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EXHIBIT 10.97
PLEDGE SECURITY AGREEMENT
PLEDGE SECURITY AGREEMENT EXECUTED ON THE ONE PART BY TARRANT MEXICO S. DE R. L.
DE C.V. REPRESENTED BY MR. GERARD GUEZ (HEREINAFTER REFERRED TO AS "THE
CREDITOR"), AND ON THE OTHER PART BY TRANS TEXTIL INTERNATIONAL, S.A. DE C.V.
REPRESENTED BY MR. JOSE KAMEL NACIF BORGE (HEREINAFTER REFERRED TO AS "THE
DEBTOR") IN ACCORDANCE WITH THE FOLLOWING:
R E C I T A L S
WHEREAS, THE DEBTOR is a corporation duly organized and existing under the laws
of the United Mexican States ("Mexico") and represents that it has the legal
capacity to execute this Agreement and that it has obtained the necessary
authorizations for the execution and performance hereof.
WHEREAS, THE DEBTOR recently amended its corporate by-laws in order to change
its corporate name from TEX TRANSAS S.A. DE C.V. to TRANS TEXTIL INTERNATIONAL,
S.A. DE C.V.
WHEREAS, THE CREDITOR is a corporation duly organized and existing under the
laws of Mexico and represents that it has the legal capacity to execute this
Agreement and that it has obtained the necessary authorizations for the
execution and performance hereof.
WHEREAS, THE CREDITOR has sold to THE DEBTOR subject to the terms and conditions
of an Equipment Purchase Agreement executed by THE DEBTOR and THE CREDITOR on
October 5, 2000 (the "Equipment Purchase Agreement") certain equipment
identified and described in Exhibit "A" (the "EQUIPMENT"), which signed by the
parties, is made a part hereof, and that said "EQUIPMENT" is free from any lien,
encumbrance or limitation of ownership. The Equipment Purchase Agreement is
identified and attached herein as Exhibit "B".
WHEREAS, the purchase mentioned in the foregoing paragraph has been or will be
documented by one promissory note for the amount of $45,795,688.00 (Forty five
million seven hundred and ninety five thousand six hundred and eighty eight
dollars 00/100) currency of the United States of America plus interests, issued
by THE DEBTOR to the order of THE CREDITOR, in accordance with the Equipment
Purchase Agreement. The promissory note mentioned in this paragraph shall be
hereinafter referred to as the "Promissory Note" and a copy of it is identified
and attached herein as Exhibit "C".
WHEREAS, THE DEBTOR is also the owner of 1,724,000 shares of common stock of
Tarrant Apparel Group ("TAG SHARES"), a parent company of THE CREDITOR, and said
shares are
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kept in escrow by Tarrant Apparel Group on behalf of THE CREDITOR to guarantee
previous obligations by THE DEBTOR towards THE CREDITOR and Tarrant Apparel
Group.
WHEREAS, in accordance with the agreement reached between THE DEBTOR and THE
CREDITOR, by means of this Agreement THE DEBTOR wishes to guarantee the prompt
compliance of all debts and obligations (together the "Obligations") assumed
towards THE CREDITOR deriving from the Equipment Purchase Agreement, as well as
to guarantee the prompt payment of the Promissory Note, constituting a pledge on
the EQUIPMENT described in Exhibit "A" hereto and the TAG SHARES referred to
above, which shall be governed by the provisions contained in the following:
C L A U S E S
FIRST. THE DEBTOR hereby constitutes in favor of THE CREDITOR a pledge on the
EQUIPMENT, which shall guarantee 100% of the Obligations assumed by THE CREDITOR
towards THE DEBTOR pursuant to the Equipment Purchase Agreement and the
Promissory Note.
In addition, THE DEBTOR hereby constitutes in favor of THE CREDITOR a pledge in
second degree on the TAG SHARES owned by THE DEBTOR which are kept in escrow by
Tarrant Apparel Group.
SECOND. In accordance with Article 334 paragraph V of the General Law of
Negotiable Instruments and Credit Operations, THE DEBTOR hereby delivers the
EQUIPMENT in custody to THE CREDITOR whom in this moment personally and by his
own right, receives such EQUIPMENT in custody as depositary in terms of article
2516 of the Civil Code for the Federal District, Mexico, and its correlative
article 2136 of the Civil Code of the state of Tlaxacala, Mexico, in the place
of deposit which shall be: Lote 1 ABC, SN, Corredor Industrial, Ixtlacuixtla,
San Diego, Xocoyucan, Tlaxcala.
THE CREDITOR hereby waives the right to receive compensation for the execution
of his duty as depositary and obliges to maintain the EQUIPMENT in good
conditions, in the understanding that THE CREDITOR shall not be responsible for
the deterioration of the EQUIPMENT derived from ordinary daily use.
THE DEBTOR, at its own expense, shall make or cause to be made all necessary
recordings in order for the pledge constituted hereby, to cause full legal
effects.
THE CREDITOR and THE DEBTOR acknowledge agree that the TAG SHARES will remain in
escrow with Tarrant Apparel Group who shall also act as depositary for purposes
of this Agreement.
THIRD. Simultaneously to the execution hereof, THE DEBTOR shall deliver to THE
CREDITOR the invoices and/or certificates evidencing legal title over the
EQUIPMENT, who shall keep them in
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its possession as depositary together with the EQUIPMENT in accordance with the
second clause of this Agreement.
The corresponding deposit slip shall be issued in the name of THE CREDITOR and
THE CREDITOR shall give a copy of the same to THE DEBTOR in order to comply with
article 337 of the General Law of Negotiable Instruments and Credit Operations.
In addition, Tarrant Apparel Group shall issue a deposit slip to THE DEBTOR with
regard to the TAG SHARES pledged as a result of the Obligations under the
Equipment Purchase Agreement and the Promissory Note.
FOURTH. THE CREDITOR may request THE DEBTOR to deliver in pledge additional
goods in order to maintain the guarantee of payment of the Obligations granted
in accordance with the Equipment Purchase Agreement and the Promissory Note. In
such event, THE DEBTOR shall grant a pledge on additional goods sufficient to
guarantee the full payment of the Obligations, within a term of five (15)
business days after the date of the request addressed for such purpose in
writing by THE CREDITOR. The refusal of THE DEBTOR to grant in pledge
additional goods during the above-mentioned period of time shall entitle THE
CREDITOR to sell the EQUIPMENT and the TAG SHARES in accordance with Article 341
of the General Law of Negotiable Instruments and Credit Operations.
For purposes of this Clause, the parties hereto agree that the value of the
EQUIPMENT and the TAG SHARES shall be market value at the time such sale takes
place.
The provision contained in this Clause shall not impair in any manner whatsoever
the rights of THE CREDITOR in accordance with the provisions of Article 340 of
the General Law of Negotiable Instruments and Credit Operations.
FIFTH. Unless otherwise provided in this Agreement, during the term hereof, THE
DEBTOR grants THE CREDITOR the right to use the EQUIPMENT for the exclusive
purpose of the manufacture, distribution, spinning, weaving, dyeing and
finishing of fabric and the cutting, sewing, finishing and distribution of
wearing apparel (the "Purpose").
SIXTH. The term of this Agreement is subject to fulfillment and completion of
the Obligations under the Equipment Purchase Agreement and Promissory Note.
Therefore, this Agreement will be terminated when all the amounts due under the
referred Promissory Note as well as the Equipment Purchase Agreement are fully
paid by THE DEBTOR to the satisfaction of THE CREDITOR.
SEVENTH. For everything relating to this Agreement, the parties indicate as
their domiciles the following:
THE DEBTOR:
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3151 East Washington Boulevard
Los Angeles, California 90023
USA.
Telecopier: (323) 881-0383
THE CREDITOR:
Edgar Allan Poe No. 231
Col Polanco, C.P. 11550
Mexico D.F.
Telecopier: (525) 255-1009
EIGHTH. It is expressly agreed that in case THE DEBTOR does not comply with the
Obligations mentioned in the Equipment Purchase Agreement, including payment in
due time of the Promissory Note, THE CREDITOR, at its choice, may exercise the
actions arising from the aforesaid Equipment Purchase Agreement and/or the
Promissory Note, or the actions which may arise from this Agreement, either one
in a successive or joint manner. In the event of discrepancy between the
Equipment Purchase Agreement mentioned above and this Agreement, the terms of
this Agreement shall prevail only with regard to the pledge of the EQUIPMENT.
NINTH. For the interpretation of and compliance with this Agreement, both
parties expressly submit themselves to the jurisdiction of the competent courts
in the city of Tlaxcala, Tlaxcala, Mexico, or in the city of Los Angeles,
California, United States of America, at the election of THE CREDITOR, waiving
hereby both parties the jurisdiction to which they may be entitled to by reason
of their present or future domiciles.
TENTH. For everything not provided for in this Agreement, the provisions of the
General Law of Negotiable Instruments and Credit Operations shall apply.
ELEVENTH. No delay or omission by THE CREDITOR to exercise any right under this
Agreement shall impair any such right, nor shall it be construed to be a waiver
thereof. No waiver of any single breach or default under this Agreement shall be
deemed a waiver of any other breach or default. Any waiver, consent or approval
under this Agreement must be in writing to be effective.
TWELFTH. The illegality or unenforceability of any provision of this Agreement
or any instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
THIRTEENTH. If at any time THE CREDITOR sells, assigns, grants participation in,
or otherwise transfers to any person, firm or corporation, all or part of the
indebtedness of THE
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DEBTOR outstanding under the Equipment Purchase Agreement and the Promissory
Note, in such event, the pledge granted hereunder will also be assigned by THE
CREDITOR. THE DEBTOR hereby acknowledges and agrees that any such disposition
will transfer the pledge to the transferee.
FOURTEENTH. THE DEBTOR agrees to pay, or reimburse THE CREDITOR for all fees,
duties and expenses, including those of a notary public, incurred in the
delivery of notices, certification of signatures and registration of this
Agreement required for it to have full legal effects.
This Agreement is signed in triplicate, by THE DEBTOR and by THE CREDITOR on
October 5, 2000. Each party keeps one copy of each version of this Agreement
and another copy shall be delivered to the Public Registry of Commerce for
recording of this Agreement thereat.
THE DEBTOR THE CREDITOR
TRANS TEXTIL INTERNATIONAL TARRANT MEXICO S. DE R. L. DE C.V
S.A. DE C.V.
By:___________________________ By:____________________________
Authorized Representative Authorized Representative
DEPOSITARY for TAG SHARES
TARRANT APPAREL GROUP
By:__________________________
Authorized Representative
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