Welcome to the Tag-It Pacific, Inc. Class Action Settlement Website.

The following is a summary of information presented in more detail in the Notice of Pendency and Proposed Settlement of Class Action and Settlement Hearing ("Notice"), which Class Members should have received in the mail, and which you can access by clicking the box to the left. Since this is just a summary, you should read the full Notice for additional details.

Please read this information carefully. If you are a Settlement Class Member (as defined below), your rights will be affected by these proceedings and you may be entitled to receive benefits under a proposed $5,750,000 class action settlement.

SETTLEMENT FAIRNESS HEARING

The Court held a Settlement Hearing at 10:00 a.m. on December 7, 2009 before the Honorable Manuel L. Real at the United States District Court for the Central District of California, located at 312 North Spring Street, Los Angeles, CA 90012, in Courtroom 8, and determined:

• (a) The proposed Settlement is fair, reasonable and adequate and is approved by the Court;
• (b) The proposed Plan of Allocation for distributing the Settlement to Class Members is fair and reasonable and is approved; and
• (c) The application by Plaintiff’s Counsel for an award of attorneys’ fees and reimbursement of litigation expenses, including payment to Lead Plaintiff, is approved.

WHAT IS THIS CASE ABOUT?

This case was brought as a class action alleging that Defendants violated §§10(b) (and SEC Rule 10b-5 issued thereunder) and 20(a) of the Securities and Exchange Act of 1934, by, among other things, making false and misleading statements in press releases and quarterly and annual reports filed with the U.S. Securities and Exchange Commission, misstating Tag-It’s financial condition, accounts receivable, accounts payable and inventory, and falsely stating that Tag-It, notwithstanding the loss of its largest customers, was expanding its customer base, continuing sales growth, and improving gross margins. Plaintiff alleges that largely as a result of the loss of its largest customers, millions of dollars in inventory became obsolete and accounts receivable became uncollectible, and that Tag-It was not continuing profitable sales growth. Plaintiff alleges that Tag-It was having serious cash flow problems and that Defendants undertook efforts to hide Tag-It’s deteriorating financial condition and that it was only towards the end of the Class Period that Tag-It took the steps necessary to write-off its obsolete inventory and to properly write-off or reserve for accounts receivable. Plaintiff alleges that Defendants engaged in this conduct to raise money to prevent Tag-It from going bankrupt. The Complaint further alleges that Lead Plaintiff and other Class Members purchased Tag-It common stock during the Class Period at prices artificially inflated as a result of Defendants’ dissemination of materially false and misleading statements.

Defendants deny all allegations of misconduct contained in the Complaint, and deny having engaged in any wrongdoing. Defendants assert that their public statements were accurate at the times made and were not intended to, and did not, defraud purchasers of Tag-It common stock.

TERMS OF THE SETTLEMENT

In exchange for the settlement and dismissal of the Litigation, Defendants’ insurance carriers paid the Settlement Fund the sum of five million seven hundred and fifty thousand dollars ($5,750,000). The Settlement Fund (less certain Court authorized expenses) is being invested in interest bearing U.S. government securities and that interest is being accrued and reinvested for the benefit of the Class. These funds will be distributed proportionately to eligible Class Members who send in valid Proof of Claim forms, after payment of Plaintiff’s Counsel’s legal fees and expenses and any award to Lead Plaintiff for his time, expense and effort in representing the Class, and the expenses and the costs of claims administration, including the costs of printing and mailing this Notice and the cost of publishing notice, as approved by the Court.

Your share of the fund will depend on the number of shares of Tag-It common stock represented by valid claim forms that Class Members send in and the dollar amount of those claims, how many shares of Tag-It common stock you held, and when you bought and sold them. A claim will be calculated as follows: The Settlement Fund less taxes, notice and administration costs, attorneys’ fees and litigation expenses (“Net Settlement Fund”) will be distributed to Class Members who submit valid, timely Proof of Claim forms (“Claimants”) under the Plan of Allocation (the “Plan”) described below. The Plan provides that Claimants will be eligible to participate in the distribution of the Net Settlement Fund only if Claimants have a net loss on all their transactions in Tag-It common stock during the Class Period.

To the extent there are sufficient funds in the Net Settlement Fund, each Claimant will receive an amount equal to the Claimant’s “Recognized Loss,” as defined below. If, however (and as is much more likely), the amount in the Net Settlement Fund is not sufficient to permit payment of the total Recognized Loss of each Claimant, then each Claimant shall be paid the percentage of the Net Settlement Fund that each Claimant’s claim bears to the total of the Recognized Losses of all Claimants. Payment in this manner shall be deemed conclusive against all Claimants. The Plan of Allocation has been prepared by Plaintiff’s Counsel with the assistance of a damages expert who took into account the report of the expert appointed by the mediator who reviewed the parties’ submissions with respect to damages. Defendants do not agree with the characterization that any damages were suffered by Lead Plaintiff or the Class.

THE RIGHTS OF THE SETTLEMENT CLASS MEMBERS

If you are a Settlement Class Member, you have the following options:

• FILE A PROOF OF CLAIM – To qualify for a payment, you must timely send in a completed Proof of Claim form with supporting documents (DO NOT SEND ORIGINALS) to the Claims Administrator. At the link on the left, you may get a Proof of Claim form. Please read the instructions carefully, fill out the Proof of Claim form, include all the documents the form asks for, sign it, and mail it to the Claims Administrator by first class mail, postmarked not later than January 21, 2010. The Claims Administrator needs all of the information requested in the Proof of Claim in order to determine what you may be entitled to.
  
  
• EXCLUDE YOURSELF FROM THE CLASS – (The Deadline Has Passed) You get no payment. This is the only option that might allow you to bring an individual lawsuit against the defendants asserting the legal claims being released in this case, if you have a valid and timely claim. A written request for exclusion from the Settlement Class, must be postmarked on or before November 23, 2009, addressed to Tag-It Class Action Settlement, c/o Rust Consulting, Inc., P.O. Box 2224, Faribault, MN 55021.
  
  Your request to be excluded must be signed and must state: (a) your name, address, and telephone number; (b) your purchases and sales of Tag-It common stock on the open market made during the Class Period, including the dates, the number of shares of Tag-It common stock purchased or sold, the price(s) paid or received per share of Tag-It common stock for each such purchase or sale, and whether you continue to hold such Tag-It common stock; (c) the amount or number of shares of Tag-It common stock held as of the beginning of the Class Period on March 28, 2003; and (d) that you wish to be excluded from the Class. You cannot exclude yourself on the phone or by e-mail.
  
  If you ask to be excluded, you will not get any settlement payment, and you cannot object to the settlement. Also, you will not be legally bound by anything that happens in this lawsuit, and you would not be prevented by this settlement from suing Defendants and their Related Parties for the Released Claims in the future. However, if you exclude yourself and bring your own lawsuit, you would be subject to all the risks of litigation, including the risk that your lawsuit would be rejected because you filed it too late. If you do not file your request for exclusion on time, you will be legally bound by all the proceedings in this Litigation, including all court orders and judgments in the Litigation, even if you have a lawsuit pending against the Released Persons that covers Released Claims, or if you subsequently start a lawsuit or an arbitration or any other proceedings against any of the Released Persons that are covered by the Released Claims.
  
  
• OBJECT – (The Deadline Has Passed) If you are a Class Member (and you have not excluded yourself), and you want to object to the Settlement or any of its terms, the proposed Plan of Allocation, the application by Plaintiff’s Counsel for an award of fees and the reimbursement of expenses, and/or the request for an award to the Lead Plaintiff under the Private Securities Litigation Reform Act, the Court will consider your views if you file a proper objection within the deadline below, and according to the following procedures. To object, you must send a signed letter saying that you object to the proposed settlement in “Huberman v. Tag-it Pacific Inc., Case No. 2:05 cv 07352 R(Ex) (United States District Court for the Central District of California).” Your letter must include your name, address, telephone number and your original signature (no copies). You must also include: (a) a written statement of your objections, (b) the grounds or the reasons for why you object or desire to appear and be heard, as well as copies of all documents or any writings that you wish the Court to consider, (c) whether you intend to present any witnesses; and (d) information about your purchases, acquisitions and sales of Tag-It common stock made during the Class Period, including the dates, the number of shares, the price(s) paid or received per share, and whether you continue to hold such Tag-It common stock.
  
  You must mail such objection, on or before November 23, 2009, to: (1) Clerk of the Court, United States District Court for the Central District of California, 312 North Spring Street, Room G-19, Los Angeles, CA 90012-4701. You must also send a copy of what you send to the Court to the following attorneys on or before November 23, 2009:
  
  

  Marian P. Rosner, Esq. Wolf Popper LLP 845 Third Avenue New York, NY 10022 Email: IRRep@wolfpopper.com Peter Stone, Esq. Jay Gandhi, Esq. Paul, Hastings, Janofsky, & Walker LLP 695 Town Center Drive 17th Floor Costa Mesa, CA 92626 Email: jaygandhi@paulhastings.com

  Lionel Z. Glancy, Esq. Glancy, Binkow & Goldberg LLP 1801 Avenue of the Stars, Suite 311 Los Angeles, CA 90067 Email: info@glancylaw.com Howard Privette, Esq. Paul, Hastings, Janofsky, & Walker LLP 515 South Flower Street Twenty Fifth Floor Los Angeles, CA 90071

FURTHER INFORMATION

Further information regarding the Litigation, the Notice and how to file your claim may be obtained by contacting the Claims Administrator or reading through the Notice and Proof of Claim links at the left. You may also contact Class Counsel at the address listed above.