UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): March 31, 2006
TARRANT APPAREL GROUP
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-26006 95-4181026
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(Address of Principal Executive Offices) (Zip Code)
(323) 780-8250
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 5.02 DEPARTURE OR ELECTION OF PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
(a), (b) RESIGNATION OF DIRECTOR AND CHIEF EXECUTIVE OFFICER
Effective March 31, 2006, Barry Aved resigned as Chief Executive
Officer and President of Tarrant Apparel Group and also resigned as a member of
our Board of Directors.
(c) APPOINTMENT OF INTERIM CHIEF EXECUTIVE OFFICER
Effective March 31, 2006, our Board of Directors has appointed Gerard
Guez as our Interim Chief Executive Officer to replace Mr. Aved.
Mr. Guez (age 50) founded Tarrant Apparel Group in 1988 and has served
as Chairman of our Board of Directors since inception. Mr. Geuz previously
served as our Chief Executive Officer from inception until 2001 and again from
March 2003 through August 2004. Mr. Guez also founded Tarrant Company Limited,
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 Company Limited, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 of the Board of Directors, and Todd Kay, our Vice Chairman of the Board
of Directors. We believe, at the time the leases were entered into, the rents on
these properties were comparable to then prevailing market rents. Our Los
Angeles offices and warehouse is leased on a month to month basis. On January 1,
2006, we entered into a one year lease agreement with Lynx International Limited
for our office space in Hong Kong. We paid $1,019,000 in 2005 in rent for office
and warehouse facilities at these locations.
In February 2004, our Hong Kong subsidiary entered into a 50/50 joint
venture with Auto Enterprises Limited, an unrelated third party, to source
products for Seven Licensing Company, LLC and our private brands subsidiary in
mainland China. On May 31, 2004, after realizing an accumulated loss from the
venture of approximately $200,000 (our share being half), we sold our interest
for $1 to Asia Trading Limited, a company owned by Jacqueline Rose, wife of
Gerard Guez. The venture owed us $221,000 as of December 31, 2004, which amount
was repaid in the first quarter of 2005.
From time to time in the past, we borrowed funds from, and advanced
funds to, Mr. Guez. The greatest outstanding balance of such advances to Mr.
Guez during 2005 was approximately $4,766,000. At December 31, 2005, the entire
balance due from Mr. Guez totaling $2.3 million was reflected as a reduction of
shareholders' equity. All advances to, and borrowings from, Mr. Guez bore
interest at the rate of 7.75% during the period. Total interest paid by Mr. Guez
was $209,000 for the year ended December 31, 2005. Mr. Guez paid expenses on our
behalf of approximately $397,000 for the year ended December 31, 2005, 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 our executive officers or directors.
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On July 1, 2001, we formed an entity to jointly market, share certain
risks and achieve economies of scale with Azteca Production International, Inc.
("Azteca"), called United Apparel Ventures, LLC ("UAV"). Azteca is owned by the
brothers of Gerard Guez, our Chairman. This entity was created to coordinate the
production of apparel for a single customer of our branded business. UAV is
owned 50.1% by Tag Mex, Inc., our wholly owned subsidiary, and 49.9% by Azteca.
Results of the operation of UAV have been consolidated into our results since
July 2001 with the minority partner's share of all gains and loses eliminated
through the minority interest line in our financial statements. Due to the
restructuring of our Mexico operations, we discontinued manufacturing for UAV
customers in the second quarter of 2004. We purchased $135,000 of finished goods
and services from Azteca and its affiliates in the year ended December 31, 2005.
Our total sales of fabric and services to Azteca in 2005 were $88,000.
At December 31, 2005, Messrs. Guez and Kay beneficially owned 590,000
and 1,003,500 shares, respectively, of common stock of Tag-It Pacific, Inc.,
collectively representing 8.7% of Tag-It Pacific's common stock at December 31,
2005. Tag-It Pacific is a provider of brand identity programs to manufacturers
and retailers of apparel and accessories. We purchased $450,000 of trim from
Tag-It Pacific during the year ended December 31, 2005.
We believe that each of the transactions described above has been
entered into on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We have adopted a policy that any transactions
between us and any of our affiliates or related parties, including our executive
officers, directors, 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.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TARRANT APPAREL GROUP
Date: April 3, 2006 By: /S/ CORAZON REYES
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Corazon Reyes, Chief Financial Officer
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