Tarrant Apparel Group announced that on December 31, 2002, the Company completed its previously announced purchase of a twill mill facility from Trans Textil International, S.A. de C.V (“Trans Textil”) and Inmobiliaria Cuadros, S.A. de C.V. (“Cuadros”).
The purchase price consisted of:
- One hundred thousand shares of a newly created, non-voting Series A Preferred Stock of Tarrant Apparel, which will become convertible into three million shares of common stock if the Company’s common shareholders approve the conversion at the 2003 annual meeting;
- A 25% equity stake in Tarrant’s wholly-owned subsidiary, Tarrant Mexico S. de R.L. de C.V.;
- Cancellation of approximately $56.9 million of certain notes and accounts receivables due from the sellers and their affiliates; and
- A nominal cash payment of $500.
Trans Textil was initially commissioned by Tarrant to construct and develop the plant, located in Tlaxcala, Mexico, in late 1998. Subsequent to completion, Trans Textil purchased and/or leased the plant’s manufacturing equipment from Tarrant and entered into a production agreement that gave Tarrant the first right to all production capacity of the twill mill. This production agreement included the option for Tarrant to purchase the facility and discontinue the production agreement with Trans Textil. The completion of the twill mill acquisition marks the final step of Tarrant Apparel’s vertical integration process, which it commenced in 1997.
