<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)*
Tag-It Pacific, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
873774 10 3
(CUSIP Number)
Gerard Guez
3151 East Washington Boulevard
Los Angeles, California 90023
(213) 780-8250
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
October 16, 1998
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box: [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 5 Pages
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- ---------------------
CUSIP NO. 873774 10 3
- ---------------------
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (entities only)
K G Investment, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
WC
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,390,000
BENEFICIALLY -----------------------------------------------------------------
OWNED BY
EACH 8 SHARED VOTING POWER
REPORTING 0
PERSON -----------------------------------------------------------------
WITH
9 SOLE DISPOSITIVE POWER
2,390,000
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,390,000
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
See Item 5 below. [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT SHOWN IN ROW (11)
37.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
00 (Limited liability company)
- --------------------------------------------------------------------------------
Page 2 of 5 Pages
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ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the common stock, par value $0.001 per
share (the "Common Stock"), of Tag-It Pacific, Inc. (the "Issuer"). The Issuer's
principal executive offices are located at 3820 South Hill Street, Los Angeles,
California 90037.
ITEM 2. IDENTITY AND BACKGROUND
The reporting person is K G Investment, LLC, a California limited
liability company ("K G"). The principal business of K G is to engage in any
lawful act or activity for which a California limited liability company may be
organized under applicable laws. The address of the principal business and the
principal office of K G is 3151 East Washington Boulevard, Los Angeles,
California 90023.
The members of K G (the "Members") are Gerard Guez and Todd Kay.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Principal Occupation and Employment Address
- ------------------------- ----------- -------------------------------------------
<S> <C> <C>
Gerard Guez USA Chairman of the Board and Chief Executive
3151 East Washington Boulevard Officer of Tarrant Apparel Group
Los Angeles, California 90023 3151 East Washington Boulevard
Los Angeles, California 90023
Todd Kay USA President of Tarrant Apparel Group
3151 East Washington Boulevard 3151 East Washington Boulevard
Los Angeles, California 90023 Los Angeles, California 90023
</TABLE>
Neither K G, nor any of its Members, has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The total consideration for the purchase by K G of Common Stock reported
in this Schedule 13D was $2,688,750, which amount was provided by the Members in
connection with the formation of K G.
ITEM 4. PURPOSE OF TRANSACTION
K G acquired the Common Stock reported herein for investment purposes. K
G may make additional purchases of Common Stock or may engage in disposition of
all or a portion of the Common Stock presently owned or hereafter acquired by K
G, either in the open market or in private transactions, depending on K G's
evaluation of the Issuer's business, prospects and financial condition, the
market for the Common Stock, other investment opportunities, general economic
conditions, money and stock market conditions and other future developments and
factors that K G deems material to its investment decision, all subject to
certain restrictions on the purchase, transfer or voting of Common Stock by K G.
For a description of such restrictions on the purchase, transfer or voting of
Common Stock held by K G, see Item 6.
On the date of this Schedule 13D, K G has no plans or proposals which
relate to or would result in any action enumerated in Item 4(a) through (j).
Page 3 of 5 Pages
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) K G beneficially owns (for purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) an aggregate of 2,390,000 shares of Common
Stock or approximately 37.0% of the outstanding Common Stock (based on the
number of shares outstanding as of July 31, 1998, as set forth in the Issuer's
Form 10-Q for the quarterly period ended June 30, 1998). Except for the shares
of Common Stock owned by K G (as set forth in this Item 5(a)), neither K G, nor
to the best knowledge of K G, any of the Members except Gerard Guez,
beneficially owns any Common Stock. Each of the Members hereby disclaims
beneficial ownership of the shares of Common Stock held by K G.
(b) K G has the sole power to vote and to dispose of the shares of Common
Stock held by K G.
(c) Except for the purchase by K G of Common Stock reported in this Schedule
13D, K G has not acquired any shares of Common Stock during the past sixty days.
Gerard Guez acquired 11,000 shares of Common Stock at $0.90 per share
for an aggregate purchase price of $9,952.50 on October 9, 1998 and 2,000 shares
of Common Stock at $1.17 per share for an aggregate purchase price of $2,341.50
on October 12, 1998, which shares were acquired by Mr. Guez in transactions by a
registered broker/dealer on the American Stock Exchange.
(d) No other person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Common Stock
beneficially owned by K G.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
For certain arrangements concerning the transfer or voting of Common
Stock between K G and certain other persons, see the Binding Letter of
Understanding dated October 14, 1998, by and between Gerard Guez and the Issuer,
and the letter agreement dated October 14, 1998, by and among Gerard Guez and
Harold Dyne, Colin Dyne, Mark Dyne, Larry Dyne and Jonathan Burstein, which
documents are incorporated herein by this reference and attached hereto as
Exhibits 99.1 and 99.2, respectively.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
99.1 Binding Letter of Understanding dated October 14, 1998, by and
between Gerard Guez and Tag-It Pacific, Inc.
99.2 Letter agreement dated October 14, 1998, by and among Gerard Guez
and Harold Dyne, Colin Dyne, Mark Dyne, Larry Dyne and Jonathan
Burstein.
Page 4 of 5 Pages
<PAGE> 5
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 26, 1998
-----------------------------------
Date
K G INVESTMENT, LLC
By: /s/ Gerard Guez
--------------------------------
Signature
Gerard Guez, Member
-----------------------------------
Name/Title
Page 5 of 5 Pages
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EXHIBIT 99.1
TAG-IT PACIFIC
October 14, 1998
Gerard Guez
RE: Binding Letter of Understanding
Dear Gerard:
This letter sets forth the agreement by you to invest in Tag-It Pacific,
Inc. (the "Company").
Gerard Guez, or if this agreement is assigned to and agreed to in
writing by Todd Kay and/or Tarrant Apparel Group, Tarrant Apparel Group and/or
Todd Kay, as applicable (in any case, the "Investor"), agrees to purchase
2,390,000 newly issued shares of the Company's common stock at a per share price
of $1 1/8. The closing of the purchase of the shares hereunder shall occur on
October 16, 1998. Both parties agree to make no public disclosures regarding the
transaction documented by this agreement prior to October 23, 1998, except that
the Company can issue a press release disclosing the number of shares sold and
the sales price. The Investor agrees that:
1. Prior to the termination of the Non-Transfer Period (as defined below),
the Investor shall not be permitted to sell or transfer any of its
shares, except for bona fide pledges as security for indebtedness,
unless the transfer (i) is approved by the Company in its sole
discretion, (ii) is to the Company, (iii) is to any trust or other
entity controlled by the Investor for personal tax or estate reasons and
the transferee agrees in writing to be bound by each of the terms of
this Agreement and that certain letter agreement (the "Side Agreement")
of even date herewith among the Dyne Shareholders (as defined below) and
the Investor to the same extent as if such transferee were the
"Investor" hereunder, (iv) to a limited liability company which is and
at all times remains wholly owned (beneficially and of record) and
controlled by Gerard Guez, Todd Kay and the Tarrant Apparel Group and
which agrees in writing to be bound by each of the terms of this
Agreement and the Side Agreement to the same extent as if such
transferee were the "Investor" hereunder, or (v) to Tarrant Apparel
Group, provided Tarrant Apparel Group agrees in writing to be bound by
each of the terms of this Agreement and the Side Agreement to the same
extent as if such transferee were the "Investor" hereunder. Any
approvals granted by the Board shall be in its sole and absolute
discretion. The "Non-Transfer Period" is defined as two years from the
date of acquisition of the Company shares pursuant to this agreement.
2. Following the Non-Transfer Period, the Investor may sell or transfer any
of such shares provided that any such sale (i) is in accordance with the
volume restrictions set forth in Rule 144, or (ii) is part of a
secondary offering initiated by the Company, or (iii) is a block sale in
a bona fide private transaction to a third party financial or strategic
investor. To the extent that a block sale or any other sale not
contemplated by the preceding clauses (i) or (ii) is executed, the
Company shall have the right of first refusal, which right will be
assignable, to purchase such shares upon the same (or economically
equivalent) terms and conditions as are set forth in the proposed block
sale.
<PAGE> 2
3. During the Non-Transfer Period, the Investor shall agree to not vote in
favor of any merger, asset sale or other extraordinary transaction
involving the Company, if such transaction is not approved by the
majority of the Board of Directors; provided, however, in the event that
the price to be paid per share pursuant to such transaction is at least
$8.00 per share, the Investor shall not be prohibited from voting in
favor of such transaction. The value of any non-cash consideration shall
be determined by the Board, with the advice of its outside investment
banker.
4. During the Non-Transfer Period, neither the Investor, nor any person or
entity affiliated with or controlled by the Investor, shall purchase any
additional shares of the Company's common stock, without the Company's
consent, in its sole and absolute discretion (except as provided in the
Side Agreement). The Company will prior to the closing procure from the
Dyne Shareholders (Harold Dyne, Colin Dyne, Mark Dyne, Larry Dyne and
Jonathan Burstein) an agreement that during the Non-Transfer Period,
none of the Dyne Shareholders, nor any person or entity affiliated with
or controlled by the Dyne Shareholders, shall purchase any additional
shares of Company common stock, other than from each other or the
Company, without the Investors consent, in its sole and absolute
discretion (except as provided in the Side Agreement).
5. Of the shares purchased hereunder by Investor, 386,778 of such shares,
as adjusted for stock splits, stock dividends and other similar
transactions, shall be referred to herein as the "Neutral Shares." So
long as the Dyne Shareholders hold more than 1,000,000 shares of the
Company's common stock, the Neutral Shares shall be voted in the same
proportion as all other outstanding shares of the Company are voted on
all matters presented to the Company's shareholders. A legend shall be
placed on the certificate(s) representing the Neutral Shares to reflect
these restrictions and Investor agrees to cause any and all transferee
to sign an agreement to be subject to such restrictions. The number of
Neutral Shares shall be reduced share by share by any shares of Company
common stock purchased by the Dyne Shareholders from the Company. The
specific shares that will cease to be Neutral Shares shall be designated
by the Investor.
6. During the Non-Transfer Period, the Investor shall have the right to
vote its shares, other than the Neutral Shares, in accordance with its
own objectives; provided, that neither the Investor, nor an entity
affiliated with or controlled by the Investor, shall promote or
initiate, or encourage another party to promote or initiate, a proxy
solicitation or vote contest in opposition to the management or the
Board of the Company, nor shall the Investor, nor any entity affiliated
with or controlled by the Investor, solicit proxies against the
management or the Board of the Company.
7. The Investor agrees that until after the Annual Meeting of Stockholders
of the Company held in 2000, the Investor shall vote its shares in the
same proportion as all other outstanding shares voted with respect to
the election of directors by the Company; provided, however, that,
except as set forth above, the Investor shall be entitled to cast its
votes with respect to shares, other than the Neutral Shares, on other
matters raised before the shareholders in its sole and absolute
discretion. Notwithstanding the foregoing, Investor agrees to vote its
shares to approve any amendment increasing the number of shares of
Company common stock reserved for issuance under the Company's stock
incentive plan, up to a maximum 900,000 shares, as adjusted for stock
splits, stock dividends and other similar transactions.
2
<PAGE> 3
8. Until after the Annual Meeting of Stockholders of the Company held in
2000, the Investor agrees not to nominate, or cause to be nominated, any
directors for election at any annual meeting.
9. The Investor shall be granted piggyback registration rights in order to
sell shares through a secondary offering pari passu with those rights
granted to the Dyne Shareholders. The Investor shall have the right to
sell the same proportion of Company shares held by it as any shares
being sold by the Dyne Shareholders, subject to any restrictions imposed
on each of these groups by the underwriter as well as general market
conditions. All expenses incurred in effecting any such registration,
including, without limitation, all registration and filing fees,
printing expenses, expenses of compliance with Blue Sky laws, fees and
disbursements of counsel for the Company, and expenses of any audits
incidental to or required by such registration shall be borne by the
Company; provided, however, that the Investor shall bear its own legal
expenses (if it retains separate counsel) and all underwriting discounts
or brokerage fees or commissions relating to the sale of its shares
pursuant to such registration.
10. The Company's shareholder rights plan will be amended to allow the
Investor to acquire the shares purchased hereunder without triggering
such plan.
11. The parties intend that the principal terms and conditions will be set
forth in a definitive agreement which shall be executed by all parties,
however if a definitive purchase and shareholder agreement is not
executed prior to the closing date, this Agreement shall be binding. The
shares issuable hereunder shall be restricted securities under the
Securities Act of 1933, as amended, and will contain appropriate
securities legends and legends referencing this agreement. The Investor
represents that it is an accredited investor as that term is defined by
Rule 501 under the Securities Act of 1933, as amended. The Investor will
make no public announcement of the matters contemplated hereby until
such time as the Investor is required to make such disclosure under
Section 13 or 16 of the Securities Exchange Act of 1934, as amended. The
Company represents and warrants that its Annual Report on Form 10-K for
the year ended December 31, 1997, Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998, and Proxy Statement for
the 1998 Annual Meeting of Stockholders, as of the date each was filed
with the Securities and Exchange Commission, did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements, in light of
the circumstances under which they were made, not misleading.
12. This letter represents the entire agreement between us pertaining to the
subject matter hereof. There are no warranties, representations or other
agreements between us in connection with the subject matter hereof
except as set forth or referred to herein. The agreement contained
herein shall bind and inure to the benefit of the successors, assigns,
personal representatives, heirs and legatees of the respective parties.
The agreement contained herein may be amended or modified only by the
written agreement of each of us. You and we agree that this document has
been executed and delivered in the State of California and shall be
construed, enforced and governed by the laws thereof. In the event of
any action, suit or proceeding brought under or in connection with this
agreement exclusive venue and jurisdiction shall lie with the state and
federal courts sitting in the County of Los Angeles,
3
<PAGE> 4
City of Los Angeles, State of California, and the prevailing party
therein shall be entitled to recover, and the other party hereto agrees
to pay, the prevailing party's costs and expenses in connection
therewith, including reasonable attorneys fees.
If the foregoing accurately sets forth our agreement and understanding,
please countersign this letter where indicated.
Very truly yours,
TAG-IT PACIFIC, INC.
By:_________________________________
Agreed to and Accepted:
October __, 1998
__________________________________
Gerard Guez
4
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EXHIBIT 99.2
October 14, 1998
Gerard Guez
Dear Gerard:
This letter sets forth the agreement between you and the Dyne
Shareholders (Harold Dyne, Colin Dyne, Mark Dyne, Larry Dyne and Jonathan
Burstein) regarding the shares of Tag-It Pacific, Inc. (the "Company") common
stock held by the Dyne Shareholders and the Investor (as that term is defined in
the letter agreement (the "Letter Agreement") entered into concurrently between
the Investor and Tag-It).
The Dyne Shareholders hereby grant you a right of first refusal with
respect to any proposed sale or other transfer of their shares of the Company's
common stock to a third party. The Dyne Shareholders shall give you notice of
any such transfer (the "Notice") and you will have the right to purchase such
shares proposed to be transferred on the same price and terms as set forth in
the Notice. If you do not purchase such shares within 7 days of receipt of the
Notice, the Dyne Shareholders shall have the right to sell or otherwise transfer
such shares at a price per share equal to or greater than the price set forth in
the Notice at any time during the 60 day period following the expiration of such
7 day period. Any shares purchased hereunder by you shall be deemed to be
Neutral Shares as that term is defined under the Letter Agreement.
You hereby grant to the Dyne Shareholders a right of first refusal with
respect to any proposed sale or other transfer of the Investor's shares of the
Company's common stock to a third party. You shall give the Mark Dyne notice of
any such transfer (the "Shareholder Notice") and the Dyne Shareholders will have
the right to purchase such shares proposed to be transferred on the same price
and terms as set forth in the Shareholder Notice. If the Dyne Shareholders do
not purchase such shares within 7 days of receipt of the Shareholder Notice, the
Investor shall have the right to sell or otherwise transfer such shares at a
price per share equal to or greater than the price set forth in the Shareholder
Notice at any time during the 60 day period following the expiration of such 7
day period.
This letter represents the entire agreement between us pertaining to the
subject matter hereof. There are no warranties, representations or other
agreements between us in connection with the subject matter hereof except as set
forth or referred to herein. The agreement contained herein shall bind and inure
to the benefit of the successors, assigns, personal representatives, heirs and
legatees of the respective parties. The agreement contained herein may be
amended or modified only by the written agreement of each of us. You and we
agree that this document has
<PAGE> 2
been executed and delivered in the State of California and shall be construed,
enforced and governed by the laws thereof. In the event of any action, suit or
proceeding brought under or in connection with this agreement exclusive venue
and jurisdiction shall lie with the state and federal courts sitting in the
County of Los Angeles, City of Los Angeles, State of California, and the
prevailing party therein shall be entitled to recover, and the other party
hereto agrees to pay, the prevailing party's costs and expenses in connection
therewith, including reasonable attorneys fees.
If the foregoing accurately sets forth our agreement and understanding,
please countersign this letter where indicated.
Very truly yours,
DYNE SHAREHOLDERS
___________________________________
Harold Dyne
___________________________________
Colin Dyne
___________________________________
Mark Dyne
___________________________________
Larry Dyne
___________________________________
Jonathan Burstein
Agreed to and Accepted:
October __, 1998
__________________________________
Gerard Guez
2
