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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934
October 16, 2000
Date of Report (Date of Earliest Event Reported)
TARRANT APPAREL GROUP
(Exact name of registrant as specified in its charter)
California 0-26430 95-4181026
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
Incorporation)
3151 East Washington Boulevard
Los Angeles, California 90023
(Address of principal executive offices) (Zip Code)
(323) 415-0410
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
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Extension of Facility Development Agreement
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On December 2, 1998, Tarrant Mexico, S. de R.L. de C.V. ("Tarrant Mexico"),
a limited liability company formed under the laws of Mexico and a wholly-owned
subsidiary of Tarrant Apparel Group ("TAG"), entered into a facility development
agreement (the "Facility Development Agreement") with Tex Transas, S.A. de C.V.,
a corporation formed under the laws of Mexico ("Tex Transas"). Under the
Facility Development Agreement, Tex Transas was to develop before December 31,
1999, and Tarrant Mexico would have the right to purchase before March 31, 2000,
a turn-key facility (the "Facility") near Puebla, Mexico to produce twill and
denim fabric and to cut, sew, wash, finish, pack, warehouse and ship apparel.
The purchase price of the Facility was to be the sum of (i) the cost
incurred by Tex Transas in constructing the Facility and installing equipment,
payable on the closing date (which cost was estimated to be approximately U.S.
$60 million), and (ii) a promissory note in the principal amount of U.S. $28
million. The principal balance of the note was to be payable on the third
anniversary of the closing date, and interest was to be payable semi-annually in
arrears at the rate of 7% per annum. For a more detailed description of the
Facility Purchase Agreement and the relationship between Tarrant Mexico and Tex
Transas, see TAG's Annual Report on Form 10-K for the fiscal year ended December
31, 1999.
Tarrant Mexico and Tex Transas have amended the Facility Development
Agreement to (i) extend to September 30, 2002 the right of Tarrant Mexico to
purchase the Facility and (ii) provide that the purchase price shall be the fair
market value of the Facility.
Sale of Fabric Production Equipment
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Concurrently with the amendment of the Facility Development Agreement as
described above, Tarrant Mexico (i) sold to Tex Transas for U.S. $33,820,279
certain denim manufacturing equipment and other tangible personal property
purchased by Tarrant Mexico for use in the Facility, (ii) sold to Tex Transas
for U.S. $1,412,225 certain cotton, work-in-progress and twill and denim fabric
manufactured in the pre-production testing of the Facility and (iii) leased
through September 30, 2002 to Tex Transas certain denim manufacturing equipment
purchased by Tarrant Mexico for use in the Facility. The purchase price for such
equipment and inventory, together with U.S. $12,469,624 previously advanced by
Tarrant Mexico to Tex Transas, is represented by a promissory note of Tex
Transas (the "Note"). The Note bears interest at 8.5% per annum, principal and
interest is payable in 60 consecutive monthly installments of US $591,437.10,
with the remaining balance due on October 5, 2005 and is secured by the
equipment purchased,
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together with 1,724,000 shares of the Common Stock of TAG issued to Tex Transas
and its affiliates in connection with the purchase from them in 1998 of a denim
mill. Such shares also secure Tex Transas' indemnity obligations to Tag &
Tarrant Mexico under the agreement by which Tex Transas purchased the denim
mill. The equipment lease requires 24 equal monthly rental payments of U.S.
$23,859.
Production Agreement
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Tarrant Mexico and Tex Transas have entered into a production agreement
(the "Production Agreement") pursuant to which Tarrant Mexico has the right,
until September 30, 2004, to purchase from Tex Transas twill or denim fabric
up to the capacity of the Facility. The purchase price of the fabric will
be mutually determined by Tarrant Mexico and Tex Transas from time to time.
Item 7. Financial Statements and Exhibits.
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10.92 Amendment No. 1 to Facility Development Agreement dated as of
March 30, 2000, and executed on October 16, 2000, by and
between Tarrant Mexico, S. de R.L. de C.V. and Tex Transas,
S.A. de C.V.
10.93+ Equipment Purchase Agreement dated as of October 5, 2000, and
executed on October 16, 2000 by and between Tarrant Mexico, S.
de R.L. de C.V. and Tex Transas, S.A. de C.V.
10.94 Secured Promissory Note (Pagare) dated as of October 5, 2000,
and executed on October 16, 2000 in the principal amount of
U.S. $47,702,128 of Tex Transas, S.A. de C.V.
10.95+ Equipment Lease dated as of October 5, 2000, and executed on
October 16, 2000 by and between Tarrant Mexico, S. de R.L. de
C.V. and Tex Transas, S.A. de C.V.
10.96 Production Agreement dated as of October 5, 2000, and executed
on October 16, 2000 by and between Tag Mex, Inc. and Tex
Transas, S.A. de C.V.
10.97+ Pledge Security Agreement dated as of October 5, 2000, and
executed on October 16, 2000 by and between Tarrant Mexico, S.
de R.L. de C.V. and Tex Transas, S.A. de C.V.
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+ All schedules and exhibits have been omitted. Any omitted schedule or exhibit
will be furnished supplementally to the Securities and Exchange Commission
upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 26, 2000 TARRANT APPAREL GROUP
By /s/ Gerard Guez
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Gerard Guez,
Chief Executive Officer
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