Document:

PROMISSORY NOTE

October 11, 2000                                        Los Angeles, California

     FOR VALUE RECEIVED, the undersigned (the "Borrower") hereby promises to pay
to the order of SANWA BANK CALIFORNIA (the "Bank"), at its Beverly Hills Office
or at such other place or to such other parties as the holder of this Note may
from time to time designate in writing, the principal sum of FIVE HUNDRED FIFTY
SIX THOUSAND FOUR HUNDRED THIRTY FIVE 74/100's DOLLARS ($556,435.74), whichever
is less, together with interest thereon. Any sums repaid under this Note may not
be reborrowed. This note renews that certain Equipment Purchase Facility
contained in a Credit Agreement dated November 8, 1999 by and between Borrower
and Bank.

     Interest shall accrue and principal and interest shall be payable as
follows:

     For the purposes hereof, "Reference Rate" shall mean an index for a
variable interest rate which is quoted, published or announced by Bank as its
Reference Rate and as to which loans may be made by Bank at, above or below such
rate; "Business Day" shall mean a day, other than a Saturday or Sunday, on which
the Bank is open for business; "Expiration Date" shall mean December 31, 2000.

     1. INTEREST: Interest shall accrue at a variable rate per annum equivalent
to the Reference Rate (the "Variable Rate"). Interest shall be adjusted
concurrently with any change in the Reference Rate. Interest shall be computed
on the basis of 360 days per year, but charged on the actual number of days
elapsed. The Borrower hereby promises and agrees to pay interest in arrears on
the last calendar day of each month

     2. PAYMENT: On the Expiration Date the entire unpaid principal balance,
together with accrued and unpaid interest, shall be due and payable.

     The acceptance by the holder of any payment under this Note after the date
that such payment is due shall not constitute a waiver of the right to require
prompt payment when due of future or succeeding payments or to declare a default
as herein provided for any failure to so pay. The acceptance by the holder of
the payment of a portion of any installment at any time that such installment is
due and payable in its entirety shall neither cure nor excuse the default caused
by failure to pay the whole of such installment and shall not constitute a
waiver of the holder's rights to require full payment when due of all future or
succeeding installments. Any partial payments shall first be applied to pay
accrued interest and the remaining portion of such payments, if any, shall be
applied to reduce the outstanding principal balance.

     Any advance under this Note shall be conclusively presumed to have been
made to and for the Borrower's benefit when the proceeds of such advance payment
are disbursed in accordance with the Borrower's instructions or deposited into
an account of the Borrower maintained at the Bank.

<PAGE>

     3. DEFAULTS. Any one or more of the following described events shall
constitute an event of default under this Note:

     (a) The Borrower shall fail to pay any amount under this Note when due.

     (b) If there is a default under any agreement to which Borrower is a party
with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
indebtedness of the Borrower, whether such indebtedness is direct or indirect,
absolute or contingent.

     (c) Any representation or warranty made by the Borrower under or in
connection with this Note or any financial statement given by the Borrower or
any guarantor of this Note shall prove to have been incorrect in any material
respect when made or given or when deemed to have been made or given.

     (d) The Borrower or any guarantor of this Note shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; or (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment.

     (e) Any writ of execution or attachment or any judgment lien shall be
issued against any property of the Borrower and shall not be discharged or
bonded against or released within 30 days after the issuance or attachment of
such writ or lien.

     (f) Any guaranty of this Note shall be revoked or limited or its
enforceability or validity shall be contested by any guarantor, by operation of
law, legal proceeding or otherwise or any guarantor who is a natural person
shall die.

     (g) Any subordination agreement shall be revoked or limited or its
enforceability or validity shall be contested by any creditor signatory thereto,
by operation of law, legal proceeding or otherwise.

     (h) The Borrower shall voluntarily suspend the transaction of business or
allow to be suspended, terminated, revoked or expired any permit, license or
approval of any governmental body necessary to conduct the Borrower's business
as now conducted.

     (i) If there occurs a material adverse change in the Borrower's business or
financial condition, or if there is a material impairment of the prospect of
repayment of any portion of the outstanding principal or interest under this
Note or there is a material impairment of the value or priority of the Bank's
security interest in any collateral securing the Borrower's obligations under
this Note.

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<PAGE>

     (j) There shall occur a sale, transfer, disposition or-encumbrance (whether
voluntary or involuntary), or an agreement shall be entered into to do so, with
respect to more than 10% of the issued and outstanding capital stock of the
Borrower.

     Upon the occurrence of any event of default described above, the holder of
this Note, at its election, may declare the entire balance of principal and
interest thereon immediately due and payable, together with all costs of
collection, including, but not limited to, reasonable attorney's fees and all
expenses incurred in connection with the protection of, or realization on, the
security for this Note.

     The liability of the makers under this Note is joint and several. The
makers, endorsers and/or guarantors hereof do hereby severally waive
presentment, demand, protest and notice of protest, dishonor and nonpayment.
Such parties expressly consent to the extension of time for the performance of
any obligation hereunder and the release of any party liable for the obligation.
The release of any party liable hereon shall not operate to release any other
party liable hereon.

     If an event of default, or an event which, with notice or passage of time
could become an event of default, has occurred or is continuing, the Borrower
shall pay to the Bank interest on any amount payable under this Note at a rate
which is 3% in excess of the rate or rates then in effect.

     This Note is not assumable without the express prior written consent of the
holder. No obligation is imposed upon the Bank or the holder of this Note to
make any advance to the Borrower, it being agreed that all advances hereunder
are optional.

     Every provision hereof is intended to be several. If any provision of this
Note is determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, such illegality, invalidity or unenforceability shall not
affect the other provisions hereof, which shall remain binding and enforceable.

     4. LAW. This Note shall be governed by and construed according to the laws
of the State of California without regard to conflict of law principles, to the
jurisdiction of whose courts the Borrower hereby submits.

     THE BORROWER AND THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS NOTE, ANY OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY. OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER VVITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERVVISE. THE BORROWER AND THE BANK EACH
AGREE THAT ANY SUCH CLAIM' OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS NOTE OR ANY OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER

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<PAGE>

SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS NOTE AND ANY OTHER LOAN DOCUMENTS.

                                        BORROWERS:

                                        TAG-IT, INC.
Address: ____________________
         ____________________           By: /S/ RONDA SALLMEN
         ____________________              ---------------------------------
                                            CHIEF FINANCIAL OFFICER
                                        ------------------------------------
                                                (Name/Title)

                                        A.G.S. STATIONERY, INC.

                                        BY:   /S/ RONDA SALLMEN
                                           ---------------------------------
                                        NAME: Ronda Sallmen, Chief Financial
                                              Officer

                                        TALON INTERNATIONAL, INC.

                                        BY:   /S/ RONDA SALLMEN
                                           ---------------------------------
                                        NAME: Ronda Sallmen, Chief Financial
                                              Officer

                                        ACKNOWLEDGED:

                                        TAG-IT PACIFIC, INC.

                                        BY:   /S/ RONDA SALLMEN
                                           ---------------------------------
                                        NAME: Ronda Sallmen, Chief Financial
                                              OfficerPacific Trim S.A. DE C.V.

                             TRIM HANDLING AGREEMENT

Entered into between Tarrant Apparel Group, Inc., & Tagmex (together referred to
as Tarrant, a garment manufacturer based in Los Angeles), and Tag-It Pacific,
Inc., & Tag-It De Mexico S.A. De C.V. (together referred to as Tag-It, a trim
company based in Los Angeles) on this 29th day of December, 1999.

Since October 1st 1998, Tag-It has been purchasing, handling and delivering most
of the trim for Tarrant's Mexico Production. Both parties wish to clarify their
understanding in the form of this agreement.

     1) TERM. This agreement describes the current understanding by the parties;
     it has commenced on October 1, 1998 and either party may cancel it at any
     time. This agreement is non-exclusive. Tarrant may elect to have another
     company handle its trim and Tag-It may service others.

     2) PURCHASING. Tag-It is responsible for purchasing trim items designated
     by Tarrant. The parties agree that most of the trim ordering is done on an
     order by order basis. When Tarrant feels it necessary, it may give Tag-It
     projections. Tag-It orders the required quantities plus 10%. The overage is
     to cover up to 5% over-cutting by Tarrant and 5% possible loss by the
     contractors.

     3) INFORMATION FLOW. Tarrant's merchandisers supply Tag-It with Trim Setup
     Sheets. The Trim Setup Sheet is considered as a purchase order from Tarrant
     to Tag-It and is presented in the form of a program containing the
     necessary information for Tag-It to order the appropriate quantities of
     trim. The Trim Setup Sheets are tracked by program number assigned by
     Tarrant. Tarrant is responsible for the accuracy of the information
     contained in the sheets.

     ORDERING:

          A) Upon receipt of a Trim Setup Sheet, Tag-It forwards to Tarrant's
          production manager the delivery schedule (in days or weeks) for each
          needed trim item within 48 hours (except holidays and weekends).

          B) After reviewing the delivery schedule and the accuracy of the setup
          sheet, Tarrant's production manager signs the sheets and returns it to
          Tag-It. At this point using sequential numbers the setup sheet becomes
          a valid purchase order from Tarrant to Tag-It for all the trim.

          C) Upon receipt of the approved setup sheet, Tag-It orders the trim
          from various vendors.

          D) The actual delivery dates for each trim item are updated on the
          Trim PO Status Report by Tag-It on a DAILY BASIS. If an item is late,
          it appears

<PAGE>

          highlighted on the report. This report is sent to merchandisers and
          production manager.

     RECEIVING:

          A) Tag-It Makes the appropriate arrangements to receive the trim items
          in its warehouse in Tehuacan.

          B) The Trim PO Status Report is updated showing the items that are
          received and ready to be delivered.

     DELIVERY:

          A) Tarrant supplies Tag-It with the Marker Requests showing the orders
          (including program number, total quantity to be cut . . .) to the
          cutting services.

          B) Tag-It uses the information on the Marker Request to insure
          adequate trim quantities are in stock. Should there be a shortage,
          Tag-It immediately notifies Tarrant's production department.

          C) After the cutting service cuts the goods, Tarrant forwards the
          actual cutting ticket to Tag-It. Tag-It uses the actual cutting ticket
          to pull the trim out of its inventory and calls the assigned
          contractor for pickup. Tag-It pulls the necessary trim for the actual
          amount cut plus 5% to cover regular loss and damages during
          production. First trim is pulled within 48 hours from receipt of
          actual cutting ticket. Note: Contractors are responsible for picking
          up the trim from Tag-It's warehouse.

          D) When contractors come for pickup, they are required to count the
          items and compare the quantities with the paperwork they are provided.
          Scales are available to facilitate the counting process. Once the
          contractor's representative agrees with the count, he or she signs for
          the pickup. The signature must be from an authorized representative of
          the contractor. By signing the documents presented by Tag-It, the
          contractor acknowledges the pickup of the exact items and quantities
          stated on the paperwork.

          E) The Contractor's representative receives the items he or she signed
          for as well as a copy of the paperwork.

          F) The process described above actually takes place in 2 steps. When
          the actual cutting ticket is received, Tag-It releases the first trim.
          Once a laundry is assigned on Tarrant's production reports, the second
          trim is released to the laundry in the same manner.

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<PAGE>

     INVOICING:

          A) The signed paperwork is forwarded to Tag-It's invoicing department.
          A single invoice for all trim is issued per cut. Missing and extra
          trims will be billed separately.

          B) Tag-It will provide a copy of the invoice as well as a copy of all
          signed paperwork on-line to Tarrant's A/P department online.

     4) SHORT SHIPPING. In some instances, Tag-It does not have sufficient trim
     to supply the contractors. In these cases, Tag-It notifies Tarrant's
     production department, the responsible merchandiser as well as the
     contractors. Tag-It then obtains the trim as fast as possible. All affected
     parties are kept informed of the progress by e-mail and phone.

     5) MISSING TRIM. Sometimes a contractor may need trim over and beyond the
     additional 5% that were originally released. This may be due to damaged
     trim or the contractor may have lost the original quantity. The contractor
     notifies both Tarrant and Tag-It of the missing quantity. The Tarrant
     merchandiser fills out an authorization form allowing Tag-It to release the
     additional quantity. The additional quantity is usually taken from items
     reserved for other cuts or programs. Tag-It re-orders the items in question
     to replenish the stock.

     6) MISSING TRIM BILLING: When additional trims are released, Tag-It
     generates an invoice to Tarrant. Along with the backup paperwork, Tag-It
     supplies Tarrant with a copy of the original proofs of delivery for the cut
     to show that the contractor was supplied with adequate quantities with the
     first delivery.

     7) PRICING. Tag-It presents Tarrant with a trim package price per garment
     for each of Tarrant's programs. These prices include ground shipping and
     handling of the trim as described in this agreement. Tarrant is responsible
     for approving the prices and yields for each item. There are certain items
     that Tag-It purchases from Tarrant Customer's approved vendors. When Tag-It
     is not the approved vendor for the item in questions, Tag-It charges
     Tarrant the purchase cost of the item plus a 17.5% markup (15% gross
     margin) plus any freight charges. When Tag-It is the approved vendor,
     standard markup is applied to the items; the price per unit is presented to
     Tarrant for approval. Prices billed to Tarrant will be according to the
     approved trim package price.

     8) MISSING INFORMATION. Under certain circumstances, Tarrant may give
     orders to Tag-It without specifying the size break down needed. It is
     understood that Tag-It is not able to properly order trim without the
     correct size break.. In the event that the size breakdowns are not received
     within 1 week (from receipt of the order), Tarrant agrees to project 150%
     of the order quantity for all the sized items.

     9) PRICE TICKETS. Most of Tarrant's customers order price tickets directly
     from a vendor of their choice. These items are shipped to Tag-It's
     warehouse for separation by cut and

                                     Page 3
<PAGE>

     distribution. So far, Tag-It has been handling the price tickets at no
     charge to Tarrant. Tag-It is not responsible for any price tickets errors
     or shortages.

     10) AIR SHIPMENTS. When it is necessary to ship items by air, Tag-It
     requests an air authorization from the appropriate Tarrant merchandiser.
     The freight bills are presented to Tarrant for payment. In certain cases,
     Tag-It will pay for the airfreight (when the rush is caused by Tag-It).

     11) LIABILITY. In certain instances, Tarrant's customers may cancel certain
     orders for which Tarrant has ordered trims and Tag-It already received.
     Tag-It makes the necessary efforts to return any item that is not needed to
     the original vendor. In many cases, it is not possible to return the
     unneeded items. These items are billed to Tarrant on a bill and hold basis.
     Tag-It will keep these items in its inventory for a specified time after
     which it will request an authorization from Tarrant to dispose of the
     unneeded items.

     12) INVENTORY. Tag-It will review its physical inventory counts taken
     quarterly. The inventory positions will be studied and the activity of each
     item will be checked. Should Tag-It find any item that has not had any
     activity in the previous quarter, it will research the origin of the item.
     If it is found that Tarrant ordered that item and did not use it, the item
     will be billed to Tarrant. Tag-It reserves the right to do this research on
     any item that has been in Tag-It's inventory more than 90 days.

     13) ITEMS ORDERED BY TARRANT. Tarrant may from time to time order certain
     items from a different source than Tag-It. Tarrant may choose to ship those
     items to Tag-It's warehouse in Tehuacan. In these instances, Tarrant agrees
     to disclose its cost for the items to Tag-It. Tag-It will invoice 17.5% of
     the value of the items to Tarrant as a handling fee. Tag-It cannot be held
     responsible for any shortage or quality problem unless it is the result of
     Tag-It handling.

     14) QUALITY CONTROL. Tag-It is responsible for the quality of the items it
     delivers to Tarrant. Prior to delivering an item from a new vendor, Tag-It
     will submit a sample of the item to Tarrant for testing and approval.
     Tag-It will assume that the quality will not pass testing and have a backup
     order (from a previous approved vendor, if available) of sufficient
     quantity ready to deliver in case the item is not acceptable. It is
     Tarrant's responsibility to notify Tag-It of any quality problem.

     15) MACHINES. Tag-It supplies the machinery to apply the trim items on the
     garments to Tarrant. Tarrant is responsible for giving Tag-It advance
     notice of the machinery needed for its production. Tarrant signs a lease
     agreement for each machine and pays the agreed upon monthly fee. Tag-It is
     responsible for the delivery of the machines and the maintenance as
     described in the lease agreement. Tag-It is not responsible for repairs
     when a machine is used with the wrong item or mistreated or modified in any
     way by contractors.

Both parties have been operating under most of the terms described above for the
past 90 days. It is understood that each party makes every possible effort to
improve its relationship with the other. There are areas of the understanding
described in this document that can and will be improved.

                                     Page 4
<PAGE>

This document aims at describing those areas that are clear to each party; it
will be updated as new procedures are implemented.

Tag-It is not the approved vendor for all of the items used by Tarrant. It is
understood that it is to the benefit both parties (for price and delivery) that
Tag-It becomes the approved vendor. Both parties have been working with
Tarrant's customers to expedite the process of getting Tag-It approved.

Accurate and timely information is crucial for the success of this relationship.
Both parties strive to provide information in a timely manner.

                                       TARRANT APPAREL GROUP

                                       By:    /S/ BARRY AVED
                                             ----------------------------------
                                       Its:   PRESIDENT
                                             ----------------------------------
                                       Date:  12/20/99
                                             ----------------------------------

                                       TAG-IT PACIFIC

                                       By:    /S/ COLIN DYNE
                                             ----------------------------------
                                       Its:   CHIEF EXECUTIVE OFFICER
                                             ----------------------------------
                                       Date:  12/20/99
                                             ----------------------------------

                                     Page 5

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