Exhibit 10.1

 

TRUE RELIGION APPAREL, INC.

EXECUTIVE CASH INCENTIVE BONUS PLAN

1.

PURPOSE.

The purpose of True Religion Apparel, Inc. Executive Cash Incentive Bonus Plan
is to provide an incentive to executive officers and other selected employees of
the Company to contribute to the growth, profitability and increased value of
the Company by providing incentive compensation that qualifies as “performance
based compensation” within the meaning of Section 162(m) of the Code.

2.

DEFINITIONS.

Except as otherwise expressly provided or the context otherwise requires,
financial and accounting terms are used as defined for purposes of , and shall
be determined in accordance with, United States generally accepted accounting
principles, as from time to time in effect, as applied and included in the
consolidated financial statements of the Company, prepared in the ordinary
course of business. The following terms, as used herein, shall have the
following meanings:

(a)       “ Administrator” shall mean the Board or a committee thereof to which
the Board has delegated authority to administer the Plan in accordance with
Section 3.

(b)        “Award” shall mean an incentive compensation award, granted pursuant
to the Plan, which is contingent upon the attainment of specific Performance
Targets during the Performance Period with respect to a preestablished
Performance Factor.

 

(c)

“Board” shall mean the Board of Directors of the Company.

 

(d)

“Code” shall mean the Internal Revenue Code of 1986, as amended.

(e)        “Company” shall mean, collectively, True Religion Apparel, Inc. and
its subsidiaries and their respective successors.

(f)         “Covered Employee” shall have the meaning set forth in Section
162(m)(3) of the Code.

 

(g)

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(h)         “Executive Officer” shall mean an officer of the Company who is an
“executive officer” within the meaning of Rule 3b-7 promulgated under the
Exchange Act.

(i)          “Participant” shall mean an officer or employee of the Company who
is, pursuant to Section 4 of the Plan, selected to participate herein.

(j)          “Performance Factors” shall mean the criteria and objectives,
determined by the Administrator, used to measure the Performance Targets which
must be met during the applicable Performance

 

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Period as a condition of the Participant’s receipt of payment with respect to an
Award. Performance Factors may include any or all of the following: revenue; net
sales; operating income; earnings before all or any of interest expense, taxes,
depreciation and/or amortization (“EBIT”, “EBITA” or “EBITDA”); net cash
provided by operating activities or other cash flow measurements; working
capital and components thereof; return on equity or average stockholders’
equity; return on assets; market share; sales (net or gross) measured by product
line, territory, customer(s), or other category; stock price; earnings per
share; earnings from continuing operations; net worth; credit rating; levels of
expense, cost or liability by category, operating unit or any other delineation;
or any increase or decrease of one or more of the foregoing over a specified
period. Such Performance Factors may relate to the performance of the Company, a
business unit, product line, territory, or any combination thereof. With respect
to Participants who are not Executive Officers, Performance Factors may also
include such objective or subjective performance goals as the Administrator may,
from time to time, establish. Subject to Section 5(b) and Section 6(b) hereof,
the Administrator shall have the sole discretion to determine whether, or to
what extent, Performance Factors are achieved.

(k)         “Performance Period” shall mean the Company’s fiscal year or such
other period as may be specified by the Administrator.

(l)          “Performance Target” shall mean the specific performance goals
applicable to any Performance Factor specified by the Administrator that are
established to determine the amount payable to a Participant as a condition of
the Participant’s receipt of payment with respect to an Award. Such performance
goals may be established in absolute terms, as objectives relative to
performance in prior periods, as an objective compared to the performance of one
or more comparable company or an index covering multiple companies, or otherwise
as the Administrator may determine.

(m)        “Plan” shall mean True Religion Apparel, Inc. Executive Cash
Incentive Bonus Plan.

(n)         “Publicly Held Corporation” shall mean a corporation issuing any
class of equity securities required to be registered under Section 12 of the
Exchange Act and shall have the meaning set forth in Section 162(m)(2) of the
Code.

3.

ADMINISTRATION.

The Plan shall be administered by the Administrator. The Administrator shall
have the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the terms,
conditions, restrictions and performance criteria, including Performance Factors
and Performance Targets, relating to any Award; to determine whether, to what
extent, and under what circumstances an Award may be settled, canceled,
forfeited, or surrendered; to make adjustments in the Performance Targets in
recognition of unusual or non-recurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles; to construe and interpret the Plan

 

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and any Award; to prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of Awards; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.

           During any period that the Company is a Publicly Held Corporation,
the Board shall delegate its authority to administer the Plan to a compensation
committee. If the Board delegates its responsibility with respect to the
administration of the Plan to a compensation committee thereof, the
Administrator shall consist of two or more persons each of whom shall be an
“outside director” within the meaning of Section 162(m) of the Code. All
decisions, determinations and interpretations of the Administrator shall be
final and binding on all persons, including the Company and the Participant (or
any person claiming any rights under the Plan from or through any Participant).

The Administrator and any members thereof shall be entitled to, in good faith,
rely or act upon any report or other information furnished to him or her by any
officer or employee of the Company, the Company’s independent certified public
accountants, consultants or any other agent assisting in the administration of
the Plan. The Administrator, any members of the compensation committee and any
officer or employee of the Company acting at the direction or on behalf of the
Administrator shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company with respect
to any such action or determination.

4.

ELIGIBILITY.

Awards may be granted to Participants in the sole discretion of the
Administrator. In determining the persons to whom Awards shall be granted, the
Performance Factors and Performance Targets relating to each Award, the
Administrator shall take into account such factors as the Administrator shall
deem relevant in connection with accomplishing the purposes of the Plan.

5.

TERMS OF AWARDS.

            Awards granted pursuant to the Plan shall be communicated to
Participants in such form as the Administrator shall from time to time approve
and the terms and conditions of such Awards shall be set forth therein.

(a)        In General. The Administrator shall specify with respect to a
Performance Period the Performance Factors and the Performance Targets
applicable to each Award. Performance Targets may include a level of performance
below which no payment shall be made and levels of performance at which
specified percentages of the Award shall be paid as well as a maximum level of
performance above which no additional Award will be paid.

(b)        Time and Form of Payment. Unless otherwise determined by the
Administrator, all payments in respect of Awards granted under this Plan shall
be made, in cash, within a reasonable period after the end of the Performance
Period, but in the case of Awards designed not to be deferred compensation
within the meaning of Section 409A of the Code, not later than the latest date
at which such Awards will still qualify for the exemption from Section 409A
applicable to short-term deferrals. In the case of Participants who are Covered
Employees,

 

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unless otherwise determined by the Administrator, such payments shall be made
only in accordance with the requirements of Section 6 after achievement of the
Performance Targets has been certified by the Administrator.

6.

AWARDS TO COVERED EMPLOYEES.

(a)        Additional Conditions. If the Administrator determines at the time an
Award is established for a Participant that the Company is a Publicly Held
Corporation and such Participant is, or may be as of the end of the tax year for
which the Company would claim a tax deduction in connection with such Award, a
Covered Employee, then the Administrator shall provide that this Section 6 is
applicable to such Award under such terms as the Administrator shall determine.

(b)        Establishment of Performance Criteria and Performance Targets. If an
Award is subject to this Section 6, then the payment of cash pursuant thereto
shall be subject to the Company achieving the applicable Performance Target for
the applicable Performance Year set by the Administrator within the time
prescribed by Section 162(m) of the Code or the regulations thereunder in order
for the level to be considered “pre-established.” Performance Factors and
Performance Targets will be considered pre-established if they are adopted by
the Administrator not later than the earlier of (i) 90 days after the
commencement of the Performance Period and (ii) the time when 25 percent of the
Performance Period has elapsed.

(c)        Discretionary Adjustments. The Administrator may, in its discretion,
at any time establish (and, once established, rescind, waive or amend)
additional conditions and terms of payment of Awards (including but not limited
to the achievement of other financial, strategic or individual goals, which may
be objective or subjective) as it may deem desirable in carrying out the
purposes of the Plan and may take into account such other factors as it deems
appropriate in administering any aspect of the Plan, including to reduce the
amount of such an Award at any time prior to payment based on such criteria as
it shall determine, including but not limited to individual merit and the
attainment of specified levels of one or any combination of the Performance
Factors. Notwithstanding any contrary provision of this Plan, the Administrator
may not adjust upwards the amount payable pursuant to any Award subject to this
Section 6, nor may it waive the achievement of the Performance Target
requirement contained in Section 6(b), except in the case of the death or
disability of the Participant or a change in control of the Company.

(d)        Certification. Prior to the payment of any Award subject to this
Section 6, the Administrator shall certify in writing that the Performance
Target requirement applicable to such Award was met.

(e)        Additional Restrictions. The Administrator shall have the power to
impose such other restrictions on Awards subject to this Section 6 as it may
deem necessary or appropriate to ensure that such Awards satisfy all
requirements for “performance-based compensation” within the meaning of Section
162(m)(4)(C) of the Code, the regulations promulgated thereunder, and any
successors thereto.

 

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(f)         Maximum Individual Bonus. Notwithstanding any other provision
hereof, no Covered Employee shall receive a payment attributable to an Award
under the Plan for any one year in excess of $8 million dollars at the time the
Award is established. The foregoing limit shall be subject to adjustments
consistent with Section 6(g) in the event of acceleration or deferral.

(g)        Express Authority (and Limitations on Authority) to Change Terms and
Conditions of Awards; Acceleration or Deferral of Payment. Without limiting the
Administrator’s authority under other provisions of the Plan, but subject to any
express limitations of the Plan and compliance with Section 162(m), the
Administrator shall have the authority to accelerate an Award that is designed
not to be deferred compensation within the meaning of Section 409A of the Code
(after the attainment of the applicable Performance Target(s)) and to waive
restrictive conditions for an Award (including any forfeiture conditions, but
not Performance Target(s)), in such circumstances as the Administrator deems
appropriate. In the case of any acceleration of an Award after the attainment of
the applicable Performance Target(s), the amount payable shall be discounted to
its present value using an interest rate equal to Moody’s Average Corporate Bond
Yield for the month preceding the month in which such acceleration occurs (or
such other rate of interest that is deemed to constitute a “reasonable rate of
interest” for purposes of Section 162(m)). In addition, and notwithstanding
anything elsewhere in the Plan to the contrary, the Administrator shall have the
authority to provide under the terms of an Award that payment or vesting shall
be accelerated upon the death or disability of a Participant, a change in
control of the Company, or, after the attainment of the applicable Performance
Target(s) upon termination of the Participant’s employment without cause or as a
constructive termination, as and in the manner provided by the Administrator,
and subject to such provision not causing the Award or the Plan to fail to
satisfy the requirements for performance-based compensation under Section 162(m)
generally.

7.

GENERAL PROVISIONS.

(a)        Compliance with Legal Requirements. The Plan and the granting and
payment of Awards, and the other obligations of the Company under the Plan,
shall be subject to all applicable federal and state laws, rules and
regulations, and to such approvals by any regulatory or governmental agency as
may be required.

(b)        Stockholder Approval. No Award shall be paid under this Plan prior to
the date that stockholders of the Company receive disclosure of and approve the
material terms of the Performance Factors under the Plan. As and to the extent
provided under Section 162(m) of the Code, the material terms of the Performance
Factors under the Plan must be disclosed to and reapproved by the Company’s
stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which the stockholders previously approved the
Performance Factors under the Plan.

(c)        Nontransferability. Awards shall not be transferable by a Participant
except upon the Participant’s death following the end of the Performance Period
but prior to the date payment is made, in which case the Award shall be payable
to the Participant’s designated beneficiary or, if no beneficiary has been
designated, transferable by will or the laws of descent and distribution.

 

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(d)        No Right to Continued Employment. Nothing in the Plan or in any Award
granted pursuant hereto shall confer upon any Participant the right to continue
in the employ of the Company or to be entitled to any remuneration or benefits
not set forth in the Plan or to interfere with or limit in any way the right of
the Company to terminate such Participant’s employment.

(e)        Withholding Taxes. Where a Participant or other person is entitled to
receive a payment pursuant to an Award hereunder, the Company shall have the
right to withhold or otherwise require the Participant or such other person to
pay to the Company the amount of any taxes that the Company may be required to
withhold before delivery to such Participant or other person of such payment.

(f)         Amendment, Termination and Duration of the Plan. The Administrator
may at any time and from time to time alter, amend, suspend, or terminate the
Plan in whole or in part; provided that, no amendment that requires stockholder
approval in order for the Plan to continue to comply with Code Section 162(m)
shall be effective unless the same shall be approved by the requisite vote of
the stockholders of the Company.

(g)        Participant Rights. No Participant shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of treatment
for Participants.

(h)        Termination of Employment. Unless otherwise provided by the
Administrator in connection with specified terminations of employment, if a
Participant’s employment terminates for any reason prior to the end of a
Performance Period prior to the payment of any Award for any reason other than
death or disability, no Award shall be payable to such Participant for that
Performance Period. A Participant whose termination is due to his or her death
or disability shall be entitled to receive a pro rated Award based on the number
of days he or she was employed by the Company during the applicable Performance
Period, such Award to be paid to such Participant (or such Participant’s
beneficiary, in the case of such Participant’s death) at the same time such
Award would have been paid if such Participant remained employed.

(i)         Unfunded Status of Awards. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.

(j)         Governing Law. The Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.

(k)        Effective Date. The Plan shall take effect upon its adoption by the
Board for the fiscal year performance period beginning January 1, 2008;
provided, however, that prior to the payment of any amount pursuant to any
Award, the Plan shall be subject to the requisite approval of the stockholders
of the Company in order to comply with Section 162(m) of the Code. In the
absence of such approval, the Plan (and any Awards made pursuant to the Plan
prior to the date of such approval) shall be null and void.

 

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(l)         Beneficiary. A Participant may file with the Administrator a written
designation of a beneficiary on such form as may be prescribed by the
Administrator and may, from time to time, amend or revoke such designation. If
no designated beneficiary survives the Participant and an Award is payable to
the Participant’s beneficiary pursuant to Section 7(b), the executor or
administrator of the Participant’s estate shall be deemed to be the grantee’s
beneficiary.

(m)       Interpretation. The Plan is designed and intended to comply, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply. Notwithstanding anything to the
contrary in the Plan, the provisions of the plan may at any time be bifurcated
by the Administrator in any manner so that certain provisions of the Plan or any
Award intended (or required in order) to satisfy the applicable requirements of
Section 162(m) are only applicable to Covered Employees whose compensation is
subject to Section 162(m).

(n)        No Impairment of Rights. The adoption or administration of the Plan
is not intended, nor will it be interpreted, as having the effect of modifying,
altering, adding or impairing any right that a Participant may have under a
separate agreement entered into between the Company or any of its subsidiaries
and such Participant.

8.

EXECUTION.

To record the adoption of the Plan by the Board on March 28, 2008, effective on
such date, the Company has caused its authorized officer to execute the Plan as
evidence of its adoption.

True Religion Apparel, Inc.

 

By: /s/ Jeffrey Lubell