Document:

CONTINUING GUARANTY

For value received and in consideration of the extension of credit by SANWA BANK
CALIFORNIA (the "Bank") to TAG-IT, INC., TALON INTERNATIONAL, INC. and A.G.S.
STATIONERY, INC. (the "Debtor") or the benefits to the undersigned derived
therefrom, the undersigned (each, a "Guarantor"), guarantees and promises to pay
to the Bank any and all Indebtedness (as defined in paragraph 1 below) and
agrees as follows:

     1. INDEBTEDNESS. The term "Indebtedness" is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations,
guaranties and liabilities of the Debtor, or any one or more of them,
heretofore, now, or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether direct or acquired by the Bank by
assignment, succession, or otherwise, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, secured or
unsecured, whether on original, renewed, extended or revised terms, and whether
the Debtor may be liable individually or jointly with others, or whether
recovery upon any Indebtedness may be or hereafter becomes barred by any statute
of limitations or whether any Indebtedness may be or hereafter becomes otherwise
unenforceable.

     2. GUARANTY. Subject to any maximum dollar limitation on Guarantor's
liability as may be specified in this Guaranty, the Guarantor unconditionally
agrees to pay to the Bank or its order, on demand, in lawful money of the United
States of America, an amount equal to the amount of the Indebtedness and to
otherwise perform any obligation of the Debtor undertaken pursuant to any
Indebtedness. In addition to any maximum principal liability hereunder, the
Guarantor agrees to (a) bear the expenses enumerated in paragraph 21 hereof and
(b) pay interest on the Indebtedness at the rate(s) applicable thereto.
Notwithstanding the foregoing, the Bank may allow the Indebtedness to exceed the
Guarantor's liability hereunder. Any payment by the Guarantor shall not reduce
the maximum principal obligation of the Guarantor hereunder unless written
notice to that effect is actually received by the Bank at or prior to the time
of such payment. Any payment received by the Bank from the Debtor or any other
person shall not reduce the Guarantor's maximum principal liability hereunder.

     3. RIGHT TO AMEND OR MODIFY INDEBTEDNESS AND/OR COLLATERAL. The Guarantor
authorizes the Bank, at its sole discretion, with or without notice and without
affecting the Guarantor's liability hereunder, from time to time to: (a) change
the time or manner of payment of any Indebtedness by renewal, extension,
modification, acceleration or otherwise; (b) alter or change any provision of
any Indebtedness including, but not limited to, the rate of interest thereon,
and any document, instrument or agreement (other than this Guaranty) evidencing,
guaranteeing, securing or related to any Indebtedness; (c) release, discharge,
exonerate, substitute or add one or more parties liable on any Indebtedness or
one or more endorsers, cosigners or guarantors for any Indebtedness; (d) obtain
collateral for the payment of any Indebtedness or any guaranty thereof; (e)
release existing or after-acquired collateral on such terms as the Bank, in its
sole discretion, shall determine; (f) apply any sums received from the Debtor,
any endorser, cosigner, other guarantor or other person liable on any
Indebtedness or from the sale or collection of collateral or its proceeds to any
indebtedness whatsoever owed or to be owed to the Bank by the Debtor in any
order or amount and regardless of whether or not such indebtedness is guaranteed
hereby, is secured by collateral or is due and payable; (g) apply any sums
received from the Guarantor or from the sale of collateral

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granted by the Guarantor to any Indebtedness in any order or amount regardless
of whether such Indebtedness is secured by collateral or is due and payable.

     4. WAIVERS. The Guarantor hereby unconditionally and irrevocably
acknowledges and agrees to the matters set forth below:

     A. DEFICIENCY. In the event that any Indebtedness is now or hereafter
secured by a deed of trust, the Guarantor waives any defense and all rights and
benefits of those laws purporting to state that no deficiency judgment may be
recovered on certain real property purchase money obligations (as presently
contained in Section 580b of the California Code of Civil Procedure and as it
may be amended or superseded in the future) and those laws purporting to state
that no deficiency judgment may be recovered after a trustee's sale under a deed
of trust (as presently contained in Section 580d of the California Code of Civil
Procedure and as it may be amended or superseded in the future). THE GUARANTOR
ACKNOWLEDGES THAT A FORECLOSURE BY A TRUSTEE'S SALE UNDER A DEED OF TRUST MAY
RESULT IN THE DESTRUCTION OF THE GUARANTOR'S SUBROGATION RIGHTS THAT MAY
OTHERWISE EXIST AND THAT A DESTRUCTION OF THOSE RIGHTS MAY CREATE A DEFENSE TO A
DEFICIENCY JUDGMENT AGAINST THE DEBTOR AND/OR THE GUARANTOR.

THE GUARANTOR WAIVES ALL RIGHTS AND DEFENSES THAT GUARANTOR MAY HAVE BECAUSE THE
INDEBTEDNESS OR ANY PORTION THEREOF IS SECURED BY REAL PROPERTY. THIS MEANS,
AMONG OTHER THINGS,

     (i) BANK MAY COLLECT FROM THE GUARANTOR WITHOUT FIRST FORECLOSING ON ANY
REAL OR PERSON PROPERTY PLEDGED BY THE DEBTOR.

     (ii) IF THE BANK FORECLOSES ON ANY REAL PROPERTY COLLATERAL PLEDGED BY THE
DEBTOR,

     (x) THE AMOUNT OF THE INDEBTEDNESS MAY BE REDUCED ONLY BY THE PRICE FOR
WHICH THAT COLLATERAL IS SOLD AT THE FORECLOSURE SALE, EVEN IF THE COLLATERAL IS
WORTH MORE THAN THE SALE PRICE.

     (y) BANK MAY COLLECT FROM THE GUARANTOR EVEN IF THE CREDITOR, BY
FORECLOSING ON THE REAL PROPERTY COLLATERAL, HAS DESTROYED ANY RIGHT THE
GUARANTOR MAY HAVE TO COLLECT FROM THE DEBTOR.

     THIS IS AN UNCONDITIONAL AND IRREVOCABLE WAIVER OF ANY RIGHTS AND DEFENSES
THE GUARANTOR MAY HAVE BECAUSE THE INDEBTEDNESS IS SECURED BY REAL PROPERTY.
THESE RIGHTS AND DEFENSES INCLUDE, BUT ARE NOT LIMITED TO, ANY RIGHTS AND
DEFENSES BASED ON SECTION 580a, 580b, 580D, OR 726 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE.

     B. ELECTION OF REMEDIES. The Guarantor waives any defense based upon the
Guarantor's loss of a right against the Debtor arising from the Bank's election
of a remedy on any

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Indebtedness under bankruptcy or other debtor relief laws or under any other
laws, including, but not limited to, those purporting to reduce the Bank's right
against the Guarantor in proportion to the principal obligation of any
Indebtedness (as presently contained in Section 2809 of the California Civil
Code and as it may be amended or superseded in the future).

     Without limiting the generality of the foregoing, Guarantor waives all
rights and defenses arising out of an election of remedies by the Bank, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Guarantor's rights of
subrogation and reimbursement against the Debtor (principal) by operation of
Section 580d of the Code of Civil Procedure or otherwise.

     C. STATUTE OF LIMITATIONS. To the maximum extent permitted by law, the
Guarantor waives the benefit of the statute of limitations affecting the
Guarantor's liability hereunder or the enforcement hereof.

     D. ACTION AGAINST THE DEBTOR AND COLLATERAL (AND OTHER REMEDIES). The
Guarantor waives all right to require the Bank to: (i) proceed against the
Debtor, any endorser, cosigner, other guarantor or other person liable on any
Indebtedness; (ii) join the Debtor or any endorser, cosigner, other guarantor or
other person liable on any Indebtedness in any action or actions that may be
brought and prosecuted by the Bank solely and separately against the Guarantor
on any Indebtedness; (iii) proceed against any item or items of collateral
securing any Indebtedness or any guaranty thereof; or (iv) pursue or refrain
from pursuing any other remedy whatsoever in the Bank's power.

     E. DEBTOR'S DEFENSES. The Guarantor waives any defense arising by reason of
any disability or other defense of the Debtor, the Debtor's successor or any
endorser, cosigner, other guarantor or other person liable on any Indebtedness
including, without limitation, any statute of limitation defense that may be
available to Debtor or such other person. Until all Indebtedness has been paid
in full, even though it may be in excess of the liability incurred hereby and
Bank has no further commitment to lend or extend financial accommodations to
Debtor, the Guarantor shall not have any right of subrogation and the Guarantor
waives any benefit of and right to participate in any collateral now or
hereafter held by the Bank. The Guarantor waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, notices of sale of any collateral securing any Indebtedness or any
guaranty thereof, and notice of the existence, creation or incurring of new or
additional Indebtedness.

     F. DEBTOR'S FINANCIAL CONDITION. The Guarantor hereby recognizes,
acknowledges and agrees that advances may be made from time to time with respect
to any Indebtedness without authorization from or notice to the Guarantor even
though the financial condition of the Debtor, any endorser, cosigner, other
guarantor or other person liable on any Indebtedness may have deteriorated since
the date of this Guaranty. The Guarantor waives all right to require the Bank to
disclose any information with respect to: any Indebtedness; the financial
condition, credit or character of the Debtor, any endorser, cosigner, other
guarantor or other person liable on any Indebtedness; any collateral securing
any Indebtedness or any guaranty thereof; or any action or inaction on the part
of the Bank, the Debtor or any endorser, cosigner, other guarantor or other
person liable on any Indebtedness. The Guarantor hereby assumes the
responsibility for being

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informed of the financial condition, credit and character of the Debtor and of
all circumstances beadng upon the risk of non-payment of any Indebtedness which
diligent inquiry would reveal.

     5. RIGHT OF SET-OFF; GRANT OF SECURITY INTEREST. In addition to all liens
upon and rights of set-off against any monies, securities or other property of
the Guarantor given to the Bank by law, the Bank shall have a security interest
in and a right to set off against all monies, securities and other property of
the Guarantor now or hereafter in the possession of or on deposit with the Bank,
the Bank's agents or any one or more of them, whether held in general or special
account or deposit or for safekeeping or otherwise; and each such security
interest and right of set-off may be exercised without demand upon or notice to
the Guarantor. No action or inaction by the Bank with respect to any security
interest or right of set-off shall be deemed a waiver thereof and every right of
set-off and security interest shall continue in full force and effect until
specifically released by the Bank in writing. The security interest created
hereby shall secure all of the Guarantor's obligations under this Guaranty.

     6. RIGHT OF FORECLOSURE. The Bank may foreclose, either by judicial
foreclosure or by exercise of power of sale, any deed of trust securing any
Indebtedness even though such foreclosure may destroy or diminish the
Guarantor's rights against the Debtor. The Guarantor shall be liable to the Bank
for any part of any Indebtedness remaining unpaid after any such foreclosure
whether or not such foreclosure was for fair market value.

     7. SUBORDINATION. Any indebtedness of the Debtor or any endorser, cosigner,
other guarantor or other person liable on any Indebtedness now or hereafter owed
to the Guarantor is hereby subordinated to the Indebtedness. Such indebtedness
owed to the Guarantor shall, if the Bank so requests, be collected, enforced and
received by the Guarantor as trustee for the Bank and be paid over to the Bank
on account of the Indebtedness but without reducing or affecting in any manner
the liability of the Guarantor set forth herein. Should the Guarantor fail to
collect the proceeds of any such indebtedness owed to it and pay the proceeds to
the Bank, the Bank, as the Guarantor's attorney-in-fact, may do such acts and
sign such documents in the Guarantor's name as the Bank considers necessary to
effect such collection, and Guarantor hereby appoints Bank as Guarantor's
attorney-in-fact for such purposes.

     8. INVALID, FRAUDULENT OR PREFERENTIAL PAYMENTS. The Guarantor agrees that,
to the extent the Debtor or any endorser, cosigner, other guarantor or other
person liable on any Indebtedness makes a payment or payments to, or is credited
for any payment or payments made for or on behalf of the Debtor to the Bank,
which payment or payments, or any part thereof, is subsequently invalidated,
determined to be fraudulent or preferential, set aside or required to be repaid
to any trustee, receiver, assignee or any other party whether under any
bankruptcy, state or federal law or under any common law or equitable cause or
otherwise, then, to the extent thereof, the obligation or part thereof intended
to be satisfied thereby shall be' revived, reinstated and continued in full
force and effect as if such payment or payments had not originally been made or
credited.

     9. JOINT AND SEVERAL OBLIGATIONS; INDEPENDENT OBLIGATIONS. If more than one
Guarantor signs this Guaranty, the obligations hereunder are joint and several.
The Guarantor's obligations hereunder are independent of the obligations of the
Debtor or any endorser, cosigner, other guarantor or other person liable on any
Indebtedness and a separate action or actions may be brought and prosecuted
against the Guarantor on any Indebtedness.

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<PAGE>

     10. FINANCIAL INFORMATION. The Guarantor hereby agrees to deliver or cause
to be delivered to the Bank.

     11. ACKNOWLEDGMENT OF RECEIPT. Receipt of a true copy of this Guaranty is
hereby acknowledged by the Guarantor. The Guarantor understands and agrees that
this Guaranty shall not constitute a commitment of any nature whatsoever by the
Bank to renew or hereafter extend credit to the Debtor. The Guarantor agrees
that this Guaranty shall be effective with or without notice from the Bank of
the Bank's acceptance hereof.

     12. CONTINUING GUARANTY. This Guaranty is a continuing guaranty. Revocation
of this Guaranty shall be effective only after written notice thereof is
personally received by an officer of the Bank at the originating office
indicated below or actually received at the originating office by United States
certified or registered mail, return receipt requested and postage prepaid.
Notice shall be effective at any office of the Bank should the originating
office no longer be in existence. Revocation shall be effective at the close of
the Bank's business day when such notice is actually received. Any revocation
shall be effective only as to the revoking party and shall not affect that
part)/s obligation with respect to any indebtedness existing before such
revocation is effective.

     13. NON-RELIANCE. In executing this Guaranty, the Guarantor is not relying,
and has not relied, upon any statement or representation made by the Bank, or
any employee, agent or representative of the Bank, with respect to the status,
financial condition or other matters related to the Debtor or the relationship
between the Debtor and the Bank.

     14. MULTIPLE GUARANTIES. If the Guarantor has executed or does execute more
than one guaranty of any indebtedness of the Debtor to the Bank, the limits of
liability thereunder and hereunder shall be cumulative.

     15. SEVERABILITY. Should any one or more provisions of this Guaranty be
determined to be illegal or unenforceable, all other provisions shall remain
effective.

     16. CORPORATE, LIMITED LIABILITY OR PARTNERSHIP AUTHORITY. If the Debtor is
a corporation, limited liability partnership or company or partnership, the Bank
need not inquire into the power of the Debtor or the authority of its officers,
directors, partners or agents acting or purporting to act in its behalf and any
credit granted in reliance upon the purported exercise of such power or
authority is guarantied hereunder.

     17. SEPARATE PROPERTY. Any married person who signs this Guaranty expressly
agrees that recourse may be had against such person's separate property for all
obligations hereunder.

     18. INTERPRETATION. If there is more than one Debtor named herein or more
than one Guarantor executing this Guaranty, the words "Debtor" and "Guarantor'?
shall respectively mean all and any one or more of them. As used in this
Guaranty, neuter terms include the masculine and feminine, and vice versa.

     19. ASSIGNMENT. The Bank may, with or without notice, assign this Guaranty
in whole or in part. This Guaranty shall inure to the benefit of the Bank, its
successors and assigns, and shall bind the Guarantor and the Guarantor's heirs,
executors, administrators, successors and assigns.

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<PAGE>

     20. RELEASE: FOR GOOD AND VALUABLE CONSIDERATION, Tag-It Pacific, Inc.
("Guarantor") does hereby forever relieve, release, and discharge Sanwa Bank
California and its present or former employees, officers, directors, agents,
representatives, attorneys, and each of them, (collectively referred to as the
"Bank") from any and all claims, debts, liabilities, demands, obligations,
promises, acts, agreements, costs and expenses, actions and causes of action, of
every type, kind, nature, description or character whatsoever, whether known or
unknown, suspected or unsuspected, absolute or contingent (collectively a
"Claim" or the "Claims") on account of or in any way concerning, arising out of,
or in any manner whatsoever connected with or related to (a) that certain Credit
Agreement dated as of October 14, 1999 between Bank and Debtor together with any
and all amendments, addenda, riders, exhibits and schedules thereto, (b) that
certain Continuing Guaranty dated April 20, 2000 executed by Guarantor with
respect to the obligations of Debtor to Bank, (c) any other instruments,
agreements or documents executed by Borrowers and/or Guarantor in connection
with any of the foregoing and (d) all Claims of any kind whatsoever heretofore
sustained or that may arise or have arisen as a consequence of any act,
omission, transaction, loan, dealing, agreement, contract, conduct or
negotiation of any kind whatsoever by or with Bank or between Bank and Debtor or
Guarantor that occurred prior to the date this Release is executed.

               A. In furtherance of this Release, Guarantor each expressly
               acknowledges and waives any and all rights under Section 1542 of
               the California Civil Code, which provides as follows:

          "A general release does not extend to claims which the creditor does
          not know or expect to exist in his favor at the time of executing the
          release, which if known by him must have materially affected his
          settlement with the debtor. "

     By entering into this Release, each party recognizes that no facts or
     representations are ever absolutely certain and it may hereafter discover
     facts in addition to or different from those which it presently knows or
     believes to be true, but that it is the intention hereby to fully, finally
     and forever settle and release all matters, disputes and differences, known
     or unknown, suspected or unsuspected; accordingly, if any party should
     subsequently discover that any fact that it relied upon in entering into
     this Release was untrue, or that any understanding of the facts was
     incorrect, no party shall not be entitled to set aside this Release by
     reason thereof, regardless of any claim of mistake of fact or any other
     circumstances whatsoever. Each party acknowledges that it is not relying
     upon and has not relied upon any representation or statement made by Bank
     with respect to the facts underlying this Release or with regard to any of
     such party's rights or asserted rights.

     This Release may be pleaded as a full and complete defense and/or as a
     cross- complaint or counterclaim against any action, suit, or other
     proceeding that may be instituted, prosecuted or attempted in breach of
     this Release.

     21. WAIVER OF JURY TRIAL. THE GUARANTOR AND THE BANK HEREBY EXPRESSLY WAIVE
ANY AND ALL RIGHTS, WHETHER ARISING UNDER THE CALIFORNIA CONSTITUTION, ANY RULES
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, COMMON LAW OR OTHERWISE, TO DEMAND A
TRIAL BY JURY IN ANY ACTION, MATTER, CLAIM OR CAUSE OF ACTION WHATSOEVER ARISING
OUT OF OR IN ANY WAY RELATED TO THIS GUARANTY OR ANY OTHER AGREEMENT,

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<PAGE>

DOCUMENT OR TRANSACTION CONTEMPLATED HEREBY WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. GUARANTOR 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 BANK AND GUARANTOR 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 GUARANTY OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY

     22. ATTORNEY'S FEES. Guarantor shall pay to Bank all costs and expenses,
including, but not limited to reasonable attorney fees, incurred by Bank in
connection with the administration, enforcement, including any bankruptcy appeal
or the enforcement of any judgment or any refinancing or restructuring of the
Guarantor's obligations under this Guaranty or any document, instrument of
agreement executed with respect to, evidencing or securing the indebtedness
hereunder.

     23. GOVERNING LAW. This Guaranty shall be governed by and construed
according to the internal laws of the State of California without regard to
conflict of law principles, and the Guarantor hereby submits to the jurisdiction
of the courts of the State of California.

     24. HEADINGS. The headings used herein are solely for the purpose of
identification and have no legal significance.

     25. ADDRESS OF THE BANK. The Bank's originating office under this Guaranty
is: 9401 Wilshire Blvd., Beverly Hills, CA 90212

     26. MAXIMUM PRINCIPAL LIABILITY. THE MAXIMUM PRINCIPAL LIABILITY UNDER THIS
GUARANTY IS the amount of $10,000,000. 00, plus interest at the rate(s)
applicable to any Indebtedness as set forth in paragraph 2 hereof and the
expenses enumerated in paragraph 21 hereof.

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<PAGE>

     This Guaranty is made as of October 12, 2000 (which shall be the date of
this Guaranty).

     Executed by the undersigned Guarantor(s) as of the date set forth above.

GUARANTOR(S):  TAG-IT PACIFIC, INC.

By:  /S/ RONDA SALLMEN
    --------------------------------
     CHIEF FINANCIAL OFFICER
------------------------------------
           (Name/Title)

Address: 3820 S. Hill Street
         Los Angeles, CA 90037
        ----------------------------This SUPPLY AGREEMENT (this "AGREEMENT") is made as of this 15th day of
December, 2000 (the "EFFECTIVE DATE"), by and among, Tag-It Pacific, Inc., a
Delaware Corporation with its corporate office at 3820 South Hill Street, Los
Angeles, CA 90037 ("TAG-IT") on the one hand, Hubert Guez, Paul Guez and Azteca
 Production International, Inc., AZT International SA D RL, Commerce Investment
Group, LLC (collectively, the "GUEZ GROUP") and all present and future apparel
affiliates of those entities (all present and future apparel companies which are
directly or indirectly majority owned or controlled by Hubert Guez, including,
without limitation, those listed here, are collectively the "COVERED
COMPANIES").

                                    RECITALS

     A.   Tag-It is a single-source provider of brand identity and trim programs
          to manufacturers of apparel and licensed consumer products.

     B.   The Covered Companies are, among other things, manufacturers of
          apparel products.

     C.   Tag-It and the Guez Group desire to enter into this Agreement, which
          will expressly bind each of the Covered Companies whereby Tag-It will
          be a supplier of trim products for certain customers of the Covered
          Companies under the terms and conditions set forth in this Agreement.

     NOW THEREFORE, and in consideration of the mutual promises, covenants,
representations and good and valuable consideration set forth herein, the
adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1.   PRODUCTS, ORDERS AND PRICING.

     1.1  SUPPLY. Tag-It shall manufacture and/or procure, and shall be the
          supplier of the trim products (the "PRODUCTS"), as described in
          SCHEDULE 1.1 attached hereto, to the following customers of Covered
          Companies during the Term of this Agreement: *** and other customers
          as mutually agreed (collectively, the "Customers"). Guez and Azteca
          shall cause each of the Covered Companies to purchase trim services
          (including trim procurement and inventory management services) from
          Tag-It. Tag-It may perform its obligations hereunder directly, through
          owned and/or controlled subsidiaries and through independent
          contractors.

     1.2  PRICING. The purchase price that the Covered Companies will pay Tag-It
          for each of the Products is also listed in SCHEDULE 1.1, ***. Tag-It
          and the Covered Companies will conduct a pricing review once annually
          at such time as may be reasonably requested by the Covered Companies.

----------------------------
*** 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 ("SEC") and have been
filed separately with the SEC.

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     1.3  MINIMUM OBLIGATION. The Guez Group shall cause the Covered Companies
          to purchase during each successive Contract Year a minimum annual
          aggregate total of Ten Million Dollars ($10,000,000) of Products from
          Tag-It (the "MINIMUM Obligation"). Each member of the Guez Group
          represents and warrants to Tag-It that the Minimum Obligation is an
          amount which is at least equal to the aggregate trim purchases by the
          Customers for the 12 month period ended November 30, 2000. For
          purposes of this Agreement, the first "CONTRACT YEAR" shall commence
          on the Effective Date and end on March 31, 2001 and successive
          Contract Year's shall mean and refer to each period of twelve (12)
          successive calendar months during the Term commencing on April l and
          ending March 31.

     1.4  DELIVERY SCHEDULES. The Covered Companies shall provide Tag-It with
          reasonable lead time for all orders for purchase and Tag-It shall
          timely fulfill all orders for purchases received from the Covered
          Companies and shall deliver the Products to wherever so instructed by
          the Covered Companies according to a reasonable delivery schedule. The
          parties hereto shall in good faith negotiate delivery schedules.

     1.5  RISK OF LOSS. Tag-It shall bear the risk of loss of, or damage to, the
          Products, until delivery in accordance with instructions from the
          Covered Companies, including common carriers.

     1.6  PURCHASE OF COVERED COMPANIES' CURRENT INVENTORY. Tag-It shall
          purchase $4,000,000 of the on-hand trim inventory of the Covered
          Companies less any inventory which the parties mutually agree is
          obsolete and in the event the parties cannot agree as to the quantity
          of obsolete inventory such determination shall be made by an
          arbitrator pursuant to the terms of Section 9.7 ("PURCHASED
          INVENTORY"). SCHEDULE 1.6, attached hereto, sets forth a listing of
          the Purchased Inventory. The Purchased Inventory shall be delivered to
          Tag-It, F.O.B. Puebla, Mexico together with a schedule of the Covered
          Companies' cost. The purchase price for the Inventory shall be the
          Covered Companies' cost and shall be paid in common stock of Tag-It
          based upon the closing market price of such common stock on December
          l3, 2000 ($4.00 per share) (the "Shares"). The Shares issued shall be
          "restricted stock" under federal securities law and the member of the
          Guez Group which is the holder of the Shares shall be referred to
          herein as the "Holder".

     1.7  HOLD PERIOD. The Shares will be "restricted" stock and shall be
          subject to other sale restrictions described in that certain Right of
          First Refusal and Sale Agreement between the parties executed
          concurrently with this Agreement.

2.   PAYMENT FOR THE PRODUCTS.

     2.1  INVOICES. Tag-It shall invoice the Covered Companies upon shipment,
          and payments by the Covered Companies shall be made directly to Tag-It
          net *** (***) days.

----------------------------
*** 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 ("SEC") and have been
filed separately with the SEC.

                                     Page 2
<PAGE>

3.   PRODUCT QUALITY.

     3.1  QUALITY SPECIFICATIONS. The quality of the Products, including, among
          other things, the technical specifications in manufacturing the
          products, shall meet the reasonable specifications and standards of
          both parties, and shall be in accordance with the industry's
          generally-accepted specifications and quality standards.

     3.2  INSPECTION OF THE PRODUCTS. The Covered Companies and their
          representatives may, from time to time, upon reasonable notice and
          during regular business hours, inspect the manufacture of Products and
          conduct related quality control. In connection therewith, Tag-It shall
          provide reasonable assistance and access to Tag-It's facilities,
          personnel and materials. Tag-It shall comply with the Covered
          Companies' reasonable quality and inspection procedures during
          production and after shipment.

     3.3  PRODUCT QUALITY, PERFORMANCE AND PRICING DISPUTE RESOLUTION. If any
          dispute should arise concerning the performance by Tag-It of its
          obligations under Sections 1.2, 1.4, 1.5, and 3.1 and is not resolved
          within 60 days following receipt by Tag-It of a written notice given
          by the Covered Parties, such dispute shall be submitted to arbitration
          pursuant to the provisions of Section 9.7 below. Further, if the
          dispute is resolved, either as a result of agreement or the entry of a
          final order by a court of competent jurisdiction or any arbitrator
          empowered by the parties to finally resolve such dispute, in favor of
          the Covered Companies, then Tag-It shall have an additional 30-day
          period following such resolution in order to cure any failure to
          perform its obligations under Sections 1.2, 1.4, 1.5, and 3.1 and
          following such cure shall be fully reinstated of all rights hereunder
          without prejudice.

4.   TERM AND TERMINATION.

     4.1  TERM. The term of this Agreement shall continue from the Effective
          Date for a period of three (3) years ("TERM").

     4.2  RENEWAL TERM. This Agreement will automatically renew for consecutive
          three (3) year terms under the same terms and conditions set forth
          herein ("RENEWAL TERM") unless terminated by either party upon
          delivering written notice to the other party at least two hundred and
          seventy (270) days prior to the end of the then existing term.

5.   REPRESENTATIONS AND WARRANTIES.

     5.1  MUTUAL REPRESENTATIONS AND WARRANTIES. Each party represents and
          warrants to the other that:

          5.1.1 it has the right and authority to enter into this Agreement and
               to perform all of its respective obligations and undertakings
               herein;

          5.1.2 this Agreement is its valid and binding obligation, enforceable
               in accordance with its terms and has been duly and validly
               authorized by all necessary corporate or other action;

                                     Page 3
<PAGE>

          5.1.3 the rights and privileges granted or to be granted hereunder are
               and will at all times be free and clear of any liens, claims,
               charges or encumbrances;

          5.1.4 it has not done or omitted to do, nor will do or omit to do, any
               act or thing that would or might impair, encumber, or diminish
               the other party's full enjoyment of the rights and privileges
               granted and to be granted under this Agreement; and

          5.1.5 it is duly organized and existing in good standing under the
               laws of the jurisdiction in which it is organized, is duly
               qualified and in good standing as a foreign corporation in every
               state in which the character of its business requires such
               qualifications, and has the power to own its property and to
               carry on its business as now being conducted.

     5.2  REPRESENTATIONS, WARRANTIES AND COVENANTS OF GUEZ GROUP.

          5.2.1 AS TO BINDING SUCCESSORS. Additionally, each member of the Guez
               Group represents, warrants and agrees that each shall cause all
               present and future Covered Companies and any successors of the
               Covered Companies to be bound to the terms and conditions of this
               Agreement, and each covenants and agrees to assume and perform
               the Covered Companies' obligations hereunder. Failure of any such
               successor company to assume the obligations of the Covered
               Companies under this Agreement will constitute a breach of this
               Agreement by the Guez Group.

          5.2.2 IN CONNECTION WITH PURCHASE OF SHARES. Each member of the Guez
               Group understands that the Shares have not been registered under
               the Securities Act and that the Shares are being offered and sold
               pursuant to an exemption from registration contained in the
               Securities Act based in part upon the representations contained
               in this Agreement. Each member of the Guez Group hereby
               represents, warrants and covenants as follows:

               (a)  ECONOMIC RISK. Each have substantial experience in
                    evaluating and investing in private placement transactions
                    of securities in companies similar to Tag-It so that it is
                    capable of evaluating the merits and risks of its investment
                    in Tag-It and has the capacity to protect its own interests.
                    Holder must bear the economic risk of this investment
                    indefinitely unless the Shares are registered pursuant to
                    the Securities Act, or an exemption from registration is
                    available. Holder also understands that there is no
                    assurance that any exemption from registration under the
                    Securities Act will be available and that, even if
                    available, such exemption may not allow Holder to transfer
                    all or any portion of the Shares under the circumstances, in
                    the amounts or at the times Holder might propose.

               (b)  ACQUISITION FOR OWN ACCOUNT. It is acquiring the Shares for
                    their own account for investment only, and not with a view
                    towards their distribution.

                                     Page 4
<PAGE>

               (c)  PROTECT THEIR INTEREST. Guez and Azteca represent that by
                    reason of their, or of their managements' business or
                    financial experience, Guez and Azteca have the capacity to
                    protect their own interests in connection with the
                    transactions contemplated in this Agreement. Further, Guez
                    and Azteca are aware of no publication of any advertisement
                    in connection with the transactions contemplated in this
                    Agreement.

               (d)  ACCREDITED INVESTOR. Each represents that it is an
                    accredited investor within the meaning of Regulation D under
                    the Securities Act.

               (e)  COMPANY INFORMATION. It has had an opportunity to discuss
                    Tag-It's business, management and financial affairs with
                    directors, officers and management of Tag-It and has had the
                    opportunity to ask questions of and receive answers from
                    Tag-It and its management regarding the terms and conditions
                    of this investment. The foregoing, however, does not limit
                    or modify the representations and warranties of Tag-It in
                    Section 5.1 of this Agreement or the right of Guez and
                    Azteca to rely thereon.

               (f)  RULE 144. Guez and Azteca acknowledge and agree that the
                    Shares must be held indefinitely unless they are
                    subsequently registered under the Securities Act or an
                    exemption from such registration is available. Each Guez and
                    Azteca has been advised or is aware of the provisions of
                    Rule 144 promulgated under the Securities Act as in effect
                    from time to time, which permits limited resale of shares
                    purchased in a private placement subject to the satisfaction
                    of certain conditions, including, among other things: the
                    availability of certain current public information about
                    Tag-It, the resale occurring following the required holding
                    period under Rule 144 and the number of shares being sold
                    during any three-month period not exceeding specified
                    limitations.

               (g)  LEGEND. The certificates representing the Shares will bear
                    the following legend:

          THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
          ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
          RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
          SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
          NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED,
          TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
          PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
          ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH
          REGISTRATION.

                                     Page 5
<PAGE>

6.   NON-SOLICITATION.

     6.1  Both during the Term of this Agreement and for the one (1) year
          following termination for any reason of this Agreement, (i) each
          member of the Guez Group and each of the Covered Companies agrees that
          it shall not solicit, divert, take away, or attempt to solicit,
          divert, or take away any of Tag-It's employees, except that if the
          Agreement is terminated for reasons other than the breach of the Guez
          Group, then the Guez Group may immediately hire any Tag-It employee
          who was an employee of the Guez Group on the Effective Date and (ii)
          Tag-It agrees that, except as approved by Hubert Guez, it shall not
          solicit, divert, take away, or attempt to solicit, divert, or take
          away any of the Guez Group's employees.

7.   CONFIDENTIAL INFORMATION.

     7.1  Each party acknowledges and agrees that it may have access to
          information, including, but not limited to, pricing information,
          intellectual property, trade secrets, business information, ideas and
          expressions, which are proprietary to and/or embody the substantial
          creative efforts of the other party ("CONFIDENTIAL INFORMATION"). The
          parties agree that Confidential Information will remain the sole and
          exclusive property of the disclosing party ("DISCLOSING PARTY"), and
          the receiving party ("RECEIVING PARTY") agrees to maintain and
          preserve the confidentiality of such information, including, but
          without limitation, taking such steps to protect and preserve the
          confidentiality of the Confidential Information as it takes to
          preserve and protect the confidentiality of its own confidential
          information. All materials and information disclosed by either party
          to the other will be presumed to be Confidential Information and will
          be so regarded by the Receiving Party unless, the Receiving Party can
          prove that the materials or information are not Confidential
          Information. For the purposes of this section:

     7.2  The parties agree that the Confidential Information will be disclosed
          for use by the Receiving Party only for the limited and sole purpose
          of carrying out the terms of this Agreement.

     7.3  The Receiving Party agrees not to disclose or permit any other person
          or entity access to the Confidential Information, except that such
          disclosure will be permitted to an employee, agent, representative or
          independent contractor of the Receiving Party requiring access to the
          same.

     7.4  The Receiving Party agrees (i) not to alter or remove any
          identification of any copyright, trademark or other proprietary rights
          notice which indicates the ownership of any part of the Confidential
          Information, and (ii) to notify the Disclosing Party of the
          circumstances surrounding any possession, use or knowledge of the
          Confidential Information by any person or entity other than those
          authorized by this Agreement.

     7.5  Confidential Information will exclude any information that (i) has
          been or is obtained by the Receiving Party from a source independent
          of the Disclosing Party and not receiving such information from the
          Disclosing Party, (ii) is or becomes

                                     Page 6
<PAGE>

          generally available to the public other than as a result of an
          unauthorized disclosure by the Disclosing Party or its personnel, or
          (iii) is independently developed by the Receiving Party without
          reliance in any way on the Confidential Information provided by the
          Disclosing Party; or (iv) the Receiving Party is required to disclose
          under judicial order, regulatory requirement, or statutory
          requirement, provided that the Receiving Party provides written notice
          and an opportunity for the Disclosing Party to take any available
          protective action prior to such disclosure.

8.   INDEMNIFICATION.

     8.1  TAG-IT'S INDEMNIFICATION. Tag-It hereby agrees to indemnify, defend,
          and hold the Covered Companies harmless from any claims, losses,
          liabilities, causes of action and costs (including reasonable
          attorneys' fees) arising from, or on account of, or related to the
          material breach by Tag-It of its obligations, representations and
          warranties hereunder.

     8.2  THE GUEZ GROUP INDEMNIFICATION. Each member of the Guez Group hereby
          agrees on their own behalf and to cause the Covered Companies to
          jointly and severally indemnify, defend, and hold Tag-It harmless from
          any claims, losses, liabilities, causes of action and costs (including
          reasonable attorneys' fees) arising from, or on account of, or related
          to any material breach by Guez Group or any Covered Company of its
          obligations, representations and warranties hereunder.

9.   GENERAL.

     9.1  GOVERNING LAW. This Agreement shall be interpreted in accordance with
          the laws of the State of California, without regard to the conflicts
          of laws principles thereof. The parties agree and Guez specifically
          agrees on behalf of each Covered Company that jurisdiction over and
          venue in any legal proceeding arising out of or relating to this
          Agreement will exclusively be in the state or federal courts located
          in California.

     9.2  ENTIRE AGREEMENT. This Agreement, including the Schedules attached
          thereto, and the Voting Agreement, Investor Rights Agreement and Right
          of First Refusal and Sale Agreement in the forms attached hereto as
          exhibits constitute the entire agreement and understanding between the
          parties and integrates all prior discussions between them related to
          its subject matter. No modification of any of the terms of the
          agreement will be valid unless in writing and signed by an authorized
          representative of each party.

     9.3  ASSIGNMENT. This Agreement may not be assigned by the Covered
          Companies to any other person, firm, or entity without the express
          written approval of Tag-It and any attempt at assignment in violation
          of this section will be null and void.

     9.4  NOTICES. All legal notices required or permitted hereunder will be
          given in writing addressed to the respective parties as set forth
          below and will either be (i) personally delivered, (ii) transmitted by
          postage prepaid certified mail, return receipt requested, or (iii)
          transmitted by nationally recognized private express courier, and will
          be deemed to have been given on the date of receipt if delivered
          personally, or three (3)

                                     Page 7
<PAGE>

          days after deposit in mail or express courier. Either party may change
          its address for purposes hereof by written notice to the other in
          accordance with the provisions of this Section. The addresses for the
          parties are as follows:

          TAG-IT PACIFIC, INC.            GUEZ GROUP C/O
          3820 South Hill St.             AZTECA PRODUCTION INTERNATIONAL, INC.
          Los Angeles, CA 90037           5804 E. Slauson Ave.
          Attn:  Colin Dyne               Commerce, CA 90040
          Fax Number:  (323) 231-7039     Attn:  Deborah Greaves, Esq.
                                          Fax Number:

          WITH COPIES TO:
          Troop Steuber Pasich Reddick & Tobey, LLP
          2029 Century Park East, 24th Floor
          Los Angeles, CA 90067-3010
          Attn:  Murray Markiles
          Fax Number:  (310) 728-2233

     9.5  RIGHTS TO INJUNCTIVE RELIEF. All parties acknowledge that remedies at
          law may be inadequate to provide full compensation in the event of a
          material breach relating to either party's obligations,
          representations, and warranties hereunder, and the non-breaching party
          will therefore be entitled to seek injunctive relief in the event of
          any such material breach.

     9.6  FORCE MAJEURE. No party will be liable for, or will be considered to
          be in breach of or default under this Agreement on account of, any
          delay or failure to perform as required by this Agreement as a result
          of any causes or conditions that are beyond such party's reasonable
          control (such as war, riot, insurrection, rebellion, strike, lockout,
          unavoidable casualty, or damage to personnel, material or equipment,
          fire, flood, storm, earthquake, tornado, or any act of God) and that
          such party is unable to overcome through the exercise of commercially
          reasonable diligence. If any force majeure event occurs, the affected
          party will give prompt written notice to the other party and will use
          commercially reasonable efforts to minimize the impact of the event.
          However, if a force majeure event detrimentally affects a party's
          performance of a material covenant set forth herein, the other party
          can immediately terminate this Agreement.

     9.7  ARBITRATION. With the exception of the parties right to pursue
          injunctive relief hereunder, the parties agree that any dispute or
          claim in law or equity arising out of this Agreement shall be decided
          by neutral, binding arbitration and not by court action, except as
          provided by California law for judicial review of arbitration
          proceedings. The arbitration shall be conducted in accordance with the
          Commercial Arbitration Rules of the American Arbitration Association
          (AAA). The parties to an arbitration may agree in writing to use
          different rules and/or arbitrator(s). In all other respects, the
          arbitration shall be conducted in accordance with Part III, Title 9 of
          the CALIFORNIA CODE OF CIVIL PROCEDURE. Judgment upon the award
          rendered by the arbitrator(s) may be entered in any court having
          jurisdiction thereof. The parties shall have the right to discovery in
          accordance with CODE OF CIVIL PROCEDURE ss.

                                     Page 8
<PAGE>

          1283.05. There shall be three arbitrators, one to be chosen directly
          by each party, and the third arbitrator to be selected by the two
          arbitrators so chosen.

          BY SIGNING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING
          OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
          DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
          ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
          LITIGATED IN A COURT OR JURY TRIAL. YOU ARE GIVING UP YOUR JUDICIAL
          RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
          INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO
          SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
          COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF
          CIVIL PROCEDURE.

     9.8  WAIVER. The waiver, express or implied, by either party of any breach
          of this Agreement by the other party will not waive any subsequent
          breach by such party of the same or a different kind.

     9.9  HEADINGS. The headings to the Sections and Schedules of this Agreement
          are included merely for convenience of reference and will not affect
          the meaning of the language included therein.

     9.10 INDEPENDENT CONTRACTORS. The parties acknowledge and agree that they
          are dealing with each other hereunder as independent contractors.
          Nothing contained in this Agreement will be interpreted as
          constituting either party the joint venturer, employee or partner of
          the other party or as conferring upon either party the power of
          authority to bind the other party in any transaction with third
          parties.

     9.11 SEVERABILITY. In the event any provision of this Agreement is held by
          a court or other tribunal of competent jurisdiction to be
          unenforceable, such provision will be reformed only to the extent
          necessary to make it enforceable, and the other provisions of this
          Agreement will remain in full force and effect.

     9.12 COUNTERPARTS. This Agreement may be executed in two or more
          counterparts, each of which will be deemed an original, but all of
          which together will constitute one and the same instrument. For
          purposes hereof, a facsimile copy of this Agreement, including the
          signature pages hereto, will be deemed to be an original.
          Notwithstanding the foregoing, the parties will deliver original
          execution copies of this Agreement to one another as soon as
          practicable following execution thereof.

     9.13 COOPERATION IN DRAFTING. All parties have cooperated in the drafting
          and preparation of this Agreement, and it will not be construed more
          favorably for or against any party.

     9.14 ATTORNEY'S FEES. Should either party hereto initiate a legal or
          administrative action or arbitration proceeding (an "ACTION") to
          enforce any of the terms or conditions of

                                     Page 9
<PAGE>

          this Agreement, the prevailing party (as determined by the court,
          arbitrator or other fact-finder) will be entitled to recover from the
          losing party all reasonable costs of the Action, including without
          limitation attorneys' fees and costs.

     9.15 SURVIVAL. Sections 5, 6, 7, 8 and 9 will survive termination or
          expiration of this Agreement.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                    TAG-IT PACIFIC, INC.

                                    By:    /S/ COLIN DYNE
                                         -------------------------------------
                                    Name:
                                           -----------------------------------
                                    Title:
                                            ----------------------------------

                                    AZTECA PRODUCTION INTERNATIONAL, INC.

                                    By:    /S/ HUBERT GUEZ
                                         -------------------------------------
                                    Name:
                                           -----------------------------------
                                    Title:
                                            ----------------------------------

                                    HUBERT GUEZ

                                    By:    /S/ HUBERT GUEZ
                                         -------------------------------------

                                    PAUL GUEZ

                                    By:    /S/ PAUL GUEZ
                                         -------------------------------------

                                    Page 10
<PAGE>

                                    AZT INTERNATIONAL SA D RL

                                    By:    /S/ HUBERT GUEZ
                                         -------------------------------------
                                    Name:
                                           -----------------------------------
                                    Title:
                                            ----------------------------------

                                    COMMERCE INVESTMENT GROUP, LLC

                                    By:    /S/ HUBERT GUEZ
                                         -------------------------------------
                                    Name:
                                           -----------------------------------
                                    Title:
                                            ----------------------------------

                                    Page 11
<PAGE>

                                  SCHEDULE 1.1
                              PRODUCTS AND PRICING

     The Products to be sold by Tag-It shall be all trim items and packaging
items as may generally be offered by Tag-It to its customers from time to time.
The prices for the Products shall be as specified in writing by Tag-It to the
Covered Companies from time to time during the term.

                                    Page 12
<PAGE>

                                  SCHEDULE 1.6
                               PURCHASED INVENTORY

     $3,960,000 of inventory located as of the date hereof at the Covered
Companies' warehouse facilities in Commerce, CA as has been previously
identified in writing by the parties.

                                    Page 13

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