this Agreement
by Buyer, nor the consummation by Buyer of the transactions contemplated hereby,
will: (a) conflict with or violate any provision of the Certificate of
Incorporation, Bylaws and/or other charter documents of Buyer; (b) require on
the part of Buyer any filing with, or any permit, authorization, consent or
approval of, any foreign, United States federal or state court, arbitral
tribunal, administrative agency or commission or other foreign, United States
federal or state governmental or regulatory authority or agency (a "GOVERNMENTAL
ENTITY"), other than federal securities filings; (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require notice, consent or waiver
under, any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness
or other arrangement to which Buyer is a party or by which Buyer is bound; or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer.
5.4 SECURITIES. The Note and the Shares have been duly authorized by all
necessary corporate action on the party of Buyer and, when payment is made for
the Shares in accordance with this Agreement, the Shares shall be validly
issued, fully paid, and nonassessable and will be free of restrictions on
transfers other than restrictions contained in this Agreement, the Stockholders
Agreement, and under applicable state and federal securities laws.
Page 8
6. ADDITIONAL COVENANTS.
6.1 GENERAL. Each party will use its best efforts to take all actions and
to do all things necessary, proper, or advisable to consummate, make effective,
and comply with all of the terms of this Agreement and the transactions
contemplated hereby (including satisfaction, but not waiver, of the Closing
conditions set forth in SECTION 8).
6.2 CANCELLATION OF PREFERRED SHARES. In partial consideration of the
parties' mutual obligations hereunder, at the Closing, Grupo shall assign,
transfer, convey and deliver to Buyer, and Buyer shall cancel all of Grupo's
right, title and interest in and to the Preferred Shares.
6.3 USE OF "TALON" NAME. Each Seller agrees that from and after the Closing
Date, Buyer shall have the right, as between Buyer and the Sellers, to the
exclusive use of the name "Talon" in any and all capacities, including as part
of Buyer's or any of its subsidiary's name and in Buyer's business dealings, and
neither the Sellers nor any of their respective affiliates or subsidiaries shall
use in any manner, as a corporate or d.b.a. name or otherwise, any name which is
or might be confused with "Talon." Notwithstanding the foregoing, Talon may
continue to use "Talon" in its corporate name for a period of no more than 30
days following the Closing Date so long as Talon promptly files such documents
and take such other actions following the Closing that are necessary to change
its corporate name as soon as practicable following the Closing. Each of the
Sellers agrees to cause each of their respective affiliates and subsidiaries to
cease using the name "Talon" as contemplated by this SECTION 6.3.
6.4 SALE OF REMAINING INVENTORY. The Sellers covenant and agree that from
and after the closing, any inventory of Talon zippers and Talon zipper
components of the Sellers set forth on SCHEDULE 1.1.4 and excluded from the
Assets may not be replenished with additional inventory and may only be sold by
the Sellers (a) to Buyer, (b) in a liquidation in which all of the remaining
inventory is sold in one transaction, (c) on consignment with Buyer or (d) to a
third party acceptable to Buyer.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, INDEMNITY; ESCROW.
7.1 SURVIVAL. Each of the representations and warranties of the parties in
SECTIONS 4 and 5 shall survive the Closing for a period of three years from the
Closing, except that all representations and warranties made pursuant to SECTION
4.5 shall expire 30 days following expiration of the relevant statute of
limitations, and all claims for losses based on intentional, fraudulent actions,
misrepresentations or breaches shall never expire.
7.2 INDEMNIFICATION BY SELLERS. The Sellers shall jointly and severally
indemnify and hold harmless Buyer, and its officers, directors, stockholders,
employees, agents, successors and assigns ("BUYER INDEMNIFIED PARTIES") from and
against any and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable legal costs and expenses) actually suffered or incurred by them
(hereinafter "BUYER LOSSES") arising out of or resulting from any of the
following: (a) any breach of, or any inaccuracy in, any representation or
warranty made by the Sellers in this Agreement or in any agreement, certificate
or other document delivered hereunder; and (b) any
Page 9
breach of or default in any covenants or agreements made by the Sellers in this
Agreement or in any agreement, certificate or other document delivered
hereunder.
7.3 INDEMNIFICATION BY IUSA. IUSA shall indemnify and hold harmless Buyer,
and its officers, directors, stockholders, employees, agents, successors and
assigns from and against any and all Buyer Losses arising out of or resulting
from any of the following: (a) any breach of, or any inaccuracy in, any
representation or warranty made by IUSA in this Agreement or in any agreement,
certificate or other document delivered hereunder; and (b) any breach of or
default in any covenants or agreements made by IUSA in this Agreement or in any
agreement, certificate or other document delivered hereunder.
7.4 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless each
Seller and IUSA, and its officers, directors, stockholders, employees, agents,
successors and assigns from and against any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable legal costs and expenses) actually
suffered or incurred by them arising out of or resulting from any of the
following: (a) any breach of, or any inaccuracy in, any representation or
warranty made by Buyer in this Agreement or in any agreement, certificate or
other document delivered hereunder; and (b) any breach of or default in any
covenants or agreements made by Buyer in this Agreement or in any agreement,
certificate or other document delivered hereunder.
7.5 ESCROW. At the Closing, the Escrow Consideration will be placed into
escrow, which the Escrow Agreement will govern. The Escrow Consideration will be
available to compensate the Buyer Indemnified Parties for Buyer Losses. The
Buyer Indemnified Parties may not receive any assets from the escrow unless and
until Officer's Certificates (as defined in the Escrow Agreement) identifying
the relevant Buyer Losses, have been delivered to the escrow agent as provided
in the Escrow Agreement.
8. CONDITIONS TO CONSUMMATION OF ASSET PURCHASE.
8.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing Date of each and every one of the
following conditions precedent, any one or more of which may be waived by Buyer
in writing:
8.1.1 (i) The representations and warranties of the Sellers contained in
this Agreement shall be true and correct in all material respects on the date
hereof and as of the Closing Date with the same effect as though such
representations and warranties had been made or given again at and as of the
Closing Date, except for any representation or warranty expressly stated to have
been made or given as of a specified date, which, at the Closing Date, shall be
true and correct in all material respects as of the date expressly stated; and
(ii) the Sellers shall have performed and complied in all respects with all of
its agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date;
8.1.2 There shall be in force no claim, proceeding, action, order or decree
by or before any Governmental Entity of competent jurisdiction restraining,
enjoining,
Page 10
prohibiting, invalidating or otherwise preventing the consummation of the
transactions contemplated hereby;
8.1.3 The Sellers shall have made the closing deliveries contemplated by
SECTION 3.2 hereof;
8.1.4 The Sellers shall have obtained and provided to Buyer all licenses,
permits, consents, waivers, approvals, and authorizations of such third parties
and Governmental Entities which are appropriate or necessary in the reasonable
opinion of Buyer in connection with: (i) the execution and delivery of this
Agreement; (ii) the consummation of the transactions contemplated hereby; and
(iii) the ownership by Buyer of the Assets; in each case in a form reasonably
satisfactory to Buyer; and
8.2 CONDITIONS TO THE SELLERS' OBLIGATIONS. The obligations of the Sellers
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing Date of each and every one of the
following conditions precedent, any one or more of which may be waived by the
Sellers:
8.2.1 (i) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects on the date hereof
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given again at and as of the Closing Date,
except for any representation or warranty expressly stated to have been made or
given as of a specified date, which, at the Closing Date, shall be true and
correct in all material respects as of the date expressly stated; and (ii) Buyer
shall have performed and complied in all respects with all of its agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date;
8.2.2 There shall be in force no claim, proceeding, action, order or decree
by or before any Governmental Entity of competent jurisdiction restraining,
enjoining, prohibiting, invalidating or otherwise preventing the consummation of
the transactions contemplated hereby; and
8.2.3 Buyer shall have made the closing deliveries contemplated by SECTION
3.3 hereof.
9. TERMINATION.
9.1 TERMINATION BY BUYER. Buyer may terminate this Agreement prior to the
Closing by giving written notice to the Sellers if there has been a material
violation or breach by the Sellers of any agreement, covenant, representation or
warranty contained in this Agreement that has not been cured within five days
after receipt of written notice thereof; or the Closing does not occur on or
prior to DECEMBER 21, 2001, or such later date as may be agreed to in writing by
the parties, provided that Buyer will not have caused such failure to close.
9.2 TERMINATION BY THE SELLERS. The Seller, acting together, may terminate
this Agreement prior to the Closing by giving written notice to Buyer if there
has been a material
Page 11
violation or breach by Buyer of any agreement, covenant, representation or
warranty contained in this Agreement that has not been cured within five days
after receipt of written notice thereof; or the Closing does not occur on or
prior to DECEMBER 21, 2001, or such later date as may be agreed to in writing by
the parties, provided that each Seller will not have caused such failure to
close.
9.3 EFFECT OF TERMINATION. If this Agreement shall be terminated pursuant
to this Section, all further obligations of the parties under this Agreement
shall terminate without further liability or obligation of any party to any
other party hereunder and this Agreement shall become void and of no further
force or effect, except for the provisions of SECTION 7, this SECTION 9 and
SECTION 11. Nothing in this SECTION 9, however, shall be deemed to release any
party hereto from any liability hereunder for any breach by such party of the
terms and provisions of this Agreement or to impair the right of any party to
compel specific performance by the any other party of its obligations under this
Agreement.
10. RELEASE; TERMINATION OF EXISTING AGREEMENTS.
10.1 RELEASE BY SELLERS.
10.1.1 Effective as of and conditioned upon Closing, each Seller, on behalf
of such Seller and each of such Seller's affiliates, subsidiaries,
representatives, agents, successors-in-interest and assigns, hereby releases and
forever discharges Buyer and each of its officers, directors, employees, agents,
stockholders, controlling persons, representatives, affiliates, subsidiaries,
successors-in-interest and assigns (individually, a "BUYER RELEASEE" and
collectively, "BUYER RELEASEES") from any and all causes of action, claims,
actions, rights, judgments, attorneys' fees, obligations, contracts, damages,
promissory notes, demands, accountings or liabilities of whatever kind and
character, whether now known or unknown, suspected or unsuspected, both at law
and in equity, which such Seller or any of such Seller's affiliates,
subsidiaries, representatives, agents, successors-in-interest and assigns now
has, have ever had or may hereafter have against the respective Buyer Releasees
arising contemporaneously with or prior to the Closing Date or on account of or
arising out of any matter, cause or event occurring contemporaneously with or
prior to the Closing Date; PROVIDED, HOWEVER, that nothing contained herein will
operate to release any obligations of Buyer arising under this Agreement or any
other agreement or instrument entered into in connection with this Agreement.
10.1.2 Each Seller agrees that each Buyer Releasee is a direct beneficiary
with respect to this SECTION 10.1 and may enforce these provisions. Each Seller
represents and warrants to the Buyer Releasees as of the date of this Agreement
and as of the Closing Date that it has not assigned nor subrogated any of said
rights, claims and causes of action referenced in this SECTION 10.1, or
authorized any other person or entity to assert any of these claims on its
behalf.
10.1.3 Each Seller agrees and covenants never to file a lawsuit,
arbitration proceeding or any other administrative proceeding against any Buyer
Releasee for any causes of action, claims, actions, rights, judgments,
obligations, damages, promissory notes, demands,
Page 12
accountings or liabilities of whatever kind and character released and
discharged by such party pursuant to this SECTION 10.1.
10.2 RELEASE BY BUYER.
10.2.1 Effective as of and conditioned upon Closing, Buyer, on behalf of
Buyer and each of Buyer's affiliates, subsidiaries, representatives, agents,
successors-in-interest and assigns, hereby releases and forever discharges the
Sellers and each Seller's respective officers, directors, employees, agents,
stockholders, controlling persons, representatives, affiliates, subsidiaries,
successors-in-interest and assigns (individually, a "SELLER RELEASEE" and
collectively, "SELLER RELEASEES") from any and all causes of action, claims,
actions, rights, judgments, attorneys' fees, obligations, contracts, damages,
promissory notes, demands, accountings or liabilities of whatever kind and
character, whether now known or unknown, suspected or unsuspected, both at law
and in equity, which Buyer or any of Buyer's affiliates, subsidiaries,
representatives, agents, successors-in-interest and assigns now has, have ever
had or may hereafter have against the respective Seller Releasees arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date; PROVIDED, HOWEVER, that nothing contained herein will operate
to release any obligations of the Seller's arising under this Agreement or any
other agreement or instrument entered into in connection with this Agreement.
10.2.2 Buyer agrees that each Seller Releasee is a direct beneficiary with
respect to this SECTION 10.2 and may enforce these provisions. Buyer represents
and warrants to the Seller Releasees as of the date of this Agreement and as of
the Closing Date that it has not assigned nor subrogated any of said rights,
claims and causes of action referenced in this SECTION 10.2, or authorized any
other person or entity to assert any of these claims on its behalf.
10.2.3 Buyer agrees and covenants never to file a lawsuit, arbitration
proceeding or any other administrative proceeding against any Seller Releasee
for any causes of action, claims, actions, rights, judgments, obligations,
damages, promissory notes, demands, accountings or liabilities of whatever kind
and character released and discharged by such party pursuant to this SECTION
10.2.
10.3 MUTUAL RELEASE. It is the intention of the parties to this Agreement
that this SECTION 10 shall be effective as a full and final accord and
satisfaction and release of all of claims and judgments identified in this
SECTION 10. Each of the parities hereby acknowledges that it has read and is
familiar with California Civil Code Section 1542 which states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Each of the parties does hereby expressly waive and relinquish all rights
and benefits which it has or may have under California Civil Code Section 1542
(or any similar
Page 13
law of any country, state, territory or jurisdiction) to the fullest extent that
it may lawfully waive such rights and benefits. In connection with the waiver
and relinquishment set forth in this SECTION 10.3, each of the parties
acknowledges that it is aware that it may hereafter discover facts in addition
to and/or different from those now known or believed to be true with respect to
the subject matter of this SECTION 10, but that notwithstanding that fact, it is
their respective intention hereby to fully, finally, and forever release all of
the claims released herein, known or unknown, suspected or unsuspected, which
now exist, may in the future exist or heretofore have existed between each
respective party, on the one hand, and those parties, persons and entities
granted releases by it, on the other hand, and that in furtherance of such
intention, the release given herein shall be and remain in effect as full and
complete releases, notwithstanding the discovery or existence of any such
additional or different facts.
10.4 TERMINATION OF OTHER AGREEMENTS: Except for this Agreement and all
agreements and other documents delivered in connection herewith, effective as of
and conditional upon the Closing, all existing agreements by and between the
parties, including, without limitation, that certain Exclusive Distribution
Agreement, dated MARCH 24, 2000, by and among Buyer and the Sellers, shall
terminate and be of no further force or effect.
11. MISCELLANEOUS.
11.1 GOVERNING LANGUAGE AND LAW. This Agreement is in the English language
only, and all communications between the parties relative to this Agreement
shall be conducted in the English language only. The Parties hereto hereby agree
that this Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California without reference to
principles of conflict of laws.
11.2 PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by Buyer, except as may
otherwise be required by law or stock exchange rule.
11.3 SUBMISSION TO JURISDICTION AND VENUE IN LOS ANGELES COUNTY,
CALIFORNIA. Solely for purposes of this Agreement and the transactions
contemplated hereby, the parties to this Agreement each hereby agrees that any
and all disputes, legal actions, suits, or proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby, whether
legal or equitable in nature, or arising out of contract or tort claims, may be
brought in any California or federal court located in Los Angeles County, State
of California, United States of America. By their signature to this Agreement,
each party, regardless of their residence, irrevocably submits to the
jurisdiction of the courts located in Los Angeles County, State of California,
United States of America, in any dispute, legal action, suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. Each party hereto acknowledges that it has freely agreed to so submit to
jurisdiction and venue, and that without such agreement the courts located in
Los Angeles County, State of California, United States of America might not
otherwise have jurisdiction over such party.
11.4 SERVICE OF PROCESS. Each party hereto agrees that service of any
process, summons, notice or document by U.S. registered mail or the foreign
equivalent of U.S. registered
Page 14
mail to such party's respective addresses set forth in this Agreement shall be
effective service of process for any action, suit or proceeding in California
with respect to any matters to which it has submitted to jurisdiction in SECTION
11.3 or if otherwise made in accordance with applicable law.
11.5 WAIVER OF CLAIM OF INDEMNITY AND INCONVENIENT FORUM. Each party hereto
irrevocably waives all claim of immunity from jurisdiction, attachment and
execution to which he or it might otherwise be entitled in any legal action or
proceeding brought in any California or federal court located in Los Angeles
County, State of California, United States of America, and further irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to any dispute, legal action, suit or proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby being
brought in any federal or California court located in Los Angeles County, State
of California, United States of America, and further hereby irrevocably waives
any claim that any such dispute, legal action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
11.6 NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid, and shall be deemed given when so delivered personally, or sent by
facsimile transmission or if mailed, five days after the date of mailing, as
follows:
(a) IF TO BUYER, TO:
Tag-It Pacific, Inc.
21900 Burbank Boulevard, Suite 270
Woodland Hills, California 91367
Facsimile: (818) 444-4110
Attention: Colin Dyne
WITH A COPY TO:
Akin, Gump Strauss, Hauer & Feld, LLP
2029 Century Park East, Suite 2400
Los Angeles, California 90067
Facsimile: (310) 728-2233
Attention: Murray Markiles, Esq.
(b) IF TO ANY OF THE SELLERS OR IUSA, TO:
Grupo Industrial Cierres Ideal, S.A. de C.V.
Paseo de la Reforma Num. 2608 PH
Col. Lomas Altas
Mexico D.F., 11950
Facsimile: 525 5 261 88 93
Attention: Chief Executive Officer
Page 15
Any party may, by notice given in accordance with this SECTION 11.6 to the other
party, designate another address or person for receipt of notices hereunder.
11.7 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties hereto or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at law or in equity.
11.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules to this Agreement
are a part of this Agreement as if set forth in full herein.
11.9 HEADINGS. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
11.10 SEVERABILITY. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.11 COSTS AND ATTORNEYS' FEES. If any action, suit, arbitration or other
proceeding is instituted to remedy, prevent or obtain relief from a default in
the performance by any party to this Agreement of its obligations under this
Agreement, the prevailing party shall recover all of such party's reasonable
attorneys' fees incurred in each and every such action, suit, arbitration or
other proceeding, including any and all appeals or petitions therefrom.
11.12 CURRENCY AND PAYMENT. All amounts payable hereunder shall be
calculated and payable in United States Dollars.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single document.
11.14 INTERPRETATION. In the event any claim is made by either party
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of either party or
its counsel.
11.15 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) contains the entire agreement among the parties with respect
to the purchase of the Divisions and the Assets and related transactions and
supersedes all prior agreements, written or oral, with respect thereto.
Page 16
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
Page 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above-written.
TAG-IT PACIFIC, INC.
By /S/ COLIN S. DYNE
------------------------------------
Colin S. Dyne
Chief Executive Officer
GRUPO INDUSTRIAL CIERRES IDEAL, S.A. DE C.V.
By: /S/ JOSE BALLESTEROS ROJAS
------------------------------------
Jose Ballesteros Rojas
Chief Executive Officer
TALON, INC.
By: /S/ JOSE BALLESTEROS ROJAS
------------------------------------
Jose Ballesteros Rojas
Chief Executive Officer
INDUSTRIAS UNIDAS, S.A. DE C.V.
By: /S/ VICTOR BARREIO
------------------------------------
Victor Barreiro
Chief Executive Officer
[SIGNATURES TO THE ASSET PURCHASE AGREEMENT]
Page 18