EXHIBIT 10.68

                              TAG-IT PACIFIC, INC.
                          21900 BURBANK BLVD, SUITE 270
                            WOODLAND HILLS, CA 91367






CONFIDENTIAL



July 12, 2002



Levi Strauss & Co.
Levi's Plaza
1155 Battery Street
San Francisco, CA 94111

         Re:      EXCLUSIVE *** COMPONENT SUPPLY AGREEMENT

Ladies and Gentlemen:

                  This  letter  agreement  (this  "AGREEMENT")  constitutes  the
binding agreement of Tag-It Pacific,  Inc., a Delaware  corporation  ("TPI") and
Levi  Strauss & Co., a Delaware  corporation  ("LS&CO."),  under which TPI shall
supply to LS&CO.  components  and  equipment for the  manufacture  of ***using a
***process  and  trade  secrets  (the   "***TECHNOLOGY")   licensed  to  TPI  by
***("***").

                  For  good  and  valuable  consideration,  receipt  of which is
hereby acknowledged, TPI and LS&CO. agree as follows:


1.       SUPPLY RELATIONSHIP

                  TPI shall sell waist band components to LS&CO. on an exclusive
basis in the Territory for certain product  categories and provide to LS&CO. and
its contract  manufacturers  equipment and training for  manufacturing *** using
the ***Technology on the terms and conditions described in this Agreement.


2.       PRODUCTS AND EQUIPMENT

                  (a) PRODUCTS.  "Products" shall mean: (i) ***(b),  ***group of
bottoms (the  "***BOTTOMS")  manufactured in accordance with the  Specifications
and ***to be sewed into ***Bottoms (the "*** PRODUCTS");  and (ii) ***components
for other LS&CO.  products  ("ADDITIONAL  PROGRAM  PRODUCTS") as may be mutually
agreed by the parties.

                  (b) INITIAL  EXECUTION OF *** BOTTOMS.  As of the date of this
Agreement,   LS&CO.  is  evaluating  four  different  ***constructions  for  the
***Bottoms:  the  "Original,"  the "3A,"  the "3AA" and the "4A"  constructions.
LS&CO. has completed evaluation and testing of the Original construction and, in


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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


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conjunction with TPI, is testing the other three constructions, certain of which
LS&CO.  currently  prefer to the Original  construction.  LS&CO.  shall complete
testing, make a selection of the desired construction and provide specifications
to TPI no later than one week after  receipt from TPI of  acceptable  samples of
the 3A, 3AA and 4A  construction.  If LS&CO.  fails to make a selection  by that
date,  then LS&CO.  shall be deemed to have selected the Original  construction,
and the ***Products shall reflect that construction.  TPI shall then supply such
***Products on the terms described in this Agreement.

                  (c)     SPECIFICATIONS.      Final     specifications     (the
"SPECIFICATIONS") for *** Products for the Original construction are included in
EXHIBIT  A.  Preliminary  specifications  for ***  Products  for the  other  two
constructions  under evaluation are included in EXHIBIT A. Final  Specifications
for the  constructions  selected through the process  described in Section 2 (b)
and for  Additional  Program  Products as shall be mutually  agreed from time to
time if and as LS&CO.  develops  products  for  which it  wishes to  incorporate
Additional  Program Products.  Data regarding current  production and processing
requirements  for the ***  Bottoms,  which data are or will be  reflected in the
Specifications, are attached as EXHIBIT B.

                  (d)     EQUIPMENT. "EQUIPMENT" means the ***machine and a ***,
each as described  on EXHIBIT C.  References  in this  Agreement to provision of
Equipment at a Facility (as defined below) mean one production  unit  consisting
of two ***machines and ***.


3.       EQUIPMENT

                  (a)     EQUIPMENT.  TPI  has delivered a set of  Equipment  to
LS&CO.'s  Powell,  Tennessee  facility for evaluation  purposes.  Such Equipment
shall be moved  at the  expense  and  risk of TPI to  LS&CO.'s  design  or other
facility in San Francisco,  or to a production or other  facility  designated by
LS&CO.  by August 15, 2002.  TPI shall have access to the machinery at all times
during reasonable  business hours or otherwise upon reasonable advance notice to
LS&CO.  TPI at its expense  shall  install and cause  Equipment to be installed,
integrated  into  manufacturing  operations  and  operational  in each of  three
facilities  (the "INITIAL  FACILITIES")  by September 1, 2002, and then up to an
additional  ***production  units,  each of  which  shall  have the  capacity  of
approximately  ***units per week (based on the selected  construction) on single
shift, as needed by LS&CO., with two of such installations  completed by October
1, 2002 and the third by October  31,  2002  (with the  Initial  Facilities  and
others that may be added in the future,  the "FACILITIES").  Going forward,  TPI
shall at its  expense  and  upon a normal  Equipment  procurement  and  delivery
schedule (approximately 60 days), provide additional Equipment to LS&CO. and its
contractors in an amount  sufficient to meet LS&CO.'s  demand for Products.  TPI
shall not be  responsible  for delays  resulting  from force majeure  events (as
contemplated  by Section 19 (d)),  the  contractors'  inability  to receive  the
Equipment  or  provide  the  access,  space and  environment  necessary  for the
Equipment  to operate (as  specified  in Section  3(b)) or for delays  caused by
negotiation of leases for the applicable equipment as required by Section 3(e).

                  (b)     INITIAL   FACILITIES.   LS&CO.  shall ensure  that the
Initial  Facilities are prepared for  installation  of the  Equipment,  with all
necessary hook-ups,  assembly line engineering and an industrial surge protector
in place and completed no later than July 31, 2002.

                  (c)     BACK-UP EQUIPMENT. TPI shall maintain a back-up set of
Equipment  and spare parts to ensure repair or  replacement  of Equipment at any
Facility  within  twenty-four  hours.  TPI, at its expense,  shall provide spare
parts and  maintenance  for the  Equipment.  TPI shall be  responsible  only for
normal  wear and  tear.  Repair  of any  damage  resulting  from  misuse  of the
Equipment  or  failure  to  maintain  the  operating  environment  shall  be the
responsibility  of the operator of the Equipment.  TPI shall be responsible  for
obtaining at its expense liability insurance for all Equipment.

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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


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                  (d)     TRAINING.  TPI shall at its  expense  at  the relevant
Facility train operators from each Initial  Facility and later-added  Facilities
to  operate  the  Equipment.  TPI  shall  provide  such  on-site  training  on a
reasonable  periodic basis in order to address  changes in operator  composition
due to attrition or other factors.

                  (e)     EQUIPMENT LEASE. LS&CO. shall cause its contractors to
enter into  ***equipment  leases on standard  forms to be provided by TPI and to
pay TPI a $1.00 start-up fee. Under the lease,  contractors shall be required to
use the Equipment exclusively for the manufacture of ***incorporating  Products,
to  permit  removal  of the  Equipment  upon  breach of the  equipment  lease or
cessation of manufacturing at the Facility of garments  incorporating  Products,
to permit  maintenance,  access  and  monitoring  by TPI,  to  prohibit  reverse
engineering,  to  protect  TPI and  ***trade  secrets,  and to  ensure  that the
Equipment remains the unencumbered property of TPI. The lease shall require that
operators use processes in accordance  with training  provided by TPI. The lease
shall require the  contractor  to indemnify TPI against  damage to the Equipment
and  liability to  third-parties  arising from misuse of the Equipment and shall
contain other  commercially  reasonable  provisions  customarily  found in major
equipment  leases.  LS&CO.  shall  cooperate  with  TPI  in  requiring  LS&CO.'s
contractors to comply with the requirements of this Agreement applicable to such
contractors.  LS&CO.  shall  cooperate  with TPI in causing the prompt return of
Equipment by a contractor  from a Facility  following any decision by LS&CO.  to
stop manufacturing garments incorporating Products at such Facility.

                  (f)     NO LS&CO. RESPONSIBILITY.  It is understood and agreed
that LS&CO. is not a guarantor of, and has no responsibility to TPI relating to,
any contractor's  compliance with the equipment lease or license or otherwise in
respect of use of the  Equipment and Products.  LS&CO.  and TPI recognize  their
common  interest in the proper and limited use by  contractors  of the Equipment
and  Product  and in the  potential  impact  on  LS&CO.'s  production  and TPI's
business arising from  contractor-level  problems. As such, LS&CO. and TPI shall
consult  and  cooperate  with one  another  regarding  any  concerns  about such
contractor  use, and TPI shall not terminate an equipment  lease or license,  or
remove or make unusable any  Equipment,  without first  notifying and consulting
with  LS&CO.,  it being  understood  that TPI shall have no  responsibility  for
production  interruptions  resulting  from the  termination by TPI of a lease in
accordance with its terms following such consultation with LS&CO.

                  (g)     FACILITY COSTS AND   PERSONNEL.   All  power,   water,
environmental and other costs of operating the Equipment shall be born by LS&CO.
with  respect  to  Equipment   installed  in  LS&CO.-owned   Facilities  and  by
contractors   with  respect  to   contractor-owned   Facilities.   Operators  in
LS&CO.-owned  Facilities shall be employed by LS&CO. and operators in contractor
Facilities  shall be  employed by the  contractors  at no cost in either case to
TPI. TPI shall have no responsibility or liability for production  interruptions
caused by lack of power or operator labor or from damage to Equipment  caused by
operators.

                  (h)     IMPROVEMENTS.  Any  improvements made to the Equipment
or the  Products  in  the  Facilities  or  the  process  of  application  in the
Facilities   shall  become  the  property  of  TPI,   subject  to  a  continuing
royalty-free  right in LS&CO.  and its contractors to use any such  improvements
during such time as they are authorized to use the Equipment.


4.       COMPENSATION AND PAYMENT

                  (a)     DEFINITIONS.   For  purposes of  this  Agreement,  the
following terms have the meanings given below:

                  "CUMULATIVE APPLICABLE PAYMENTS" means the sum of (x) payments
in  respect  of  Cumulative  Product  and  Applicable  Trim  Purchases  and  (y)
Make-Whole Payments as of the relevant date of determination.


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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  "CUMULATIVE  APPLICABLE TRIM PURCHASES"  means cumulative Trim
purchases by LS&CO. as of the relevant date of determination up to $2 million.

                  "CUMULATIVE PAYMENTS" means the sum of (x) payments in respect
of Cumulative  Product and Trim Purchases and (y) Make-Whole  Payments as of the
relevant date of determination.

                  "CUMULATIVE   PRODUCT   PURCHASES"  means  cumulative  Product
purchases by LS&CO. as of the relevant date of determination.

                  "CUMULATIVE  PRODUCT AND APPLICABLE TRIM PURCHASES"  means the
sum of: (x)  Cumulative  Product  Purchases and (y) Cumulative  Applicable  Trim
Purchases as of the relevant date of determination.

                  "CUMULATIVE  PRODUCT AND TRIM PURCHASES" means the sum of: (x)
Cumulative  Product  Purchases  and  (y)  Cumulative  Trim  Purchases  as of the
relevant date of determination.

                  "CUMULATIVE TRIM PURCHASES" means cumulative Trim purchases by
LS&CO. as of the relevant date of determination.

                  "INITIAL PAYMENT"  means a payment  of $1.25 million by LS&CO.
to TPI upon the execution of this Agreement.

                  "MAKE-WHOLE  AMOUNT"  means the  difference  between:  (x) the
Minimum  Guaranteed  Quarterly  Amount and (y) the  Quarterly  Applicable  Total
Purchase Amount in respect of any contract quarter.

                  "MAKE-WHOLE CREDIT" means cumulative  Make-Whole Amounts as of
the relevant date of determination.

                  "MAKE-WHOLE  REPORT"  means  a  report  generated  by TPI  and
provided to LS&CO.  after the end of a contract  quarter  showing the  Quarterly
Applicable  Trim Purchase  Amount,  Quarterly  Product  Purchase  Amount and any
required  Make-Whole  Amount for such  quarter,  in form and content  reasonably
satisfactory to LS&CO.

                  "MINIMUM GUARANTEED PURCHASE AMOUNT" means $10 million.

                  "MINIMUM GUARANTEED QUARTERLY AMOUNT" means $1.25 million.

                  "QUARTERLY  APPLICABLE TRIM PURCHASE AMOUNT" means actual Trim
purchases by LS&CO. up to $250,000 in respect of any contract quarter.

                  "QUARTERLY  PRODUCT  PURCHASE  AMOUNT"  means  actual  Product
purchases by LS&CO. in respect of any contract quarter.

                  "QUARTERLY APPLICABLE TOTAL PURCHASE AMOUNT" means the sum of:
(x) the Quarterly Product Purchase Amount and (y) the Quarterly  Applicable Trim
Purchase Amount in respect of any contract quarter.

                  "TRIM"  means  thread,  zippers,   labels,  buttons,   rivets,
polybags, packing cartons, hang-tags,  pocket flashers,  waistband tickets, size
stickers and other trim products for garments sold by TPI.


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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (b)     INVOICES. TPI shall issue invoices  upon  shipment for
Products and Trim  containing  all  information  requested  by LS&CO.  including
invoice number, product codes, number of units and cartons shipped and any other
relevant  information as may be reasonably  specified by LS&CO.  TPI shall issue
Make-Whole Reports after the end of each contract quarter.

                  (c)     PAYMENT.   All  payments required to be made  by LS&CO
shall be made in U.S. Dollars unless otherwise  agreed.  All such payments shall
be made via bank  wire  transfer  to  TPI's  bank or via bank  check to TPI and,
unless a date for payment is  otherwise  specified in this  Agreement,  shall be
paid on a net 30 days basis.  TPI may charge interest on any undisputed past due
amount at the rate of one percent (1%) per month  compounded and calculated from
the time the  undisputed  amount became past due until paid,  or, if lower,  the
maximum rate permitted by law.

                  (d)     MINIMUM  GUARANTEED  PURCHASE AMOUNT.   TPI  shall  be
entitled  to receive  from LS&CO.  in respect of the  Initial  Term at least the
Minimum  Guaranteed  Purchase  Amount on the basis and through the provisions of
this  Section 4, it being  understood  that such  provisions  provide  that Trim
purchases  in excess of $2 million are not  "counted" in  determining  purchases
satisfying the Minimum Guaranteed Purchase Amount requirement.

                  (e)     CONTRACT  QUARTERS.   TPI shall be entitled to receive
from LS&CO. in respect of each contract quarter at least the Minimum  Guaranteed
Quarterly Amount. If the Quarterly Applicable Total Purchase Amount is less than
the Minimum  Guaranteed  Quarterly Amount for any contract quarter,  then LS&CO.
shall pay TPI the Make-Whole Amount.

                  (f)     ACHIEVEMENT  OF MINIMUM.   If at  any time  during the
Initial Term TPI has received from LS&CO.  Cumulative  Applicable Payments equal
to or exceeding the Minimum  Guaranteed  Purchase Amount,  then LS&CO.  shall be
deemed to have discharged its obligations to pay the Minimum Guaranteed Purchase
Amount  and   Minimum   Guaranteed   Quarterly   Amounts,   and  the   quarterly
guarantee/Make-Whole Amount arrangement shall stop.

                  (g)     CREDIT.  From and after the time LS&CO. has discharged
its  obligations to pay the Minimum  Guaranteed  Purchase Amount and the Minimum
Guaranteed  Quarterly Amounts as provided in Section 5 (e), then LS&CO. shall be
obligated to pay only for its actual  purchases of Products and Trim taking into
account  and  applying  the  Make-Whole  Credit.  The  Make-Whole  Credit  shall
thereafter be applied to reduce amounts  payable for Product  purchases and Trim
purchases  during  the  balance  of the  Initial  Term  in a  manner  such  that
Cumulative  Payments as of the end of the Initial Term do not exceed  Cumulative
Product and Trim  Purchases in respect of the Initial  Term.  TPI shall not have
any  obligation at the end of the Initial Term to refund  Make-Whole  Amounts or
provide credit in respect of unused Make-Whole Amounts if Cumulative Product and
Trim  Purchases  over  the  Initial  Term  amounted  to less  than  the  Minimum
Guaranteed Purchase Amount.

                  (h)     INITIAL PAYMENT. LS&CO. shall make the Initial Payment
of $1.25 million to TPI upon execution of this Agreement. Payment of the Initial
Payment shall discharge LS&CO.'s obligation in respect of the Minimum Guaranteed
Quarterly  Amount for the first contract  quarter.  The Initial Payment shall be
applied to purchases  of Product and to  purchases  of Trim up to the  Quarterly
Applicable Trim Purchase Amount to be shipped in the first contract quarter, and
to the extent not so applied to be treated as a paid Make-Whole Amount.

                  (i)     PAYMENTS  AFTER  INITIAL  PAYMENTS.   As  provided  in
Section 4(c),  LS&CO.  shall after the Initial  Payment is fully applied pay for
Product and Trim purchases on a net 30 day basis.

                  (j)     PAYMENT OF MAKE-WHOLE AMOUNTS. LS&CO. shall pay  Make-
Whole Amounts,  if any,  within 30 days after receipt of the Make-Whole  Report.
LS&CO.  shall make any such payments  through wire transfer or check as provided
in Section 4 (c).


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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (k)     TRIM  PURCHASE PRICE  AND TERMS.  TPI shall  offer its
entire Trim product line to LS&CO. with pricing on a most-favored-customer basis
for similar quantities to similarly situated customers.  Trim purchases, if any,
shall otherwise be on the terms set out in this Agreement.

                  (l)     PRICE FOR ***  PRODUCTS.  The  price for  the  initial
*** Products is $*** per unit for the Original  construction,  $*** per unit for
the 4A  construction,  $*** per unit for the 3AA  construction and $*** per unit
for the 3A construction. Such amount for the *** Product selected shall be TPI's
entire  compensation  for the  ***  Products.  Pricing  for  Additional  Program
Products shall be as mutually agreed from time to time prior to incorporation of
such  Products into LS&CO.  products.  It, and other prices as may be agreed for
Additional  Program  Products,  shall be  binding  without  regard to changes in
exchange rates, local inflation,  monetary system  developments or other factors
that may affect TPI's costs, profits or otherwise.  Going forward, TPI shall use
commercially  reasonable  efforts to reduce the cost of Products  and to provide
LS&CO. with price reductions if achieved by TPI after  consideration of all cost
increases  otherwise absorbed by TPI, it being understood that TPI is not making
any guaranty that future prices will be lower and that TPI shall not be required
to  purchase  components  from  any  vendor  not  acceptable  to TPI in its sole
discretion or to accept lower margins or absolute profitability on the Products.

                  (m)     EXAMPLES.  Examples  of  the   computation   of  TPI's
compensation  are  attached as EXHIBIT D. The  examples  are not  intended as an
independent source of legal obligation but rather as a convenient reference tool
given the number of variables  involved in the computation of TPI's compensation
under this Agreement.


5.       COMMERCIAL TERMS

                  (a)     START-UP.  TPI  shall be prepared to accept orders and
ship on time all  initial  orders  of ***  Products  by  LS&CO.  in line  with a
September 1, 2002 production start,  subject to timely satisfaction by LS&CO and
its  contractors  of  all  installation  prerequisites  and  conclusion  of  the
specifications  as provided in this Agreement,  and, going forward,  to ship all
orders on time and complete. LS&CO. expects that its initial order shall require
delivery  to  the  appropriate   Facilities  of  approximately  ***units  before
September  1, 2002.  LS&CO.'s  initial  order  shall  require  TPI to deliver by
September 1, 2002 to the Facilities Products ready for the manufacture of ***and
to  deliver by  September  10,  2002 to the  Facilities  Products  ready for the
manufacture of ***. LS&CO.  expects that its subsequent orders shall require TPI
to deliver Products to the Facilities ready for the manufacture of ***by each of
October 1, 2002,  ***by  October  10,  2002,  ***by  November  1, 2002 and ***by
November 10, 2002. TPI shall not be  responsible  for late delivery of logo tape
if artwork is not complete by July 15,  2002,  and any  airfreight  charges as a
result of late delivery of artwork shall be paid by LS&CO.

                  (b)     FREIGHT  AND RISK OF LOSS.  TPI shall  supply Products
C&F at the Facilities.

                  (c)     ORDERING.   LS&CO. shall  order  Products  by  issuing
purchase orders in paper or electronic form as it may determine with TPI. LS&CO.
shall provide a separate purchase order for Products that LS&CO. intends to hold
as owned-inventory.

                  (d)     INVENTORY.  By  November 15, 2002, TPI shall build and
thereafter  maintain a ***inventory  of Products  based on the LS&CO.  forecasts
referred to in Section 6(a). TPI shall maintain ***of such inventory  in-country
in each country  where there is a Facility as  appropriate  to that Facility and
the other ***of  inventory in Miami,  another U.S.  facility or a country  where
there is a facility chosen by TPI. If TPI for any reason shall be unable to meet
all of its orders from customers for ***components,  TPI shall give LS&CO. first
priority before fulfilling other orders.


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***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (e)     ON-SCHEDULE DELIVERIES. TPI shall deliver all Products
to  LS&CO.  by the  dates  and at  the  locations  specified  by  LS&CO.  in the
applicable  purchase  order so long as the amounts  ordered are equal to or less
than that reflected in the most recent applicable forecast. To the extent orders
are for amounts in excess of the  forecast  amount,  TPI shall use  commercially
reasonable  efforts (which in any case does not include air freight) to ship all
such  excess  orders  for  delivery  at the  time  specified  by  LS&CO.  in the
applicable purchase order, and in any case shall deliver those Products no later
than sixty (60) days after the  delivery  date  stated in such  purchase  order.
LS&CO.  shall give to TPI  shipping  destinations  for Products no later than 45
days  before  the  required  delivery  date.  TPI  shall  ship all  Products  in
accordance  with those  instructions.  TPI shall pay all freight,  insurance and
delivery charges for returned  rejected  Products only if TPI requests return of
such rejected Products. If TPI experiences delays for which it is responsible in
supplying  Products such that it may not meet the required delivery date for the
Products,  TPI shall, at its own expense and without right of reimbursement from
LS&CO.,  take  appropriate  shipping  measures  (for  example,  air  freight) in
consultation with LS&CO. to order to meet the required delivery date.

                  (f)     INSPECTION; REJECTION. The provisions of Division 2 of
the  California  Uniform  Commercial  Code  shall  govern  matters  relating  to
inspection,  acceptance,  rejection and  revocation of acceptance of Products by
LS&CO.  It is  understood  that  LS&CO.  contractors  may perform and act on the
inspection as agents for LS&CO.  and that TPI and LS&CO.  expect in the ordinary
course to develop and implement quality control,  problem resolution and related
procedures.

                  (g)     LIMITED WARRANTY.  TPI warrants that all Products: (i)
shall  when  delivered  be free  from  defects  in  materials,  workmanship  and
fabrication;  (ii) shall when  delivered be of quality,  size,  description  and
dimension  specified  in  the  applicable  Specifications;  (iii)  to  the  best
knowledge  of TPI,  shall not infringe any patent,  trade  secret,  trademark or
other  intellectual  property  right of any third party;  (iv) shall be made and
sold in compliance with applicable laws and this Agreement;  and (viii) shall be
conveyed free and clear of all liens and adverse  claims.  All warranties  shall
survive any inspection,  delivery,  acceptance or payment by LS&CO.  and for two
years  after the cut ticket  number of the  garment  into  which the  Product is
incorporated.  Notwithstanding  the  provisions  of  this  Section  5  (g),  the
warranties  contained  in Sections 5 (g) (i) and (ii) shall not  survive  beyond
incorporation  into  garments to the extent a product  defect or failure to meet
Specifications  following  garment  processing,  manufacturing  or washing using
methods  not  approved  by TPI as of the  date of this  Agreement  or  otherwise
approved under Section 6 (c) is reasonably  demonstrated by LS&CO. not to result
from such unapproved processing, manufacturing or washing. EXCEPT AS PROVIDED IN
THIS  AGREEMENT,  TPI MAKES NO OTHER  REPRESENTATIONS  OR  WARRANTIES  ABOUT THE
PRODUCTS.  TPI DISCLAIMS ALL OTHER  WARRANTIES,  EXPRESS OR IMPLIED,  INCLUDING,
WITHOUT  LIMITATION,   WARRANTIES  AS  TO  MERCHANTABILITY  AND  FITNESS  FOR  A
PARTICULAR PURPOSE.

                  (h)     PRODUCTION  RISK.   As  provided in Section 5(d),  TPI
shall build and maintain a  ***inventory  of Products.  If such inventory at any
time after  November  15, 2002 falls below thirty (30) days,  LS&CO.  may in its
discretion and following notice to TPI deal directly with and purchase  Products
from TPI's suppliers.  LS&CO.  shall give advance notice of its intended initial
communications  with TPI's  suppliers and give TPI a reasonable  opportunity  to
participate  in such  discussions.  TPI shall  cooperate with such suppliers and
LS&CO.  (including by facilitating and  participating in such discussions) in an
effort to timely  produce and ship Products to LS&CO.  in order to eliminate any
risk to  production  of garments by LS&CO.  Such  actions may  include,  without
limitation, granting contractual waivers and sublicenses and facilitating direct
interaction  between LS&CO. and ***and other suppliers to TPI. LS&CO. may engage
in such activities until TPI rebuilds its inventory to the required  three-month
amount and otherwise provides assurances satisfactory to LS&CO. of TPI's ability
reliably to supply  Products to LS&CO.  and maintain  inventories  in accordance
with this Agreement.


                                       7
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (i)     SUPPLIER PROTOCOLS AND REPORTS. No later than five (5)
days after the execution of this  Agreement,  TPI shall provide LS&CO.  with the
names,  locations and contact  persons for each of TPI's  suppliers of Products.
Going forward,  TPI shall promptly provide LS&CO.  with the same information for
new  suppliers  and shall advise  LS&CO.  if TPI no longer is using a particular
supplier.  LS&CO. shall use such information for purposes of this Agreement only
and, other than in connection with ongoing purchasing activities under Section 5
(h),  shall not directly or indirectly  contact or visit the  suppliers  without
first  notifying  TPI  and  unless  TPI  participates  in the  interaction.  All
information received from TPI suppliers by LS&CO. regarding TPI shall be subject
to the NDA.  LS&CO.  may specify and TPI will be subject to quality  control and
other  requirements  and arrangements  generally  applicable to and satisfied by
LS&CO. raw materials suppliers.  LS&CO. may reasonably specify reports, shipping
documents  and  other  information  it  requires  from  TPI in  either  paper or
electronic  form. Such reports may include,  without  limitation,  reports about
inventory  composition  and position,  incoming  shipments,  production  status,
quality,  shipping times and other matters reasonably related to the performance
by TPI of its obligations under this Agreement.  TPI shall deliver those reports
and other information  reasonably  requested by LS&CO. by the dates specified by
LS&CO.  Notwithstanding  any provision of this  Agreement to the  contrary,  TPI
shall not be  required  to provide to LS&CO any  information  relating  to other
customers of TPI or any cost related information.

                  (j)     TPI RESPONSIBILITY.  TPI shall,  at its sole  expense,
furnish all facilities,  machinery,  equipment,  maintenance,  labor, travel and
other  resources  TPI needs and uses to  perform  TPI's  obligations  under this
Agreement.  TPI shall be responsible  for  procuring,  monitoring and paying any
suppliers (including,  without limitation, ***) and subcontractors it may use in
connection with  designing,  manufacturing  and shipping  Products and otherwise
performing its  obligations  under this Agreement.  TPI understands  that LS&CO.
shall not be responsible for any capital  improvements or other expenditures TPI
may make in preparation for,  expectation of performance under or performance of
this Agreement.


6.       LS&CO.'S RESPONSIBILITIES CONCERNING PRODUCTION

                  (a)     FORECASTS. LS&CO. shall  provide to TPI a  non-binding
rolling  twelve-month  forecast,  updated  monthly (with the first such forecast
provided no later than July 22, 2002),  showing LS&CO.'s good faith  anticipated
monthly  requirements  for  Products by Facility and  Product-type  based on and
consistent with current production plans. It is understood that such non-binding
forecasts may reflect considerable variability due to market conditions, customs
matters,  production  constraints and other factors.  TPI if it chooses may take
these forecasts into account in planning its activities (including accepting and
fulfilling  orders from other  customers  and sourcing raw  materials)  over the
relevant period.  TPI and LS&CO.  understand,  however,  that such forecasts are
always of a non-binding  nature, that they do not create a binding commitment on
either of them to buy or sell  Products  and that each  works at its own risk in
relying on these forecasts.

                  (b)     STOPPAGE  OF USE.   If LS&CO. decides to stop  using a
Product for a particular garment, LS&CO. shall provide advance notice to TPI and
work with TPI in reducing TPI's  inventory of the applicable  Product to zero as
the garment  production run is concluded.  Inventory  shall be applied on a FIFO
basis,  and all  inventory  of any SKU for which there have been no purchases at
all for at least 180 days for a bona fide  manufacturing  run shall be purchased
by LS&CO.,  it being understood that purchases for any such Products shall count
against the Minimum  Guaranteed  Purchase  Amount and following  purchase may be
used only for the manufacture of ***using the technology provided by TPI.

                  (c)     GARMENT PROCESSING.   LS&CO.  shall  launder  garments
incorporating  Products  only  within  the  tolerances  and using  only the wash
chemicals defined in or incorporated into the  Specifications  for each Product.
LS&CO.  shall  provide and update 60 days before any change all of the following
information  (together  with a flow chart  showing  the order of each  processes
listed): (i) percentage of shrinkage of fabric; (ii) chemicals used on fabric to
achieve ***application; (iii) chemicals


                                       8
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


used in the  wash;  (iv)  duration  of  wash;  (v)  temperature  of  wash;  (vi)
temperature  of presses to be applied to ***;  (vii) number of pressing  cycles;
(viii)  duration of pressing,  by  temperature;  (ix)***;  (x) ***; and (xi) all
fiber content  information for the fabric used. TPI shall not be responsible for
product failures resulting from changes from processes approved by TPI.


7.       EXCLUSIVITY

                  (a)     GENERAL.   EXHIBIT  E sets  forth  multiple  types  of
apparel in market segments/age categories (the "PRODUCT CATEGORIES").  TPI shall
supply  ***components  and make  Equipment  available to LS&CO.  on an exclusive
basis in the Territory during the Initial Term for use in all Product Categories
identified  in EXHIBIT E except as described in Section 7(b).  Unless  otherwise
agreed by TPI, LS&CO. may use the Products only for Product Categories which are
exclusive to LS&CO. under this Agreement.


                  (b)     ***.   The   Product  Categories   include  (i) ***and
***market segments;  (ii) ***and  ***including ***and ***segments;  (iii) ***and
***age   categories;   (iv)   ***and   ***age   categories;   and   (v)   ***and
***(collectively,  the "***PRODUCT CATEGORIES").  TPI shall supply ***components
and make Equipment available on an exclusive-from-TPI basis in the Territory for
use in all such  ***Product  Categories.  However,  if TPI and  LS&CO.  have not
reached agreement as of February 28, 2003 on pricing, minimum guaranteed volumes
and  specifications  for a  ***Product  Category to be marketed  under  LS&CO.'s
***(R) Brand (it being  understood  that such terms shall be reasonable and on a
similarly-situated  most-favored-customer  basis),  then TPI  shall no longer be
obligated  to supply  ***components  to LS&CO.  on an  exclusive  basis for such
***Product  Category  for  which  there  is no  such  agreement  (a  "NON-AGREED
***CATEGORY").  TPI in that  case  shall  make  such  components  and  Equipment
available to LS&CO.  on a  non-exclusive  basis for ***(R) brand garments in the
***Product  Categories  on the terms  otherwise  provided in this  Agreement for
Additional Program Products for other Product Categories.

                  (c)     LICENSEES.   TPI  understands that LS&CO. has licensed
to or may license to third parties the right to make certain  products  included
in the Product Categories under the Dockers(R),  Slates(R) and Levi's(R) brands.
LS&CO.  and TPI  shall  cooperate  in  providing,  and TPI  shall in good  faith
provide, such licensees with a 90-day first right of refusal to exclusive use of
***components in and Equipment for those licensed products for a period equal to
the Initial Term.  (For clarity,  TPI shall provide such first refusal rights to
licensees  under  licenses  relating  to the  Dockers(R)  and  Slates(R)  brands
established  after the date of this  Agreement.) The first such right of refusal
relates to***,  the licensee of the ***(R)  trademark for ***. The 90-day period
for ***shall commence upon the date of this Agreement and end 90 days thereafter
if TPI  and  ***have  not  reached  agreement  on  reasonable  pricing,  minimum
guaranteed volumes and specifications for ***. With respect to each category not
covered by an agreement  with TPI at such time, TPI shall no longer be obligated
to supply ***components to LS&CO or its licensees on an exclusive basis for such
category  for  which  there  is no such  agreement  but may  elect,  in its sole
discretion,  to make components and Equipment available to LS&CO.'s licensees on
a non-exclusive basis.

                  (d)     ***BRANDS.     ***  TPI  shall  at  LS&CO.'s   request
communicate  to  ***LS&CO.'s  concerns  about  imports into the U.S. of products
incorporating  ***and take commercially  reasonably  actions in respect of ***to
minimize the impact of such exclusion in the ***on  LS&CO.'s  exclusivity in the
United States and related purchases of Products from TPI.

                  (e)     TERRITORY.  For purposes of this Agreement,  the  term
"Territory"  means the United States,  its territories and possessions,  and the
phrase  "***components and make Equipment available on an exclusive basis in the
Territory"  means  that TPI  shall  not  sell,  license,  market,  offer or make
available  the  ***Technology  or any  ***or  components  or  Equipment  for the
manufacture of *** using the  ***Technology  to any person  (including,  without
limitation,  any apparel  manufacturer,  marketer or brand owner or any retailer
offering private label or branded  products) for the  manufacture,  marketing or
sale of


                                       9
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


garments in the Product Categories which are at such time exclusive to LS&CO. in
the Territory. In addition, as contemplated by the definition of "USA Market" in
the  ***,  LS&CO.   shall  have  the   non-exclusive   right  to  sell  garments
incorporating the Products in countries outside the United States.


8.       OPTION TO REPLACE PRODUCT PURCHASES WITH TRIM PURCHASES

                  For purposes of this Agreement,  the term "REMAINING  PRODUCTS
PURCHASE AMOUNT" means the difference  between the Minimum  Guaranteed  Purchase
Amount and Cumulative  Product and  Applicable  Trim Purchases as of the date of
the Trim Option  Notice  referred  to in this  Section 8. No later than July 31,
2003, LS&CO.  shall have the right to pay the Remaining Products Purchase Amount
and discharge its obligation to pay the Minimum  Guaranteed  Purchase Amount and
Minimum Guaranteed Quarterly Amounts in lieu of purchasing Products on the basis
described in this Section 8. LS&CO.  may do so by  providing  written  notice to
TPI,  no later than July 31,  2003,  advising  TPI of  LS&CO.'s  exercise of its
option under this Section 8 (the "TRIM OPTION NOTICE"). Upon giving such notice,
LS&CO.  shall be obligated to purchase Trim, during the period beginning on July
31, 2003 and ending on the third  anniversary of the execution of this Agreement
and in a manner during the Initial Term consistent  with the Minimum  Guaranteed
Quarterly  Amount and  Make-Whole  Amount  scheme  provided  in Section 4, in an
amount equal to two times the Remaining  Products Purchase Amount.  Purchases of
Trim as  contemplated  by  Section  4  shall  not  count  for  purposes  of this
provision;  this Section 8 requires Trim purchases over and above the $2 million
in Trim purchases  contemplated by the definition of Cumulative  Applicable Trim
Purchases in Section 4. However,  to the extent LS&CO.  has not fully  purchased
the $2  million  in Trim  provided  for in  Section  4, the  Remaining  Products
Purchase  Amount shall be reduced by subsequent Trim purchases made prior to the
end of the eighth  contract  quarter up to the $2 million cap.  Upon the date of
the Trim Option Notice,  LS&CO.  shall no longer have exclusive rights to supply
as  provided  in  Section  7 and the  provisions  of  Section  14 (d)  shall  be
applicable  apply insofar as they relate to the wind-down of production and sale
of garments incorporating Products.


9.       MARKETING

                  (a)     PRODUCT  LABEL.   Subject  to Section 10 (d),  in  all
LS&CO. products incorporating Products in the Territory, a "TAG-IT," "TEKFIT" or
other TPI trademark  shall appear on the front of the interior care label,  in a
manner  to be  mutually  agreed  upon and not to  exceed  the  logo  size of the
"***(R)" logo or other branding as it appears on such label.  The expected forms
of such TAG-IT and TEKFIT trademarks are attached as EXHIBIT F.

                  (b)     LS&CO. MARKETING.   Subject to  Section 10 (a), LS&CO.
shall  have  complete  freedom  to  decide  whether  and how to  market,  label,
distribute and advertise products that incorporate the Products. However, for so
long as LS&CO.  purchases  and uses  Products in its products and markets  those
products  under a trademark or tagline that describes  specifically  the stretch
feature of the waist band,  LS&CO.  shall not use the trademark or tagline on or
for garments that do not incorporate Products. One (but not exclusive) principle
for applying the preceding rule: a trademark or tagline registered on the United
States Patent and Trademark Office (the "PTO")  Principal  Register shall not be
deemed "descriptive" for this purpose. LS&CO. shall retain ownership of any such
trademarks or taglines and  associated  goodwill,  and TPI shall not acquire any
rights or interest in the trademarks or taglines.

                  (c)     RESOURCES.   LS&CO. shall  have  complete  freedom  in
deciding  how to use  Products  and how much  effort and how many  resources  to
devote to designing,  sourcing, marketing and selling products incorporating the
Products and, except for its obligation to pay the Minimum  Guaranteed  Purchase
Amount,  shall have no affirmative  obligation to TPI to exploit LS&CO.'s rights
under this Agreement, create demand or otherwise.


                                       10
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (d)     PRODUCT CLAIMS.   In  view of  legal  and  advertising
requirements  relating to product  claims and claims  substantiation,  TPI shall
consult and cooperate  with LS&CO.  in developing and making claims about LS&CO.
products  incorporating  ***manufactured  using the ***Technology.  TPI shall be
responsible   for  all  claims  it  makes   about   ***manufactured   using  the
***Technology and about the ***Technology.

                  (e)     TPI PUBLICITY.  TPI may reference the inclusion of the
Products in LS&CO.  products in trade  advertising and press releases subject to
the prior written  approval of LS&CO.,  which approval shall not be unreasonably
withheld or delayed. TPI shall give LS&CO. drafts, proposed copy or the like for
any such press  release  or trade  advertisement  at least five days  before the
intended  date of release or cut-off  for  publication  and shall not release or
publish  until it makes  affirmative  contact with LS&CO.  and obtains  LS&CO.'s
approval  unless advised by counsel that release is required in order for TPI to
comply with its disclosure obligations under applicable securities law and stock
exchange regulations.


10.      INTELLECTUAL PROPERTY RIGHTS

                  (a)     ***LICENSE.  A copy of the license  agreement  between
TPI and ***, which reflects TPI's rights  received from ***and  ***rights in the
United  States (the "***") and those other  countries in which patents have been
issued,  together with a related  letter from ***, is attached as EXHIBIT G (the
"***LICENSE").  A copy of the  ***,  together  with a letter  from the  inventor
confirming ***'s ownership of the ***is attached as EXHIBIT H. TPI shall provide
LS&CO. with a copy of the formal assignment document filed with the PTO promptly
after its filing.  TPI agrees that LS&CO may, and shall in applicable  equipment
leases provide that LS&CO.'s  contractors may, on a non-exclusive basis, use the
Equipment  to  assemble  the  Products  into  ***and  for other uses that may be
permitted by TPI in the exercise of its sole  discretion.  TPI shall comply with
the  ***License  and not enter into any  modification  of the  ***License in any
manner that limits or otherwise adversely affects the exclusivity established in
favor of LS&CO.  under this  Agreement.  TPI shall promptly advise LS&CO. of any
event or development (including, without limitation, any notice of breach of the
***License  given by ***to TPI or any bona fide claims of infringement by TPI or
***of a third  party's  intellectual  property  rights) of which TPI's  officers
become aware that  reasonably  could result in termination  or material  adverse
modification  of the ***License or  cancellation,  invalidation or limitation of
the claims of the ***Patent,  it being understood,  however, that TPI shall have
no liability for any delay in providing such notice if LS&CO.  if not materially
prejudiced by such delay.  Nothing in this Agreement  requires TPI to provide to
LS&CO.  rights  in the  ***Technology  greater  than  those  provided  to TPI by
***under the ***License.

                  (b)     OTHER TECHNOLOGIES.   LS&CO. may  develop, acquire and
use other *** technologies and products,  incorporate in any products and market
and sell those  products as it sees fit,  subject to TPI's patent and  trademark
rights, the NDA and the provisions of Section 9 (b). TPI's patent, trademark and
know-how rights and  confidential  information are not licensed to LS&CO.  other
than for the  manufacture  and sale of garments  incorporating  the Products and
LS&CO. shall not infringe or misappropriate them.

                  (c)    REVERSE ENGINEERING.  LS&CO. shall not reverse engineer
or attempt to  duplicate  TPI's  know-how,  the  Equipment  or the  process  for
manufacturing Products, it being understood,  however, that that nothing in this
Section 10 (c) shall limit LS&CO.'s ability to engage in its ordinary production
evaluation,  product  performance,  manufacturability,  occupational  health and
safety,  maintenance  and repair,  risk  management  analysis and other ordinary
procedures.  LS&CO.'s  ability to engage in such  activities  does not limit the
applicability of the NDA to such activities or imply that any license is granted
by TPI.


                                       11
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (d)     TPI  TRADEMARK.   As provided in Section 9 (a), LS&CO.
shall include on care labels in products  incorporating Products a TPI trademark
(the "TPI  TRADEMARK").  The  initial  TPI  Trademark  is expected to be "*** by
Tag-It" in the form shown on  EXHIBIT F. TPI has filed U.S.  Application  Serial
No.  76/374,373  for a "TEKFIT"  trademark (the "TEKFIT  APPLICATION")  with the
United States Patent and Trademark  Office  ("PTO") on an intent to use basis. A
copy of TPI's  application  for the TEKFIT  trademark  is attached as EXHIBIT I.
Should  TPI decide it wishes to replace  the  TAG-IT  trademark  with the TEKFIT
trademark or other TPI Trademark,  LS&CO.  shall make the transition once LS&CO.
is satisfied in its reasonable judgment that there are no third party trademarks
in the  Territory  that  would  conflict  with  its use of the  TEKFIT  or other
trademark, but in no event shall LS&CO. transition to the TEKFIT trademark prior
to the issuance of a Notice of Allowance for the TEKFIT  Application by the PTO.
TPI at LS&CO.'s  request shall provide LS&CO.  with copies of any search reports
that it has obtained for the TEKFIT or other TPI Trademark,  any  correspondence
relating to the  availability  of the TEKFIT or other  trademark  and any Office
Actions  issued by the PTO  against  any  applications  for the  TEKFIT or other
trademark,  including without limitation,  the Office Action dated June 24, 2002
for the  TEKFIT  Application.  TPI shall  also  promptly  inform  LS&CO.  of any
Oppositions  or  Requests  For  Extension  of Time To  Oppose  that may be filed
against  the TEKFIT  Application  or any  application  for a TPI  Trademark.  At
LS&CO.'s  request,  TPI shall  notify  LS&CO.  of any  foreign  applications  or
registrations  that it owns  for the TPI  Trademark  and  shall  not  object  to
LS&CO.'s use of the TPI Trademark in countries outside the United States in care
labels of garments  incorporating  Products sold outside the  Territory.  LS&CO.
shall not use the TPI Trademark on any products not incorporating  Products. TPI
shall retain ownership of the TPI Trademark and associated goodwill,  and LS&CO.
shall not through  such use acquire any rights or interest in the TPI  Trademark
other than the right to include it on such care labels.

                  (e)     THIRD PARTY INFRINGEMENTS.  TPI shall use commercially
reasonable  efforts to defend the  Products,  Equipment,  ***Technology  and TPI
Trademark  against  infringement by third parties.  Upon receiving  notification
from LS&CO. of any such  infringement,  TPI shall take  commercially  reasonable
steps to end the  infringement.  If TPI does not institute an infringement  suit
within sixty (60) days after LS&CO.'s  written request that it do so, LS&CO. may
institute  and  prosecute  such lawsuit in the name of TPI. Any lawsuit shall be
prosecuted  solely  at the  expense  of the  party  bringing  suit  and all sums
recovered shall be paid to TPI. However, should LS&CO. prosecute such action, it
shall be entitled to deduct from any  settlement or judgment its costs and legal
fees  incurred  in  connection  with  bringing  the action.  If TPI  declines to
prosecute  such a suit,  TPI shall  cooperate  with  LS&CO.  including,  without
limitation, agreeing to mutually acceptable counsel and settlement terms. Unless
TPI and LS&CO. otherwise agree, no settlement shall limit, restrict or otherwise
affect the right of TPI or LS&CO. to carry on or conduct their business (then or
in the future) or require any payment to be made or license to be granted by TPI
or  LS&CO.,  or limit,  restrict,  make more  expensive  or less  profitable  or
otherwise  adversely  affect  the  manner in which TPI or LS&CO.  carries  on or
conducts its business (then or in the future). In addition, TPI and LS&CO. shall
not be  obligated  to  consent to any  settlement  which  does not  include  the
delivery by the settling defendant of a full and final release of TPI and LS&CO.
from any and all liability with respect to the subject matter of such action.

                  (f)     NDA APPLICABILITY.  A copy of the  NDA is attached  as
EXHIBIT J. TPI and LS&CO.  put in place the NDA in connection with evaluation of
a potential business relationship with one another. Going forward, the NDA shall
remain in effect, apply to exchanges of Confidential  Information after the date
of  this  Agreement  and  require  use of  Confidential  Information  solely  in
connection  with  the  transactions   and  relationship   contemplated  by  this
Agreement.  Each  party's  obligations  under  Sections  2  and 3 of  NDA  shall
terminate two years after the  termination  of this Agreement and in the case of
***Know-How  (as defined in the NDA),  as provided  in the NDA.  This  Agreement
shall be considered an amendment of the NDA.


                                       12
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


11.      TALON APPROVAL

                  For good and valuable  consideration,  LS&CO.  on May 13, 2002
approved all Talon brand metal and synthetic  zippers (the "ZIPPERS") for use by
LS&CO.  and all LS&CO.  contractors in the  manufacture of all LS&CO.  products,
including  all denim and twill  lines  (the  "ZIPPER  APPROVAL").  A copy of the
Zipper  Approval  is  attached  as  EXHIBIT  K.  LS&CO.  shall use  commercially
reasonable  efforts to  provide a written  confirmation  of the Zipper  Approval
consistent with this Section 10 to all buyers within the LS&CO. organization and
to all LS&CO.  subcontractors and contract  manufacturers.  TPI shall supply the
Zippers to all such  purchasers  on prices no higher than those offered by ***at
standard prices for the equivalent zippers, and shall provide LS&CO. a ***on all
purchases of Talon brand metal zippers by LS&CO. and its contract manufacturers,
and a ***on all  purchases of Talon brand nylon  zippers made by LS&CO.  and its
contract  manufacturers.  TPI shall pay LS&CO. ***on a quarterly basis within 30
days after the end of each calendar quarter. The Zipper Approval shall remain in
effect until September 1, 2004.


12.      TEST RESULTS

                  LS&CO.    conducted    tests    of   the    washability    and
manufacturability of garments of the Original construction incorporating the ***
Products and of consumer response to such garments. All test methods,  protocols
and results relating to these tests constitute confidential information of LS&CO
and, to the extent  provided to TPI, shall be held as such by TPI under the NDA,
and LS&CO.  shall not disclose any  washability  test results and reports except
under the same terms it may disclose TPI confidential information under the NDA.
TPI shall be  provided  the  opportunity  to review (but not copy) all such test
results and reports.


13.      TERM

                  (a)     INITIAL  TERM.   Unless  earlier  terminated by either
party under this Section 13, the term of the Agreement shall end on September 1,
2004,  it being  understood  that the  September 1 date shall be extended by the
number of days beyond September 1, 2002, if any,  required for completion of the
installation  of the Equipment at the Initial  Facilities  other than delays for
which TPI is not responsible (the "INITIAL TERM"). The first contract year shall
run from the date of this Agreement  until September 1, 2003 (as that period may
be extended as described in the  preceding  sentence),  and the second  contract
year shall end on the first  anniversary of the expiration of the first contract
year. (For clarity,  it is understood that the first contract  quarter shall run
from the date of this Agreement  until  September 1, 2002 (as they period may be
extended as described in this Section 13 (a).)

                  (b)     EXTENSION.  Six months prior to the  expiration of the
Initial  Term,  TPI and  LS&CO.  shall meet to  discuss  an  extension  of those
elements of the exclusive supply  relationship  then in effect.  Neither TPI nor
LS&CO.  shall  have  any  obligation  to enter  into  such an  extension.  If an
agreement  is not reached with  respect to  extension  of any  exclusive  supply
relationship,  all exclusive rights of LS&CO.  shall terminate upon the last day
of the  Initial  Term.  If TPI  and  LS&CO.  do not  agree  on an  extension  of
exclusivity, for a period of two years following the Initial Term, TPI shall, on
a non-exclusive  basis and at LS&CO.'s  option,  continue to supply *** Products
and Additional  Program  Products that are actively being supplied by TPI at the
expiration of the Term.  Pricing and other supply terms and  conditions for such
purchases shall be on a better than  most-favored  customer basis, but otherwise
in accordance with those generally offered by TPI to its customers.


                                       13
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


14.      TERMINATION

                  (a)     TERMINATION   AT  EXPIRATION OF  INITIAL  TERM.   This
Agreement shall  terminate upon the expiration of the Initial Term as  described
in Section 13.

                  (b)     TERMINATION BY TPI

                          (i)    TPI  may  terminate  this  Agreement if  LS&CO.
breaches any of its material  obligations under this Agreement and fails to cure
the breach within 40 days after receiving  written notice of the breach.  Such a
termination shall be effective five days after the expiration of the cure period
if the breach is not cured.

                          (ii)   TPI  may terminate  this  Agreement  if  LS&CO.
files a petition in bankruptcy, is adjudicated a bankrupt or files a petition or
otherwise  seeks  relief  under any  bankruptcy,  insolvency  or  reorganization
statute or proceeding, or a petition in bankruptcy is filed against it or is not
dismissed  within 60 days,  or it makes an  assignment  for the  benefit  of its
creditors  or a  custodian  or a receiver  or trustee is  appointed  for it or a
substantial  portion  of its  business  or assets or it  admits in  writing  its
inability  to pay its debts as they  become  due.  Such a  termination  shall be
effective upon delivery of a notice to that effect by TPI to LS&CO.

                          (iii)  TPI may terminate this Agreement as provided in
Section 15 (d). Such a termination  shall be effective  upon receipt of a notice
to that effect by LS&CO. from TPI as provided in Section 15 (d).

                  (c)     TERMINATION BY LS&CO.

                          (i)    LS&CO. may  terminate  this  Agreement  if  TPI
breaches any of its material  obligations under this Agreement and fails to cure
the breach within 40 days after receiving  written notice of the breach.  Such a
termination shall be effective five days after the expiration of the cure period
if the breach is not cured.

                          (ii)   LS&CO. may terminate  if this  Agreement if TPI
files a petition in bankruptcy, is adjudicated a bankrupt or files a petition or
otherwise  seeks  relief  under any  bankruptcy,  insolvency  or  reorganization
statute or proceeding, or a petition in bankruptcy is filed against it or is not
dismissed  within 60 days,  or it makes an  assignment  for the  benefit  of its
creditors  or a  custodian  or a receiver  or trustee is  appointed  for it or a
substantial  portion  of its  business  or assets or it  admits in  writing  its
inability  to pay its debts as they  become  due.  Such a  termination  shall be
effective upon delivery of a notice to that effect by LS&CO. to TPI.

                          (iii)  LS&CO.  may terminate  the  Agreement  upon (A)
termination  of  the  ***License;  or (B) a  decision  by the  U.S.  Patent  and
Trademark  Office or by a court to cancel or  invalidate  or limit the claims of
the Patent.

                  (d)     CONSEQUENCES OF TERMINATION.   Upon the effective date
of any termination of this Agreement:

                          (i)    In  the  event of any termination,  and subject
to Section  15 (d),  LS&CO.  may,  for a period of 120 days,  use its  remaining
inventory of Products and complete  production  using the  Equipment of garments
incorporating  those Products,  and thereafter market and sell such garments for
an additional 120-day period as provided in this Agreement.

                          (ii)   If  LS&CO.  terminates  or  if  this  Agreement
expires  in  accordance  with its  terms,  LS&CO.  shall have the right (and the
obligation if the termination is a result of expiration or, after


                                       14
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


the Minimum  Guaranteed  Purchase  Amount is satisfied,  termination  by TPI) to
purchase  all  Products in TPI's  inventory at a price equal to **% of the price
for those  Products in effect  immediately  prior to the time of  termination or
expiration, and to manufacture and sell those garments as provided in Section 14
(d)(i).

                          (iii)  TPI  shall  immediately  stop   all  use of the
Specifications  and other LS&CO.  data relating to Product  requirements  and at
LS&CO.'s request return to LS&CO. such materials.

                          (iv)   LS&CO. shall pay any  outstanding  invoices for
delivered  Products  and for any  Products  shipped  after  the  termination  or
expiration.

                          (v)    LS&CO.'s exclusivity rights shall terminate and
TPI shall be free to sell ***components and provide Equipment to other companies
for use in all Product Categories in the Territory.

                          (vi)   LS&CO.'s  rights to use the TPI Trademark shall
terminate upon completion of Product sales permitted under this Section 14 (d).

                          (vii)  TPI's  rights to identify  LS&CO. as a customer
shall  terminate,  and TPI shall no longer  identify LS&CO. as a customer or use
photographs, other images or reproductions of LS&CO. products or advertising, in
any promotional  materials,  advertising,  investor relations materials or other
document or medium.

                          (viii) LS&CO.'s   obligation   to   pay  the   Minimum
Guaranteed  Purchase Amount and remaining Minimum  Guaranteed  Quarterly Amounts
shall terminate, it being understood that Section 16 (c) provides for liquidated
damages in the case of a termination by TPI under Section 14 (b)(i).

                          (ix)   LS&CO   shall  promptly   return  to   TPI  all
Equipment located in LS&CO.-owned Facilities, and, as provided by Section 3 (e),
reasonably  cooperate  with  TPI  to  assist  TPI  to  recover  from  all  LS&CO
contractors all Equipment located in contractor Facilities,  following cessation
of manufacturing by LS&CO of garments incorporating the Products.

                          (x)    The provisions of Sections 5 (g), 6(b), 10 (b),
10 (c), 11, 12, 15, 16, 17 and 19, and the NDA,  shall  survive the  termination
for any reason of this Agreement.

                          (xi)   The Zipper Approval shall not be affected.


15.      INDEMNIFICATION AND INSURANCE

                  (a)     INDEMNITY BY TPI. TPI shall defend, indemnify and hold
harmless  LS&CO.  and any of its  employees  or agents  (together,  the  "LS&CO.
Indemnified Parties") from and against any and all claims, actions, liabilities,
obligations,  damages,  losses,  demands,  recoveries,  deficiencies,  costs  or
expenses,   including,  without  limitation,   reasonable  attorneys'  fees  and
expenses,  (collectively,  "Claims") which any of the LS&CO. Indemnified Parties
may suffer or incur  connected  with,  resulting from or arising out of: (i) the
inaccuracy  in any material  respect of any  representation  made by TPI in this
Agreement;  (ii) any material  failure by TPI to perform any of its  obligations
under this  Agreement;  (iii) any  defects in the  Products,  any  deviation  of
Products from the Specifications or any other breach of the warranties about the
Products  made by TPI in this  Agreement;  (iv) any  claim  that  the  Products,
Equipment, components of the Products or Equipment, the underlying processes and
know-how, any related manuals and documents, Trim and the TPI Trademark that may
be used on LS&CO.  garments  violates the patent,  trademark,  copyright,  trade
secret,  trade dress or other intellectual  property or other right of any third
party;  or (v)  any  other  act or  failure  to act by TPI,  including,  without
limitation, any negligent, reckless or


                                       15
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


willful   misconduct  by  TPI  or  its  employees,   agents,   contractors   and
subcontractors relating to the transactions contemplated by this Agreement.

                  (b)     INDEMNITY BY LS&CO. LS&CO. shall defend, indemnify and
hold  harmless  TPI and any of its  employees  or  agents  (together,  the  "TPI
Indemnified  Parties")  from and against any and all Claims which any of the TPI
Indemnified  Parties  may  suffer or incur  connected  with,  resulting  from or
arising out of: (i) the inaccuracy in any material respect of any made by LS&CO.
in this  Agreement;  (ii) any material  failure by LS&CO.  to perform any of its
obligations  under this  Agreement;  or (iii) any other act or failure to act by
LS&CO.,  including,  without  limitation,  any  negligent,  reckless  or willful
misconduct by LS&CO. or its employees,  agents,  contractors and  subcontractors
relating to the transactions contemplated by this Agreement.

                  (c)     MECHANICS.  An indemnified party shall promptly notify
the indemnifying  party of a claim but failure or delay by the indemnified party
in giving  this notice  shall not reduce or  otherwise  affect the  indemnifying
party's  indemnification  obligations,  except to the extent that the failure or
delay shall have materially prejudiced its ability to defend against, settle, or
satisfy the Claim or materially increased the cost of doing so. The indemnifying
party  at its  expense  shall  have  the  right to pay,  compromise,  settle  or
otherwise  dispose of any Claim.  Unless the indemnified party otherwise agrees,
however,  no settlement  shall limit,  restrict or otherwise affect the right of
the  indemnified  party to  carry on or  conduct  its  business  (then or in the
future) or require any payment to be made by any  indemnified  party,  or limit,
restrict,  make more expensive or less profitable or otherwise  adversely affect
the manner in which the  indemnified  party  carries on or conducts its business
(then or in the future).  In addition,  the  indemnifying  party shall not enter
into any  settlement  which does not include the delivery by the settling  third
party of a full and final release of all of the indemnified parties from any and
all liability with respect to the Claim. The  indemnifying  party at its expense
shall defend,  subject to the indemnified party being able to reasonably monitor
and participate in such defense  (including the selection of counsel  reasonably
satisfactory to both),  the indemnified  party from any Claims.  The indemnified
party at all times may employ its own counsel, but the fees and expenses of this
counsel shall be at the indemnified  party's own expense unless the indemnifying
party  authorizes  the employment in connection  with the defense of Claims,  or
unless the  indemnifying  party has not  employed  counsel to take charge of the
defense of any Claims within a reasonable  period after receiving  notice of the
Claim; the indemnifying  party shall pay in both the cases the fees and expenses
of this counsel.  That all said,  LS&CO.  may in its sole  discretion  decide to
defend a Claim  itself and thereby not "tender" the defense to TPI, but with the
consequence  that TPI shall not be obligated to indemnify  LS&CO.  in respect of
that Claim or its defense.

                  (d)     INTELLECTUAL  PROPERTY  PROBLEMS.   TPI shall  provide
notice to  LS&CO.  immediately  upon the  commencement  or threat of any  action
brought  against TPI whose outcome may affect the validity of TPI's rights under
the ***License or its ability to manufacture  and sell Products or to provide or
license and permit the use of the Equipment, ***Technology and TPI Trademark, it
being  understood,  however,  that TPI shall have no liability  for any delay in
providing such notice if LS&CO. if not materially prejudiced by such delay. If a
third party  alleges,  formally or  informally,  that TPI or LS&CO.  is or would
infringe or violate that third  party's  intellectual  property  rights or other
rights by reason of the Products, Equipment,  ***Technology or TPI Trademark or,
if in LS&CO.'s  reasonable  opinion,  there exist  circumstances  suggesting the
substantial  likelihood or possibility of such a claim, then TPI, at its expense
and as approved  by LS&CO.  shall:  (i) procure for LS&CO.,  in form and content
reasonably  satisfactory  to  LS&CO.,  the  right to  continue  using  Products,
Equipment,  ***Technology  and the TPI  Trademark;  (ii)  replace  or modify the
Products,  Equipment,  TPI  Trademark  or  process  at TPI's  expense so that it
becomes  non-infringing,  it  being  understood,  however,  that  the  Products,
Equipment  and  process  as  modified  or  replaced  must  continue  to meet the
Specifications;  or (iii) take those other actions as may be  appropriate  given
the credibility, scope and timing of the allegation or claim. If TPI is not able
to able to obtain a license or otherwise  work around the claim on  commercially
reasonable terms within forty (40) days after TPI receives notice of such claim,
TPI may terminate  the Agreement by giving a notice to that effect to LS&CO.  (a
"CESSATION"),  with the  termination  effective  upon the date of receipt of the
notice.


                                       16
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


Following receipt of that notice, LS&CO. shall cease manufacturing and accepting
new orders for garments incorporating the Products after Cessation unless LS&CO.
obtains the third  party  claimant's  consent  that  allows  LS&CO.  to continue
manufacturing  and selling such garments until LS&CO.  depletes its inventory of
Products  existing at the time of  Cessation.  TPI shall within thirty (30) days
after the Cessation,  or any other  resolution that requires non-use of Products
in the  form  sold  to  LS&CO.  or  cessation  of  sale by  LS&CO.  of  garments
incorporating Products, refund to LS&CO. all amounts paid to TPI for Products in
raw material or work-in-process  form or in unsold finished garments in LS&CO.'s
inventory and in all garments incorporating Products recalled from LS&CO. retail
customers by reason of the claim giving rise to the Cessation.  It is understood
that, if the Cessation or other resolution  occurs prior to LS&CO.'s purchase of
at least $1.25  million in Products  from TPI,  TPI shall  refund to LS&CO.  the
unapplied  portion of Initial  Payment in  addition  to any other  amounts to be
refunded  under  this  Section  15  (d).  TPI  shall  further  be  bound  by its
indemnification  obligations  under Section 15(a)(iv) with respect to judgments,
settlements  and  claims  arising  from  LS&CO.'s  use of  Products,  Equipment,
***Technology  and  the TPI  Trademark  and  manufacture  and  sale of  garments
incorporating Products prior to the Cessation.

                  (e)     INSURANCE.  From the date of this Agreement until the
date three years after the last sale of a Product, TPI shall maintain at its own
expense  with  financially  sound  insurance   companies  having  the  following
coverages: (i) worker's compensation insurance as required under the laws of the
state where its work will be performed; (ii) employer's liability insurance with
a limit of $1 million for bodily injury each accident,  bodily injury by disease
and bodily injury each  employees;  (iii)  commercial  general  liability with a
limit of $1 million  per  occurrence  for  bodily  injury,  including  death and
property  damage,  and $2 million in the aggregate.  TPI shall furnish to LS&CO.
certificates  of insurance  evidencing  these coverages and shall use reasonable
efforts to obtain  each  insurer's  agreement  to give  LS&CO.  30 days  advance
written notice of any cancellation or material change in coverage.  LS&CO. shall
be named as an additional  insured with respect to commercial  general liability
insurance and, as respects property  insurance,  LS&CO. shall be named as a loss
payee insofar as its interests appear.


16.      REMEDIES

                  (a)     REMEDIES.   If LS&CO.  breaches  this  Agreement,  and
except as otherwise  provided in this Agreement,  TPI shall have the rights of a
seller of goods under  Division 2 of the  California  Uniform  Commercial  Code,
together with all other rights and remedies it may have under applicable law, in
each case subject to Section 16 (b). If TPI breaches this Agreement,  and except
as otherwise provided in this Agreement, LS&CO. shall have the rights of a buyer
of goods under Division 2 of the California  Uniform  Commercial Code,  together
with all other  rights and  remedies it may have under  applicable  law, in each
case subject to Section 16 (b).

                  (b)     LIMITATION ON MONETARY DAMAGES AND OTHER LIABILITIES.

                          (i)    Except as provided in this Section 16, monetary
damage remedies and indemnification liabilities shall be limited as to both kind
and  amount.  Neither  TPI nor  LS&CO.  shall be  liable  to the  other  for any
indirect,  loss of profit (other than such damages for loss of profits as may be
established  by TPI as a result  of a  breach  by  LS&CO  of its  obligation  to
purchase  Trim as  required by Section 8 after  delivery  by LS&CO.  of the Trim
Option Notice), loss of use, loss of production,  punitive,  incidental, special
or consequential  damages arising out of or in connection with any breach of any
provision of this  Agreement,  regardless of whether that party has been advised
of the likelihood of these damages arising from a breach. NEITHER TPI NOR LS&CO.
SHALL BE ENTITLED,  DIRECTLY OR  INDIRECTLY,  TO ANY FORM OF INDEMNITY  FROM THE
OTHER AS A CONSEQUENCE  OF  TERMINATION  OF THIS  AGREEMENT OR IN RESPECT OF ANY
DECLINE IN THE OTHER'S  VOLUMES,  REVENUES,  MARGINS,  EARNINGS OR OPPORTUNITIES
BELOW  FORECASTS  OR  EXPECTATIONS.  TPI WAIVES  ANY CLAIMS IT MAY HAVE  AGAINST
LS&CO.  ARISING  FROM ANY  ALLEGED  GOODWILL  CREATED BY TPI FOR THE  BENEFIT OF
LS&CO. OR FROM THE ALLEGED


                                       17
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


CREATION OR  INCREASE OF A MARKET FOR  LS&CO.'S  PRODUCTS OR  OTHERWISE.  LS&CO.
WAIVES ANY CLAIMS IT MAY HAVE  AGAINST  TPI ARISING  FROM ANY  ALLEGED  GOODWILL
CREATED  BY  LS&CO.  FOR THE  BENEFIT  OF TPI OR FROM THE  ALLEGED  CREATION  OR
INCREASE OF A MARKET FOR TPI'S PRODUCTS OR OTHERWISE.

                          (ii)   Prior  to such  time as  Cumulative  Applicable
Payments  equal or exceed  the  Minimum  Guaranteed  Purchase  Amount,  LS&CO.'s
cumulative  liability for money damages to TPI for any and all breaches or other
claims or  otherwise  relating to this  Agreement  shall be limited to (a) $***,
PLUS (b) amounts  payable if any by LS&CO.  for unpaid  invoices  for  delivered
Products  and  Trim,  PLUS (c)  amounts  payable  if any by LS&CO.  to  purchase
Products if required  under  Section  6(b) and/or  Section  14(d),  PLUS (d) all
liquidated  damages payable in respect of LS&CO.'s Minimum  Guaranteed  Purchase
Amount obligation as provided in Section 16(c).

                          (iii)  After   such  time  as  Cumulative   Applicable
Payments  are greater  than the Minimum  Guaranteed  Purchase  Amount,  LS&CO.'s
cumulative  liability for money damages to TPI for any and all breaches or other
claims or  otherwise  relating to this  Agreement  shall be limited to (a) $***,
PLUS (b)  amounts  payable if any by LS&CO.  in respect of unpaid  invoices  for
delivered  Products  and Trim,  PLUS (c)  amounts  payable  if any by LS&CO.  to
purchase Products if required under Section 6(b) and/or Section 14 (d).

                          (iv)   TPI's cumulative liability for money damages to
LS&CO. for any and all breaches of or other claims or otherwise relating to this
Agreement shall not exceed $***. These  limitations shall not apply to any claim
by LS&CO., directly or by way of indemnification,  arising from the intellectual
property rights  indemnification  obligation contained in Section 15(a)(iv),  it
being understood, however, that TPI's indemnification obligation with respect to
judgments,  settlements  and third party  claims under that  provision  shall be
limited in the case of  Cessation  as  provided  in such  Section  15 (d).  SUCH
AMOUNTS  RECOVERABLE  UNDER THIS  SECTION 16 (B)(IV) AND SECTION  15(A)(IV)  (AS
LIMITED BY SECTION  15(D)) SHALL BE LS&CO'S  MAXIMUM  ENTITLEMENT TO DAMAGES AND
RECOVERY FROM TPI ARISING FROM MATERIAL  BREACH OR  TERMINATION  OF OR OTHERWISE
RELATING TO THIS AGREEMENT.

                  (c)     LIQUIDATED  DAMAGES.  If TPI terminates this Agreement
under  Section  14(b)(i),  then TPI shall be  entitled  to receive  from  LS&CO.
liquidated  damages in an amount  equal to the  difference  between  the Minimum
Guaranteed  Purchase  Amount and All-In  Payments as of the time of termination.
For purposes of this  Section 16 (c),  "ALL-IN  PAYMENTS"  means the sum of: (x)
Cumulative  Applicable  Payments;  (y) payments in respect of Product  purchases
under  Section 6 (b) and 14 (d)(ii) (to the extent not already  reflected in the
computation of Cumulative  Applicable  Payments);  and (z) payments, if any, for
purchases of Trim after the Trim Option Notice is exercised. This Section 16 (c)
shall  not limit  TPI's  right to seek and  collect  additional  damages  if any
resulting from a breach by LS&CO.,  including,  without limitation,  a breach of
its  obligation  to purchase  Trim after  exercise of the Trim Option  Notice as
contemplated  by and subject to Section 16 (b) (i). SUCH  LIQUIDATED  DAMAGES AS
PROVIDED IN THIS  SECTION 16 (C) AND ANY AMOUNTS  RECOVERABLE  UNDER  SECTION 16
(B)(II)  SHALL,  PRIOR TO DISCHARGE OF THE MINIMUM  GUARANTEED  PURCHASE  AMOUNT
OBLIGATION,  BE TPI'S  MAXIMUM  ENTITLEMENT  TO DAMAGES AND RECOVERY FROM LS&CO.
ARISING FROM MATERIAL  BREACH OR  TERMINATION  OF OR OTHERWISE  RELATING TO THIS
AGREEMENT.  TPI and LS&CO.  agree that the liquidated  damages set forth in this
Section  16(c) are  reasonable in light of the  circumstances  and are specified
based on the agreement of the parties that actual  damages in the  circumstances
for which such  liquidated  damages  are  specified  will be  difficult  to fix.
Nothing in this Section 16 (c) or otherwise  in this  Agreement  limits TPI's or
LS&CO.'s  rights to defend any claim by the other  party that TPI or LS&CO.  has
committed a breach of this Agreement or limits either TPI or LS&CO.'s ability to
bring a counterclaim against the other party.


                                       18
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (d)     INJUNCTIVE  RELIEF.  Nothing in this Agreement  limits
the  ability of TPI or LS&CO.  to seek  injunctive  relief  and other  equitable
remedies as provided in the NDA or in matters involving  breaches of obligations
under this Agreement including, without limitation, the provisions of Section 7,
9 and 10, it being  acknowledged  that such breaches may cause a party to suffer
irreparable  harm and may not be adequately  compensated in damages.  Nothing in
this Agreement  prevents  either TPI or LS&CO.  from bringing such an action for
injunctive  relief in lieu of exercising  termination  rights or seeking damages
under this Agreement.

                  (e)     ATTORNEYS'  FEES. In the event that any suit or action
is instituted to enforce any provision in this Agreement,  the prevailing  party
in such  dispute  shall be entitled to recover  from the losing  party all fees,
costs and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement,  including without  limitation,  such reasonable fees
and  expenses  of  attorneys  and  accountants,  which  shall  include,  without
limitation, all reasonable fees, costs and expenses of appeals.


17.      RELATIONSHIP

                  TPI and LS&CO.  are and shall remain  independent  contracting
parties;  the  arrangements  contemplated  by this  Agreement  do not  create  a
partnership,  joint venture,  employment,  fiduciary or similar relationship for
any  purpose.  This  Agreement is not intended to and does not create any direct
relationship  between  LS&CO.  and  any  employee,  contractor,   subcontractor,
supplier,  creditor or person in a relationship with TPI. Each of TPI and LS&CO.
shall  be  solely  responsible,  both  during  the  effectiveness  of and  after
termination  of this  Agreement,  for the  payment  of all wages,  benefits  and
severance,  and federal,  provincial,  state and local payroll, social security,
unemployment,  insurance and similar taxes or amounts, for all of its respective
employees.  Neither TPI nor LS&CO.  shall have the power to obligate or bind the
other to a third party or commitment in any way.


18.      REPRESENTATIONS AND WARRANTIES

                  (a)     TPI   REPRESENTATIONS.    TPI  hereby  represents  and
warrants to LS&CO. as follows:

                          (i)    ORGANIZATION, GOOD STANDING AND  QUALIFICATION.
TPI is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware.  TPI has all  requisite  corporate  power and
authority to own and operate its properties  and assets,  to execute and deliver
this Agreement and to carry out the provisions of this  Agreement,  and to carry
on its business as presently conducted.  TPI is duly qualified and is authorized
to do  business  and  is in  good  standing  as a  foreign  corporation  in  all
jurisdictions  in which the nature of its activities and of its properties (both
owned  and  leased)  makes  such  qualification  necessary,   except  for  those
jurisdictions in which failure to do so would not have a Material Adverse Effect
(as  hereinafter  defined)  on  TPI or  its  business.  (For  purposes  of  this
Agreement,  "MATERIAL  ADVERSE  EFFECT"  shall mean any effect on the  business,
operations, properties, prospects, material agreements or financial condition of
TPI or LS&CO., as applicable,  that is material and adverse to TPI or LS&CO., as
applicable,  and its  subsidiaries,  taken as a  whole,  and/or  any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with its  ability to enter into and perform  any of its  obligations  under this
Agreement in any material respect.)

                          (ii)   AUTHORIZATION; BINDING OBLIGATIONS. TPI has all
requisite  corporate  power and  authority  to execute,  deliver and perform its
obligations  under this Agreement.  All corporate action on the part of TPI, its
officers,  directors and  stockholders  necessary for the  authorization of this
Agreement  and the  performance  of all  obligations  of TPI  hereunder has been
taken. This Agreement, when executed and delivered, shall be, and the ***License
is, a valid and binding  obligation of TPI  enforceable in accordance with their
terms,   except:   (i)  as  limited  by   applicable   bankruptcy,   insolvency,
reorganization,


                                       19
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


moratorium  or  other  laws of  general  application  affecting  enforcement  of
creditors'  rights;  and (ii)  general  principles  of equity that  restrict the
availability of equitable remedies.

                          (iii)  LITIGATION  AND OTHER  PROCEEDINGS.   Except as
disclosed  in its filings  with the  Securities  and  Exchange  Commission  (the
"SEC"), (i) there are no lawsuits or proceedings pending or, to the knowledge of
TPI, threatened, against TPI, nor has TPI received any written or oral notice of
any such action,  suit,  proceeding or investigation,  which could reasonably be
expected to have a Material Adverse Effect,  and (ii) no judgment,  order, writ,
injunction  or decree or award has been issued by or, to the  knowledge  of TPI,
requested of any court,  arbitrator or governmental agency which could result in
a Material Adverse Effect.

                          (iv)   ABSENCE  OF   CONFLICTS.   The   execution  and
delivery of this Agreement,  the consummation by TPI of the transactions  herein
contemplated  and the performance of or compliance with the terms and conditions
hereof by TPI shall not,  directly or indirectly  (and with or without notice or
the passage of time or both),  (a) violate any requirements of law applicable to
TPI or its subsidiaries; (b) conflict with or result in a breach of or a default
under any organizational documents of TPI or its subsidiaries or any contractual
obligation to which TPI or its  subsidiaries  is a party or by which such entity
or its  properties  are bound except where such  violation or conflict would not
have a Material Adverse Effect;  (c) result in the creation or imposition of any
lien upon any  property  (now owned or  hereafter  acquired)  except  where such
violation or conflict would not have a Material  Adverse Effect;  or (d) violate
or conflict with, or give any governmental  authority the right to challenge the
transactions  contemplated  by this  Agreement  or  revoke,  withdraw,  suspend,
cancel,  terminate or modify, any regulatory  authorization issued to or held by
TPI or any subsidiary.

                          (v)    INTELLECTUAL  PROPERTY.  TPI has rights  to all
patents, know-how,  technology and information necessary to manufacture and sell
Products and provide and license use of the Equipment and the  ***Technology  to
LS&CO. and LS&CO.'s  contractors as contemplated by this Agreement.  To the best
knowledge  of  TPI,  none  of  the  manufacture   and  sale  of  Products,   the
incorporation  of  Products  into  garments,  the use of the  Equipment  and ***
Technology  or the TPI  Trademark  infringes  upon or violates the  intellectual
property  rights of any third  party.  TPI has not  received any notice or claim
from any third party to the effect that  manufacture  and sale of Products,  the
incorporation  of  Products  into  garments,  the use of the  Equipment  and ***
Technology or the TPI Trademark  infringes such third party's or any other third
party's  rights,  and, to the best of TPI's  knowledge,  *** has not  received a
similar notice or claim. To the best of TPI's knowledge, other than as may exist
as outlined in the letter  included  with the *** License in EXHIBIT G, there is
no unauthorized use,  infringement or misappropriation by any third party of the
*** Patent,  the ***  Technology or the  Equipment.  The *** License in the form
attached  as EXHIBIT G is in full force and  effect,  and TPI has full power and
authority  under the ***  License to grant the  exclusivity  rights and make the
other  agreements  contemplated  by this  Agreement.  This  Agreement  does  not
conflict  with or result in a breach  under any contract to which TPI is a party
whether or not such breach would result in a Material  Adverse  Effect.  TPI has
not received any notice from *** or other third party  objecting to the terms of
this Agreement or the transactions contemplated by this Agreement.

                  (b)     LS&CO. REPRESENTATIONS.  LS&CO. hereby represents  and
warrants to TPI as follows:

                          (i)    ORGANIZATION,  GOOD STANDING AND QUALIFICATION.
LS&CO. is a corporation  duly organized,  validly  existing and in good standing
under the laws of the State of  Delaware.  LS&CO.  has all  requisite  corporate
power and authority to own and operate its properties and assets, to execute and
deliver this Agreement and to carry out the provisions of this Agreement, and to
carry on its business as presently  conducted.  LS&CO.  is duly qualified and is
authorized  to do business and is in good standing as a foreign  corporation  in
all  jurisdictions  in which the nature of its  activities and of its properties
(both


                                       20
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


owned  and  leased)  makes  such  qualification  necessary,   except  for  those
jurisdictions in which failure to do so would not have a Material Adverse Effect
on LS&CO. or its business.

                          (ii)   AUTHORIZATION; BINDING OBLIGATIONS.  LS&CO. has
all requisite corporate power and authority to execute,  deliver and perform its
obligations  under this Agreement.  All corporate  action on the part of LS&CO.,
its officers, directors and stockholders necessary for the authorization of this
Agreement and the  performance of all  obligations of LS&CO.  hereunder has been
taken. This Agreement, when executed and delivered, shall be a valid and binding
obligation of LS&CO.  enforceable in accordance with their terms,  except (i) as
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
other laws of general  application  affecting  enforcement of creditors' rights;
and (ii)  general  principles  of  equity  that  restrict  the  availability  of
equitable remedies.

                          (iii)  ABSENCE  OF   CONFLICTS.    The  execution  and
delivery of this  Agreement,  the  consummation  by LS&CO.  of the  transactions
herein  contemplated  and the  performance  of or compliance  with the terms and
conditions  hereof by LS&CO.  shall not,  directly  or  indirectly  (and with or
without notice or the passage of time or both),  (a) violate any requirements of
law applicable to LS&CO. or its  subsidiaries;  (b) conflict with or result in a
breach  of or a default  under any  organizational  documents  of LS&CO.  or its
subsidiaries or any contractual  obligation to which LS&CO. or its  subsidiaries
is a party or by which such entity or its properties are bound except where such
violation or conflict would not have a Material  Adverse  Effect;  (c) result in
the creation or imposition of any lien upon any property (now owned or hereafter
acquired)  except  where such  violation  or conflict  would not have a Material
Adverse  Effect;  or (d)  violate or  conflict  with,  or give any  governmental
authority the right to challenge the transactions contemplated by this Agreement
or revoke,  withdraw,  suspend,  cancel,  terminate  or modify,  any  regulatory
authorization issued to or held by LS&CO. or any subsidiary.

                  (c)     NO  OTHER  REPRESENTATIONS.  TPI and LS&CO.  recognize
that  there are many  uncertainties  in the  transactions  contemplated  by this
Agreement.   TPI  and  LS&CO.  agree  and  acknowledge  that  other  than  those
representations   expressly  made  in  this   Agreement,   no   representations,
warranties, commitments or guarantees of any kind have been made to either party
by the other, or by anyone acting on its behalf, including,  without limitation,
representations concerning the volume of business, longevity of the relationship
or the  prospects  for sales or  profits.  TPI and LS&CO.  each has made its own
independent  business  evaluation  in  deciding  to do  business  on  the  terms
described in this  Agreement.  It is understood  and agreed that:  (i) TPI shall
always be free to engage in negotiations and to enter into agreements with other
customers  provided that these  negotiations  and  agreements do not violate any
term of this  Agreement  and (ii)  LS&CO.  shall  always  be free to  engage  in
negotiations  and to enter into  agreements  with other  vendors  and  suppliers
provided that these  negotiations and agreements do not violate any term of this
Agreement.


19.      MISCELLANEOUS

                  (a)     GOVERNING  LAW.  This  Agreement  shall be governed by
and  interpreted  in  accordance  with the laws of the  State of  California  as
applied to  contracts  entered  into and  performed  solely  within the State of
California.

                  (b)     EXPENSES.   Each  party  shall  bear its own  expenses
in establishing, negotiating and documenting this Agreement.

                  (c)     PRESS  RELEASES.  TPI expects to issue a press release
and  make a Form 8-K  filing  with  the SEC  relating  to its  entry  into  this
Agreement.  TPI shall consult with and obtain LS&CO.'s  approval  regarding such
statements,  such approval not to be unreasonably withheld or delayed. If either
TPI or LS&CO.  must file this  Agreement  as an exhibit to an SEC  filing,  each
shall consult with the other and use commercially  reasonable  efforts to obtain
confidential treatment of appropriate provisions of the


                                       21
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


Agreement in accordance with SEC rules. Going forward, except as may be required
by law or applicable  stock exchange  regulations,  neither party shall make any
press release concerning this Agreement or the underlying business  relationship
without the prior  approval  of the other,  not to be  unreasonably  withheld or
delayed.

                  (d)     FORCE MAJEURE.  Neither party shall be responsible for
any failure to perform due to causes  beyond its  reasonable  control  (each,  a
"FORCE  MAJEURE"  event),  provided that such party gives prompt  written notice
thereof to the other.  The time for  performance  shall be extended for a period
equal to the duration of the Force Majeure, but in no event longer than 60 days.
It is  understood  and agreed  that Force  Majeure  events do not  include:  (a)
non-performance  by *** or other supplier or  subcontractor  to TPI whether as a
result of default by the supplier or  subcontractor or by TPI or otherwise other
than a  default  due  to a  Force  Majeure  event  affecting  such  supplier  or
contractor;  (b)  cancellation,  invalidity  or  limitation of the claims of the
patent  or,  as  provided  for  in  Section  15,   allegations  or  findings  of
infringement  of  intellectual   property  rights  of  third  parties;   or  (c)
termination,  modification,  injunction or other action  terminating or limiting
TPI's rights under the *** License.

                  (e)     ENTIRE AGREEMENT.  This  Agreement,  together with the
NDA, represent the final, complete and exclusive agreement of LS&CO. and TPI and
supersede  any and all  prior  or  contemporaneous  agreements,  communications,
course of dealing, arrangements or understandings between LS&CO. and TPI. Should
there be any conflict  between the terms of this Agreement or any other document
created by LS&CO. or TPI relating to the business  relationship,  this Agreement
shall control. LS&CO. rejects any term or condition of any TPI invoice, shipping
document,  letter,  e-mail or other TPI document which conflicts with or adds to
this Agreement;  LS&CO. gives advance notification of objection to any aspect of
TPI's  acceptance  which contains terms which materially alter the terms of this
Agreement under the previsions of California Uniform Commercial Code Sec. 2-207.
TPI rejects any term or condition of any shipping  document,  letter,  e-mail or
other  document from LS&CO or its  contractors  which  conflicts with or adds to
this  Agreement;  TPI gives advance  notification  of objection to any aspect of
LS&CO.'s  or  its  contractors'   purchase  order  which  contains  terms  which
materially  alter the terms of this Agreement under the previsions of California
Uniform  Commercial  Code Sec.  2-207.  This  Agreement  may be modified only as
stated  in and  by a  writing  signed  by  both  LS&CO.  and  TPI  which  refers
specifically to this Agreement and states that it is amending this Agreement.

                  (f)     COOPERATION. TPI and LS&CO. shall reasonably cooperate
with  one  another  in  providing  information  relating  to its  activities  in
retrospect of this Agreement in connection with any audit or dispute, whether at
an  administrative  or  judicial  level,  relating  to tax,  customs,  financial
reporting or other matter.

                  (g)     ASSIGNMENT.  This Agreement shall be  binding upon the
successors  and  permitted  assigns  of  LS&CO.  and TPI.  LS&CO.  may,  without
obtaining  the consent of TPI,  freely assign its rights and delegate its duties
(either  directly or by operation of law) under this  Agreement to any affiliate
of LS&CO. or any successor to LS&CO. by merger,  consolidation or sale of assets
or to any purchaser of the assets  comprising the ***(R) brand. It is understood
that affiliates of LS&CO.  may purchase  Products for  incorporation in garments
sold outside the United States;  such  purchases  shall be on the same terms and
conditions set out in this Agreement.  TPI may not assign its rights or delegate
its duties  without  first  obtaining  the written  consent of LS&CO.,  it being
understood,  however, that TPI may, without obtaining the consent of TPI, freely
assign its rights and  delegate its duties  (either  directly or by operation of
law) under this Agreement to any affiliate of TPI that succeeds to substantially
all of the  manufacturing  business  of TPI or any  successor  to TPI by merger,
consolidation or sale of assets.

                  (h)     NO  THIRD  PARTY  BENEFIT.  This Agreement  is for the
exclusive  benefit  of LS&CO.  and TPI not for the  benefit  of any third  party
including,  without  limitation,  *** or any creditor,  equity owner,  employee,
supplier, agent or subcontractor of TPI.


                                       22
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  (i)     SEVERABILITY.  In case any provision of this Agreement
shall  be  invalid,  illegal  or  unenforceable,   the  validity,  legality  and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired thereby.

                  (j)     DELAYS OR OMISSIONS.  No delay or omission to exercise
any right,  power or remedy accruing to any party,  upon any breach,  default or
noncompliance by another party under this Agreement shall impair any such right,
power or remedy,  nor shall it be  construed  to be a waiver of any such breach,
default or noncompliance,  or any acquiescence  therein, or of or in any similar
breach, default or noncompliance thereafter occurring. Any waiver on any party's
part of any  provisions or conditions of this  Agreement  must be in writing and
shall be effective  only to the extent  specifically  set forth in such writing.
All remedies under this Agreement,  by law, or otherwise  afforded to any party,
shall be cumulative and not alternative.

                  (k)     NOTICES.   All notices required or permitted hereunder
shall be in writing and shall be deemed  effectively  given:  (i) upon  personal
delivery  to the party to be  notified,  (ii) when  sent by  confirmed  telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the  next   business   day,  or  (iii)  one  (1)  day  after   deposit  with  an
internationally recognized overnight courier, specifying next day delivery, with
written or electronic  verification of receipt. All communications shall be sent
to the parties at the addresses  set forth on the  signature  pages hereof or at
such other  address as such party may  designate by written  notice to the other
parties hereto.

                  (l)     OTHER MATTERS;  KEY DATES. It is understood and agreed
that the ***  Technology  rights and know-how  provided and licensed  under this
Agreement by TPI to LS&CO.  are  "intellectual  property"  within the meaning of
Section  365 of the  Bankruptcy  Code and that the  Products  are  "unique"  for
purposes of Division 2 of the California  Uniform Commercial Code. A list of key
dates under this  Agreement  is attached as EXHIBIT L. This list is not intended
as a comprehensive  list of all key dates and timeframes  under the Agreement or
as an  independent  source of legal  obligation;  instead,  it is  intended as a
convenient reference tool.

                  (m)     TITLES AND SUBTITLES.  The  titles of the sections and
subsections of this Agreement are for  convenience of reference only and are not
to be considered in construing this Agreement.

                  (n)     PRONOUNS.   All  pronouns  contained  herein, and  any
variations  thereof,  shall be deemed  to refer to the  masculine,  feminine  or
neutral, singular or plural, as the identity of the parties hereto may require.

                  (o)     COUNTERPARTS.   This  Agreement  may  be  executed  in
counterparts (including by facsimile),  all of which, when taken together, shall
constitute one original.


                                     * * * *


                                       23
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.


<PAGE>


                  If the terms and  provisions of this  Agreement are acceptable
to you, please  indicate your acceptance and approval by signing,  or by causing
to be signed on your behalf,  the enclosed copy of this  Agreement and returning
it to the undersigned.

Very truly yours,

TAG-IT PACIFIC, INC., a Delaware corporation

By:      /s/ Colin Dyne
         -----------------------------
         Colin Dyne
         Chief Executive Officer


Address:          21900 Burbank Blvd, Suite 270
                  Woodland Hills, CA  91367


ACCEPTED:

LEVI STRAUSS & CO., a Delaware corporation

By:      /s/ Bobbi Silten
         -----------------------------
         Bobbi Silten
         President, ***(R)Brand

Address:          1155 Battery Street
                  San Francisco, CA 94111

Exhibits:

Exhibit A:        Specifications
Exhibit B:        *** Bottoms Processes
Exhibit C:        *** Equipment
Exhibit D:        Compensation and Payment
Exhibit E:        Product Categories
Exhibit F:        TAG-IT and TEKFIT marks
Exhibit G:        *** License and letter from ***
Exhibit H:        *** and letter from inventor
Exhibit I:        TEKFIT Trademark Application
Exhibit J:        Mutual Non-Disclosure Agreement
Exhibit K:        Zipper Approval
Exhibit L:        Key Dates


                                       24
***  Terms  represented  by  this  symbol  are  considered  confidential.  These
confidential  terms  have been  omitted  pursuant  to a  Confidential  Treatment
request filed with the  Securities  and Exchange  Commission and have been filed
separately with the Securities and Exchange Commission.