EXHIBIT 10.36


         GUARANTY  AGREEMENT (as amended,  restated,  supplemented  or otherwise
modified,  this "GUARANTY" or this  "AGREEMENT"),  dated as of June 27, 2007, is
made by TALON  INTERNATIONAL,  INC.,  a Delaware  corporation,  TAG-IT,  INC., a
California  corporation,  A.G.S.  STATIONARY,  INC., a  California  corporation,
TAG-IT PACIFIC  LIMITED,  a Hong Kong  corporation,  TAG-IT PACIFIC (HK) LTD., a
British Virgin Islands corporation,  TAGIT de MEXICO, S.A. de C.V., TALON ZIPPER
(SHENZHEN) COMPANY,  LTD., a Chinese  corporation,  and TALON INTERNATIONAL PVT.
LTD.,  an  Indian   corporation   (each  a  "GUARANTOR"  and   collectively  the
"GUARANTORS"),  in favor of BLUEFIN CAPITAL,  LLC, a Delaware limited  liability
company (the "LENDER").

                              STATEMENT OF PURPOSE

         Pursuant to the terms of the Revolving  Credit and Term Loan  Agreement
of even date herewith by and between Tag-It Pacific,  Inc. (the  "BORROWER") and
the Lender (as same may be amended, modified,  supplemented and/or restated from
time to time, the "LOAN AGREEMENT"),  the Lender has agreed to make Loans to the
Borrower in the principal  amount of up to $14,500,000 at any time  outstanding,
upon the terms and subject to the conditions set forth therein.

         Each of the  Guarantors  is a  direct  wholly-owned  Subsidiary  of the
Borrower.

         The  Borrower  and the  Guarantors,  though  separate  legal  entities,
comprise one integrated financial enterprise, and the Loans will inure, directly
or indirectly, to the benefit of each of the Guarantors.

         It is a condition precedent to the obligation of the Lender to make the
Loans under the Loan  Agreement  that the  Guarantors  shall have  executed  and
delivered this Guaranty to the Lender.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are hereby  acknowledged  by the  parties  hereto,  and to
induce  the  Lender  to  enter  into the Loan  Agreement  and to make the  Loans
thereunder, the Guarantors hereby agree with the Lender as follows:

                                    ARTICLE I

                                  DEFINED TERMS

         SECTION 1.1 DEFINITIONS. The following terms when used in this Guaranty
shall have the meanings assigned to them below:

         "ADDITIONAL   GUARANTOR"   means  each  direct  or  indirect   Domestic
Subsidiary  of the  Borrower  which  hereafter  becomes a Guarantor  pursuant to
SECTION 4.17 hereof and SECTION 5.11 of the Loan Agreement.

         "APPLICABLE  INSOLVENCY  LAWS"  means  all  Applicable  Laws  governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency,

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fraudulent  transfers or conveyances or other similar laws  (including,  without
limitation,  11 U.S.C.  Sections  544,  547,  548 and 550 and other  "avoidance"
provisions of Title 11 of the United States Code, as amended or supplemented).

         "GUARANTEED OBLIGATIONS" has the meaning set forth in SECTION 2.1.

         "GUARANTY"  means  this  Guaranty  Agreement,  as  amended,   modified,
supplemented and/or restated from time to time.

         SECTION 1.2 OTHER DEFINITIONAL  PROVISIONS.  Capitalized terms used and
not  otherwise  defined in this  Guaranty,  including the preambles and recitals
hereof,  shall have the meanings ascribed to them in the Loan Agreement.  In the
event of a conflict  between  capitalized  terms defined  herein and in the Loan
Agreement,  the Loan Agreement  shall  control.  The words  "hereof,"  "herein",
"hereto" and  "hereunder" and words of similar import when used in this Guaranty
shall refer to this Guaranty as a whole and not to any  particular  provision of
this  Guaranty,  and Section  references are to this Guaranty  unless  otherwise
specified.  The  meanings  given  to  terms  defined  herein  shall  be  equally
applicable  to both the  singular  and  plural  forms of such  terms.  Where the
context  requires,  terms relating to the  Collateral or any part thereof,  when
used in relation to a Guarantor,  shall refer to such Guarantor's  Collateral or
the relevant part thereof. The word "including" and words of similar import when
used in this  Agreement  shall  mean  "including,  without  limitation,"  unless
otherwise specified.

                                   ARTICLE II

                                    GUARANTY

         SECTION 2.1 GUARANTY. Each Guarantor hereby, jointly and severally with
the  other  Guarantors,   unconditionally  guarantees  to  the  Lender  and  its
successors,   endorsees,   transferees  and  assigns,  the  prompt  payment  and
performance  of all  Obligations of the Borrower,  whether  primary or secondary
(whether by way of endorsement or otherwise),  whether now existing or hereafter
arising,  whether or not from time to time  reduced or  extinguished  (except by
payment  thereof) or hereafter  increased or incurred,  whether  enforceable  or
unenforceable  as against the  Borrower,  whether or not  discharged,  stayed or
otherwise  affected by any Applicable  Insolvency Law or proceeding  thereunder,
whether  matured or unmatured,  whether  joint or several,  as and when the same
become  due  and  payable  (whether  at  maturity  or  earlier,   by  reason  of
acceleration, mandatory repayment or otherwise), in accordance with the terms of
the  agreements  and  instruments  evidencing  such  Obligations,  including all
renewals,  extensions  or  modifications  thereof (all such  Obligations  of the
Borrower  being   hereafter   collectively   referred  to  as  the   "GUARANTEED
OBLIGATIONS").

         SECTION  2.2  BANKRUPTCY  LIMITATIONS  ON  GUARANTORS.  Notwithstanding
anything to the contrary  contained in SECTION 2.1, it is the  intention of each
Guarantor  and the Lender that,  in any  proceeding  involving  the  bankruptcy,
reorganization, arrangement, adjustment of debts, relief of debtors, dissolution
or  insolvency  or any similar  proceeding  with respect to any Guarantor or its
assets,  the  amount  of  such  Guarantor's  obligations  with  respect  to  the
Guaranteed  Obligations  shall be equal to, but not in excess  of,  the  maximum
amount  thereof not subject to avoidance or recovery by operation of  Applicable
Insolvency Laws after giving effect to SECTION 2.3. To that end, but only in the
event and to the extent that after giving effect to


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SECTION  2.3  such  Guarantor's  obligations  with  respect  to  the  Guaranteed
Obligations or any payment made pursuant to such Guaranteed  Obligations  would,
but for the  operation of the first  sentence of this SECTION 2.2, be subject to
avoidance or recovery in any such proceeding  under  Applicable  Insolvency Laws
after giving effect to SECTION 2.3, the amount of such  Guarantor's  obligations
with  respect to the  Guaranteed  Obligations  shall be  limited to the  largest
amount  which,  after  giving  effect  thereto,   would  not,  under  Applicable
Insolvency  Laws,  render  such  Guarantor's  obligations  with  respect  to the
Guaranteed  Obligations  unenforceable  or  avoidable  or  otherwise  subject to
recovery under  Applicable  Insolvency  Laws. To the extent any payment actually
made pursuant to the Guaranteed  Obligations exceeds the limitation of the first
sentence of this SECTION 2.2 and is otherwise  subject to avoidance and recovery
in any such proceeding under  Applicable  Insolvency Laws, the amount subject to
avoidance  shall in all events be  limited  to the  amount by which such  actual
payment exceeds such limitation and the Guaranteed Obligations as limited by the
first  sentence of this SECTION 2.2 shall in all events remain in full force and
effect and be fully  enforceable  against such Guarantor.  The first sentence of
this  Section  2.2 is  intended  solely to  preserve  the  rights of the  Lender
hereunder  against  such  Guarantor  in such  proceeding  to the maximum  extent
permitted  by  Applicable  Insolvency  Laws  and  neither  such  Guarantor,  the
Borrower, any other Guarantor nor any other Person shall have any right or claim
under such  sentence  that would not  otherwise  be available  under  Applicable
Insolvency Laws in such proceeding.

         SECTION 2.3 AGREEMENTS FOR CONTRIBUTION.

                  (a) To the extent that any Guarantor is required, by reason of
         its obligations hereunder,  to pay to the Lender an amount greater than
         the  amount of value  (as  determined  in  accordance  with  Applicable
         Insolvency  Laws) actually made available to or for the benefit of such
         Guarantor on account of the Loan Agreement,  this Guaranty or any other
         Loan  Document,  such  Guarantor  shall  have an  enforceable  right of
         contribution  against  the  remaining  Guarantors,  and  the  remaining
         Guarantors  shall be jointly and severally  liable for repayment of the
         full amount of such excess payment.  Subject only to the  subordination
         provided in SECTION 2.3(D),  such Guarantor further shall be subrogated
         to any and all  rights  of the  Lender  against  the  Borrower  and the
         remaining Guarantors to the extent of such excess payment.

                  (b) To the  extent  that  any  Guarantor  would,  but  for the
         operation  of  this  SECTION  2.3  and by  reason  of  its  obligations
         hereunder or its  obligations  to other  Guarantors  under this SECTION
         2.3, be rendered insolvent for any purpose under Applicable  Insolvency
         Laws, each of the Guarantors  hereby agrees to indemnify such Guarantor
         and commits to make a contribution  to such  Guarantor's  capital in an
         amount at least equal to the amount necessary to prevent such Guarantor
         from having been rendered  insolvent by reason of the incurrence of any
         such obligations.

                  (c) To the  extent  that  any  Guarantor  would,  but  for the
         operation  of  this  SECTION  2.3,  be  rendered  insolvent  under  any
         Applicable  Insolvency Law by reason of its incurring of obligations to
         any other Guarantor  under the foregoing  SECTIONS 2.3(A) and (B), such
         Guarantor  shall,  in turn,  have  rights of  contribution  to the full
         extent  provided in the foregoing  SECTIONS  2.3(A) and (B) against the
         remaining  Guarantors,   such  that  all  obligations  of  all  of  the
         Guarantors hereunder and under this SECTION 2.3 shall be allocated in a
         manner  such that no


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         Guarantor shall be rendered  insolvent for any purpose under Applicable
         Insolvency Law by reason of its incurrence of such obligations.

                  (d)  Notwithstanding  any  payment or  payments  by any of the
         Guarantors hereunder,  or any set-off or application of funds of any of
         the  Guarantors  by the  Lender,  or the  receipt of any amounts by the
         Lender with respect to any of the Guaranteed  Obligations,  none of the
         Guarantors  shall be entitled to be  subrogated to any of the rights of
         the Lender against the Borrower or the other  Guarantors or against any
         collateral  security  held  by  the  Lender  for  the  payment  of  the
         Guaranteed  Obligations,  nor  shall  any of the  Guarantors  seek  any
         reimbursement  from the  Borrower  or any of the  other  Guarantors  in
         respect of  payments  made by such  Guarantor  in  connection  with the
         Guaranteed  Obligations,  until  all  amounts  owing to the  Lender  on
         account  of the  Guaranteed  Obligations  are  paid  in  full  and  the
         Revolving Credit Commitment has been terminated. If any amount shall be
         paid to any Guarantor on account of such subrogation rights at any time
         when all of the Guaranteed Obligations shall not have been paid in full
         or the Revolving  Credit  Commitment  has not  terminated,  such amount
         shall be held by such Guarantor in trust for the benefit of the Lender,
         segregated  from other funds of such  Guarantor,  and shall,  forthwith
         upon  receipt by such  Guarantor,  be turned  over to the Lender in the
         exact form received by such Guarantor  (duly endorsed by such Guarantor
         to the  Lender,  if  required)  to be applied  against  the  Guaranteed
         Obligations,  whether  matured or unmatured,  in the order set forth in
         the Loan Agreement.

         SECTION 2.4 NATURE OF GUARANTY.

                  (a) Each Guarantor  agrees that this Guaranty is a continuing,
         unconditional   guaranty  of  payment  and   performance   and  not  of
         collection,  and that its  obligations  under  this  Guaranty  shall be
         primary,  absolute and  unconditional,  irrespective of, and unaffected
         by:

                           (i)   the    genuineness,    validity,    regularity,
                  enforceability  or any future  amendment of, or change in, the
                  Loan  Agreement  or any  other  Loan  Document  or  any  other
                  agreement, document or instrument to which the Borrower or any
                  Subsidiary is or may become a party;

                           (ii)  the  absence  of any  action  to  enforce  this
                  Guaranty, the Loan Agreement or any other Loan Document or the
                  waiver or  consent by the  Lender  with  respect to any of the
                  provisions of this  Guaranty,  the Loan Agreement or any other
                  Loan Document;

                           (iii)  the  existence,  value  or  condition  of,  or
                  failure to perfect any Lien against, any security for or other
                  guaranty of the Guaranteed  Obligations or any action,  or the
                  absence  of any  action,  by the  Lender  in  respect  of such
                  security  or  guaranty  (including,  without  limitation,  the
                  release of any such security or guaranty); or

                           (iv) any other  action or  circumstances  which might
                  otherwise constitute a legal or equitable discharge or defense
                  of a surety or guarantor;

         it being agreed by each Guarantor  that,  subject to the first sentence
         of  SECTION  2.2,  its  obligations  under this  Guaranty  shall not be
         discharged until the final  indefeasible  payment and  performance,  in
         full, of the Guaranteed Obligations.


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                  (b) Each  Guarantor  represents,  warrants and agrees that its
         obligations under this Guaranty are not and shall not be subject to any
         counterclaims,  offsets or defenses  of any kind  against the Lender or
         the Borrower, whether now existing or which may arise in the future.

                  (c) Each  Guarantor  hereby agrees and  acknowledges  that the
         Guaranteed  Obligations,  and any of them, shall conclusively be deemed
         to have been  created,  contracted or incurred,  or renewed,  extended,
         amended or waived,  in reliance  upon this  Guaranty,  and all dealings
         between the Borrower and any of the  Guarantors,  on the one hand,  and
         the Lender, on the other hand, likewise shall be conclusively  presumed
         to have been had or consummated in reliance upon this Guaranty.

         SECTION 2.5 WAIVERS.  To the extent  permitted by law,  each  Guarantor
expressly  waives all of the  following  rights and defenses  (and agrees not to
take advantage of or assert any such right or defense):

                  (a) any  rights  it may now or in the  future  have  under any
         statute, or at law or in equity, or otherwise,  to compel the Lender to
         proceed in respect of the Obligations against the Borrower or any other
         Person or against any security for or other guaranty of the payment and
         performance of the Guaranteed Obligations before proceeding against, or
         as a condition to proceeding against, such Guarantor;

                  (b) any  defense  based  upon the  failure  of the  Lender  to
         commence an action in respect of the Guaranteed Obligations against the
         Borrower,  such  Guarantor,  any other guarantor or any other Person or
         any  security  for  the  payment  and  performance  of  the  Guaranteed
         Obligations;

                  (c) any right to insist upon,  plead or in any manner whatever
         claim or take the benefit or advantage  of, any  appraisal,  valuation,
         stay,   extension,   marshalling  of  assets  or  redemption  laws,  or
         exemption,  whether now or at any time  hereafter  in force,  which may
         delay, prevent or otherwise affect the performance by such Guarantor of
         its  obligations  under,  or the  enforcement  by the  Lender  of  this
         Guaranty;

                  (d) any right of diligence,  presentment,  demand, protest and
         notice  (except as  specifically  required  herein) of whatever kind or
         nature with respect to any of the Guaranteed Obligations and waives, to
         the extent  permitted by Applicable  Law, the benefit of all provisions
         of law  which  are or  might  be in  conflict  with  the  terms of this
         Guaranty; and

                  (e) any and all  right to  notice  of the  creation,  renewal,
         extension or accrual of any of the  Obligations  and notice of or proof
         of reliance by the Lender upon, or acceptance of, this Guaranty.

                  Each  Guarantor  agrees that any notice or directive  given at
         any time to the Lender which is inconsistent  with any of the foregoing
         waivers  shall be null and void and may be ignored by the Lender,  and,
         in  addition,  may not be  pleaded or  introduced  as  evidence  in any
         litigation  relating to this Guaranty for the reason that such pleading
         or  introduction  would be at variance  with the written  terms of this
         Guaranty,  unless the  Lender  has  specifically  agreed  otherwise  in
         writing.  The foregoing  waivers are of the essence of the  transaction
         contemplated by the Loan


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         Agreement and the other Loan  Documents  and, but for this Guaranty and
         such waivers, the Lender would decline to enter into the Loan Agreement
         and the other Loan Documents.

         SECTION 2.6  MODIFICATION OF LOAN DOCUMENTS,  ETC. The Lender shall not
incur any  liability to any Guarantor as a result of any of the  following,  and
none of the following shall impair, limit or release this Guaranty or any of the
obligations of any Guarantor under this Guaranty:

                  (a) any change or extension  of the manner,  place or terms of
         payment  of, or renewal or  alteration  of all or any  portion  of, the
         Guaranteed Obligations;

                  (b) any action  under or in respect of the Loan  Agreement  or
         the other  Loan  Documents  in the  exercise  of any  remedy,  power or
         privilege  contained  therein or  available  to any of them at law,  in
         equity or  otherwise,  or waiver or refrain  from  exercising  any such
         remedies, powers or privileges;

                  (c) any amendment or modification,  in any manner  whatsoever,
         of the Loan Documents;

                  (d) any extension or waiver of the time for performance by any
         Guarantor,  any other guarantor,  the Borrower or any other Person,  or
         compliance  with,  any term,  covenant or  agreement  on its part to be
         performed  or  observed  under  a Loan  Document,  or  waiver  of  such
         performance  or  compliance  or consent to a failure  of, or  departure
         from, such performance or compliance;

                  (e) the taking and  holding  security  or  Collateral  for the
         payment of the Obligations or the sale, exchange, release, disposal of,
         or other dealing with, any property pledged,  mortgaged or conveyed, or
         in which the Lender has been granted a Lien, to secure any indebtedness
         of any Guarantor, any other guarantor or the Borrower to the Lender;

                  (f) the  release of anyone who may be liable in any manner for
         the payment of any amounts owed by any Guarantor,  any other  guarantor
         or the Borrower to the Lender; or

                  (g) any  modification or termination of any  intercreditor  or
         subordination  agreement pursuant to which claims of other creditors of
         any Guarantor,  any other guarantor or the Borrower are subordinated to
         the claims of the Lender.

         SECTION 2.7 DEMAND BY THE LENDER. In addition to the terms set forth in
this Article II and in no manner  imposing any limitation on such terms,  if all
or any portion of the then outstanding Guaranteed Obligations are declared to be
immediately due and payable,  then the Guarantors  shall, upon demand in writing
therefor  by the  Lender  to the  Guarantors,  pay  all or such  portion  of the
outstanding  Guaranteed  Obligations  then due and payable or  declared  due and
payable.

         SECTION 2.8 REMEDIES. Upon the occurrence and during the continuance of
any Event of  Default,  the Lender may  enforce  against  the  Guarantors  their
respective  obligations and liabilities hereunder and exercise such other rights
and  remedies  as may be  available  to the  Lender  hereunder,  under  the Loan
Agreement or the other Loan Documents or otherwise.


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         SECTION 2.9 BENEFITS OF GUARANTY.  The  provisions of this Guaranty are
for the benefit of the Lender and its  successors,  transferees,  endorsees  and
assigns,  and nothing herein contained shall impair, as between the Borrower and
the Lender,  the  obligations of the Borrower under the Loan  Documents.  In the
event  that all or any part of the  Obligations  are  transferred,  endorsed  or
assigned  by the Lender to any Person or  Persons  as  permitted  under the Loan
Agreement, any reference to a "Lender" herein shall be deemed to refer similarly
and ratably to such Person or Persons.

         SECTION 2.10 TERMINATION; REINSTATEMENT.

                  (a) Subject to SECTION  2.10(C)  below,  this  Guaranty  shall
         remain in full force and effect  until all the  Guaranteed  Obligations
         shall have been indefeasibly paid in full.

                  (b) No payment made by the  Borrower,  any  Guarantor,  or any
         other Person received or collected by the Lender from the Borrower, any
         Guarantor, or any other Person by virtue of any action or proceeding or
         any set-off or appropriation or application at any time or from time to
         time in reduction of or in payment of the Guaranteed  Obligations shall
         be deemed to modify,  reduce, release or otherwise affect the liability
         of any  Guarantor  hereunder  which  shall,  notwithstanding  any  such
         payment  (other than any payment  made by such  Guarantor in respect of
         the obligations of the Guarantors or any payment  received or collected
         from such Guarantor in respect of the  obligations of the  Guarantors),
         remain liable for the  obligations  of the Guarantors up to the maximum
         liability of such Guarantor hereunder until the Guaranteed  Obligations
         shall have been indefeasibly paid in full.

                  (c) Each  Guarantor  agrees  that,  if any payment made by the
         Borrower or any other Person applied to the  Obligations is at any time
         annulled, set aside, rescinded,  invalidated, declared to be fraudulent
         or preferential or otherwise  required to be refunded or repaid, or the
         proceeds of any Collateral are required to be refunded by the Lender to
         the  Borrower,  its  estate,  trustee,  receiver  or any other  Person,
         including,  without limitation, any Guarantor, under any Applicable Law
         or equitable  cause,  then, to the extent of such payment or repayment,
         each  Guarantor's  liability  hereunder  (and  any  Lien or  Collateral
         securing such liability)  shall be and remain in full force and effect,
         as fully as if such payment had never been made, and, if prior thereto,
         this Guaranty shall have been canceled or surrendered  (and if any Lien
         or Collateral securing such Guarantor's  liability hereunder shall have
         been  released  or  terminated  by  virtue  of  such   cancellation  or
         surrender),  this  Guaranty  (and  such  Lien or  Collateral)  shall be
         reinstated  in full force and effect,  and such prior  cancellation  or
         surrender shall not diminish,  release,  discharge, impair or otherwise
         affect the  obligations  of such  Guarantor in respect of the amount of
         such payment (or any Lien or Collateral securing such obligation).

         SECTION 2.11 PAYMENTS.  Payments by the Guarantors shall be made to the
Lender,  to be credited and applied to the Guaranteed  Obligations in accordance
with the  Loan  Agreement,  in  immediately  available  Dollars  to the  account
designated by the Lender.


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                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         To  induce  the  Lender  to  make  the  Loans,  each  Guarantor  hereby
represents and warrants that:

         SECTION  3.1  EXISTENCE.  Such  Guarantor  is duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation or formation,  has the requisite power and authority to own, lease
and  operate  its  properties  and to carry on its  business  as now  being  and
hereafter  proposed to be conducted and is duly  qualified and  authorized to do
business in each  jurisdiction  in which the character of its  properties or the
nature of its business  requires such  qualification  and  authorization and the
failure to be so qualified would have a Material Adverse Effect.

         SECTION 3.2 AUTHORIZATION OF AGREEMENT;  ENFORCEABILITY. Such Guarantor
has the right, power and authority to execute, deliver and perform this Guaranty
and has  taken  all  necessary  corporate  or  other  organizational  action  to
authorize  its  execution,  delivery  and  performance  of this  Guaranty.  This
Guaranty has been duly executed and delivered by the duly authorized officers of
such  Guarantor  and this  Guaranty  constitutes  the legal,  valid and  binding
obligation of such  Guarantor  enforceable  against such Guarantor in accordance
with its  terms,  except  as such  enforcement  may be  limited  by  bankruptcy,
insolvency, reorganization, moratorium or similar state or federal debtor relief
laws from time to time in effect  which  affect the  enforcement  of  creditors'
rights in general and the availability of equitable remedies.

         SECTION  3.3  NO  CONFLICT;  CONSENTS.  The  execution,   delivery  and
performance by such Guarantor of this Guaranty will not, by the passage of time,
the  giving  of notice or  otherwise,  violate  any  material  provision  of any
Applicable Law or  contractual  obligation of such Guarantor and will not result
in the creation or  imposition  of any Lien upon or with respect to any property
or revenues of such Guarantor.  No consent or authorization  of, filing with, or
other act by or in respect of, any arbitrator or  governmental  authority and no
consent of any other Person (including,  without limitation,  any stockholder or
creditor  of such  Guarantor),  is required in  connection  with the  execution,
delivery, performance, validity or enforceability of this Guaranty.

         SECTION 3.4  LITIGATION.  No actions,  suits or proceedings  before any
arbitrator  or  governmental  authority are pending or, to the knowledge of such
Guarantor,  threatened  by or  against  such  Guarantor  or  against  any of its
properties with respect to this Guaranty or any of the transactions contemplated
hereby.

         SECTION 3.5 TITLE TO ASSETS.  Such  Guarantor has a valid  ownership or
leasehold interest in any and all real property owned or occupied by it, and has
good title to all of its personal  property  sufficient to carry on its business
free of any and all Liens of any type whatsoever, except Permitted Liens.

         SECTION 3.6  SOLVENCY.  As of the Closing Date (or such later date upon
which such  Guarantor  became a party  hereto),  such  Guarantor (i) has capital
sufficient to carry on its


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business and  transactions and all business and transactions in which it engages
and is able to pay its debts as they mature,  (ii) owns property having a value,
both at fair  valuation on a going concern  basis,  and at present fair saleable
value on a going  concern  basis,  greater  than the amount  required to pay its
probable liabilities (including contingencies),  and (iii) does not believe that
it will  incur  debts or  liabilities  beyond  its  ability to pay such debts or
liabilities  as they  mature,  subject  in each  case to the first  sentence  of
SECTION 2.2.

                                   ARTICLE IV

                                  MISCELLANEOUS

         SECTION 4.1  AMENDMENTS IN WRITING.  None of the terms or provisions of
this Guaranty may be waived, amended,  supplemented or otherwise modified except
in accordance with SECTION 9.04 of the Loan Agreement.

         SECTION 4.2 NOTICES. All notices and communications  hereunder shall be
given to the addresses and otherwise made in accordance with SECTION 9.06 of the
Loan Agreement; provided that notices and communications to the Guarantors shall
be  directed  to the  Guarantors  at the  address of the  Borrower  set forth in
SECTION 9.06 of the Loan Agreement.

         SECTION 4.3 ENFORCEMENT EXPENSES, INDEMNIFICATION.

                  (a) Each  Guarantor  agrees to pay or reimburse the Lender for
         all its  reasonable  costs and  expenses  incurred in  connection  with
         enforcing or  preserving  any rights under this  Guaranty and the other
         Loan Documents to which such Guarantor is a party,  including,  without
         limitation, the reasonable fees and disbursements of counsel (including
         the allocated fees and expenses of in-house counsel) to the Lender.

                  (b) Each  Guarantor  agrees  to pay,  and to save  the  Lender
         harmless  from, any and all  liabilities  with respect to, or resulting
         from any delay in  paying,  any and all stamp,  excise,  sales or other
         taxes which may be payable or  determined to be payable with respect to
         any of the  Collateral  or in connection  with any of the  transactions
         contemplated by this Guaranty.

                  (c) Each  Guarantor  agrees  to pay,  and to save  the  Lender
         harmless from, any and all liabilities,  obligations,  losses, damages,
         penalties,  costs and expenses in connection  with actions,  judgments,
         suits,  costs,   expenses  or  disbursements  of  any  kind  or  nature
         whatsoever  with  respect  to  the  execution,  delivery,  enforcement,
         performance  and  administration  of this  Guaranty  to the  extent the
         Borrower  would be required  to do so  pursuant  to the Loan  Agreement
         and/or the Collateral Agreement.

                  (d) The agreements in this SECTION 4.3 shall survive repayment
         of the  Obligations  and all  other  amounts  payable  under  the  Loan
         Agreement and the other Loan Documents.

         SECTION 4.4  GOVERNING  LAW.  This  Guaranty  shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York,
without giving effect to principles of conflicts of laws.


                                       9
<PAGE>


         SECTION 4.5 CONSENT TO JURISDICTION AND VENUE.

                  (a) Each Guarantor hereby irrevocably consents to the personal
         jurisdiction  of all state and federal  courts located in New York, New
         York (and any courts  from which an appeal from any of such courts must
         or may be taken) in any action,  claim or other proceeding  arising out
         of any dispute in  connection  with this  Agreement  and the other Loan
         Documents,  any rights or obligations  hereunder or thereunder,  or the
         performance  of such  rights and  obligations.  Each  Guarantor  hereby
         irrevocably  consents  to the service of a summons  and  complaint  and
         other process in any action,  claim or proceeding brought by the Lender
         in  connection  with this  Agreement or the other Loan  Documents,  any
         rights or obligations  hereunder or thereunder,  or the  performance of
         such rights and  obligations,  on behalf of itself or its property,  by
         registered or certified mail, return receipt  requested,  in the manner
         specified  in  SECTION  9.06 of the  Loan  Agreement.  Nothing  in this
         SECTION 4.5 shall affect the right of the Lender to serve legal process
         in any other manner  permitted by Applicable Law or affect the right of
         the Lender to bring any action or  proceeding  against any Guarantor or
         its properties in the courts of any other jurisdictions.

                  (b) The Guarantors hereby irrevocably waive any objection each
         may have now or in the future to the  laying of venue in the  aforesaid
         jurisdiction in any action, claim or other proceeding arising out of or
         in connection with this Guaranty, any other Loan Document or the rights
         and obligations of the parties hereunder or thereunder.  The Guarantors
         irrevocably waive, in connection with such action, claim or proceeding,
         any plea or claim that the action, claim or proceeding has been brought
         in an inconvenient forum.

         SECTION 4.6 PRESERVATION OF REMEDIES, DAMAGES.

                  (a) PRESERVATION OF CERTAIN  REMEDIES.  The parties hereto and
         the other Loan Documents preserve, without diminution, certain remedies
         that such  Persons  may employ or exercise  freely,  either  alone,  in
         conjunction  with or during a dispute.  Each such Person shall have and
         hereby   reserves   the  right  to  proceed  in  any  court  of  proper
         jurisdiction  or by self-help to exercise or  prosecute  the  following
         remedies,  as applicable:  (i) all rights to foreclose against any real
         or personal  property or other  security by  exercising a power of sale
         granted in the Loan  Documents or under  Applicable  Law or by judicial
         foreclosure and sale,  including a proceeding to confirm the sale, (ii)
         all rights of self-help  including peaceful  occupation of property and
         collection of rents, set-off, and peaceful possession of property,  and
         (iii) obtaining  provisional or ancillary remedies including injunctive
         relief, sequestration, garnishment, attachment, appointment of receiver
         and in filing an involuntary  bankruptcy  proceeding.  Preservation  of
         these  remedies  does not  limit the  power of an  arbitrator  to grant
         similar remedies that may be requested by a party in a dispute.

                  (b)  NO  PUNITIVE/EXEMPLARY   DAMAGES.  The  Lender  and  each
         Guarantor  hereby  agree  that no such  Person  shall  have a remedy of
         punitive  or  exemplary  damages  against  any  other  party  to a Loan
         Document  and each  such  Person  hereby  waives  any right or claim to
         punitive or exemplary  damages that it may now have or may arise in the
         future in connection with any dispute hereunder or under any other Loan
         Document,  whether  such  dispute is resolved  through  arbitration  or
         judicially.


                                       10
<PAGE>


         SECTION 4.7 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE LENDER AND EACH GUARANTOR  HEREBY  IRREVOCABLY  WAIVE THEIR  RESPECTIVE
RIGHTS TO A JURY TRIAL WITH  RESPECT TO ANY  ACTION,  CLAIM OR OTHER  PROCEEDING
ARISING OUT OF ANY DISPUTE IN  CONNECTION  WITH THIS  GUARANTY,  THE NOTE OR THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,  OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         SECTION 4.8 NO WAIVER BY COURSE OF CONDUCT,  CUMULATIVE  REMEDIES.  The
Lender shall not by any act (except by a written instrument  pursuant to SECTION
4.1),  delay,  indulgence,  omission or  otherwise  be deemed to have waived any
right or remedy  hereunder  or to have  acquiesced  in any  Default  or Event of
Default. No failure to exercise,  nor any delay in exercising on the part of the
Lender,  any  right,  power or  privilege  hereunder  shall  operate as a waiver
thereof.  No  single  or  partial  exercise  of any  right,  power or  privilege
hereunder shall preclude any other or further  exercise  thereof or the exercise
of any other right,  power or privilege.  A waiver by the Lender of any right or
remedy  hereunder  on any one  occasion  shall not be  construed as a bar to any
right or remedy which the Lender would  otherwise  have on any future  occasion.
The rights and remedies herein provided are cumulative,  may be exercised singly
or concurrently  and are not exclusive of any other rights or remedies  provided
by law.

         SECTION 4.9 SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
and shall inure to the benefit of each Guarantor (and shall bind all Persons who
become  bound  as a  Guarantor  under  this  Guaranty),  the  Lender  and  their
successors  and  assigns;  PROVIDED  that no Guarantor  may assign,  transfer or
delegate any of its rights or obligations  under this Guaranty without the prior
written consent of all holders of Obligations.

         SECTION 4.10  SEVERABILITY.  If any provision hereof is held by a court
of competent  jurisdiction to be invalid or unenforceable  in any  jurisdiction,
then, to the fullest extent  permitted by law, (a) the other  provisions  hereof
shall  remain  in full  force  and  effect  in such  jurisdiction  and  shall be
liberally  construed in favor of the Lender in order to carry out the intentions
of the parties  hereto as nearly as may be possible;  and (b) the  invalidity or
unenforceability  of any provisions hereof in any jurisdiction  shall not affect
the validity or enforceability of such provision in any other jurisdiction.

         SECTION  4.11  HEADINGS.  The  various  section  headings  used in this
Guaranty are for  convenience of reference only and shall not affect the meaning
or interpretation of this Guaranty or any provisions hereof.

         SECTION 4.12 COUNTERPARTS. This Guaranty may be executed by the parties
hereto in several counterparts,  each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.

         SECTION 4.13 SET-OFF. Each Guarantor hereby irrevocably  authorizes the
Lender,  at any time and from time to time during the continuance of an Event of
Default,  without  notice to such  Guarantor  or any other  Guarantor,  any such
notice being expressly waived by each Guarantor,  to set off and appropriate and
apply any and all deposits (general or special,  time or demand,  provisional or
final), in any currency, and any other credits, indebtedness or claims, in


                                       11
<PAGE>


any currency,  in each case whether direct or indirect,  absolute or contingent,
matured or  unmatured,  at any time held or owing by the Lender (or any agent of
the Lender) to or for the credit or the account of such  Guarantor,  or any part
thereof, in such amounts as the Lender may elect,  against and on account of the
obligations  and liabilities of such Guarantor to the Lender  hereunder,  as the
Lender may elect, whether or not the Lender has made any demand for payment. The
Lender  shall  notify  such  Guarantor  promptly  of any  such  set-off  and the
application  made by the  Lender  of the  proceeds  thereof;  PROVIDED  that the
failure to give such notice  shall not affect the  validity of such  set-off and
application. The rights of the Lender under this Section 4.13 are in addition to
other  rights and  remedies  (including,  without  limitation,  other  rights of
set-off) which the Lender may have.

         SECTION 4.14  INTEGRATION.  This Guaranty and the other Loan  Documents
represent  the  agreement of the  Guarantors  and the Lender with respect to the
subject  matter  hereof and thereof,  and there are no  promises,  undertakings,
representations  or warranties by the Lender  relative to subject  matter hereof
and thereof not  expressly  set forth or referred to herein or in the other Loan
Documents.

         SECTION 4.15 ACKNOWLEDGEMENTS. Each Guarantor hereby acknowledges that:

                  (a)  it has  been  advised  by  counsel  in  the  negotiation,
         execution and delivery of this Guaranty and the other Loan Documents to
         which it is a party;

                  (b) the Lender as such has no fiduciary  relationship  with or
         duty  to any  Guarantor  arising  out  of or in  connection  with  this
         Guaranty  or any of the  other  Loan  Documents,  and the  relationship
         between the Guarantors, on the one hand, and the Lender as such, on the
         other  hand,  in  connection  herewith or  therewith  is solely that of
         debtor and creditor; and

                  (c) no joint  venture is  created  hereby or by the other Loan
         Documents   or   otherwise   exists  by  virtue  of  the   transactions
         contemplated  hereby among the Lender or among the  Guarantors  and the
         Lender.

         SECTION 4.16 RELEASES. At such time as the Guaranteed Obligations shall
have been  indefeasibly  paid in full, this Guaranty and all obligations  (other
than those  expressly  stated to survive  such  termination)  of the  Guarantors
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party.

         SECTION 4.17 ADDITIONAL  GUARANTORS.  Each direct or indirect  Domestic
Subsidiary  of the Borrower  that is required to become a party to this Guaranty
pursuant to Section 5.11 of the Loan Agreement  shall become a Guarantor for all
purposes  of  this  Guaranty  upon  execution  and  delivery  by  such  Domestic
Subsidiary of a joinder or supplement in form and substance  satisfactory to the
Lender.

                           [Signature Page to Follow]


                                       12
<PAGE>


         IN WITNESS  WHEREOF,  each of the Guarantors has executed and delivered
this Guaranty by its duly authorized officer, all as of the date first set forth
above.


                                       TALON INTERNATIONAL, INC.,
                                       a Delaware corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       TAG-IT, INC.,
                                       a California corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       A.G.S. STATIONARY,  INC., a
                                       California corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       TAG-IT PACIFIC LIMITED,
                                       a Hong Kong corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       TAG-IT PACIFIC (HK) LTD.,
                                       a British Virgin Islands corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       13
<PAGE>


                                       TAG IT de MEXICO, S.A. de C.V.

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       TALON ZIPPER (SHENZHEN) COMPANY, LTD.,
                                       a Chinese corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       TALON INTERNATIONAL PVT. LTD.,
                                       an Indian corporation

                                       By:  /s/ Lonnie D. Schnell
                                           -------------------------------------
                                            Name:  Lonnie D. Schnell
                                            Title: Chief Financial Officer


                                       14