Exhibit
10.2
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LIMITED JOINT AND SEVERAL GUARANTEE
LIMITED JOINT AND SEVERAL GUARANTEE, dated as of February
26, 2009 (this “ Limited Guarantee ”), by Gerard
Guez and Todd Kay (each, a “ Guarantor ” and
together, the “ Guarantors ”) in favor of
Tarrant Apparel Group, a California corporation (the “
Guaranteed Party ”).
1. GUARANTEE . To induce the Guaranteed
Party to enter into an Agreement and Plan of Merger, dated as of
the date hereof (as amended, restated, supplemented or otherwise
modified from time to time, the “ Merger Agreement
”) by and among Sunrise Acquisition Company, LLC, a
California limited liability company (“ Parent
”), Sunrise Merger Company, a California corporation and a
wholly-owned subsidiary of Parent (“ Merger Sub
”), the Guaranteed Party and the Guarantors, pursuant to
which Merger Sub will merge with and into the Guaranteed Party,
with the Guaranteed Party as the corporation surviving such merger
(the “ Merger ”), the Guarantors, intending to
be legally bound, hereby absolutely, irrevocably and
unconditionally, jointly and severally guarantee to the Guaranteed
Party, the due and punctual observance, performance and discharge
of any and all payment obligations of Parent and Merger Sub under
the Merger Agreement (the “ Obligations ”),
including, without limitation, (a) the obligation to pay the
aggregate Merger Consideration for all Shares outstanding
immediately prior to the Effective Time and amounts payable
pursuant to the Merger Agreement with respect to any In the Money
Options and the Company Warrants, (b) the obligation of Parent
to pay the Business Interruption Fee if required in accordance with
Section 6.3 of the Merger Agreement, (c) any payment
obligation of Parent or Merger Sub resulting from or arising out of
the breach or non-performance of any representation, warranty or
covenant of Parent, Merger Sub, the Guarantors or any of their
Representatives contained in the Merger Agreement and (d) any
costs or expenses of enforcement or collection of the Merger
Agreement, the Obligations or this Limited Guarantee (including
reasonable attorneys fees and costs) that are incurred by or on
behalf of the Guaranteed Party ((a) through (d), collectively, the
“ Aggregate Merger Consideration and Costs ”);
provided , that notwithstanding the foregoing or the joint
and several nature of this Limited Guarantee, and without limiting
Gerard Guez’s joint and several obligations hereunder, the
maximum amount payable by Todd Kay pursuant to this Limited
Guarantee shall not exceed the sum of (x) Five Million Dollars
($5,000,000) plus (y) any costs or expenses (including reasonable
attorneys fees and costs) incurred by or on behalf of the
Guaranteed Party to enforce Todd Kay’s obligations as a
Guarantor under this Limited Guarantee or to collect any amounts
payable by Todd Kay as a Guarantor in accordance with the terms
hereof (the sum of (x) and (y), the “Kay Cap”);
provided, further, that in no event shall the Guarantors’
aggregate liability under this Limited Guarantee exceed the
Aggregate Merger Consideration and Costs (the “ Cap
”), it being understood that this Limited Guarantee may not
be enforced without giving effect to the Cap. All payments
hereunder shall be made in immediately available funds in lawful
money of the United States. The Guarantors, jointly and severally,
promise and undertake to make all payments hereunder free and clear
of any
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deduction, offset,
defense, claim or counterclaim of any kind. Capitalized terms used
but not defined herein (and the term “affiliate”) shall
have the meanings ascribed to them in the Merger Agreement.
If Parent or Merger Sub is in breach of or fails to timely perform
its Obligations, then the Guaranteed Party may at any time and from
time to time, at the Guaranteed Party’s option, take any and
all actions available hereunder or permitted under any applicable
statutes, laws, rules, regulations, ordinances, codes, writs,
orders, decisions, injunctions, judgments, awards or decrees of any
Governmental Entity (collectively, “ Laws ”) to
collect on the Guarantors’ joint and several obligations and
liabilities hereunder in respect of such Obligations, subject only
to the Cap and, solely with respect to Todd Kay, the Kay Cap.
In furtherance of the foregoing, each Guarantor acknowledges that
the Guaranteed Party may, in its sole and absolute discretion,
bring and prosecute a separate action or actions against the
Guarantors or either of them for the full amount of the Obligations
(subject only to the Cap and, solely with respect to Todd Kay, the
Kay Cap), regardless of whether any action is first, concurrently
or subsequently brought against Parent or Merger Sub or whether
Parent or Merger Sub is joined in any such action or actions.
2. NATURE OF GUARANTEE . The
Guarantors’ joint and several liabilities and obligations
hereunder are absolute, unconditional, irrevocable and continuing
irrespective, without limitation, of (a) any lack of validity
or enforceability of the Merger Agreement or (b) any
modification, amendment or waiver of, or any consent to any
departure from, the Merger Agreement that may be agreed to by
Parent, Merger Sub or the Guarantors. Without limiting the
foregoing, the Guaranteed Party shall not be obligated to file any
claim relating to the Obligations if Parent or Merger Sub becomes
subject to a bankruptcy, reorganization or similar proceeding, and
the failure of the Guaranteed Party to so file shall not affect any
Guarantor’s joint and several liabilities and obligations
hereunder. If any payment to the Guaranteed Party in respect of the
Obligations is rescinded or must otherwise be returned for any
reason whatsoever, each Guarantor shall remain jointly and
severally liable hereunder with respect to such Obligations as if
such payment had not been made. This Limited Guarantee is an
unconditional and continuing guarantee of payment and not of
collection.
3. CHANGES IN OBLIGATIONS, CERTAIN WAIVERS .
Each Guarantor agrees that the Guaranteed Party may at
any time and from time to time, without notice to or further
consent of any Guarantor, extend the time of payment of any of the
Obligations, and may also make any agreement with Parent or Merger
Sub for the extension, renewal, payment, compromise, discharge or
release thereof, in whole or in part, without in any way impairing
or affecting either Guarantor’s joint and several liabilities
and obligations under this Limited Guarantee. Each Guarantor agrees
that the joint and several obligations of the Guarantors hereunder
shall not be released or discharged, in whole or in part, or
otherwise affected by (a) any failure or delay on the part of
the Guaranteed Party to assert any claim or demand or to enforce
any right or remedy against Parent or Merger Sub; (b) any
change in the time, place or manner of payment of any of the
Obligations; (c) any rescission, waiver, compromise,
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consolidation or other
amendment or modification of any of the terms or provisions of the
Merger Agreement made in accordance with the terms thereof or any
agreement evidencing, securing or otherwise executed in connection
with any of the Obligations; (d) the addition, substitution or
release of any entity or other Person interested or involved in the
transactions contemplated by the Merger Agreement; (e) any
change in the corporate existence, structure or ownership of
Parent, Merger Sub or any other Person interested or involved in
the transactions contemplated by the Merger Agreement; (f) any
divorce, separation insolvency, bankruptcy, reorganization or other
similar proceeding affecting Parent, Merger Sub or any other Person
interested or involved in the transactions contemplated by the
Merger Agreement (including the Guarantors); (g) the existence
of any claim, set-off or other right which any Guarantor may have
at any time against Parent, Merger Sub or the Guaranteed Party,
whether in connection with the Obligations or otherwise; or
(h) the adequacy or availability of any other means the
Guaranteed Party may have of obtaining payment related to the
Obligations. To the fullest extent permitted by Law, each Guarantor
hereby expressly waives any and all rights or defenses arising by
reason of any Law which would otherwise require any election of
remedies by the Guaranteed Party. Each Guarantor also waives
promptness, diligence, notice of the acceptance of this Limited
Guarantee and of the Obligations (including the Guarantors’
joint and several liabilities and obligations with respect thereto
hereunder), presentment, demand for payment, notice of
non-performance, default, dishonor and protest, notice of any
Obligations incurred and all other notices of any kind, all
defenses which may be available by virtue of any valuation, stay,
moratorium Law or other similar Law now or hereafter in effect, any
right to require the marshalling of assets of Parent or Merger Sub
or any other Person interested in the transactions contemplated by
the Merger Agreement, and all suretyship defenses generally. Each
Guarantor acknowledges that he will receive substantial direct and
indirect benefits from the transactions contemplated by the Mer
