UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 0-26006
TARRANT APPAREL GROUP
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4181026
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (323) 780-8250
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registration is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the Common Stock held by non-affiliates
of the Registrant is approximately $34,264,994 based upon the closing price of
the Common Stock on June 30, 2006.
Number of shares of Common Stock of the Registrant outstanding as of
March 23, 2007: 30,543,763.
DOCUMENTS INCORPORATED BY REFERENCE
None
================================================================================
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K on Form 10-K/A (this "Amendment") amends our
Annual Report on Form 10-K for the fiscal year ended December 31, 2006,
originally filed with the Securities and Exchange Commission on March 27, 2007
(the "Original Filing"). We are filing this Amendment to include the information
required by Part III and not included in the Original Filing, as we will not
file our definitive proxy statement within 120 days of the end of our fiscal
year ended December 31, 2006.
Except as described above, no other changes have been made to the Original
Filing. This Amendment continues to speak as of the date of the Original Filing,
and the Company has not updated the disclosures contained therein to reflect any
events which occurred at a date subsequent to the filing of the Original Filing.
Accordingly, this Amendment should be read in conjunction with the original
Annual Report.
As a result of these amendments, we are also filing as exhibits to this
Amendment the certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. Because no financial statements are contained within this Amendment, we
are not including certifications pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
In this Amendment, unless the context indicates otherwise, the terms "Company,"
"we," "us," and "our" refer to Tarrant Apparel Group, and its subsidiaries.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of our
executive officers and directors as of April 16, 2007:
NAME AGE POSITION
---- --- --------
Gerard Guez................ 51 Chairman of the Board of Directors and
Interim Chief Executive Officer
Todd Kay................... 50 Vice Chairman of the Board of Directors
Stephane Farouze........... 38 Director
Milton Koffman............. 83 Director
Simon Mani................. 55 Director
Joseph Mizrachi............ 61 Director
Mitchell Simbal............ 53 Director
David N. Burke............. 57 Chief Financial Officer
Henry Chu.................. 69 President of Tarrant Company Limited,
Registrant's Hong Kong subsidiary
Charles Ghailian........... 54 President of Tag Mex, Inc.
CLASS I DIRECTORS: TERMS EXPIRING IN 2007
STEPHANE FAROUZE Stephane Farouze has served as a director of
the Company since May 2003. Mr. Farouze is
currently a Managing Director of Paradigm
Global Advisors. Previously, from March 2000
to November 2000, Mr. Farouze was employed
as the Global Head of Sales and
Restructuring of Societe General Asset
Management. From March 1998 to February
2000, Mr. Farouze was Head of Foreign
Exchanges for the Italian Market for BNP.
Mr. Farouze received a Bachelor of Science
in Applied Arts and Sciences and a Business
Administration (Finance) degree from San
Diego State University in 1992.
MEMBER: AUDIT COMMITTEE, COMPENSATION
COMMITTEE
MILTON KOFFMAN Milton Koffman was elected as a director of
the Company in November 2001. Since 1997,
Mr. Koffman has been the Chairman of the
Board for New Valu, Inc., a multi- faceted
provider of investment capital, commercial
loans and other financial services for
various operating companies. Additionally,
he is a founder and director of Global
Credit Services, a leading provider of
business information and analysis for
manufacturing, financial, lending and real
estate companies. Mr. Koffman has previously
served on the boards of IEC Electronics,
Jayark Corporation, Sattlers Department
Stores, Walter Reed Theaters, Scoreboard,
Inc. and the Gruen Watch Company. Mr.
Koffman received a B.S. from Ohio State
University in 1945.
MEMBER: AUDIT COMMITTEE, COMPENSATION
COMMITTEE
1
MITCHELL SIMBAL Mitchell Simbal has served as a director of
the Company since June 2001. Since 1997, Mr.
Simbal has been Senior Vice President of
Retail Operations for Caesars Entertainment,
which includes Caesars Palace, Paris Las
Vegas, Bally's and Flamingo Hilton. In this
position, Mr. Simbal is responsible for a
$100 million retail division. Mr. Simbal has
a B.S. in accounting from the University of
Hartford.
MEMBER: AUDIT COMMITTEE, COMPENSATION
COMMITTEE
CLASS II DIRECTORS: TERMS EXPIRING IN 2008
GERARD GUEZ Gerard Guez founded the Company in 1988 and
has served as our Chairman of the Board
since inception and as Chief Executive
Officer from inception until 2001 and again
from March 2003 through August 2004. Mr.
Guez was re-appointed as Interim Chief
Executive Officer, effective March 31, 2006.
Mr. Guez also founded Tarrant Company
Limited ("Tarrant HK"), our Hong Kong
subsidiary, in 1985, and he has served as
its Chairman since inception and Chief
Executive Officer from 1985 through October
2001. Prior to founding Tarrant HK, Mr. Guez
served as the President of Sasson Jeans,
L.A., Inc., which was a manufacturer and
distributor of denim apparel under the
"Sasson" license.
TODD KAY Todd Kay has served as our President from
1988 to September 1999 and from March 2000
to August 2003, and has served as Vice
Chairman since September 7, 1999. Mr. Kay
has also served as a director of the Company
since 1988 and as a director of Tarrant HK
since 1986. Prior to joining us, Mr. Kay was
a sales manager for Sasson Jeans, L.A., Inc.
from 1979 to 1980 and served as President of
JAG Beverly Hills, Inc., an apparel
manufacturer, from 1980 to 1985.
JOSEPH MIZRACHI Joseph Mizrachi has served as a director of
the Company since June 2001. Since 1982, Mr.
Mizrachi has been engaged in capital funding
to finance buyouts of small and medium size
companies. He has also been the Chairman of
the Board of Midwest Properties Management,
Inc. since 1980, which is engaged in the
management of real estate, and he was
formerly a member of the board of directors
of American Realty Investors Inc. (NYSE) and
he was a director and member of the loan
committee of Heritage Bank in Washington,
DC. Mr. Mizrachi received an undergraduate
degree in Economics and Political Science in
1968 and a Master's degree in Business
Administration in Finance and Marketing in
1971, both from the Hebrew University in
Jerusalem, Israel. He became a member of the
American Society of Chartered Life
Underwriter (CLU) in 1973 and a Chartered
Financial Consultant (CFC) in 1982. In 1978,
he received another Master's degree in
Business Administration and Financial
Counseling (MFS) from The American college
in Bryn Mawr, Pennsylvania.
MEMBER: AUDIT COMMITTEE, COMPENSATION
COMMITTEE
2
SIMON MANI Simon Mani has served as a director of the
company since December 2004. Since 1994, Mr.
Mani has served as General Manager of Mani
Brothers Real Estate Investment Group, a
privately-held real estate investment firm
that owns, renovates, operates, manages, and
leases over 1 million square feet of
commercial property. Previously, Mr. Mani
served as President of the Sara Lee Fresh
division of Sara Lee Bakery from 1992 until
2001. In this position Mr. Mani supervised
over 1,500 employees and managed over 500
distributors. Mr. Mani and his brother
founded the International Baking Company,
which the Manis sold to Sara Lee Bakery in
1992.
MEMBER: AUDIT COMMITTEE, COMPENSATION
COMMITTEE
OTHER EXECUTIVE OFFICERS
DAVID N. BURKE David Burke has served as our Chief
Financial Officer since March 28, 2007, and
served as our Vice President of Finance from
May 2006 to March 2007. Prior to joining us,
Mr. Burke was a Vice President at Citibank
from 2004 to May 2006, where he focused on
corporate banking for middle market
companies in Southern California. From 2001
to 2003, he was a Vice President with J.P.
Morgan Chase & Co.. Mr. Burke has also
previously served as Principal, Finance and
Development for Program Planning
Professionals, Inc.; Senior Vice President
of The Fuji Bank, Ltd.; and Vice President
with Bankers Trust Company. Mr. Burke earned
a bachelor's degree in English from
Princeton University and an MBA in Finance
and Accounting from the Columbia University
School of Business.
HENRY CHU Henry Chu has served as President of Tarrant
Company Limited, our Hong Kong subsidiary,
since September 2001. Mr. Chu, is also
currently a director of Tarrant HK, a
position he has held since 2002. Prior to
joining Tarrant, Mr. Chu was the founder and
owner of a garment manufacturing company.
Mr. Chu has over 30 years of experience in
the garment industry.
CHARLES GHAILIAN Charles Ghailian joined the Company in March
1999 upon acquisition of certain assets of
CMG, Inc., where he served as Chief
Executive Officer since 1988. CMG, Inc.
designed, produced and sold private label
and CHAZZZ branded woven and knit apparel
for women, children and men. He was named
President of Chazzz, a Division of Tag Mex,
Inc., a wholly-owned subsidiary of the
Company. In April 2002, Mr. Ghailian was
appointed President of Tag Mex, Inc. In
addition to managing the day-to-day
operations of Tag Mex, Inc., Mr. Ghailian
oversees developments with certain
customers, including Sears, J.C. Penny and
Mervyn's.
AUDIT COMMITTEE
The Board of Directors has a separately designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934. The Audit Committee currently consists of Messrs. Farouze, Koffman,
Mizrachi, Mani and Simbal, all of whom qualify as "independent" directors within
the meaning of the applicable rules for companies traded on The NASDAQ Global
Market (NASDAQ). The Board of Directors has determined that Mitchell Simbal is
an "audit committee financial expert" as defined in Item 401(h)(2) of Regulation
S-K.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers, directors, and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the SEC. Executive officers, directors and greater-than-ten
percent shareholders are required by SEC regulations to furnish us with copies
of all Section 16(a) forms they file. Based solely on our review of the copies
3
of the forms received by us and written representations from certain reporting
persons that they have complied with the relevant filing requirements, we
believe that, during the year ended December 31, 2006, all of our executive
officers, directors and greater-than-ten percent shareholders complied with all
Section 16(a) filing requirements.
CODE OF ETHICS.
We have adopted a Code of Ethical Conduct that is applicable to all of our
officers, directors and employees, including our principal executive officer,
principal financial officer, principal accounting officer and persons performing
similar functions. A copy of our Code of Ethical Conduct was filed as an exhibit
to our Annual Report on Form 10-K.
4
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Tarrant Apparel Group's compensation program for senior executives is
administered by the Compensation Committee of our Board of Directors. The
Compensation Committee is responsible for considering and making recommendations
to the Board of Directors regarding executive compensation and is responsible
for administering our stock option and executive incentive compensation plans.
The Compensation Committee is committed to ensure that its compensation plan is
consistent with our company goals and objectives and the long term interests of
its shareholders.
Our named executive officers for 2006 were as follows:
o Gerard Guez, Chairman of the Board and (since March 31, 2006)
Interim Chief Executive Officer;
o Barry Aved, former Chief Executive Officer (resigned as CEO as
of March 31, 2006);
o Corazon Reyes, former Chief Financial Officer (resigned as CFO
as of March 28, 2007);
o Todd Kay, Vice Chairman of the Board;
o Charles Ghailian, President of our subsidiary, Tag Mex, Inc.;
and
o Henry Chu, President of our subsidiary, Tarrant Company
Limited.
OVERVIEW OF COMPENSATION PHILOSOPHY AND OBJECTIVES
Our compensation programs are designed to deliver a compensation package which
is competitive in attracting and retaining key executive talent in the garment
industry. Different programs are geared to short and longer term performance
with the goal of increasing shareholder value over the long term. To achieve
these objectives, the Compensation Committee has established an incentive
program for our executive officers based on meeting specific revenue and margin
criteria in which long term continued improvement in pre-tax profit is the goal.
More specifically, the Compensation Committee believes that our executive
compensation should encompass the following:
o help attract and retain the most qualified individuals by
being competitive with compensation packages paid to persons
having similar responsibilities and duties in comparable
businesses;
o motivate and reward individuals who help us achieve our short
term and long term objectives and thereby contribute
significantly to the success of our company;
o relate to the value created for shareholders by being directly
tied to our financial performance and condition and the
particular executive officer's contribution; and
o reflect the qualifications, skills, experience, and
responsibilities of the particular executive officer.
The Compensation Committee has approved a compensation structure for the named
executive officers, determined on an individual basis, which incorporates four
key components: base salary, annual discretionary incentive payments, stock
options and other benefits.
In connection with its compensation determinations, the Compensation Committee
seeks, and is significantly influenced by, the views of the Chief Executive
Officer with respect to appropriate compensation levels of the other officers.
EXECUTIVE COMPENSATION COMPONENTS
For the year ended December 31, 2006, the principal components of compensation
for the named executive officers were:
5
o annual base salary;
o annual discretionary incentive compensation;
o stock options; and
o retirement and other benefits.
ANNUAL BASE SALARY
In general, base salary for each employee, including the named executive
officers, is established based on the individual's job responsibilities,
performance and experience; our company's size relative to competitors; the
competitive environment; and a general view as to available resources.
For our Chief Executive Officer, the Compensation Committee's practice is to
review the base salary to ensure competitiveness in the market place. Currently,
our Chairman of the Board, Gerard Guez, is also serving as our Interim CEO. No
adjustments to Mr. Guez's compensation have been made to reflect the interim
added responsibility. The Compensation Committee considers the base salaries of
the named executives to ensure they take into account their performance,
experience and retention value and that salary levels continue to be competitive
with companies of similar size and complexity.
ANNUAL DISCRETIONARY INCENTIVE COMPENSATION
Named executive officers are eligible to receive discretionary annual cash
incentive bonuses. We believe that annual incentive compensation should be
determined with specific reference to our overall performance and goals, as well
as the performance and goals of the division or function over which each
individual executive has primary responsibility. In this regard, the
Compensation Committee considers both quantitative and qualitative factors. At
this time, the incentive program has not yet been linked with a set of clear
objectives.
In 2006, the Compensation Committee approved incentive bonuses payable to each
of Gerard Guez and Todd Kay based upon the Company's achievement of specified
pre-tax income thresholds for the year. Mr. Kay was awarded a cash bonus of
$150,000 for 2006, but Mr. Guez was not awarded a bonus for 2006 as the target
for his bonus was not achieved. In 2006, Barry Aved received a discretionary
cash bonus of $100,000, which was awarded to Mr. Aved based primarily on his
performance as CEO prior to his resignation in March 2006. In addition, Charles
Ghailian received a cash bonus in 2006 of $170,000.
STOCK OPTIONS
We provide a long term incentive opportunity for each of the named executive
officers through awards of stock options. Our stock option program is a long
term plan designed to create a link between executive compensation and our
financial performance, provide an opportunity for increased equity ownership by
executives, and maintain competitive levels of total compensation.
In the case of recommended stock option awards, the Compensation Committee
reviews the recommendation of senior management and tests fairness before
approving the stock awards. All stock options have been granted at an exercise
price equal to the closing market price of our common stock on the date of
grant. Stock options generally vest in four equal annual installments over a
period of four years; however, options will immediately vest in full upon a
change on control of the Company. Stock options expire ten years from date of
grant.
In 2006, no named executive officers received stock option awards other than
Charles Ghailian and Henry Chu.
RETIREMENT BENEFITS
We maintain a 401(k) plan for our employees. Named executive officers
participate in these plans on the same terms as other eligible employees,
subject to any legal limits on the amount that may be contributed by executives
under the plans.
6
We make a "matching" contribution equal to 100% of the employee's contribution
up to 5% of the employee's annual compensation.
OTHER BENEFITS
o MEDICAL BENEFITS. Our employees have a choice of three
coverage options under our company-sponsored group health
insurance plan. Each option covers the same services and
supplies but differs in the quality of provider network.
During 2006, we fully funded the HMO portion of the employee
coverage.
o DENTAL BENEFITS. We maintain a group dental plan that covers
preventive, basic and major services for employees and
eligible dependents. During 2006, we fully funded the HMO
portion of our California employee coverage and the PPO
coverage for our New York employee coverage.
o LIFE INSURANCE. We maintain a group life insurance plan that
provides for basic life and accidental death and dismemberment
coverage ranging from $10,000 to $50,000 depending on the
employee classification. We pay the premiums under this plan.
o VACATION. All employees are eligible for vacation based on
years of service.
o OTHER PERQUISITES. Vehicle and car allowances have been
provided for certain named executives. We do not generally
provide other perquisites for other employees.
o PRIVATE PLANE. From time to time our executives use a private
plan owned by 477 Aviation LLC, a company owned by Gerard Guez
for business purposes. We reimburse Mr. Guez for the fuel and
related expenses incurred by 477 Aviation LLC for our
executives' business use of the aircraft. For 2006, the amount
of expenses reimbursed was approximately $240,000.
DEDUCTIBILITY OF COMPENSATION EXPENSES
Pursuant to Section 162(m) under the Internal Revenue Code, certain compensation
paid to executive officers in excess of $1 million is not tax deductible, except
to the extent such excess constitutes performance-based compensation. The
Compensation Committee has and will continue to carefully consider the impact of
Section 162(m) when establishing incentive compensation plans and could, in
certain circumstances, approve and authorize compensation that is not fully tax
deductible.
ACCOUNTING AND TAX CONSIDERATIONS
We consider the accounting implications of all aspects of our executive
compensation program. Our executive compensation program is designed to achieve
the most favorable accounting (and tax) treatment possible as long as doing so
does not conflict with the intended plan design or program objectives.
7
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of our Board of Directors currently consists of
Stephane Farouze, Milton Koffman, Joseph Mizrachi, Simon Mani and Mitchell
Simbal. The Compensation Committee is responsible for considering and making
recommendations to the Board of Directors regarding executive compensation and
is responsible for administering the Company's stock option and executive
incentive compensation plans.
The Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis included in this report. Based on the
review and discussion with management, the Compensation Committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be included
in Tarrant Apparel Group's Annual Report on Form 10-K.
COMPENSATION COMMITTEE
Stephane Farouze
Milton Koffman
Joseph Mizrachi
Simon Mani
Mitchell Simbal
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to each person serving as Chief Executive
Officer and Chief Financial Officer during 2006, and the three most highly
compensated executive officers other than the Chief Executive Officer and Chief
Financial Officer who were serving as executive officers at the end of the 2006
whose compensation exceeded $100,000 (referred to as "named executive
officers"), information concerning all compensation paid for services to us in
all capacities for 2006.
OPTION ALL OTHER
NAME AND SALARY BONUS AWARDS COMPENSATION TOTAL
PRINCIPAL POSITION YEAR ($) ($) ($)(4) ($)(5) ($)
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Gerard Guez (1) 2006 52,000 -- -- -- 52,000
Interim Chief Executive
Officer and Chairman
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Barry Aved (2) 2006 407,692 100,000 -- -- 507,692
Former Chief Executive Officer
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Corazon Reyes (3) 2006 220,000 -- -- 23,425 243,425
Chief Financial Officer
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Todd Kay 2006 750,000 150,000 -- 71,154 971,154
Vice Chairman of the Board of
Directors
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Charles Ghailian 2006 383,968 170,000 77,207 -- 631,175
President of Tag Mex, Inc.
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
Henry Chu 2006 335,484 -- 21,819 33,255 390,558
President of Tarrant Company
Limited
---------------------------------- ---------- ------------ ------------- ----------- --------------- ------------------
(1) Mr. Guez was appointed as Interim Chief Executive Officer on March 31,
2006.
(2) Mr. Aved resigned as Chief Executive Officer and President and as a
member of our board of directors, effective March 31, 2006.
(3) Ms. Reyes resigned from the position of Chief Financial Officer and as
a member of our board of directors effective March 28, 2007.
(4) The amounts in this column represent the dollar amounts recognized for
financial statement reporting purposes in fiscal 2006 with respect to
stock options granted in 2006 as well as prior fiscal years, in
accordance with SFAS 123R. For additional information on the valuation
assumptions with respect to option grants, including the options
granted in 2006, see note 14 to the consolidated financial statements
in our Annual Report on Form 10-K for the year ended December 31, 2006.
These amounts do not reflect the actual value that may be realized by
the named executive officers which depends on the value of our shares
in the future.
(5) All other compensation for 2006 consists of the following:
--------------------------- ----------- ------------ ----------- ---------- ------------ -------------
Mr. Guez Mr. Aved Ms. Reyes Mr. Kay Mr. Chu Mr. Ghailian
--------------------------- ----------- ------------ ----------- ---------- ------------ -------------
Automobile allowance/lease - - 7,615 71,154 - -
--------------------------- ----------- ------------ ----------- ---------- ------------ -------------
Cash-out of unused - - 4,810 - - 31,707
vacation
--------------------------- ----------- ------------ ----------- ---------- ------------ -------------
401(k) matching - - 11,000 - - 1,548
contribution
--------------------------- ----------- ------------ ----------- ---------- ------------ -------------
9
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2006
The following table provides information about equity-awards granted to each
named executive officer in 2006 under the Tarrant Apparel Group 2006 Stock
Incentive Plan, which is the only plan pursuant to which awards were granted in
2006.
ALL OTHER OPTION EXERCISE OR BASE GRANT DATE FAIR
AWARDS: NUMBER OF PRICE OF OPTION VALUE OF OPTION
GRANT SECURITIES UNDERLYING AWARDS ($/SH) AWARDS
NAME DATE OPTIONS (#) ((1)) ($)((2))
------------------- --------------- ----------------------- ------------------- ------------------
Charles Ghailian 6/19/2006 500,000 1.84 625,000
------------------- --------------- ----------------------- ------------------- ------------------
Henry Chu 6/19/2006 141,304 1.84 176,630
------------------- --------------- ----------------------- ------------------- ------------------
(1) The exercise price of options granted in 2006 is equal to the closing
price of our common stock on the grant date, as reported on the NASDAQ
Global Market.
(2) The grant date fair value is generally the amount the company would
expense in its financial statements over the award's service period, but
does not include a reduction for forfeitures.
10
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006
The following table provides information with respect to outstanding stock
options held by each of the named executive officers as of December 31, 2006.
NUMBER OF SECURITIES OPTION OPTION
UNDERLYING UNEXERCISED EXERCISE EXPIRATION
NAME GRANT DATE OPTIONS (1) PRICE ($) DATE
------------------- -------------- ------------------------------ -------------- ---------------
(#) (#)
EXERCISABLE UNEXERCISABLE
------------------- -------------- -------------- --------------- -------------- ---------------
Gerard Guez 10/13/1998 666,668 -- 13.50 10/13/2008
05/15/2002 1,000,000 -- 5.50 05/15/2012
05/28/2003 1,000,000 -- 3.65 05/28/2013
------------------- -------------- -------------- --------------- -------------- ---------------
Barry Aved 05/02/1997 2,000 -- 8.50 05/02/2007
05/01/1998 3,000 -- 15.50 05/01/2008
05/03/1999 2,000 -- 45.50 05/03/2009
05/08/2000 4,000 -- 8.25 05/08/2010
05/08/2001 4,000 -- 5.55 05/08/2011
08/12/2003 4,000 -- 2.84 08/12/2013
09/23/2003 100,000 -- 3.65 09/23/2013
12/04/2003 400,000 -- 3.939 12/04/2013
01/02/2004 30,000 -- 3.68 01/02/2014
------------------- -------------- -------------- --------------- -------------- ---------------
Corazon Reyes 01/03/2000 2,000 -- 9.938 01/03/2010
12/17/2001 30,000 -- 5.09 02/17/2011
------------------- -------------- -------------- --------------- -------------- ---------------
Todd Kay 10/13/1998 333,332 -- 13.50 10/13/2008
05/15/2002 1,000,000 -- 5.50 05/15/2012
05/28/2003 1,000,000 -- 3.65 05/28/2013
------------------- -------------- -------------- --------------- -------------- ---------------
Charles Ghailian 04/08/1999 36,000 -- 39.9688 04/08/2009
12/15/1999 36,000 -- 9.969 12/15/2009
12/17/2001 100,000 -- 5.09 12/17/2011
12/30/2003 25,000 -- 3.60 12/30/2013
06/19/2006 -- 500,000 (1) 1.84 06/19/2016
------------------- -------------- -------------- --------------- -------------- ---------------
Henry Chu 10/31/2003 100,000 -- 3.94 10/31/2013
06/19/2006 -- 141,304 (2) 1.84 06/19/2016
------------------- -------------- -------------- --------------- -------------- ---------------
(1) Vests in 4 equal installments on each of January 1, 2007, January 1,
2008, January 1, 2009 and January 1, 2010.
(2) Vests in 4 equal installments on each of June 19, 2007, June 19, 2008,
June 19, 2009 and June 19, 2010.
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2006
There were no stock option exercises by any of the named executive officers
during 2006. No stock awards vested for any named executive officer during 2006.
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EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Except for our agreement Henry Chu described below, we do no have written
employment agreements with any of our other named executive officers.
We entered into an employment agreement as of September 16, 2005 with Henry Chu,
President of our Hong Kong subsidiary Tarrant Company Limited. This employment
agreement is for a term of three years. Mr. Chu's employment agreement provides
for a monthly salary of HKD200,000 (or approximately US$25,787 per month). The
agreement provides that either party may terminate the agreement provided a two
months advance written notice is provided to the other party. As a result, if we
were to immediately terminate Mr. Chu's employment, we would be required to
continue to pay him two months' salary, or approximately (US) $51,574.
POTENTIAL TERMINATION AND CHANGE IN CONTROL BENEFITS
We do not have a formal plan for severance or separation pay for our employees,
but from time to time we include a severance provision in the employment
agreements of our executive officers that is triggered in the event of
involuntary termination without cause or in the event of a change in control.
Currently, except for Henry Chu's employment agreement, none of our named
executive officers are entitled to receive severance payments upon a termination
of employment.
Our stock option plans provide that upon a change in control of the Company, all
outstanding stock options will immediately become vested and exercisable. As of
December 31, 2006, there were no unvested stock options held the named executive
officers that had an exercise price lower than the closing price of our common
stock on December 29, 2006 of $1.47, as reported by NASDAQ. As a result, there
would have been no value of the accelerated vesting had a change in control
occurred on December 31, 2006. Currently, there are no other benefits payable to
our named executive officers upon a change in control.
DIRECTOR COMPENSATION
The general policy of the Board of Directors is that compensation for
independent directors should be a mix of cash and equity-based compensation. We
do not pay management directors for Board service in addition to their regular
employee compensation. The full Board of Directors has the primary
responsibility for reviewing and considering any revisions to director
compensation.
DIRECTOR SUMMARY COMPENSATION TABLE
The following table details the total compensation earned by the company's
non-employee directors in 2006.
FEES EARNED OR OPTION AWARDS TOTAL
NAME PAID IN CASH ($) ($)(6) ($)
---------------------- ------------------- ------------------- -----------------
Stephane Farouze (1) $50,000 $618 $50,618
---------------------- ------------------- ------------------- -----------------
Milton Koffman (2) $48,000 $618 $48,618
---------------------- ------------------- ------------------- -----------------
Simon Mani (3) $48,000 $618 $48,618
---------------------- ------------------- ------------------- -----------------
Joseph Mizrachi (4) $48,000 $618 $48,618
---------------------- ------------------- ------------------- -----------------
Mitchell Simbal (5) $50,000 $618 $50,618
---------------------- ------------------- ------------------- -----------------
Total: $244,000 $3,090 $247,090
---------------------- ------------------- ------------------- -----------------
(1) As of December 31, 2006, Mr. Farouze held options to purchase a total of
24,000 shares.
(2) As of December 31, 2006, Mr. Koffman held options to purchase a total of
28,000 shares.
(3) As of December 31, 2006, Mr. Mani held options to purchase a total of
24,000 shares.
(4) As of December 31, 2006, Mr. Mizrachi held options to purchase a total of
32,000 shares.
(5) As of December 31, 2006, Mr. Simbal held options to purchase a total of
28,000 shares.
(6) The amounts in this column represent the dollar amounts recognized for
financial statement reporting purposes in fiscal 2006 with respect to
stock options granted in 2006 as well as prior fiscal years, in
accordance with SFAS 123R. For additional information on the valuation
assumptions with respect to option grants, including the options granted
in 2006, see note 14 to the consolidated financial statements in our
Annual Report on Form 10-K for the year ended December 31, 2006. These
amounts do not reflect the actual value that may be realized by the named
executive officers which depends on the value of our shares in the
future.
12
We pay to each non-employee director a monthly cash retainer of $4,000 for
service as a director. We also reimburse non-employee directors for all expenses
incurred in their capacity as a member of the Board. In addition, the Chairman
of each Board committee receives $2,000 per year for such service.
Our current practice is to grant each non-employee director an initial option to
purchase 20,000 shares of our common stock upon joining the Board of Directors,
and, thereafter, to grant each non-employee an option to purchase 4,000 shares
of common stock on the date of each annual meeting at which such person is
reelected to serve as a director. These options have an exercise price equal to
the fair market value of such shares on the date of grant, become exercisable so
long as the recipient continues to serve as a director in four equal annual
installments commencing on the first anniversary of the grant thereof, and
expire on the tenth anniversary of the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our Board of Directors currently consists of
Stephane Farouze, Milton Koffman, Joseph Mizrachi, Simon Mani and Mitchell
Simbal. None of these individuals was an officer or employee of the Company at
any time during fiscal 2006. No current executive officer of the Company has
served as a member of the board of directors or compensation committee of any
entity for which a member of our Board of Directors or Compensation Committee
has served as an executive officer.
13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2007, unless otherwise indicated,
certain information relating to the ownership of our common stock by (i) each of
our directors, (ii) each of our named executive officers, (iii) all of our
current named executive officers and directors as a group, and (iv) each other
shareholder who, to our knowledge, beneficially owns 5% or more of our common
stock. Except as listed below, there are no other persons known to us to the
beneficial owner of more than five percent of the outstanding shares of our
common stock. Except as may be indicated in the footnotes to the table and
subject to applicable community property laws, each such person has the sole
voting and investment power with respect to the shares owned. The address of
each person listed is in care of the Company, 3151 East Washington Blvd., Los
Angeles, CA 90023, unless otherwise set forth below such person's name.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED (1) PERCENT (1)
---------------- ---------------------- -----------
DIRECTORS AND EXECUTIVE OFFICERS:
Gerard Guez...................................... 12,883,084 (2) 38.7%
Todd Kay......................................... 4,995,999 (3) 15.1%
Barry Aved (former CEO).......................... 619,000 (4) 2.0%
Corazon Reyes (former CFO)....................... 284,888 (5) *
Charles Ghailian................................. 197,000 (6) *
Stephane Farouze................................. 100,000 (7) *
Henry Chu ....................................... 100,000 (6) *
Milton Koffman................................... 34,000 (8) *
Joseph Mizrachi.................................. 28,000 (6) *
Mitchell Simbal.................................. 24,000 (6) *
Simon Mani....................................... 20,000 (6) *
David N. Burke................................... 0 --
DIRECTORS AND OFFICERS AS A GROUP (13 PERSONS)... 19,285,971 (9) 52.5%
OTHER 5% BENEFICIAL OWNERS:
Guggenheim Capital, LLC.......................... 3,500,000 (10) 10.3%
227 West Monroe Street, Chicago, IL 60606
GMM Capital LLC.................................. 1,583,700 (11) 5.2%
1450 Broadway, 38th Floor, New York, NY 10018
----------
* Less than one percent.
(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned
by more than one person (if, for example, persons share the power to vote
or the power to dispose of the shares). In addition, shares are deemed to
be beneficially owned by a person if the person has the right to acquire
the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided. In computing the
percentage ownership of any person, the amount of shares outstanding is
deemed to include the amount of shares beneficially owned by such person
(and only such person) by reason of these acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in
this table does not necessarily reflect the person's actual ownership or
voting power with respect to the number of shares of common stock
actually outstanding at March 31, 2007. Percentage ownership is based
upon 30,543,763 shares of common stock issued and outstanding as of March
31, 2007.
(2) Includes 2,766,668 shares of common stock issuable upon exercise of stock
options which are or will become exercisable on or prior to May 30, 2007.
Mr. Guez has pledged an aggregate of 3,394,851 of such shares to
financial institutions to secure the repayment of loans to Mr. Guez or
corporations controlled by Mr. Guez.
14
(3) Includes 2,433,332 shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007. Mr. Kay has pledged an aggregate of 1,115,000 of such shares to
financial institutions to secure the repayment of loans to Mr. Kay or
corporations controlled by Mr. Kay.
(4) Includes 559,000 shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007.
(5) Includes 52,000 shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007.
(6) Consists of shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007.
(7) Includes 20,000 shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007.
(8) Includes 24,000 shares of common stock issuable upon exercise of stock
options, which are or will become exercisable on or prior to May 30,
2007.
(9) Includes 6,224,000 shares of common stock issuable upon exercise of stock
options that are or will become exercisable on or prior to May 30, 2007.
(10) Information taken from Schedule 13D filed with the SEC on June 27, 2006.
Consists of shares of common stock issuable upon exercise of currently
exercisable warrants. Guggenheim Capital, LLC exercises power over
1,892,857 shares through Guggenheim Investment Management, LLC and power
over 1,607,143 shares through Midland Advisors Company, both of which are
subsidiaries of Guggenheim Capital, LLC. Of these shares, Orpheus
Holdings, LLC is the owner of warrants to purchase 1,892,587 shares.
Guggenheim Investment Management, LLC is the manager of Orpheus Holdings,
LLC and may be deemed to beneficially own such shares. Each of these
persons disclaims membership in a group, as defined in Section 13(d)(3)
of the Securities Exchange Act.
(11) Information taken from Schedule 13G filed with the SEC on February 15,
2007. GMM Trust is the sole member of GMM Capital LLC and shares voting
and investment power with respect to the shares.
The information as to shares beneficially owned has been individually furnished
by the respective directors, named executive officers, and other shareholders of
the Company, or taken from documents filed with the SEC.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information regarding our equity
compensation plans as of December 31, 2006.
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EXERCISE NUMBER OF SECURITIES
BE ISSUED UPON EXERCISE PRICE OF OUTSTANDING REMAINING AVAILABLE FOR
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER EQUITY
WARRANTS AND RIGHTS RIGHTS COMPENSATION PLANS
----------------------- ------------------------- ----------------------------
Equity compensation
plans approved by
security holders...... 7,673,659 $5.52 3,872,000
Equity compensation
plans not approved by
security holders...... 1,181,732 $4.09 --
----------------------- ------------------------- ----------------------------
Total................. $5.33 3,872,000
MATERIAL FEATURES OF INDIVIDUAL EQUITY COMPENSATION PLANS NOT APPROVED BY
SHAREHOLDERS
Sanders Morris Harris Inc. acted as placement agent in connection with our
October 2003 private placement financing transaction. As partial consideration
for their services as placement agent, we issued to Sanders Morris Harris a
warrant to purchase 881,732 shares of our common stock at an exercise price of
$4.65 per share. The warrant has a term of 5 years. As of April 17, 2004, the
warrant became fully vested and exercisable.
15
Sanders Morris Harris Inc. acted as placement agent in connection with our
January 2004 registered sale of 1,200,000 shares of our common stock. As partial
consideration for their services as placement agent, we issued to Sanders Morris
Harris a warrant to purchase 30,000 shares of our common stock at an exercise
price of $3.35 per share. The warrant is fully vested and exercisable and has a
term of five years.
T.R. Winston & Company acted as placement agent in connection our December 2004
private placement financing transaction. As partial consideration for their
services as placement agent, we issued T.R. Winston & Company a warrant to
purchase 200,000 shares our common stock at an exercise price of $2.50 per
share. The warrant has a term of five years. The warrant will become vested and
exercisable on June 14, 2005.
Durham Capital Corporation acted as our advisor in connection with our 2006
credit facility with Guggenheim Corporate Funding as agent. As partial
compensation for its services, we issued Durham Capital a warrant which is
exercisable for 70,000 shares of our common stock. This warrant has a term of 10
years and is exercisable at a price of $1.88 per share, subject to adjustment
for certain dilutive issuances.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
REVIEW AND APPROVAL OF RELATED PERSON TRANSACTIONS
We have adopted, by resolution of our Board of Directors, a policy that any
transactions between us and any of our affiliates or related parties, including
our executive officers, directors, shareholders who own 5% or more of our common
stock, the family members of those individuals and any of their affiliates, must
(1) be approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (2) be on
terms no less favorable to us than could be obtained from unaffiliated third
parties.
REPORTABLE RELATED PERSON TRANSACTIONS
Other than the employment arrangements described elsewhere in this report and
the transactions described below, since January 1, 2006, there has not been, nor
is there currently proposed, any transaction or series of similar transactions
to which we were or will be a party:
o in which the amount involved exceeds $120,000; and
o in which any director, executive officer, shareholder who
beneficially owns 5% or more of our common stock or any member
of their immediate family had or will have a direct or
indirect material interest.
We lease our principal offices and warehouse located in Los Angeles, California
from GET and office space in Hong Kong from Lynx International Limited. GET and
Lynx International Limited are each owned by Gerard Guez, our Chairman and
Interim Chief Executive Officer, and Todd Kay, our Vice Chairman. We believe, at
the time the leases were entered into, the rents on these properties were
comparable to then prevailing market rents. During the first seven months of
2006, our Los Angeles offices and warehouse were leased on a month to month
basis. On August 1, 2006, we entered into a lease agreement with GET for the Los
Angeles offices and warehouse, which lease has a term of five years with an
option to renew for an additional five year term. On February 1, 2007, we
entered into a one year lease agreement with Lynx International Limited for our
office space and warehouse in Hong Kong. We paid $1,076,000 in 2006 in rent for
office and warehouse facilities at these locations.
On May 1, 2006, we sublet a portion of our executive office in Los Angeles,
California and our sales office in New York to Seven Licensing Company, LLC
("Seven Licensing") for a monthly payment of $25,000 on a month to month basis.
Seven Licensing is beneficially owned by Gerard Guez. We received $200,000 in
rental income from this sublease in the year ended December 31, 2006.
On September 1, 2006, our subsidiary in Hong Kong, Tarrant Company Limited,
entered into an agreement with Seven Licensing to be its buying agent to source
and purchase apparel merchandise. Total sales to Seven Licensing during the year
ended December 31, 2006 were $4.4 million.
16
In August 2004, we entered into an Agreement for Purchase of Assets with
affiliates of Mr. Kamel Nacif, a shareholder at the time of the transaction,
which agreement was amended in October 2004. Pursuant to the agreement, as
amended, on November 30, 2004, we sold to the purchasers substantially all of
our assets and real property in Mexico, including the equipment and facilities
we previously leased to Mr. Nacif's affiliates in October 2003, for an aggregate
purchase price consisting of: a) $105,400 in cash and $3,910,000 by delivery of
unsecured promissory notes bearing interest at 5.5% per annum; and b)
$40,204,000, by delivery of secured promissory notes bearing interest at 4.5%
per annum, with payments due on December 31, 2005 and every year thereafter
until December 31, 2014. The secured promissory notes are payable in partial or
total amounts anytime prior to the maturity of each note. As of September 30,
2006, the outstanding balance of the notes and interest receivables were $41.1
million prior to the reserve. Historically, we have placed orders for purchases
of fabric from the purchasers pursuant to the purchase commitment agreement we
entered into at the time of the sale of the Mexico assets, and we have satisfied
our payment obligations for the fabric by offsetting the amounts payable against
the amounts due to us under the notes. However, during 2006, the purchasers
ceased providing fabric and are not currently making payments under the notes.
We further evaluated the recoverability of the notes receivable and recorded a
loss on the notes receivable in the third quarter of 2006 in an amount equal to
the outstanding balance less the value of the underlying assets securing the
notes. The loss was estimated to be approximately $27.1 million, resulting in a
notes receivable balance at September 30, 2006 of approximately $14 million. We
believe there was no significant change subsequently on the value of the
underlying assets securing the notes; therefore, we did not have additional
reserve in the fourth quarter of 2006. We will continue to pursue payments on
the notes receivable and believe the remaining $14 million balance at December
31, 2006 is realizable.
Upon consummation of the sale of our Mexico assets, we entered into a purchase
commitment agreement with the purchasers, pursuant to which we agreed to
purchase annually over the ten-year term of the agreement, $5 million of fabric
manufactured at our former facilities acquired by the purchasers at negotiated
market prices. This agreement replaced a previously existing purchase commitment
agreement with Mr. Nacif's affiliates. We did not purchase any fabric under this
agreement in 2006. Net amount due from Mr. Kamel Nacif and his affiliates was
$116,000 as of December 31, 2006.
From time to time in the past, we had advanced funds to Mr. Guez. These were net
advances to Mr. Guez or payments paid on his behalf before the enactment of the
Sarbanes-Oxley Act in 2002. The promissory note documenting these advances
contains a provision that the entire amount together with accrued interest is
immediately due and payable upon our written demand. The greatest outstanding
balance of such advances to Mr. Guez during 2006 was approximately $2,279,000.
At December 31, 2006, the entire balance due from Mr. Guez totaling $2.2 million
was reflected as a reduction of shareholders' equity. All amounts due from Mr.
Guez bore interest at the rate of 7.75% during the period. Total interest paid
by Mr. Guez was $171,000 for the year ended December 31, 2006. Mr. Guez paid
expenses on our behalf of approximately $299,000 for the year ended December 31,
2006, which amounts were applied to reduce accrued interest and principal on Mr.
Guez's loan. These amounts included fuel and related expenses incurred by 477
Aviation, LLC, a company owned by Mr. Guez, when our executives used this
company's aircraft for business purposes. Since the enactment of the
Sarbanes-Oxley Act in 2002, no further personal loans (or amendments to existing
loans) have been or will be made to officers or directors of Tarrant.
We purchased $1.1 million of fabric from Azteca Production International, Inc.
and its affiliates for the year ended December 31, 2006. Our total sales of
fabric and services to Azteca Production International in 2006 were $9,000.
Azteca Production International is owned by the brothers of Gerard Guez.
We purchased $205,000 of trim from Tag-It Pacific, Inc. for the year ended
December 31, 2006. At December 31, 2006, Gerard Guez and Todd Kay beneficially
owned 488,400 and 1,003,500 shares, respectively, of common stock of Tag-It
Pacific, collectively representing 8.1% of Tag-It Pacific's common stock.
DIRECTOR INDEPENDENCE
A majority of our Board of Directors is comprised of "independent" directors
within the meaning of the applicable rules for companies traded on the NASDAQ
Global Market. During 2006, the Board determined that each of Stephane Farouze,
Milton Koffman, Simon Mani, Joseph Mizrachi, and Mitchell Simbal were
independent.
17
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee of our Board of Directors is responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditors. Singer Lewak Greenbaum & Goldstein LLP audited our
consolidated financial statements for the fiscal years ended December 31, 2006
and 2005.
AUDIT FEES
Singer Lewak Greenbaum & Goldstein billed us an aggregate of approximately
$391,000 in fees for audit services associated with the audit of our annual
financial statements for the fiscal year ended December 31, 2006 and the review
of our financial statements included in our quarterly reports on Form 10-Q for
2006. Singer Lewak Greenbaum & Goldstein billed us an aggregate of approximately
$265,000 in fees for audit services associated with the audit of our annual
financial statements for the fiscal year ended December 31, 2005. Grant Thornton
LLP (our prior principal accountants) billed us an aggregate of approximately
$93,000 in fees for the review of our financial statements included in our
quarterly reports on Form 10-Q for 2005.
AUDIT-RELATED FEES
Singer Lewak Greenbaum & Goldstein billed us $0 in fees for audit-related
services for the years ended December 31, 2006 and 2005, respectively.
Audit-related services principally include assurance and related services that
are reasonably related to the performance of the audit or review of our
financial statements and are not reported under "Audit Fees" above.
TAX FEES
Singer Lewak Greenbaum & Goldstein billed us $0 for tax services during the
years ended December 31, 2006 and 2005, which would include services for tax
compliance, tax advice and tax planning.
ALL OTHER FEES
Singer Lewak Greenbaum & Goldstein billed us $99,000 and $0 in fees for the
years ended December 31, 2006 and 2005, respectively, other all services
provided during such periods and not otherwise described above. For 2006, these
fees were for due diligence and related services in connection with financing
and acquisition activities.
All of the services described above were approved by our Audit Committee.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS
Consistent with policies of the Securities and Exchange Commission regarding
auditor independence, the Audit Committee has responsibility for appointing,
setting compensation and overseeing the work of the independent auditor. In
recognition of this responsibility, the Audit Committee has established a policy
to pre-approve all audit and permissible non-audit services provided by the
independent auditor. Our Audit Committee has considered whether the provision of
non-audit services is compatible with maintaining the independent accountant's
independence, and has approved any such services.
18
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Schedule. (Previously filed with the
Original Filing.)
(b) Exhibits.
31.1 Certificate of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities and Exchange Act
of 1934, as amended.
31.2
Certificate of Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities and Exchange Act
of 1934, as amended.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TARRANT APPAREL GROUP
By: /S/ GERARD GUEZ
------------------------------
Gerard Guez
Interim Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ GERARD GUEZ Chairman of the Board of Directors April 30, 2007
------------------------ and Interim Chief Executive Officer
Gerard Guez (Principal Executive Officer)
/S/ DAVID N. BURKE Chief Financial Officer April 30, 2007
------------------------ (Principal Financial and Accounting
David N. Burke Officer)
* Vice Chairman of the Board of April 30, 2007
------------------------ Directors
Todd Kay
* Director April 30, 2007
------------------------
Milton Koffman
* Director April 30, 2007
------------------------
Stephane Farouze
* Director April 30, 2007
------------------------
Mitchell Simbal
* Director April 30, 2007
------------------------
Joseph Mizrachi
* Director April 30, 2007
------------------------
Simon Mani
* By: /S/ GERARD GUEZ
-----------------------
Gerard Guez, Attorney-in-fact
S-1