Exhibit 10.4
STOCK TRANSFER RESTRICTION
AGREEMENT
THIS STOCK TRANSFER RESTRICTION
AGREEMENT (this “ Agreement ”), dated July 31,
2005, is entered into by and between Bernard Manuel (“
Manuel ”) and Hubert Guez (“ Guez
”).
W I T N E S S E T H
:
WHEREAS, Cygne Designs, Inc., a
Delaware corporation (the “ Company ”), Commerce
Clothing Company, LLC, a California limited liability company
(“ Commerce ”), Guez and the other members of
Commerce wish to enter into an Asset Purchase Agreement (as such
agreement may hereafter be amended from time to time, the “
Purchase Agreement ”) pursuant to which Cygne will
purchase certain assets from Commerce; and
WHEREAS, Manuel Beneficially Owns
(as defined herein) 4,946,975 shares of common stock of the Company
(the “ Manuel Shares ”); and
WHEREAS, Guez is a member of
Commerce; and
WHEREAS, pursuant to the Purchase
Agreement, upon consummation of the transactions contemplated
therein, the Company will deliver to Commerce and its designees a
total of 10,500,000 shares of common stock of the Company (the
“ Commerce Shares ”), upon which Guez will
Beneficially Own a portion of such shares; and
WHEREAS, Manuel and Guez have agreed
to enter into this Agreement to provide for certain restrictions on
the sale or other transfer of the record ownership or the
Beneficial Ownership of the Shares from the date hereof until the
termination of this Agreement pursuant to the terms and conditions
hereof; and
WHEREAS, terms used but not
expressly defined herein shall have the meanings set forth in the
Purchase Agreement.
NOW, THEREFORE, in consideration of
the foregoing and the mutual premises, representations, warranties,
covenants and agreements contained herein, and for other valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions . For purposes
of this Agreement:
(a) “ Beneficially Own
” or “ Beneficial Ownership ” with respect
to any securities shall mean having “beneficial
ownership” of such securities (as determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
“ Exchange Act ”)), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.
Notwithstanding the foregoing, securities Beneficially Owned by a
Person shall not include securities which are actually owned by
other Persons but which such Person may be deemed to Beneficially
Own under Rule 13d-3 under the Exchange Act solely because such
Person may be deemed to be part of a “group” with such
other Persons as within the meaning of Section 13(d)(3) of the
Exchange Act.
(b) “ Person ”
shall mean individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated
organization or other entity.
(c) “ Securities Act
” shall mean the Securities Act of 1933, as
amended.
(d) “ Transfer ”
shall mean any (i) sale, transfer, pledge, assignment, the granting
of an option with respect to or other disposition, or (ii) any
agreement, commitment or arrangement to do any of the foregoing,
whether voluntarily or involuntarily, by operation of law or
otherwise.
(e) “ Trigger Event
” shall mean the earlier to occur of the following: (i) a
“change of control” of the Company as defined under
Section 382 of the Internal Revenue Code of 1986, as amended
, or (ii) the Shares are traded on any stock exchange,
market or trading facility on which the Shares are traded at a
minimum price of $8.00 per Share.
2. Scope of Agreement . The
parties agree that only 4,946,975 of the Commerce Shares that Guez
Beneficially Owns subsequent to the Closing of the transactions
contemplated by the Purchase Agreement (the “ Guez
Shares ”) shall be subject to the terms of this Agreement
and no other Commerce Shares, whether Beneficially Owned by Guez or
otherwise, shall be subject to the terms of this Agreement. All of
the Manuel Shares shall be subject to the terms of this Agreement.
The Manuel Shares and the Guez Shares shall collectively be
referred to hereunder as the “ Shares
.”
3. Prohibitions on Transfer
During Restricted Period .
(a) Transfer Restrictions .
Except as set forth in Section 3(b) hereof, neither Guez nor Manuel
shall, at any time prior to June 30, 2008 (the “
Restricted Period ”), directly or indirectly, cause or
permit any Transfer of all or any portion of the Shares held of
record or Beneficially Owned by him. Any purported Transfer of
Shares other than in accordance with this Agreement shall be null
and void.
(b) Permitted Transfers . The
restrictions set forth in Section 3(a) hereof shall not apply to
the following:
(1) Transfers (i) in the case of
Guez, to an Affiliate of Guez or to an Affiliate of Guez’
spouse, (ii) in the case of Manuel, to an Affiliate of Manuel or to
an Affiliate of Manuel’s spouse; or (iii) made solely for
estate planning purposes (each such Person to whom or which a
Transfer is made under this Section 3(b)(1) is referred to as a
“ Transferee ”); provided, that no Transfer by
Guez or Manuel pursuant to this Section 3(b)(1) shall be effective
unless the Transferee shall agree in writing to be bound by the
terms and conditions of this Agreement. Transfers by such
Transferees shall be subject to the terms of this
Agreement.
(2) Transfers made upon the
occurrence of a Trigger Event pursuant to Section 4
hereof.
(3) Transfers pursuant to the mutual
agreement of Guez and Manuel (subject to Rule 144 under the
Securities Act and any other applicable restrictions under the
Securities Act).
2
4. Trigger Event .
(a) At any time following the tenth
calendar day after the occurrence of a Trigger Event, during the
Restricted Period, each of Guez and Manuel shall have the right
(subject to Rule 144 under the Securities Act and any other
applicable restrictions under the Securities Act), at his sole
option, to Transfer up to an aggregate of 1,000,000 Shares
Beneficially Owned by him to any Person; provided that Guez,
in his sole discretion, upon written notice to Manuel within five
calendar days after the occurrence of a Trigger Event (the “
Moratorium Notification ”) and upon satisfaction of
Section 4(c) below, shall have the right to defer the Transfer
rights set forth in this Section 4(a) for a period of up to one
year from the date of the Trigger Event (the “ Deferral
Term ”), in which case neither Guez nor Manuel shall have
the right to exercise his Transfer rights under this Section 4(a)
until expiration of the Deferral Term. For purposes of clarity, the
instance of only one Trigger Event can occur under this
Agreement.
(b) In the event of a Trigger Event,
each of Guez and Manuel shall have the following additional
Transfer rights during the Restricted Period:
(i) In the event Guez has not
timely issued a Moratorium Notification under Section 4(a) above,
during each three-month period following the Trigger Event, each of
Guez and Manuel shall have the right, at his sole option, to
Transfer up to an aggregate of 250,000 additional Shares
Beneficially Owned by him to any Person (subject to Rule 144 under
the Securities Act and any other applicable restrictions under the
Securities Act); or
(ii) In the event Guez has
timely issued a Moratorium Notification under Section 4(a) above,
during each three-month period commencing six calendar months after
the occurrence of a Trigger Event, each of Guez and Manuel shall
have the right, at his sole option, to Transfer up to an aggregate
of 250,000 additional Shares Beneficially Owned by him to any
Person (subject to Rule 144 u
