TARRANT APPAREL GROUP
EX-10.2
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-2.txt
<DESCRIPTION>EX-10.2
<TEXT>
                                                                    EXHIBIT 10.2

                               SECURITY AGREEMENT

            SECURITY   AGREEMENT,   dated  as  of  December   14,   2004  (this
"AGREEMENT"),  among  Tarrant  Apparel  Group,  a  California  corporation  (the
"COMPANY" or the "DEBTOR") and the holder or holders of the Company's 6% Secured
Convertible Debentures due December 14, 2007 in the original aggregate principal
amount of $10,000,000 (the  "DEBENTURES"),  signatory  hereto,  their endorsees,
transferees and assigns (collectively referred to as, the "SECURED PARTIES").

                              W I T N E S S E T H:

            WHEREAS, pursuant to the Purchase Agreement and the Debentures,  the
Secured  Parties  have  severally  agreed  to extend  the  loans to the  Company
evidenced by the Debenture; and

            WHEREAS,  in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, the Debtor has agreed to execute and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, PARI PASSU with
each other Secured Party, a perfected  security  interest in certain property of
such Debtor to secure the prompt  payment,  performance and discharge in full of
all of the Company's obligations under the Debenture.

            NOW, THEREFORE,  in consideration of the agreements herein contained
and for other good and valuable  consideration,  the receipt and  sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

            1. CERTAIN  DEFINITIONS.  As used in this  Agreement,  the following
terms shall have the  meanings  set forth in this  Section 1. Terms used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document",    "equipment",    "fixtures",   "general   intangibles",   "goods",
"instruments",  "inventory",  "investment property",  "letter-of-credit rights",
"proceeds" and  "supporting  obligations")  shall have the  respective  meanings
given such terms in Article 9 of the UCC.

                  (a)  "COLLATERAL"  means the  collateral  in which the Secured
         Parties are granted a security  interest  by this  Agreement  and which
         shall consist of all of Debtor's present and future  Accounts,  Chattel
         Paper  and  Instruments,   and  all  Supporting  Obligations,   General
         Intangibles and Documents  arising out of or relating to the foregoing;
         Retained  Goods;  credit  balances and other property of Debtor held or
         received by Secured Parties;  rights of stoppage in transit,  replevin,
         repossession,  reclamation  and other  rights and remedies of an unpaid
         vendor; and all of Debtor's Records relating to and all proceeds of the
         foregoing property and rights.

            Notwithstanding  the  foregoing,  nothing  herein shall be deemed to
constitute  an  assignment  of any asset which,  in the event of an  assignment,
becomes  void by  operation  of  applicable  law or the  assignment  of which is
otherwise  prohibited  by  applicable  law (in each case to the extent that such
applicable  law is not overridden by Sections  9-406,  9-407 and/or 9-408 of the
UCC or other similar  applicable  law);  provided,  however,  that to the extent
permitted


<PAGE>


by applicable law, this Agreement shall create a valid security interest in such
asset and, to the extent  permitted by  applicable  law,  this  Agreement  shall
create a valid security interest in the proceeds of such asset.

                  (b)  "MAJORITY  IN  INTEREST"  shall  mean,  at  any  time  of
         determination,  the  majority  in interest  (based on  then-outstanding
         principal  amounts of Debentures at the time of such  determination) of
         the Secured Parties.

                  (c) "Intercreditor Agreement" means that certain Intercreditor
         Agreement,  dated as of the date hereof,  among GMAC Commercial Finance
         LLC,  UPS Capital  Global Trade  Finance  Corporation,  the Agent,  and
         Debtor.

                  (d) "OBLIGATIONS" means all of the Debtor's  obligations under
         this Agreement, the Purchase Agreement,  the Debentures,  and any other
         instruments, agreements or other documents executed and/or delivered in
         connection  herewith  or  therewith,  in  each  case,  whether  now  or
         hereafter  existing,  voluntary  or  involuntary,  direct or  indirect,
         absolute or  contingent,  liquidated  or  unliquidated,  whether or not
         jointly  owed  with  others,  and  whether  or not  from  time  to time
         decreased or extinguished and later increased, created or incurred, and
         all or any portion of such obligations or liabilities that are paid, to
         the  extent all or any part of such  payment  is  avoided or  recovered
         directly or indirectly from any of the Secured Parties as a preference,
         fraudulent  transfer or otherwise as such  obligations  may be amended,
         supplemented,  converted,  extended  or  modified  from  time to  time.
         Without   limiting  the   generality   of  the   foregoing,   the  term
         "Obligations" shall include, without limitation:  (i) principal of, and
         interest on the  Debentures and the loans  extended  pursuant  thereto;
         (ii)  any and all  other  fees,  indemnities,  costs,  obligations  and
         liabilities of the Debtor from time to time under or in connection with
         this Agreement, the Debentures,  and any other instruments,  agreements
         or other documents executed and/or delivered in connection  herewith or
         therewith;  and  (iii)  all  amounts  (including  but  not  limited  to
         post-petition  interest)  in  respect  of the  foregoing  that would be
         payable but for the fact that the  obligations  to pay such amounts are
         unenforceable  or not  allowable  due to the existence of a bankruptcy,
         reorganization or similar proceeding involving the Debtor.

                  (e)  "ORGANIZATIONAL  DOCUMENTS"  means  with  respect  to the
         Debtor,  the  documents  by  which  Debtor  was  organized  (such  as a
         certificate of  incorporation,  certificate  of limited  partnership or
         articles  of  organization,  and  including,  without  limitation,  any
         certificates  of  designation  for  preferred  stock or other  forms of
         preferred equity) and which relate to the internal governance of Debtor
         (such as bylaws,  a  partnership  agreement  or an  operating,  limited
         liability or members agreement).

                  (f) "UCC"  means the Uniform  Commercial  Code of the State of
         California and or any other applicable law of any state or states which
         has jurisdiction with respect to all, or any portion of, the Collateral
         or this  Agreement,  from time to time. It is the intent of the parties
         that defined  terms in the UCC should be  construed  in their  broadest
         sense so that the term  "Collateral"  will be construed in its broadest
         sense.  Accordingly if there are, from time to time, changes to defined
         terms in the UCC that broaden the


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<PAGE>


         definitions,  they are incorporated herein and if existing  definitions
         in the UCC are broader than the amended definitions,  the existing ones
         shall be controlling.

         2. GRANT OF  PERFECTED  SECURITY  INTEREST.  As an  inducement  for the
Secured Parties to extend the loans as evidenced by the Debentures and to secure
the complete and timely payment,  performance and discharge in full, as the case
may be, of all of the Obligations, Debtor hereby unconditionally and irrevocably
pledges,  grants  and  hypothecates  to the  Secured  Parties a  continuing  and
perfected  security  interest  in and to, a lien  upon  and a right  of  set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (the "SECURITY INTEREST").


         3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTOR.
Debtor  represents  and warrants to, and covenants and agrees with,  the Secured
Parties as follows:

                  (a) Debtor has the requisite  corporate power and authority to
         enter into this  Agreement and  otherwise to carry out its  obligations
         hereunder.  The execution,  delivery and  performance by Debtor of this
         Agreement  and  the  filings   contemplated   therein  have  been  duly
         authorized by all necessary action on the part of Debtor and no further
         action is required by Debtor.  This Agreement has been duly executed by
         Debtor.  This  Agreement  constitutes  the  legal,  valid  and  binding
         obligation of Debtor, enforceable against Debtor in accordance with its
         terms  except  as such  enforceability  may be  limited  by  applicable
         bankruptcy,  insolvency,  reorganization  and  similar  laws of general
         application  relating  to or  affecting  the  rights  and  remedies  of
         creditors and by general principles of equity.

                  (b) The Debtor has no place of business  or offices  where its
         books of account and records  are kept (other than  temporarily  at the
         offices of its attorneys or accountants) or places where  Collateral is
         stored or located,  except as set forth on SCHEDULE A attached  hereto.
         Except as  disclosed on SCHEDULE A, none of such  Collateral  is in the
         possession of any consignee, bailee, warehouseman, agent or processor.

                  (c) Except for Permitted  Liens (as defined in the Debentures)
         and except as set forth on  SCHEDULE B attached  hereto,  the Debtor is
         the sole owner of the  Collateral  (except for  non-exclusive  licenses
         granted by any Debtor in the  ordinary  course of  business),  free and
         clear of any liens, security interests, encumbrances, rights or claims,
         and is fully  authorized  to grant the  Security  Interest  (subject to
         obtaining  the  consent  of  (i)  GMAC  under  that  certain  Factoring
         Agreement  by and among  GMAC,  Debtor and  certain of its  Affiliates,
         dated as of  September  29,  2004,  as amend to date  (the "  FACTORING
         AGREEMENT")  and (ii) UPS Capital  Global Trade  Finance  ("UPS") under
         that  certain  Guaranty and  Security  Agreement  by and among  Debtor,
         certain of its Affiliates and UPS, dated as of May 30, 2002, as amended
         to date (the  "GUARANTY").  There is not on file in any governmental or
         regulatory authority, agency or recording office an effective financing
         statement, security agreement, license or transfer or any notice of any
         of the  foregoing  (other than those that will be filed in favor of the
         Secured  Parties  pursuant  to  this  Agreement  and  pursuant  to  the
         Factoring  Agreement  and  Guaranty)  covering or affecting  any of the
         Collateral.  So long as this  Agreement  shall be in effect,  except as


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<PAGE>


         otherwise  provided herein,  the Debtor shall not execute and shall not
         knowingly  permit to be on file in any such  office or agency  any such
         financing  statement  or other  document or  instrument  (except to the
         extent  filed or recorded in favor of the Secured  Parties  pursuant to
         the terms of this  Agreement or in favor of GMAC or UPS pursuant to the
         Factoring Agreement or Guaranty).

                  (d) No written claim has been received that any  Collateral or
         Debtor's use of any Collateral  violates the rights of any third party.
         There has been no adverse  decision to any Debtor's  claim of ownership
         rights in or exclusive rights to use the Collateral in any jurisdiction
         or to Debtor's right to keep and maintain such Collateral in full force
         and effect,  and there is no proceeding  involving  said rights pending
         or, to the best  knowledge  of  Debtor,  threatened  before  any court,
         judicial body, administrative or regulatory agency, arbitrator or other
         governmental authority.

                  (e) Debtor  shall at all times  maintain  its books of account
         and  records  relating  to the  Collateral  at its  principal  place of
         business and its  Collateral  at the  locations set forth on SCHEDULE A
         attached  hereto and may not relocate such books of account and records
         or tangible  Collateral  unless it  delivers to the Secured  Parties at
         least 30 days  prior to such  relocation  (i)  written  notice  of such
         relocation  and the new  location  thereof  (which  must be within  the
         United States) and (ii) evidence that appropriate  financing statements
         under  the UCC and  other  necessary  documents  have  been  filed  and
         recorded  and other  steps  have been  taken to  perfect  the  Security
         Interest to create in favor of the Secured  Parties a valid,  perfected
         and continuing perfected lien in the Collateral.

                  (f) This Agreement  creates in favor of the Secured  Parties a
         valid security  interest in the  Collateral,  subject only to Permitted
         Liens (as defined in the Debentures) and the liens in favor of GMAC and
         UPS,  securing the payment and  performance  of the  Obligations.  Upon
         making the filings  described in the immediately  following  paragraph,
         all security interests created hereunder in any Collateral which may be
         perfected by filing Uniform Commercial Code financing  statements shall
         have  been  duly  perfected.  Except  for  the  filing  of the  Uniform
         Commercial  Code financing  statements  referred to in the  immediately
         following  paragraph  no action is  necessary  to  create,  perfect  or
         protect the security interests created hereunder.  Without limiting the
         generality of the  foregoing,  except for the filing of said  financing
         statements,   obtaining   the  consent  of  GMAC  under  the  Factoring
         Agreement,  the  consent of UPS under the  Guaranty,  no consent of any
         third parties and no authorization, approval or other action by, and no
         notice to or filing with, any governmental authority or regulatory body
         is required for (i) the  execution,  delivery and  performance  of this
         Agreement,  (ii) the creation or perfection  of the Security  Interests
         created  hereunder in the  Collateral or (iii) the  enforcement  of the
         rights of the Secured Parties hereunder.

                  (g) Debtor hereby  authorizes the Secured  Parties,  or any of
         them,  to file one or more  financing  statements  under the UCC,  with
         respect to the Security  Interest  with the proper filing and recording
         agencies in any jurisdiction deemed proper by them.


                                       4
<PAGE>


                  (h) The execution,  delivery and performance of this Agreement
         by the  Debtor  does  not  (i)  violate  any of the  provisions  of any
         Organizational  Documents of Debtor or any judgment,  decree,  order or
         award of any court,  governmental  body or arbitrator or any applicable
         law, rule or regulation  applicable to Debtor or (ii) conflict with, or
         constitute  a default (or an event that with notice or lapse of time or
         both  would  become a default)  under,  or give to others any rights of
         termination,  amendment,  acceleration or cancellation (with or without
         notice, lapse of time or both) of, any agreement, credit facility, debt
         or other  instrument  (evidencing  Debtor's debt or otherwise) or other
         understanding  to which  Debtor is a party or by which any  property or
         asset of Debtor is bound or affected (except for any conflict under the
         Factoring Agreement and the Guaranty,  which conflicts will be resolved
         by consents  obtained from GMAC and UPS concurrent  with the closing of
         this Agreement).

                  (i) Debtor shall at all times  maintain the liens and Security
         Interest  provided  for  hereunder  as valid  and  perfected  liens and
         security  interests in the  Collateral in favor of the Secured  Parties
         until this  Agreement  and the  Security  Interest  hereunder  shall be
         terminated  pursuant  to  Section 11 hereof.  Debtor  hereby  agrees to
         defend the same against the claims of any and all persons and entities.
         Debtor shall  safeguard and protect all  Collateral  for the account of
         the Secured Parties. At the request of the Secured Parties, Debtor will
         sign and  deliver  to the  Secured  Parties at any time or from time to
         time  one or  more  financing  statements  pursuant  to the UCC in form
         reasonably satisfactory to the Secured Parties and will pay the cost of
         filing the same in all public offices  wherever filing is, or is deemed
         by the Secured  Parties to be,  necessary  or  desirable  to effect the
         rights and  obligations  provided  for  herein.  Without  limiting  the
         generality of the foregoing, Debtor shall pay all fees, taxes and other
         amounts  necessary to maintain the Collateral and the Security Interest
         hereunder,  and Debtor shall obtain and furnish to the Secured  Parties
         from time to time, upon demand, such releases and/or  subordinations of
         claims and liens which may be required to maintain  the priority of the
         Security Interest hereunder.

                  (j) Debtor will not transfer, pledge,  hypothecate,  encumber,
         license, sell or otherwise dispose of any of the Collateral (except for
         non-exclusive  licenses  granted  by Debtor in its  ordinary  course of
         business)  without the prior written consent of a Majority in Interest;
         provided  that nothing  herein shall limit or restrict  GMAC's or UPS's
         rights with respect to the Collateral.

                  (k) Debtor shall keep and preserve  its  equipment,  inventory
         and other tangible  Collateral in good condition,  repair and order and
         shall  not  operate  or  locate  any such  Collateral  (or  cause to be
         operated or located) in any area excluded from insurance coverage.

                  (l) Debtor shall maintain with financially sound and reputable
         insurers,  insurance  with  respect to the  Collateral  against loss or
         damage of the kinds and in the amounts  customarily  insured against by
         entities of established  reputation having similar properties similarly
         situated and in such amounts as are  customarily  carried under similar
         circumstances  by other such  entities and  otherwise as is prudent for
         entities engaged in


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<PAGE>


         similar  businesses  but in any  event  sufficient  to  cover  the full
         replacement  cost  thereof.  Debtor shall cause each  insurance  policy
         issued in connection herewith to provide,  and the insurer issuing such
         policy  to  certify  to the Agent  that (a) the Agent  will be named as
         lender  loss payee and  additional  insured  under each such  insurance
         policy; (b) if such insurance be proposed to be cancelled or materially
         changed for any reason  whatsoever,  such insurer will promptly  notify
         the Agent and such  cancellation or change shall not be effective as to
         the Agent for at least  thirty (30) days after  receipt by the Agent of
         such notice,  unless the effect of such change is to extend or increase
         coverage  under the policy;  and (c) the Agent will have the right (but
         no  obligation) at its election to remedy any default in the payment of
         premiums  within  thirty  (30) days of notice  from the insurer of such
         default.  If no Event of Default (as defined in the  Debenture)  exists
         and if the  proceeds  arising  out of any claim or  series  of  related
         claims do not exceed  $100,000,  loss payments in each instance will be
         applied by the  applicable  Debtor to the repair and/or  replacement of
         property  with  respect  to which the loss was  incurred  to the extent
         reasonably  feasible,  and any loss  payments  or the  balance  thereof
         remaining,  to the  extent  not so  applied,  shall be  payable  to the
         applicable  Debtor,  provided,  however,  that payments received by any
         Debtor after an Event of Default  occurs and is continuing or in excess
         of $100,000 for any occurrence or series of related  occurrences  shall
         be paid to the Agent and, if received by such Debtor,  shall be held in
         trust  for and  immediately  paid over to the  Agent  unless  otherwise
         directed  in  writing  by the  Agent.  Copies of such  policies  or the
         related  certificates,  in each case,  naming the Agent as lender  loss
         payee and  additional  insured shall be delivered to the Agent at least
         annually and at the time any new policy of insurance is issued.

                  (m) Debtor shall,  within ten (10) days of obtaining knowledge
         thereof,  advise the Secured Parties promptly, in sufficient detail, of
         any substantial change in the Collateral,  and of the occurrence of any
         event  which would have a material  adverse  effect on the value of the
         Collateral or on the Secured Parties' security interest therein.

                  (n) Debtor shall  promptly  execute and deliver to the Secured
         Parties   such  further   deeds,   mortgages,   assignments,   security
         agreements,  financing  statements  or  other  instruments,  documents,
         certificates and assurances and take such further action as the Secured
         Parties may from time to time  request  and may in its sole  discretion
         deem necessary to perfect,  protect or enforce its security interest in
         the Collateral.

                  (o)  Debtor  shall  permit  the  Secured   Parties  and  their
         representatives  and agents to inspect the  Collateral at any time, and
         to make  copies  of  records  pertaining  to the  Collateral  as may be
         requested by a Secured Party from time to time.

                  (p)  Debtor  shall  take all  steps  reasonably  necessary  to
         diligently pursue and seek to preserve, enforce and collect any rights,
         claims,  causes of action  and  accounts  receivable  in respect of the
         Collateral.

                  (q)  Debtor  shall  promptly  notify  the  Secured  Parties in
         sufficient  detail upon becoming aware of any attachment,  garnishment,
         execution or other legal process  levied  against any Collateral and of
         any other information received by Debtor that may


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<PAGE>


         materially affect the value of the Collateral, the Security Interest or
         the rights and remedies of the Secured Parties hereunder.

                  (r) All information  heretofore,  herein or hereafter supplied
         to the Secured  Parties by or on behalf of Debtor  with  respect to the
         Collateral is accurate and complete in all material  respects as of the
         date furnished.

                  (s) The Debtor  shall at all times  preserve  and keep in full
         force and effect its valid  existence  and good standing and any rights
         and franchises material to its business.

                  (t) Debtor  will not change  its name,  type of  organization,
         jurisdiction of organization,  organizational identification number (if
         it has one), legal or corporate structure,  or identity, or add any new
         fictitious  name  unless it  provides  at least 30 days  prior  written
         notice to the  Secured  Parties of such change and, at the time of such
         written  notification,  Debtor  provides any  financing  statements  or
         fixture  filings  necessary  to  perfect  and  continue  perfected  the
         perfected security Interest granted and evidenced by this Agreement.

                  (u) Debtor may not  relocate its chief  executive  office to a
         new  location  without  providing  30 days prior  written  notification
         thereof  to the  Secured  Parties  and so long as,  at the time of such
         written  notification,  Debtor  provides any  financing  statements  or
         fixture  filings  necessary  to  perfect  and  continue  perfected  the
         perfected security Interest granted and evidenced by this Agreement.

                  (v) Debtor was  organized and remains  organized  solely under
         the laws of the state set forth next to such Debtor's name in the first
         paragraph  of this  Agreement.  SCHEDULE D attached  hereto  sets forth
         Debtor's organizational identification number.

                  (w) (i) The actual name of Debtor is the name set forth in the
         preamble  above;  (ii) Debtor has no trade  names  other than  "Fashion
         Resource"; (iii) Debtor has not used any name other than that stated in
         the preamble hereto or "Fashion Resource" for the preceding five years;
         and (iv) no entity has merged  into  Debtor or been  acquired by Debtor
         within the past five years.

                  (x) At any  time  and from  time to time  that any  Collateral
         consists of  instruments,  certificated  securities or other items that
         require  or permit  possession  by the  secured  party to  perfect  the
         security  interest  created  hereby,  the  Debtor  shall  deliver  such
         Collateral to the Agent.

                  (y) To the extent that any  Collateral is in the possession of
         any third  party,  the Debtor  shall join with the  Secured  Parties in
         notifying such third party of the Secured Parties' security interest in
         such   Collateral   and  shall  use  its  best  efforts  to  obtain  an
         acknowledgement and agreement from such third party with respect to the
         Collateral, in form and substance satisfactory to the Secured Parties.


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<PAGE>


                  (z) If any  Debtor  shall  at  any  time  hold  or  acquire  a
         commercial  tort claim,  such Debtor shall promptly  notify the Secured
         Parties in a writing signed by such Debtor of the  particulars  thereof
         and grant to the Secured  Parties in such  writing a security  interest
         therein  and in the  proceeds  thereof,  all  upon  the  terms  of this
         Agreement,  with such writing to be in form and substance  satisfactory
         to the Secured Parties.

                  (aa)  Debtor  will from time to time,  at the  expense  of the
         Debtor,  promptly execute and deliver all such further  instruments and
         documents,  and take all such  further  action as may be  necessary  or
         desirable,  or as the Secured Parties may reasonably  request, in order
         to perfect and protect any security interest granted or purported to be
         granted hereby or to enable the Secured Parties to exercise and enforce
         their rights and remedies  hereunder and with respect to any Collateral
         or to otherwise carry out the purposes of this Agreement.

                  (bb) None of the account  debtors or other persons or entities
         obligated on any of the Collateral is a governmental  authority covered
         by the Federal  Assignment of Claims Act or any similar federal,  state
         or local statute or rule in respect of such Collateral.

         4.       DEFAULTS. The following events shall be "EVENTS OF DEFAULT":

                  (a) The  occurrence  of an Event of Default (as defined in the
         Debentures) under the Debentures;

                  (b) Any representation or warranty of Debtor in this Agreement
         shall prove to have been incorrect in any material respect when made;

                  (c) The  failure by Debtor to  observe  or perform  any of its
         obligations  hereunder for five (5) days after  delivery to such Debtor
         of notice of such  failure  by or on behalf of a Secured  Party  unless
         such  default is capable of cure but cannot be cured  within  such time
         frame and such  Debtor is using  best  efforts to cure same in a timely
         fashion; or

                  (d) If any provision of this  Agreement  shall at any time for
         any  reason  be  declared  to be null  and  void,  or the  validity  or
         enforceability  thereof  shall be contested by Debtor,  or a proceeding
         shall be commenced by Debtor,  or by any governmental  authority having
         jurisdiction  over  Debtor,  seeking to  establish  the  invalidity  or
         unenforceability  thereof,  or Debtor  shall  deny that  Debtor has any
         liability or obligation purported to be created under this Agreement.

         5.       DUTY TO HOLD IN TRUST.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time  thereafter,  Debtor shall,  upon receipt of any revenue,  income,
         dividend,  interest  or other sums  subject to the  Security  Interest,
         whether  payable  pursuant to the  Debenture  or  otherwise,  or of any
         check, draft, note, trade acceptance or other instrument  evidencing an
         obligation  to pay any such sum, hold the same in trust for the Secured
         Parties  and shall  forthwith


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<PAGE>


         endorse and  transfer  any such sums or  instruments,  or both,  to the
         Secured Parties,  pro-rata in proportion to their initial  purchases of
         Debentures for application to the  satisfaction of the Obligations (and
         if any  Debenture is not  outstanding,  pro-rata in  proportion  to the
         initial purchases of the remaining Debentures).

         6.       RIGHTS AND REMEDIES UPON DEFAULT.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time  thereafter,   the  Secured  Parties,  acting  through  any  agent
         appointed  by them for such  purpose,  shall have the right to exercise
         all of the remedies conferred  hereunder and under the Debentures,  and
         the Secured Parties shall have all the rights and remedies of a secured
         party under the UCC. Without limitation, the Secured Parties shall have
         the following rights and powers:

                           (i) The Secured  Parties shall have the right to take
                  possession of the  Collateral  and, for that  purpose,  enter,
                  with the aid and assistance of any person,  any premises where
                  the Collateral,  or any part thereof,  is or may be placed and
                  remove the same,  and Debtor shall assemble the Collateral and
                  make it available  to the Secured  Parties at places which the
                  Secured Parties shall reasonably  select,  whether at Debtor's
                  premises  or  elsewhere,  and make  available  to the  Secured
                  Parties, without rent, all of Debtor's respective premises and
                  facilities  for the  purpose  of the  Secured  Parties  taking
                  possession of,  removing or putting the Collateral in saleable
                  or disposable form.

                           (ii) Upon  notice to the Debtor by Agent,  all rights
                  of Debtor to exercise the voting and other  consensual  rights
                  which it would  otherwise  be  entitled  to  exercise  and all
                  rights of Debtor to receive the dividends  and interest  which
                  it would otherwise be authorized to receive and retain,  shall
                  cease. Upon such notice, Agent shall have the right to receive
                  any  interest,   cash  dividends  or  other  payments  on  the
                  Collateral  and,  at the option of Agent,  to exercise in such
                  Agent's  discretion  all  voting  rights  pertaining  thereto.
                  Without limiting the generality of the foregoing,  Agent shall
                  have the right (but not the obligation) to exercise all rights
                  with  respect  to the  Collateral  as if it were  the sole and
                  absolute owner thereof.

                           (iii) The  Secured  Parties  shall  have the right to
                  assign, sell, lease or otherwise dispose of and deliver all or
                  any part of the  Collateral,  at  public  or  private  sale or
                  otherwise,  either  with  or  without  special  conditions  or
                  stipulations, for cash or on credit or for future delivery, in
                  such  parcel or parcels  and at such time or times and at such
                  place or  places,  and upon such terms and  conditions  as the
                  Secured Parties may deem commercially reasonable,  all without
                  (except as shall be required by applicable  statute and cannot
                  be waived) advertisement or demand upon or notice to Debtor or
                  right of  redemption  of Debtor,  which are  hereby  expressly
                  waived.  Upon  each  such  sale,  lease,  assignment  or other
                  transfer  of  Collateral,  the  Secured  Parties  may,  unless
                  prohibited by applicable law which cannot be waived,  purchase
                  all or any part of the  Collateral  being sold,


                                       9
<PAGE>


                  free  from and  discharged  of all  trusts,  claims,  right of
                  redemption and equities of Debtor, which are hereby waived and
                  released.

                           (iv) The  Secured  Parties  shall have the right (but
                  not the  obligation)  to notify any  account  debtors  and any
                  obligors  under  instruments  or  accounts  to  make  payments
                  directly  to the Secured  Parties and to enforce the  Debtors'
                  rights against such account debtors and obligors.


                  (b) The Agent may comply with any applicable law in connection
         with a  disposition  of  Collateral  and  such  compliance  will not be
         considered  adversely to affect the  commercial  reasonableness  of any
         sale of the  Collateral.  The  Agent  may sell the  Collateral  without
         giving any warranties and may specifically disclaim such warranties. If
         the Agent sells any of the  Collateral on credit,  the Debtor will only
         be credited with payments actually made by the purchaser.  In addition,
         Debtor waives any and all rights that it may have to a judicial hearing
         in advance of the enforcement of any of the Agent's rights and remedies
         hereunder,  including, without limitation, its right following an Event
         of  Default  to take  immediate  possession  of the  Collateral  and to
         exercise its rights and remedies with respect thereto.


         7.    APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease or
other  disposition of the Collateral  hereunder  shall be applied first,  to the
expenses of retaking,  holding,  storing,  processing  and  preparing  for sale,
selling, and the like (including,  without limitation, any taxes, fees and other
costs  incurred in connection  therewith) of the  Collateral,  to the reasonable
attorneys' fees and expenses  incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral,  and then to  satisfaction  of the  Obligations  pro rata  among the
Secured Parties (based on  then-outstanding  principal  amounts of Debentures at
the time of any such  determination),  and to the  payment of any other  amounts
required by  applicable  law,  after which the Secured  Parties shall pay to the
Debtor any surplus proceeds.  If, upon the sale, license or other disposition of
the  Collateral,  the proceeds  thereof are  insufficient  to pay all amounts to
which the Secured  Parties are legally  entitled,  the Debtor will be liable for
the deficiency,  together with interest thereon, at the rate of 10% per annum or
the lesser amount  permitted by applicable  law (the  "Default  Rate"),  and the
reasonable fees of any attorneys employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law, Debtor waives all claims,
damages and demands against the Secured Parties arising out of the repossession,
removal,  retention  or sale of the  Collateral,  unless due solely to the gross
negligence or willful misconduct of the Secured Parties as determined by a final
judgment (not further appealed) of a court of competent jurisdiction.


         8.     COSTS  AND  EXPENSES.   Debtor  agrees  to  pay  all  reasonable
out-of-pocket  fees,  costs and expenses  incurred in connection with any filing
required  hereunder,  including  without  limitation,  any financing  statements
pursuant  to  the  UCC,   continuation   statements,   partial  releases  and/or
termination   statements  related  thereto  or  any  expenses  of  any  searches
reasonably  required by the  Secured  Parties.  Debtor  shall also pay all other
claims and charges which in the reasonable  opinion of the Secured Parties might
prejudice,  imperil or otherwise affect the


                                       10
<PAGE>


Collateral or the Security Interest therein.  Debtor will also, upon demand, pay
to the Secured Parties the amount of any and all reasonable expenses,  including
the  reasonable  fees and expenses of its counsel and of any experts and agents,
which the Secured  Parties may incur in connection  with (i) the  enforcement of
this Agreement,  (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement  of any of the rights of the Secured  Parties under the  Debentures.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Debentures and shall bear interest at the Default Rate.

         9.    RESPONSIBILITY FOR COLLATERAL. The Debtor assumes all liabilities
and responsibility in connection with all Collateral,  and the Obligations shall
in no way be affected or diminished by reason of the loss,  destruction,  damage
or theft of any of the Collateral or its unavailability for any reason.  Without
limiting the generality of the foregoing,  (a) neither the Agent nor any Secured
Party (i) has any duty  (either  before or after an Event of Default) to collect
any amounts in respect of the  Collateral or to preserve any rights  relating to
the Collateral,  or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) Debtor shall remain obligated and liable under each
contract or agreement  included in the Collateral to be observed or performed by
Debtor  thereunder.  Neither  the Agent nor any  Secured  Party  shall  have any
obligation  or  liability  under any such  contract or agreement by reason of or
arising out of this  Agreement or the receipt by the Agent or any Secured  Party
of any  payment  relating to any of the  Collateral,  nor shall the Agent or any
Secured  Party be obligated in any manner to perform any of the  obligations  of
Debtor under or pursuant to any such contract or  agreement,  to make inquiry as
to the nature or sufficiency of any payment received by the Agent or any Secured
Party in respect of the Collateral or as to the  sufficiency of any  performance
by any party under any such contract or agreement, to present or file any claim,
to take any action to enforce any  performance  or to collect the payment of any
amounts  which may have been  assigned to the Agent or to which the Agent or any
Secured Party may be entitled at any time or times.

         10.  SECURITY INTEREST  ABSOLUTE. All rights of the Secured Parties and
all obligations of the Debtor  hereunder,  shall be absolute and  unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Debentures or any agreement  entered into in connection  with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment  or  performance  of,  or in  any  other  term  of,  all  or  any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other  agreement  entered into in connection with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guaranty,  or any other  security,  for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might
otherwise  constitute any legal or equitable  defense  available to Debtor, or a
discharge of all or any part of the Security Interest granted hereby.  Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured  Parties  shall  continue  even if the  Obligations  are  barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy. Debtor expressly waives presentment,  protest, notice of protest,
demand,  notice of nonpayment


                                       11
<PAGE>


and demand for  performance.  In the event that at any time any  transfer of any
Collateral or any payment  received by the Secured  Parties  hereunder  shall be
deemed  by final  order  of a court of  competent  jurisdiction  to have  been a
voidable preference or fraudulent  conveyance under the bankruptcy or insolvency
laws of the United  States,  or shall be deemed to be otherwise due to any party
other than the Secured Parties,  then, in any such event,  Debtor's  obligations
hereunder  shall  survive  cancellation  of this  Agreement,  and  shall  not be
discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement,  but  shall  remain a valid and  binding  obligation  enforceable  in
accordance  with the terms and  provisions  hereof.  Debtor  waives all right to
require the Secured  Parties to proceed against any other person or entity or to
apply any  Collateral  which the  Secured  Parties  may hold at any time,  or to
marshal assets, or to pursue any other remedy. Debtor waives any defense arising
by reason of the  application  of the statute of  limitations  to any obligation
secured hereby.

         11.    TERM OF  AGREEMENT.  This  Agreement  and the Security  Interest
shall terminate on the date on which all payments under the Debentures have been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided,  however, that all indemnities of the Debtor contained in
this Agreement (including, without limitation, Annex A hereto) shall survive and
remain  operative and in full force and effect  regardless of the termination of
this Agreement.

         12.    POWER OF ATTORNEY; FURTHER ASSURANCES.

                  (a) Debtor  authorizes  the Secured  Parties,  and does hereby
         make,  constitute and appoint the Secured Parties and their  respective
         officers,   agents,   successors   or   assigns   with  full  power  of
         substitution,  as such Debtor's true and lawful attorney-in-fact,  with
         power, in the name of the various Secured Parties or Debtor,  to, after
         the occurrence and during the  continuance of an Event of Default,  (i)
         endorse any note, checks,  drafts, money orders or other instruments of
         payment  (including  payments payable under or in respect of any policy
         of  insurance)  in  respect  of  the  Collateral  that  may  come  into
         possession  of the  Secured  Parties;  (ii) to  sign  and  endorse  any
         financing  statement  pursuant  to the UCC or any  invoice,  freight or
         express bill,  bill of lading,  storage or warehouse  receipts,  drafts
         against debtors,  assignments,  verifications and notices in connection
         with accounts, and other documents relating to the Collateral; (iii) to
         pay or discharge taxes, liens, security interests or other encumbrances
         at any time levied or placed on or threatened  against the  Collateral;
         (iv) to demand,  collect,  receipt for, compromise,  settle and sue for
         monies due in  respect of the  Collateral;  and (v)  generally,  at the
         option of the Secured Parties, and at the expense of the Debtor, at any
         time,  or  from  time to  time,  to  execute  and  deliver  any and all
         documents  and  instruments  and to do all acts and  things  which  the
         Secured  Parties deem  necessary to protect,  preserve and realize upon
         the Collateral and the Security  Interest  granted  therein in order to
         effect the intent of this Agreement and the Debentures all as fully and
         effectually as the Debtor might or could do; and Debtor hereby ratifies
         all that said attorney  shall lawfully do or cause to be done by virtue
         hereof. This power of attorney is coupled with an interest and shall be
         irrevocable  for the term of this  Agreement and  thereafter as long as
         any of the Obligations shall be outstanding.

                  (b)  On  a  continuing  basis,   Debtor  will  make,  execute,
         acknowledge,  deliver,  file and  record,  as the case may be, with the
         proper filing and recording  agencies in any  jurisdiction,  including,
         without limitation,  the jurisdictions indicated on SCHEDULE C attached
         hereto, all such


                                       12
<PAGE>


         instruments,  and take all such  action  as may  reasonably  be  deemed
         necessary  or  advisable,  or as  reasonably  requested  by the Secured
         Parties,  to  perfect  the  Security  Interest  granted  hereunder  and
         otherwise  to carry out the intent and purposes of this  Agreement,  or
         for  assuring  and  confirming  to the  Secured  Parties  the  grant or
         perfection of a perfected security interest in all the Collateral under
         the UCC.

                  (c) Debtor hereby irrevocably  appoints the Secured Parties as
         Debtor's attorney-in-fact, with full authority in the place and instead
         of Debtor and in the name of Debtor,  from time to time in the  Secured
         Parties'  discretion,  to take any action and to execute any instrument
         which the Secured Parties may deem necessary or advisable to accomplish
         the  purposes of this  Agreement,  including  the  filing,  in its sole
         discretion,  of one or more  financing or  continuation  statements and
         amendments  thereto,  relative  to any of the  Collateral  without  the
         signature of Debtor where  permitted by law.  This power of attorney is
         coupled with an interest and shall be irrevocable  for the term of this
         Agreement  and  thereafter as long as any of the  Obligations  shall be
         outstanding.

         13.  NOTICES.  All notices, requests,  demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).

         14.  OTHER  SECURITY.  To the extent  that the  Obligations  are now or
hereafter  secured by property  other than the  Collateral or by the  guarantee,
endorsement or property of any other person, firm,  corporation or other entity,
then the Secured  Parties  shall have the right,  in their sole  discretion,  to
pursue,  relinquish,  subordinate,  modify or take any other action with respect
thereto,  without in any way modifying or affecting any of the Secured  Parties'
rights and remedies hereunder.

         15.  APPOINTMENT  OF AGENT.  The Secured  Parties  hereby  appoint T.R.
Winston & Company (the "AGENT") to act as their agent for purposes of exercising
any and all rights and remedies of the Secured Parties hereunder.  Additionally,
the Secured  Parties hereby appoint the Agent to act as their agent for purposes
of negotiating and binding the Secured Parties to the Intercreditor Agreement by
and among Agent,  Debtor,  GMAC and UPS,  substantially in the form of EXHIBIT A
attached hereto (the "INTERCREDITOR  AGREEMENT"),  which Intercreditor Agreement
shall be binding on the Secured Parties, their successors and assigns, by virtue
of Agent's signature  thereto.  Such appointment shall continue until revoked in
writing by a Majority in  Interest,  at which time a Majority in Interest  shall
appoint a new Agent.  The Agent  shall  have the  rights,  responsibilities  and
immunities set forth in ANNEX A hereto.

         16.  AGREEMENT  TO  SUBORDINATE  TO SENIOR  INDEBTEDNESS.  The  Secured
Parties  hereby  agree  that if  Debtor  desires  to  incur  additional  secured
indebtedness  from any of GMAC Commercial  Finance LLC, UPS Capital Global Trade
Finance  Corporation or DBS Bank (Hong Kong) Limited (formerly known as Dao Heng
Bank), or any of their respective affiliates


                                       13
<PAGE>


("EXISTING SENIOR LENDERS"), or to replace existing secured indebtedness held by
any of the Existing Senior Lenders (such additional or replacement indebtedness,
the  "SENIOR  INDEBTEDNESS"),  the  Secured  Parties  shall (i)  consent  to the
incurrence  of such Senior  Indebtedness,  and (ii)  subordinate  their right to
payment of the Secured  Obligations  to the prior  payment in full of the Senior
Indebtedness, and subordinate their rights in the Collateral to the prior rights
in the  Collateral  of the  holder or holders  of Senior  Indebtedness  on terms
substantially  similar to the payment  and  Collateral  subordination  terms set
forth in the  Intercreditor  Agreement;  provided  that (W) the  holder  of such
Senior  Indebtedness  is  an  Existing  Senior  Lender  or,  in  the  case  of a
replacement  of  Senior  Indebtedness,  one or more  commercial  banks  or other
financial  institutions  whose  primary  business  is not  investing  in  equity
securities,  (X) the Secured Parties shall not be obligated to subordinate their
rights to receive payment to the prior payment of any of the Senior Indebtedness
unless and until the  occurrence of, and then only for the  continuation  of, an
event  of  default  under  the  Senior  Indebtedness,  and (Y) any  indebtedness
incurred to replace existing secured  indebtedness shall be pursuant to a credit
facility primarily to fund working capital.

         17.      MISCELLANEOUS.

                  (a) No course of dealing  between  the Debtor and the  Secured
         Parties, nor any failure to exercise,  nor any delay in exercising,  on
         the  part  of the  Secured  Parties,  any  right,  power  or  privilege
         hereunder or under the  Debentures  shall operate as a waiver  thereof;
         nor shall  any  single  or  partial  exercise  of any  right,  power or
         privilege  hereunder  or  thereunder  preclude  any  other  or  further
         exercise  thereof  or  the  exercise  of  any  other  right,  power  or
         privilege.

                  (b) All of the rights and remedies of the Secured Parties with
         respect  to  the  Collateral,  whether  established  hereby  or by  the
         Debentures or by any other  agreements,  instruments or documents or by
         law shall be cumulative and may be exercised singly or concurrently.

                  (c) This  Agreement  constitutes  the entire  agreement of the
         parties  with respect to the subject  matter  hereof and is intended to
         supersede all prior  negotiations,  understandings  and agreements with
         respect thereto. Except as specifically set forth in this Agreement, no
         provision  of this  Agreement  may be modified  or amended  except by a
         written agreement  specifically  referring to this Agreement and signed
         by the parties hereto.

                  (d) In the event any provision of this Agreement is held to be
         invalid,  prohibited  or  unenforceable  in any  jurisdiction  for  any
         reason,  unless such  provision  is narrowed by judicial  construction,
         this Agreement shall, as to such jurisdiction,  be construed as if such
         invalid,  prohibited or unenforceable  provision had been more narrowly
         drawn  so as  not  to be  invalid,  prohibited  or  unenforceable.  If,
         notwithstanding the foregoing,  any provision of this Agreement is held
         to be invalid,  prohibited or unenforceable in any  jurisdiction,  such
         provision, as to such jurisdiction,  shall be ineffective to the extent
         of   such   invalidity,   prohibition   or   unenforceability   without
         invalidating  the  remaining  portion  of such  provision  or the other


                                       14
<PAGE>


         provisions  of this  Agreement  and without  affecting  the validity or
         enforceability  of  such  provision  or the  other  provisions  of this
         Agreement in any other jurisdiction.

                  (e) No waiver of any breach or default or any right under this
         Agreement shall be considered valid unless in writing and signed by the
         party giving such  waiver,  and no such waiver shall be deemed a waiver
         of any  subsequent  breach or default or right,  whether of the same or
         similar nature or otherwise.

                  (f) This  Agreement  shall be  binding  upon and  inure to the
         benefit of each party hereto and its successors and assigns.

                  (g) Each party shall take such further  action and execute and
         deliver such further  documents as may be necessary or  appropriate  in
         order to carry out the provisions and purposes of this Agreement.

                  (h)  All  questions  concerning  the  construction,  validity,
         enforcement and  interpretation  of this Agreement shall be governed by
         and construed and enforced in accordance  with the internal laws of the
         State of New York, without regard to the principles of conflicts of law
         thereof.   Debtor   agrees   that  all   proceedings   concerning   the
         interpretations,   enforcement   and   defense   of  the   transactions
         contemplated  by this  Agreement  and the  Debenture  (whether  brought
         against  a  party  hereto  or  its  respective  affiliates,  directors,
         officers,  shareholders,  partners, members, employees or agents) shall
         be commenced exclusively in the state and federal courts sitting in the
         City of New York, Borough of Manhattan.  Each Debtor hereby irrevocably
         submits to the exclusive  jurisdiction  of the state and federal courts
         sitting  in  the  City  of New  York,  Borough  of  Manhattan  for  the
         adjudication of any dispute hereunder or in connection herewith or with
         any transaction  contemplated  hereby or discussed  herein,  and hereby
         irrevocably  waives,  and agrees not to assert in any  proceeding,  any
         claim that it is not personally subject to the jurisdiction of any such
         court,  that such  proceeding  is improper.  Each party  hereto  hereby
         irrevocably  waives personal service of process and consents to process
         being  served in any such  proceeding  by  mailing a copy  thereof  via
         registered or certified  mail or overnight  delivery  (with evidence of
         delivery)  to such party at the  address  in effect  for  notices to it
         under this Agreement and agrees that such service shall constitute good
         and sufficient service of process and notice thereof. Nothing contained
         herein  shall be deemed to limit in any way any right to serve  process
         in any manner  permitted by law. Each party hereto  hereby  irrevocably
         waives,  to the fullest extent permitted by applicable law, any and all
         right  to  trial  by jury in any  legal  proceeding  arising  out of or
         relating to this Agreement or the transactions  contemplated hereby. If
         any party shall commence a proceeding to enforce any provisions of this
         Agreement,  then  the  prevailing  party  in such  proceeding  shall be
         reimbursed by the other party for its  reasonable  attorneys'  fees and
         other costs and expenses incurred with the  investigation,  preparation
         and prosecution of such proceeding.

                  (i)  This   Agreement   may  be  executed  in  any  number  of
         counterparts,  each of which when so executed  shall be deemed to be an
         original and, all of which taken together shall  constitute one and the
         same Agreement. In the event that any signature is


                                       15
<PAGE>


         delivered  by facsimile  transmission,  such  signature  shall create a
         valid  binding  obligation  of the party  executing (or on whose behalf
         such  signature is executed) the same with the same force and effect as
         if such facsimile signature were the original thereof.

                  (j) Debtor shall  indemnify,  reimburse  and hold harmless the
         Secured Parties and their respective partners,  members,  shareholders,
         officers, directors, employees and agents (collectively, "INDEMNITEES")
         from and  against  any and all losses,  claims,  liabilities,  damages,
         penalties, suits, costs and expenses, of any kind or nature, (including
         fees  relating to the cost of  investigating  and  defending any of the
         foregoing)  imposed on, incurred by or asserted against such Indemnitee
         in any way  related  to or  arising  from or alleged to arise from this
         Agreement  or  the   Collateral,   except  any  such  losses,   claims,
         liabilities, damages, penalties, suits, costs and expenses which result
         from the gross  negligence or willful  misconduct of the  Indemnitee as
         determined by a final,  nonappealable  decision of a court of competent
         jurisdiction. This indemnification provision is in addition to, and not
         in  limitation   of,  any  other   indemnification   provision  in  the
         Debentures,  the  Purchase  Agreement  (as such term is  defined in the
         Debentures)  or any  other  agreement,  instrument  or  other  document
         executed or delivered in connection herewith or therewith.


                            [SIGNATURE PAGES FOLLOW]


                                       16
<PAGE>


            IN WITNESS  WHEREOF,  the parties  hereto have caused this  Security
Agreement to be duly executed on the day and year first above written.


                                    TARRANT APPAREL GROUP


                                    By: /s/ Corazon Reyes
                                        ------------------------------
                                        Name:  Corazon Reyes
                                        Title: Chief Financial Officer





                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]


                                       17
<PAGE>


             [SIGNATURE PAGE OF HOLDERS TO TAGS SECURITY AGREEMENT]

Name of Investing Entity:  G. Tyler Runnels or Jasmine Niklas Runnels TTEES The
                           Runnels Family Trust DTD 1-11-2000
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ G. Tyler Runnels
                                                       --------------------
Name of Authorized Signatory: G. Tyler Runnels
Title of Authorized Signatory: Trustee


Name of Investing Entity:  High Tide, LLC
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ G. Tyler Runnels
                                                       --------------------
Name of Authorized Signatory: G. Tyler Runnels
Title of Authorized Signatory: Manager


Name of Investing Entity:  Bear Stearns Securities Corp. Custodian FBO J. Steven
                           Emerson IRA II
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ J. Steven Emerson
                                                       ---------------------
Name of Authorized Signatory: J. Steven Emerson
Title of Authorized Signatory: Sole Ben., Self Directed IRA


Name of Investing Entity:  Bear Stearns Securities Corp. Custodian FBO J. Steven
                           Emerson Roth IRA
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ J. Steven Emerson
                                                       ---------------------
Name of Authorized Signatory: J. Steven Emerson
Title of Authorized Signatory: Sole Ben., Self Directed IRA


Name of Investing Entity:  Bristol Investment Fund, Ltd.
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ Paul Kessler
                                                       ----------------
Name of Authorized Signatory: Paul Kessler
Title of Authorized Signatory: Director


Name of Investing Entity:  MM & B Holdings, a California general partnership
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ Bryan Ezralow
                                                       -----------------
Name of Authorized Signatory: Brian Ezralow, TTEE of the Bryan Ezralow 1994
                              Trust
Title of Authorized Signatory: General Partner


Name of Investing Entity:  Freedman Leff Investment Partnership


                                       18
<PAGE>


SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ David Leff, Trustee
                                                       -----------------------
Name of Authorized Signatory: David Leff as Trustee of the David Leff Family
                              Trust
Title of Authorized Signatory: General Partner


Name of Investing Entity:  Bank Insinger de Beaufort Safe Custody NV
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ David Mun-Gavin
                                                       -------------------
Name of Authorized Signatory: David Mun-Gavin
Title of Authorized Signatory: Director of Private Banking


Name of Investing Entity:  JMG Triton Offshore Fund, Ltd.
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ Jonathan Glaser
                                                       -------------------
Name of Authorized Signatory: Jonathan Glaser
Title of Authorized Signatory: Member Manager of the Investment Manager


Name of Investing Entity:  JMB Capital Partners L.P.
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ Cyrus (Illegible)
                                                       ---------------------
Name of Authorized Signatory: Cyrus (Illegible)
Title of Authorized Signatory: Analyst


Name of Investing Entity:  JMG Capital Partners
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: /s/ Jonathan Glaser
                                                       -------------------
Name of Authorized Signatory: Jonathan Glaser
Title of Authorized Signatory: Member Manager of the GP


                                       19
<PAGE>


                                    EXHIBIT A

                             INTERCREDITOR AGREEMENT


                                       20
<PAGE>


                                   SCHEDULE A


Principal Place of Business of Debtor:

         3151 East Washington Boulevard
         Los Angeles, California 90023

Locations Where Collateral is Located or Stored:

         3151 East Washington Boulevard
         Los Angeles, California 90023


                                       21
<PAGE>


                                   SCHEDULE B


1.       Tarrant Company Limited  ("TCL"),  Marble Limited ("ML") and Trade Link
         Holdings  Limited  ("TLHL" and together with TCL and ML,  collectively,
         "Tarrant  Subsidiaries"  and  each,  a  "Tarrant  Subsidiary"),  each a
         corporation  organized  under the laws of Hong  Kong,  and UPS  Capital
         Global Trade Finance Corporation ("UPS") are each party to that certain
         Syndicated Letter of Credit Facility Agreement dated June 13, 2002 (the
         "UPS Credit  Facility")  pursuant to which UPS has extended a revolving
         letter of credit  facility  to  Tarrant  Subsidiaries  to  finance  the
         purchase and  processing of certain  inventory from time to time by, or
         for the benefit of,  Tarrant  Subsidiaries.  The Company  executed  and
         delivered that certain Guaranty and Security  Agreement dated as of May
         30, 2002,  in favor of UPS,  guaranteeing  the  obligations  of Tarrant
         Subsidiaries  to  UPS  arising  under  the  UPS  Credit  Facility  (the
         "Guaranteed  UPS  Obligations")  and,  to  secure  the  Guaranteed  UPS
         Obligations,  each of Tarrant and certain other controlled subsidiaries
         of Tarrant has granted  therein in favor of UPS a security  interest in
         certain  of its  personal  property  as more  fully  set  forth  in the
         Guaranty and Security Agreement.

2.       GMAC  Commercial  Finance LLC  ("GMAC"),  the Company and certain other
         controlled  subsidiaries  of the Company  are  parties to that  certain
         Factoring  Agreement effective as of September 29, 2004 (the "Factoring
         Agreement").  To  secure  its  obligations  pursuant  to the  Factoring
         Agreement,  the Company and its controlled subsidiaries a party thereto
         each  granted in favor of GMAC,  a security  interest in certain of its
         accounts receivable and related personal property.

The security interest granted in favor of UPS and GMAC is senior to the security
interests granted to the purchasers of debentures under the Securities  Purchase
Agreement and related agreements.


                                       22
<PAGE>


                                   SCHEDULE C


1.       Secretary of State of the State of California



                                       23
<PAGE>


                                   SCHEDULE D

                      Organizational Identification Number

                                    C1446349



                                       24
<PAGE>

                                     ANNEX A
                                       TO
                                    SECURITY
                                    AGREEMENT

                                    THE AGENT

                  1.  APPOINTMENT.  The Secured Parties (all  capitalized  terms
         used  herein  and not  otherwise  defined  shall  have  the  respective
         meanings  provided in the  Security  Agreement to which this Annex A is
         attached (the "AGREEMENT")), by their acceptance of the benefits of the
         Agreement, hereby designate T.R. Winston & Company (the "Agent") as the
         Agent to act as  specified  herein and in the  Agreement.  Each Secured
         Party shall be deemed  irrevocably  to authorize the Agent to take such
         action on its behalf  under the  provisions  of the  Agreement  and any
         other Transaction  Document (as such term is defined in the Debentures)
         and to exercise  such powers and to perform such duties  hereunder  and
         thereunder as are specifically delegated to or required of the Agent by
         the terms  hereof and thereof and such other  powers as are  reasonably
         incidental  thereto.  The Agent may perform any of its duties hereunder
         by or through its agents or employees.

                  2.  NATURE  OF  DUTIES.  The  Agent  shall  have no  duties or
         responsibilities  except those  expressly  set forth in the  Agreement.
         Neither  the  Agent  nor any of its  partners,  members,  shareholders,
         officers, directors, employees or agents shall be liable for any action
         taken or omitted by it as such under the  Agreement  or hereunder or in
         connection herewith or therewith, be responsible for the consequence of
         any oversight or error of judgment or answerable  for any loss,  unless
         caused solely by its or their gross  negligence  or willful  conduct as
         determined  by a final  judgment  (not subject to further  appeal) of a
         court of  competent  jurisdiction.  The  duties of the  Agent  shall be
         mechanical and  administrative  in nature;  the Agent shall not have by
         reason of the Agreement or any other  Transaction  Document a fiduciary
         relationship in respect of any Debtor or any Secured Party; and nothing
         in the  Agreement  or any  other  Transaction  Document,  expressed  or
         implied,  is intended to or shall be so construed as to impose upon the
         Agent  any  obligations  in  respect  of the  Agreement  or  any  other
         Transaction Document except as expressly set forth herein and therein.

                  3. LACK OF  RELIANCE ON THE AGENT.  Independently  and without
         reliance  upon the Agent,  each Secured  Party,  to the extent it deems
         appropriate,   has  made  and  shall  continue  to  make  (i)  its  own
         independent investigation of the financial condition and affairs of the
         Company and its  subsidiaries  in connection  with such Secured Party's
         investment  in  the  Debtor,   the  creation  and  continuance  of  the
         Obligations,   the   transactions   contemplated   by  the  Transaction
         Documents,  and the taking or not  taking of any  action in  connection
         therewith,  and (ii) its own appraisal of the  creditworthiness  of the
         Company and its  subsidiaries,  and of the value of the Collateral from
         time to  time,  and the  Agent  shall  have no duty or  responsibility,
         either initially or on a continuing basis, to provide any Secured Party
         with any credit,  market or other  information  with  respect  thereto,
         whether coming into its possession  before any Obligations are incurred
         or at any time or times thereafter.  The Agent shall not be responsible
         to the  Debtor  or any  Secured  Party  for any  recitals,  statements,
         information,  representations  or warranties herein or in any document,
         certificate or other writing delivered in connection  herewith,  or for
         the execution,


                                       25
<PAGE>


         effectiveness,   genuineness,  validity,  enforceability,   perfection,
         collectibility,  priority or  sufficiency of the Agreement or any other
         Transaction  Document,  or for the financial condition of the Debtor or
         the value of any of the Collateral,  or be required to make any inquiry
         concerning  either the  performance  or observance of any of the terms,
         provisions  or  conditions  of the  Agreement or any other  Transaction
         Document, or the financial condition of the Debtor, or the value of any
         of the  Collateral,  or the  existence  or  possible  existence  of any
         default or Event of Default under the Agreement,  the Debentures or any
         of the other Transaction Documents.

                  4. CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right
         to take any action with respect to the Collateral,  on behalf of all of
         the Secured Parties.  To the extent practical,  the Agent shall request
         instructions  from the Secured Parties with respect to any material act
         or action  (including  failure to act) in connection with the Agreement
         or any other  Transaction  Document,  and shall be  entitled  to act or
         refrain  from acting in  accordance  with the  instructions  of Secured
         Parties holding a majority in principal amount of Debentures  (based on
         then-outstanding  principal  amounts of  Debentures  at the time of any
         such determination);  if such instructions are not provided despite the
         Agent's request  therefor,  the Agent shall be entitled to refrain from
         such act or taking such action,  and if such action is taken,  shall be
         entitled to  appropriate  indemnification  from the Secured  Parties in
         respect of actions  to be taken by the Agent;  and the Agent  shall not
         incur  liability  to any  person or entity by reason of so  refraining.
         Without  limiting the  foregoing,  (a) no Secured  Party shall have any
         right of action  whatsoever  against the Agent as a result of the Agent
         acting or refraining from acting hereunder in accordance with the terms
         of the  Agreement  or any other  Transaction  Document,  and the Debtor
         shall have no right to question or challenge  the  authority of, or the
         instructions  given to, the Agent pursuant to the foregoing and (b) the
         Agent shall not be required to take any action which the Agent believes
         (i) could reasonably be expected to expose it to personal  liability or
         (ii) is  contrary  to this  Agreement,  the  Transaction  Documents  or
         applicable law.

                  5. RELIANCE. The Agent shall be entitled to rely, and shall be
         fully  protected  in relying,  upon any  writing,  resolution,  notice,
         statement,   certificate,   telex,   teletype  or  telecopier  message,
         cablegram,  radiogram,  order or other  document or  telephone  message
         signed,  sent or made by the proper person or entity, and, with respect
         to  all  legal  matters  pertaining  to the  Agreement  and  the  other
         Transaction Documents and its duties thereunder, upon advice of counsel
         selected by it and upon all other matters  pertaining to this Agreement
         and the other  Transaction  Documents and its duties  thereunder,  upon
         advice of other experts selected by it.

                  6.  INDEMNIFICATION.  To the  extent  that  the  Agent  is not
         reimbursed  and  indemnified  by the Debtor,  the Secured  Parties will
         jointly and severally  reimburse and indemnify the Agent, in proportion
         to  their  initially   purchased   respective   principal   amounts  of
         Debentures,  from and  against  any and all  liabilities,  obligations,
         losses, damages, penalties,  actions, judgments, suits, costs, expenses
         or disbursements of any kind or nature  whatsoever which may be imposed
         on, incurred by or asserted  against the Agent in performing its duties
         hereunder or under the Agreement or any other Transaction  Document, or
         in any way  relating  to or arising out of the  Agreement  or any other
         Transaction  Document  except for those  determined by a final judgment
         (not subject to further appeal) of a court of competent jurisdiction to
         have resulted  solely from the Agent's own gross  negligence or willful
         misconduct.  Prior to taking any action  hereunder as Agent,  the Agent
         may require each Secured Party to deposit with it sufficient


                                       26
<PAGE>


         sums as it  determines  in good faith is necessary to protect the Agent
         for costs and expenses associated with taking such action.

                  7. RESIGNATION BY THE AGENT.

                  (a) The  Agent  may  resign  from the  performance  of all its
         functions  and duties  under the  Agreement  and the other  Transaction
         Documents  at any time by  giving 30 days'  prior  written  notice  (as
         provided in the Agreement) to the Debtor and the Secured Parties.  Such
         resignation shall take effect upon the appointment of a successor Agent
         pursuant to clauses (b) and (c) below.

                  (b) Upon any such notice of resignation,  the Secured Parties,
         acting by a Majority  in  Interest,  shall  appoint a  successor  Agent
         hereunder.

                  (c) If a  successor  Agent  shall not have  been so  appointed
         within said  30-day  period,  the Agent shall then  appoint a successor
         Agent who shall serve as Agent until such time,  if any, as the Secured
         Parties  appoint a successor  Agent as provided  above.  If a successor
         Agent has not been appointed  within such 30-day period,  the Agent may
         petition  any court of competent  jurisdiction  or may  interplead  the
         Debtor and the Secured Parties in a proceeding for the appointment of a
         successor  Agent,  and  all  fees,  including,   but  not  limited  to,
         extraordinary  fees  associated  with the  filing of  interpleader  and
         expenses  associated  therewith,  shall be  payable  by the  Debtor  on
         demand.

                  8. RIGHTS  WITH  RESPECT TO  COLLATERAL.  Each  Secured  Party
         agrees with all other  Secured  Parties and the Agent (i) that it shall
         not, and shall not attempt to,  exercise any rights with respect to its
         security  interest  in the  Collateral,  whether  pursuant to any other
         agreement or otherwise (other than pursuant to this Agreement), or take
         or institute  any action  against the Agent or any of the other Secured
         Parties in respect of the  Collateral  or its rights  hereunder  (other
         than any such action  arising  from the breach of this  Agreement)  and
         (ii) that such  Secured  Party has no other  rights with respect to the
         Collateral  other  than as set  forth in this  Agreement  and the other
         Transaction Documents.


                                       27

</TEXT>
</DOCUMENT>
