EXHIBIT 10.23.1
EMPLOYMENT AGREEMENT
1. Parties. The parties to this Employment Agreement (the "Agreement")
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effective as of January 1, 1998 are as follows:
1.1 ▇▇▇▇▇▇ ▇▇▇▇ ("Executive"); and
1.2 Tarrant Apparel Group (including any successors, the "Company").
2. Employment and Duties. Executive is hereby employed as the Chief
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Executive Officer of the Company. Executive shall report directly to the Board
of Directors (the "Board") and Executive shall perform such executive duties and
functions as shall be specified from time to time by the Board consistent with
Executive's position as Chief Executive Officer of the Company, including such
duties as are customarily performed by the chief executive officer of a
corporation. Executive hereby accepts such employment and agrees to perform the
services contemplated herein faithfully, diligently, to the best of Executive's
ability and in the best interests of the Company. Executive shall devote
substantially all his business time and efforts to the rendition of such
services. Executive's principal place of employment and the Company's principal
place of business will be in Los Angeles, California .
3. Term of Agreement. The term of this Agreement shall commence on
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January 1, 1998 and, unless earlier terminated pursuant to the provisions of
Section 5, shall continue until December 31, 2002 (the "Term").
4. Compensation and Other Benefits. The Company shall provide the
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following compensation and other benefits to Executive during the Term as
compensation for the performance by Executive of his obligations under this
Agreement:
4.1 Base Salary. The Company shall pay to Executive an annual base
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salary (the "Base Salary") at the rate of $1,000,000 per annum (or such
increased amount as the Board, its sole discretion, from time to time may
determine), payable in approximately equal periodic installments pursuant to the
general policy of the Company from time to time, but not less frequently than
monthly. Executive's Base Salary may not be decreased during the Term of this
Agreement.
4.2 Annual Bonus.
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4.2.1 Amount. In addition to the Base Salary, the Company shall
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pay to Executive an annual bonus (the "Annual Bonus") for the twelve month
period ended December 31, 1998 in the amount of $1,000,000 and for each twelve
month period ended December 31, 1999, 2000, 2001 and 2002 in the amount of
$2,000,000, in each case payable not later than 90 days after the end of such
twelve month period.
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4.2.2 Repayment of Indebtedness. Notwithstanding anything to the
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contrary contained herein, $500,000 of the Annual Bonus for each of the twelve
month periods ended December 31, 1999, 2000, 2001 and 2002 will be applied by
the Company first to pay any interest which has accrued as of the date such
Annual Bonus is payable on any indebtedness of Executive to the Company and then
against the unpaid principal balance of such indebtedness, and the balance, if
any, shall be paid to Executive.
4.2 Pre-Tax Income. Notwithstanding anything to the contrary
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contained herein, each Annual Bonus shall be reduced by the percentage set forth
in column (A) below in the event the Company's pre-tax income computed after
bonus for the twelve month period ended on the immediately preceding December 31
("Milestone Pre-Tax Income") shall bear the relationship set forth in column (B)
below to the milestone for such twelve month period set forth in columns (C) and
(D):
(B) (C) (D)
(A) Relationship of Twelve Months Milestone
Reduction In Actual to Milestone Ended Pre-Tax
Annual Bonus Pre-Tax Income December 31 Income
--------------- ---------------------------- -------------- -------------
Less Than Greater
Or Equal To Than
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0% N/A 100%
10% 99.9% 90% 1998 $ 35,000,000
20% 89.9% 80% 1999 $ 55,000,000
30% 79.9% 70% 2000 $ 69,000,000
40% 69.9% 60% 2001 $ 91,000,000
100% 59.9% 0% 2002 $119,000,000
4.3 Employee Benefit Plans. During the Term, Executive shall be
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entitled to participate in such pension, welfare, and medical and life insurance
plans and programs as are maintained by the Company from time to time for the
general benefit of its executive employees (with respect to each of the
foregoing, a "Plan" and, collectively, the "Plans").
4.4 Fringe Benefits. Executive shall be entitled to such fringe
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benefits and perquisites ("Fringe Benefits") as are generally made available to
executives of the Company pursuant to Company policy or which are normal to
Executive's position, and such other fringe benefits as may be determined by the
Board during the Term.
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4.5 Stock Option. The Company shall grant to Executive the right to
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purchase up to 666,668 shares of the Common Stock of the Company at an exercise
price of $13.50 per share, which right shall expire on November 12, 2008 and
shall first become exercisable in the four equal installments of 166,667 shares
on December 31, 1998, 1999, 2000 and 2001, all on the further terms and
conditions set forth on Exhibit A hereto; provided, however, that (i) the right
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to purchase any such shares which theretofore has not become exercisable shall
become exercisable on November 2, 2008 and (ii) the number of shares in each
such installment shall be reduced by the percentage set forth in column (A)
below in the event the Company's pre-tax income computed after bonus for the
twelve month period ended on the immediately preceding December 31 ("Milestone
Pre-Tax Income") shall bear the relationship set forth in column (B) below to
the milestone for such twelve month period set forth in columns (C) and (D):
(B) (C) (D)
(A) Relationship of Twelve Months Milestone
Reduction In Actual to Milestone Ended Pre-Tax
Annual Bonus Pre-Tax Income December 31 Income
------------ ------------------------- ------------- ----------
Less Than Greater
Or Equal To Than
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0% N/A 100%
10% 99.9% 90% 1998 $ 35,000,000
20% 89.9% 80% 1999 $ 55,000,000
30% 79.9% 70% 2000 $ 69,000,000
40% 69.9% 60% 2001 $ 91,000,000
100% 59.9% 0% 2002 $119,000,000
5. Termination of Employment.
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5.1 Termination for Cause.
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5.1.1 Entitlements Upon Termination for Cause. The Company shall
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have the right to terminate Executive's employment prior to the expiration of
the Term for "Cause," as defined in subsection 5.1.2. If Executive's employment
is so terminated, Executive shall be entitled to receive (i) payment of the pro
rata portion of Executive's then current Base Salary through and including the
date of termination, plus a pro rata portion of Executive's Annual Bonus, if any
and if such amount is determinable, for the current year and (ii) payment for
all accrued and unused vacation time existing as of the date of termination as
reflected in the Company's personnel records, payment of which will be made at a
rate calculated in accordance with Executive's then current Base Salary.
Executive shall not be eligible to receive Base Salary,
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Annual Bonus, or to participate in any Plans or to receive any Fringe Benefits
with respect to future periods after the date of such termination, except for
the right to receive benefits under any Plan in which Executive participates in
accordance with the terms of such Plan, provided that nothing in this subsection
shall require the Company to make any contribution or payment to any such Plan
after termination of Executive's employment.
5.1.2 Cause Defined. For the purposes of this Agreement, "Cause"
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shall mean: (a) Executive's continual and material failure or refusal (whether
intentional, reckless or negligent) to perform his duties under this Agreement;
(b) a material breach by Executive of his fiduciary duties to the Company; or
(c) Executive's indictment of a crime (whether or not denominated a felony)
involving dishonesty or moral turpitude.
5.1.3 Termination Date; Notice. If acts giving rise to the
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Company's right to terminate under subsection 5.1 exist, Company shall provide
specific details of such acts in a written notice of termination delivered by
Company to Executive and Executive shall have a reasonable period of time (not
less than thirty (30) days and not more than sixty (60) days) to cure such acts.
If Executive fails to cure within such period, Executive shall be terminated
effective the date written notice of failure to cure is given. If such acts
involve fraudulent conduct or moral turpitude, no opportunity to cure shall
exist and the date of termination of employment by the Company under subsection
5.1 shall be the date set forth in the written notice of termination delivered
by the Company to Executive, unless no such date is specified in such notice, in
which case the date of termination shall be the date of receipt by Executive of
written notice of termination and such notice shall provide specific details of
the fraudulent conduct and/or moral turpitude.
5.2 Death. If Executive dies prior to the expiration of the Term,
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his beneficiary or estate shall be entitled to receive such amount of the then
current Base Salary, Annual Bonus and other compensation and disbursement of
benefits as would have been payable to Executive under a termination for Cause
under subsection 5.1 as of the date of death. Executive's beneficiary or estate
shall also be entitled to receive such amounts, if any, as are payable to
Executive under any applicable insurance policies.
5.3 Disability. If Executive becomes Permanently Disabled (as
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defined below) prior to the expiration of the Term, this Agreement shall be
terminated as of the date of such disability. In the event of such termination,
Executive shall be entitled to receive such amounts of Base Salary, Annual Bonus
and other compensation and disbursement of benefits as would have been payable
to Executive under a termination for Cause under subsection 5.1 as of the date
on which Executive became Permanently Disabled as defined below. Executive
shall also be entitled to receive such amounts, if any, as are payable to
Executive under any applicable insurance policies. For the purposes of this
subsection, "Permanently Disabled" shall mean the incapacity of Executive due to
illness, accident, or other incapacity to perform his duties for a period of
ninety (90) consecutive days as determined by the Board.
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5.4 Termination Without Cause. If Executive is terminated by the
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Company without Cause, the Company shall continue to make the payments provided
for in Section 4 at the rate then being paid to Executive through the end of the
Term; provided, however, that any salary or bonus Executive may receive from any
other employment which he obtains subsequent to such termination shall be offset
against and reduce the payments the Company is required to make to Executive
hereunder. Executive shall not be required or obligated to obtain other
employment to mitigate the payments due him hereunder.
5.5 Termination of Relationship. In the event of the termination of
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the employment relationship between the Company and Executive, Executive shall
be deemed to have resigned any and all positions then held by Executive
including, without limitation, officerships or governing body memberships in
subsidiary corporations of the Company, if any.
6. Assignment. This Agreement shall inure to the benefit of the
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Company's successors, assigns, grantees and its associated, affiliated,
subsidiary and parent companies as may now or hereafter exist. This Agreement
shall be binding on Executive, his heirs, executors or administrators, and legal
representatives but shall not be assignable by Executive and the obligations of
Executive may not be delegated.
7. Severability. In the event that any provision of this Agreement
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should be held to be void, voidable, unlawful or for any reason unenforceable,
the remaining provisions or portions of this Agreement shall remain in full
force and effect.
8. Notices. Any notice, request, demand, or other communication required
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or permitted to be given under this Agreement shall be sufficient if in writing
and delivered personally or sent by certified or registered mail to the Company
at its principal executive offices and to Executive at his residence address as
shown on the records of the Company.
9. No Third-Party Benefits. None of the provisions of this Agreement
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shall be for the benefit of, or enforceable by, any third-party beneficiary.
10. Amendment; Waiver. This Agreement may not be modified, amended or
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waived in any manner except by an instrument in writing signed by both Executive
and the Company. The waiver by either party of compliance with any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.
11. Applicable Law. This Agreement, Executive's employment relationship
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with the Company, and any and all matters or claims arising out of or related to
this Agreement or Executive's employment relationship with the Company, shall be
governed by, and construed in accordance with, the laws of the State of
California regardless of the choice of laws provisions of California or any
other jurisdiction.
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12. Supersedes Previous Agreements. This Agreement constitutes the entire
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agreement and understanding between the parties to this Agreement and supersedes
all prior and contemporaneous negotiations and understandings between the
parties whether oral or written, expressed or implied.
13. Counterparts. This Agreement may be executed by the parties in
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counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
14. Headings. The headings of sections and subsections of this Agreement
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are included solely for convenience of reference and shall not control the
meaning or interpretation of any of the provisions of this Agreement.
15. Attorneys' Fees. In the event of any dispute or controversy arising
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out of this Agreement, the prevailing party shall be entitled to reimbursement
of its reasonable costs, including court and arbitration costs and attorneys'
fees and costs.
IN WITNESS WHEREOF, the Company has caused its duly authorized
representative to execute, and Executive has executed, this Agreement as of the
date first above written.
TARRANT APPAREL GROUP
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Compensation
Committee of the Board of Directors
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇
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EXHIBIT A
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NONQUALIFIED STOCK OPTION AGREEMENT
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THIS NONQUALIFIED STOCK OPTION AGREEMENT is made as of the thirteenth day
of October, 1998, between TARRANT APPAREL GROUP, a California corporation (the
"Company"), and ▇▇▇▇▇▇ ▇▇▇▇ ("Optionee").
R E C I T A L S
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A. The Compensation Committee (the "Committee") of the Board of Directors of
the Company has determined that it is to the advantage and in the best
interests of the Company and its shareholders to grant a nonqualified stock
option to Optionee covering 666,668 shares of the Company's Common Stock
(or any class of stock into which such Common Stock is converted or
reclassified) ("Common Stock") as an inducement to remain in the service of
the Company and as an incentive for increased effort during such service,
and has approved the execution of this Nonqualified Stock Option Agreement
between the Company and Optionee.
B. The option granted hereby is not intended to qualify as an "incentive stock
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option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option. The Company grants to Optionee the right and option
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("Option") to purchase on the terms and conditions hereinafter set forth, all or
any part of an aggregate of 666,668 shares of Common Stock at the purchase price
of $13.50 per share, which price is equal to the fair market value of such stock
(as determined pursuant to Section 4 hereof) on the date of this Agreement. The
Option shall be exercisable from time to time in accordance with the provisions
of this Agreement during a period expiring on October 12, 2008 (the "Expiration
Date").
2. Vesting. The Option shall first become exercisable in the four equal
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installments of 166,667 shares on December 31, 1998, 1999, 2000 and 2001;
provided, however, that (i) the right to purchase any such shares which
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theretofore has not become exercisable shall become exercisable on October 11,
2008 and (ii) the number of shares in each such installment shall be reduced by
the percentage set forth in column (A) below in the event the Company's pre-tax
income for the twelve month period ended on the immediately preceding December
31 ("Milestone Pre-Tax Income") shall bear the
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relationship set forth in column (B) below to the milestone for such twelve
month period set forth in columns (C) and (D):
(B) (C) (D)
(A) Relationship of Twelve Months Milestone
Reduction In Actual to Milestone Ended Pre-Tax
Vesting Pre-Tax Income December 31 Income
------------- ------------------------ ------------- ---------
Less Than Greater
Or Equal To Than
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0% N/A 100%
10% 99.9% 90% 1998 $35,000,000
20% 89.9% 80% 1999 $55,000,000
30% 79.9% 70% 2000 $69,000,000
40% 69.9% 60% 2001 $91,000,000
100% 59.9% 0% 2002 $119,000,000
3. Manner of Exercise. Each exercise of this Option shall be by means of
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a written notice of exercise delivered to the Company, specifying the number of
shares to be purchased and accompanied by payment to the Company of the full
purchase price of the shares to be purchased solely (i) in cash or by check
payable to the order of the Company, (ii) by delivery of shares of Common Stock
of the Company already owned by, and in the possession of, Optionee, valued at
their fair market value, as determined in accordance with Section 4 hereof, or
(iii) (x) by a promissory note made by Optionee in favor of the Company, upon
the terms and conditions determined by the Committee including, to the extent
the Committee determines appropriate, a security interest in the shares issuable
upon exercise or other property, or (y) through a "cashless exercise," in either
case complying with applicable law (including, without limitation, state and
federal margin requirements), or any combination thereof. Shares of Common
Stock used to satisfy the exercise price of this Option shall be valued at their
fair market value determined (in accordance with Section 4 hereof) on the date
of exercise (or if such date is not a business day, as of the close of the
business day immediately preceding such date). This Option may not be exercised
for a fraction of a share and no partial exercise of this Option may be for less
than (a) one hundred (100) shares or (b) the total number of shares then
eligible for exercise, if less than one hundred (100) shares.
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This Option may be exercised (i) during the lifetime of Optionee only by
Optionee; (ii) to the extent permitted by the Committee or by the terms of this
Agreement, Optionee's spouse if such spouse obtained the Option pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA,
or the rules thereunder ("Qualified Domestic Relations Order"); and (iii) after
Optionee's death by his or her transferees by will or the laws of descent or
distribution.
4. Fair Market Value of Common Stock. The fair market value of a share
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of Common Stock shall be determined for purposes of this Agreement by reference
to the closing price on the principal stock exchange on which such shares are
then listed or, if such shares are not then listed on a stock exchange, by
reference to the closing price (if approved for quotation on the NASDAQ National
Market) or the mean between the bid and asked price (if other over-the-counter
issue) of a share as supplied by the National Association of Securities Dealers,
Inc. through NASDAQ (or its successor in function), in each case as reported by
The Wall Street Journal, for the business day immediately preceding the date on
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which the option is granted (which, for all purposes, shall be the date of this
Agreement) or exercised (or, if for any reason no such price is available, in
such other manner as the Committee may deem appropriate to reflect the then fair
market value thereof).
5. Shares to be Issued in Compliance with Federal Securities Laws and
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Exchange Rules. By accepting the Option, Optionee represents and agrees, for
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Optionee and his legal successors (by will or the laws of descent and
distribution or through a Qualified Domestic Relations Order), that none of the
shares purchased upon exercise of the Option will be acquired with a view to any
sale, transfer or distribution of said shares in violation of the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, or any applicable state "blue sky" laws. If required by
the Committee at the time the Option is exercised, Optionee or any other person
entitled to exercise the Option shall furnish evidence satisfactory to the
Company (including a written and signed representation) to such effect in form
and substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation of the Securities Act or state blue sky
laws by such person. The Company shall use its reasonable efforts to take all
necessary and appropriate action to assure that the shares issuable upon the
exercise of this Option shall be issued in full compliance with the Securities
Act, state blue sky laws and all applicable listing requirements of any
principal securities exchange on which shares of the same class are listed.
6. Withholding of Taxes. Upon the exercise of this Option, the Company
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shall have the right to require Optionee or Optionee's legal successor to pay
the Company the amount of any taxes which the Company may be required to
withhold with respect to such shares.
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7. No Assignment. This Option and all other rights and privileges
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granted hereby shall not be transferred, either voluntarily or by operation of
law otherwise than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order. Upon any attempt to so transfer or
otherwise dispose of this Option or any other right or privileges granted hereby
contrary to the provisions hereof, this Option and all rights and privileges
contained herein shall immediately become null and void and of no further force
or effect.
8. Adjustment for Reorganizations, Stock Splits, etc. If the outstanding
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shares of Common Stock of the Company (or any other class of shares or
securities which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased or decreased or changed into or
exchanged for a different number or kind of shares or securities of the Company
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, an appropriate
and proportionate adjustment shall be made in the maximum number and kind of
shares receivable upon the exercise of this Option, without change in the
aggregate purchase price applicable to the unexercised portion of this Option,
but with a corresponding adjustment in the price for each share or other unit of
any security covered by this Option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than eighty percent
(80%) of the then outstanding stock of the Company to another corporation, this
Option shall terminate; provided, however, that notwithstanding the foregoing,
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the Committee shall provide in writing in connection with such transaction for
the appropriate satisfaction of this Option by one or more of the following
alternatives (separately or in combinations): (i) for the Option to become
immediately exercisable notwithstanding the provisions of Sections 2 and 3; (ii)
for the assumption by the successor corporation of this Option or the
substitution by such corporation therefor of a new option covering the stock of
the successor corporation or its affiliates with appropriate adjustments as to
the number and kind of shares and prices; (iii) for the continuance of the
Option by such successor corporation in the manner and under the terms provided
herein; or (iv) for the payment in cash or stock in lieu of and in complete
satisfaction of this Option.
Adjustments under this Section 8 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under this Option on any such adjustment.
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9. Participation by Optionee in Other Company Plans. Nothing herein
------------------------------------------------
contained shall affect the right of Optionee to participate in and receive
benefits under and in accordance with the then current provisions of any
pension, insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.
10. No Rights as a Shareholder Until Issuance of Stock Certificate.
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Neither Optionee nor any other person legally entitled to exercise this Option
shall be entitled to any of the rights or privileges of a shareholder of the
Company in respect of any shares issuable upon any exercise of this Option
unless and until a certificate or certificates representing such shares shall
have been actually issued and delivered to Optionee. No shares shall be issued
and delivered upon the exercise of this Option unless and until there shall have
been full compliance with all applicable requirements of the Securities Act
(whether by registration or satisfaction of exemption conditions), all
applicable listing requirements of any national securities exchange on which
shares of the same class are then listed and any other requirements of law or of
any regulatory bodies having jurisdiction over such issuance and delivery.
11. Not an Employment or Service Contract. Nothing herein contained shall
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be construed as an agreement by the Company or any of its affiliates, express or
implied, to employ Optionee or contract for Optionee's services, to restrict
the Company's or such affiliate's right to discharge Optionee or cease
contracting for Optionee's services or to modify, extend or otherwise affect in
any manner whatsoever, the terms of any employment agreement or contract for
services which may exist between Optionee and the Company or any of its
affiliates.
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12. Execution. The interpretation, performance and enforcement of this
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Agreement shall be governed by the internal substantive laws of the State of
California.
TARRANT APPAREL GROUP
By ___________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President - Finance and
Chief Financial Officer
OPTIONEE
______________________________
▇▇▇▇▇▇ ▇▇▇▇
By her signature below, the spouse of Optionee agrees to be bound by all of
the terms and conditions of the foregoing Agreement.
OPTIONEE'S SPOUSE
________________________________
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ GUEZ
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