As filed with the Securities and Exchange
Commission on December 11, 2003. Registration No. 333-_____
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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 No.)
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(323) 780-8250
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
GERARD GUEZ, CHIEF EXECUTIVE OFFICER
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(323) 780-8250
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
COPIES TO:
John J. McIlvery, Esq.
Stubbs Alderton & Markiles, LLP
15821 Ventura Boulevard, Suite 525
Encino, California 91436
(818) 444-4500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount Of
of Securities Amount To Be Price Per Offering Registration
To Be Registered Registered(1) Unit(1)(2) Price(1)(2)(3) Fee
--------------------------------------------------------------------------------
Common Stock, no
par value.......
Preferred Stock,
no par value....
Warrants..........
TOTAL............. $20,000,000 $1,618
================================================================================
(1) An indeterminate number of or aggregate principal amount of the securities
is being registered as may at various times be issued at indeterminate
prices, with an aggregate public offering price not to exceed $20,000,000
or the equivalent thereof in one or more currencies.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(3) Includes consideration to be received by the Registrant for registered
securities that are issuable upon exercise, conversion or exchange of other
registered securities.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
SUBJECT TO COMPLETION - DECEMBER 11, 2003
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
PROSPECTUS $20,000,000
TARRANT APPAREL GROUP
COMMON STOCK
PREFERRED STOCK
WARRANTS
----------
This prospectus relates to common stock, preferred stock and warrants
for equity securities which we may sell from time to time in one or more
offerings up to an aggregate initial public offering price of $20,000,000. We
will provide specific terms of these sales in supplements to this prospectus.
You should read this prospectus and each supplement carefully before you invest.
This prospectus may not be used to offer and sell securities unless accompanied
by a prospectus supplement.
We currently have an effective registration statement on Form S-3 (File
No. 333-110090) relating to the offer and sale of up to 11,423,052 shares of our
common stock by the selling shareholders named in the prospectus included in
that registration statement. The offer and sale by Tarrant of the securities
described in this prospectus and any prospectus supplement is not related to the
offer and sale by the selling shareholders of their shares of our common stock.
Our common stock is traded on the NASDAQ National Market System under
the symbol "TAGS." On December 10, 2003, the last reported sale price of the
common stock on the NASDAQ National Market System was $3.90 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT THE RISKS YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
----------
The date of this prospectus is ______________
TABLE OF CONTENTS
Page
----
ABOUT THIS PROSPECTUS..........................................................3
TARRANT APPAREL GROUP..........................................................3
RISK FACTORS...................................................................4
FORWARD-LOOKING STATEMENTS....................................................10
USE OF PROCEEDS...............................................................10
DILUTION......................................................................11
DESCRIPTION OF THE COMMON STOCK AND PREFERRED STOCK WE MAY OFFER..............11
DESCRIPTION OF THE WARRANTS WE MAY OFFER......................................15
PLAN OF DISTRIBUTION..........................................................16
WHERE YOU CAN FIND MORE INFORMATION...........................................17
LEGAL MATTERS.................................................................18
EXPERTS.......................................................................18
2
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may sell common stock,
preferred stock and warrants for equity securities from time to time in one or
more offerings up to an aggregate initial public offering price of $20,000,000.
This prospectus provides you with a general description of the securities we may
offer. Each time we sell any securities under this prospectus, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
below under the heading "Where You Can Find More Information."
TARRANT APPAREL GROUP
Tarrant Apparel Group is a leading provider of apparel, serving
specialty retailers, mass merchandisers and department store chains and major
international brands located primarily in the United States by designing,
merchandising, contracting for the manufacture of, and selling primarily casual,
moderately-priced apparel for women, men and children. Our major customers
include specialty retailers, such as Express, a division of The Limited, as well
as Lane Bryant, Lerner New York, Wet Seal, Fedrerated Department Stores, J.C.
Penney, K-Mart, Kohl's, Mervyns, Sears and Wal-Mart. Our products are
manufactured in a variety of woven and knit fabrications and include jeans wear,
casual pants, t-shirts, shorts, blouses, shirts and other tops, dresses and
jackets.
We were incorporated in California in September 1988. Our executive
offices are located at 3151 East Washington Boulevard, Los Angeles, California
90023, and our telephone number is (323) 780-8250. Information on our website,
www.tags.com, does not constitute part of this prospectus.
3
RISK FACTORS
You should carefully consider the following risks before you decide to
buy our securities. The risks and uncertainties described below are the material
ones facing our company. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. If
this occurs, the trading price of our common stock could decline, and you may
lose all or part of the money you paid to buy our securities.
RISKS ASSOCIATED WITH THIS OFFERING
INSIDERS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH COULD LIMIT OUR
SHAREHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS.
As of December 10, 2003, our executive officers and directors and their
affiliates owned approximately 30.2% of the outstanding shares of our common
stock. Gerard Guez, our Chief Executive Officer and Chairman, and Todd Kay, our
President and Vice Chairman, alone own approximately 20.4% and 9.4%,
respectively, of the outstanding shares of our common stock at December 10,
2003. Accordingly, our executive officers and directors have the ability to
affect the outcome of, or exert considerable influence over, all matters
requiring shareholder approval, including the election and removal of directors
and any change in control. This concentration of ownership of our common stock
could have the effect of delaying or preventing a change of control of us or
otherwise discouraging or preventing a potential acquirer from attempting to
obtain control of us. This, in turn, could have a negative effect on the market
price of our common stock. It could also prevent our shareholders from realizing
a premium over the market prices for their shares of common stock.
WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE PRICE OF
OUR COMMON STOCK.
Our shareholders rights plan, our ability to issue additional shares of
preferred stock and some provisions of our articles of incorporation and bylaws
could make it more difficult for a third party to make an unsolicited takeover
attempt of us. These anti-takeover measures may depress the price of our common
stock by making it more difficult for third parties to acquire us by offering to
purchase shares of our stock at a premium to its market price.
OUR STOCK PRICE HAS BEEN VOLATILE.
Our common stock is quoted on the NASDAQ National Market System, and
there can be substantial volatility in the market price of our common stock. The
market price of our common stock has been, and is likely to continue to be,
subject to significant fluctuations due to a variety of factors, including
quarterly variations in operating results, operating results which vary from the
expectations of securities analysts and investors, changes in financial
estimates, changes in market valuations of competitors, announcements by us or
our competitors of a material nature, loss of one or more customers, additions
or departures of key personnel, future sales of common stock and stock market
price and volume fluctuations. In addition, general political and economic
conditions such as a recession, or interest rate or currency rate fluctuations
may adversely affect the market price of our common stock.
In addition, the stock market in general has experienced extreme price
and volume fluctuations that have affected the market price of our common stock.
Often, price fluctuations are unrelated to operating performance of the specific
companies whose stock is affected. In the past, following periods of volatility
in the market price of a company's stock, securities class action litigation has
occurred against the issuing company. If we were subject to this type of
litigation in the future, we could incur substantial costs and a diversion of
our management's attention and resources, each of which could have a
4
material adverse effect on our revenue and earnings. Any adverse determination
in this type of litigation could also subject us to significant liabilities.
ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO YOU.
Some investors favor companies that pay dividends, particularly in
general downturns in the stock market. We have not declared or paid any cash
dividends on our common stock. We currently intend to retain any future earnings
for funding growth, and we do not currently anticipate paying cash dividends on
our common stock in the foreseeable future. Additionally, we cannot pay
dividends on our common stock unless the terms of our bank credit facilities and
outstanding preferred stock, if any, permit the payment of dividends on our
common stock. Because we may not pay dividends, your return on this investment
likely depends on your selling our stock at a profit.
RISKS RELATED TO OUR BUSINESS
WE DEPEND ON A GROUP OF KEY CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR SALES. A
SIGNIFICANT ADVERSE CHANGE IN A CUSTOMER RELATIONSHIP OR IN A CUSTOMER'S
FINANCIAL POSITION COULD HARM OUR BUSINESS AND FINANCIAL CONDITION.
Express (a division of The Limited) accounted for approximately 13.5%
and 10.2% of our net sales for the first nine months of 2003 and 2002,
respectively. Lane Bryant accounted for 12.2% and 20% of our net sales for the
first nine months of 2003 and 2002, respectively. Lerner New York accounted for
7.2% and 10.7% of our net sales for the first nine months of 2003 and 2002,
respectively. We believe that consolidation in the retail industry has
centralized purchasing decisions and given customers greater leverage over
suppliers like us, and we expect this trend to continue. If this consolidation
continues, our net sales and results of operations may be increasingly sensitive
to deterioration in the financial condition of, or other adverse developments
with, one or more of our customers.
While we have long-standing customer relationships, we do not have
long-term contracts with any of them, including Express. Purchases generally
occur on an order-by-order basis, and relationships exist as long as there is a
perceived benefit to both parties. A decision by a major customer, whether
motivated by competitive considerations, financial difficulties, and economic
conditions or otherwise, to decrease its purchases from us or to change its
manner of doing business with us, could adversely affect our business and
financial condition. In addition, during recent years, various retailers,
including some of our customers, have experienced significant changes and
difficulties, including consolidation of ownership, increased centralization of
purchasing decisions, restructurings, bankruptcies and liquidations.
These and other financial problems of some of our retailers, as well as
general weakness in the retail environment, increase the risk of extending
credit to these retailers. A significant adverse change in a customer
relationship or in a customer's financial position could cause us to limit or
discontinue business with that customer, require us to assume more credit risk
relating to that customer's receivables, limit our ability to collect amounts
related to previous purchases by that customer, or result in required prepayment
of our receivables securitization arrangements, all of which could harm our
business and financial condition.
FAILURE TO MANAGE OUR GROWTH AND EXPANSION COULD IMPAIR OUR BUSINESS.
Since our inception, we have experienced periods of rapid growth. No
assurance can be given that we will be successful in maintaining or increasing
our sales in the future. Any future growth in sales will require additional
working capital and may place a significant strain on our management, management
information systems, inventory management, production capability, distribution
facilities and receivables management. Any disruption in our order processing,
sourcing or distribution systems could cause orders
5
to be shipped late, and under industry practices, retailers generally can cancel
orders or refuse to accept goods due to late shipment. Such cancellations and
returns would result in a reduction in revenue, increased administrative and
shipping costs and a further burden on our distribution facilities.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.
We have experienced, and expect to continue to experience, substantial
variations in our net sales and operating results from quarter to quarter. We
believe that the factors which influence this variability of quarterly results
include the timing of our introduction of new product lines, the level of
consumer acceptance of each new product line, general economic and industry
conditions that affect consumer spending and retailer purchasing, the
availability of manufacturing capacity, the seasonality of the markets in which
we participate, the timing of trade shows, the product mix of customer orders,
the timing of the placement or cancellation of customer orders, the weather,
transportation delays, quotas, the occurrence of charge backs in excess of
reserves and the timing of expenditures in anticipation of increased sales and
actions of competitors. Due to fluctuations in our revenue and operating
expenses, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance. It is possible
that in some future quarter or quarters, our operating results will be below the
expectations of securities analysts or investors. In that case, our stock price
could fluctuate significantly or decline.
INCREASES IN THE PRICE OF RAW MATERIALS OR THEIR REDUCED AVAILABILITY COULD
INCREASE OUR COST OF SALES AND DECREASE OUR PROFITABILITY.
The principal raw material used in our apparel is cotton. The price and
availability of cotton may fluctuate significantly, depending on a variety of
factors, including crop yields, weather, supply conditions, government
regulation, economic climate and other unpredictable factors. Any raw material
price increases could increase our cost of sales and decrease our profitability
unless we are able to pass higher prices on to our customers. Moreover, any
decrease in the availability of cotton could impair our ability to meet our
production requirements in a timely manner.
THE SUCCESS OF OUR BUSINESS DEPENDS UPON OUR ABILITY TO OFFER INNOVATIVE AND
UPGRADED PRODUCTS.
The apparel industry is characterized by constant product innovation
due to changing consumer preferences, and by the rapid replication of new
products by competitors. As a result, our success depends in large part on our
ability to continuously develop, market and deliver innovative products at a
pace and intensity competitive with other manufacturers in our segments. In
addition, we must create products that appeal to multiple consumer segments at a
range of price points. Any failure on our part to regularly develop innovative
products and update core products could:
o limit our ability to differentiate, segment and price our
products;
o adversely affect retail and consumer acceptance of our
products; and
o limit sales growth.
The increasing importance of product innovation in apparel requires us
to strengthen our internal research and commercialization capabilities, to rely
on successful commercial relationships with third parties such as fiber, fabric
and finishing providers and to compete and negotiate effectively for new
technologies and product components.
6
THE FINANCIAL CONDITION OF OUR CUSTOMERS COULD AFFECT OUR RESULTS OF OPERATIONS.
Certain retailers, including some of our customers, have experienced in
the past, and may experience in the future, financial difficulties, which
increase the risk of extending credit to such retailers and the risk that
financial failure will eliminate a customer entirely. These retailers have
attempted to improve their own operating efficiencies by concentrating their
purchasing power among a narrowing group of vendors. There can be no assurance
that we will remain a preferred vendor for our existing customers. A decrease in
business from or loss of a major customer could have a material adverse effect
on our results of operations. There can be no assurance that our factor will
approve the extension of credit to certain retail customers in the future. If a
customer's credit is not approved by the factor, we could assume the collection
risk on sales to the customer itself, require that the customer provide a letter
of credit, or choose not to make sales to the customer.
THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN
QUALIFIED EMPLOYEES.
We need talented and experienced personnel in a number of areas
including our core business activities. Our success is dependent upon
strengthening our management depth across our business at a rapid pace. An
inability to retain and attract qualified personnel or the loss of any of our
current key executives could harm our business. Our ability to attract and
retain qualified employees is adversely affected by the Los Angeles location of
our corporate headquarters due to the high cost of living in the Los Angeles
area.
WE DEPEND ON OUR COMPUTER AND COMMUNICATIONS SYSTEMS.
As a multi-national corporation, we rely on our computer and
communication network to operate efficiently. Any interruption of this service
from power loss, telecommunications failure, weather, natural disasters or any
similar event could have a material adverse affect on our business and
operations. Additionally, hackers and computer viruses have disrupted operations
at many major companies. We may be vulnerable to similar acts of sabotage, which
could have a material adverse effect on our business and operations.
WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE.
We may not be able to fund our future growth or react to competitive
pressures if we lack sufficient funds. Currently, we believe we have sufficient
cash on hand and cash available through our bank credit facilities, issuance of
long-term debt, proceeds from loans from affiliates, and proceeds from the
exercise of stock options to fund existing operations for the foreseeable
future. However, in the future we may need to raise additional funds through
equity or debt financings or collaborative relationships. This additional
funding may not be available or, if available, it may not be available on
economically reasonable terms. In addition, any additional funding may result in
significant dilution to existing shareholders. If adequate funds are not
available, we may be required to curtail our operations or obtain funds through
collaborative partners that may require us to release material rights to our
products.
OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH IMPORTING PRODUCTS.
Substantially all of our import operations are subject to tariffs
imposed on imported products and quotas imposed by trade agreements. In
addition, the countries in which our products are manufactured or imported may
from time to time impose additional new quotas, duties, tariffs or other
restrictions on our imports or adversely modify existing restrictions. Adverse
changes in these import costs and restrictions, or our suppliers' failure to
comply with customs or similar laws, could harm our business. We cannot assure
that future trade agreements will not provide our competitors with an advantage
over
7
us, or increase our costs, either of which could have an adverse effect on our
business and financial condition.
Our operations are also subject to the effects of international trade
agreements and regulations such as the North American Free Trade Agreement, and
the activities and regulations of the World Trade Organization. Generally, these
trade agreements benefit our business by reducing or eliminating the duties
and/or quotas assessed on products manufactured in a particular country.
However, trade agreements can also impose requirements that adversely affect our
business, such as limiting the countries from which we can purchase raw
materials and setting quotas on products that may be imported into the United
States from a particular country. In addition, the World Trade Organization may
commence a new round of trade negotiations that liberalize textile trade by
further eliminating quotas or reducing tariffs. The elimination of quotas on
World Trade Organization member countries by 2005 and other effects of these
trade agreements could result in increased competition from developing
countries, which historically have lower labor costs, including China and
Taiwan, both of which recently became members of the World Trade Organization.
This potential increase in competition from developing countries is one of the
several reasons why we have determined to lease our manufacturing operations in
Mexico.
Our ability to import products in a timely and cost-effective manner
may also be affected by problems at ports or issues that otherwise affect
transportation and warehousing providers, such as labor disputes. These problems
could require us to locate alternative ports or warehousing providers to avoid
disruption to our customers. These alternatives may not be available on short
notice or could result in higher transit costs, which could have an adverse
impact on our business and financial condition.
OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS REDUCES OUR ABILITY TO CONTROL THE
MANUFACTURING PROCESS, WHICH COULD HARM OUR SALES, REPUTATION AND OVERALL
PROFITABILITY.
We depend on independent contract manufacturers to secure a sufficient
supply of raw materials and maintain sufficient manufacturing and shipping
capacity in an environment characterized by declining prices, continuing cost
pressure and increased demands for product innovation and speed-to-market. This
dependence could subject us to difficulty in obtaining timely delivery of
products of acceptable quality. In addition, a contractor's failure to ship
products to us in a timely manner or to meet the required quality standards
could cause us to miss the delivery date requirements of our customers. The
failure to make timely deliveries may cause our customers to cancel orders,
refuse to accept deliveries, impose non-compliance charges through invoice
deductions or other charge-backs, demand reduced prices or reduce future orders,
any of which could harm our sales, reputation and overall profitability. We do
not have material long-term contracts with any of our independent contractors
and any of these contractors may unilaterally terminate their relationship with
us at any time. To the extent we are not able to secure or maintain
relationships with independent contractors that are able to fulfill our
requirements, our business would be harmed.
Although we monitor the compliance of our independent contractors with
applicable labor laws, we do not control our contractors or their labor
practices. The violation of federal, state or foreign labor laws by one of the
our contractors could result in our being subject to fines and our goods that
are manufactured in violation of such laws being seized or their sale in
interstate commerce being prohibited. From time to time, we have been notified
by federal, state or foreign authorities that certain of our contractors are the
subject of investigations or have been found to have violated applicable labor
laws. To date, we have not been subject to any sanctions that, individually or
in the aggregate, have had a material adverse effect on our business, and we are
not aware of any facts on which any such sanctions could be based. There can be
no assurance, however, that in the future we will not be subject to sanctions as
a result of violations of applicable labor laws by our contractors, or that such
sanctions will not have a material adverse effect on our business and results of
operations. In addition, certain of our customers, including The Limited,
require strict compliance by their apparel manufacturers, including us,
8
with applicable labor laws and visit our facilities often. There can be no
assurance that the violation of applicable labor laws by one of our contractors
will not have a material adverse effect on our relationship with our customers.
OUR BUSINESS IS SUBJECT TO RISKS OF OPERATING IN A FOREIGN COUNTRY AND TRADE
RESTRICTIONS.
Approximately 97% of our products were imported from outside the U.S.
in the third quarter of 2003, and most of our fixed assets are located in
Mexico. We are subject to the risks associated with doing business and owning
fixed assets in foreign countries, including, but not limited to, transportation
delays and interruptions, political instability, expropriation, currency
fluctuations and the imposition of tariffs, import and export controls, other
non-tariff barriers (including changes in the allocation of quotas) and cultural
issues. Any changes in those countries' labor laws and government regulations
may have a negative effect on our profitability.
WE CANNOT GUARANTEE THAT OUR FUTURE ACQUISITIONS WILL BE SUCCESSFUL.
In the future, we may seek to continue our growth through acquisition.
We compete for acquisition and expansion opportunities with companies which have
significantly greater financial and management resources than us. There can be
no assurance that suitable acquisition or investment opportunities will be
identified, that any of these transactions can be consummated, or that, if
acquired, these new businesses can be integrated successfully and profitably
into our operations. These acquisitions and investments may also require a
significant allocation of resources, which will reduce our ability to focus on
the other portions of our business, including many of the factors listed in the
prior risk factor.
RISKS ASSOCIATED WITH OUR INDUSTRY
OUR SALES ARE HEAVILY INFLUENCED BY GENERAL ECONOMIC CYCLES.
Apparel is a cyclical industry that is heavily dependent upon the
overall level of consumer spending. Purchases of apparel and related goods tend
to be highly correlated with cycles in the disposable income of our consumers.
Our customers anticipate and respond to adverse changes in economic conditions
and uncertainty by reducing inventories and canceling orders. As a result, any
substantial deterioration in general economic conditions, increases in interest
rates, acts of war, terrorist or political events that diminish consumer
spending and confidence in any of the regions in which we compete, could reduce
our sales and adversely affect our business and financial condition. This has
been underscored by the events of September 11, 2001 and the war in the Middle
East.
OUR BUSINESS IS HIGHLY COMPETITIVE AND DEPENDS ON CONSUMER SPENDING PATTERNS.
The apparel industry is highly competitive. We face a variety of
competitive challenges including:
o anticipating and quickly responding to changing consumer
demands;
o developing innovative, high-quality products in sizes, colors
and styles that appeal to consumers of varying age groups and
tastes;
o competitively pricing our products and achieving customer
perception of value; and
o providing strong and effective marketing support.
9
WE MUST SUCCESSFULLY GAUGE FASHION TRENDS AND CHANGING CONSUMER PREFERENCES TO
SUCCEED.
Our success is largely dependent upon our ability to gauge the fashion
tastes of our customers and to provide merchandise that satisfies retail and
customer demand in a timely manner. The apparel business fluctuates according to
changes in consumer preferences dictated in part by fashion and season. To the
extent, we misjudge the market for our merchandise, our sales may be adversely
affected. Our ability to anticipate and effectively respond to changing fashion
trends depends in part on our ability to attract and retain key personnel in our
design, merchandising and marketing staff. Competition for these personnel is
intense, and we cannot be sure that we will be able to attract and retain a
sufficient number of qualified personnel in future periods.
OUR BUSINESS IS SUBJECT TO SEASONAL TRENDS.
Historically, our operating results have been subject to seasonal
trends when measured on a quarterly basis. This trend is dependent on numerous
factors, including the markets in which we operate, holiday seasons, consumer
demand, climate, economic conditions and numerous other factors beyond our
control. There can be no assurance that our historic operating patterns will
continue in future periods as we cannot influence or forecast many of these
factors.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934, both as amended. These forward-looking
statements are subject to various risks and uncertainties. The forward-looking
statements include, without limitation, statements regarding our future business
plans and strategies and our future financial position or results of operations,
as well as other statements that are not historical. You can find many of these
statements by looking for words like "will", "may", "believes", "expects",
"anticipates", "plans" and "estimates" and for similar expressions. Because
forward-looking statements involve risks and uncertainties, there are many
factors that could cause the actual results to differ materially from those
expressed or implied. These include, but are not limited to, economic
conditions. Any forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those projected in this prospectus, for the reasons, among
others, described in the Risk Factors section beginning on page 4. You should
read the Risk Factors section carefully, and should not place undue reliance on
any forward-looking statements, which speak only as of the date of this
prospectus. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this prospectus or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that any net proceeds from the sale of the securities that we may
offer under this prospectus and any accompanying prospectus supplement will be
used for general corporate purposes. General corporate purposes may include
acquisitions, investments, repayment of debt, capital expenditures, repurchase
of our capital stock and any other purposes that we may specify in any
prospectus supplement. We may invest the net proceeds temporarily until we use
them for their stated purpose.
10
DILUTION
Our net tangible book value at September 30, 2003 was $69,750,000, or
$3.72 per share of common stock. Net tangible book value per share represents
total tangible assets less total liabilities divided by the number of
outstanding shares of common stock on September 30, 2003. Assuming we issue an
aggregate of $20,000,000 of common stock at an assumed public offering price of
$3.90 per share (the last reported sale price of the common stock on the NASDAQ
National Market on December 10, 2003), and our receipt of the estimated net
proceeds from the sale of those shares (after estimated offering expenses of
$38,000), our adjusted net tangible book value at September 30, 2003 would have
been $89,712,000, or $3.75 per share. This represents an immediate increase in
our adjusted net tangible book value of $0.03 per share to existing shareholders
and an immediate dilution of $0.15 per share to new investors purchasing common
stock in such offering. The following table illustrates this per share dilution:
Assumed public offering price per share (1)............. $ 3.90
Net tangible book value per share
at September 30, 2003............................ $ 3.72
Increase in net tangible book value per
share attributable to this offering.............. 0.03
--------
Net tangible book value per share after this
offering............................................. 3.75
-------
Dilution in net tangible book value per share
to new investors..................................... $ 0.15
=======
----------------
(1) We have assumed an offering price of $3.90 per share based on the last
reported sale price of the common stock on the NASDAQ National Market on
December 10, 2003. The assumed offering price of the common stock at the
time any common stock is offered hereby may differ significantly from the
offering price assumed for purposes of this Prospectus.
The computations in the table above assume no exercise of any
outstanding stock options and warrants after September 30, 2003. At September
30, 2003 there were options and warrants outstanding to purchase a total of
8,348,487 shares of common stock at a weighted average exercise price of $7.55
per share. If any of these options are exercised, there will be further dilution
to new investors.
If the securities offered by this prospectus are common stock, if
required, a prospectus supplement may include a revised dilution table setting
forth any increase in net tangible book value to existing shareholders and any
dilution to new investors based on the proposed number of shares of common stock
to be offered and the assumed public offering price at the time of such
offering.
DESCRIPTION OF THE COMMON STOCK AND PREFERRED STOCK WE MAY OFFER
The following description of our common stock and preferred stock,
together with the additional information included in any applicable prospectus
supplements, summarizes the material terms and provisions of these types of
securities but is not complete. For the complete terms of our common stock and
preferred stock, please refer to our restated articles of incorporation, as
amended, and bylaws that are incorporated by reference into the registration
statement which includes this prospectus and, with respect to preferred stock,
the certificate of determination which will be filed with the Securities and
Exchange Commission for each series of preferred stock we may designate, if any.
We also refer you to the description of our common stock set forth in our
Registration Statement on Form 8-A filed with the SEC on May 4, 1995.
11
We will describe in a prospectus supplement the specific terms of any
common stock or preferred stock we may offer pursuant to this prospectus. If
indicated in a prospectus supplement, the terms of such common stock or
preferred stock may differ from the terms described below.
COMMON STOCK
Under our restated articles of incorporation, as amended, we may issue
up to 100 million (100,000,000) shares of common stock. The holders of our
common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared by the Tarrant
board of directors out of funds legally available for that purpose. In the event
of liquidation, dissolution or winding up of Tarrant, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to the prior distribution rights of any outstanding
preferred stock. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. The outstanding shares of common stock are fully
paid and non-assessable.
The transfer agent and registrar for our common stock is Computershare
Trust Company, 350 Indiana Street, Suite 800, Golden, CO 80401.
PREFERRED STOCK
Under our restated articles of incorporation we may issue up to 2
million (2,000,000) shares of preferred stock. The number of authorized shares
of preferred stock includes 250,000 shares of Series B Preferred Stock issuable
pursuant to the Rights Agreement, as described below under the heading " -
Shareholder Rights Plan." No shares of preferred stock or options to purchase
preferred stock are currently outstanding. Our board of directors has the
authority, without further action by the shareholders, to issue up to the
maximum authorized number of shares of preferred stock in one or more series.
The board of directors also has the authority to designate the rights,
preferences, privileges and restrictions of each such series, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series. The rights, preferences, privileges and restrictions of each series
will be fixed by the certificate of determination relating to that series. Any
or all of the rights of the preferred stock may be greater than the rights of
the common stock.
The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of Tarrant without further action by
the shareholders. The issuance of preferred stock with voting and conversion
rights may also adversely affect the voting power of the holders of common
stock. In certain circumstances, an issuance of preferred stock could have the
effect of decreasing the market price of the common stock.
Whenever preferred stock is to be sold pursuant to this prospectus, we
will file a prospectus supplement relating to that sale which will specify:
o the number of shares in the series of preferred stock;
o the designation for the series of preferred stock by number,
letter or title that shall distinguish the series from any
other series of preferred stock;
o the dividend rate, if any, and whether dividends on that
series of preferred stock will be cumulative, noncumulative or
partially cumulative;
12
o the voting rights of that series of preferred stock, if any;
o any conversion provisions applicable to that series of
preferred stock;
o any redemption or sinking fund provisions applicable to that
series of preferred stock;
o the liquidation preference per share of that series of
preferred stock, if any; and
o the terms of any other preferences or rights, if any,
applicable to that series of preferred stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
We have shares of common stock and preferred stock available for future
issuance without shareholder approval. These additional shares may be utilized
for a variety of corporate purposes, including future public offerings to raise
additional capital, facilitate corporate acquisitions or payable as a dividend
on the capital stock.
The existence of unissued and unreserved common stock and preferred
stock may enable our board of directors to issue shares to persons friendly to
current management or to issue preferred stock with terms that could render more
difficult or discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest or otherwise, thereby protecting the continuity of
our management. In addition, the issuance of preferred stock could adversely
affect the voting power of holders of common stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation.
SHAREHOLDER RIGHTS PLAN
Each outstanding share of our common stock includes, and each share of
common stock offered under this prospectus and the accompanying prospectus
supplement will include, one preferred stock purchase right (individually a
"Right" and collectively the "Rights") as provided under the Rights Agreement,
dated November 21, 2003, between us and Computershare Trust Company. Each Right
entitles the holder, until the earlier of December 12, 2013 or the redemption of
the Rights, to purchase one one-thousandth of a share of our Series B Preferred
Stock, no par value (the "Series B Preferred Stock"), at a price (the "Purchase
Price") of $25.00 per one one-thousandth of a share (as may be adjusted to
reflect stock splits, stock dividends or certain other dilutive events since the
issuance of the Rights). The Series B Preferred Stock is nonredeemable and will
have 1,000 votes per share (subject to adjustment). We have reserved 250,000
shares of Series B Preferred Stock for issuance upon exercise of the Rights.
The Rights will become exercisable upon the earliest to occur of (i)
the tenth day after the acquisition by a person or group of affiliated or
associated persons (other than certain exempt persons or permitted holders, as
defined in the Rights Agreement) of beneficial ownership of 15% or more of our
outstanding common stock, (ii) the tenth day after the commencement of a tender
or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of affiliated or associated persons of 15% or
more of our outstanding common stock, (iii) the tenth day after the date of
filing of a registration statement for any such exchange offer under the
Securities Act of 1933, and (iv) the tenth day after the date on which our Board
declares any person or group of affiliated or associated persons which
beneficially owns 10% or more of our outstanding common stock to be an "Adverse
Person" (as described in the Rights Agreement).
Following the date the Rights become exercisable, the Rights would give
holders (other than the acquiring stockholder who triggered exercise of the
Rights, its affiliates and transferees) the right to purchase from us, for the
Purchase Price, that number of one one-thousandth (1/1000th) of a share of
Series B Preferred Stock (or, in certain circumstances, Common Stock, cash,
property or other securities
13
of ours) having a market value of twice the Purchase Price of the Right.
Further, in a merger, consolidation or sale or transfer of 50% or more of the
consolidated assets or earning power of Tarrant, each Right will be converted
into the right to purchase, for the Purchase Price, that number of shares of
common stock of the surviving entity or (in certain circumstances) its parent
corporation, which at the time of such transaction will have a market value of
twice the Purchase Price of the Right. The Rights Agreement contains an
exception for inadvertent acquisitions of more than 15% of our common stock, so
long as the holder reduces its ownership below the 15% threshold within five
business days following notice from our board of directors.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each one one-thousandth (1/1000th) of a share of Preferred Stock
will be entitled to participating dividends per one one-thousandth (1/1000th) of
a share equal to dividends which may from time to time be declared on a share of
Common Stock. In the event of liquidation, the Preferred Stock holders will be
entitled to a preferential liquidation payment. These rights are protected by
customary anti-dilution provisions.
One Right will be issued in respect of each share of our common stock
issued before the earlier of December 12, 2013 or the redemption of the Rights.
As of the date of this prospectus, the Rights are not exercisable, certificates
representing the Rights have not been issued and the Rights automatically trade
with shares of our common stock.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire Tarrant on
terms not approved by our board of directors. The Rights should not interfere
with any merger or other business combination approved by the Board prior to the
time that holders of the Rights become entitled to exercise their Rights for
Series B Preferred Stock (or securities of the surviving entity in a merger with
the Company), since until that time the Rights may be redeemed by the Board at
$0.001 per Right.
CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS
Our restated articles of incorporation and bylaws could make the
acquisition of Tarrant and the removal of incumbent officers and directors more
difficult. These provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of Tarrant to negotiate with us first. We believe that the
benefits of increased protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
Tarrant outweigh the disadvantages of discouraging such proposals because, among
other things, negotiation of such proposals could result in an improvement of
their terms. These provisions provide for, among other things:
o a classified board of directors;
o a prohibition on shareholder action through written consents;
o a requirement that special meetings of shareholders be called
only by our board of directors, the chairman of our board of
directors, our chief executive officer, our president, or by
the holders of shares entitled to cast not less than 10% of
the votes at the meeting;
o advance notice requirements for shareholder proposals and
nominations;
o limitations on the ability of shareholders to amend, alter or
repeal our articles of incorporation or our bylaws; and
o the authority of our board of directors to issue, without
shareholder approval, preferred stock with such terms as the
board of directors may determine.
14
DESCRIPTION OF THE WARRANTS WE MAY OFFER
We may issue warrants, including warrants to purchase common stock,
preferred stock, or any combination of the foregoing. Warrants may be issued
independently or together with any securities and may be attached to or separate
from the securities. The warrants will be issued under warrant agreements to be
entered into between us and the receipient of the warrant or a warrant agent as
detailed in the prospectus supplement relating to warrants being offered.
The applicable prospectus supplement will describe the following terms,
where applicable, of the warrants in respect of which this prospectus is being
delivered:
o the title of the warrants;
o the aggregate number of the warrants;
o the price or prices at which the warrants will be issued;
o the currencies in which the price or prices of the warrants
may be payable;
o the designation, amount, and terms of the offered securities
purchasable upon exercise of the warrants;
o the designation and terms of the other offered securities, if
any, with which the warrants are issued and the number of the
warrants issued with each security;
o if applicable, the date on and after which the warrants and
the offered securities purchasable upon exercise of the
warrants will be separately transferable;
o the price or prices at which and currency or currencies in
which the offered securities purchasable upon exercise of the
warrants may be purchased;
o the date on which the right to exercise the warrants shall
commence and the date on which the right shall expire;
o the minimum or maximum amount of the warrants which may be
exercised at any one time;
o information with respect to book-entry procedures, if any;
o a discussion of any federal income tax considerations; and
o any other material terms of the warrants, including terms,
procedures, and limitations relating to the exchange and
exercise of the warrants.
15
PLAN OF DISTRIBUTION
We may sell the securities:
o through one or more underwriters or dealers,
o directly to purchasers, through agents, or
o through a combination of any of these methods of sale.
We may distribute the securities:
o from time to time in one or more transactions at a fixed price
or prices, which may be changed from time to time,
o at market prices prevailing at the times of sale,
o at prices related to such prevailing market prices, or
o at negotiated prices.
We will describe the method of distribution of the securities in the
applicable prospectus supplement.
Underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from us or our purchasers (as their agents
in connection with the sale of securities). These underwriters, dealers or
agents may be considered to be underwriters under the Securities Act of 1933. As
a result, discounts, commissions, or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. Each prospectus supplement will identify any such underwriter,
dealer or agent, and describe any compensation received by them from us. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Underwriters, dealers and agents may be entitled, under agreements
entered into with us, to indemnification by us against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution with respect to payments made by the underwriters, dealers or
agents, under agreements between us and the underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of
securities an option to purchase additional securities to cover over-allotments,
if any, in connection with the distribution. Underwriters or agents and their
associates may be customers of, engage in transactions with, or perform services
for us in the ordinary course of business.
In connection with the offering of the securities, certain underwriters
and selling group members and their respective affiliates, may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the applicable securities. These transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M promulgated by
the SEC pursuant to which these persons may bid for or purchase securities for
the purpose of stabilizing their market price.
The underwriters in an offering of securities may also create a "short
position" for their account by selling more securities in connection with the
offering than they are committed to purchase from us. In that case, the
underwriters could cover all or a portion of the short position by either
purchasing securities in the open market following completion of the offering of
these securities or by exercising any over-allotment option granted to them by
us. In addition, any managing underwriter may impose "penalty
16
bids" under contractual arrangements with other underwriters, which means that
they can reclaim from an underwriter (or any selling group member participating
in the offering) for the account of the other underwriters, the selling
concession for the securities that are distributed in the offering but
subsequently purchased for the account of the underwriters in the open market.
Any of the transactions described in this paragraph or comparable transactions
that are described in any accompanying prospectus supplement may result in the
maintenance of the price of the securities at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph or in an accompanying prospectus supplement are required to be taken
by any underwriters and, if they are undertaken, may be discontinued at any
time.
Our common stock is listed on the NASDAQ National Market under the
symbol "TAGS." Any shares of common stock sold pursuant to a prospectus
supplement will be listed on the NASDAQ National Market, subject to official
notice of issuance. The preferred stock and any securities other than common
stock that we may sell pursuant to this prospectus, and any prospectus
supplement, will be new issues of securities with no established trading market
and may or may not be listed on a national securities exchange. Any underwriters
or agents to or through which we may sell securities may make a market in the
securities, but these underwriters or agents will not be obligated to do so and
any of them may discontinue any market making at any time without notice. We
cannot, therefore, give any assurance as to the liquidity of our trading market
for any securities that we may sell, other than our common stock.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC with
respect to the common stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules that are part of the registration statement. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. We refer you to the registration statement and the
exhibits and schedules thereto for further information with respect to us and
our common stock. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Our SEC filings are also available to the public
from the SEC's website at www.sec.gov.
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934 and, in accordance with those
requirements, will continue to file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the SEC's website referred to above.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. We incorporate by reference the documents listed
below and any additional documents filed by us with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of
securities is terminated. The information we incorporate by reference is an
important part of this prospectus, and any information that we file later with
the SEC will automatically update and supersede this information.
The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the year ended December 31,
2002 (File No. 000-26430);
2. Our Amendment No. 1 to our Annual Report on Form 10-K for the
year ended December 31, 2002, as filed on May 15, 2003 (File
No. 000-26430)
17
3. Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2003 (File No. 000-26430);
4. Our Quarterly Report on Form 10-Q for the quarter ended June
30, 2003 (File No. 000-26430);
5. Our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003 (File No. 000-26430);
6. Our Current Report on Form 8-K as filed on April 4, 2003 (File
No. 000-26430);
7. Our Current Report on Form 8-K as filed on May 16, 2003 (File
No. 000-26430);
8. Our Current Report on Form 8-K as filed on July 10, 2003 (File
No. 000-26430);
9. Our Current Report on Form 8-K as filed on August 18, 2003
(File No. 000-26430);
10. Our Current Report on Form 8-K as filed on October 27, 2003
(File No. 000-26430);
11. Our Current Report on Form 8-K as filed on November 14, 2003
(File No. 000-26430);
12. Our Current Report on Form 8-K as filed on November 21, 2003
(File No. 000-26430);
13. Our Current Report on Form 8-K as filed on December 10, 2003
(File No. 000-26430);
14. The description of the Common Stock of the Registrant
contained in the Registrant's Registration Statement on Form
8-A as filed on May 4, 1995 (File No. 000-26006), including
any amendment or report filed for the purpose of updating such
description; and
15. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 since December
31, 2002, including all such reports filed after the date of
the initial registration statement and prior to effectiveness
of the registration statement.
You may request a copy of these filings, at no cost, by writing or
calling us at Tarrant Apparel Group, 3151 East Washington Boulevard, Los
Angeles, California 90023, telephone number (323) 780-8250, Attention: Patrick
Chow.
You should rely only on the information contained in this prospectus or
any supplement and in the documents incorporated by reference above. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement or in the
documents incorporated by reference is accurate on any date other than the date
on the front of those documents.
LEGAL MATTERS
Stubbs Alderton & Markiles, LLP, Encino, California, has rendered to
Tarrant Apparel Group a legal opinion as to the validity of the common stock,
preferred stock and warrants for equity securities to be offered pursuant to
this prospectus.
EXPERTS
The consolidated financial statements of the Tarrant Apparel Group
appearing in Tarrant Apparel Group's Annual Report (Form 10-K) for the year
ended December 31, 2002 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon and incorporated by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
18
--------------------
$20,000,000
TARRANT APPAREL GROUP
PROSPECTUS
COMMON STOCK
PREFERRED STOCK
WARRANTS
--------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the offering. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee.
Registration fee - Securities and Exchange Commission ............ $ 1,618
Legal Fees and Expenses .......................................... 20,000
Accounting Fees and Expenses ..................................... 15,000
Miscellaneous Expenses ........................................... 1,382
-------
Total ....................................................... $38,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Restated Articles of Incorporation and its Bylaws
provide for the indemnification by the Registrant of each director, officer and
employee of the Registrant to the fullest extent permitted under California Law,
as the same exists or may hereafter be amended. Section 317 of the California
General Corporation Law provides in relevant part that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
In addition, Section 317 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in the best interests of the corporation and
its shareholders. No indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation in the performance of that person's duty to the corporation and
its shareholders, unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and then only to the extent that the
court shall determine. California law further provides that nothing in the above
described provisions shall be deemed exclusive of any other rights to
indemnification or advancement of expenses to which any person may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise.
II-1
The Registrant has entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director of the Registrant and
certain officers of the Registrant (the "Indemnitees"). Pursuant to the terms
and conditions of the Indemnity Agreements, the Registrant indemnified each
Indemnitee against any amounts which he or she becomes legally obligated to pay
in connection with any claim against him or her based upon any action or
inaction which he or she may commit, omit or suffer while acting in his or her
capacity as a director and/or officer of the Registrant or its subsidiaries,
provided, however, that Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action, had no reasonable cause
to believe Indemnitee's Conduct was unlawful.
Item 16. Exhibits.
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------
1.1 Form of Underwriting Agreement (1)
3.1 Restated Articles of Incorporation (2)
3.1.1 Certificate of Amendment of Restated Articles of Incorporation (3)
3.1.2 Certificate of Amendment of Restated Articles of Incorporation (3)
3.1.3 Certificate of Amendment of Restated Articles of Incorporation (4)
3.2 Restated Bylaws (2)
4.1 Specimen of Common Stock Certificate (5)
4.2 Certificate of Determination of Preferences, Rights and Limitations
of Series B Convertible Preferred Stock (6)
4.3 Rights Agreement, dated as of November 21, 2003, by and between the
Company and Computershare Trust Company, as Rights Agent (6)
4.4 Form of Certificate of Determination of Preferences, Rights and
Limitations of Preferred Stock (together with preferred stock
certificate) (1)
4.5 Form of Warrant Agreement (together with warrant certificate, if
any) (1)
5.1 Opinion and Consent of Stubbs Alderton & Markiles, LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Stubbs Alderton & Markiles, LLP (7)
24.1 Power of Attorney (8)
----------
(1) To be filed by a report on Form 8-K pursuant to Item 601 of Regulation S-K.
(2) Filed as an exhibit to Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on May 4, 1995.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the period ended
June 30, 2002.
(4) Filed as an exhibit to Current Report on Form 8-K dated December 10, 2003.
(5) Filed as an exhibit to Amendment No. 1 to Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on July 15, 1995.
(6) Filed as an exhibit to Current Report on Form 8-K dated November 21, 2003.
II-2
(7) Included in Exhibit 5.1.
(8) Included on signature page.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that the information
required to be included in a post-effective amendment by paragraphs
(a)(1)(i) and (a)(1)(ii) above may be contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 and (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities
II-3
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on December 11,
2003.
TARRANT APPAREL GROUP
By: /s/ Gerard Guez
-------------------------
Gerard Guez
Chairman of the Board
POWER OF ATTORNEY
The undersigned directors and officers of Tarrant Apparel Group do
hereby constitute and appoint Patrick Chow and Gerard Guez, and each of them, as
his true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any or all amendments (including post effective amendments)
to this Registration Statement and a new Registration Statement filed pursuant
to Rule 462(b) of the Securities Act of 1933 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gerard Guez Chief Executive Officer and December 11, 2003
--------------------- Chairman of the Board of
Gerard Guez Directors
/s/ Todd Kay Vice Chairman of the Board December 11, 2003
--------------------- of Directors
Todd Kay
/s/ Patrick Chow Chief Financial Officer, December 11, 2003
--------------------- Treasurer and Director
Patrick Chow (Principal Financial and
Accounting Officer)
/s/ Barry Aved President and Director December 11, 2003
---------------------
Barry Aved
/s/ Larry Russ Director December 11, 2003
---------------------
Larry Russ
/s/ Stephane Farouze Director December 11, 2003
---------------------
Stephane Farouze
/s/ Mitchell Simbal Director December 11, 2003
---------------------
Mitchell Simbal
/s/ Joseph Mizrachi Director December 11, 2003
---------------------
Joseph Mizrachi
/s/ Milton Koffman Director December 11, 2003
---------------------
Milton Koffman
S-1
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------
1.1 Form of Underwriting Agreement (1)
3.1 Restated Articles of Incorporation (2)
3.1.1 Certificate of Amendment of Restated Articles of Incorporation (3)
3.1.2 Certificate of Amendment of Restated Articles of Incorporation (3)
3.1.3 Certificate of Amendment of Restated Articles of Incorporation (4)
3.2 Restated Bylaws (2)
4.1 Specimen of Common Stock Certificate (5)
4.2 Certificate of Determination of Preferences, Rights and Limitations
of Series B Convertible Preferred Stock (6)
4.3 Rights Agreement, dated as of November 21, 2003, by and between the
Company and Computershare Trust Company, as Rights Agent (6)
4.4 Form of Certificate of Determination of Preferences, Rights and
Limitations of Preferred Stock (together with preferred stock
certificate) (1)
4.5 Form of Warrant Agreement (together with warrant certificate, if
any) (1)
5.1 Opinion and Consent of Stubbs Alderton & Markiles, LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Stubbs Alderton & Markiles, LLP (7)
24.1 Power of Attorney (8)
----------
(1) To be filed by a report on Form 8-K pursuant to Item 601 of Regulation S-K.
(2) Filed as an exhibit to Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on May 4, 1995.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the period ended
June 30, 2002.
(4) Filed as an exhibit to Current Report on Form 8-K dated December 10, 2003.
(5) Filed as an exhibit to Amendment No. 1 to Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on July 15, 1995.
(6) Filed as an exhibit to Current Report on Form 8-K dated November 21, 2003.
(7) Included in Exhibit 5.1.
(8) Included on signature page.
EX-1