THIS AGREEMENT is made as of December 31, 1997, by TAG-IT PACIFIC, LLC. a Delaware limited
liability company ("Debtor"), to THE CRUTTENDEN ROTH BRIDGE FUND, LLC, a California limited
liability company ("Secured Party").
A. Debtor has executed and delivered to Secured Party that certain note (the "Note") captioned "Senior
Subordinated Secured Note" dated as of the date hereof, in the original principal amount of $220,000.
B. As part of the consideration for the granting of the loan evidenced by the Note and as additional security
therefor, Secured Party has required that Debtor grant a security interest in the "Collateral" (as defined below)
and Debtor desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter set forth and other valuable
consideration, the parties agree as follows:
1. DEFINITIONS. Certain terms used in this Agreement shall have the meaning set forth below.
"COLLATERAL" means all of Debtor's right, title and interest (whether now held or hereafter acquired) in and to
all personal property (whether tangible or intangible) described in EXHIBIT "A" hereto, incorporated herein by
"EVENT OF DEFAULT" means an Event of Default as defined in, and occurring under, that certain Securities
Purchase Agreement (the "Securities Purchase Agreement") of even date herewith by and between Debtor and
"INDEBTEDNESS" means the indebtedness evidenced by the Note and any other indebtedness or liability of
Debtor to Secured Party now existing or hereafter arising under the Note, including, without limitation, under any
"PERMITTED LIENS" means any security interests, mortgages, pledges, liens, claims, counterclaims, charges
and encumbrances, in, or on any of the assets or properties of the Debtor, to secure the indebtedness described
Section 7.2 of the Securities Purchase Agreement.
"SENIOR DEBT" shall bear the same meaning as in the Securi