EXHIBIT 10.1
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of this 4th day
of January, 2006 (the “Effective Date”), is entered into by and between True
Religion Apparel, Inc., a Delaware corporation (“TRA”), and Jeffrey Lubell
(“Executive”).
     WHEREAS, TRA and Executive desire to enter into this Agreement to assure
TRA of the continuing and exclusive services of Executive and to set forth the
rights and the duties of the parties hereto.
     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
terms and conditions contained herein, it is hereby agreed as follows:
     1. Employment Period. Subject to the provisions for earlier termination
hereinafter provided, Executive’s employment hereunder shall be for a term (the
“Employment Period”) commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the “Initial Termination Date”); provided,
however, that this Agreement shall be automatically extended for one additional
year on the Initial Termination Date and on each subsequent anniversary of the
initial Termination Date, unless either Executive or TRA elects not to so extend
the term of the Agreement by notifying the other party, in writing, of such
election not less than ninety (90) days prior to the last day of the term as
then in effect. For the avoidance of doubt, non-renewal of this Agreement
pursuant to the proviso contained in the preceding sentence shall not be deemed
to give rise to any payment to Executive as might be the case in connection with
a termination of this Agreement.
     2. Terms of Employment.
          (a) Position and Duties.
               (i) During the Employment Period, Executive shall serve as
Chairman and Chief Executive Officer of TRA and shall perform such employment
duties as are usual and customary for such positions and such other duties as
the Board of Directors of TRA (the “Board”) shall from time to time reasonably
assign to Executive. Executive shall report to the Board of Directors of TRA. At
TRA’s request, Executive shall serve TRA and/or its subsidiaries and affiliates
in other offices and capacities in addition to the foregoing. In the event that
Executive, during the Employment Period, serves in any one or more of such
additional capacities, Executive’s compensation shall not be increased beyond
that specified in Section 2(b) of this Agreement. In addition, in the event
Executive’s service in one or more of such additional capacities is subsequently
terminated, Executive’s compensation, as specified in Section 2(b) of this
Agreement, shall not be diminished or reduced in any manner as a result of such
termination for so long as Executive otherwise remains employed under the terms
of this Agreement. During the Employment Period, Executive shall perform his
duties at the Company’s offices in the Los Angeles metropolitan area.
               (ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which Executive is entitled, Executive agrees to
devote substantially all of his business time, energy, skill and best efforts to
the performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of TRA. Notwithstanding the
foregoing, during the Employment Period it shall not be a violation of this
Agreement for Executive to (A) serve on corporate, civic or charitable boards or
committees consistent with TRA’s conflicts of interests policies

 

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and corporate governance guidelines in effect from time to time, (B) deliver
lectures or fulfill speaking engagements or (C) manage his personal investments,
so long as such activities do not interfere with the performance of Executive’s
responsibilities as an executive officer of TRA. It is expressly understood and
agreed that to the extent that any such activities have been conducted by
Executive prior to the Effective Date and fully disclosed in writing and agreed
to by TRA in writing, the continued conduct of such activities subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of Executive’s responsibilities to TRA; provided, however, that no such activity
shall be permitted that violates any written non-competition agreement between
the parties or prevents Executive from devoting substantially all of his
business time to the fulfillment of his duties hereunder.
               (iii) Executive agrees that he will not take personal advantage
of any business opportunity that arises during his employment by TRA which may
be of benefit to TRA unless all material facts regarding such opportunity are
promptly reported by Executive to the Board for consideration by TRA and the
disinterested members of the Board determine to reject the opportunity and to
approve Executive’s participation therein.
          (b) Compensation.
               (i) Base Salary. During the Employment Period, Executive shall
receive a base salary (the “Base Salary”) of $500,000 per annum, as the same may
be increased thereafter (or thereafter decreased, but not below the then-current
Base Salary). The Base Salary shall be paid at such intervals as TRA pays
executive salaries generally. During the Employment Period, the Base Salary
shall be reviewed at least annually for possible increase (but not decrease) in
TRA’s sole discretion, as determined by TRA’s compensation committee or full
Board; provided, however, that Executive shall be entitled to any annual
cost-of-living increases in Base Salary that are granted to senior executives of
TRA generally. Any increase in Base Salary shall not serve to limit or reduce
any other obligation to Executive under this Agreement. The term “Base Salary”
as utilized in this Agreement shall refer to Base Salary as so adjusted.
               (ii) Annual Bonus. In addition to the Base Salary, Executive
shall be eligible to earn, for each fiscal year of TRA ending during the
Employment Period, an annual cash performance bonus (an “Annual Bonus”). For
2006, the amount and target performance goals for such Annual Bonus are set
forth on Schedule A attached hereto. The amount of Annual Bonus and target
performance goals for future years during the Term shall be determined by TRA’s
compensation committee after consultation with the Executive.
               (iii) Equity Incentive Award. Concurrently herewith, the Company
is granting Executive an award consisting of 130,000 shares of restricted stock
pursuant to the Company’s 2005 Stock Incentive Plan. Such shares of restricted
stock shall vest 25% immediately, 50% on the first anniversary of the date of
grant, and 25% on the second anniversary of the date of grant and shall be
granted pursuant to the Company’s standard restricted stock award agreement.
               (iv) Incentive, Savings and Retirement Plans. During the
Employment Period, Executive shall be eligible to participate in all other
incentive plans, policies and programs, and all savings and retirement plans,
policies and programs, in each case that are applicable generally to senior
executives of TRA.
               (v) Welfare Benefit Plans. During the Employment Period,
Executive and Executive’s eligible family members shall be eligible for
participation in the welfare benefit plans, practices, policies and programs
(including, if applicable, medical, dental, disability, employee life, group
life and accidental death insurance plans and programs) maintained by TRA for
its senior executives.

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               (vi) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
incurred by Executive in accordance with the policies, practices and procedures
of TRA provided to senior executives of TRA.
               (vii) Fringe Benefits. During the Employment Period, Executive
shall be entitled to such fringe benefits and perquisites as are provided by TRA
to its senior executives from time to time, in accordance with the policies,
practices and procedures of TRA.
               (viii) Vacation. During the Employment Period, Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of TRA applicable to its senior executives.
               (ix) Indemnification Agreement. On the Effective Date, TRA and
Executive shall, if they have not done so previously, enter into an
indemnification agreement in the form adopted by the Board for the officers of
TRA and which contains customary terms and conditions for a public company.
               (x) Automobile. Executive shall be entitled to an automobile
allowance of Two Thousand Dollars ($2,000) per month.
          (c) Additional Agreements. As a condition to TRA entering into this
Agreement, Executive shall concurrently herewith enter into a Confidentiality
and Non-Disclosure Agreement with TRA (the “Non-Disclosure Agreement”), a form
of which is set forth as Exhibit B hereto, and a Non-Competition Agreement (the
“Non-Competition Agreement”), a form of which is set forth as Exhibit C hereto.
     3. Termination of Employment.
          (a) Death or Disability. Executive’s employment will terminate
automatically upon Executive’s death. Executive’s employment may be terminated
if Executive suffers a Disability. For purposes of this Agreement, “Disability”
means Executive’s inability by reason of physical or mental illness to fulfill
his obligations hereunder for 90 consecutive days or on a total of 150 days in
any 12-month period which, in the reasonable opinion of an independent physician
selected by TRA or its insurers and reasonably acceptable to Executive or
Executive’s legal representative, renders Executive unable to perform the
essential functions of his job, even after reasonable accommodations are made by
TRA. TRA is not, however, required to make unreasonable accommodations for
Executive or accommodations that would create an undue hardship on TRA.
          (b) Cause. TRA may terminate Executive’s employment during the
Employment Period for Cause or without Cause. For purposes of this Agreement,
“Cause” shall mean the occurrence of any one or more of the following events:
               (i) Executive’s willful failure to perform or gross negligence in
performing Executive’s duties owed to TRA, after ten (10) days following written
notice delivered to Executive by the Board, which notice specifies such failure
or negligence;
               (ii) Executive’s commission of an act of fraud or dishonesty in
the performance of Executive’s duties;

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               (iii) Executive’s conviction of, or entry by Executive of a
guilty or no contest plea to, any (x) felony or (y) any misdemeanor involving
moral turpitude;
               (iv) Any breach by Executive of Executive’s fiduciary duty or
duty of loyalty to TRA; or
               (v) Executive’s material breach of any of the provisions of this
Agreement, which is not cured within ten (10) days following written notice
thereof from TRA.
          The termination of employment of Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of a majority the Board at
a meeting of the Board called and held for such purpose (after reasonable notice
is provided to Executive and Executive is given an opportunity to be heard
before the Board), finding that, in the good faith opinion of the Board,
sufficient Cause exists to terminate Executive pursuant to this Section 3(b);
provided, that if Executive is a member of the Board, Executive shall not
participate in the deliberations regarding such resolution, vote on such
resolution, nor shall Executive be counted in determining a majority of the
Board.
          (c) Good Reason. Executive’s employment may be terminated by Executive
for Good Reason or without Good Reason. For purposes of this Agreement, “Good
Reason” shall mean the occurrence of any one or more of the following events
without Executive’s prior written consent, unless TRA fully cures the
circumstances constituting Good Reason (provided such circumstances are capable
of cure) prior to the Date of Termination (as defined below):
               (i) A material reduction in Executive’s titles, duties, authority
and responsibilities, or the assignment to Executive of any duties materially
inconsistent with Executive’s position, authority, duties or responsibilities
without the written consent of Executive;
               (ii) TRA’s reduction of Executive’s annual base salary or bonus
opportunity, each as in effect on the date hereof or as the same may be
increased from time to time;
               (iii) The relocation of TRA’s headquarters to a location more
than thirty-five (35) miles from TRA’s current headquarters in Los Angeles,
California; or
               (iv) TRA’s failure to cure a material breach of its obligations
under the Agreement within fifteen (15) business days after written notice is
delivered to the Board by Executive which specifically identifies the manner in
which Executive believes that TRA has breached its obligations under the
Agreement.
          (d) Notice of Termination. Any termination by TRA for Cause, or by
Executive for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 9(c) of this Agreement. For
purposes of this Agreement, a “Notice of Termination” means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by Executive or TRA to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of Executive or TRA,
respectively, hereunder or preclude Executive or TRA, respectively, from
asserting such fact or circumstance in enforcing Executive’s or TRA’s rights
hereunder.

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          (e) Date of Termination. “Date of Termination” means (i) if
Executive’s employment is terminated by TRA for Cause, or by Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein (which date shall not be more than 30 days after the giving of
such notice), as the case may be, (ii) if Executive’s employment is terminated
by TRA other than for Cause or Disability, the Date of Termination shall be the
date on which TRA notifies Executive of such termination, (iii) if Executive’s
employment is terminated by Executive without Good Reason, the Date of
Termination shall be the thirtieth day after the date on which Executive
notifies TRA of such termination, unless otherwise agreed by TRA and Executive,
and (iv) if Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death or Disability of
Executive, as the case may be.
     4. Obligation of TRA Upon Termination.
          (a) Without Cause or For Good Reason. If, during the Employment
Period, TRA shall terminate Executive’s employment without Cause or Executive
shall terminate his employment for Good Reason:
               (i) Executive shall be paid, in two lump sum payments
(A) Executive’s earned but unpaid Base Salary and accrued but unpaid vacation
pay through the Date of Termination, and any Annual Bonus required to be paid to
Executive pursuant to Section 2(b)(ii) above for any fiscal year of TRA that
ends on or before the Date of Termination to the extent not previously paid (the
“Accrued Obligations”), and (B) an amount (the “Severance Amount”) equal to one
and one-half (1.5) (the “Severance Multiple”) times the sum of (x) the Base
Salary in effect on the Date of Termination plus (y) either (1) the average
Annual Bonus received by Executive for the two complete fiscal years (or such
lesser number of years as Executive has been employed by TRA) of TRA immediately
prior to the Termination Date, or (2) if the Date of Termination occurs before
the end of the first complete fiscal year after the Effective Date, the amount
of the Pro-Rated Annual Bonus (defined below) for such partial fiscal year;
provided, however, if less than one (1) year remains in the Employment Period
after the Date of Termination, the Severance Multiple shall equal one (1);
provided, further, that the Accrued Obligations shall be paid when due under
California law and the Severance Amount shall be paid no later than 60 days
after the Date of Termination;
               (ii) At the time when annual bonuses are paid to TRA’s other
senior executives for the fiscal year of TRA in which the Date of Termination
occurs, Executive shall be paid an Annual Bonus in an amount equal to the
product of (x) the amount of the Annual Bonus to which Executive would have been
entitled if Executive’s employment had not been terminated, and (y) a fraction,
the numerator of which is the number of days in such fiscal year through the
Date of Termination and the denominator of which is the total number of days in
such fiscal year (a “Pro-Rated Annual Bonus”);
               (iii) For a period of eighteen months following the Date of
Termination, TRA shall continue to provide Executive and Executive’s eligible
family members with group health insurance coverage at least equal to that which
would have been provided to them if Executive’s employment had not been
terminated (or at TRA’s election, pay the applicable COBRA premium for such
coverage); provided, however, that if Executive becomes re-employed with another
employer and is eligible to receive group health insurance coverage under
another employer’s plans, TRA’s obligations under this Section 4(a)(iii) shall
terminate and any such coverage shall be reported by Executive to TRA;
               (iv) All outstanding stock options, restricted stock and other
equity awards granted to Executive under any of TRA’s equity incentive plans (or
awards substituted therefore covering

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the securities of a successor company) shall be modified to reflect an
additional twelve (12) months of vesting; and
               (v) To the extent not theretofore paid or provided, TRA shall
timely pay or provide to Executive any vested benefits and other amounts or
benefits required to be paid or provided or which Executive is eligible to
receive as of the Date of Termination under any plan, contract or agreement of
TRA and its affiliates (such other amounts and benefits shall be hereinafter
referred to as the “Other Benefits”) to which Executive is a party.
Notwithstanding the foregoing, it shall be a condition to Executive’s right to
receive the amounts provided for in Sections 4(a)(i)(B) and 4(a)(ii) and (iii)
above that Executive execute, deliver to TRA and not revoke a release of claims
in substantially the form attached hereto as Exhibit A.
          (b) For Cause or Without Good Reason. If Executive’s employment shall
be terminated by TRA for Cause or by Executive without Good Reason during the
Employment Period, TRA shall have no further obligations to Executive under this
Agreement other than pursuant to Section 7 hereof, and the obligation to pay to
Executive the Accrued Obligations when due under California law and to provide
the Other Benefits.
          (c) Death or Disability. If Executive’s employment is terminated by
reason of Executive’s death or Disability during the Employment Period:
               (i) The Accrued Obligations shall be paid to Executive’s estate
or beneficiaries or to Executive, as applicable, in cash within 30 days of the
Date of Termination;
               (ii) 100% of Executive’s then current annual Base Salary, as in
effect on the Date of Termination, shall be paid to Executive’s estate or
beneficiaries or to Executive, as applicable, in cash when due under California
law;
               (iii) The Pro-Rated Annual Bonus shall be paid to Executive’s
estate or beneficiaries or to Executive, as applicable, at the time when annual
bonuses are paid to TRA’s other senior executives for the fiscal year of TRA in
which the Date of Termination occurs;
               (iv) For a period of eighteen months following the Date of
Termination, Executive and Executive’s eligible family members shall continue to
be provided with group health insurance coverage at least equal to that which
would have been provided to them if Executive’s employment had not been
terminated (or at TRA’s election, pay the applicable COBRA premium for such
coverage); provided, however, that if Executive becomes re-employed with another
employer and is eligible to receive group health insurance coverage under
another employer’s plans, TRA’s obligations under this Section 4(d)(iv) shall
terminate, and any such coverage shall be reported by Executive to TRA; and
               (v) The Other Benefits shall be paid or provided to Executive’s
estate or beneficiaries or to Executive, as applicable, on a timely basis.
     5. Change in Control. If a Change in Control (as defined herein) occurs
during the Employment Period, and the Executive’s employment is terminated by
the Company without Cause or by the Executive for Good Reason, in each case
within one (1) year after the effective date of the Change in Control, then the
Executive shall be entitled to the payments and benefits provided in
Section 4(a), subject to the terms and conditions thereof; provided, that for
purposes of this Section 5, (a) the Severance Multiple shall equal three (3) and
(b) all outstanding stock options, restricted stock and other equity awards
granted to Executive under any of TRA’s equity incentive plans (or awards
substituted

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therefore covering the securities of a successor company) shall become
immediately vested and exercisable in full. For purposes of this Agreement,
“Change in Control” shall mean the occurrence of any of the following events:
          (a) Any transaction, whether effected directly or indirectly,
resulting in any “person” or “group” (as those terms are defined in
Sections 3(a)(9), 13(d), and 14(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules thereunder) having “beneficial
ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of
securities entitled to vote generally in the election of directors (“voting
securities”) of TRA that represent greater than 35% of the combined voting power
of TRA’s then outstanding voting securities, other than
               (i) any transaction or event resulting in the beneficial
ownership of voting securities by a trustee or other fiduciary holding
securities under any employee benefit plan (or related trust) sponsored or
maintained by TRA or any Person controlled by TRA or by any employee benefit
plan (or related trust) sponsored or maintained by TRA or any Person controlled
by TRA, or
               (ii) any transaction or event resulting in the beneficial
ownership of voting securities by TRA or a corporation owned, directly or
indirectly, by the stockholders of TRA in substantially the same proportions as
their ownership of the stock of TRA, or
               (iii) any transaction or event resulting in the beneficial
ownership of voting securities pursuant to a transaction described in clause
(c) below that would not be a Change in Control under clause (c), or
               (iv) any transaction or event resulting solely from the transfer
or acquisition of the beneficial ownership of voting securities by Jeffery
Lubell, or an Immediate Family Member or Affiliate thereof (collectively, the
“Lubell Affiliates”);
          (b) Individuals who, as of the Effective Date, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election by TRA’s stockholders, or
nomination for election by the Board, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an election contest with respect to the election or
removal of directors or other solicitation of proxies or consents by or on
behalf of a Person other than the Board;
          (c) The consummation by TRA (whether directly involving TRA or
indirectly involving TRA through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or other
disposition of all or substantially all of TRA’s assets or (z) the acquisition
of assets or stock of another entity, in each case, other than a transaction:
               (i) which results in TRA’s voting securities outstanding
immediately before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of TRA or the Person
that, as a result of the transaction, controls, directly or indirectly, TRA or
owns, directly or indirectly, all or substantially all of TRA’s assets or
otherwise succeeds to the business of TRA (TRA or such person, the “Successor
Entity”)) directly or indirectly, greater than 50% of the combined voting power
of the Successor Entity’s outstanding voting securities immediately after the
transaction, and

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               (ii) after which no Person or group beneficially owns voting
securities representing greater than 50% of the combined voting power of the
Successor Entity; provided, however, that no Person or group shall be treated
for purposes of this clause (c) as beneficially owning greater than 50% of
combined voting power of the Successor Entity solely as a result of the voting
power held in TRA prior to the consummation of the transaction; or
          (d) the approval by TRA’s stockholders of a liquidation or dissolution
of TRA.
          For purposes of clause (a) above, the calculation of voting power
shall be made as if the date of the acquisition were a record date for a vote of
TRA’s stockholders, and for purposes of clause (c) above, the calculation of
voting power shall be made as if the date of the consummation of the transaction
were a record date for a vote of TRA’s stockholders.
          The following terms shall have the following meanings for purposes of
this Section 5:
               (i) “Affiliate” shall mean, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under common control
with such Person. Control of any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities or other interests, by contract or otherwise, and
the terms “controlling” and “controlled” have meanings correlative to the
foregoing.
               (ii) “Immediate Family Member” shall mean a natural person’s
estate or heirs or current spouse or former spouse, parents, parents-in-law,
children (whether natural, adopted or by marriage), siblings and grandchildren
and any trust or estate, all of the beneficiaries of which consist of such
person or such person’s spouse, or former spouse, parents, parents-in-law,
children, siblings or grandchildren.
               (iii) “Person” shall mean an individual or a corporation,
partnership, limited liability company, trust, unincorporated organization,
association or other entity.
     6. Full Settlement. In no event shall Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement and except as
expressly provided, such amounts shall not be reduced whether or not Executive
obtains other employment. If any party to this Agreement institutes any action,
suit, counterclaim, appeal, arbitration or mediation for any relief against
another party, declaratory or otherwise (collectively an “Action”), to enforce
the terms hereof or to declare rights hereunder, then the Prevailing Party in
such Action shall be entitled to recover from the other party all costs and
expenses of the Action, including reasonable attorneys’ fees and costs (at the
Prevailing Party’s attorneys’ then-prevailing rates) incurred in bringing and
prosecuting or defending such Action and/or enforcing any judgment, order,
ruling or award (collectively, a “Decision”) granted therein, all of which shall
be deemed to have accrued on the commencement of such Action and shall be paid
whether or not such Action is prosecuted to a Decision. Any Decision entered in
such Action shall contain a specific provision providing for the recovery of
attorneys’ fees and costs incurred in enforcing such Decision. A court or
arbitrator shall fix the amount of reasonable attorneys’ fees and costs upon the
request of either party. Any judgment or order entered in any final judgment
shall contain a specific provision providing for the recovery of all costs and
expenses of suit, including reasonable attorneys’ fees and expert fees and costs
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, costs shall include, without limitation, in addition to Costs
incurred in prosecution or defense of the underlying action, reasonable
attorneys’ fees, costs, expenses and expert fees and costs incurred in the
following: (a) post judgment motions and collection actions; (b) contempt
proceedings; (c) garnishment, levy, debtor and third party examinations; (d)
discovery; (e) bankruptcy litigation; and (f) appeals of any

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order or judgment. “Prevailing Party” within the meaning of this Section
includes, without limitation, a party who agrees to dismiss an Action in
consideration for the other party’s payment of the amounts allegedly due or
performance of the covenants allegedly breached, or obtains substantially the
relief sought by such party.
     7. Certain Additional Payments by TRA.
          (a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then Executive shall be entitled to receive
an additional payment (the “Excise Tax Gross-Up Payment”) in an amount such
that, after payment by Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Excise Tax Gross-Up Payment, Executive retains an amount of
the Excise Tax Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
          (b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when an Excise
Tax Gross-Up Payment is required, the amount of such Excise Tax Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by such nationally recognized accounting firm as may be selected by TRA and
reasonably acceptable to Executive (the “Accounting Firm”); provided, that the
Accounting Firm’s determination shall be made based upon “substantial authority”
within the meaning of Section 6662 of the Code; provided, further, that
Executive may waive the requirement that the determination be made by the
Accounting Firm and may elect to have the determination made by TRA. The
Accounting Firm shall provide detailed supporting calculations both to TRA and
Executive within 15 business days of the receipt of notice from Executive that
there has been a Payment or such earlier time as is requested by TRA. All fees
and expenses of the Accounting Firm shall be borne solely by TRA. Any Excise Tax
Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by TRA
to Executive within five days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon
TRA and Executive, unless TRA obtains an opinion of outside legal counsel, based
upon at least “substantial authority” within the meaning of Section 6662 of the
Code, reaching a different determination, in which event such legal opinion
shall be binding upon TRA and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Excise Tax Gross-Up
Payments that will not have been made by TRA should have been made (the
“Underpayment”), consistent with the calculations required to be made hereunder.
In the event TRA exhausts its remedies pursuant to Section 7(c) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by TRA to or for the benefit of Executive.
          (c) Executive shall notify TRA in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by TRA of the
Excise Tax Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after Executive is informed in
writing of such claim. Executive shall apprise TRA of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30-day period following the date
on which Executive gives such notice to TRA (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If TRA
notifies Executive in writing prior to the expiration of such period that TRA
desires to contest such claim, Executive shall:

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               (i) give TRA any information reasonably requested by TRA relating
to such claim,
               (ii) take such action in connection with contesting such claim as
TRA shall reasonably request in writing from time to-time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by TRA,
               (iii) cooperate with TRA in good faith in order effectively to
contest such claim, and
               (iv) permit TRA to participate in any proceedings relating to
such claim;
     provided, however, that TRA shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such-contest, and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 7(c),
TRA shall control all proceedings taken in connection with such contest, and, at
its sole discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in
respect of such claim and may, at its sole discretion, either direct Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as TRA shall determine;
provided, however, that, if TRA directs Executive to pay such claim and sue for
a refund, TRA shall advance the amount of such payment to Executive, on an
interest-free basis, and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such advance or with respect to any imputed
income in connection with such advance; and provided, further, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, TRA’s control
of the contest shall be limited to issues with respect to which the Excise Tax
Gross-Up Payment would be payable hereunder, and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
          (d) If, after the receipt by Executive of an Excise Tax Gross-Up
Payment or an amount advanced by TRA pursuant to Section 7(c), Executive becomes
entitled to receive any refund with respect to the Excise Tax to which such
Excise Tax Gross-Up Payment relates or with respect to such claim, Executive
shall (subject to TRA’s complying with the requirements of Section 7(c), if
applicable) promptly pay to TRA the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by TRA pursuant to Section 7(c), a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and TRA does not notify Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Excise Tax Gross-Up Payment required to be paid.
          (e) Notwithstanding any other provision of this Section 7, TRA may, in
its sole discretion, withhold and pay over to the Internal Revenue Service or
any other applicable taxing authority, for the benefit of Executive, all or any
portion of any Excise Tax Gross-Up Payment, and Executive hereby consents to
such withholding.

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          (f) Any other liability for unpaid or unwithheld Excise Taxes shall be
borne exclusively by TRA, in accordance with Section 3403 of the Code. The
foregoing sentence shall not in any manner relieve TRA of any of its obligations
under this Employment Agreement.
          (g) Definitions. The following terms shall have the following meanings
for purposes of this Section 7:
               (i) “Code” shall mean the Internal Revenue Code of 1986, as
amended.
               (ii) “Excise Tax” shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or penalties imposed with
respect to such excise tax.
               (iii) “Parachute Value” of a Payment shall mean the present value
as of the date of the change of control for purposes of Section 280G of the Code
of the portion of such Payment that constitutes a “parachute payment” under
Section 280G(b)(2), as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment.
               (iv) A “Payment” shall mean any payment or distribution in the
nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to
or for the benefit of Executive, whether paid or payable pursuant to this
Agreement or otherwise.
               (v) The “Safe Harbor Amount” shall mean 2.99 times Executive’s
“base amount,” within the meaning of Section 280G(b)(3) of the Code.
               (vi) “Value” of a Payment shall mean the economic present value
of a Payment as of the date of the change of control for purposes of
Section 280G of the Code, as determined by the Accounting Firm using the
discount rate required by Section 280G(d)(4) of the Code.
     8. Successors. This Agreement is personal to Executive and without the
prior written consent of TRA shall not be assignable by Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by Executive’s legal representatives. This
Agreement shall inure to the benefit of and be binding upon TRA and its
successors and assigns.
     9. Miscellaneous.
          (a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
          (b) Arbitration. To the fullest extent allowed by law, any
controversy, claim or dispute between Executive and TRA (and/or any of its
owners, directors, officers, employees, affiliates, or agents) relating to or
arising out of Executive’s employment or the cessation of that employment will
be submitted to final and binding arbitration in the County of Los Angeles,
State of California, for determination in accordance with the American
Arbitration Association’s (“AAA”) National Rules for the Resolution of
Employment Disputes, as the exclusive remedy for such controversy, claim or
dispute. In any such arbitration, the parties may conduct discovery in
accordance with the applicable rules of the

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arbitration forum, except that the arbitrator shall have the authority to order
and permit discovery as the arbitrator may deem necessary and appropriate in
accordance with applicable state or federal discovery statutes. The arbitrator
shall issue a reasoned, written decision, and shall have full authority to award
all remedies which would be available in court. The parties shall share the
filing fees required for the arbitration, provided that Executive shall not be
required to pay an amount in excess of the filing fees required by a federal or
state court with jurisdiction. TRA shall pay the arbitrator’s fees and any AAA
administrative expenses. The award of the arbitrator shall be final and binding
upon the parties and may be entered as a judgment in any California court of
competent jurisdiction and the parties hereby consent to the exclusive
jurisdiction of the courts of California. Possible disputes covered by the above
include (but are not limited to) unpaid wages, breach of contract, torts,
violation of public policy, discrimination, harassment, or any other
employment-related claims under laws including but not limited to, Title VII of
the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age
Discrimination in Employment Act, the California Fair Employment and Housing
Act, the California Labor Code, and any other statutes or laws relating to an
employee’s relationship with his/her employer, regardless of whether such
dispute is initiated by the employee or TRA. Thus, this bilateral arbitration
agreement applies to any and all claims that TRA may have against an employee,
including but not limited to, claims for misappropriation of TRA property,
disclosure of proprietary information or trade secrets, interference with
contract, trade libel, gross negligence, or any other claim for alleged wrongful
conduct or breach of the duty of loyalty by an employee. However,
notwithstanding anything to the contrary contained herein, TRA and Executive
shall have their respective rights to seek and obtain injunctive relief with
respect to any controversy, claim or dispute to the extent permitted by law.
Claims for workers’ compensation benefits and unemployment insurance (or any
other claims where mandatory arbitration is prohibited by law) are not covered
by this arbitration agreement, and such claims may be presented by either
Executive or TRA to the appropriate court or government agency. BY AGREEING TO
THIS BINDING ARBITRATION PROVISION, BOTH EXECUTIVE AND TRA GIVE UP ALL RIGHTS TO
TRIAL BY JURY. This arbitration agreement is to be construed as broadly as is
permissible under applicable law.
          (c) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive: at Executive’s most recent address on the records of TRA,
If to TRA:
True Religion Apparel, Inc.
1525 Rio Vista Avenue
Los Angeles, CA 90023
Attn: Chief Financial Officer
with a copy to:
Manatt, Phelps & Phillips, LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attn: Mark J. Kelson, Esq.
          or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.

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          (d) Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the
contrary, if TRA determines, in its good faith judgment, that any transfer or
deemed transfer of funds hereunder is likely to be construed as a personal loan
prohibited by Section 13(k) of the Exchange Act and the rules and regulations
promulgated thereunder, then such transfer or deemed transfer shall not be made
to the extent necessary or appropriate so as not to violate the Exchange Act and
the rules and regulations promulgated thereunder.
          (e) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. In the event any provision or term hereof is deemed
to have exceeded applicable legal authority or shall be in conflict with
applicable legal limitations, such provision shall be reformed and rewritten as
necessary to achieve consistency and compliance with such applicable law.
          (f) Withholding. TRA may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation. In addition,
notwithstanding any other provision of this Agreement, TRA may, in its sole
discretion, withhold and pay over to the Internal Revenue Service or any other
applicable taxing authority, for the benefit of Executive, all or any portion of
any Excise Tax Gross-Up Payment and Executive hereby consents to such
withholding.
          (g) No Waiver. Executive’s or TRA’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right Executive or TRA may have hereunder, including, without limitation, the
right of Executive to terminate employment for Good Reason pursuant to Section
3(c) of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
          (h) Entire Agreement. As of the Effective Date, this Agreement, the
Non-Disclosure Agreement , the Non-Competition Agreement, each of which is being
entered into between the parties concurrently herewith, and any equity award
agreements entered into between TRA and Executive, constitute the final,
complete and exclusive agreement between Executive and TRA with respect to the
subject matter hereof and replaces and supersedes any and all other agreements,
offers or promises, whether oral or written, made to Executive by TRA or any
representative thereof. Effective as of the Effective Date, the Employment
Agreement dated as of June 20, 2003, and amended as of January 1, 2005, by and
between Executive and TRA is terminated, and is of no further force or effect
whatsoever.
          (i) Consultation With Counsel. Executive acknowledges that Executive
has had a full and complete opportunity to consult with counsel and other
advisors of Executive’s own choosing concerning the terms, enforceability and
implications of this Agreement, and that TRA has not made any representations or
warranties to Executive concerning the terms, enforceability or implications of
this Agreement other than as reflected in this Agreement.
          (j) Counterparts. This Agreement may be executed simultaneously in two
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

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     IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and,
pursuant to the authorization from the Board, TRA has caused these presents to
be executed in its name on its behalf, all as of the day and year first above
written.

                  “Executive”       “TRA”    
 
                        TRUE RELIGION APPAREL, INC.    
 
               
 
               
 
      By:        
 
               
Name: Jeffrey Lubell
          Name: Charles Lesser    
 
          Title: Chief Financial Officer    

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SCHEDULE A
2006 ANNUAL BONUS
     During 2006, the Executive shall be entitled to receive an Annual Bonus
based upon the following formula:

      2006   Bonus Annual EBIT*   Opportunity**
$36.8 million
  2% of EBIT
 
   
$46 million and above
  4% of EBIT

 

*   EBIT is defined as earnings before interest and taxes and is calculated as
net income plus interest expense plus tax expense.   **   No Annual Bonus will
be paid to the Executive if EBIT is below $36.8 million. All amounts between
$36.8 million EBIT and $46 million EBIT are interpolated. The maximum Annual
Bonus payable is $5,000,000.

SCHEDULE A
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EXHIBIT A
RELEASE
          For a valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the undersigned does hereby release and forever discharge
the “Releasees” hereunder, consisting of True Religion Apparel, Inc. and each of
its subsidiaries, associates, affiliates, successors, heirs, assigns, agents,
directors, officers, employees, representatives, lawyers, insurers, and all
persons acting by, through, under or in concert with them, or any of them, of
and from any and all manner of action or actions, cause or causes of action, in
law or in equity, suits, debts, liens, contracts, agreements, promises,
liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses,
of any nature whatsoever, known or unknown, fixed or contingent to the extent
permissible under applicable law (hereinafter called “Claims”), which the
undersigned now has or may hereafter have against the Releasees, or any of them,
by reason of any matter, cause, or thing whatsoever from the beginning of time
to the date hereof. The Claims released herein include, without limiting the
generality of the foregoing, any Claims in any way arising out of, based upon,
or related to the employment or termination of employment of the undersigned by
the Releasees, or any of them; any alleged breach of any express or implied
contract of employment; any alleged torts or other alleged legal restrictions on
Releasee’s right to terminate the employment of the undersigned; and any alleged
violation of any federal, state or local statute or ordinance including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In
Employment Act, the Americans With Disabilities Act, and the California Fair
Employment and Housing Act.
          THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL
AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH
PROVIDES AS FOLLOWS:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
          THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY
WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
          IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990,
THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:
          (A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS
RELEASE;
          (B) HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE
SIGNING IT; AND
          (C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS
RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT
REVOCATION PERIOD.
SCHEDULE A
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          The undersigned represents and warrants that there has been no
assignment or other transfer of any interest in any Claim which he may have
against Releasees, or any of them, and the undersigned agrees to indemnify and
hold Releasees, and each of them, harmless from any liability, Claims, demands,
damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of
them, as the result of any such assignment or transfer or any rights or Claims
under any such assignment or transfer. It is the intention of the parties that
this indemnity does not require payment as a condition precedent to recovery by
the Releasees against the undersigned under this indemnity.
          The undersigned agrees that if he hereafter commences any suit arising
out of, based upon, or relating to any of the Claims released hereunder or in
any manner asserts against Releasees, or any of them, any of the Claims released
hereunder, then the undersigned agrees to pay to Releasees, and each of them, in
addition to any other damages caused to Releasees thereby, all attorneys’ fees
incurred by Releasees in defending or otherwise responding to said suit or
Claim.
          The undersigned further understands and agrees that neither the
payment of any sum of money nor the execution of this Release shall constitute
or be construed as an admission of any liability whatsoever by the Releasees, or
any of them, who have consistently taken the position that they have no
liability whatsoever to the undersigned.
          IN WITNESS WHEREOF, the undersigned has executed this Release this
           day of                     ,                     .

         
 
  “Executive”        
 
       
 
       
 
  Name:    

EXHIBIT A
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EXHIBIT B
CONFIDENTIALITY & NON-DISCLOSURE AGREEMENT
     This Confidentiality and Non-Disclosure Agreement (“Agreement”) is made as
of this 4th of January, 2006 by and between True Religion Apparel, Inc., a
Delaware corporation (“TRA”), and Jeffrey Lubell (“Executive”).
     WHEREAS, concurrently with the execution of this Agreement, TRA and
Executive have entered into (i) an Employment Agreement, pursuant to which TRA
has agreed to employ Executive, and Executive has agreed to be employed by TRA,
as its Chief Executive Officer (the “Employment Agreement”) and (ii) a
Non-Competition Agreement (the “Non-Competition Agreement”);
     WHEREAS, TRA and Executive agree that, in connection with the execution of
the Employment Agreement and Executive’s employment, Executive will not disclose
TRA proprietary information pursuant to the terms and conditions hereof;
     WHEREAS, capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Employment Agreement.
     NOW, THEREFORE, in furtherance of the foregoing and in exchange for good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
     1. Proprietary Information. Executive acknowledges that during the course
of Executive’s employment with TRA, Executive has had and will necessarily have
access to and make use of proprietary information and confidential records of
TRA and its Affiliates. Executive covenants that Executive shall not, during the
term of his employment with TRA or at any time thereafter (irrespective of the
circumstances under which Executive’s employment with TRA terminates), directly
or indirectly, use for Executive’s own purpose or for the benefit of any Person
other than TRA and its Affiliates, nor otherwise disclose, any proprietary
information of which Executive has knowledge to any Person, unless such
disclosure has been authorized in writing by TRA or such Affiliates or is
otherwise required by law. Executive acknowledges and understands that the term
“proprietary information” includes, but is not limited to, patents, copyrights
and trade secrets such as: (a) designs, drawings, sketches, fabrics, accessories
and ornaments utilized or incorporated in or proposed to be utilized or
incorporated in any product of TRA or its Affiliates; (b) the software products,
programs, applications and processes utilized by or on behalf of TRA and its
Affiliates (other than off-the-shelf software programs); (c) the name and/or
address of any customer or vendor of TRA and its Affiliates or any information
concerning the transactions or relations of any customer or vendor of TRA and
its Affiliates with TRA or any of its stockholders, principals, directors,
officers, employees or agents; (d) any information concerning any product,
technology or procedure employed by or on behalf of TRA and its Affiliates but
not generally known to its customers, vendors or competitors, or under
development by or being tested by or on behalf of TRA and its Affiliates but not
at the time offered generally to customers or vendors; (e) any proprietary
information relating to TRA’s computer software, computer systems, pricing or
marketing methods, sales margins, cost or source of raw materials, supplies or
goods, capital structure, operating results, borrowing arrangements or business
plans; (f) any information which is generally regarded as confidential or
proprietary in any line of business engaged in by or on behalf of TRA and its
Affiliates; (g) any business plans, budgets, advertising or marketing plans of
TRA or its Affiliates; (h) any information contained in any of the written or
oral policies and procedures or manuals of TRA or its Affiliates; (i) any
information belonging to customers, vendors or Affiliates of TRA and its
Affiliates or any other individual or entity which TRA and its Affiliates has
agreed to hold in confidence; and (j) all written, graphic and other
EXHIBIT B
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material (whether in writing on magnetic tape or in electronic or other form)
relating to or containing any of the foregoing. Executive acknowledges and
understands that information that is not novel or copyrighted or trademarked or
patented may nonetheless be proprietary information. The term “proprietary
information” shall not include information generally available to and known by
the public, information developed independently by Executive or information that
is or becomes available to Executive on a non-confidential basis from a source
other than TRA (or any of its Affiliates) or TRA’s stockholders, principals,
directors, officers, employees or agents (other than as a result of a breach of
any obligation of confidentiality).
     2. Confidentiality and Surrender of Records. Executive shall not during the
term of his employment with TRA or at any time thereafter (irrespective of the
circumstances under which Executive’s employment with TRA terminates), except as
required by law or as is necessary for the performance of Executive’s duties
hereunder, directly or indirectly, publish, make known or in any fashion
disclose any confidential records to, or permit any inspection or copying of
confidential records by, any individual or entity, nor shall Executive retain,
and will deliver promptly to TRA, any of the same following termination of
Executive’s employment hereunder for any reason or upon request by TRA. The term
“confidential records” means all correspondence, memoranda, files, manuals,
books, designs, sketches, lists, financial, operating, or marketing records,
magnetic tape, or electronic or other media or equipment or records of any kind
which may be in Executive’s possession or under Executive’s control or
accessible to Executive which contain any proprietary information. All
confidential records shall be and remain the sole property of TRA during the
term of Executive’s employment and thereafter.
     3. Disclosure Required by Law. In the event Executive is required by law or
court order to disclose any proprietary information or confidential records of
TRA, Executive shall provide TRA with prompt written notice so that TRA may seek
a protective order or other appropriate remedy, and if such protective order or
other remedy is not obtained, Executive shall furnish only that portion of the
proprietary information or confidential records that is legally required.
     4. No Other Obligations. Executive represents and warrants to TRA that
Executive is not precluded or limited in Executive’s ability to undertake or
perform the duties described herein by any contract, agreement or restrictive
covenant. Executive covenants that Executive shall not employ the trade secrets
or proprietary information of any other Person in connection with Executive’s
employment by TRA.
     5. Developments the Property of TRA. All discoveries, inventions, designs,
drawings, sketches, products, processes, methods and improvements conceived,
developed or otherwise made by Executive at any time, alone or with others, and
in any way relating to the present or future business or products of TRA and its
Affiliates, including fabric or other designs, whether or not subject to
copyright protection and whether or not reduced to tangible form during the
period of Executive’s employment with TRA (collectively referred to as
“Developments”), shall be the sole property of TRA. Executive agrees to, and
hereby does, assign to TRA all of Executive’s right, title and interest
throughout the world in and to all Developments. Executive agrees that all such
Developments that are copyrightable shall constitute works made for hire under
the copyright laws of the United States and Executive hereby assigns to TRA all
copyrights and other proprietary rights Executive may have in any such
Developments to the extent that they might not be considered works made for
hire. Any provision in this Agreement requiring Executive to assign Executive’s
rights in all Developments shall not apply to an invention that qualifies fully
under the provisions of California Labor Code section 2870, the terms of which
are incorporated herein. Executive shall make and maintain adequate and current
written records of all Developments, and shall disclose all Developments fully
and in writing to TRA promptly after development of the same, and at any time
upon request; provided, however, that Developments excluded under the preceding
sentence shall be received by TRA in confidence.
EXHIBIT B
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     6. Enforcement. Executive acknowledges and agrees that, by virtue of
Executive’s position, Executive’s services, and access to and use of
confidential records and proprietary information, any violation by Executive of
any of the undertakings contained in this Agreement would cause TRA or its
Affiliates immediate, substantial and irreparable injury for which it has no
adequate remedy at law. Accordingly, Executive agrees that in the event of a
breach by Executive of any said undertakings, TRA will be entitled to temporary
and permanent injunctive relief in any court of competent jurisdiction (without
the need to post any bond and without proving that damages would be inadequate).
     7. Amendments. No amendment or modification to this Agreement shall be
valid unless in writing signed by Executive and an authorized officer of TRA.
     8. No Alteration of Employment Status. The execution of this Agreement
shall not be construed in any manner to alter Executive’s employment with TRA as
provided in Executive’s Employment Agreement.
     9. Effect of Waiver. The waiver by any party of a breach of any provision
of this Agreement will not operate or be construed as a waiver of any subsequent
breach thereof or as a waiver of any other provisions of this Agreement. The
remedies set forth herein are nonexclusive and are in addition to any other
remedies that any party may have at law or in equity.
     10. Attorneys’ Fees. If any legal action, arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach or default in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover attorneys’ fees and
costs as set forth in the Employment Agreement.
     11. Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive: at Executive’s most recent address on the records of TRA,
If to TRA:
True Religion Apparel, Inc.
1525 Rio Vista Avenue
Los Angeles, CA 90023
Attn: Chief Financial Officer
with a copy to:
Manatt, Phelps & Phillips, LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attn: Mark J. Kelson, Esq.
          or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
EXHIBIT B
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     12. Miscellaneous. This Agreement is entered into and shall be governed and
interpreted in accordance with the laws of the State of California, without
regard to or application of choice of law rules or principles. It shall be
binding upon and inure to the benefit of the parties, and to their respective
heirs, personal representatives, successors and assigns. In the event that any
provision of this Agreement is found by a court, arbitrator or other tribunal to
be illegal, invalid or unenforceable, then the remaining provisions of this
Agreement shall not be voided, but shall be enforced to the maximum extent
permissible by law.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.

                          “Executive”       “TRA”    
 
                                TRUE RELIGION APPAREL, INC.    
 
                   
 
                   
 
          By:        
 
                        Name:           Name:                     Title:    

EXHIBIT B
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EXHIBIT C
NON-COMPETITION AGREEMENT
     This Non-Competition Agreement (this “Agreement”) is dated as of January 4,
2006, by and between True Religion Apparel, Inc., a Delaware corporation (“TRA”)
and Jeffrey Lubell (“Executive”).
     WHEREAS, concurrently with the execution of this Agreement, TRA and
Executive have entered into (i) an Employment Agreement, pursuant to which TRA
has agreed to employ Executive, and Executive has agreed to be employed by TRA,
as its Chief Executive Officer (the “Employment Agreement”) and (ii) a
Confidentiality and Non-Disclosure Agreement (the “Non-Disclosure Agreement”);
     WHEREAS, TRA and Executive agree that, in connection with the execution of
the Employment Agreement and Executive’s employment, Executive will not engage
in competition with TRA pursuant to the terms and conditions hereof;
     WHEREAS, capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Employment Agreement.
     NOW, THEREFORE, in furtherance of the foregoing and in exchange for good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:

  1.   Noncompetition; Nonsolicitation.

  (a)   During the Employment Period and, if Executive’ employment is terminated
by TRA or Executive terminates his employment with TRA for any reason, for one
(1) year thereafter, Executive shall not engage in Competition (as defined
below) with TRA or any of its Affiliates.     (b)   The term “Competition” for
purposes of this Agreement shall mean the taking of any of the following actions
by Executive in any county in the United States: (i) the conduct of, directly or
indirectly (including, without limitation, engaging in, assisting or performing
services for), any business that engages in any activity which is directly
competitive with the business of TRA, whether such business is conducted by
Executive individually or as principal, partner, officer, director, consultant,
security holder, creditor, employee, stockholder, member or manager of any
person, partnership, corporation, limited liability company or any other entity;
and/or (ii) ownership of interests in any business which is competitive,
directly or indirectly, with any business carried on by TRA (or any successor
thereto) or its Affiliates.     (c)   During the Employment Period, and for one
(1) year thereafter, Executive shall not, directly or indirectly, solicit the
employment of or employ any person who is then or has been within three
(3) months prior to the time of such action, an employee of TRA, or any
Affiliate of TRA.     (d)   During the Employment Period, and for one (1) year
thereafter, Executive agrees that upon the earlier of Executive’s
(x) negotiating with any Person concerning the possible employment of Executive
by such Person in Competition

EXHIBIT C
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      with TRA, (y) receiving an offer of employment from any Person in
Competition with TRA, or (z) becoming employed by any Person in competition with
TRA, Executive will (A) immediately provide notice to TRA of such circumstances
and (B) provide copies of this Agreement to such Person. Executive further
agrees that TRA may provide notice to any such Person of Executive’s obligations
under this Agreement.

     2. Specific Performance. Executive acknowledges that in the event of breach
or threatened breach by Executive of the terms of Section 1 hereof, TRA could
suffer significant and irreparable harm that could not be satisfactorily
compensated in monetary terms, and that the remedies at law available to TRA may
otherwise be inadequate and TRA shall be entitled, in addition to any other
remedies to which it may be entitled to under law or in equity, to specific
performance of this Agreement by Executive including the immediate ex parte
issuance, without bond, of a temporary restraining order enjoining Executive
from any such violation or threatened violation of Section 1 hereof and to
exercise such remedies cumulatively or in conjunction with all other rights and
remedies provided by law and not otherwise limited by this Agreement. Executive
hereby acknowledges and agrees that TRA shall not be required to post bond as a
condition to obtaining or exercising any such remedies, and Executive hereby
waives any such requirement or condition.
     3. Reasonableness of Covenants. Executive agrees that all of the covenants
contained in this Agreement are reasonably necessary to protect the legitimate
interests of TRA and its affiliates, are reasonable with respect to time and
territory and that he has read and understands the descriptions of the covenants
so as to be informed as to their meaning and scope.
     4. Attorneys’ Fees. If any legal action, arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach or default in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover attorneys’ fees and costs as
set forth in the Employment Agreement.
     5. No Alteration of Employment Status. The execution of this Agreement
shall not be construed in any manner to alter Executive’s employment with TRA as
provided in the Employment Agreement.
     6. Effect of Waiver. The waiver by either party of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach thereof or as a waiver of any other provision of this
Agreement. The remedies set forth herein are nonexclusive and are in addition to
any other remedies that TRA may have at law or in equity.
     7. Severability. Any provision of this Agreement which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and
subject to this paragraph, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that any other provisions of
this Agreement invalid, illegal or unenforceable in any other jurisdiction.
Notwithstanding the foregoing, if any provision of this Agreement should be
deemed invalid, illegal or unenforceable because its scope or duration is
considered excessive, such provision shall be modified so that the scope of the
provision is reduced only to the minimum extent necessary to render the modified
provision valid, legal and enforceable.
     8. Governing Law. This Agreement shall be governed, construed, interpreted
and enforced in accordance with the laws of the State of California, without
regard to the conflict of laws principles thereof. The parties irrevocably elect
as the sole judicial forum for the adjudication of any matters arising
EXHIBIT C
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under or in connection with this Agreement, and consent to the exclusive
jurisdiction of, the federal and state courts of the State of California.
     9. Entire Agreement. This Agreement, together with the Employment
Agreement, the Non-Disclosure Agreement and any equity award agreements between
Executive and TRA, contains the entire agreement and understanding between TRA
and Executive with respect to the subject matter hereof, and no representations,
promises, agreements or understandings, written or oral, not herein or therein
contained shall be of any force or effect.
     10. Assignment. This Agreement may not be assigned by Executive, but may be
assigned by TRA to any successor to its business and will inure to the benefit
of and be binding upon any such successor.
     11. Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
     If to Executive: at Executive’s most recent address on the records of TRA,
     If to TRA:
True Religion Apparel, Inc.
1525 Rio Vista Avenue
Los Angeles, CA 90023
Attn: Chief Financial Officer
with a copy to:
Manatt, Phelps & Phillips, LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attn: Mark J. Kelson, Esq.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
     12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
     13. Amendments. No amendment or modification to this Agreement shall be
valid unless in writing signed by Executive and an authorized officer of TRA.
     14. Executive’s Acknowledgment. Executive acknowledges (a) that he has had
the opportunity to consult with independent counsel of his own choice concerning
this Agreement, and (b) that he has read and understands this Agreement, is
fully aware of its legal effect, and has entered into it freely based on his own
judgment.
EXHIBIT C
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.

                          “Executive”       “TRA”    
 
                                TRUE RELIGION APPAREL, INC.    
 
                   
 
          By:        
 
                   
 
  Name:           Name:    
 
              Title:    

EXHIBIT C
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