TARRANT APPAREL GROUP
EX-10.31.8
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>ex10-31_8.txt
<DESCRIPTION>EX-10.31.8
<TEXT>
                                                                 EXHIBIT 10.31.8


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                              DATED 17TH JUNE, 2004
                        (WITH EFFECT FROM 10TH MAY, 2004)

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                           TARRANT COMPANY LIMITED (1)
                                       AND
                               MARBLE LIMITED (2)
                                       AND
                         TRADE LINK HOLDINGS LIMITED (3)
                                 (AS BORROWERS)

                                       AND

             UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION (4)
                                   (AS AGENT)

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                            EIGHTH DEED OF VARIATION
                                       TO
                      SYNDICATED LETTER OF CREDIT FACILITY

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                              BARLOW LYDE & GILBERT
                                   24TH FLOOR
                            NINE QUEEN'S ROAD CENTRAL
                                    HONG KONG

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<PAGE>


THIS  DEED is made the 17th day of June,  2004  (but has  effect  from 10th May,
2004).

BETWEEN:

(1)      TARRANT  COMPANY  LIMITED a  company  incorporated  in Hong Kong  under
         company number 163310 with its registered office at 13th Floor,  Lladro
         Centre, 72-80 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong
         ("TARRANT");

(2)      MARBLE LIMITED a company incorporated in Hong Kong under company number
         399753 with its registered office at 13th Floor,  Lladro Centre,  72-80
         Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong
         ("MARBLE");

(3)      TRADE LINK HOLDINGS  LIMITED a company  incorporated in Hong Kong under
         company number 592076 with its registered office at 13th Floor,  Lladro
         Centre,  72-80 Hoi Yuen Road,  Kwun Tong,  Kowloon,  Hong Kong  ("TRADE
         LINK"); and

(4)      UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION (the "AGENT").

WHEREAS:

(A)      Under  the  terms  of  a  syndicated   letter  of  credit  facility
         agreement (the "FACILITY  AGREEMENT" such expression  shall include
         the same as from time to time  amended,  supplemented  or modified)
         entered  into on 13th June 2002 by and  between the  Borrowers  and
         the  Beneficiaries,  the  Agent  (in its  capacity  as the  Issuer)
         agreed,  inter alia, to make  available to the Borrowers a facility
         for the issue of letters of credit,  upon the terms and  subject to
         the conditions set out therein.

(B)      Under various Deeds of Variation to the Facility Agreement entered into
         on 26th February,  2003,  19th May, 2003,  2nd June,  2003,  18th June,
         2003, 23rd December,  2003,  17th March,  2004 and 5th May, 2004 by and
         between the Borrowers  and the Agent (the "PRIOR DEEDS OF  VARIATION"),
         the parties thereto agreed to vary the terms of the Facility  Agreement
         as set out in the Prior Deeds of Variation.

(C)      The Borrowers have requested the Agent,  and the Agent (in its capacity
         as the  Issuer)  has  agreed  in  principle,  to the  amendment  of the
         financial covenants and undertakings as hereinafter set out.

(G)      The parties hereto have therefore agreed,  pursuant to Clause 23 of the
         Facility Agreement,  to vary the terms of the Facility Agreement as set
         out in this Deed of Variation.

NOW THIS DEED HEREBY WITNESSETH as follows:-

1.       DEFINITIONS AND INTERPRETATION

         Words and phrases  which are not defined or  construed  in this Deed of
         Variation but which are defined or construed in the Facility Agreement,
         the Companies Ordinance or the Bankruptcy  Ordinance shall be construed
         as having the  meanings  ascribed to them  therein.  To the extent that
         there is any inconsistency between the terms of this Deed of


                                       1
<PAGE>


         Variation  and the  Facility  Agreement,  the  terms  of  this  Deed of
         Variation  shall  prevail.  References  to clause  numbers are to those
         clauses in the Facility Agreement, unless indicated otherwise.

2.       VARIATION

2.1      The parties  hereto hereby agree that the Facility  Agreement  shall be
         varied in the following manner:-

         2.1.1    By the  deletion in its entirety of Clause 4.2 of the Facility
                  Agreement, and the substitution therefor with the following:

                  "4.2     LETTERS OF CREDIT

                           UPON THE  REQUEST  OF ANY  BORROWER  (CONTAINED  IN A
                           UTILISATION  NOTICE), THE ISSUER MAY, IN ITS SOLE AND
                           ABSOLUTE  DISCRETION,  ISSUE ONE OR MORE  DOCUMENTARY
                           LETTERS OF CREDIT,  OR GRANT TO THAT  BORROWER ONE OR
                           MORE IMPORT  LOANS OR FINANCE  ONE OR MORE  DOCUMENTS
                           AGAINST  ACCEPTANCE  (EACH A "LETTER OF CREDIT"),  IN
                           EACH CASE  DENOMINATED  IN US DOLLARS OR ANY  FOREIGN
                           CURRENCY AS THE ISSUER MAY AGREE, FOR THAT BORROWER'S
                           ACCOUNT AND  SUBJECT TO THE TERMS OF THIS  AGREEMENT.
                           WITHOUT   PREJUDICE   TO  THE   ISSUER'S   OVERRIDING
                           DISCRETION  AS TO  WHETHER TO ACCEPT OR TO REJECT ANY
                           REQUEST FOR THE ISSUE OF A LETTER OF CREDIT:,

                           4.2.1   THE ISSUER  WILL NOT ISSUE ANY LETTER OF
                           CREDIT:

                                   (A)  IF  THE  US  DOLLAR  EQUIVALENT  OF  THE
                                        MAXIMUM  FACE  AMOUNT  OF THE  REQUESTED
                                        LETTER OF CREDIT,  PLUS ALL COMMISSIONS,
                                        FEES AND CHARGES  DUE FROM THE  BORROWER
                                        IN  CONNECTION  WITH  ITS  ISSUE,  WOULD
                                        CAUSE  THE   AMOUNT  OF  THE   AVAILABLE
                                        FACILITY TO BE EXCEEDED AT SUCH TIME; OR

                                   (B)  IF THE  EXPIRY  DATE  OF THE  LETTER  OF
                                        CREDIT WOULD BE LATER THAN 364 DAYS FROM
                                        ITS DATE OF ISSUE; OR

                                   (C)  IF  THE  US  DOLLAR  EQUIVALENT  OF  THE
                                        MAXIMUM  FACE  AMOUNT  OF THE  REQUESTED
                                        LETTER OF CREDIT  WHEN  AGGREGATED  WITH
                                        THE US DOLLAR  EQUIVALENT OF THE MAXIMUM
                                        FACE VALUE OF ALL LETTERS OF CREDIT THEN
                                        IN  ISSUE  WOULD  EXCEED   US$25,000,000
                                        (TWENTY FIVE MILLION US DOLLARS; OR

                          4.2.2    THE  ISSUER  WILL  NOT  FINANCE  ONE OR  MORE
                                   DOCUMENTS AGAINST ACCEPTANCE IF THE US DOLLAR
                                   EQUIVALENT  OF THE MAXIMUM FACE AMOUNT OF THE
                                   REQUESTED  FINANCING  EXCEEDS 90% OF THE FACE
                                   AMOUNT OF THE UNDERLYING  CONTRACT(S) OF SALE
                                   TO WHICH THE FINANCING RELATES,

                          UNLESS THE ISSUER HAS  SPECIFICALLY  AGREED  WITH
                          THE BORROWER THAT IT IS PREPARED TO DO SO."

         2.1.2    By the  deletion in its  entirety  of Clause  4.8.3 (a) of the
                  Facility  Agreement,  and the  substitution  therefor with the
                  following:


                                       2
<PAGE>


                  "(A)     SUBJECT TO SUB-CLAUSE  (B) BELOW,  1% PER ANNUM ABOVE
                           THE PRIME  RATE OF BANK OF AMERICA  (AS  CONCLUSIVELY
                           DETERMINED BY BANK OF AMERICA) FROM TIME TO TIME; OR"

         2.1.3    By the deletion in its entirety of Clause 10.4 of the Facility
                  Agreement, and the substitution therefor with the following:

                  "10.4    FINANCIAL RATIOS

                           EACH  OF THE  BORROWERS  SHALL  ENSURE  THAT,  AT ALL
                           TIMES,  THE FINANCIAL  CONDITION OF TAG AND THE GROUP
                           (ON A  CONSOLIDATED  BASIS),  MEASURED ON A QUARTERLY
                           BASIS, SHALL BE SUCH THAT:

                           10.4.1   TANGIBLE NET WORTH:  TANGIBLE NET WORTH
                                    SHALL  BE NOT LESS  THAN THE  FOLLOWING
                                    AMOUNTS ON THE FOLLOWING DATES:

                                    --------------------------------------------
                                    DATE                      TANGIBLE NET WORTH
                                    --------------------------------------------
                                    31ST MARCH, 2004          US$80,000,000
                                    30TH JUNE, 2004           US$80,000,000
                                    30TH SEPTEMBER,2004       US$80,000,000
                                    31ST DECEMBER,2004        US$80,000,000
                                    --------------------------------------------

                           10.4.2   FIXED  CHARGE  COVERAGE:  THE  RATIO OF
                                    (I)   EBITDA  TO  (II)  CASH   INTEREST
                                    EXPENSE  AS  AT  THE  FOLLOWING  DATES,
                                    CALCULATED  ON EACH SUCH DATE USING THE
                                    RESULTS  ON  THE  DATE  OF  THE  FISCAL
                                    QUARTER  SPECIFIED  BELOW  AND THE LAST
                                    DAY OF  EACH OF THE  THREE  IMMEDIATELY
                                    PRECEDING   FISCAL   QUARTERS,    SHALL
                                    EXCEED THE RATIO SPECIFIED BELOW:

                                    --------------------------------------------
                                    DATE                      RATIO
                                    --------------------------------------------
                                    31ST MARCH, 2004          0.25 : 1
                                    30TH JUNE, 2004           1.00 : 1
                                    30TH SEPTEMBER, 2004      1.25 : 1
                                    31ST DECEMBER 2004        2.00 : 1
                                    --------------------------------------------

                           10.4.3   TOTAL LEVERAGE RATIO:  THE RATIO OF (I)
                                    TOTAL  LIABILITIES TO (II) TANGIBLE NET
                                    WORTH  ON  THE  DATES  SPECIFIED  BELOW
                                    SHALL  NOT  EXCEED  THE   CORRESPONDING
                                    RATIO SPECIFIED BELOW:

                                    --------------------------------------------
                                    DATE                      RATIO
                                    --------------------------------------------
                                    31ST MARCH, 2004          1.50 : 1
                                    30TH JUNE, 2004           1.60 : 1
                                    30TH  SEPTEMBER, 2004     1.60 : 1
                                    31ST DECEMBER, 2004       1.50 : 1
                                    --------------------------------------------

                           ALL AS  CALCULATED  BY  REFERENCE  TO THE  ACCOUNTING
                           INFORMATION (THE "RELEVANT  ACCOUNTING  INFORMATION")
                           MOST RECENTLY  DELIVERED  UNDER THIS AGREEMENT  BEING
                           (I) THE ANNUAL AUDITED FINANCIAL STATEMENTS DELIVERED
                           UNDER CLAUSE  10.2.1 AND (II) EACH SET OF  MANAGEMENT
                           ACCOUNTS (AS  CONSOLIDATED  FOR THE  RELEVANT  FISCAL
                           QUARTER) DELIVERED UNDER CLAUSE 10.2.2.


                                       3
<PAGE>


                           10.4.4   TO THE EXTENT THAT ANY FINANCIAL INFORMATION
                                    FOR  THE   CALCULATION   OF  THE   FOREGOING
                                    FINANCIAL  RATIOS IS IN MEXICAN  PESOS,  THE
                                    BORROWERS  ACKNOWLEDGE THAT A FIXED EXCHANGE
                                    OF 11.202  MEXICAN  PESOS TO 1 UNITED STATES
                                    DOLLARS SHALL BE APPLIED."

3.       GENERAL

3.1      The parties hereto hereby acknowledge and confirm that:-

         3.1.1    the terms of the  Facility  Agreement as varied and amended in
                  accordance  with this Deed of  Variation  shall remain in full
                  force and effect; and

         3.1.2    neither the  obligations  of any  Borrower  nor the rights and
                  remedies  of the  Agent  under  the  Facility  Agreement,  any
                  Security  Document or any other Finance  Document or otherwise
                  conferred by law shall be  discharged,  prejudiced or impaired
                  by reason of the  execution  of this Deed of  Variation or the
                  variation  of  the  terms  and   conditions  of  the  Facility
                  Agreement in accordance with this Deed of Variation.

3.2      This Deed of  Variation  may be executed in any number of  counterparts
         and by the different  parties hereto on separate  counterparts  each of
         which when so executed  and  delivered  shall be  original  but all the
         counterparts together shall constitute one and the same instrument.

3.3      This Deed of Variation  shall be governed and  construed in  accordance
         with the laws of the Hong  Kong  Special  Administrative  Region of the
         People's  Republic of China and the parties  hereto  agree to submit to
         the  non-exclusive  jurisdiction of the Courts of the Hong Kong Special
         Administrative Region of the People's Republic of China.



IN WITNESS WHEREOF this Deed of Variation has been entered into the day and year
first above written.


                                       4
<PAGE>


THE BORROWERS


THE COMMON SEAL of            )
TARRANT COMPANY LIMITED       )
was hereunto affixed          )
in the presence of:           )


/S/ HENRY CHU
--------------------------
HENRY CHU, DIRECTOR

/S/ CHARLES LAI
--------------------------
CHARLES LAI, DIRECTOR/SECRETARY




THE COMMON SEAL of            )
MARBLE LIMITED                )
was hereunto affixed          )
in the presence of:           )


/S/ HENRY CHU
--------------------------
HENRY CHU, DIRECTOR

/S/ GRACE TAM
--------------------------
GRACE TAM, DIRECTOR/SECRETARY




THE COMMON SEAL of            )
TRADE LINK HOLDINGS LIMITED   )
was hereunto affixed          )
in the presence of:           )


/S/ HENRY CHU
--------------------------
HENRY CHU, DIRECTOR

/S/ GRACE TAM
--------------------------
GRACE TAM, DIRECTOR/SECRETARY


                                       5
<PAGE>


THE AGENT


SIGNED for and on behalf of   )
UPS CAPITAL GLOBAL            )
TRADE FINANCE CORPORATION     )
by:                           )
in the presence of:           )              /S/ ROBIN C. NIX
                                             ----------------------------------
                                                 ROBIN C. NIX,
                                                 U.S. COUNTRY MANAGER


--------------------------
WITNESS


                                       6

</TEXT>
</DOCUMENT>
