As filed with the Securities and Exchange Commission on November 13, 2000
                                            Registration No. 333-

------------------------------------------------------------------------------

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                  ---------

                                  FORM S-8
           REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                                 ----------

                            TARRANT APPAREL GROUP
           (Exact name of registrant as specified in its charter)

               California                                 95-4181026
      (State or other jurisdiction                     (I.R.S. Employer
   of incorporation or organization)                   Identification No.)

     3151 East Washington Boulevard                         90023
        Los Angeles, California                          (Zip code)
(Address of principal executive offices)
                                  --------

                          EMPLOYEE INCENTIVE PLAN
                          (Full title of the plan)
                                 ----------

                               SCOTT BRISKIE
                           Vice President-Finance
                        and Chief Financial Officer
                           Tarrant Apparel Group
                       3151 East Washington Boulevard
                       Los Angeles, California 90023
                  (Name and address of agent for service)

                               (323) 780-8250
       (Telephone number, including area code, of agent for service)

                                  Copy to:

                           PETER M. MENARD, ESQ.
                  Sheppard, Mullin, Richter & Hampton LLP
                     333 South Hope Street, 48th Floor
                       Los Angeles, California 90071
                               (213) 617-5483

                      CALCULATION OF REGISTRATION FEE
================================================================================
                                     Proposed         Proposed
                      Amount          maximum          maximum        Amount of
Title of securities   to be       offering price      aggregate     registration
to be registered   registered(1)   per share(2)    offering price      fee (3)
--------------------------------------------------------------------------------
Common Stock        3,600,000         $5.9375       $21,375,000        $3,350
================================================================================

(1)   This Registration Statement covers, in addition to the number of shares of
      Common Stock stated above, such  indeterminate  number of shares of Common
      Stock as may be issued upon exercise of options granted under the Employee
      Incentive Plan as a result of the adjustment provisions thereof.

(2)   Estimated   solely  for  purposes  of   calculating   the  amount  of  the
      registration  fee  pursuant to Rule 457 based upon the average of the high
      and low  prices of the Common  Stock as  reported  on the Nasdaq  National
      Market on November 2, 2000.

(3)   Pursuant  to  Instruction  E to Form S-8,  the  registration  fee does not
      include  $2,293 with respect to  1,600,000  shares  previously  registered
      pursuant to the predecessor plan  (Registration  No. 333-3448) for which a
      registration fee previously has been paid.
================================================================================

          This Registration Statement Includes a Total of 53 Pages.
                     Exhibit Index Appears on Page II-4.
                                                                   Page 1 of 53
<PAGE>



                                   PART I

            INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

            The document(s)  containing the  information  specified in Part I of
Form of S-8 will be sent or given to participants in the Employee Incentive Plan
(the  "Plan")  of  Tarrant   Apparel  Group,  a  California   corporation   (the
"Registrant"),  as specified in Rule 428(b)(1) promulgated by the Securities and
Exchange  Commission  (the  "Commission")  under the  Securities Act of 1933, as
amended (the  "Securities  Act").  Such document(s) are not being filed with the
Commission either as part of this  Registration  Statement or as prospectuses or
prospectus  supplements pursuant to Rule 424 in accordance with the Note to Part
I of Form S-8. These documents and the documents  incorporated by reference into
this  Registration  Statement  pursuant to Item 3 of Part II of Form S-8,  taken
together,  constitute a prospectus that meets the  requirements of Section 10(a)
of the Securities Act.





































                                     I-1

                                                                   Page 2 of 53
<PAGE>


                                  PART II

             INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.
         ---------------------------------------

            The following documents  previously filed by the Registrant with the
Commission are incorporated in this Registration Statement by reference:

            (a) The Registrant's Annual Report on Form 10-K for the fiscal  year
ended December 31, 1999;

            (b) All other reports filed by the  Registrant  pursuant to Sections
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the fiscal year ended December 31, 1999; and

            (c) The description of the Common Stock of the Registrant  contained
in the Registrant's  Registration Statement on Form 8-A, including any amendment
or report filed for the purpose of updating such description.

            All documents  filed by the  Registrant  pursuant to Section  13(a),
13(c),  14 or  15(d)  of the  Exchange  Act  subsequent  to  the  date  of  this
Registration  Statement  and prior to the filing of a  post-effective  amendment
which  indicates  that all  securities  offered  hereby  have been sold or which
deregisters  all  securities  then  remaining  unsold,  shall  be  deemed  to be
incorporated  by reference  into this  Registration  Statement  and to be a part
hereof from the date of filing of such documents.

            Any  statement  made in a  document  incorporated  or  deemed  to be
incorporated  by reference  herein shall be deemed to be modified or  superseded
for  purposes  of this  Registration  Statement  to the extent  that a statement
contained  herein  or in any other  subsequently  filed  document  which is also
incorporated  or deemed to be  incorporated  by  reference  herein  modifies  or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4.  Description of Securities.
         -------------------------

            Not applicable.

Item 5.  Interests of Named Experts and Counsel.
         --------------------------------------

            Not applicable.

Item 6.  Indemnification of Directors and Officers.
         -----------------------------------------

            Section  204  of  the  General  Corporation  Law  of  the  State  of
California  (the  "California  Law")  permits  the  limitation  of the  personal
liability of a director for monetary  damages in an action  brought by or in the
right of the  corporation  for breach of a director's  duties to the corporation
and  its   shareholders   under  certain   conditions  and  subject  to  certain
limitations.

            Section 317 of the  California  Law (i) permits  indemnification  of
directors, officers, employees and other agents of the corporation under certain
conditions  and  subject  to  certain  limitations  and (ii)  provides  that the
corporation  has the power to purchase and  maintain  insurance on behalf of its
directors,  officers,  employees and other agents against any liability asserted
against or incurred by them in such  capacity or arising out of their  status as
such.

                                   II-1
                                                                   Page 3 of 53
<PAGE>

            Article  Seven of the  Restated  Articles  of  Incorporation  of the
            Registrant provides as follows:

            SEVEN:   The  liability  of the  directors of this  corporation  for
                     monetary   damages  shall  be  eliminated  to  the  fullest
                     extent permissible under California law.

            Article  Eight of the  Restated  Articles  of  Incorporation  of the
            Registrant provides as follows:

            EIGHT:   This  corporation  is authorized to indemnify the directors
                     and  officers  of  this  corporation  to the fullest extent
                     permissible under California law.

            Section 5.05 of the Bylaws of the Registrant provides as follows:

                  Section 5.05.  Indemnification and Insurance.
                  ------------   -----------------------------

                  (a) Right to Indemnification. Each person who was or is made a
            party to or is threatened to be made a party to or is  involuntarily
            involved in any action, suit or proceeding, whether civil, criminal,
            administrative  or investigative  (hereinafter a  "Proceeding"),  by
            reason of the fact that he or she,  or a person of whom he or she is
            the legal  representative,  is or was a  director  of officer of the
            corporation  or is or was serving  (during such  person's  tenure as
            director or officer)  at the request of the  corporation,  any other
            corporation,  partnership,  joint venture, trust or other enterprise
            in any  capacity,  whether the basis of a  Proceeding  is an alleged
            action in an  official  capacity  as a director or officer or in any
            other  capacity  while  serving as a director or  officer,  shall be
            indemnified  and held  harmless  by the  corporation  to the fullest
            extent  authorized  by  California  Law,  as the same  exists or may
            hereafter be amended (but, in the case of any such  amendment,  only
            to the extent that such amendment permits the corporation to provide
            broader   indemnification   rights  than  said  law   permitted  the
            corporation  to  provide  prior  to  such  amendment),  against  all
            expenses,  liability and loss (including attorneys' fees, judgments,
            fines, or penalties and amounts to be paid in settlement) reasonably
            incurred or suffered by such  person in  connection  therewith.  The
            right  to  indemnification  conferred  in this  Section  shall  be a
            contract  right  and  shall  include  the  right  to be  paid by the
            corporation  the  expenses  incurred in  defending a  Proceeding  in
            advance  of the  final  disposition;  provided,  however,  that,  if
            California  Law requires the payment of such  expenses in advance of
            the  final  disposition  of a  Proceeding  shall be made  only  upon
            receipt by the corporation of an undertaking by or on behalf of such
            director  or officer to repay all  amounts so  advanced  if it shall
            ultimately  be  determined  that such  director  or  officer  is not
            entitled  to be  indemnified  under this  Section or  otherwise.  No
            amendment  to or repeal of this  Section 5.05 shall apply to or have
            any effect on any right to  indemnification  provided hereunder with
            respect to any acts or omissions  occurring  prior to such amendment
            or repeal.

                  (b) Right of Claimant to Bring Suit.  If a claim for indemnity
            under  paragraph  (a) of  this  Section  is not  paid in full by the
            corporation  within  ninety (90) days after a written claim has been
            received by the corporation, the claimant may at any time thereafter
            bring suit against the  corporation  to recover the unpaid amount of
            the claim and, if successful in whole or in part, the claimant shall
            also be entitled to be paid the  expense of  prosecuting  such claim
            including   reasonable   attorneys'   fees  incurred  in  connection
            therewith.  It shall be a defense to any such action  (other than an
            action brought to enforce a claim for expenses incurred in defending
            a Proceeding in advance of its final  disposition where the required
            undertaking,   if  any  is  required,   has  been  tendered  to  the
            corporation)  that the claimant has not met the standards of conduct
            which make it permissible  under  California Law for the corporation
            to indemnify the claimant for the amount claimed,  but the burden of
            proving  such  defense  shall  be on the  corporation.  Neither  the
            failure  of the  corporation  (including  its  Board  of  Directors,
            independent  legal  counsel,  or its  shareholders)  to have  made a
            determination   prior  to  the  commencement  of  such  action  that

                                   II-2
                                                                   Page 4 of 53
<PAGE>

            indemnification  of the  claimant  is  proper  in the  circumstances
            because he or she has met the  applicable  standard  of conduct  set
            forth  in  California  Law,  nor  an  actual  determination  by  the
            corporation  (including  its Board of Directors,  independent  legal
            counsel,  or its  shareholders)  that the  claimant has not met such
            applicable standard of conduct,  shall be a defense to the action or
            create a  presumption  that the claimant has not met the  applicable
            standard of conduct.

                  (c) Non-Exclusivity  of Rights.  The  rights conferred in this
            Section  shall  not be  exclusive  of any  other  rights  which  any
            director,  officer,  employee or agent may have or hereafter acquire
            under  any  statute,   provision   of  the   Restated   Articles  of
            Incorporation,   bylaw,   agreement,   vote   of   shareholders   or
            disinterested  directors or otherwise,  to the extent the additional
            rights to indemnification are authorized in the Restated Articles of
            Incorporation of the corporation.

                  (d) Insurance.  In  furtherance  and  not in limitation of the
            powers conferred by statute:

                        (1) the corporation may purchase and maintain  insurance
            on behalf of any person who is or was a director,  officer, employee
            or agent of the  corporation,  or is serving  at the  request of the
            corporation  as a  director,  officer,  employee or agent of another
            corporation,  partnership,  joint venture, trust or other enterprise
            against  any  expense,   liability  or  loss,  whether  or  not  the
            corporation  would have the power to  indemnify  the person  against
            that expense, liability or loss under California Law.

                        (2) the  corporation  may create a trust  fund,  grant a
            security  interest  and/or  use  other  means  (including,   without
            limitation,  letters of credit,  surety bonds  and/or other  similar
            arrangements),   as  well  as   enter   into   contracts   providing
            indemnification  to the full extent  authorized  or permitted by law
            and including as part thereof  provisions with respect to any or all
            of the foregoing to ensure the payment of such amounts as may become
            necessary  to  effect   indemnification  as  provided  therein,   or
            elsewhere.

                  (e) Indemnification of Employees and Agents of the Corporation
            Corporation. The corporation may, to the extent authorized from time
            to time by the Board of Directors,  grant rights to indemnification,
            including  the  right  to be paid by the  corporation  the  expenses
            incurred  in  defending  a  Proceeding   in  advance  of  its  final
            disposition,  to any  employee  or agent of the  corporation  to the
            fullest  extent of the  provisions of this Section or otherwise with
            respect  to the  indemnification  and  advancement  of  expenses  of
            directors and officers of the corporation.

                  (f) Amendment by Shareholders.  Any action by the shareholders
            with respect to any  amendment to or the  elimination  of all or any
            part of this Article V, Section 5.05,  shall require approval by the
            holders of 66-2/3% of the outstanding shares of the corporation.

            The  Registrant  has entered into  indemnification  agreements  with
certain of its directors and executive  officers which require the Registrant to
indemnify such persons to the fullest extent permitted by applicable law.

            The Registrant  maintains an insurance  policy pursuant to which the
directors  and officers of the  Registrant  are  insured,  within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of certain claims,  actions, suits or proceedings,  and certain
liabilities which might be imposed as a result of such claims, actions, suits or
proceedings,  which may be  brought  against  them by  reason of their  being or
having been such directors and officers.

Item 7.  Exemption from Registration Claimed.
         -----------------------------------

            Not applicable.

                                   II-3
                                                                   Page 5 of 53
<PAGE>


Item 8.  Exhibits.
         --------

      Exhibit
      Number      Description
      ------      -----------

        3.1       Restated Articles of Incorporation of the Registrant(1)
        3.2       Restated Bylaws of the Registrant(1)
        5.1       Opinion of Sheppard, Mullin, Richter & Hampton LLP
       23.1       Consent of Sheppard, Mullin, Richter & Hampton LLP
                     (see Exhibit 5.1)
       23.2       Consent of Independent Auditors (Ernst & Young  LLP)
       24.1       Power of Attorney (See page II-6)
       99.1       Employee Incentive Plan
       99.2       Form of Incentive Stock Option Agreement
       99.3       Form of Non-Qualified Stock Option Agreement

Item 9.  Undertakings.
         ------------

            (a)   The undersigned Registrant hereby undertakes:

                  (1) To file,  during any  period in which  offers or sales are
being made, a post-effective amendment to this Registration Statement:

                        (i)   To  include  any  prospectus  required  by Section
10(a)(3) of the Securities Act of 1933;

                       (ii)   To  reflect  in the prospectus any facts or events
arising after the  effective  date of this  Registration  Statement (or the most
recent post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and

                      (iii)   To  include  any material information with respect
to the  plan of  distribution  not  previously  disclosed  in this  Registration
Statement  or any  material  change  to such  information  in this  Registration
Statement;

            Provided,  however,  that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information  required to be included in a post-effective  amendment
by those  paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant  pursuant to Section 13 or Section 15(d) of the
Securities  Exchange  Act of 1934 that are  incorporated  by  reference  in this
Registration Statement.

                  (2) That for the purpose of  determining  any liability  under
the Securities Act of 1933, each such  post-effective  amendment shall be deemed
to be a new registration  statement  relating to the securities offered therein,
and the  offering  of such  securities  at that  time  shall be deemed to be the
initial bona fide offering thereof.

                  (3) To remove from  registration by means of a  post-effective
amendment  any of the  securities  being  registered  which remain unsold at the
termination of the offering.

            (b) The undersigned  Registrant hereby undertakes that, for purposes
of determining  any liability  under the Securities Act of 1933,  each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities  Exchange  Act of 1934  that is  incorporated  by  reference  in this

--------

(1)   Filed as an exhibit to the Registrant's Registration Statement on Form S-1
      filed with the Securities and Exchange Commission on May 4, 1995 (File No.
      33-91874).

                                   II-4
                                                                   Page 6 of 53
<PAGE>


Registration  Statement  shall  be  deemed  to be a new  registration  statement
relating to the securities  offered herein,  and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

            (c) Insofar as  indemnification  for  liabilities  arising under the
Securities  Act of 1933 may be permitted to directors,  officers or  controlling
persons of the Registrant  pursuant to the foregoing  provisions,  or otherwise,
the  Registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Securities  Act of 1933 and is,  therefore,  unenforceable.  In the event
that a claim  for  indemnification  against  such  liabilities  (other  than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling  person of the Registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities being registered,  the Registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification  by it is  against  public  policy  as  expressed  in  the
Securities  Act of 1933 and will be governed by the final  adjudication  of such
issue.
































                                   II-5
                                                                   Page 7 of 53
<PAGE>


                                  SIGNATURES

            Pursuant to the  requirements  of the  Securities  Act of 1933,  the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of Los Angeles, State of California,  on this tenth day
of November, 2000.

                                   TARRANT APPAREL GROUP


                                   By   /S/ Scott Briskie
                                      ________________________________________
                                            Scott Briskie,
                                            Vice President-Finance and
                                            Chief Financial Officer


            KNOW ALL MEN BY THESE  PRESENTS,  that each person  whose  signature
appears below constitutes and appoints each of Gerard Guez and Scott Briskie his
true  and  lawful   attorney-in-fact   and  agent,   each  with  full  power  of
substitution,  for  him  and in his  name,  place  and  stead,  in any  and  all
capacities, to sign any or all amendments to this Registration Statement, and to
file the same with all exhibits  thereto,  and all other documents in connection
therewith, with the Securities and Exchange Commission,  granting unto each said
attorney-in-fact  and agent with full power and authority to do and perform each
and every  act and thing  requisite  and  necessary  to be done in and about the
premises,  as  fully  to all  intents  and  purposes  as he might or could do in
person,  hereby ratifying and confirming all that each said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

            Pursuant  to the  requirements  of the  Securities  Act of 1933,  as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         Signature                                     Title                                    Date
         ---------                                     -----                                    ----
   <S>                                  <C>                                               <C>
     /S/ Gerard Guez                    Chairman of the Board, Chief Executive            November 10, 2000
   _____________________________        Officer and Director (Principal Executive
        Gerard Guez                     Officer)

     /S/ Todd Kay                       Vice Chairman, President and Director             November 10, 2000
   _____________________________
         Todd Kay

     /S/ Barry S. Aved                  Director                                          November 10, 2000
   _____________________________
       Barry S. Aved

     /S/ Scott Briskie                  Vice President - Finance, Chief Financial         November 10, 2000
   _____________________________        Officer (Principal Financial and Accounting
       Scott Briskie                    Officer) and Director

     /S/ Nicolas Berggruen              Director                                          November 10, 2000
   _____________________________
       Nicolas Berggruen

     /S/ James R. Miller                Director                                          November 10, 2000
   _____________________________
        James R. Miller

     /S/ Karen S. Wasserman             Executive Vice President, General                 November 10, 2000
   _____________________________        Merchandising Manager and Director
       Karen S. Wasserman
</TABLE>

                                   II-6
                                                                   Page 8 of 53
<PAGE>





                                   EXHIBITS
                                      TO
                                   FORM S-8

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                ---------------

                             TARRANT APPAREL GROUP











































                                                                   Page 9 of 53
<PAGE>



                                 EXHIBIT INDEX


Exhibit                                                              Sequential
Number      Description                                              Page Number
------      -----------                                              -----------

  3.1       Restated Articles of Incorporation of the Registrant(1)      __
  3.2       Restated Bylaws of the Registrant(1)                         __
  5.1       Opinion of Sheppard, Mullin, Richter & Hampton LLP           11
 23.1       Consent of Sheppard, Mullin, Richter & Hampton LLP
                (see Exhibit 5.1)                                        __
 23.2       Consent of Independent Auditors (Ernst & Young  LLP)         15
 24.1       Power of Attorney (See page II-6)                            __
 99.1       Employee Incentive Plan                                      17
 99.2       Form of Incentive Stock Option Agreement                     39
 99.3       Form of Non-Qualified Stock Option Agreement                 47





























--------

(1)   Filed as an exhibit to the Registrant's Registration Statement on Form S-1
      filed with the Securities and Exchange Commission on May 4, 1995 (File No.
      33-91874).




                                                                  Page 10 of 53
<PAGE>



                                  EXHIBIT 5.1

              Opinion of Sheppard, Mullin, Richter & Hampton LLP



















































                                                                  Page 11 of 53

<PAGE>












                                                                     Exhibit 5.1
                                                                     -----------

                               November 10, 2000


Tarrant Apparel Group
3151 East Washington Boulevard
Los Angeles, California  90023


Re:   Registration Statement on Form S-8
      ----------------------------------


Gentlemen:

            At your request, we have examined the Registration Statement on Form
S-8 (the  "Registration  Statement")  to be filed by Tarrant  Apparel  Group,  a
California  corporation  (the  "Company"),  with  the  Securities  and  Exchange
Commission (the "SEC") in connection with the registration  under the Securities
Act of 1933,  as amended (the  "Securities  Act"),  of  3,600,000  shares of the
Company's common stock (the "Common Stock"), that may be issued in the aggregate
pursuant to awards  granted under the  Company's  Employee  Incentive  Plan (the
"Plan").

            In rendering  this  opinion,  we have  examined  only the  following
documents:

            1.   The  Restated  Articles of  Incorporation  of the  Company,  as
                 certified by the  California  Secretary of State as of November
                 8, 2000;

            2.   The Bylaws of the Company, as certified by the Secretary of the
                 Company as of November 10, 2000;

            3.   The Plan;

            4.   The forms of Incentive Stock Option Agreement and Non-Qualified
                 Stock Option Agreement  (collectively  the  "Agreements") to be
                 used in connection with the Plan;




                                                                  Page 12 of 53

<PAGE>



Tarrant Apparel Group
November 10, 2000
Page 2


            5.   Resolutions, adopted by the Company's Board of Directors as  of
                 January 13, 1997,  April 2, 1999 and July 17, 2000, and by  the
                 shareholders of the Company as of May 2, 1997 and May 3,  1999,
                 pertaining to the adoption of the Plan, the Agreements and  the
                 Registration Statement; and

            6.   The Registration Statement.

            With  respect  to the  foregoing  documents,  we  have  assumed  the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to originals of all documents submitted to us as
certified or reproduced  copies.  We also have obtained from the officers of the
Company certificates as to all factual matters necessary for the purpose of this
opinion and,  insofar as this opinion is based on such matters of fact,  we have
relied on such certificates without independent investigation.

            Based  solely  upon the  foregoing  and  assuming,  without  further
inquiry,  that (i) all awards  granted under the Plan to date have been, and all
awards to be  granted  under  the Plan  will be,  duly and  validly  granted  in
accordance with the terms of the Plan, (ii) the  consideration for the shares of
Common Stock to be issued  pursuant to such awards will be received prior to the
issuance thereof, (iii) the shares of Common Stock to be issued pursuant to such
awards  will be  issued  in  accordance  with  the  terms  of the  Plan  and the
applicable  Agreement,  (iv) the  Registration  Statement will become  effective
under the  Securities  Act prior to the  issuance of any shares of Common  Stock
under  the  Plan  and  no  stop  order  suspending  the   effectiveness  of  the
Registration  Statement  shall  have been  issued  and no  proceedings  for that
purpose  shall  have  been   instituted  or  be  pending  before  the  SEC,  (v)
prospectuses  will be  updated  and  delivered  to  participants  in the Plan as
required by the Securities Act and the rules and regulations  promulgated by the
SEC thereunder,  and (vi) the grant of awards under the Plan and the issuance of
shares of Common Stock  pursuant to such awards will comply with the  securities
laws of each state or jurisdiction applicable thereto (other than the Securities
Act), upon which assumptions the following opinion is expressly conditioned,  it
is the opinion of the  undersigned  that the  3,600,000  shares of Common  Stock
issuable by the Company pursuant to awards granted pursuant to the Plan will be,
when issued and delivered  against payment therefor in accordance with the Plan,
the  applicable  Agreement  and the  Registration  Statement,  duly  authorized,
validly issued, fully paid and non-assessable.










                                                                  Page 13 of 53

<PAGE>



Tarrant Apparel Group
November 10, 2000
Page 3


            This opinion is limited to the General  Corporation Law of the State
of California and the Securities Act and the rules and  regulations  promulgated
by the SEC thereunder,  to present judicial interpretations thereof and to facts
as they presently  exist.  In rendering  this opinion,  we have no obligation to
revise or  supplement  it should the current laws of the State of  California or
the  Securities  Act or such rules and  regulations  be  changed by  legislative
action,  judicial  decision or otherwise or if we become aware of any facts that
change the opinion expressed herein after the date hereof.

            This opinion is issued to you solely for use in connection  with the
Registration  Statement and is not to be quoted or otherwise  referred to in any
financial  statements of the Company or related document,  nor is it to be filed
with or furnished to any  government  agency or other person,  without the prior
written consent of the undersigned in each instance.

            We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

                                     Respectfully submitted,



                                     SHEPPARD, MULLIN, RICHTER & HAMPTON LLP


























                                                                  Page 14 of 53
<PAGE>



                                 EXHIBIT 23.2

              Consent of Independent Auditors (Ernst & Young LLP)


















































                                                                  Page 15 of 53

<PAGE>



                                                                    Exhibit 23.2
                                                                    ------------



                       CONSENT OF INDEPENDENT AUDITORS
                       -------------------------------


      We consent to the incorporation by reference in the Registration Statement
      (Form S-8 333- 0000) pertaining to the Employee  Incentive Plan of Tarrant
      Apparel  Group of our  report  dated  March 17,  2000 with  respect to the
      consolidated  financial  statements and schedules of Tarrant Apparel Group
      for the year ended December 31, 1999 included in the Annual Report on Form
      10-K of Tarrant Apparel Group for the year ended December 31, 1999.


                                    ERNST & YOUNG LLP



Los Angeles, California
November 10, 2000































                                                                  Page 16 of 53

<PAGE>



                                 EXHIBIT 99.1

                            Employee Incentive Plan


















































                                                                  Page 17 of 53
<PAGE>



                                                                    Exhibit 99.1
                                                                    ------------

                            TARRANT APPAREL GROUP
                           EMPLOYEE INCENTIVE PLAN
                   (Formerly the "1995 Stock Option Plan")
                  (Amended and Restated as of May 2, 1997)
                         (Amended as of May 3, 1999)


            Tarrant Apparel Group, a California corporation (the "Company"),  by
action of both its Compensation Committee and its Board of Directors as a whole,
hereby adopts the Tarrant  Apparel Group  Employee  Incentive  Plan (the "Plan")
with the following provisions:

            1.  Purpose.  The  purpose of the Plan is to promote and advance the
interests  of the Company and its  shareholders  by enabling the Company and its
Subsidiaries to attract, retain and motivate officers, directors,  employees and
independent  contractors  by providing for  performance-based  benefits,  and to
strengthen  the  mutuality of interests  between such persons and the  Company's
shareholders.   The  Plan  is   designed   to  meet  this   intent  by  offering
performance-based  stock and cash  incentives and other  equity-based  incentive
awards,  thereby  providing a  proprietary  interest in pursuing  the  long-term
growth, profitability and financial success of the Company.

            2.    Definitions.  For  purposes  of this Plan, the following terms
shall have the meanings set forth below:

                  (a)  "Award"  or  "Awards"  means an award or grant  made to a
Participant under Sections 6 through 10, inclusive, of the Plan.

                  (b)  "Board" means the Board of Directors of the Company.

                  (c)  "Code" means the  Internal  Revenue  Code of 1986,  as in
effect  from  time  to time  or any  successor  thereto,  together  with  rules,
regulations and authoritative interpretations promulgated thereunder.

                  (d)  "Committee" means the Compensation Committee of the Board
that is provided for in Section 3 of the Plan.

                  (e)  "Common Stock"  means the Common  Stock of the Company or
any security of the Company issued in substitution, exchange or lieu thereof.

                  (f)  "Company"  means  Tarrant  Apparel  Group,  a  California
corporation,  or a Subsidiary or successor  corporation,  or any holding company
for Tarrant Apparel Group which is a parent of the Company within the meaning of
Code Section 424(e).




                                   -1-

                                                                  Page 18 of 53
<PAGE>



                  (g)  "Date of  Grant"  means  the date the  Committee  (or the
Board,  as the case may be) takes formal action  designating  that a Participant
shall receive an Award,  notwithstanding  the date the  Participant  accepts the
Award, the date the Company and the Participant  enter into a written  agreement
with respect to the Award, or any other date.

                  (h)  "Effective  Date"  means the date the Plan is approved by
the holders of a majority of the shares of Common Stock  represented  and voting
and  entitled  to vote at a meeting  of the  shareholders  of the  Company or by
written  consent  of a  majority  of the  outstanding  shares of  Common  Stock,
provided such approval of the  shareholders  of the Company occurs within twelve
(12)  months  before or after the  Committee  and the Board both adopt the Plan.
Awards may be granted prior to the Effective Date, but payment under such Awards
is contingent upon shareholder approval as provided above in this definition. In
the event the Company  does not obtain  shareholder  approval  of the Plan,  any
Awards granted pursuant to the Plan shall be rescinded automatically.

                  (i)  "Exchange Act" means the Securities Exchange Act of 1934,
as amended and in effect from time to time, or any successor statute.

                  (j)  "Fair Market Value" means on any given date,  the closing
price for the Common Stock on such date,  or, if the Common Stock was not traded
on such date,  on the next  preceding  day on which the Common Stock was traded,
determined in accordance with the following rules.

                            (i)  If  the  Common Stock is admitted to trading or
listing on a national securities exchange registered under the Exchange Act, the
closing  price for any day shall be the last reported sale price regular way, or
in the case no such reported  sale takes place on such date,  the average of the
last  reported bid and ask prices  regular way, in either case on the  principal
national securities exchange on which the Common Stock is admitted to trading or
listed, or

                           (ii)  If  not  listed  or  admitted to trading on any
national  securities  exchange,  the last sale price of the Common  Stock on the
National  Association of Securities Dealers Automated  Quotation National Market
System ("NMS") or, in case no such reported sale takes place, the average of the
closing bid and ask prices on such date, or




                                   -2-

                                                                  Page 19 of 53

<PAGE>



                          (iii)  If  not  quoted  on the NMS, the average of the
closing bid and ask prices of the Common  Stock on the National  Association  of
Securities  Dealers  Automated  Quotation  System  ("NASDAQ") or any  comparable
system, or

                           (iv)  If  the Common Stock is not listed on NASDAQ or
any comparable system, the closing bid and ask prices as furnished by any member
of the National  Association of Securities Dealers,  Inc., selected from time to
time by the Company for that purpose.

                  (k)  "Incentive  Stock Option" means any Stock Option  granted
pursuant to the  provisions  of Section 6 of the Plan that is intended to be and
is specifically  designated as an "incentive stock option" within the meaning of
Section 422 of the Code.

                  (l)  "Non-Qualified  Stock  Option"  means  any  Stock  Option
granted  pursuant  to the  provisions  of  Section  6 of the Plan that is not an
Incentive Stock Option.

                  (m)  "Participant"  means an  officer,  director,  employee or
independent  contractor  with  respect  to the  Company or a  Subsidiary  who is
granted an Award under the Plan.

                  (n)  "Performance  Award"  means  an Award granted pursuant to
the  provisions of Section 9 of the Plan,  the vesting of which is contingent on
the attainment of specified performance criteria.

                  (o)  "Performance   Share  Grant"  means  an  Award  of  units
representing  shares of Common  Stock  granted  pursuant  to the  provisions  of
Section 9 of the Plan.

                  (p)  "Performance Unit Grant" means an Award of monetary units
granted pursuant to the provisions of Section 9 of the Plan.

                  (q)  "Plan"   means   this   Tarrant  Apparel  Group  Employee
Incentive Plan, as set forth herein and as it may be hereafter  amended and from
time to time in effect.

                  (r)   "Restricted  Award"  means  an Award granted pursuant to
the provisions of Section 8 of the Plan.

                  (s)  "Restricted  Stock  Grant"  means an Award of  shares  of
Common Stock granted pursuant to the provisions of Section 8 of the Plan.




                                   -3-

                                                                  Page 20 of 53
<PAGE>



                  (t)  "Restricted   Unit  Grant"   means   an  Award  of  units
representing  shares of Common  Stock  granted  pursuant  to the  provisions  of
Section 8 of the Plan.

                  (u)  "Stock  Appreciation  Right"  means  an  Award to benefit
from the  appreciation  of Common Stock  granted  pursuant to the  provisions of
Section 7 of the Plan.

                  (v)  "Stock  Option"  means  an  Award  to  purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan.

                  (w)  "Subsidiary"  means any  corporation or entity which is a
subsidiary of the Company  within the meaning of Section  424(f) of the Code (or
successor sections).

                  (x)  "Ten Percent Shareholder"  means a person who owns (after
taking into account the  constructive  ownership  rules of Section 424(d) of the
Code or  successor  sections)  more than ten  percent  (10%) of the stock of the
Company.

            3.    Administration.
                  --------------

                  (a)  The  Plan  is being established and shall be administered
by the  Compensation  Committee to be appointed  from time to time by the Board.
The Committee shall be comprised solely of not less than two persons who are all
"outside  directors" within the meaning of Section  162(m)(4)(C) of the Code and
not less than the  minimum  number (if any) of members of the Board  required by
Rule 16b-3 of the Exchange Act (or any successor  rule).  All Committee  members
must also be "disinterested persons" for securities law purposes. Members of the
Committee  shall serve at the  pleasure of the Board and the Board may from time
to time remove members from, or add members to, the Committee.  No person who is
not an "outside director" within the meaning of Section 162(m)(4)(C) of the Code
and a  "disinterested  person" may serve on the  Committee.  Appointment  to the
Committee of any person who is not an "outside  director"  and a  "disinterested
person" shall  automatically  be null and void,  and any person on the Committee
who ceases to be an "outside  director" for purposes of Section  162(m)(4)(C) of
the Code and a "disinterested  person" shall  automatically  and without further
action cease to be a member of the Committee.

                  (b)  A  majority  of  the  members  of  the  Committee   shall
constitute a quorum for the transaction of business.  Action approved in writing
by a majority of the members of the Committee then serving shall be as effective
as if the action had been taken by  unanimous  vote at a meeting duly called and
held.  Two  Committee  members  have signed the  original  Plan  document  below
signifying that the Committee,  as well as the Board as a whole, has adopted and
established this Plan.



                                   -4-

                                                                  Page 21 of 53

<PAGE>



                  (c)  The Committee is authorized to construe and interpret the
Plan, to promulgate,  amend,  and rescind rules and  procedures  relating to the
implementation  of the Plan, and to make all other  determinations  necessary or
advisable for the  administration of the Plan. Any determination,  decision,  or
action of the Committee in  connection  with the  construction,  interpretation,
administration,   or   application  of  the  Plan  shall  be  binding  upon  all
Participants and any person claiming under or through any Participant.  Although
the  Committee  is   anticipated   to  make  certain   Awards  that   constitute
"performance-based  compensation"  within the meaning of Section 162(m)(4)(C) of
the Code, the Committee is also expressly  authorized to make Awards that do not
constitute   "performance-based   compensation"   within  the  meaning  of  that
provision.  By way of example, and not by way of limitation,  the Committee,  in
its sole and  absolute  discretion,  may  issue an Award  that is not based on a
performance  goal,  as set forth in (g) below,  but is based solely on continued
service to the Company.

                  (d)  The Committee  may  employ or retain  persons  other than
members  of  the   Committee   to  assist  the   Committee   to  carry  out  its
responsibilities  under such  conditions  and  limitations  as it may prescribe,
except  that the  Committee  may not  delegate  its  authority  with  regard  to
selection for  participation of and the granting of Awards to persons subject to
Section  16 of the  Exchange  Act or with  regard  to any of the  duties  of the
Committee  under Section 162(m) of the Code necessary for awards under this Plan
to  qualify  as   "performance-based   compensation"  for  purposes  of  Section
162(m)(4)(C) of the Code.

                  (e)  The  Committee  is  expressly  authorized  to  make  such
modifications  to the Plan as are necessary to effectuate the intent of the Plan
as a result of any  changes in the income tax,  accounting,  or  securities  law
treatment of Participants and the Plan.

                  (f)  The Company shall effect the granting of Awards under the
Plan in accordance with the determinations  made by the Committee,  by execution
of instruments in writing in such form as approved by the Committee.

                  (g)  The Committee, in the case of each Award, shall establish
in writing at the time of making the Award the  business  criterion  or criteria
(if any) that must be satisfied for payment pursuant to the Award and the amount
payable upon satisfaction of those standards.  Those standards are also referred
to herein as  performance  goals.  Such  criterion or criteria (if any) shall be
established prior to the Participant rendering the services to which they relate
and while the outcome is substantially uncertain or at such other time permitted
under Treasury Regulations Section 1.162-27(e)(2). In carrying out these duties,
the Committee shall use objective  written  standards for establishing  both the
performance  goal and the amount of  compensation  such that a third  party with
knowledge of the relevant  facts would be able to determine  whether and to what
extent the goal has been satisfied and the amount of compensation  payable.  The
Committee  shall provide a copy of the document  setting forth such standards to
the affected Participant and shall retain such written material in its permanent
books and records.



                                   -5-

                                                                  Page 22 of 53

<PAGE>



                  (h)  The Committee  may not  increase  an Award once  granted,
although it may grant additional Awards to the same Participant.

                  (i)  The Committee  shall  keep the Board  informed  as to its
actions and make  available  to the Board its books and  records.  Although  the
Compensation  Committee has the authority to establish and  administer the Plan,
the Board reserves the right at any time to abolish the Committee and administer
the Plan itself.

                  (j)  In  the  case of remuneration that is intended to qualify
as performance-based compensation for purposes of Code Section 162(m)(4)(C), the
Committee and the Board shall  disclose to the  shareholders  of the Company the
material terms under which such  remuneration  is to be paid under the Plan, and
shall  seek  approval  of the  shareholders  by a  majority  vote in a  separate
shareholder vote before payment of such  remuneration.  For these purposes,  the
material terms include the  individuals  (or class of  individuals)  eligible to
receive such  compensation,  a description of the business criterion or criteria
on which  the  performance  goal is  based,  either  the  maximum  amount of the
compensation  to be paid  thereunder or the formula used to calculate the amount
of  compensation if the  performance  goal is attained,  and such other terms as
required under Code Section 162(m)(4)(C) and the Treasury Regulations thereunder
determined  from time to time.  The  foregoing  actions  shall be  undertaken in
conformity  with  the  rules  of  Code  Section  162(m)(4)(C)(ii)  and  Treasury
Regulations promulgated thereunder. Such remuneration shall not be payable under
this Plan in the absence of such an approving  shareholder  vote. In the case of
remuneration that is not intended to qualify as  performance-based  compensation
under Code Section  162(m)(4)(C),  the  Committee  and the Board shall make such
disclosures  to and seek such approval from the  shareholders  of the Company as
they reasonably determine are required by law.

                  (k)  To  the  extent required under Code Section 162(m)(4)(C),
before any payment of  remuneration  under this Plan, the Committee must certify
in writing that the performance  goals and any other material terms of the Award
were in fact  satisfied.  Such  certification  shall be kept with the  permanent
books and records of the Committee, and the Committee shall provide the affected
Participant with a copy of such certification.

                  (l)  The Committee  shall use its good faith  best  efforts to
comply with the requirements of Section 162(m)(4)(C) of the Code for Awards that
are intended to qualify under that section as "performance-based  compensation,"
but shall have no liability to the Company or any  recipient in the event one or
more Awards do not so qualify.




                                   -6-

                                                                  Page 23 of 53

<PAGE>



            4.    Duration of and Common Stock Subject to the Plan.
                  ------------------------------------------------

                  (a)  Term.  The  Plan  shall  terminate   automatically on the
tenth  (10th)  anniversary  date of the  date  of  adoption  of the  Plan by the
Committee,  the date of adoption of the Plan by the Board,  or the tenth  (10th)
anniversary date of the date of shareholder  approval of the Plan,  whichever is
earlier  (subject to earlier  termination  by action of the Board),  except with
respect to Awards then outstanding.

                  (b)  Shares of Common  Stock Subject to the Plan.  The maximum
total  number of shares of Common Stock with  respect to which  aggregate  stock
Awards may be granted under the Plan shall be Three Million Six Hundred Thousand
(3,600,000).

                            (i)  All of the amounts stated in this Paragraph (b)
are subject to adjustment as provided in Section 15 below.

                           (ii)  For  the  purpose of computing the total number
of shares of Common Stock  available  for Awards under the Plan,  there shall be
counted  against the foregoing  limitations the number of shares of Common Stock
subject to issuance upon exercise or used for payment or settlement of Awards.

                          (iii)  If any Awards are forfeited, terminated, expire
unexercised,  settled  or paid in cash in lieu of stock or  exchanged  for other
Awards, the shares of Common Stock which were theretofore subject to such Awards
shall  again be  available  for  Awards  under  the Plan to the  extent  of such
forfeiture or expiration of such Awards.

                  (c)  Source of Common Stock.  Common Stock which may be issued
under the plan may be either  authorized  and unissued  shares or issued  shares
which have been reacquired by the Company.  No fractional shares of Common Stock
shall be issued under the Plan.

            5.    Eligibility.  Incentive Stock Options may be granted under the
Plan only to employees  (including  employee  directors)  of the Company and its
Subsidiaries.  Officer,  directors,  employees,  and independent contractors are
eligible to receive  Non-Qualified  Stock Options,  Stock  Appreciation  Rights,
Restricted Awards, Performance Awards and other Awards under the Plan.

            6.    Stock Options.  Stock Options granted under the Plan may be in
the form of Incentive Stock Options or Non-Qualified Stock Options (collectively
referred to as "Stock Options"). Stock Options shall be subject to the terms and
conditions set forth below.  Each written Stock Option  agreement  shall contain
such  additional  terms  and  conditions,  not  inconsistent  with  the  express
provisions of the Plan, as the Committee shall deem desirable.




                                   -7-

                                                                  Page 24 of 53

<PAGE>



                  (a)  Grant.  Stock Options  shall be granted under the Plan on
such terms and conditions not  inconsistent  with the provisions of the Plan and
pursuant to written  agreements  with the optionee in such form as the Committee
may from time to time approve in its sole and absolute discretion.  The terms of
individual  Stock Option  agreements  need not be  identical.  Each Stock Option
agreement  shall state  specifically  whether it is intended to be an  Incentive
Stock Option agreement or a Non-Qualified Stock Option agreement.  Stock Options
may be granted alone or in addition to other Awards under the Plan.  Only common
law employees may receive grants of Incentive  Stock  Options.  No person may be
granted  (in any  calendar  year)  options  to  purchase  more than one  hundred
thousand  (100,000)  shares of Common Stock  (subject to adjustment  pursuant to
Section 15). The foregoing  sentence is an annual limitation on grants and not a
cumulative  limitation.  Any Stock  Option  repriced  during a year shall  count
against this annual limitation.

                  (b)  Stock  Option  Price.  The  exercise  price  per share of
Common  Stock  purchasable  under a Stock  Option  shall  be  determined  by the
Committee at the time of grant.  In no event shall the exercise price of a Stock
Option be less than one hundred  percent  (100%) of the Fair Market Value of the
Common Stock on the Date of the Grant of such Stock Option. In the case of a Ten
Percent  Shareholder,  the exercise price shall be not less than one hundred ten
percent  (110%)  of the Fair  Market  Value of the  Common  Stock on its Date of
Grant.

                  (c)  Option Term. The term of each Stock Option shall be fixed
by the  Committee.  However,  the term of any Stock  Option shall not exceed ten
(10) years after the date such Stock Option is granted. Furthermore, the term of
an Incentive Stock Option granted to a Ten Percent  Shareholder shall not exceed
five (5) years after its Date of Grant.

                  (d)  Exercisability.  A Stock Option shall be  exercisable  at
such  time or  times  and  subject  to such  terms  and  conditions  as shall be
determined  by the  Committee  at the Date of Grant and set forth in the written
Stock Option agreement. However, no Stock Option shall be exercisable during the
first six (6) months  after the date such  Stock  Option is  granted.  A written
Stock  Option  agreement  may,  if  permitted  pursuant  to  its  terms,  become
exercisable in full upon the occurrence of events selected by the Committee that
are beyond the  control of the  Participant  (including,  but not  limited to, a
Change in Control of the Company as set forth in Section 16 below).

                  (e)  Method of Exercise.  A Stock Option may be  exercised, in
whole or in part, by giving written notice of exercise to the Company specifying
the  number of shares to be  purchased.  Such  notice  shall be  accompanied  by




                                   -8-

                                                                  Page 25 of 53

<PAGE>



payment in full of the purchase  price (i) in cash or (ii) if  acceptable to the
Committee,  in shares of Common  Stock  already  owned by the  Participant  or a
promissory  note.  The  Committee  may also  permit  Participants,  either  on a
selective or aggregate  basis, to  simultaneously  exercise Options and sell the
shares of Common  Stock  thereby  acquired,  pursuant to a brokerage  or similar
arrangement,  approved in advance by the  Committee,  and use the proceeds  from
such sale as payment of part or all of the purchase price of such shares.

                  (f)  Special Rule for Incentive Stock Options. With respect to
Incentive  Stock Options granted under the Plan, the aggregate Fair Market Value
(determined  as of the Date of Grant) of the  number of shares  with  respect to
which  Incentive  Stock  Options  are  exercisable  for  the  first  time  by  a
Participant  during any calendar  year (under this Plan and all other  incentive
stock  option plans of this  Company or its  Subsidiaries)  shall not exceed one
hundred  thousand  dollars  ($100,000) or such other limit as may be required by
the Code.

            7.    Stock  Appreciation  Rights.  The  grant of Stock Appreciation
Rights under the Plan shall be subject to the  following  terms and  conditions.
Furthermore,  the Stock Appreciation  Rights shall contain such additional terms
and  conditions,  not  inconsistent  with the express  terms of the Plan, as the
Committee  shall  deem  desirable.  The terms of each Stock  Appreciation  Right
granted  shall be set forth in a written  agreement  between the Company and the
Participant  receiving  such  grant.  The terms of such  agreements  need not be
identical.

                  (a)  Stock Appreciation  Rights. A Stock Appreciation Right is
an Award  determined  by the  Committee  entitling a  Participant  to receive an
amount  equal to the excess of the Fair Market  Value of a share of Common Stock
on a fixed date,  which shall be the date  concluding a measuring  period set by
the Committee upon granting the Stock  Appreciation  Right, over the Fair Market
Value of a share of Common Stock on the Date of Grant of the Stock  Appreciation
Right,  multiplied  by the number of shares of Common Stock subject to the Stock
Appreciation  Right.  No Stock  Appreciation  Rights  granted in any year to any
person may be measured  by an amount of shares of Common  Stock in excess of one
hundred thousand (100,000) shares, subject to adjustment under Section 15 below.
The  foregoing  sentence is an annual  limitation on grants and not a cumulative
limitation.

                  (b)  Grant.  A Stock  Appreciation  Right  may be  granted  in
addition to or completely  independent  of any other Award under the Plan.  Upon
grant of a Stock  Appreciation  Right, the Committee shall select and inform the
Participant  regarding the number of shares of Common Stock subject to the Stock
Appreciation  Right and the date  that  constitutes  the close of the  measuring
period.

                  (c)  Measuring Period. A Stock Appreciation Right shall accrue
in value from the Date of Grant over a time period established by the Committee,




                                   -9-

                                                                  Page 26 of 53

<PAGE>



except that in no event shall a Stock  Appreciation  Right be payable within the
first six (6) months after the Date of Grant. In the written Stock  Appreciation
Right agreement, the Committee may also provide (but is not required to provide)
that a Stock  Appreciation  Right shall be automatically  payable on one or more
specified  dates  prior  to the  normal  end of the  measuring  period  upon the
occurrence of events selected by the Committee (including, but not limited to, a
Change in  Control of the  Company  as set forth in  Section 16 below)  that are
beyond the control of the  Participant.  The  Committee  may provide (but is not
required to provide) in the Stock  Appreciation Right agreement that in the case
of a cash  payment  such  acceleration  in  payment  shall  also be  subject  to
discounting  of the payment to reasonably  reflect the time value of money using
any  reasonable  discount  rate  selected by the  Committee in  accordance  with
Treasury Regulations under Code Section 162(m).

                  (d)  Form of Payment. Payment pursuant to a Stock Appreciation
Right  may be made  (i) in  cash,  (ii)  in  shares  of  Common  Stock,  (iii) a
promissory  note or (iv) in any combination of the above, as the Committee shall
determine in its sole and absolute  discretion.  The Committee may elect to make
this  determination  either at the time the Stock Appreciation Right is granted,
at the time of payment or at any time in between such dates.  However, any Stock
Appreciation  Right paid upon or  subsequent  to the  occurrence  of a Change in
Control (as defined in Section 16) shall be paid in cash.

            8.    Restricted Awards.  Restricted  Awards  granted under the Plan
may be in the form of either  Restricted Stock Grants or Restricted Unit Grants.
Restricted  Awards  shall be  subject  to the  following  terms and  conditions.
Furthermore,  the  Restricted  Awards  shall be pursuant to a written  agreement
executed both by the Company and the Participant,  which agreement shall contain
such  additional  terms  and  conditions,  not  inconsistent  with  the  express
provisions of the Plan, as the  Committee  shall deem  desirable in its sole and
absolute discretion. The terms of such written agreements need not be identical.

                  (a)  Restricted Stock Grants.  A Restricted  Stock Grant is an
Award of shares of Common Stock  transferred  to a  Participant  subject to such
terms  and  conditions  as the  Committee  deems  appropriate,  as set  forth in
Paragraph (d) below.

                  (b)  Restricted  Unit Grants.  A  Restricted  Unit Grant is an
Award of units (with each unit having a value  equivalent to one share of Common
Stock)  granted to a  Participant  subject to such terms and  conditions  as the
Committee deems appropriate, including, without limitation, the requirement that
the  Participant  forfeit  all or a portion of such units  upon  termination  of
employment  for  specified  reasons  within a  specified  period  of  time,  and
restrictions  on the sale,  assignment,  transfer or other  disposition  of such
units.




                                   -10-

                                                                  Page 27 of 53

<PAGE>



                  (c)  Grants of Awards.  Restricted Awards may be granted under
the Plan in such form and on such terms and conditions as the Committee may from
time to time approve.  Restricted  Awards may be granted alone or in addition to
other Awards  under the Plan.  Subject to the terms of the Plan,  the  Committee
shall  determine the number of Restricted  Awards to be granted to a Participant
and  the  Committee  may  impose  different  terms  and  conditions   (including
performance  goals) on any particular  Restricted Award made to any Participant.
Each  Participant  receiving  a  Restricted  Stock Grant shall be issued a stock
certificate in respect of such shares of Common Stock. Such certificate shall be
registered  in the name of such  Participant,  shall be  accompanied  by a stock
power duly executed by such  Participant,  and shall bear an appropriate  legend
referring to the terms,  conditions and  restrictions  applicable to such Award.
The  certificate  evidencing  the shares shall be held in custody by the Company
until the restrictions imposed thereon shall have lapsed or been removed.

                  (d)  Restriction Period.  Restricted Awards shall provide that
in  order  for a  Participant  to vest  in such  Awards,  the  Participant  must
continuously  provide  services to the Company or its  Subsidiaries,  subject to
relief for specified reasons,  for such period as the Committee may designate at
the time of the Award  ("Restriction  Period").  If the Committee so provides in
the written  agreement  with the  Participant,  a  Restricted  Award may also be
subject  to  satisfaction  of such  performance  goals as are set  forth in such
agreement.  During the Restriction  Period, a Participant may not sell,  assign,
transfer,  pledge,  encumber,  or  otherwise  dispose of shares of Common  Stock
received under a Restricted Stock Grant. The Committee,  in its sole discretion,
may provide for the lapse of restrictions during the Restriction Period upon the
occurrence of events  selected by the  Committee  that are beyond the control of
the  Participant  (including,  but not  limited  to, a Change in  Control of the
Company  under  Section 16). The  Committee  may provide (but is not required to
provide) in the written  agreement with the recipient that in the case of a cash
payment such acceleration in payment shall also be subject to discounting of the
payment  to  reasonably  reflect  the time value of money  using any  reasonable
discount rate selected by the Committee in accordance with Treasury  Regulations
under Code Section 162(m). Upon expiration of the applicable  Restriction Period
(or lapse of restrictions  during the Restriction  Period where the restrictions
lapse in installments or by action of the Committee),  the Participant  shall be
entitled to receive his or her Restricted Award or portion thereof,  as the case
may be.

                  (e)  Payment  of  Awards.   A   Participant   who  receives  a
Restricted Stock Grant shall be paid solely by release of the restricted  shares
at the  termination  of the  Restriction  Period  (whether  in one  payment,  in
installments or otherwise).  A Participant  shall be entitled to receive payment
for a  Restricted  Unit Grant (or  portion  thereof)  in an amount  equal to the
aggregate  Fair Market Value of the shares of Common Stock covered by such Award
upon the expiration of the applicable  Restriction Period. Payment in settlement
of a Restricted  Unit Grant shall be made as soon as  practicable  following the
conclusion  of  the  specified Restriction Period (i) in cash, (ii) in shares of




                                   -11-

                                                                  Page 28 of 53

<PAGE>



Common  Stock equal to the number of units  granted  under the  Restricted  Unit
Grant with respect to which such payment is made, or (iii) in any combination of
the above, as the Committee shall determine in its sole and absolute discretion.
The Committee may elect to make this determination  either at the time the Award
is granted, at the time of payment or at any time in between such dates.

                  (f)  Rights as a Shareholder.  A Participant  shall have, with
respect to the shares of Common Stock received  under a Restricted  Stock Grant,
all of the rights of a shareholder  of the Company,  including the right to vote
the shares,  and the right to receive any cash  dividends.  Such cash  dividends
shall be withheld,  however,  until their release upon lapse of the restrictions
under the Restricted  Award.  Stock dividends  issued with respect to the shares
covered by a Restricted  Grant shall be treated as  additional  shares under the
Restricted  Grant and shall be subject to the same  restrictions and other terms
and conditions  that apply to shares under the Restricted  Grant with respect to
which the dividends are issued.

            9.    Performance Awards. Performance Awards granted under the Plan

may be in the form of  either  Performance  Share  Grants  or  Performance  Unit
Grants.  Performance  Awards  shall be subject to the terms and  conditions  set
forth below.  Furthermore,  the  Performance  Awards shall be subject to written
agreements  which  shall  contain  such  additional  terms and  conditions,  not
inconsistent  with the express  provisions of the Plan,  as the Committee  shall
deem desirable in its sole and absolute discretion.  Such agreements need not be
identical.

                  (a)  Performance Share Grants. A Performance Share Grant is an
Award of units (with each unit equivalent in value to one share of Common Stock)
granted to a Participant  subject to such terms and  conditions as the Committee
deems  appropriate,  including,  without  limitation,  the requirement  that the
Participant forfeit such units (or a portion of such units) in the event certain
performance criteria are not met within a designated period of time.

                  (b)  Performance Unit Grants.  A Performance  Unit Grant is an
Award of units (with each unit  representing  such monetary amount as designated
by the Committee) granted to a Participant  subject to such terms and conditions
as  the  Committee  deems  appropriate,   including,   without  limitation,  the
requirement that the Participant forfeit such units (or a portion of such units)
in the event certain performance criteria are not met within a designated period
of time.

                  (c)  Grants of  Awards.  Performance  Awards  shall be granted
under the Plan pursuant to written  agreements with the Participant in such form
as the  Committee  may from  time to time  approve.  Performance  Awards  may be
granted  alone or in addition  to other  Awards  under the Plan.  Subject to the
terms of the Plan,  the  Committee  shall  determine  the number of  Performance
Awards to be granted to a Participant  and the  Committee  may impose  different




                                   -12-

                                                                  Page 29 of 53

<PAGE>



terms  and  conditions  on  any  particular   Performance   Award  made  to  any
Participant.

                  (d)  Performance  Goals and Performance  Periods.  Performance
Awards shall provide  that,  in order for a Participant  to vest in such Awards,
the Company must achieve certain performance goals ("Performance  Goals") over a
designated performance period selected by the Committee  ("Performance Period").
The  Performance  Goals  and  Performance  Period  shall be  established  by the
Committee,  in its sole and absolute  discretion.  The Committee shall establish
Performance  Goals for each  Performance  Period before the  commencement of the
Performance  Period and while the outcome is substantially  uncertain or at such
other time permitted  under Treasury  Regulations  Section  1.162-27(e)(2).  The
Committee  shall also  establish a schedule or  schedules  for such  Performance
Period setting forth the portion of the  Performance  Award which will be earned
or  forfeited  based on the  degree  of  achievement  of the  Performance  Goals
actually achieved or exceeded.  In setting  Performance Goals, the Committee may
use such  measures  as  return  on  equity,  earnings  growth,  revenue  growth,
comparisons to peer companies,  or such other measure or measures of performance
in such manner as it deems appropriate.

                  (e)  Payment of  Awards.  In the case of a  Performance  Share
Grant, the Participant shall be entitled to receive payment for each unit earned
in an amount  equal to the  aggregate  Fair Market Value of the shares of Common
Stock covered by such Award as of the end of the Performance Period. In the case
of a  Performance  Unit  Grant,  the  Participant  shall be  entitled to receive
payment for each unit earned in an amount equal to the dollar value of each unit
times  the  number of units  earned.  The  Committee,  pursuant  to the  written
agreement  with the  Participant,  may make such  Performance  Awards payable in
whole or in part upon the  occurrence of events  selected by the Committee  that
are beyond the  control of the  Participant  (including,  but not  limited to, a
Change  in  Control  of the  Company  as set forth in  Section  16  below).  The
Committee may provide (but is not required to provide) in the written  agreement
with the recipient that, in the case of a cash payment,  acceleration in payment
of a  Performance  Award  shall  also be subject to  discounting  to  reasonably
reflect the time value of money using any  reasonable  discount rate selected by
the Committee in accordance with Treasury Regulations under Code Section 162(m).
Payment  in  settlement  of a  Performance  Award  shall  be  made  as  soon  as
practicable following the conclusion of the Performance Period (i) in cash, (ii)
in shares of Common  Stock,  or (iii) in any  combination  of the above,  as the
Committee may determine in its sole and absolute  discretion.  The Committee may
elect to make this determination either at the time the Award is granted, at the
time of payment, or at any time in between such dates.



                                   -13-

                                                                  Page 30 of 53

<PAGE>



            10.   Other Stock-Based and Combination Awards.

                  (a)  The Committee  may  grant  other  Awards  under  the Plan
pursuant to which Common  Stock is or may in the future be  acquired,  or Awards
denominated  in stock units,  including  ones valued using  measures  other than
market value.  Such other  stock-based  grants may be granted either alone or in
addition to any other type of Award granted under the Plan.

                  (b)  The Committee  may also  grant  Awards  under the Plan in
combination  with other Awards or in exchange of Awards,  or in combination with
or as  alternatives  to grants or rights  under any other  employee  plan of the
Company, including the plan of any acquired entity.

                  (c) Subject to the provisions of the Plan, the Committee shall
have  authority to determine  the  individuals  to whom and the time or times at
which the  Awards  shall be made,  the  number  of shares of Common  Stock to be
granted or covered  pursuant to such  Awards,  and any and all other  conditions
and/or terms of the Awards.

            11.   Deferral Elections.  The Committee may permit a Participant to
elect to defer his or her  receipt  of the  payment of cash or the  delivery  of
shares of Common Stock that would otherwise be due to such Participant by virtue
of the  exercise,  earn out or vesting  of an Award made under the Plan.  If any
such election is permitted,  the Committee  shall establish rules and procedures
for such payment  deferrals,  including the possible (a) payment or crediting of
reasonable  interest on such  deferred  amounts  credited  in cash,  and (b) the
payment or crediting of dividend equivalents in respect of deferrals credited in
units of Common Stock. The Company and the Committee shall not be responsible to
any person in the event that the payment deferral does not result in deferral of
income for tax purposes.

            12.   Dividend  Equivalents.   Awards  of  Stock   Options,   Stock
Appreciation Rights, Restricted Unit Grants, Performance Share Grants, and other
stock-based  Awards may, in the sole and absolute  discretion of the  Committee,
earn dividend equivalents.  In respect of any such Award which is outstanding on
a dividend record date for Common Stock, the Participant may be credited with an
amount equal to the amount of cash or stock  dividends that would have been paid
on the shares of Common Stock  covered by such Award had such shares been issued
and outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend equivalents,  including
the  timing,  form of  payment,  and  payment  contingencies  of  such  dividend
equivalents, as it deems appropriate or necessary.




                                   -14-

                                                                  Page 31 of 53

<PAGE>



            13.   Termination of Employment.  The  terms  and  conditions  under
which an Award may be exercised after a Participant's  termination of employment
shall be determined by the Committee and reflected in the written agreement with
the Participant  concerning the Award,  except that in the event a Participant's
employment with the Company or a Subsidiary terminates for any reason within six
(6) months of the date of grant of any Award held by the Participant,  the Award
shall  expire  as of  the  date  of  such  termination  of  employment  and  the
Participant and the  Participant's  legal  representative  or beneficiary  shall
forfeit any and all rights pertaining to such Award.

            14.   Non-transferability of Awards. No Award under the Plan, and no
rights or interest therein, shall be assignable or transferable by a Participant
except  by will  or the  laws of  descent  and  distribution  or  pursuant  to a
qualified  domestic  relations order within the meaning of the Code.  Subject to
the foregoing, during the lifetime of a Participant, Awards are exercisable only
by,  and  payments  in  settlement  of  Awards  will be  payable  only  to,  the
Participant or his or her legal representative.

            15.   Adjustments Upon Changes in Capitalization, Etc.
                  -----------------------------------------------

                  (a)  The  existence  of  the  Plan  and  the  Awards   granted
hereunder  shall  not  affect or  restrict  in any way the right or power of the
Board or the  shareholders  of the Company to make or authorize any  adjustment,
recapitalization,  reorganization  or  other  change  in the  Company's  capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Company's Common Stock or the rights thereof, the dissolution or liquidation
of the  Company,  or any sale or  transfer  of all or any part of its  assets or
business, or any other corporate act or proceeding.

                  (b)  In  the  event  of any change in capitalization affecting
the  Common  Stock of the  Company  after the  Effective  Date,  such as a stock
dividend,  stock  split,  recapitalization,   merger,  consolidation,  split-up,
combination,  exchange  of shares,  other form of  reorganization,  or any other
change affecting the Common Stock, such  proportionate  adjustments,  if any, as
the Committee or the Board in its  discretion  may deem  appropriate  to reflect
such change shall be made with respect to (i) the aggregate  number of shares of
Common Stock for which Awards in respect  thereof may be granted under the Plan,
(ii) the maximum  number of shares of Common  Stock which may be sold or awarded
to any  Participant,  (iii) the number of shares of Common Stock covered by each
outstanding  Award,  and (iv) the  price  per share in  respect  of  outstanding
Awards.

                  (c)  The Committee or the Board may also make such adjustments
in the  number  of  shares  covered  by,  and the  price or  other  value of any
outstanding Awards in the event of a spin-off or other distribution  (other than
normal cash  dividends)  of Company  assets to  shareholders.  In the event that
another corporation or business entity is being acquired by the Company, and the
Company agrees to assume outstanding employee stock option or stock appreciation
rights  and/or  the  obligation  to make  future  grants of options or rights to




                                   -15-

                                                                  Page 32 of 53

<PAGE>



employees of the acquired entity, the aggregate number of shares of Common Stock
available for Awards under Section 4 of the Plan may be increased accordingly.

            16.   Change in Control.
                  -----------------

                  (a)  In the event  of a  Change  in  Control  (as  defined  in
Paragraph (b) below) of the Company,  and except as otherwise  provided in Award
agreements:

                            (i)  All Stock Options or Stock Appreciation Rights
then outstanding  shall become fully exercisable as of the date of the Change in
Control (and shall terminate at such time as specified in the Award agreement);

                           (ii)  All   restrictions   and   conditions   of  all
Restricted  Stock Grants and Restricted  Unit Grants then  outstanding  shall be
deemed satisfied as of the date of the Change in Control; and

                          (iii)  All  Performance  Share  Grants and Performance
Unit  Grants  shall be deemed to have  been  fully  earned as of the date of the
Change in Control;

subject to the limitation  that any Award which has been  outstanding  less than
six (6) months on the date of the Change in Control  shall not be afforded  such
treatment.

                  (b)  A "Change in  Control"  shall be deemed to have  occurred
upon the occurrence of any one (or more) of the following events:

                            (i)  Any  person,  including  a  group as defined in
Section  13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of
the Company  with  respect to which 25% or more of the total number of votes for
the election of the Board may be cast;

                           (ii)  As a result of, or in connection with, any cash
tender offer,  exchange  offer,  merger or other business  combination,  sale of
assets or contested election, or combination of the foregoing,  persons who were
directors  of the Company  just prior to such event shall cease to  constitute a
majority of the Board;

                          (iii)  The  shareholders  of the Company shall approve
an agreement  providing either for a transaction in which the Company will cease
to  be an  independent  publicly  owned  corporation  or  for a  sale  or  other
disposition of all or substantially all the assets of the Company;



                                   -16-

                                                                  Page 33 of 53

<PAGE>



                           (iv)  A  tender  offer  or exchange offer is made for
shares of the  Company's  Common  Stock (other than one made by the Company) and
shares of Common Stock are acquired thereunder; or

                            (v)  Formation  of a holding company for the Company
in which the  shareholdings  of the  holding  company  after its  formation  are
substantially the same as for the Company prior to the holding company formation
does not constitute a Change in Control for purposes of this Plan.

                  (c)  In  the  event that any payment under this Plan (alone or
in  conjunction  with other  payments)  would  otherwise  constitute  an "excess
parachute  payment"  under Section 280G of the Code (in the sole judgment of the
Company),  such payment shall be reduced or eliminated to the extent the Company
determines  necessary to avoid deduction  disallowance under Section 280G of the
Code or the imposition of excise tax under Section 4999 of the Code. The Company
may consult with a Participant  regarding the application of Section 280G and/or
Section 4999 to payments  otherwise due to such Participant  under the Plan, but
the judgment of the Company as to applicability of those provisions,  the degree
to which a payment must be reduced to avoid those  provisions,  and which Awards
shall be reduced,  is final. The  Compensation  Committee shall act on behalf of
the Company in interpreting and administering this limitation.

            17.   Amendment and  Termination.  Without  further  approval of the
shareholders, the Board may at any time terminate the Plan, or may amend it from
time to time in such  respects  as the Board may deem  advisable.  However,  the
Board may not,  without approval of the  shareholders,  make any amendment which
would (a) increase the  aggregate  number of shares of Common Stock which may be
issued  under the Plan  (except  for  adjustments  pursuant to Section 15 of the
Plan),   (b)  materially   modify  the   requirements   as  to  eligibility  for
participation in the Plan, or (c) materially  increase the benefits  accruing to
Participants under the Plan.  Notwithstanding the above, the Board may amend the
Plan to take into account changes in applicable  securities laws, federal income
tax laws and other  applicable  laws.  Further,  should the  provisions  of Rule
16b-3, or any successor rule,  under the Exchange Act be amended,  the Board may
amend the Plan in  accordance  with any  modifications  to that rule without the
need for shareholder approval.  Notwithstanding the foregoing,  the Plan may not
be amended more than once every six months other than to comply with the changes
in the Code or the Employee Retirement Income Security Act of 1974 ("ERISA").

            18.   Miscellaneous Matters.
                  ---------------------

                  (a)  Tax Withholding.  The  Company  shall  have the  right to
deduct from any payment,  including the delivery of shares,  made under the Plan
any federal,  state,  or local taxes of any kind  required by law to be withheld
with  respect to such  payments or to take such other action as may be necessary
in the opinion of the Company to satisfy all  obligation for the payment of such
taxes. If Common Stock is used to satisfy tax  withholding,  such stock shall be




                                   -17-

                                                                  Page 34 of 53

<PAGE>



valued based on the Fair Market Value when the tax withholding is required to be
made.

                  (b)  No Right to Employment.  Neither the adoption of the Plan
nor the  granting of any Award shall  confer upon any employee of the Company or
any  Subsidiary  any  right to  continued  employment  with the  Company  or any
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the  Company  or a  Subsidiary  to  terminate  the  employment  of any of its
employees at any time, with or without cause.

                  (c)  Unfunded Plan. The Plan shall be unfunded and the Company
shall  not be  required  to  segregate  any  assets  that  may at  any  time  be
represented by Awards under the Plan. Any liability of the Company to any person
with  respect to any Award under the Plan shall be based solely upon any written
contractual  obligations  that may be  effected  pursuant  to the Plan.  No such
obligation  of the  Company  shall be deemed to be  secured by any pledge of, or
other encumbrance on, any property of the Company.

                  (d)  Annulment  of  Awards.  The  grant of any Award under the
Plan payable in cash is  provisional  until cash is paid in settlement  thereof.
The  grant of any  Award  payable  in  Common  Stock is  provisional  until  the
Participant becomes entitled to the certificate in settlement  thereof.  Payment
under  any  Awards  granted  pursuant  to the  Plan is  wholly  contingent  upon
shareholder approval of the Plan. Where approval for an award sought pursuant to
Section 162(m)(4)(C)(ii) is not granted by the Company's shareholders, the Award
shall be annulled automatically. In the event the employment of a Participant is
terminated for cause (as defined below), any Award which is provisional shall be
annulled as of the date of such termination for cause. For purposes of the Plan,
the term  "terminated  for  cause"  means  any  discharge  because  of  personal
dishonesty,  willful  misconduct,  breach of fiduciary duty  involving  personal
profit,  continuing  intentional  or habitual  failure to perform stated duties,
violation of any law (other than minor traffic violations or similar misdemeanor
offenses not involving moral turpitude),  or material breach of any provision of
an employment or independent contractor agreement with the Company.

                  (e)  Other Company Benefit and Compensation Programs. Payments
and other benefits received by a Participant under an Award made pursuant to the
Plan  shall  not  be  deemed  a  part  of  a  Participant's  regular,  recurring
compensation  for purposes of the termination  indemnity or severance pay law of
any state.  Furthermore,  such  benefits  shall not be included in, nor have any
effect on, the  determination  of benefits under any other employee benefit plan
or similar arrangement  provided by the Company or a Subsidiary unless expressly
so provided by such other plan or  arrangement,  or except  where the  Committee




                                   -18-

                                                                  Page 35 of 53

<PAGE>



expressly determines that inclusion of an Award or portion of an Award should be
included.  Awards under the Plan may be made in combination  with or in addition
to, or as alternatives to, grants, awards or payments under any other Company or
Subsidiary   plans.   The  Company  or  any  Subsidiary  may  adopt  such  other
compensation programs and additional  compensation  arrangements (in addition to
this Plan) as it deems  necessary to attract,  retain,  and  motivate  officers,
directors,  employees  or  independent  contractors  for their  service with the
Company and its Subsidiaries.

                  (f)  Securities  Law  Restrictions.  No shares of Common Stock
shall be issued under the Plan unless counsel for the Company shall be satisfied
that such  issuance  will be in  compliance  with  applicable  federal and state
securities  laws.  Certificates  for shares of Common Stock  delivered under the
Plan may be subject to such stock-transfer  orders and other restrictions as the
Committee  may  deem  advisable   under  the  rules,   regulations,   and  other
requirements of the Securities and Exchange Commission,  any stock exchange upon
which the  Common  Stock is then  listed,  and any  applicable  federal or state
securities  law.  The  Committee  may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

                  (g)  Award  Agreement.  Each  Participant  receiving  an Award
under the Plan shall enter into a written  agreement  with the Company in a form
specified by the Committee agreeing to the terms and conditions of the Award and
such  related  matters  as  the  Committee  shall,  in  its  sole  and  absolute
discretion, determine.

                  (h)  Costs of Plan.  The  costs  and expenses of administering
the Plan shall be borne by the Company.

                  (i)  Governing Law.  The Plan and all actions taken thereunder
shall be governed by and construed in  accordance  with the laws of the State of
California.

                              TARRANT APPAREL GROUP,
                              a California corporation



Date: February 24, 1997       By:      /s/  Gerard Guez
                                  ----------------------------------------------
                                          Chairman, Board of Directors






                                   -19-

                                                                  Page 36 of 53

<PAGE>



                    CERTIFICATE OF COMPENSATION COMMITTEE
                    -------------------------------------

            The  undersigned  two  persons,  being  members of the  Compensation
Committee and "outside directors" within the meaning of Section  162(m)(4)(C)(i)
of the Internal Revenue Code of 1986,  hereby certify that the foregoing Tarrant
Apparel  Group  Employee  Incentive  Plan was  adopted  and  established  by the
Compensation Committee on December 20, 1996.


Date:  January 16, 1997                /s/  Barry S. Aved
                                    --------------------------------------------
                                    Compensation Committee Member


Date:  January 16, 1997                /s/  Walter L. Krieger
                                    --------------------------------------------
                                    Compensation Committee Member



                          CERTIFICATE OF SECRETARY
                          ------------------------

            The  undersigned,  being the Corporate  Secretary of Tarrant Apparel
Group, a California  corporation,  hereby  certifies that the foregoing  Tarrant
Apparel Group Employee Incentive Plan (the "Plan") was, pursuant to the Articles
and Bylaws of the  Corporation,  duly adopted by the  Compensation  Committee on
December 20, 1996, and by the Board of Directors as a whole on January 13, 1997.
The Plan was approved by the shareholders of the Corporation on May 2, 1997.


Date:  May 2, 1997                     /s/  Corazon R. Reyes
                                    --------------------------------------------
                                        Secretary


                       [Seal of Tarrant Apparel Group]














                                   -20-

                                                                  Page 37 of 53

<PAGE>



                          CERTIFICATE OF SECRETARY
                          ------------------------

            The  undersigned,  being the Corporate  Secretary of Tarrant Apparel
Group,  a  California  corporation,  hereby  certifies  that Section 4(b) of the
foregoing  Tarrant  Apparel  Group  Employee  Incentive  Plan (the  "Plan") was,
pursuant to Section 16 of the Plan,  duly amended by the Board of Directors as a
whole on April 2, 1999 and the shareholders of the Corporation on May 3, 1999 to
increase from 2,600,000 to 3,600,000 the number of shares of the Common Stock of
the Corporation which may be subject to awards granted under the Plan.


Date:  May 3, 1999                     /s/  Corazon R. Reyes
                                    --------------------------------------------
                                    Corporate Secretary


                       [Seal of Tarrant Apparel Group]



































                                   -21-

                                                                  Page 38 of 53
<PAGE>



                                 EXHIBIT 99.2

                   Form of Incentive Stock Option Agreement


















































                                                                  Page 39 of 53
<PAGE>


                                                                    Exhibit 99.2
                                                                    ------------

                       INCENTIVE STOCK OPTION AGREEMENT
                       --------------------------------



      THIS INCENTIVE STOCK OPTION  AGREEMENT is made as of the Date of Grant set
forth below,  between  TARRANT  APPAREL  GROUP,  a California  corporation  (the
"Company"),  and the person whose name appears on the signature page hereof (the
"Optionee").  All capitalized  terms not specifically  defined herein shall have
the meanings set forth in the Company's Employee Incentive Plan (the "Plan").


                                   RECITALS
                                   --------

      A.    The Board of  Directors  and the  shareholders  of the Company  both
approved and adopted the Plan.  The Plan  provides for the granting of awards to
directors,  officers,  employees  and  consultants  of the Company or any of its
affiliates.

      B.    Pursuant  to the  Plan,  the  Plan is  administered  by a  committee
appointed by and comprised of members of the Company's  Board of Directors  (the
"Committee").

      C.    Pursuant to the Plan, the Committee has determined that it is to the
advantage and in the best interests of the Company and its shareholders to grant
an  incentive  stock  option to the Optionee  covering  shares of the  Company's
Common Stock (or any class of stock into which such Common Stock is converted or
reclassified  as  provided in the Plan)  ("Common  Stock") as an  inducement  to
remain in the service of the Company and as an incentive  for  increased  effort
during such  service,  and has approved the  execution of this  Incentive  Stock
Option Agreement between the Company and the Optionee.

      D.    The option  granted  hereby is intended to qualify as an  "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").

      NOW, THEREFORE, the parties hereto agree as follows:

            1.  Grant of Option.  Effective as of the date of grant set forth on
the  signature  page  hereof (the "Date of  Grant"),  the Company  grants to the
Optionee  the right and  option  (the  "Option")  to  purchase  on the terms and
conditions  hereinafter  set forth,  all or any part of such number of shares of
Common Stock at such purchase  price per share as are set forth on the signature
page  hereof,  which price is not less than the fair market  value of such stock
(as  determined  pursuant  to Section 4 hereof) on the Date of Grant;  provided,
however, that if the Optionee possesses more than ten percent (10%) of the total
combined  voting  power  of all  classes  of  stock  of  the  Company  (and  its
affiliates) (a "10%  Shareholder"),  such price is not less than one hundred and
ten  percent  (110%)  of the fair  market  value of such  stock  (as  determined
pursuant  to Section 4) on the Date of Grant.  The Option  shall be  exercisable


                                    -1-
                                                                  Page 40 of 53
<PAGE>


from time to time in accordance  with the provisions of this Agreement  during a
period  expiring  on the  date set  forth  on the  signature  page  hereof  (the
"Expiration  Date") or earlier in accordance with Section 5; provided,  however,
that if the Option is granted to a 10% Shareholder, the Expiration Date shall be
the fifth anniversary of the Date of Grant.

            2.  Vesting.  The Option shall become  exercisable  to purchase, and
shall  vest with  respect  to,  such  percentage  of the shares  covered  hereby
(rounded to the nearest whole share) as may be set forth on the  signature  page
hereof.  In each  case the  number of shares  which  may be  purchased  shall be
calculated to the nearest full share.

            3.  Manner  of  Exercise.  Each  exercise  of the Option shall be by
means of a written notice of exercise  delivered to the Company,  specifying the
number of shares to be purchased  and  accompanied  by payment to the Company of
the full purchase  price of the shares to be purchased  solely (i) in cash or by
check payable to the order of the Company,  (ii) by delivery of shares of Common
Stock of the Company  already owned by, and in the  possession of, the Optionee,
valued at their fair market value,  as determined in accordance  with Section 4,
or (iii) (x) by a promissory note made by Optionee in favor of the Company, upon
the terms and conditions  determined by the Committee  including,  to the extent
the Committee determines appropriate, a security interest in the shares issuable
upon exercise or other property, or (y) through a "cashless exercise," in either
case complying with applicable law  (including,  without  limitation,  state and
federal margin requirements), or any combination thereof. Shares of Common Stock
used to satisfy the exercise  price of this Option shall be valued at their fair
market value  determined  (in  accordance  with Section 4 hereof) on the date of
exercise (or if such date is not a business day, as of the close of the business
day  immediately  preceding  such date).  This Option may not be exercised for a
fraction of a share and no partial  exercise of this Option may be for less than
(a) one hundred (100) shares or (b) the total number of shares then eligible for
exercise, if less than one hundred (100) shares.

            The Option may be exercised  (i) during the lifetime of the Optionee
only by the  Optionee;  (ii) to the extent  permitted by the Committee or by the
terms of this  Agreement,  Optionee's  spouse if such spouse obtained the Option
pursuant to a qualified domestic relations order as defined by the Code or Title
I of ERISA, or the rules thereunder  ("Qualified Domestic Relations Order"); and
(iii) after the Optionee's  death by his or her  transferees by will or the laws
of descent or distribution.

            4.  Fair Market Value of Common  Stock.  The fair market  value of a
share of Common  Stock shall be  determined  for  purposes of this  Agreement by
reference to the closing  price on the  principal  stock  exchange on which such
shares  are then  listed  or,  if such  shares  are not then  listed  on a stock
exchange,  by reference to the closing  price (if approved for  quotation on the
NASDAQ  National  Market System) or the mean between the bid and asked price (if
other  over-the-counter  issue)  of  a  share  as  supplied  by   the   National
Association  of Securities  Dealers,  Inc.  through  NASDAQ (or its successor in
function), in each case as reported by The Wall Street Journal, for the business
day  immediately  preceding the Date of Grant or the date on which the Option is
exercised  (or,  if for any  reason no such  price is  available,  in such other
manner as the  Committee  may deem  appropriate  to reflect the then fair market
value thereof).


                                    -2-
                                                                  Page 41 of 53
<PAGE>


            5.  Termination of Employment; Death or Permanent Disability. If the
Optionee  ceases to be employed by the Company or one of its  affiliates for any
reason other than the  Optionee's  death or "permanent  disability"  (within the
meaning of Section 22(e)(3) of the Code), the Option shall be exercisable  until
the earlier of (i) the Expiration Date or (ii) a date three (3) months after the
date the Optionee ceases to be an employee of the Company or such affiliate,  to
the extent  exercisable on the date of such  cessation of employment,  and shall
thereafter  expire  and be void and of no further  force or  effect.  A leave of
absence  approved in writing by the Committee  shall not be deemed a termination
of  employment  for the  purposes  of this  Section 5, but the Option may not be
exercised  during any such leave of absence,  except  during the first three (3)
months thereof. If the Optionee dies or becomes "permanently disabled" while the
Optionee is employed by the Company or one of its  affiliates,  the Option shall
expire on the  earlier  of (i) the  Expiration  Date or (ii) a date one (1) year
after  the  date  of  such  death  or  "permanent  disability,"  to  the  extent
exercisable on the date of death or permanent  disability,  and shall thereafter
expire and be void and of no further  force or effect.  During such period after
death,  the  Option  may,  to the  extent  that  it  remained  unexercised  (but
exercisable by the Optionee according to the Option's terms) on the date of such
death, be exercised by the person or persons to whom the Optionee's rights under
the Option  shall  pass by the  Optionee's  will or by the laws of  descent  and
distribution.

            6.  Shares to be Issued in Compliance  with Federal  Securities Laws
and Exchange Rules. By accepting the Option, the Optionee represents and agrees,
for the Optionee and his or her legal successors (by will or the laws of descent
and distribution or through a Qualified Domestic Relations Order),  that none of
the shares purchased upon exercise of the Option will be acquired with a view to
any sale, transfer or distribution of said shares in violation of the Securities
Act of 1933, as amended (the  "Securities  Act"),  and the rules and regulations
promulgated thereunder,  or any applicable state "blue sky" laws. If required by
the  Committee  at the time the Option is  exercised,  the Optionee or any other
person  entitled to exercise the Option shall furnish  evidence  satisfactory to
the Company  (including a written and signed  representation)  to such effect in
form and substance satisfactory to the Company,  including an indemnification of
the Company in the event of any  violation of the  Securities  Act or state blue
sky laws by such person.  The Company shall use its  reasonable  efforts to take
all necessary and appropriate action to assure that the shares issuable upon the
exercise of this Option shall be issued in full  compliance  with the Securities
Act,  state  blue  sky  laws  and all  applicable  listing  requirements  of any
principal securities exchange on which shares of the same class are listed.

            7.  Withholding of Taxes.  Upon  any  disposition by the Optionee or
the Optionee's  legal  successor of shares of Common Stock acquired  pursuant to
the exercise of this Option  within two (2) years of the Date of Grant or within
one (1) year of the  exercise  of this  Option  (an  "Early  Disposition"),  the
Company  shall have the right to require the  Optionee or the  Optionee's  legal
successor  to pay the  Company  the amount of any taxes which the Company may be
required to withhold  with  respect to such  shares.  The  Optionee  agrees,  as
partial  consideration  for the  designation of the Option as an incentive stock
option under Section 422 of the Code, to notify the Company in writing promptly,
and in no event later than thirty (30) days following, any Early Disposition.


                                    -3-

                                                                  Page 42 of 53
<PAGE>


            8.  No Assignment.  The Option and all other  rights and  privileges
granted hereby shall not be transferred,  either  voluntarily or by operation of
law otherwise than by will or the laws of descent and  distribution  or pursuant
to a  Qualified  Domestic  Relations  Order.  Upon any attempt to so transfer or
otherwise dispose of this Option or any other right or privileges granted hereby
contrary to the  provisions  hereof,  this Option and all rights and  privileges
contained herein shall immediately  become null and void and of no further force
or effect.

            9.  Adjustment  for  Reorganizations,  Stock  Splits,  etc.   If the
outstanding  shares of Common Stock of the Company (or any other class of shares
or securities  which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased,  decreased,  changed into or exchanged
for a different  number or kind of shares or securities  of the Company  through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse  stock  split  or  other  similar   transaction,   an  appropriate   and
proportionate  adjustment shall be made in the maximum number and kind of shares
receivable  upon the exercise of this Option,  without change in the total price
applicable to the unexercised  portion of this Option,  but with a corresponding
adjustment in the price for each share or other unit of any security  covered by
this Option.

            Upon  the  dissolution  or  liquidation  of the  Company,  or upon a
reorganization,  merger  or  consolidation  of the  Company  with  one  or  more
corporations as a result of which the Company is not the surviving  corporation,
or upon a sale of  substantially  all the  property or more than eighty  percent
(80%) of the then outstanding stock of the Company to another corporation,  this
Option shall terminate;  provided,  however, that notwithstanding the foregoing,
the Committee shall provide in writing in connection  with such  transaction for
the  appropriate  satisfaction  of this  Option by one or more of the  following
alternatives  (separately  or in  combination):  (i) for this  Option  to become
immediately exercisable notwithstanding the provisions of Sections 2 and 3; (ii)
for  the  assumption  by  the  successor  corporation  of  this  Option  or  the
substitution by such corporation  therefor of a new option covering the stock of
the successor  corporation or its affiliates with appropriate  adjustments as to
the number and kind of shares and prices;  (iii) for the continuance of the Plan
by such  successor  corporation  in which event the Plan and this  Option  shall
continue in the manner and under the terms so provided;  or (iv) for the payment
in cash or stock in lieu of and in complete satisfaction of this Option.

            Adjustments  under  this  Section  9 shall be made by the Committee,
whose  determination  as to what  adjustments  shall  be  made,  and the  extent
thereof,  shall be final, binding and conclusive.  No fractional shares of stock
shall be issued under this Option on any such adjustment.

            10. Participation  by the Optionee in Other Company Plans.   Nothing
herein  contained  shall affect the right of the Optionee to  participate in and
receive benefits under and in accordance with the then current provisions of any
pension,  insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.

            11. No Rights as a Shareholder Until Issuance of Stock  Certificate.
Neither the  Optionee  nor any other person  legally  entitled to exercise  this
Option shall be entitled to any of the rights or privileges of a shareholder  of


                                    -4-

                                                                  Page 43 of 53
<PAGE>


the Company in respect of any shares  issuable  upon any  exercise of the Option
unless and until a certificate or  certificates  representing  such shares shall
have been  actually  issued and  delivered to the  Optionee.  No shares shall be
issued and  delivered  upon the  exercise of this Option  unless and until there
shall  have  been  full  compliance  with  all  applicable  requirements  of the
Securities  Act  (whether  by  registration  or  satisfaction  of  an  exemption
therefrom),  all  applicable  listing  requirements  of  a  national  securities
exchange on which shares of the same class are listed and any other requirements
of law or of any regulatory  bodies having  jurisdiction  over such issuance and
delivery.

            12. Not an Employment or Service Contract.  Nothing herein contained
shall be  construed  as an  agreement  by the Company or any of its  affiliates,
express or  implied,  to employ the  Optionee  or  contract  for the  Optionee's
services,  to restrict the Company's or such affiliate's  right to discharge the
Optionee or cease contracting for the Optionee's  services or to modify,  extend
or  otherwise  affect in any  manner  whatsoever,  the  terms of any  employment
agreement or contract for services  which may exist between the Optionee and the
Company or any of its affiliates.

            13. Agreement  Subject to the Plan.  The Option  hereby  granted  is
subject to, and the Company  and the  Optionee  agree to be bound by, all of the
terms and conditions of the Plan, as the same shall be amended from time to time
in accordance  with the terms  thereof,  but no such amendment  shall  adversely
affect the Optionee's rights under this Option without the prior written consent
of the Optionee.

























                                    -5-

                                                                  Page 44 of 53
<PAGE>



            14. Execution.  The  interpretation,  performance and enforcement of
this Agreement shall be governed by the internal  substantive  laws of the State
of California.


                  COMPANY:                TARRANT APPAREL GROUP



                                          By_______________________________

                                          Its_______________________________


                  OPTIONEE:


                                          ---------------------------------
                                          Name
































                                    -6-

                                                                  Page 45 of 53
<PAGE>


      By his or her  signature  below,  the spouse of the Optionee  agrees to be
bound by all of the terms and conditions of the foregoing Agreement.

                  OPTIONEE'S SPOUSE:



                                          ---------------------------------
                                          Name

      The following  terms and  conditions are an integral part of the foregoing
Incentive Stock Option Agreement.


            Optionee:                     _________________________________

            Address:                      _________________________________
                                          _________________________________

            Social Security Number:       _________________________________


            Date of Grant:                _________________________________

            Number of shares purchasable: _________________________________

            Exercise Price per share:     _________________________________

            Expiration Date:              _________________________________



--------------------------------------------------------------------------------
     Anniversary Date         Percentage Initially      Cumulative Percentage
   of the Date of Grant           Exercisable                Exercisable
--------------------------------------------------------------------------------
          First                       25%                        25%
--------------------------------------------------------------------------------
          Second                      25%                        50%
--------------------------------------------------------------------------------
          Third                       25%                        75%
--------------------------------------------------------------------------------
          Fourth                      25%                        100%
--------------------------------------------------------------------------------







                                    -7-

                                                                  Page 46 of 53
<PAGE>



                                 EXHIBIT 99.3

                 Form of Non-Qualified Stock Option Agreement



















































                                                                  Page 47 of 53
<PAGE>



                                                                  EXHIBIT 99.3
                                                                  ------------

                     NON-QUALIFIED STOCK OPTION AGREEMENT
                     ------------------------------------



      THIS NON-QUALIFIED  STOCK OPTION AGREEMENT is made as of the Date of Grant
set forth below,  between TARRANT APPAREL GROUP, a California  corporation  (the
"Company"),  and the  employee  of the  Company  whose name  appears  below (the
"Optionee").  All capitalized  terms not specifically  defined herein shall have
the meanings set forth in the Company's Employee Incentive Plan (the "Plan").


                                   RECITALS
                                   --------

      A.    The Board of  Directors  and the  shareholders  of the Company  both
approved and adopted the Plan.  The Plan  provides for the granting of awards to
directors,  officers,  employees  and  consultants  of the Company or any of its
affiliates.

      B.    Pursuant  to the Plan,  the Plan is  administered  by the  Committee
appointed by and comprised of members of the Company's Board of Directors.

      C.    Pursuant to the Plan, the Compensation  Committee (the  "Committee")
has  determined  that it is to the  advantage  and in the best  interests of the
Company  and its  shareholders  to grant an  non-qualified  stock  option to the
Optionee  covering  shares of the Company's  Common Stock (or any class of stock
into which such Common  Stock is converted  or  reclassified  as provided in the
Plan) ("Common  Stock") as an inducement to remain in the service of the Company
and as an incentive for increased  effort during such service,  and has approved
the execution of this  Non-Qualified  Stock Option Agreement between the Company
and the Optionee.

      D.    The  option  granted  hereby  is  not  intended  to  qualify  as  an
"incentive stock option" under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").

      NOW, THEREFORE, the parties hereto agree as follows:

            1.  Grant of Option.  The  Company  grants to the Optionee the right
and option (the  "Option") to purchase on the terms and  conditions  hereinafter
set  forth,  all or any part of such  number of  shares of Common  Stock at such
purchase  price per share as are set forth  below,  which price is not less than
the fair market value of such stock (as determined pursuant to Section 4 hereof)
on the Date of  Grant.  The  Option  shall be  exercisable  from time to time in
accordance with the provisions of this Agreement during a period expiring on the
tenth  anniversary  of the Date of Grant (the  "Expiration  Date") or earlier in
accordance with Section 5.

            2.  Vesting.  The  Option  shall become exercisable to purchase, and
shall  vest with  respect  to,  such  percentage  of the shares  covered  hereby
(rounded to the nearest whole share) as may be set forth on the  signature  page

                                    -1-

                                                                  Page 48 of 53
<PAGE>


hereof.  In each  case the  number of shares  which  may be  purchased  shall be
calculated to the nearest full share.

            3.  Manner of Exercise.  Each  exercise  of  the  Option shall be by
means of a written notice of exercise  delivered to the Company,  specifying the
number of shares to be purchased  and  accompanied  by payment to the Company of
the full purchased price of the shares to be purchased  solely (i) in cash or by
check payable to the order of the Company,  (ii) by delivery of shares of Common
Stock of the Company  already owned by, and in the  possession of, the Optionee,
valued at their fair market value,  as determined in accordance  with Section 4,
or (iii) (x) by a promissory note made by Optionee in favor of the Company, upon
the terms and conditions  determined by the Committee  including,  to the extent
the Committee determines appropriate, a security interest in the shares issuable
upon exercise or other property, or (y) through a "cashless exercise," in either
case complying with applicable law  (including,  without  limitation,  state and
federal margin requirements), or any combination thereof. Shares of Common Stock
used to satisfy the exercise  price of this Option shall be valued at their fair
market value  determined  (in  accordance  with Section 4 hereof) on the date of
exercise (or if such date is not a business day, as of the close of the business
day immediately preceding date). This Option may not be exercised for a fraction
of a share and no partial  exercise  of this Option may be for less than (a) one
hundred  (100)  shares or (b) the  total  number of  shares  then  eligible  for
exercise, if less than one hundred (100) shares.

            The Option may be exercised  (i) during the lifetime of the Optionee
only by the  Optionee;  (ii) to the extent  permitted by the Committee or by the
terms of this  Agreement,  Optionee's  spouse if such spouse obtained the Option
pursuant to a  qualified  domestic  relations  ordered as defined by the Code of
Title  I of  ERISA,  or the  rules  thereunder  ("Qualified  Domestic  Relations
Order");  and (iii) after the Optionee's death by his or her transferees by will
or the laws of descent or distribution.

            4.  Fair Market  Value of Common Stock.  The fair market  value of a
share of Common  Stock shall be  determined  for  purposes of this  Agreement by
reference to the closing  price on the  principal  stock  exchange on which such
shares  are then  listed  or,  if such  shares  are not then  listed  on a stock
exchange,  by reference to the closing  price (if approved for  quotation on the
NASDAQ  National  Market System) or the mean between the bid and asked price (if
other  over-the-counter  issue)  of  a  share  as  supplied   by   the  National
Association  of Securities  Dealers,  Inc.  through  NASDAQ (or its successor in
function), in each case as reported by The Wall Street Journal, for the business
day immediately  preceding the date on which the option is granted  (which,  for
all purposes, shall be the Date of Grant) or exercised (or, if for any reason no
such  price  is  available,  in such  other  manner  as the  Committee  may deem
appropriate to reflect the then fair market value thereof).

            5.  Termination of Employment; Death or Permanent Disability. If the
Optionee  ceases to be employed by the Company or one of its  affiliates for any
reason other than the  Optionee's  death or "permanent  disability"  (within the
meaning of Section 22(e)(3) of the Code), the Option shall be exercisable  until
the earlier of (i) the Expiration Date or (ii) a date three (3) months after the
date the Optionee ceases to be an employee of the Company or such affiliate,  to
the extent  exercisable on the date of such  cessation of employment,  and shall
thereafter  expire  and be void and of no further  force or  effect.  A leave of

                                    -2-

                                                                  Page 49 of 53
<PAGE>


absence  approved in writing by the Committee  shall not be deemed a termination
of  employment  for the  purposes  of this  Section 5, but the Option may not be
exercised  during any such leave of absence,  except  during the first three (3)
months thereof. If the Optionee dies or becomes "permanently disabled" while the
Optionee is employed by the Company or one of its  affiliates,  the Option shall
expire on the  earlier  of (i) the  Expiration  Date or (ii) a date one (1) year
after  the  date  of  such  death  or  "permanent  disability,"  to  the  extent
exercisable on the date of death or permanent  disability,  and shall thereafter
expire and be void and of no further  force or effect.  During such period after
death,  the  Option  may,  to the  extent  that  it  remained  unexercised  (but
exercisable by the Optionee according to the Option's terms) on the date of such
death, be exercised by the person or persons to whom the Optionee's rights under
the Option  shall  pass by the  Optionee's  will or by the laws of  descent  and
distribution.

            6.  Shares to be Issued in Compliance  with Federal  Securities Laws
and Exchange Rules. By accepting the Option, the Optionee represents and agrees,
for the Optionee and his or her legal successors (by will or the laws of descent
and distribution or through a Qualified Domestic Relations Order),  that none of
the shares purchased upon exercise of the Option will be acquired with a view to
any sale, transfer or distribution of said shares in violation of the Securities
Act of 1933, as amended (the  "Securities  Act"),  and the rules and regulations
promulgated thereunder,  or any applicable state "blue sky" laws. If required by
the  Committee  at the time the Option is  exercised,  the Optionee or any other
person  entitled to exercise the Option shall furnish  evidence  satisfactory to
the Company  (including a written and signed  representation)  to such effect in
form and substance satisfactory to the Company,  including an indemnification of
the Company in the event of any  violation of the  Securities  Act or state blue
sky laws by such person.  The Company shall use  reasonable  efforts to take all
necessary  and  appropriate  action to assure that the shares  issuable upon the
exercise of this Option shall be issued in full  compliance  with the Securities
Act,  state  blue  sky  laws  and all  applicable  listing  requirements  of any
principal securities exchange on which shares of the same class are listed.

            7.  Withholding of Taxes.  Upon  any  disposition by the Optionee or
the Optionee's  legal  successor of shares of Common Stock acquired  pursuant to
the exercise of this Option  within two (2) years of the Date of Grant or within
one (1) year of the  exercise  of this  Option  (in  "Early  Disposition"),  the
Company  shall have the right to require the  Optionee or the  Optionee's  legal
successor  to pay the  Company  the amount of any taxes which the Company may be
required to withhold with respect to such shares.

            8.  No  Assignment.  The Option and all other rights and  privileges
granted hereby shall not be transferred,  either  voluntarily or by operation of
law otherwise than by will or the laws of descent and  distribution  or pursuant
to a  Qualified  Domestic  Relations  Order.  Upon any attempt to so transfer or
otherwise dispose of this Option or any other right or privileges granted hereby
contrary to the  provisions  hereof,  this Option and all rights and  privileges
contained herein shall immediately  become null and void and of no further force
or effect.

            9.  Adjustment  for  Reorganizations,  Stock  Splits,  etc.   If the
outstanding  shares of Common Stock of the Company (or any other class of shares
or securities  which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased,  decreased,  changed into or exchanged

                                    -3-

                                                                  Page 50 of 53
<PAGE>


for a different  number or kind of shares or securities  of the Company  through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse  stock  split  or  other  similar   transaction,   an  appropriate   and
proportionate  adjustment shall be made in the maximum number and kind of shares
receivable  upon the exercise of this Option,  without change in the total price
applicable to the unexercised  portion of this Option,  but with a corresponding
adjustment in the price for each share or other unit of any security  covered by
this Option.

            Upon  the  dissolution  or  liquidation  of the  Company,  or upon a
reorganization,  merger  or  consolidation  of the  Company  with  one  or  more
corporations as a result of which the Company is not the surviving  corporation,
or upon a sale of  substantially  all the  property or more than eighty  percent
(80%) of the then outstanding stock of the Company to another corporation,  this
Option shall terminate;  provided,  however, that notwithstanding the foregoing,
the Committee shall provide in writing in connection  with such  transaction for
the  appropriate  satisfaction  of this  Option by one or more of the  following
alternatives  (separately  or in  combination):  (i) for this  Option  to become
immediately exercisable notwithstanding the provisions of Sections 2 and 3; (ii)
for  the  assumption  by  the  successor  corporation  of  this  Option  or  the
substitution by such corporation  therefor of a new option covering the stock of
the successor  corporation or its affiliates with appropriate  adjustments as to
the number and kind of shares and prices;  (iii) for the continuance of the Plan
by such  successor  corporation  in which event the Plan and this  Option  shall
continue in the manner and under the terms so provided;  or (iv) for the payment
in cash or stock in lieu of and in complete satisfaction of this Option.

            Adjustments  under  this  Section 9 shall be made by the  Committee,
whose  determination  as to what  adjustments  shall  be  made,  and the  extent
thereof,  shall be final, binding and conclusive.  No fractional shares of stock
shall be issued under this Option on any such adjustment.

            10. Participation  by the Optionee in Other Company Plans.   Nothing
herein  contained  shall affect the right of the Optionee to  participate in and
receive benefits under and in accordance with the then current provisions of any
pension,  insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.

            11. No Rights as a Shareholder Until Issuance of Stock  Certificate.
Neither the  Optionee  nor any other person  legally  entitled to exercise  this
Option shall be entitled to any of the rights or privileges of a shareholder  of
the Company in respect of any shares  issuable  upon any  exercise of the Option
unless and until a certificate or  certificates  representing  such shares shall
have been  actually  issued and  delivered to the  Optionee.  No shares shall be
issued and  delivered  upon the  exercise of this Option  unless and until there
shall  have  been  full  compliance  with  all  applicable  requirements  of the
Securities  Act  (whether  by  registration  or  satisfaction  of  an  exemption
therefrom),  all  applicable  listing  requirements  of  a  national  securities
exchange on which shares of the same class are listed and any other requirements
of law or of any regulatory  bodies having  jurisdiction  over such issuance and
delivery.

            12. Not an Employment or Service Contract.  Nothing herein contained
shall be  construed  as an  agreement  by the Company or any of its  affiliates,

                                    -4-

                                                                  Page 51 of 53
<PAGE>


express or  implied,  to employ the  Optionee  or  contract  for the  Optionee's
services,  to restrict the Company's or such affiliate's  right to discharge the
Optionee or cease contracting for the Optionee's  services or to modify,  extend
or  otherwise  affect in any  manner  whatsoever,  the  terms of any  employment
agreement or contract for services  which may exist between the Optionee and the
Company or any of its affiliates.

            13. Agreement  Subject  to the Plan.  The Option  hereby  granted is
subject to, and the Company  and the  Optionee  agree to be bound by, all of the
terms and conditions of the Plan, as the same shall be amended from time to time
in accordance  with the terms  thereof,  but no such amendment  shall  adversely
affect the Optionee's rights under this Option without the prior written consent
of the Optionee.

            14. Execution.  The  interpretation,  performance and enforcement of
this Agreement shall be governed by the internal  substantive  laws of the State
of California.

                  COMPANY:                TARRANT APPAREL GROUP



                                          By_______________________________

                                          Its_______________________________

                  OPTIONEE:



                                          ---------------------------------
                                          Name





















                                    -5-

                                                                  Page 52 of 53
<PAGE>


      By his or her  signature  below,  the spouse of the Optionee  agrees to be
bound by all of the terms and conditions of the foregoing Agreement.

                  OPTIONEE'S SPOUSE:



                                          ---------------------------------
                                          Name

      The following  terms and  conditions are an integral part of the foregoing
Incentive Stock Option Agreement.


            Optionee:                     _________________________________

            Address:                      _________________________________
                                          _________________________________

            Social Security Number:       _________________________________


            Date of Grant:                _________________________________

            Number of shares purchasable: _________________________________

            Exercise Price per share:     _________________________________

            Expiration Date:              _________________________________



--------------------------------------------------------------------------------
     Anniversary Date         Percentage Initially      Cumulative Percentage
   of the Date of Grant           Exercisable                Exercisable
--------------------------------------------------------------------------------
          First                       25%                        25%
--------------------------------------------------------------------------------
          Second                      25%                        50%
--------------------------------------------------------------------------------
          Third                       25%                        75%
--------------------------------------------------------------------------------
          Fourth                      25%                        100%
--------------------------------------------------------------------------------










                                    -6-

                                                                  Page 53 of 53
[{"type": "S-8", "sequence": "1", "filename": "tarrants8.txt", "description": "TARRANT APPAREL FORM S-8", "secsgml_size_bytes": 137557}]
{"company-data": {"conformed-name": "TARRANT APPAREL GROUP", "cik": "0000944948", "assigned-sic": "2330", "irs-number": "954181026", "state-of-incorporation": "CA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-49810", "film-number": "761685"}, "business-address": {"street1": "3151 EAST WASHINGTON BLVD", "city": "LOS ANGELES", "state": "CA", "zip": "90023", "phone": "2137808250"}, "mail-address": {"street1": "3151 EAST WASHINGTON BLVD", "city": "LOS ANGELES", "state": "CA", "zip": "90023"}}
As filed with the Securities and Exchange Commission on November 13, 2000
                                            Registration No. 333-

------------------------------------------------------------------------------

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                  ---------

                                  FORM S-8
           REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                                 ----------

                            TARRANT APPAREL GROUP
           (Exact name of registrant as specified in its charter)

               California                                 95-4181026
      (State or other jurisdiction                     (I.R.S. Employer
   of incorporation or organization)                   Identification No.)

     3151 East Washington Boulevard                         90023
        Los Angeles, California                          (Zip code)
(Address of principal executive offices)
                                  --------

                          EMPLOYEE INCENTIVE PLAN
                          (Full title of the plan)
                                 ----------

                               SCOTT BRISKIE
                           Vice President-Finance
                        and Chief Financial Officer
                           Tarrant Apparel Group
                       3151 East Washington Boulevard
                       Los Angeles, California 90023
                  (Name and address of agent for service)

                               (323) 780-8250
       (Telephone number, including area code, of agent for service)

                                  Copy to:

                           PETER M. MENARD, ESQ.
                  Sheppard, Mullin, Richter & Hampton LLP
                     333 South Hope Street, 48th Floor
                       Los Angeles, California 90071
                               (213) 617-5483

                      CALCULATION OF REGISTRATION FEE
================================================================================
                                     Proposed         Proposed
                      Amount          maximum          maximum        Amount of
Title of securities   to be       offering price      aggregate     registration
to be registered   registered(1)   per share(2)    offering price      fee (3)
--------------------------------------------------------------------------------
Common Stock        3,600,000         $5.9375       $21,375,000        $3,350
================================================================================

(1)   This Registration Statement covers, in addition to the number of shares of
      Common Stock stated above, such  indeterminate  number of shares of Common
      Stock as may be issued upon exercise of options granted under the Employee
      Incentive Plan as a result of the adjustment provisions thereof.

(2)   Estimated   solely  for  purposes  of   calculating   the  amount  of  the
      registration  fee  pursuant to Rule 457 based upon the average of the high
      and low  prices of the Common  Stock as  reported  on the Nasdaq  National
      Market on November 2, 2000.

(3)   Pursuant  to  Instruction  E to Form S-8,  the  registration  fee does not
      include  $2,293 with respect to  1,600,000  shares  previously  registered
      pursuant to the predecessor plan  (Registration  No. 333-3448) for which a
      registration fee previously has been paid.
================================================================================

          This Registration Statement Includes a Total of 53 Pages.
                     Exhibit Index Appears on Page II-4.
                                                                   Page 1 of 53
PART I

            INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

            The document(s)  containing the  information  specified in Part I of
Form of S-8 will be sent or given to participants in the Employee Incentive Plan
(the  "Plan")  of  Tarrant   Apparel  Group,  a  California   corporation   (the
"Registrant"),  as specified in Rule 428(b)(1) promulgated by the Securities and
Exchange  Commission  (the  "Commission")  under the  Securities Act of 1933, as
amended (the  "Securities  Act").  Such document(s) are not being filed with the
Commission either as part of this  Registration  Statement or as prospectuses or
prospectus  supplements pursuant to Rule 424 in accordance with the Note to Part
I of Form S-8. These documents and the documents  incorporated by reference into
this  Registration  Statement  pursuant to Item 3 of Part II of Form S-8,  taken
together,  constitute a prospectus that meets the  requirements of Section 10(a)
of the Securities Act.

                                     I-1

                                                                   Page 2 of 53
PART II

             INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.
         ---------------------------------------

            The following documents  previously filed by the Registrant with the
Commission are incorporated in this Registration Statement by reference:

            (a) The Registrant's Annual Report on Form 10-K for the fiscal  year
ended December 31, 1999;

            (b) All other reports filed by the  Registrant  pursuant to Sections
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the fiscal year ended December 31, 1999; and

            (c) The description of the Common Stock of the Registrant  contained
in the Registrant's  Registration Statement on Form 8-A, including any amendment
or report filed for the purpose of updating such description.

            All documents  filed by the  Registrant  pursuant to Section  13(a),
13(c),  14 or  15(d)  of the  Exchange  Act  subsequent  to  the  date  of  this
Registration  Statement  and prior to the filing of a  post-effective  amendment
which  indicates  that all  securities  offered  hereby  have been sold or which
deregisters  all  securities  then  remaining  unsold,  shall  be  deemed  to be
incorporated  by reference  into this  Registration  Statement  and to be a part
hereof from the date of filing of such documents.

            Any  statement  made in a  document  incorporated  or  deemed  to be
incorporated  by reference  herein shall be deemed to be modified or  superseded
for  purposes  of this  Registration  Statement  to the extent  that a statement
contained  herein  or in any other  subsequently  filed  document  which is also
incorporated  or deemed to be  incorporated  by  reference  herein  modifies  or
supersedes  such statement.  Any such statement so modified or superseded  shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4.  Description of Securities.
         -------------------------

            Not applicable.

Item 5.  Interests of Named Experts and Counsel.
         --------------------------------------

            Not applicable.

Item 6.  Indemnification of Directors and Officers.
         -----------------------------------------

            Section  204  of  the  General  Corporation  Law  of  the  State  of
California  (the  "California  Law")  permits  the  limitation  of the  personal
liability of a director for monetary  damages in an action  brought by or in the
right of the  corporation  for breach of a director's  duties to the corporation
and  its   shareholders   under  certain   conditions  and  subject  to  certain
limitations.

            Section 317 of the  California  Law (i) permits  indemnification  of
directors, officers, employees and other agents of the corporation under certain
conditions  and  subject  to  certain  limitations  and (ii)  provides  that the
corporation  has the power to purchase and  maintain  insurance on behalf of its
directors,  officers,  employees and other agents against any liability asserted
against or incurred by them in such  capacity or arising out of their  status as
such.

                                   II-1
                                                                   Page 3 of 53
Article  Seven of the  Restated  Articles  of  Incorporation  of the
            Registrant provides as follows:

            SEVEN:   The  liability  of the  directors of this  corporation  for
                     monetary   damages  shall  be  eliminated  to  the  fullest
                     extent permissible under California law.

            Article  Eight of the  Restated  Articles  of  Incorporation  of the
            Registrant provides as follows:

            EIGHT:   This  corporation  is authorized to indemnify the directors
                     and  officers  of  this  corporation  to the fullest extent
                     permissible under California law.

            Section 5.05 of the Bylaws of the Registrant provides as follows:

                  Section 5.05.  Indemnification and Insurance.
                  ------------   -----------------------------

                  (a) Right to Indemnification. Each person who was or is made a
            party to or is threatened to be made a party to or is  involuntarily
            involved in any action, suit or proceeding, whether civil, criminal,
            administrative  or investigative  (hereinafter a  "Proceeding"),  by
            reason of the fact that he or she,  or a person of whom he or she is
            the legal  representative,  is or was a  director  of officer of the
            corporation  or is or was serving  (during such  person's  tenure as
            director or officer)  at the request of the  corporation,  any other
            corporation,  partnership,  joint venture, trust or other enterprise
            in any  capacity,  whether the basis of a  Proceeding  is an alleged
            action in an  official  capacity  as a director or officer or in any
            other  capacity  while  serving as a director or  officer,  shall be
            indemnified  and held  harmless  by the  corporation  to the fullest
            extent  authorized  by  California  Law,  as the same  exists or may
            hereafter be amended (but, in the case of any such  amendment,  only
            to the extent that such amendment permits the corporation to provide
            broader   indemnification   rights  than  said  law   permitted  the
            corporation  to  provide  prior  to  such  amendment),  against  all
            expenses,  liability and loss (including attorneys' fees, judgments,
            fines, or penalties and amounts to be paid in settlement) reasonably
            incurred or suffered by such  person in  connection  therewith.  The
            right  to  indemnification  conferred  in this  Section  shall  be a
            contract  right  and  shall  include  the  right  to be  paid by the
            corporation  the  expenses  incurred in  defending a  Proceeding  in
            advance  of the  final  disposition;  provided,  however,  that,  if
            California  Law requires the payment of such  expenses in advance of
            the  final  disposition  of a  Proceeding  shall be made  only  upon
            receipt by the corporation of an undertaking by or on behalf of such
            director  or officer to repay all  amounts so  advanced  if it shall
            ultimately  be  determined  that such  director  or  officer  is not
            entitled  to be  indemnified  under this  Section or  otherwise.  No
            amendment  to or repeal of this  Section 5.05 shall apply to or have
            any effect on any right to  indemnification  provided hereunder with
            respect to any acts or omissions  occurring  prior to such amendment
            or repeal.

                  (b) Right of Claimant to Bring Suit.  If a claim for indemnity
            under  paragraph  (a) of  this  Section  is not  paid in full by the
            corporation  within  ninety (90) days after a written claim has been
            received by the corporation, the claimant may at any time thereafter
            bring suit against the  corporation  to recover the unpaid amount of
            the claim and, if successful in whole or in part, the claimant shall
            also be entitled to be paid the  expense of  prosecuting  such claim
            including   reasonable   attorneys'   fees  incurred  in  connection
            therewith.  It shall be a defense to any such action  (other than an
            action brought to enforce a claim for expenses incurred in defending
            a Proceeding in advance of its final  disposition where the required
            undertaking,   if  any  is  required,   has  been  tendered  to  the
            corporation)  that the claimant has not met the standards of conduct
            which make it permissible  under  California Law for the corporation
            to indemnify the claimant for the amount claimed,  but the burden of
            proving  such  defense  shall  be on the  corporation.  Neither  the
            failure  of the  corporation  (including  its  Board  of  Directors,
            independent  legal  counsel,  or its  shareholders)  to have  made a
            determination   prior  to  the  commencement  of  such  action  that

                                   II-2
                                                                   Page 4 of 53
indemnification  of the  claimant  is  proper  in the  circumstances
            because he or she has met the  applicable  standard  of conduct  set
            forth  in  California  Law,  nor  an  actual  determination  by  the
            corporation  (including  its Board of Directors,  independent  legal
            counsel,  or its  shareholders)  that the  claimant has not met such
            applicable standard of conduct,  shall be a defense to the action or
            create a  presumption  that the claimant has not met the  applicable
            standard of conduct.

                  (c) Non-Exclusivity  of Rights.  The  rights conferred in this
            Section  shall  not be  exclusive  of any  other  rights  which  any
            director,  officer,  employee or agent may have or hereafter acquire
            under  any  statute,   provision   of  the   Restated   Articles  of
            Incorporation,   bylaw,   agreement,   vote   of   shareholders   or
            disinterested  directors or otherwise,  to the extent the additional
            rights to indemnification are authorized in the Restated Articles of
            Incorporation of the corporation.

                  (d) Insurance.  In  furtherance  and  not in limitation of the
            powers conferred by statute:

                        (1) the corporation may purchase and maintain  insurance
            on behalf of any person who is or was a director,  officer, employee
            or agent of the  corporation,  or is serving  at the  request of the
            corporation  as a  director,  officer,  employee or agent of another
            corporation,  partnership,  joint venture, trust or other enterprise
            against  any  expense,   liability  or  loss,  whether  or  not  the
            corporation  would have the power to  indemnify  the person  against
            that expense, liability or loss under California Law.

                        (2) the  corporation  may create a trust  fund,  grant a
            security  interest  and/or  use  other  means  (including,   without
            limitation,  letters of credit,  surety bonds  and/or other  similar
            arrangements),   as  well  as   enter   into   contracts   providing
            indemnification  to the full extent  authorized  or permitted by law
            and including as part thereof  provisions with respect to any or all
            of the foregoing to ensure the payment of such amounts as may become
            necessary  to  effect   indemnification  as  provided  therein,   or
            elsewhere.

                  (e) Indemnification of Employees and Agents of the Corporation
            Corporation. The corporation may, to the extent authorized from time
            to time by the Board of Directors,  grant rights to indemnification,
            including  the  right  to be paid by the  corporation  the  expenses
            incurred  in  defending  a  Proceeding   in  advance  of  its  final
            disposition,  to any  employee  or agent of the  corporation  to the
            fullest  extent of the  provisions of this Section or otherwise with
            respect  to the  indemnification  and  advancement  of  expenses  of
            directors and officers of the corporation.

                  (f) Amendment by Shareholders.  Any action by the shareholders
            with respect to any  amendment to or the  elimination  of all or any
            part of this Article V, Section 5.05,  shall require approval by the
            holders of 66-2/3% of the outstanding shares of the corporation.

            The  Registrant  has entered into  indemnification  agreements  with
certain of its directors and executive  officers which require the Registrant to
indemnify such persons to the fullest extent permitted by applicable law.

            The Registrant  maintains an insurance  policy pursuant to which the
directors  and officers of the  Registrant  are  insured,  within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of certain claims,  actions, suits or proceedings,  and certain
liabilities which might be imposed as a result of such claims, actions, suits or
proceedings,  which may be  brought  against  them by  reason of their  being or
having been such directors and officers.

Item 7.  Exemption from Registration Claimed.
         -----------------------------------

            Not applicable.

                                   II-3
                                                                   Page 5 of 53
Item 8.  Exhibits.
         --------

      Exhibit
      Number      Description
      ------      -----------

        3.1       Restated Articles of Incorporation of the Registrant(1)
        3.2       Restated Bylaws of the Registrant(1)
        5.1       Opinion of Sheppard, Mullin, Richter & Hampton LLP
       23.1       Consent of Sheppard, Mullin, Richter & Hampton LLP
                     (see Exhibit 5.1)
       23.2       Consent of Independent Auditors (Ernst & Young  LLP)
       24.1       Power of Attorney (See page II-6)
       99.1       Employee Incentive Plan
       99.2       Form of Incentive Stock Option Agreement
       99.3       Form of Non-Qualified Stock Option Agreement

Item 9.  Undertakings.
         ------------

            (a)   The undersigned Registrant hereby undertakes:

                  (1) To file,  during any  period in which  offers or sales are
being made, a post-effective amendment to this Registration Statement:

                        (i)   To  include  any  prospectus  required  by Section
10(a)(3) of the Securities Act of 1933;

                       (ii)   To  reflect  in the prospectus any facts or events
arising after the  effective  date of this  Registration  Statement (or the most
recent post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and

                      (iii)   To  include  any material information with respect
to the  plan of  distribution  not  previously  disclosed  in this  Registration
Statement  or any  material  change  to such  information  in this  Registration
Statement;

            Provided,  however,  that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information  required to be included in a post-effective  amendment
by those  paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant  pursuant to Section 13 or Section 15(d) of the
Securities  Exchange  Act of 1934 that are  incorporated  by  reference  in this
Registration Statement.

                  (2) That for the purpose of  determining  any liability  under
the Securities Act of 1933, each such  post-effective  amendment shall be deemed
to be a new registration  statement  relating to the securities offered therein,
and the  offering  of such  securities  at that  time  shall be deemed to be the
initial bona fide offering thereof.

                  (3) To remove from  registration by means of a  post-effective
amendment  any of the  securities  being  registered  which remain unsold at the
termination of the offering.

            (b) The undersigned  Registrant hereby undertakes that, for purposes
of determining  any liability  under the Securities Act of 1933,  each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities  Exchange  Act of 1934  that is  incorporated  by  reference  in this

--------

(1)   Filed as an exhibit to the Registrant's Registration Statement on Form S-1
      filed with the Securities and Exchange Commission on May 4, 1995 (File No.
      33-91874).

                                   II-4
                                                                   Page 6 of 53
Registration  Statement  shall  be  deemed  to be a new  registration  statement
relating to the securities  offered herein,  and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

            (c) Insofar as  indemnification  for  liabilities  arising under the
Securities  Act of 1933 may be permitted to directors,  officers or  controlling
persons of the Registrant  pursuant to the foregoing  provisions,  or otherwise,
the  Registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Securities  Act of 1933 and is,  therefore,  unenforceable.  In the event
that a claim  for  indemnification  against  such  liabilities  (other  than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling  person of the Registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities being registered,  the Registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification  by it is  against  public  policy  as  expressed  in  the
Securities  Act of 1933 and will be governed by the final  adjudication  of such
issue.

                                   II-5
                                                                   Page 7 of 53
SIGNATURES

            Pursuant to the  requirements  of the  Securities  Act of 1933,  the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of Los Angeles, State of California,  on this tenth day
of November, 2000.

                                   TARRANT APPAREL GROUP

                                   By   /S/ Scott Briskie
                                      ________________________________________
                                            Scott Briskie,
                                            Vice President-Finance and
                                            Chief Financial Officer

            KNOW ALL MEN BY THESE  PRESENTS,  that each person  whose  signature
appears below constitutes and appoints each of Gerard Guez and Scott Briskie his
true  and  lawful   attorney-in-fact   and  agent,   each  with  full  power  of
substitution,  for  him  and in his  name,  place  and  stead,  in any  and  all
capacities, to sign any or all amendments to this Registration Statement, and to
file the same with all exhibits  thereto,  and all other documents in connection
therewith, with the Securities and Exchange Commission,  granting unto each said
attorney-in-fact  and agent with full power and authority to do and perform each
and every  act and thing  requisite  and  necessary  to be done in and about the
premises,  as  fully  to all  intents  and  purposes  as he might or could do in
person,  hereby ratifying and confirming all that each said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

            Pursuant  to the  requirements  of the  Securities  Act of 1933,  as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature                                     Title                                    Date
         ---------                                     -----                                    ----
/S/ Gerard Guez                    Chairman of the Board, Chief Executive            November 10, 2000
   _____________________________        Officer and Director (Principal Executive
        Gerard Guez                     Officer)

     /S/ Todd Kay                       Vice Chairman, President and Director             November 10, 2000
   _____________________________
         Todd Kay

     /S/ Barry S. Aved                  Director                                          November 10, 2000
   _____________________________
       Barry S. Aved

     /S/ Scott Briskie                  Vice President - Finance, Chief Financial         November 10, 2000
   _____________________________        Officer (Principal Financial and Accounting
       Scott Briskie                    Officer) and Director

     /S/ Nicolas Berggruen              Director                                          November 10, 2000
   _____________________________
       Nicolas Berggruen

     /S/ James R. Miller                Director                                          November 10, 2000
   _____________________________
        James R. Miller

     /S/ Karen S. Wasserman             Executive Vice President, General                 November 10, 2000
   _____________________________        Merchandising Manager and Director
       Karen S. Wasserman
II-6
                                                                   Page 8 of 53
EXHIBITS
                                      TO
                                   FORM S-8

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                ---------------

                             TARRANT APPAREL GROUP

                                                                   Page 9 of 53
EXHIBIT INDEX

Exhibit                                                              Sequential
Number      Description                                              Page Number
------      -----------                                              -----------

  3.1       Restated Articles of Incorporation of the Registrant(1)      __
  3.2       Restated Bylaws of the Registrant(1)                         __
  5.1       Opinion of Sheppard, Mullin, Richter & Hampton LLP           11
 23.1       Consent of Sheppard, Mullin, Richter & Hampton LLP
                (see Exhibit 5.1)                                        __
 23.2       Consent of Independent Auditors (Ernst & Young  LLP)         15
 24.1       Power of Attorney (See page II-6)                            __
 99.1       Employee Incentive Plan                                      17
 99.2       Form of Incentive Stock Option Agreement                     39
 99.3       Form of Non-Qualified Stock Option Agreement                 47

--------

(1)   Filed as an exhibit to the Registrant's Registration Statement on Form S-1
      filed with the Securities and Exchange Commission on May 4, 1995 (File No.
      33-91874).

                                                                  Page 10 of 53
EXHIBIT 5.1

              Opinion of Sheppard, Mullin, Richter & Hampton LLP

                                                                  Page 11 of 53
Exhibit 5.1
                                                                     -----------

                               November 10, 2000

Tarrant Apparel Group
3151 East Washington Boulevard
Los Angeles, California  90023

Re:   Registration Statement on Form S-8
      ----------------------------------

Gentlemen:

            At your request, we have examined the Registration Statement on Form
S-8 (the  "Registration  Statement")  to be filed by Tarrant  Apparel  Group,  a
California  corporation  (the  "Company"),  with  the  Securities  and  Exchange
Commission (the "SEC") in connection with the registration  under the Securities
Act of 1933,  as amended (the  "Securities  Act"),  of  3,600,000  shares of the
Company's common stock (the "Common Stock"), that may be issued in the aggregate
pursuant to awards  granted under the  Company's  Employee  Incentive  Plan (the
"Plan").

            In rendering  this  opinion,  we have  examined  only the  following
documents:

            1.   The  Restated  Articles of  Incorporation  of the  Company,  as
                 certified by the  California  Secretary of State as of November
                 8, 2000;

            2.   The Bylaws of the Company, as certified by the Secretary of the
                 Company as of November 10, 2000;

            3.   The Plan;

            4.   The forms of Incentive Stock Option Agreement and Non-Qualified
                 Stock Option Agreement  (collectively  the  "Agreements") to be
                 used in connection with the Plan;

                                                                  Page 12 of 53
Tarrant Apparel Group
November 10, 2000
Page 2

            5.   Resolutions, adopted by the Company's Board of Directors as  of
                 January 13, 1997,  April 2, 1999 and July 17, 2000, and by  the
                 shareholders of the Company as of May 2, 1997 and May 3,  1999,
                 pertaining to the adoption of the Plan, the Agreements and  the
                 Registration Statement; and

            6.   The Registration Statement.

            With  respect  to the  foregoing  documents,  we  have  assumed  the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to originals of all documents submitted to us as
certified or reproduced  copies.  We also have obtained from the officers of the
Company certificates as to all factual matters necessary for the purpose of this
opinion and,  insofar as this opinion is based on such matters of fact,  we have
relied on such certificates without independent investigation.

            Based  solely  upon the  foregoing  and  assuming,  without  further
inquiry,  that (i) all awards  granted under the Plan to date have been, and all
awards to be  granted  under  the Plan  will be,  duly and  validly  granted  in
accordance with the terms of the Plan, (ii) the  consideration for the shares of
Common Stock to be issued  pursuant to such awards will be received prior to the
issuance thereof, (iii) the shares of Common Stock to be issued pursuant to such
awards  will be  issued  in  accordance  with  the  terms  of the  Plan  and the
applicable  Agreement,  (iv) the  Registration  Statement will become  effective
under the  Securities  Act prior to the  issuance of any shares of Common  Stock
under  the  Plan  and  no  stop  order  suspending  the   effectiveness  of  the
Registration  Statement  shall  have been  issued  and no  proceedings  for that
purpose  shall  have  been   instituted  or  be  pending  before  the  SEC,  (v)
prospectuses  will be  updated  and  delivered  to  participants  in the Plan as
required by the Securities Act and the rules and regulations  promulgated by the
SEC thereunder,  and (vi) the grant of awards under the Plan and the issuance of
shares of Common Stock  pursuant to such awards will comply with the  securities
laws of each state or jurisdiction applicable thereto (other than the Securities
Act), upon which assumptions the following opinion is expressly conditioned,  it
is the opinion of the  undersigned  that the  3,600,000  shares of Common  Stock
issuable by the Company pursuant to awards granted pursuant to the Plan will be,
when issued and delivered  against payment therefor in accordance with the Plan,
the  applicable  Agreement  and the  Registration  Statement,  duly  authorized,
validly issued, fully paid and non-assessable.

                                                                  Page 13 of 53
Tarrant Apparel Group
November 10, 2000
Page 3

            This opinion is limited to the General  Corporation Law of the State
of California and the Securities Act and the rules and  regulations  promulgated
by the SEC thereunder,  to present judicial interpretations thereof and to facts
as they presently  exist.  In rendering  this opinion,  we have no obligation to
revise or  supplement  it should the current laws of the State of  California or
the  Securities  Act or such rules and  regulations  be  changed by  legislative
action,  judicial  decision or otherwise or if we become aware of any facts that
change the opinion expressed herein after the date hereof.

            This opinion is issued to you solely for use in connection  with the
Registration  Statement and is not to be quoted or otherwise  referred to in any
financial  statements of the Company or related document,  nor is it to be filed
with or furnished to any  government  agency or other person,  without the prior
written consent of the undersigned in each instance.

            We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

                                     Respectfully submitted,

                                     SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

                                                                  Page 14 of 53
EXHIBIT 23.2

              Consent of Independent Auditors (Ernst & Young LLP)

                                                                  Page 15 of 53
Exhibit 23.2
                                                                    ------------

                       CONSENT OF INDEPENDENT AUDITORS
                       -------------------------------

      We consent to the incorporation by reference in the Registration Statement
      (Form S-8 333- 0000) pertaining to the Employee  Incentive Plan of Tarrant
      Apparel  Group of our  report  dated  March 17,  2000 with  respect to the
      consolidated  financial  statements and schedules of Tarrant Apparel Group
      for the year ended December 31, 1999 included in the Annual Report on Form
      10-K of Tarrant Apparel Group for the year ended December 31, 1999.

                                    ERNST & YOUNG LLP

Los Angeles, California
November 10, 2000

                                                                  Page 16 of 53
EXHIBIT 99.1

                            Employee Incentive Plan

                                                                  Page 17 of 53
Exhibit 99.1
                                                                    ------------

                            TARRANT APPAREL GROUP
                           EMPLOYEE INCENTIVE PLAN
                   (Formerly the "1995 Stock Option Plan")
                  (Amended and Restated as of May 2, 1997)
                         (Amended as of May 3, 1999)

            Tarrant Apparel Group, a California corporation (the "Company"),  by
action of both its Compensation Committee and its Board of Directors as a whole,
hereby adopts the Tarrant  Apparel Group  Employee  Incentive  Plan (the "Plan")
with the following provisions:

            1.  Purpose.  The  purpose of the Plan is to promote and advance the
interests  of the Company and its  shareholders  by enabling the Company and its
Subsidiaries to attract, retain and motivate officers, directors,  employees and
independent  contractors  by providing for  performance-based  benefits,  and to
strengthen  the  mutuality of interests  between such persons and the  Company's
shareholders.   The  Plan  is   designed   to  meet  this   intent  by  offering
performance-based  stock and cash  incentives and other  equity-based  incentive
awards,  thereby  providing a  proprietary  interest in pursuing  the  long-term
growth, profitability and financial success of the Company.

            2.    Definitions.  For  purposes  of this Plan, the following terms
shall have the meanings set forth below:

                  (a)  "Award"  or  "Awards"  means an award or grant  made to a
Participant under Sections 6 through 10, inclusive, of the Plan.

                  (b)  "Board" means the Board of Directors of the Company.

                  (c)  "Code" means the  Internal  Revenue  Code of 1986,  as in
effect  from  time  to time  or any  successor  thereto,  together  with  rules,
regulations and authoritative interpretations promulgated thereunder.

                  (d)  "Committee" means the Compensation Committee of the Board
that is provided for in Section 3 of the Plan.

                  (e)  "Common Stock"  means the Common  Stock of the Company or
any security of the Company issued in substitution, exchange or lieu thereof.

                  (f)  "Company"  means  Tarrant  Apparel  Group,  a  California
corporation,  or a Subsidiary or successor  corporation,  or any holding company
for Tarrant Apparel Group which is a parent of the Company within the meaning of
Code Section 424(e).

                                   -1-

                                                                  Page 18 of 53
(g)  "Date of  Grant"  means  the date the  Committee  (or the
Board,  as the case may be) takes formal action  designating  that a Participant
shall receive an Award,  notwithstanding  the date the  Participant  accepts the
Award, the date the Company and the Participant  enter into a written  agreement
with respect to the Award, or any other date.

                  (h)  "Effective  Date"  means the date the Plan is approved by
the holders of a majority of the shares of Common Stock  represented  and voting
and  entitled  to vote at a meeting  of the  shareholders  of the  Company or by
written  consent  of a  majority  of the  outstanding  shares of  Common  Stock,
provided such approval of the  shareholders  of the Company occurs within twelve
(12)  months  before or after the  Committee  and the Board both adopt the Plan.
Awards may be granted prior to the Effective Date, but payment under such Awards
is contingent upon shareholder approval as provided above in this definition. In
the event the Company  does not obtain  shareholder  approval  of the Plan,  any
Awards granted pursuant to the Plan shall be rescinded automatically.

                  (i)  "Exchange Act" means the Securities Exchange Act of 1934,
as amended and in effect from time to time, or any successor statute.

                  (j)  "Fair Market Value" means on any given date,  the closing
price for the Common Stock on such date,  or, if the Common Stock was not traded
on such date,  on the next  preceding  day on which the Common Stock was traded,
determined in accordance with the following rules.

                            (i)  If  the  Common Stock is admitted to trading or
listing on a national securities exchange registered under the Exchange Act, the
closing  price for any day shall be the last reported sale price regular way, or
in the case no such reported  sale takes place on such date,  the average of the
last  reported bid and ask prices  regular way, in either case on the  principal
national securities exchange on which the Common Stock is admitted to trading or
listed, or

                           (ii)  If  not  listed  or  admitted to trading on any
national  securities  exchange,  the last sale price of the Common  Stock on the
National  Association of Securities Dealers Automated  Quotation National Market
System ("NMS") or, in case no such reported sale takes place, the average of the
closing bid and ask prices on such date, or

                                   -2-

                                                                  Page 19 of 53
(iii)  If  not  quoted  on the NMS, the average of the
closing bid and ask prices of the Common  Stock on the National  Association  of
Securities  Dealers  Automated  Quotation  System  ("NASDAQ") or any  comparable
system, or

                           (iv)  If  the Common Stock is not listed on NASDAQ or
any comparable system, the closing bid and ask prices as furnished by any member
of the National  Association of Securities Dealers,  Inc., selected from time to
time by the Company for that purpose.

                  (k)  "Incentive  Stock Option" means any Stock Option  granted
pursuant to the  provisions  of Section 6 of the Plan that is intended to be and
is specifically  designated as an "incentive stock option" within the meaning of
Section 422 of the Code.

                  (l)  "Non-Qualified  Stock  Option"  means  any  Stock  Option
granted  pursuant  to the  provisions  of  Section  6 of the Plan that is not an
Incentive Stock Option.

                  (m)  "Participant"  means an  officer,  director,  employee or
independent  contractor  with  respect  to the  Company or a  Subsidiary  who is
granted an Award under the Plan.

                  (n)  "Performance  Award"  means  an Award granted pursuant to
the  provisions of Section 9 of the Plan,  the vesting of which is contingent on
the attainment of specified performance criteria.

                  (o)  "Performance   Share  Grant"  means  an  Award  of  units
representing  shares of Common  Stock  granted  pursuant  to the  provisions  of
Section 9 of the Plan.

                  (p)  "Performance Unit Grant" means an Award of monetary units
granted pursuant to the provisions of Section 9 of the Plan.

                  (q)  "Plan"   means   this   Tarrant  Apparel  Group  Employee
Incentive Plan, as set forth herein and as it may be hereafter  amended and from
time to time in effect.

                  (r)   "Restricted  Award"  means  an Award granted pursuant to
the provisions of Section 8 of the Plan.

                  (s)  "Restricted  Stock  Grant"  means an Award of  shares  of
Common Stock granted pursuant to the provisions of Section 8 of the Plan.

                                   -3-

                                                                  Page 20 of 53
(t)  "Restricted   Unit  Grant"   means   an  Award  of  units
representing  shares of Common  Stock  granted  pursuant  to the  provisions  of
Section 8 of the Plan.

                  (u)  "Stock  Appreciation  Right"  means  an  Award to benefit
from the  appreciation  of Common Stock  granted  pursuant to the  provisions of
Section 7 of the Plan.

                  (v)  "Stock  Option"  means  an  Award  to  purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan.

                  (w)  "Subsidiary"  means any  corporation or entity which is a
subsidiary of the Company  within the meaning of Section  424(f) of the Code (or
successor sections).

                  (x)  "Ten Percent Shareholder"  means a person who owns (after
taking into account the  constructive  ownership  rules of Section 424(d) of the
Code or  successor  sections)  more than ten  percent  (10%) of the stock of the
Company.

            3.    Administration.
                  --------------

                  (a)  The  Plan  is being established and shall be administered
by the  Compensation  Committee to be appointed  from time to time by the Board.
The Committee shall be comprised solely of not less than two persons who are all
"outside  directors" within the meaning of Section  162(m)(4)(C) of the Code and
not less than the  minimum  number (if any) of members of the Board  required by
Rule 16b-3 of the Exchange Act (or any successor  rule).  All Committee  members
must also be "disinterested persons" for securities law purposes. Members of the
Committee  shall serve at the  pleasure of the Board and the Board may from time
to time remove members from, or add members to, the Committee.  No person who is
not an "outside director" within the meaning of Section 162(m)(4)(C) of the Code
and a  "disinterested  person" may serve on the  Committee.  Appointment  to the
Committee of any person who is not an "outside  director"  and a  "disinterested
person" shall  automatically  be null and void,  and any person on the Committee
who ceases to be an "outside  director" for purposes of Section  162(m)(4)(C) of
the Code and a "disinterested  person" shall  automatically  and without further
action cease to be a member of the Committee.

                  (b)  A  majority  of  the  members  of  the  Committee   shall
constitute a quorum for the transaction of business.  Action approved in writing
by a majority of the members of the Committee then serving shall be as effective
as if the action had been taken by  unanimous  vote at a meeting duly called and
held.  Two  Committee  members  have signed the  original  Plan  document  below
signifying that the Committee,  as well as the Board as a whole, has adopted and
established this Plan.

                                   -4-

                                                                  Page 21 of 53
(c)  The Committee is authorized to construe and interpret the
Plan, to promulgate,  amend,  and rescind rules and  procedures  relating to the
implementation  of the Plan, and to make all other  determinations  necessary or
advisable for the  administration of the Plan. Any determination,  decision,  or
action of the Committee in  connection  with the  construction,  interpretation,
administration,   or   application  of  the  Plan  shall  be  binding  upon  all
Participants and any person claiming under or through any Participant.  Although
the  Committee  is   anticipated   to  make  certain   Awards  that   constitute
"performance-based  compensation"  within the meaning of Section 162(m)(4)(C) of
the Code, the Committee is also expressly  authorized to make Awards that do not
constitute   "performance-based   compensation"   within  the  meaning  of  that
provision.  By way of example, and not by way of limitation,  the Committee,  in
its sole and  absolute  discretion,  may  issue an Award  that is not based on a
performance  goal,  as set forth in (g) below,  but is based solely on continued
service to the Company.

                  (d)  The Committee  may  employ or retain  persons  other than
members  of  the   Committee   to  assist  the   Committee   to  carry  out  its
responsibilities  under such  conditions  and  limitations  as it may prescribe,
except  that the  Committee  may not  delegate  its  authority  with  regard  to
selection for  participation of and the granting of Awards to persons subject to
Section  16 of the  Exchange  Act or with  regard  to any of the  duties  of the
Committee  under Section 162(m) of the Code necessary for awards under this Plan
to  qualify  as   "performance-based   compensation"  for  purposes  of  Section
162(m)(4)(C) of the Code.

                  (e)  The  Committee  is  expressly  authorized  to  make  such
modifications  to the Plan as are necessary to effectuate the intent of the Plan
as a result of any  changes in the income tax,  accounting,  or  securities  law
treatment of Participants and the Plan.

                  (f)  The Company shall effect the granting of Awards under the
Plan in accordance with the determinations  made by the Committee,  by execution
of instruments in writing in such form as approved by the Committee.

                  (g)  The Committee, in the case of each Award, shall establish
in writing at the time of making the Award the  business  criterion  or criteria
(if any) that must be satisfied for payment pursuant to the Award and the amount
payable upon satisfaction of those standards.  Those standards are also referred
to herein as  performance  goals.  Such  criterion or criteria (if any) shall be
established prior to the Participant rendering the services to which they relate
and while the outcome is substantially uncertain or at such other time permitted
under Treasury Regulations Section 1.162-27(e)(2). In carrying out these duties,
the Committee shall use objective  written  standards for establishing  both the
performance  goal and the amount of  compensation  such that a third  party with
knowledge of the relevant  facts would be able to determine  whether and to what
extent the goal has been satisfied and the amount of compensation  payable.  The
Committee  shall provide a copy of the document  setting forth such standards to
the affected Participant and shall retain such written material in its permanent
books and records.

                                   -5-

                                                                  Page 22 of 53
(h)  The Committee  may not  increase  an Award once  granted,
although it may grant additional Awards to the same Participant.

                  (i)  The Committee  shall  keep the Board  informed  as to its
actions and make  available  to the Board its books and  records.  Although  the
Compensation  Committee has the authority to establish and  administer the Plan,
the Board reserves the right at any time to abolish the Committee and administer
the Plan itself.

                  (j)  In  the  case of remuneration that is intended to qualify
as performance-based compensation for purposes of Code Section 162(m)(4)(C), the
Committee and the Board shall  disclose to the  shareholders  of the Company the
material terms under which such  remuneration  is to be paid under the Plan, and
shall  seek  approval  of the  shareholders  by a  majority  vote in a  separate
shareholder vote before payment of such  remuneration.  For these purposes,  the
material terms include the  individuals  (or class of  individuals)  eligible to
receive such  compensation,  a description of the business criterion or criteria
on which  the  performance  goal is  based,  either  the  maximum  amount of the
compensation  to be paid  thereunder or the formula used to calculate the amount
of  compensation if the  performance  goal is attained,  and such other terms as
required under Code Section 162(m)(4)(C) and the Treasury Regulations thereunder
determined  from time to time.  The  foregoing  actions  shall be  undertaken in
conformity  with  the  rules  of  Code  Section  162(m)(4)(C)(ii)  and  Treasury
Regulations promulgated thereunder. Such remuneration shall not be payable under
this Plan in the absence of such an approving  shareholder  vote. In the case of
remuneration that is not intended to qualify as  performance-based  compensation
under Code Section  162(m)(4)(C),  the  Committee  and the Board shall make such
disclosures  to and seek such approval from the  shareholders  of the Company as
they reasonably determine are required by law.

                  (k)  To  the  extent required under Code Section 162(m)(4)(C),
before any payment of  remuneration  under this Plan, the Committee must certify
in writing that the performance  goals and any other material terms of the Award
were in fact  satisfied.  Such  certification  shall be kept with the  permanent
books and records of the Committee, and the Committee shall provide the affected
Participant with a copy of such certification.

                  (l)  The Committee  shall use its good faith  best  efforts to
comply with the requirements of Section 162(m)(4)(C) of the Code for Awards that
are intended to qualify under that section as "performance-based  compensation,"
but shall have no liability to the Company or any  recipient in the event one or
more Awards do not so qualify.

                                   -6-

                                                                  Page 23 of 53
4.    Duration of and Common Stock Subject to the Plan.
                  ------------------------------------------------

                  (a)  Term.  The  Plan  shall  terminate   automatically on the
tenth  (10th)  anniversary  date of the  date  of  adoption  of the  Plan by the
Committee,  the date of adoption of the Plan by the Board,  or the tenth  (10th)
anniversary date of the date of shareholder  approval of the Plan,  whichever is
earlier  (subject to earlier  termination  by action of the Board),  except with
respect to Awards then outstanding.

                  (b)  Shares of Common  Stock Subject to the Plan.  The maximum
total  number of shares of Common Stock with  respect to which  aggregate  stock
Awards may be granted under the Plan shall be Three Million Six Hundred Thousand
(3,600,000).

                            (i)  All of the amounts stated in this Paragraph (b)
are subject to adjustment as provided in Section 15 below.

                           (ii)  For  the  purpose of computing the total number
of shares of Common Stock  available  for Awards under the Plan,  there shall be
counted  against the foregoing  limitations the number of shares of Common Stock
subject to issuance upon exercise or used for payment or settlement of Awards.

                          (iii)  If any Awards are forfeited, terminated, expire
unexercised,  settled  or paid in cash in lieu of stock or  exchanged  for other
Awards, the shares of Common Stock which were theretofore subject to such Awards
shall  again be  available  for  Awards  under  the Plan to the  extent  of such
forfeiture or expiration of such Awards.

                  (c)  Source of Common Stock.  Common Stock which may be issued
under the plan may be either  authorized  and unissued  shares or issued  shares
which have been reacquired by the Company.  No fractional shares of Common Stock
shall be issued under the Plan.

            5.    Eligibility.  Incentive Stock Options may be granted under the
Plan only to employees  (including  employee  directors)  of the Company and its
Subsidiaries.  Officer,  directors,  employees,  and independent contractors are
eligible to receive  Non-Qualified  Stock Options,  Stock  Appreciation  Rights,
Restricted Awards, Performance Awards and other Awards under the Plan.

            6.    Stock Options.  Stock Options granted under the Plan may be in
the form of Incentive Stock Options or Non-Qualified Stock Options (collectively
referred to as "Stock Options"). Stock Options shall be subject to the terms and
conditions set forth below.  Each written Stock Option  agreement  shall contain
such  additional  terms  and  conditions,  not  inconsistent  with  the  express
provisions of the Plan, as the Committee shall deem desirable.

                                   -7-

                                                                  Page 24 of 53
(a)  Grant.  Stock Options  shall be granted under the Plan on
such terms and conditions not  inconsistent  with the provisions of the Plan and
pursuant to written  agreements  with the optionee in such form as the Committee
may from time to time approve in its sole and absolute discretion.  The terms of
individual  Stock Option  agreements  need not be  identical.  Each Stock Option
agreement  shall state  specifically  whether it is intended to be an  Incentive
Stock Option agreement or a Non-Qualified Stock Option agreement.  Stock Options
may be granted alone or in addition to other Awards under the Plan.  Only common
law employees may receive grants of Incentive  Stock  Options.  No person may be
granted  (in any  calendar  year)  options  to  purchase  more than one  hundred
thousand  (100,000)  shares of Common Stock  (subject to adjustment  pursuant to
Section 15). The foregoing  sentence is an annual limitation on grants and not a
cumulative  limitation.  Any Stock  Option  repriced  during a year shall  count
against this annual limitation.

                  (b)  Stock  Option  Price.  The  exercise  price  per share of
Common  Stock  purchasable  under a Stock  Option  shall  be  determined  by the
Committee at the time of grant.  In no event shall the exercise price of a Stock
Option be less than one hundred  percent  (100%) of the Fair Market Value of the
Common Stock on the Date of the Grant of such Stock Option. In the case of a Ten
Percent  Shareholder,  the exercise price shall be not less than one hundred ten
percent  (110%)  of the Fair  Market  Value of the  Common  Stock on its Date of
Grant.

                  (c)  Option Term. The term of each Stock Option shall be fixed
by the  Committee.  However,  the term of any Stock  Option shall not exceed ten
(10) years after the date such Stock Option is granted. Furthermore, the term of
an Incentive Stock Option granted to a Ten Percent  Shareholder shall not exceed
five (5) years after its Date of Grant.

                  (d)  Exercisability.  A Stock Option shall be  exercisable  at
such  time or  times  and  subject  to such  terms  and  conditions  as shall be
determined  by the  Committee  at the Date of Grant and set forth in the written
Stock Option agreement. However, no Stock Option shall be exercisable during the
first six (6) months  after the date such  Stock  Option is  granted.  A written
Stock  Option  agreement  may,  if  permitted  pursuant  to  its  terms,  become
exercisable in full upon the occurrence of events selected by the Committee that
are beyond the  control of the  Participant  (including,  but not  limited to, a
Change in Control of the Company as set forth in Section 16 below).

                  (e)  Method of Exercise.  A Stock Option may be  exercised, in
whole or in part, by giving written notice of exercise to the Company specifying
the  number of shares to be  purchased.  Such  notice  shall be  accompanied  by

                                   -8-

                                                                  Page 25 of 53
payment in full of the purchase  price (i) in cash or (ii) if  acceptable to the
Committee,  in shares of Common  Stock  already  owned by the  Participant  or a
promissory  note.  The  Committee  may also  permit  Participants,  either  on a
selective or aggregate  basis, to  simultaneously  exercise Options and sell the
shares of Common  Stock  thereby  acquired,  pursuant to a brokerage  or similar
arrangement,  approved in advance by the  Committee,  and use the proceeds  from
such sale as payment of part or all of the purchase price of such shares.

                  (f)  Special Rule for Incentive Stock Options. With respect to
Incentive  Stock Options granted under the Plan, the aggregate Fair Market Value
(determined  as of the Date of Grant) of the  number of shares  with  respect to
which  Incentive  Stock  Options  are  exercisable  for  the  first  time  by  a
Participant  during any calendar  year (under this Plan and all other  incentive
stock  option plans of this  Company or its  Subsidiaries)  shall not exceed one
hundred  thousand  dollars  ($100,000) or such other limit as may be required by
the Code.

            7.    Stock  Appreciation  Rights.  The  grant of Stock Appreciation
Rights under the Plan shall be subject to the  following  terms and  conditions.
Furthermore,  the Stock Appreciation  Rights shall contain such additional terms
and  conditions,  not  inconsistent  with the express  terms of the Plan, as the
Committee  shall  deem  desirable.  The terms of each Stock  Appreciation  Right
granted  shall be set forth in a written  agreement  between the Company and the
Participant  receiving  such  grant.  The terms of such  agreements  need not be
identical.

                  (a)  Stock Appreciation  Rights. A Stock Appreciation Right is
an Award  determined  by the  Committee  entitling a  Participant  to receive an
amount  equal to the excess of the Fair Market  Value of a share of Common Stock
on a fixed date,  which shall be the date  concluding a measuring  period set by
the Committee upon granting the Stock  Appreciation  Right, over the Fair Market
Value of a share of Common Stock on the Date of Grant of the Stock  Appreciation
Right,  multiplied  by the number of shares of Common Stock subject to the Stock
Appreciation  Right.  No Stock  Appreciation  Rights  granted in any year to any
person may be measured  by an amount of shares of Common  Stock in excess of one
hundred thousand (100,000) shares, subject to adjustment under Section 15 below.
The  foregoing  sentence is an annual  limitation on grants and not a cumulative
limitation.

                  (b)  Grant.  A Stock  Appreciation  Right  may be  granted  in
addition to or completely  independent  of any other Award under the Plan.  Upon
grant of a Stock  Appreciation  Right, the Committee shall select and inform the
Participant  regarding the number of shares of Common Stock subject to the Stock
Appreciation  Right and the date  that  constitutes  the close of the  measuring
period.

                  (c)  Measuring Period. A Stock Appreciation Right shall accrue
in value from the Date of Grant over a time period established by the Committee,

                                   -9-

                                                                  Page 26 of 53
except that in no event shall a Stock  Appreciation  Right be payable within the
first six (6) months after the Date of Grant. In the written Stock  Appreciation
Right agreement, the Committee may also provide (but is not required to provide)
that a Stock  Appreciation  Right shall be automatically  payable on one or more
specified  dates  prior  to the  normal  end of the  measuring  period  upon the
occurrence of events selected by the Committee (including, but not limited to, a
Change in  Control of the  Company  as set forth in  Section 16 below)  that are
beyond the control of the  Participant.  The  Committee  may provide (but is not
required to provide) in the Stock  Appreciation Right agreement that in the case
of a cash  payment  such  acceleration  in  payment  shall  also be  subject  to
discounting  of the payment to reasonably  reflect the time value of money using
any  reasonable  discount  rate  selected by the  Committee in  accordance  with
Treasury Regulations under Code Section 162(m).

                  (d)  Form of Payment. Payment pursuant to a Stock Appreciation
Right  may be made  (i) in  cash,  (ii)  in  shares  of  Common  Stock,  (iii) a
promissory  note or (iv) in any combination of the above, as the Committee shall
determine in its sole and absolute  discretion.  The Committee may elect to make
this  determination  either at the time the Stock Appreciation Right is granted,
at the time of payment or at any time in between such dates.  However, any Stock
Appreciation  Right paid upon or  subsequent  to the  occurrence  of a Change in
Control (as defined in Section 16) shall be paid in cash.

            8.    Restricted Awards.  Restricted  Awards  granted under the Plan
may be in the form of either  Restricted Stock Grants or Restricted Unit Grants.
Restricted  Awards  shall be  subject  to the  following  terms and  conditions.
Furthermore,  the  Restricted  Awards  shall be pursuant to a written  agreement
executed both by the Company and the Participant,  which agreement shall contain
such  additional  terms  and  conditions,  not  inconsistent  with  the  express
provisions of the Plan, as the  Committee  shall deem  desirable in its sole and
absolute discretion. The terms of such written agreements need not be identical.

                  (a)  Restricted Stock Grants.  A Restricted  Stock Grant is an
Award of shares of Common Stock  transferred  to a  Participant  subject to such
terms  and  conditions  as the  Committee  deems  appropriate,  as set  forth in
Paragraph (d) below.

                  (b)  Restricted  Unit Grants.  A  Restricted  Unit Grant is an
Award of units (with each unit having a value  equivalent to one share of Common
Stock)  granted to a  Participant  subject to such terms and  conditions  as the
Committee deems appropriate, including, without limitation, the requirement that
the  Participant  forfeit  all or a portion of such units  upon  termination  of
employment  for  specified  reasons  within a  specified  period  of  time,  and
restrictions  on the sale,  assignment,  transfer or other  disposition  of such
units.

                                   -10-

                                                                  Page 27 of 53
(c)  Grants of Awards.  Restricted Awards may be granted under
the Plan in such form and on such terms and conditions as the Committee may from
time to time approve.  Restricted  Awards may be granted alone or in addition to
other Awards  under the Plan.  Subject to the terms of the Plan,  the  Committee
shall  determine the number of Restricted  Awards to be granted to a Participant
and  the  Committee  may  impose  different  terms  and  conditions   (including
performance  goals) on any particular  Restricted Award made to any Participant.
Each  Participant  receiving  a  Restricted  Stock Grant shall be issued a stock
certificate in respect of such shares of Common Stock. Such certificate shall be
registered  in the name of such  Participant,  shall be  accompanied  by a stock
power duly executed by such  Participant,  and shall bear an appropriate  legend
referring to the terms,  conditions and  restrictions  applicable to such Award.
The  certificate  evidencing  the shares shall be held in custody by the Company
until the restrictions imposed thereon shall have lapsed or been removed.

                  (d)  Restriction Period.  Restricted Awards shall provide that
in  order  for a  Participant  to vest  in such  Awards,  the  Participant  must
continuously  provide  services to the Company or its  Subsidiaries,  subject to
relief for specified reasons,  for such period as the Committee may designate at
the time of the Award  ("Restriction  Period").  If the Committee so provides in
the written  agreement  with the  Participant,  a  Restricted  Award may also be
subject  to  satisfaction  of such  performance  goals as are set  forth in such
agreement.  During the Restriction  Period, a Participant may not sell,  assign,
transfer,  pledge,  encumber,  or  otherwise  dispose of shares of Common  Stock
received under a Restricted Stock Grant. The Committee,  in its sole discretion,
may provide for the lapse of restrictions during the Restriction Period upon the
occurrence of events  selected by the  Committee  that are beyond the control of
the  Participant  (including,  but not  limited  to, a Change in  Control of the
Company  under  Section 16). The  Committee  may provide (but is not required to
provide) in the written  agreement with the recipient that in the case of a cash
payment such acceleration in payment shall also be subject to discounting of the
payment  to  reasonably  reflect  the time value of money  using any  reasonable
discount rate selected by the Committee in accordance with Treasury  Regulations
under Code Section 162(m). Upon expiration of the applicable  Restriction Period
(or lapse of restrictions  during the Restriction  Period where the restrictions
lapse in installments or by action of the Committee),  the Participant  shall be
entitled to receive his or her Restricted Award or portion thereof,  as the case
may be.

                  (e)  Payment  of  Awards.   A   Participant   who  receives  a
Restricted Stock Grant shall be paid solely by release of the restricted  shares
at the  termination  of the  Restriction  Period  (whether  in one  payment,  in
installments or otherwise).  A Participant  shall be entitled to receive payment
for a  Restricted  Unit Grant (or  portion  thereof)  in an amount  equal to the
aggregate  Fair Market Value of the shares of Common Stock covered by such Award
upon the expiration of the applicable  Restriction Period. Payment in settlement
of a Restricted  Unit Grant shall be made as soon as  practicable  following the
conclusion  of  the  specified Restriction Period (i) in cash, (ii) in shares of

                                   -11-

                                                                  Page 28 of 53
Common  Stock equal to the number of units  granted  under the  Restricted  Unit
Grant with respect to which such payment is made, or (iii) in any combination of
the above, as the Committee shall determine in its sole and absolute discretion.
The Committee may elect to make this determination  either at the time the Award
is granted, at the time of payment or at any time in between such dates.

                  (f)  Rights as a Shareholder.  A Participant  shall have, with
respect to the shares of Common Stock received  under a Restricted  Stock Grant,
all of the rights of a shareholder  of the Company,  including the right to vote
the shares,  and the right to receive any cash  dividends.  Such cash  dividends
shall be withheld,  however,  until their release upon lapse of the restrictions
under the Restricted  Award.  Stock dividends  issued with respect to the shares
covered by a Restricted  Grant shall be treated as  additional  shares under the
Restricted  Grant and shall be subject to the same  restrictions and other terms
and conditions  that apply to shares under the Restricted  Grant with respect to
which the dividends are issued.

            9.    Performance Awards. Performance Awards granted under the Plan

may be in the form of  either  Performance  Share  Grants  or  Performance  Unit
Grants.  Performance  Awards  shall be subject to the terms and  conditions  set
forth below.  Furthermore,  the  Performance  Awards shall be subject to written
agreements  which  shall  contain  such  additional  terms and  conditions,  not
inconsistent  with the express  provisions of the Plan,  as the Committee  shall
deem desirable in its sole and absolute discretion.  Such agreements need not be
identical.

                  (a)  Performance Share Grants. A Performance Share Grant is an
Award of units (with each unit equivalent in value to one share of Common Stock)
granted to a Participant  subject to such terms and  conditions as the Committee
deems  appropriate,  including,  without  limitation,  the requirement  that the
Participant forfeit such units (or a portion of such units) in the event certain
performance criteria are not met within a designated period of time.

                  (b)  Performance Unit Grants.  A Performance  Unit Grant is an
Award of units (with each unit  representing  such monetary amount as designated
by the Committee) granted to a Participant  subject to such terms and conditions
as  the  Committee  deems  appropriate,   including,   without  limitation,  the
requirement that the Participant forfeit such units (or a portion of such units)
in the event certain performance criteria are not met within a designated period
of time.

                  (c)  Grants of  Awards.  Performance  Awards  shall be granted
under the Plan pursuant to written  agreements with the Participant in such form
as the  Committee  may from  time to time  approve.  Performance  Awards  may be
granted  alone or in addition  to other  Awards  under the Plan.  Subject to the
terms of the Plan,  the  Committee  shall  determine  the number of  Performance
Awards to be granted to a Participant  and the  Committee  may impose  different

                                   -12-

                                                                  Page 29 of 53
terms  and  conditions  on  any  particular   Performance   Award  made  to  any
Participant.

                  (d)  Performance  Goals and Performance  Periods.  Performance
Awards shall provide  that,  in order for a Participant  to vest in such Awards,
the Company must achieve certain performance goals ("Performance  Goals") over a
designated performance period selected by the Committee  ("Performance Period").
The  Performance  Goals  and  Performance  Period  shall be  established  by the
Committee,  in its sole and absolute  discretion.  The Committee shall establish
Performance  Goals for each  Performance  Period before the  commencement of the
Performance  Period and while the outcome is substantially  uncertain or at such
other time permitted  under Treasury  Regulations  Section  1.162-27(e)(2).  The
Committee  shall also  establish a schedule or  schedules  for such  Performance
Period setting forth the portion of the  Performance  Award which will be earned
or  forfeited  based on the  degree  of  achievement  of the  Performance  Goals
actually achieved or exceeded.  In setting  Performance Goals, the Committee may
use such  measures  as  return  on  equity,  earnings  growth,  revenue  growth,
comparisons to peer companies,  or such other measure or measures of performance
in such manner as it deems appropriate.

                  (e)  Payment of  Awards.  In the case of a  Performance  Share
Grant, the Participant shall be entitled to receive payment for each unit earned
in an amount  equal to the  aggregate  Fair Market Value of the shares of Common
Stock covered by such Award as of the end of the Performance Period. In the case
of a  Performance  Unit  Grant,  the  Participant  shall be  entitled to receive
payment for each unit earned in an amount equal to the dollar value of each unit
times  the  number of units  earned.  The  Committee,  pursuant  to the  written
agreement  with the  Participant,  may make such  Performance  Awards payable in
whole or in part upon the  occurrence of events  selected by the Committee  that
are beyond the  control of the  Participant  (including,  but not  limited to, a
Change  in  Control  of the  Company  as set forth in  Section  16  below).  The
Committee may provide (but is not required to provide) in the written  agreement
with the recipient that, in the case of a cash payment,  acceleration in payment
of a  Performance  Award  shall  also be subject to  discounting  to  reasonably
reflect the time value of money using any  reasonable  discount rate selected by
the Committee in accordance with Treasury Regulations under Code Section 162(m).
Payment  in  settlement  of a  Performance  Award  shall  be  made  as  soon  as
practicable following the conclusion of the Performance Period (i) in cash, (ii)
in shares of Common  Stock,  or (iii) in any  combination  of the above,  as the
Committee may determine in its sole and absolute  discretion.  The Committee may
elect to make this determination either at the time the Award is granted, at the
time of payment, or at any time in between such dates.

                                   -13-

                                                                  Page 30 of 53
10.   Other Stock-Based and Combination Awards.

                  (a)  The Committee  may  grant  other  Awards  under  the Plan
pursuant to which Common  Stock is or may in the future be  acquired,  or Awards
denominated  in stock units,  including  ones valued using  measures  other than
market value.  Such other  stock-based  grants may be granted either alone or in
addition to any other type of Award granted under the Plan.

                  (b)  The Committee  may also  grant  Awards  under the Plan in
combination  with other Awards or in exchange of Awards,  or in combination with
or as  alternatives  to grants or rights  under any other  employee  plan of the
Company, including the plan of any acquired entity.

                  (c) Subject to the provisions of the Plan, the Committee shall
have  authority to determine  the  individuals  to whom and the time or times at
which the  Awards  shall be made,  the  number  of shares of Common  Stock to be
granted or covered  pursuant to such  Awards,  and any and all other  conditions
and/or terms of the Awards.

            11.   Deferral Elections.  The Committee may permit a Participant to
elect to defer his or her  receipt  of the  payment of cash or the  delivery  of
shares of Common Stock that would otherwise be due to such Participant by virtue
of the  exercise,  earn out or vesting  of an Award made under the Plan.  If any
such election is permitted,  the Committee  shall establish rules and procedures
for such payment  deferrals,  including the possible (a) payment or crediting of
reasonable  interest on such  deferred  amounts  credited  in cash,  and (b) the
payment or crediting of dividend equivalents in respect of deferrals credited in
units of Common Stock. The Company and the Committee shall not be responsible to
any person in the event that the payment deferral does not result in deferral of
income for tax purposes.

            12.   Dividend  Equivalents.   Awards  of  Stock   Options,   Stock
Appreciation Rights, Restricted Unit Grants, Performance Share Grants, and other
stock-based  Awards may, in the sole and absolute  discretion of the  Committee,
earn dividend equivalents.  In respect of any such Award which is outstanding on
a dividend record date for Common Stock, the Participant may be credited with an
amount equal to the amount of cash or stock  dividends that would have been paid
on the shares of Common Stock  covered by such Award had such shares been issued
and outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend equivalents,  including
the  timing,  form of  payment,  and  payment  contingencies  of  such  dividend
equivalents, as it deems appropriate or necessary.

                                   -14-

                                                                  Page 31 of 53
13.   Termination of Employment.  The  terms  and  conditions  under
which an Award may be exercised after a Participant's  termination of employment
shall be determined by the Committee and reflected in the written agreement with
the Participant  concerning the Award,  except that in the event a Participant's
employment with the Company or a Subsidiary terminates for any reason within six
(6) months of the date of grant of any Award held by the Participant,  the Award
shall  expire  as of  the  date  of  such  termination  of  employment  and  the
Participant and the  Participant's  legal  representative  or beneficiary  shall
forfeit any and all rights pertaining to such Award.

            14.   Non-transferability of Awards. No Award under the Plan, and no
rights or interest therein, shall be assignable or transferable by a Participant
except  by will  or the  laws of  descent  and  distribution  or  pursuant  to a
qualified  domestic  relations order within the meaning of the Code.  Subject to
the foregoing, during the lifetime of a Participant, Awards are exercisable only
by,  and  payments  in  settlement  of  Awards  will be  payable  only  to,  the
Participant or his or her legal representative.

            15.   Adjustments Upon Changes in Capitalization, Etc.
                  -----------------------------------------------

                  (a)  The  existence  of  the  Plan  and  the  Awards   granted
hereunder  shall  not  affect or  restrict  in any way the right or power of the
Board or the  shareholders  of the Company to make or authorize any  adjustment,
recapitalization,  reorganization  or  other  change  in the  Company's  capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Company's Common Stock or the rights thereof, the dissolution or liquidation
of the  Company,  or any sale or  transfer  of all or any part of its  assets or
business, or any other corporate act or proceeding.

                  (b)  In  the  event  of any change in capitalization affecting
the  Common  Stock of the  Company  after the  Effective  Date,  such as a stock
dividend,  stock  split,  recapitalization,   merger,  consolidation,  split-up,
combination,  exchange  of shares,  other form of  reorganization,  or any other
change affecting the Common Stock, such  proportionate  adjustments,  if any, as
the Committee or the Board in its  discretion  may deem  appropriate  to reflect
such change shall be made with respect to (i) the aggregate  number of shares of
Common Stock for which Awards in respect  thereof may be granted under the Plan,
(ii) the maximum  number of shares of Common  Stock which may be sold or awarded
to any  Participant,  (iii) the number of shares of Common Stock covered by each
outstanding  Award,  and (iv) the  price  per share in  respect  of  outstanding
Awards.

                  (c)  The Committee or the Board may also make such adjustments
in the  number  of  shares  covered  by,  and the  price or  other  value of any
outstanding Awards in the event of a spin-off or other distribution  (other than
normal cash  dividends)  of Company  assets to  shareholders.  In the event that
another corporation or business entity is being acquired by the Company, and the
Company agrees to assume outstanding employee stock option or stock appreciation
rights  and/or  the  obligation  to make  future  grants of options or rights to

                                   -15-

                                                                  Page 32 of 53
employees of the acquired entity, the aggregate number of shares of Common Stock
available for Awards under Section 4 of the Plan may be increased accordingly.

            16.   Change in Control.
                  -----------------

                  (a)  In the event  of a  Change  in  Control  (as  defined  in
Paragraph (b) below) of the Company,  and except as otherwise  provided in Award
agreements:

                            (i)  All Stock Options or Stock Appreciation Rights
then outstanding  shall become fully exercisable as of the date of the Change in
Control (and shall terminate at such time as specified in the Award agreement);

                           (ii)  All   restrictions   and   conditions   of  all
Restricted  Stock Grants and Restricted  Unit Grants then  outstanding  shall be
deemed satisfied as of the date of the Change in Control; and

                          (iii)  All  Performance  Share  Grants and Performance
Unit  Grants  shall be deemed to have  been  fully  earned as of the date of the
Change in Control;

subject to the limitation  that any Award which has been  outstanding  less than
six (6) months on the date of the Change in Control  shall not be afforded  such
treatment.

                  (b)  A "Change in  Control"  shall be deemed to have  occurred
upon the occurrence of any one (or more) of the following events:

                            (i)  Any  person,  including  a  group as defined in
Section  13(d)(3) of the Exchange Act, becomes the beneficial owner of shares of
the Company  with  respect to which 25% or more of the total number of votes for
the election of the Board may be cast;

                           (ii)  As a result of, or in connection with, any cash
tender offer,  exchange  offer,  merger or other business  combination,  sale of
assets or contested election, or combination of the foregoing,  persons who were
directors  of the Company  just prior to such event shall cease to  constitute a
majority of the Board;

                          (iii)  The  shareholders  of the Company shall approve
an agreement  providing either for a transaction in which the Company will cease
to  be an  independent  publicly  owned  corporation  or  for a  sale  or  other
disposition of all or substantially all the assets of the Company;

                                   -16-

                                                                  Page 33 of 53
(iv)  A  tender  offer  or exchange offer is made for
shares of the  Company's  Common  Stock (other than one made by the Company) and
shares of Common Stock are acquired thereunder; or

                            (v)  Formation  of a holding company for the Company
in which the  shareholdings  of the  holding  company  after its  formation  are
substantially the same as for the Company prior to the holding company formation
does not constitute a Change in Control for purposes of this Plan.

                  (c)  In  the  event that any payment under this Plan (alone or
in  conjunction  with other  payments)  would  otherwise  constitute  an "excess
parachute  payment"  under Section 280G of the Code (in the sole judgment of the
Company),  such payment shall be reduced or eliminated to the extent the Company
determines  necessary to avoid deduction  disallowance under Section 280G of the
Code or the imposition of excise tax under Section 4999 of the Code. The Company
may consult with a Participant  regarding the application of Section 280G and/or
Section 4999 to payments  otherwise due to such Participant  under the Plan, but
the judgment of the Company as to applicability of those provisions,  the degree
to which a payment must be reduced to avoid those  provisions,  and which Awards
shall be reduced,  is final. The  Compensation  Committee shall act on behalf of
the Company in interpreting and administering this limitation.

            17.   Amendment and  Termination.  Without  further  approval of the
shareholders, the Board may at any time terminate the Plan, or may amend it from
time to time in such  respects  as the Board may deem  advisable.  However,  the
Board may not,  without approval of the  shareholders,  make any amendment which
would (a) increase the  aggregate  number of shares of Common Stock which may be
issued  under the Plan  (except  for  adjustments  pursuant to Section 15 of the
Plan),   (b)  materially   modify  the   requirements   as  to  eligibility  for
participation in the Plan, or (c) materially  increase the benefits  accruing to
Participants under the Plan.  Notwithstanding the above, the Board may amend the
Plan to take into account changes in applicable  securities laws, federal income
tax laws and other  applicable  laws.  Further,  should the  provisions  of Rule
16b-3, or any successor rule,  under the Exchange Act be amended,  the Board may
amend the Plan in  accordance  with any  modifications  to that rule without the
need for shareholder approval.  Notwithstanding the foregoing,  the Plan may not
be amended more than once every six months other than to comply with the changes
in the Code or the Employee Retirement Income Security Act of 1974 ("ERISA").

            18.   Miscellaneous Matters.
                  ---------------------

                  (a)  Tax Withholding.  The  Company  shall  have the  right to
deduct from any payment,  including the delivery of shares,  made under the Plan
any federal,  state,  or local taxes of any kind  required by law to be withheld
with  respect to such  payments or to take such other action as may be necessary
in the opinion of the Company to satisfy all  obligation for the payment of such
taxes. If Common Stock is used to satisfy tax  withholding,  such stock shall be

                                   -17-

                                                                  Page 34 of 53
valued based on the Fair Market Value when the tax withholding is required to be
made.

                  (b)  No Right to Employment.  Neither the adoption of the Plan
nor the  granting of any Award shall  confer upon any employee of the Company or
any  Subsidiary  any  right to  continued  employment  with the  Company  or any
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the  Company  or a  Subsidiary  to  terminate  the  employment  of any of its
employees at any time, with or without cause.

                  (c)  Unfunded Plan. The Plan shall be unfunded and the Company
shall  not be  required  to  segregate  any  assets  that  may at  any  time  be
represented by Awards under the Plan. Any liability of the Company to any person
with  respect to any Award under the Plan shall be based solely upon any written
contractual  obligations  that may be  effected  pursuant  to the Plan.  No such
obligation  of the  Company  shall be deemed to be  secured by any pledge of, or
other encumbrance on, any property of the Company.

                  (d)  Annulment  of  Awards.  The  grant of any Award under the
Plan payable in cash is  provisional  until cash is paid in settlement  thereof.
The  grant of any  Award  payable  in  Common  Stock is  provisional  until  the
Participant becomes entitled to the certificate in settlement  thereof.  Payment
under  any  Awards  granted  pursuant  to the  Plan is  wholly  contingent  upon
shareholder approval of the Plan. Where approval for an award sought pursuant to
Section 162(m)(4)(C)(ii) is not granted by the Company's shareholders, the Award
shall be annulled automatically. In the event the employment of a Participant is
terminated for cause (as defined below), any Award which is provisional shall be
annulled as of the date of such termination for cause. For purposes of the Plan,
the term  "terminated  for  cause"  means  any  discharge  because  of  personal
dishonesty,  willful  misconduct,  breach of fiduciary duty  involving  personal
profit,  continuing  intentional  or habitual  failure to perform stated duties,
violation of any law (other than minor traffic violations or similar misdemeanor
offenses not involving moral turpitude),  or material breach of any provision of
an employment or independent contractor agreement with the Company.

                  (e)  Other Company Benefit and Compensation Programs. Payments
and other benefits received by a Participant under an Award made pursuant to the
Plan  shall  not  be  deemed  a  part  of  a  Participant's  regular,  recurring
compensation  for purposes of the termination  indemnity or severance pay law of
any state.  Furthermore,  such  benefits  shall not be included in, nor have any
effect on, the  determination  of benefits under any other employee benefit plan
or similar arrangement  provided by the Company or a Subsidiary unless expressly
so provided by such other plan or  arrangement,  or except  where the  Committee

                                   -18-

                                                                  Page 35 of 53
expressly determines that inclusion of an Award or portion of an Award should be
included.  Awards under the Plan may be made in combination  with or in addition
to, or as alternatives to, grants, awards or payments under any other Company or
Subsidiary   plans.   The  Company  or  any  Subsidiary  may  adopt  such  other
compensation programs and additional  compensation  arrangements (in addition to
this Plan) as it deems  necessary to attract,  retain,  and  motivate  officers,
directors,  employees  or  independent  contractors  for their  service with the
Company and its Subsidiaries.

                  (f)  Securities  Law  Restrictions.  No shares of Common Stock
shall be issued under the Plan unless counsel for the Company shall be satisfied
that such  issuance  will be in  compliance  with  applicable  federal and state
securities  laws.  Certificates  for shares of Common Stock  delivered under the
Plan may be subject to such stock-transfer  orders and other restrictions as the
Committee  may  deem  advisable   under  the  rules,   regulations,   and  other
requirements of the Securities and Exchange Commission,  any stock exchange upon
which the  Common  Stock is then  listed,  and any  applicable  federal or state
securities  law.  The  Committee  may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

                  (g)  Award  Agreement.  Each  Participant  receiving  an Award
under the Plan shall enter into a written  agreement  with the Company in a form
specified by the Committee agreeing to the terms and conditions of the Award and
such  related  matters  as  the  Committee  shall,  in  its  sole  and  absolute
discretion, determine.

                  (h)  Costs of Plan.  The  costs  and expenses of administering
the Plan shall be borne by the Company.

                  (i)  Governing Law.  The Plan and all actions taken thereunder
shall be governed by and construed in  accordance  with the laws of the State of
California.

                              TARRANT APPAREL GROUP,
                              a California corporation

Date: February 24, 1997       By:      /s/  Gerard Guez
                                  ----------------------------------------------
                                          Chairman, Board of Directors

                                   -19-

                                                                  Page 36 of 53
CERTIFICATE OF COMPENSATION COMMITTEE
                    -------------------------------------

            The  undersigned  two  persons,  being  members of the  Compensation
Committee and "outside directors" within the meaning of Section  162(m)(4)(C)(i)
of the Internal Revenue Code of 1986,  hereby certify that the foregoing Tarrant
Apparel  Group  Employee  Incentive  Plan was  adopted  and  established  by the
Compensation Committee on December 20, 1996.

Date:  January 16, 1997                /s/  Barry S. Aved
                                    --------------------------------------------
                                    Compensation Committee Member

Date:  January 16, 1997                /s/  Walter L. Krieger
                                    --------------------------------------------
                                    Compensation Committee Member

                          CERTIFICATE OF SECRETARY
                          ------------------------

            The  undersigned,  being the Corporate  Secretary of Tarrant Apparel
Group, a California  corporation,  hereby  certifies that the foregoing  Tarrant
Apparel Group Employee Incentive Plan (the "Plan") was, pursuant to the Articles
and Bylaws of the  Corporation,  duly adopted by the  Compensation  Committee on
December 20, 1996, and by the Board of Directors as a whole on January 13, 1997.
The Plan was approved by the shareholders of the Corporation on May 2, 1997.

Date:  May 2, 1997                     /s/  Corazon R. Reyes
                                    --------------------------------------------
                                        Secretary

                       [Seal of Tarrant Apparel Group]

                                   -20-

                                                                  Page 37 of 53
CERTIFICATE OF SECRETARY
                          ------------------------

            The  undersigned,  being the Corporate  Secretary of Tarrant Apparel
Group,  a  California  corporation,  hereby  certifies  that Section 4(b) of the
foregoing  Tarrant  Apparel  Group  Employee  Incentive  Plan (the  "Plan") was,
pursuant to Section 16 of the Plan,  duly amended by the Board of Directors as a
whole on April 2, 1999 and the shareholders of the Corporation on May 3, 1999 to
increase from 2,600,000 to 3,600,000 the number of shares of the Common Stock of
the Corporation which may be subject to awards granted under the Plan.

Date:  May 3, 1999                     /s/  Corazon R. Reyes
                                    --------------------------------------------
                                    Corporate Secretary

                       [Seal of Tarrant Apparel Group]

                                   -21-

                                                                  Page 38 of 53
EXHIBIT 99.2

                   Form of Incentive Stock Option Agreement

                                                                  Page 39 of 53
Exhibit 99.2
                                                                    ------------

                       INCENTIVE STOCK OPTION AGREEMENT
                       --------------------------------

      THIS INCENTIVE STOCK OPTION  AGREEMENT is made as of the Date of Grant set
forth below,  between  TARRANT  APPAREL  GROUP,  a California  corporation  (the
"Company"),  and the person whose name appears on the signature page hereof (the
"Optionee").  All capitalized  terms not specifically  defined herein shall have
the meanings set forth in the Company's Employee Incentive Plan (the "Plan").

                                   RECITALS
                                   --------

      A.    The Board of  Directors  and the  shareholders  of the Company  both
approved and adopted the Plan.  The Plan  provides for the granting of awards to
directors,  officers,  employees  and  consultants  of the Company or any of its
affiliates.

      B.    Pursuant  to the  Plan,  the  Plan is  administered  by a  committee
appointed by and comprised of members of the Company's  Board of Directors  (the
"Committee").

      C.    Pursuant to the Plan, the Committee has determined that it is to the
advantage and in the best interests of the Company and its shareholders to grant
an  incentive  stock  option to the Optionee  covering  shares of the  Company's
Common Stock (or any class of stock into which such Common Stock is converted or
reclassified  as  provided in the Plan)  ("Common  Stock") as an  inducement  to
remain in the service of the Company and as an incentive  for  increased  effort
during such  service,  and has approved the  execution of this  Incentive  Stock
Option Agreement between the Company and the Optionee.

      D.    The option  granted  hereby is intended to qualify as an  "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").

      NOW, THEREFORE, the parties hereto agree as follows:

            1.  Grant of Option.  Effective as of the date of grant set forth on
the  signature  page  hereof (the "Date of  Grant"),  the Company  grants to the
Optionee  the right and  option  (the  "Option")  to  purchase  on the terms and
conditions  hereinafter  set forth,  all or any part of such number of shares of
Common Stock at such purchase  price per share as are set forth on the signature
page  hereof,  which price is not less than the fair market  value of such stock
(as  determined  pursuant  to Section 4 hereof) on the Date of Grant;  provided,
however, that if the Optionee possesses more than ten percent (10%) of the total
combined  voting  power  of all  classes  of  stock  of  the  Company  (and  its
affiliates) (a "10%  Shareholder"),  such price is not less than one hundred and
ten  percent  (110%)  of the fair  market  value of such  stock  (as  determined
pursuant  to Section 4) on the Date of Grant.  The Option  shall be  exercisable

                                    -1-
                                                                  Page 40 of 53
from time to time in accordance  with the provisions of this Agreement  during a
period  expiring  on the  date set  forth  on the  signature  page  hereof  (the
"Expiration  Date") or earlier in accordance with Section 5; provided,  however,
that if the Option is granted to a 10% Shareholder, the Expiration Date shall be
the fifth anniversary of the Date of Grant.

            2.  Vesting.  The Option shall become  exercisable  to purchase, and
shall  vest with  respect  to,  such  percentage  of the shares  covered  hereby
(rounded to the nearest whole share) as may be set forth on the  signature  page
hereof.  In each  case the  number of shares  which  may be  purchased  shall be
calculated to the nearest full share.

            3.  Manner  of  Exercise.  Each  exercise  of the Option shall be by
means of a written notice of exercise  delivered to the Company,  specifying the
number of shares to be purchased  and  accompanied  by payment to the Company of
the full purchase  price of the shares to be purchased  solely (i) in cash or by
check payable to the order of the Company,  (ii) by delivery of shares of Common
Stock of the Company  already owned by, and in the  possession of, the Optionee,
valued at their fair market value,  as determined in accordance  with Section 4,
or (iii) (x) by a promissory note made by Optionee in favor of the Company, upon
the terms and conditions  determined by the Committee  including,  to the extent
the Committee determines appropriate, a security interest in the shares issuable
upon exercise or other property, or (y) through a "cashless exercise," in either
case complying with applicable law  (including,  without  limitation,  state and
federal margin requirements), or any combination thereof. Shares of Common Stock
used to satisfy the exercise  price of this Option shall be valued at their fair
market value  determined  (in  accordance  with Section 4 hereof) on the date of
exercise (or if such date is not a business day, as of the close of the business
day  immediately  preceding  such date).  This Option may not be exercised for a
fraction of a share and no partial  exercise of this Option may be for less than
(a) one hundred (100) shares or (b) the total number of shares then eligible for
exercise, if less than one hundred (100) shares.

            The Option may be exercised  (i) during the lifetime of the Optionee
only by the  Optionee;  (ii) to the extent  permitted by the Committee or by the
terms of this  Agreement,  Optionee's  spouse if such spouse obtained the Option
pursuant to a qualified domestic relations order as defined by the Code or Title
I of ERISA, or the rules thereunder  ("Qualified Domestic Relations Order"); and
(iii) after the Optionee's  death by his or her  transferees by will or the laws
of descent or distribution.

            4.  Fair Market Value of Common  Stock.  The fair market  value of a
share of Common  Stock shall be  determined  for  purposes of this  Agreement by
reference to the closing  price on the  principal  stock  exchange on which such
shares  are then  listed  or,  if such  shares  are not then  listed  on a stock
exchange,  by reference to the closing  price (if approved for  quotation on the
NASDAQ  National  Market System) or the mean between the bid and asked price (if
other  over-the-counter  issue)  of  a  share  as  supplied  by   the   National
Association  of Securities  Dealers,  Inc.  through  NASDAQ (or its successor in
function), in each case as reported by The Wall Street Journal, for the business
day  immediately  preceding the Date of Grant or the date on which the Option is
exercised  (or,  if for any  reason no such  price is  available,  in such other
manner as the  Committee  may deem  appropriate  to reflect the then fair market
value thereof).

                                    -2-
                                                                  Page 41 of 53
5.  Termination of Employment; Death or Permanent Disability. If the
Optionee  ceases to be employed by the Company or one of its  affiliates for any
reason other than the  Optionee's  death or "permanent  disability"  (within the
meaning of Section 22(e)(3) of the Code), the Option shall be exercisable  until
the earlier of (i) the Expiration Date or (ii) a date three (3) months after the
date the Optionee ceases to be an employee of the Company or such affiliate,  to
the extent  exercisable on the date of such  cessation of employment,  and shall
thereafter  expire  and be void and of no further  force or  effect.  A leave of
absence  approved in writing by the Committee  shall not be deemed a termination
of  employment  for the  purposes  of this  Section 5, but the Option may not be
exercised  during any such leave of absence,  except  during the first three (3)
months thereof. If the Optionee dies or becomes "permanently disabled" while the
Optionee is employed by the Company or one of its  affiliates,  the Option shall
expire on the  earlier  of (i) the  Expiration  Date or (ii) a date one (1) year
after  the  date  of  such  death  or  "permanent  disability,"  to  the  extent
exercisable on the date of death or permanent  disability,  and shall thereafter
expire and be void and of no further  force or effect.  During such period after
death,  the  Option  may,  to the  extent  that  it  remained  unexercised  (but
exercisable by the Optionee according to the Option's terms) on the date of such
death, be exercised by the person or persons to whom the Optionee's rights under
the Option  shall  pass by the  Optionee's  will or by the laws of  descent  and
distribution.

            6.  Shares to be Issued in Compliance  with Federal  Securities Laws
and Exchange Rules. By accepting the Option, the Optionee represents and agrees,
for the Optionee and his or her legal successors (by will or the laws of descent
and distribution or through a Qualified Domestic Relations Order),  that none of
the shares purchased upon exercise of the Option will be acquired with a view to
any sale, transfer or distribution of said shares in violation of the Securities
Act of 1933, as amended (the  "Securities  Act"),  and the rules and regulations
promulgated thereunder,  or any applicable state "blue sky" laws. If required by
the  Committee  at the time the Option is  exercised,  the Optionee or any other
person  entitled to exercise the Option shall furnish  evidence  satisfactory to
the Company  (including a written and signed  representation)  to such effect in
form and substance satisfactory to the Company,  including an indemnification of
the Company in the event of any  violation of the  Securities  Act or state blue
sky laws by such person.  The Company shall use its  reasonable  efforts to take
all necessary and appropriate action to assure that the shares issuable upon the
exercise of this Option shall be issued in full  compliance  with the Securities
Act,  state  blue  sky  laws  and all  applicable  listing  requirements  of any
principal securities exchange on which shares of the same class are listed.

            7.  Withholding of Taxes.  Upon  any  disposition by the Optionee or
the Optionee's  legal  successor of shares of Common Stock acquired  pursuant to
the exercise of this Option  within two (2) years of the Date of Grant or within
one (1) year of the  exercise  of this  Option  (an  "Early  Disposition"),  the
Company  shall have the right to require the  Optionee or the  Optionee's  legal
successor  to pay the  Company  the amount of any taxes which the Company may be
required to withhold  with  respect to such  shares.  The  Optionee  agrees,  as
partial  consideration  for the  designation of the Option as an incentive stock
option under Section 422 of the Code, to notify the Company in writing promptly,
and in no event later than thirty (30) days following, any Early Disposition.

                                    -3-

                                                                  Page 42 of 53
8.  No Assignment.  The Option and all other  rights and  privileges
granted hereby shall not be transferred,  either  voluntarily or by operation of
law otherwise than by will or the laws of descent and  distribution  or pursuant
to a  Qualified  Domestic  Relations  Order.  Upon any attempt to so transfer or
otherwise dispose of this Option or any other right or privileges granted hereby
contrary to the  provisions  hereof,  this Option and all rights and  privileges
contained herein shall immediately  become null and void and of no further force
or effect.

            9.  Adjustment  for  Reorganizations,  Stock  Splits,  etc.   If the
outstanding  shares of Common Stock of the Company (or any other class of shares
or securities  which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased,  decreased,  changed into or exchanged
for a different  number or kind of shares or securities  of the Company  through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse  stock  split  or  other  similar   transaction,   an  appropriate   and
proportionate  adjustment shall be made in the maximum number and kind of shares
receivable  upon the exercise of this Option,  without change in the total price
applicable to the unexercised  portion of this Option,  but with a corresponding
adjustment in the price for each share or other unit of any security  covered by
this Option.

            Upon  the  dissolution  or  liquidation  of the  Company,  or upon a
reorganization,  merger  or  consolidation  of the  Company  with  one  or  more
corporations as a result of which the Company is not the surviving  corporation,
or upon a sale of  substantially  all the  property or more than eighty  percent
(80%) of the then outstanding stock of the Company to another corporation,  this
Option shall terminate;  provided,  however, that notwithstanding the foregoing,
the Committee shall provide in writing in connection  with such  transaction for
the  appropriate  satisfaction  of this  Option by one or more of the  following
alternatives  (separately  or in  combination):  (i) for this  Option  to become
immediately exercisable notwithstanding the provisions of Sections 2 and 3; (ii)
for  the  assumption  by  the  successor  corporation  of  this  Option  or  the
substitution by such corporation  therefor of a new option covering the stock of
the successor  corporation or its affiliates with appropriate  adjustments as to
the number and kind of shares and prices;  (iii) for the continuance of the Plan
by such  successor  corporation  in which event the Plan and this  Option  shall
continue in the manner and under the terms so provided;  or (iv) for the payment
in cash or stock in lieu of and in complete satisfaction of this Option.

            Adjustments  under  this  Section  9 shall be made by the Committee,
whose  determination  as to what  adjustments  shall  be  made,  and the  extent
thereof,  shall be final, binding and conclusive.  No fractional shares of stock
shall be issued under this Option on any such adjustment.

            10. Participation  by the Optionee in Other Company Plans.   Nothing
herein  contained  shall affect the right of the Optionee to  participate in and
receive benefits under and in accordance with the then current provisions of any
pension,  insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.

            11. No Rights as a Shareholder Until Issuance of Stock  Certificate.
Neither the  Optionee  nor any other person  legally  entitled to exercise  this
Option shall be entitled to any of the rights or privileges of a shareholder  of

                                    -4-

                                                                  Page 43 of 53
the Company in respect of any shares  issuable  upon any  exercise of the Option
unless and until a certificate or  certificates  representing  such shares shall
have been  actually  issued and  delivered to the  Optionee.  No shares shall be
issued and  delivered  upon the  exercise of this Option  unless and until there
shall  have  been  full  compliance  with  all  applicable  requirements  of the
Securities  Act  (whether  by  registration  or  satisfaction  of  an  exemption
therefrom),  all  applicable  listing  requirements  of  a  national  securities
exchange on which shares of the same class are listed and any other requirements
of law or of any regulatory  bodies having  jurisdiction  over such issuance and
delivery.

            12. Not an Employment or Service Contract.  Nothing herein contained
shall be  construed  as an  agreement  by the Company or any of its  affiliates,
express or  implied,  to employ the  Optionee  or  contract  for the  Optionee's
services,  to restrict the Company's or such affiliate's  right to discharge the
Optionee or cease contracting for the Optionee's  services or to modify,  extend
or  otherwise  affect in any  manner  whatsoever,  the  terms of any  employment
agreement or contract for services  which may exist between the Optionee and the
Company or any of its affiliates.

            13. Agreement  Subject to the Plan.  The Option  hereby  granted  is
subject to, and the Company  and the  Optionee  agree to be bound by, all of the
terms and conditions of the Plan, as the same shall be amended from time to time
in accordance  with the terms  thereof,  but no such amendment  shall  adversely
affect the Optionee's rights under this Option without the prior written consent
of the Optionee.

                                    -5-

                                                                  Page 44 of 53
14. Execution.  The  interpretation,  performance and enforcement of
this Agreement shall be governed by the internal  substantive  laws of the State
of California.

                  COMPANY:                TARRANT APPAREL GROUP

                                          By_______________________________

                                          Its_______________________________

                  OPTIONEE:

                                          ---------------------------------
                                          Name

                                    -6-

                                                                  Page 45 of 53
By his or her  signature  below,  the spouse of the Optionee  agrees to be
bound by all of the terms and conditions of the foregoing Agreement.

                  OPTIONEE'S SPOUSE:

                                          ---------------------------------
                                          Name

      The following  terms and  conditions are an integral part of the foregoing
Incentive Stock Option Agreement.

            Optionee:                     _________________________________

            Address:                      _________________________________
                                          _________________________________

            Social Security Number:       _________________________________

            Date of Grant:                _________________________________

            Number of shares purchasable: _________________________________

            Exercise Price per share:     _________________________________

            Expiration Date:              _________________________________

--------------------------------------------------------------------------------
     Anniversary Date         Percentage Initially      Cumulative Percentage
   of the Date of Grant           Exercisable                Exercisable
--------------------------------------------------------------------------------
          First                       25%                        25%
--------------------------------------------------------------------------------
          Second                      25%                        50%
--------------------------------------------------------------------------------
          Third                       25%                        75%
--------------------------------------------------------------------------------
          Fourth                      25%                        100%
--------------------------------------------------------------------------------

                                    -7-

                                                                  Page 46 of 53
EXHIBIT 99.3

                 Form of Non-Qualified Stock Option Agreement

                                                                  Page 47 of 53
EXHIBIT 99.3
                                                                  ------------

                     NON-QUALIFIED STOCK OPTION AGREEMENT
                     ------------------------------------

      THIS NON-QUALIFIED  STOCK OPTION AGREEMENT is made as of the Date of Grant
set forth below,  between TARRANT APPAREL GROUP, a California  corporation  (the
"Company"),  and the  employee  of the  Company  whose name  appears  below (the
"Optionee").  All capitalized  terms not specifically  defined herein shall have
the meanings set forth in the Company's Employee Incentive Plan (the "Plan").

                                   RECITALS
                                   --------

      A.    The Board of  Directors  and the  shareholders  of the Company  both
approved and adopted the Plan.  The Plan  provides for the granting of awards to
directors,  officers,  employees  and  consultants  of the Company or any of its
affiliates.

      B.    Pursuant  to the Plan,  the Plan is  administered  by the  Committee
appointed by and comprised of members of the Company's Board of Directors.

      C.    Pursuant to the Plan, the Compensation  Committee (the  "Committee")
has  determined  that it is to the  advantage  and in the best  interests of the
Company  and its  shareholders  to grant an  non-qualified  stock  option to the
Optionee  covering  shares of the Company's  Common Stock (or any class of stock
into which such Common  Stock is converted  or  reclassified  as provided in the
Plan) ("Common  Stock") as an inducement to remain in the service of the Company
and as an incentive for increased  effort during such service,  and has approved
the execution of this  Non-Qualified  Stock Option Agreement between the Company
and the Optionee.

      D.    The  option  granted  hereby  is  not  intended  to  qualify  as  an
"incentive stock option" under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").

      NOW, THEREFORE, the parties hereto agree as follows:

            1.  Grant of Option.  The  Company  grants to the Optionee the right
and option (the  "Option") to purchase on the terms and  conditions  hereinafter
set  forth,  all or any part of such  number of  shares of Common  Stock at such
purchase  price per share as are set forth  below,  which price is not less than
the fair market value of such stock (as determined pursuant to Section 4 hereof)
on the Date of  Grant.  The  Option  shall be  exercisable  from time to time in
accordance with the provisions of this Agreement during a period expiring on the
tenth  anniversary  of the Date of Grant (the  "Expiration  Date") or earlier in
accordance with Section 5.

            2.  Vesting.  The  Option  shall become exercisable to purchase, and
shall  vest with  respect  to,  such  percentage  of the shares  covered  hereby
(rounded to the nearest whole share) as may be set forth on the  signature  page

                                    -1-

                                                                  Page 48 of 53
hereof.  In each  case the  number of shares  which  may be  purchased  shall be
calculated to the nearest full share.

            3.  Manner of Exercise.  Each  exercise  of  the  Option shall be by
means of a written notice of exercise  delivered to the Company,  specifying the
number of shares to be purchased  and  accompanied  by payment to the Company of
the full purchased price of the shares to be purchased  solely (i) in cash or by
check payable to the order of the Company,  (ii) by delivery of shares of Common
Stock of the Company  already owned by, and in the  possession of, the Optionee,
valued at their fair market value,  as determined in accordance  with Section 4,
or (iii) (x) by a promissory note made by Optionee in favor of the Company, upon
the terms and conditions  determined by the Committee  including,  to the extent
the Committee determines appropriate, a security interest in the shares issuable
upon exercise or other property, or (y) through a "cashless exercise," in either
case complying with applicable law  (including,  without  limitation,  state and
federal margin requirements), or any combination thereof. Shares of Common Stock
used to satisfy the exercise  price of this Option shall be valued at their fair
market value  determined  (in  accordance  with Section 4 hereof) on the date of
exercise (or if such date is not a business day, as of the close of the business
day immediately preceding date). This Option may not be exercised for a fraction
of a share and no partial  exercise  of this Option may be for less than (a) one
hundred  (100)  shares or (b) the  total  number of  shares  then  eligible  for
exercise, if less than one hundred (100) shares.

            The Option may be exercised  (i) during the lifetime of the Optionee
only by the  Optionee;  (ii) to the extent  permitted by the Committee or by the
terms of this  Agreement,  Optionee's  spouse if such spouse obtained the Option
pursuant to a  qualified  domestic  relations  ordered as defined by the Code of
Title  I of  ERISA,  or the  rules  thereunder  ("Qualified  Domestic  Relations
Order");  and (iii) after the Optionee's death by his or her transferees by will
or the laws of descent or distribution.

            4.  Fair Market  Value of Common Stock.  The fair market  value of a
share of Common  Stock shall be  determined  for  purposes of this  Agreement by
reference to the closing  price on the  principal  stock  exchange on which such
shares  are then  listed  or,  if such  shares  are not then  listed  on a stock
exchange,  by reference to the closing  price (if approved for  quotation on the
NASDAQ  National  Market System) or the mean between the bid and asked price (if
other  over-the-counter  issue)  of  a  share  as  supplied   by   the  National
Association  of Securities  Dealers,  Inc.  through  NASDAQ (or its successor in
function), in each case as reported by The Wall Street Journal, for the business
day immediately  preceding the date on which the option is granted  (which,  for
all purposes, shall be the Date of Grant) or exercised (or, if for any reason no
such  price  is  available,  in such  other  manner  as the  Committee  may deem
appropriate to reflect the then fair market value thereof).

            5.  Termination of Employment; Death or Permanent Disability. If the
Optionee  ceases to be employed by the Company or one of its  affiliates for any
reason other than the  Optionee's  death or "permanent  disability"  (within the
meaning of Section 22(e)(3) of the Code), the Option shall be exercisable  until
the earlier of (i) the Expiration Date or (ii) a date three (3) months after the
date the Optionee ceases to be an employee of the Company or such affiliate,  to
the extent  exercisable on the date of such  cessation of employment,  and shall
thereafter  expire  and be void and of no further  force or  effect.  A leave of

                                    -2-

                                                                  Page 49 of 53
absence  approved in writing by the Committee  shall not be deemed a termination
of  employment  for the  purposes  of this  Section 5, but the Option may not be
exercised  during any such leave of absence,  except  during the first three (3)
months thereof. If the Optionee dies or becomes "permanently disabled" while the
Optionee is employed by the Company or one of its  affiliates,  the Option shall
expire on the  earlier  of (i) the  Expiration  Date or (ii) a date one (1) year
after  the  date  of  such  death  or  "permanent  disability,"  to  the  extent
exercisable on the date of death or permanent  disability,  and shall thereafter
expire and be void and of no further  force or effect.  During such period after
death,  the  Option  may,  to the  extent  that  it  remained  unexercised  (but
exercisable by the Optionee according to the Option's terms) on the date of such
death, be exercised by the person or persons to whom the Optionee's rights under
the Option  shall  pass by the  Optionee's  will or by the laws of  descent  and
distribution.

            6.  Shares to be Issued in Compliance  with Federal  Securities Laws
and Exchange Rules. By accepting the Option, the Optionee represents and agrees,
for the Optionee and his or her legal successors (by will or the laws of descent
and distribution or through a Qualified Domestic Relations Order),  that none of
the shares purchased upon exercise of the Option will be acquired with a view to
any sale, transfer or distribution of said shares in violation of the Securities
Act of 1933, as amended (the  "Securities  Act"),  and the rules and regulations
promulgated thereunder,  or any applicable state "blue sky" laws. If required by
the  Committee  at the time the Option is  exercised,  the Optionee or any other
person  entitled to exercise the Option shall furnish  evidence  satisfactory to
the Company  (including a written and signed  representation)  to such effect in
form and substance satisfactory to the Company,  including an indemnification of
the Company in the event of any  violation of the  Securities  Act or state blue
sky laws by such person.  The Company shall use  reasonable  efforts to take all
necessary  and  appropriate  action to assure that the shares  issuable upon the
exercise of this Option shall be issued in full  compliance  with the Securities
Act,  state  blue  sky  laws  and all  applicable  listing  requirements  of any
principal securities exchange on which shares of the same class are listed.

            7.  Withholding of Taxes.  Upon  any  disposition by the Optionee or
the Optionee's  legal  successor of shares of Common Stock acquired  pursuant to
the exercise of this Option  within two (2) years of the Date of Grant or within
one (1) year of the  exercise  of this  Option  (in  "Early  Disposition"),  the
Company  shall have the right to require the  Optionee or the  Optionee's  legal
successor  to pay the  Company  the amount of any taxes which the Company may be
required to withhold with respect to such shares.

            8.  No  Assignment.  The Option and all other rights and  privileges
granted hereby shall not be transferred,  either  voluntarily or by operation of
law otherwise than by will or the laws of descent and  distribution  or pursuant
to a  Qualified  Domestic  Relations  Order.  Upon any attempt to so transfer or
otherwise dispose of this Option or any other right or privileges granted hereby
contrary to the  provisions  hereof,  this Option and all rights and  privileges
contained herein shall immediately  become null and void and of no further force
or effect.

            9.  Adjustment  for  Reorganizations,  Stock  Splits,  etc.   If the
outstanding  shares of Common Stock of the Company (or any other class of shares
or securities  which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased,  decreased,  changed into or exchanged

                                    -3-

                                                                  Page 50 of 53
for a different  number or kind of shares or securities  of the Company  through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse  stock  split  or  other  similar   transaction,   an  appropriate   and
proportionate  adjustment shall be made in the maximum number and kind of shares
receivable  upon the exercise of this Option,  without change in the total price
applicable to the unexercised  portion of this Option,  but with a corresponding
adjustment in the price for each share or other unit of any security  covered by
this Option.

            Upon  the  dissolution  or  liquidation  of the  Company,  or upon a
reorganization,  merger  or  consolidation  of the  Company  with  one  or  more
corporations as a result of which the Company is not the surviving  corporation,
or upon a sale of  substantially  all the  property or more than eighty  percent
(80%) of the then outstanding stock of the Company to another corporation,  this
Option shall terminate;  provided,  however, that notwithstanding the foregoing,
the Committee shall provide in writing in connection  with such  transaction for
the  appropriate  satisfaction  of this  Option by one or more of the  following
alternatives  (separately  or in  combination):  (i) for this  Option  to become
immediately exercisable notwithstanding the provisions of Sections 2 and 3; (ii)
for  the  assumption  by  the  successor  corporation  of  this  Option  or  the
substitution by such corporation  therefor of a new option covering the stock of
the successor  corporation or its affiliates with appropriate  adjustments as to
the number and kind of shares and prices;  (iii) for the continuance of the Plan
by such  successor  corporation  in which event the Plan and this  Option  shall
continue in the manner and under the terms so provided;  or (iv) for the payment
in cash or stock in lieu of and in complete satisfaction of this Option.

            Adjustments  under  this  Section 9 shall be made by the  Committee,
whose  determination  as to what  adjustments  shall  be  made,  and the  extent
thereof,  shall be final, binding and conclusive.  No fractional shares of stock
shall be issued under this Option on any such adjustment.

            10. Participation  by the Optionee in Other Company Plans.   Nothing
herein  contained  shall affect the right of the Optionee to  participate in and
receive benefits under and in accordance with the then current provisions of any
pension,  insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.

            11. No Rights as a Shareholder Until Issuance of Stock  Certificate.
Neither the  Optionee  nor any other person  legally  entitled to exercise  this
Option shall be entitled to any of the rights or privileges of a shareholder  of
the Company in respect of any shares  issuable  upon any  exercise of the Option
unless and until a certificate or  certificates  representing  such shares shall
have been  actually  issued and  delivered to the  Optionee.  No shares shall be
issued and  delivered  upon the  exercise of this Option  unless and until there
shall  have  been  full  compliance  with  all  applicable  requirements  of the
Securities  Act  (whether  by  registration  or  satisfaction  of  an  exemption
therefrom),  all  applicable  listing  requirements  of  a  national  securities
exchange on which shares of the same class are listed and any other requirements
of law or of any regulatory  bodies having  jurisdiction  over such issuance and
delivery.

            12. Not an Employment or Service Contract.  Nothing herein contained
shall be  construed  as an  agreement  by the Company or any of its  affiliates,

                                    -4-

                                                                  Page 51 of 53
express or  implied,  to employ the  Optionee  or  contract  for the  Optionee's
services,  to restrict the Company's or such affiliate's  right to discharge the
Optionee or cease contracting for the Optionee's  services or to modify,  extend
or  otherwise  affect in any  manner  whatsoever,  the  terms of any  employment
agreement or contract for services  which may exist between the Optionee and the
Company or any of its affiliates.

            13. Agreement  Subject  to the Plan.  The Option  hereby  granted is
subject to, and the Company  and the  Optionee  agree to be bound by, all of the
terms and conditions of the Plan, as the same shall be amended from time to time
in accordance  with the terms  thereof,  but no such amendment  shall  adversely
affect the Optionee's rights under this Option without the prior written consent
of the Optionee.

            14. Execution.  The  interpretation,  performance and enforcement of
this Agreement shall be governed by the internal  substantive  laws of the State
of California.

                  COMPANY:                TARRANT APPAREL GROUP

                                          By_______________________________

                                          Its_______________________________

                  OPTIONEE:

                                          ---------------------------------
                                          Name

                                    -5-

                                                                  Page 52 of 53
By his or her  signature  below,  the spouse of the Optionee  agrees to be
bound by all of the terms and conditions of the foregoing Agreement.

                  OPTIONEE'S SPOUSE:

                                          ---------------------------------
                                          Name

      The following  terms and  conditions are an integral part of the foregoing
Incentive Stock Option Agreement.

            Optionee:                     _________________________________

            Address:                      _________________________________
                                          _________________________________

            Social Security Number:       _________________________________

            Date of Grant:                _________________________________

            Number of shares purchasable: _________________________________

            Exercise Price per share:     _________________________________

            Expiration Date:              _________________________________

--------------------------------------------------------------------------------
     Anniversary Date         Percentage Initially      Cumulative Percentage
   of the Date of Grant           Exercisable                Exercisable
--------------------------------------------------------------------------------
          First                       25%                        25%
--------------------------------------------------------------------------------
          Second                      25%                        50%
--------------------------------------------------------------------------------
          Third                       25%                        75%
--------------------------------------------------------------------------------
          Fourth                      25%                        100%
--------------------------------------------------------------------------------

                                    -6-

                                                                  Page 53 of 53