EXHIBIT 10.77.2
 
MODIFICATION AGREEMENT
 
THIS MODIFICATION AGREEMENT (“Agreement”) is entered into as of June 7, 2002, by
and between General Electric Capital Corporation (“Lender”) and Tarrant Apparel
Group (“Borrower”).
 
WHEREAS, Borrower and Lender entered into that certain Loan Agreement dated as
of September 1, 1999 regarding a loan thereunder in the original principal
amount of US $12,500,000 (as amended or modified from time to time, the
“September Loan Agreement”);
 
WHEREAS, Borrower and Lender also entered into that certain Loan Agreement dated
as of October 12, 1999 regarding a loan thereunder in the original principal
amount of US $3,750,000 (as amended or modified from time to time, the “October
Loan Agreement”);
 
WHEREAS, the September Loan Agreement and the October Loan Agreement are
sometimes hereinafter referred to collectively as the “Loan Agreement”;
capitalized terms used but not defined herein shall have the meanings given in
the Loan Agreement, as applicable);
 
WHEREAS, on or about March 28, 2002, Lender delivered to Borrower a letter
waiving Borrower’s compliance under Section 10(c) of the Loan Agreement for its
fiscal quarters ending December 31, 2001 and March 31, 2002 (a copy of which
letter is attached hereto as Exhibit A, and incorporated herein by this
reference and called, the “Waiver Letter”); and
 
WHEREAS, in accordance with the terms of the Waiver Letter, the parties now
desire to further clarify the terms and conditions of such waiver agreement and
provide for certain additional modifications to the Loan Agreements, on and
subject to the terms of this Agreement;
 
NOW THEREFORE, in consideration of the foregoing, the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Lender and Borrower agree as follows:
 
1.  Conditions of Waiver; Agreements.    The parties hereto reaffirm their
respective agreement to the terms and conditions of the Waiver Letter, subject
to the further provisions of this Agreement. As indicated therein, such
violations constituted Events of Default, which absent Lender’s waiver thereof,
would have entitled Lender to exercise all of its rights and remedies under the
Loan Agreement and under law. Notwithstanding the foregoing, Lender’s waiver
hereunder and under the Waiver Letter is subject, in all respects, to Borrower’s
execution and delivery of this Agreement and the satisfaction of the terms and
conditions hereof. In accordance with the foregoing, Borrower hereby further
agrees as follows:
 
(i)  That Borrower shall pay to Lender an immediate prepayment of the Loan
described in the September Loan Agreement, in the amount of $250,000, in good
funds (which amount Lender hereby confirms has been received);
 
(ii)  That Borrower shall pay to Lender, in good funds, a documentation fee in
the amount of $10,000 (which amount Lender hereby confirms has been received);
 
(iii)  That the Note evidencing the Loan under the September Loan Agreement is
hereby amended by adding to the existing monthly installments thereunder, an
additional Twenty-Five Thousand Dollar ($25,000) per month principal payment,
commencing with the monthly installment due thereunder on June 1, 2002, and on
the date of each monthly installment thereafter; and

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(iv)  To cause each guarantor and any other party that may be obligated with
respect to the indebtedness evidenced by the Loan Agreement, to provide its
written consent to the terms of the Waiver Letter and this Agreement, in form
and substance satisfactory to Lender.
 
2.  Credit Support Documents.    It is hereby agreed that any security
agreement, chattel mortgage, guaranty, letter of credit, letter of credit
agreement, recourse arrangement, or other agreement given as security for the
Indebtedness evidenced by the Loan Agreement and the other Debt Documents shall
remain in full force and effect, and unmodified, except to the extent provided
herein.
 
3.  Conditions Unsatisfied.    Failure of Borrower to satisfy the terms and
conditions of this Agreement shall constitute an Event of Default under the Loan
Agreement.
 
4.  No Claims.    Borrower and each guarantor by their signature hereto where
indicated, each acknowledges that there are no existing claims, defenses
(personal or otherwise) or rights of setoff or recoupment whatsoever with
respect to any Loan Agreement or any other Debt Document. Borrower and each
guarantor by their signature hereto where indicated, each agrees that this
Agreement in no way acts as a release or relinquishment of any liens or other
rights in favor of Lender.
 
5.  Indemnifications; Reaffirmations.    Borrower hereby agrees to and does
indemnify and hold the Lender and each of its directors, shareholders, officers,
employees, affiliates, attorneys and agents harmless from and against any and
all liabilities which may be imposed on, incurred by or asserted against the
same in any manner relating to or arising out of the Loan Agreement, this
Agreement or any act, event or transaction related to, attendant to or preceding
the execution of this Agreement. The Borrower hereby agrees with, reaffirms and
acknowledges the representations and warranties contained in the Loan Agreement.
Furthermore, the Borrower represents that, as of the date hereof, all
representations and warranties contained in the Loan Agreement continue to be
true and in full force and effect. This Agreement is given to the Lender by the
Borrower without defenses, set-offs, claims or counterclaims of any kind. To the
extent that any defenses, set-offs, claims or counterclaims against the Lender
may exist, the Borrower waives and releases the Lender from same. The Borrower
ratifies and reaffirms all terms, covenants, conditions and agreements contained
in the Loan Agreement.
 
6.  Miscellaneous.    THIS AGREEMENT MERELY MODIFIES THE LOAN AGREEMENT AND
CERTAIN DEBT DOCUMENTS; IT DOES NOT IN ANY WAY DISCHARGE THE INDEBTEDNESS
EVIDENCED THEREBY. EXCEPT AS OTHERWISE MODIFIED BY THIS AGREEMENT, ALL TERMS OF
THE DEBT DOCUMENTS REMAIN IN FULL FORCE AND EFFECT. This Agreement shall not be
effective unless and until Lender receives a written consent, in form and
substance satisfactory to Lender, from each guarantor and all other parties that
may be obligated with respect to the Indebtedness evidenced by the Debt
Documents. Lender’s waivers herein are expressly conditioned upon the accuracy
of the financial statements and other information submitted by Borrower and the
existence of no other Event of Default, other than the ones specifically
addressed herein or in the Waiver Letter. This Agreement will not, and shall not
be construed to, give Borrower any right to any future waiver or modification of
any terms of the Debt Documents. The waivers of Lender herein are only for the
time period and the matters addressed hereby. Lender’s waivers are not intended
to apply to any other time period or any other event. All amounts due or
becoming due under the Loan Agreement or otherwise to Lender, are not, and will
not be, subject to any defense, setoff, recoupment, abatement or counterclaim
for any reason whatsoever. To the extent that any defenses, set-offs,
recoupments, abatements, claims or counterclaims may exist, the Borrower waives
and releases the Lender from the same. The terms of this Agreement are
incorporated into and made a part of the Debt Documents. Lender reserves all of
its rights and remedies under the Loan Agreement and the other Debt Documents.
 
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.

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TARRANT APPAREL GROUP
     
GENERAL ELECTRIC CAPITAL CORPORATION
By:
 
/s/    PATRICK CHOW        

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By:
 
/s/    LEAH A. SMITH        

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Patrick Chow
Chief Financial Officer
         
Leah A. Smith
Senior Risk Manager

 
Accepted and agreed to by:
 
SIEMENS FINANCIAL SERVICES, INC.,
fka SIEMENS CREDIT CORPORATION
By:
 
/s/    CRAIG L. JOHNSON      

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Craig L. Johnson
VP Credit and Operations

 
Date: 07/11/02

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CONSENT OF GUARANTOR
 
The undersigned Guarantor has received a copy of and read the above Modification
Agreement and the Waiver Letter attached thereto (collectively, the
“Modification Documents”), executed by Tarrant Apparel Group (“Borrower”) and
General Electric Capital Corporation (“Lender”). The undersigned hereby consents
to the terms and conditions of the Modification Documents. The undersigned
executed and delivered to Lender, a Corporate Guaranty dated September 1, 1999
along with a Master Security Agreement dated as of September 1, 1999, a
Corporate Guaranty dated October 12, 1999 along with a Master Security Agreement
dated as of October 12, 1999, and certain other documents, instruments, security
and other and agreements executed in connection therewith (collectively, the
“Guaranty Documents”). The undersigned hereby further agrees and affirms, in all
respects, for good and valuable consideration, the receipt of which is hereby
acknowledged, that the Guaranty Documents are hereby reaffirmed and remain and
shall remain in full force and effect without variance, qualification,
discharge, or diminution, and that pursuant to each such Guaranty Document, the
undersigned guarantees, among other things, the obligations of Borrower under
the Modification Documents and all other Debt Documents.
 
The undersigned Guarantor further agrees to sign a Trust Modification document,
acceptable in form and substance to GE Capital Bank, S.A., to acknowledge under
the Trust Agreement (“Contrato de Fideicomiso Irrevocable en Garantía número
F/172”) signed with GE Capital Bank, S.A., that a modification has occurred
under the Loan Agreement.
 
TARRANT MEXICO, S DE R.L. DE C.V.
By:
 
/s/    CORAZON REYES      

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Corazon Reyes
   
Title

 
Date: 6/7/02

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Exhibit A
 
[Copy of Waiver Letter]

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