EXHIBIT 10.1

 

SECURITIES REDEMPTION AGREEMENT

 

THIS AGREEMENT (this “Agreement”), dated as of the 12th day of July, 2013, is
made by and among CVC CALIFORNIA, LLC, a Delaware limited liability company
(“Seller”), TALON INTERNATIONAL, INC., a Delaware corporation (“Buyer”), and,
with respect to Section 4.3 of this Agreement only, Lonnie D. Schnell and Larry
Dyne.

 

Article I.
PURCHASE AND SALE; PRICE

 

1.1     Purchase and Sale of Shares. Concurrently with the execution and
delivery of this Agreement, Seller shall sell and deliver to Buyer, and Buyer
shall purchase and redeem from Seller, an aggregate of 407,160 shares (the
“Shares”) of Series B Convertible Preferred Stock of Buyer (the “Series B
Preferred Stock”), for the consideration set forth in Section  below.

 

1.2     Purchase Price. Concurrently with the execution and delivery of this
Agreement and in consideration of the sale, conveyance, transfer and delivery of
the Shares provided for in this Agreement, Buyer shall pay to Seller an
aggregate purchase price for the Shares (the “Purchase Price”) of $18,800,000,
to be paid as follows:

 

(a)     $13,000,000 (the “Cash Payment”) by wire transfer of immediately
available funds to such bank account of Seller as Seller will designate in
writing to Buyer; and

 

(b)     $5,800,000 by delivery to Seller of a one percent (1%) promissory note
issued by Buyer (in the form designated as Exhibit 1.2(b) hereto) and payable to
the order of Seller in the principal amount of $5,800,000 and with a term of six
(6) months (the “Note”).

 

1.3     Deliveries. Concurrently with the execution and delivery of this
Agreement, (i) Seller shall transfer and assign to Buyer all of the Shares by
delivering one or more certificates representing the Shares, duly endorsed for
transfer to Buyer or accompanied by an appropriate stock power in respect of the
Shares executed by Buyer, and (ii) Buyer shall deliver the Cash Payment and the
Note in the manner provided for in Section  above.

 

Article II.
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to Buyer as follows:

 

2.1     Corporate Organization, etc. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

 

2.2     Authorization, etc. Seller has the full legal right, authorization, and
capacity to execute and deliver, and to perform its obligations under, this
Agreement and to sell, transfer and deliver the Shares. Seller has taken all
action necessary to authorize its execution, delivery and performance of its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Seller and constitutes the valid obligation of Seller, and is
legally binding on and enforceable against Seller in accordance with its terms.

 

 
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2.3     No Conflict. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, (i) conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under any
provision of any mortgage, indenture, lease or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Seller or its properties or assets,
or (ii) violate any provision of law, or any order, judgment or decree of any
court or other governmental authority applicable to Seller.

 

2.4     Title to Shares. Seller has good and valid right, title and interest to
the Shares, all of which are owned by the Seller free and clear of any charge,
equitable interest, lien, pledge, security interest, or other similar interest
or right (collectively, “Lien”). Seller has the full legal right, power and
authority, and any approval required by law, to sell, assign, transfer and
deliver the Shares under this Agreement and to make the representations,
warranties, covenants and agreements made by Seller under this Agreement. Buyer
will acquire good and valid title to the Shares being sold and transferred by
Seller hereunder, in each case free and clear of all Liens, other that those
created or suffered by Buyer. Seller has not entered into any agreements,
understandings or undertakings with respect to the Shares being sold and
transferred by Seller under this Agreement pursuant to which Seller is or may
become obligated, directly or indirectly, to transfer, dispose of, or assign the
Shares, or which would result in any person placing a Lien upon the Shares.

 

2.5     Governmental Authorities. Seller is not required to submit any notice,
report or other filing with and no consent, approval or authorization is
required by any governmental or regulatory authority in connection with Seller’s
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby.

 

2.6     No Consents. No approvals, authorizations, consents, orders or other
actions of, or filings with, any person are required to be obtained or made by
Seller in connection with the execution of and the consummation of this
Agreement and the transactions contemplated under this Agreement.

 

2.7     Acknowledgment. Seller acknowledges that: (i) Buyer possesses material
non-public information about Buyer, including, without, limitation, information
concerning Buyer’s financial condition and results of operations from April 1,
2013 through the date hereof, which information has not been publicly disclosed
as of the date of this Agreement; (ii) Buyer has made available for inspection
by Seller information about Buyer and its operations including, without
limitation, Buyer’s financial results for the period from April 1, 2013 through
the date hereof; and (iii) Seller has had an opportunity to discuss with Buyer
and its directors and/or executive officers, Buyer’s business, management and
financial affairs, and Seller has had an opportunity to receive answers to its
satisfaction to any questions Seller may have.

 

 
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2.8     No Other Representations. Except as expressly set forth in this Article
II, Seller makes no representations or warranties in connection with the
transactions contemplated by this Agreement. Without limitation of the
foregoing, Seller makes no representations or warranties regarding Buyer or its
business, operations, assets, liabilities, financial condition or prospects.

 

Article III.
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller as follows:

 

3.1     Corporate Organization, etc. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

 

3.2     Authorization, etc. Buyer has the full legal right, authorization, and
capacity to execute and deliver, and to perform its obligations under, this
Agreement and to purchase, redeem and pay for the Shares in accordance herewith.
Buyer has taken all action necessary to authorize its execution, delivery and
performance of its obligations under this Agreement and the Note. This Agreement
and the Note have been duly executed and delivered by Buyer and constitute the
valid obligations of Buyer, and are legally binding on and enforceable against
Buyer in accordance with their respective terms.

 

3.3     No Conflict. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, (i) conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under any
provision of any mortgage, indenture, lease or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Buyer or its properties or assets,
or (ii) violate any provision of law, the certificate of incorporation or
by-laws of Buyer, or any order, judgment or decree of any court or other
governmental authority applicable to Buyer.

 

3.4     Governmental Authorities. Buyer is not required to submit any notice,
report or other filing with and no consent, approval or authorization is
required by any governmental or regulatory authority in connection with Buyer’s
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby.

 

3.5     No Consents. No approvals, authorizations, consents, orders or other
actions of, or filings with, any person are required to be obtained or made by
Buyer in connection with the execution of and the consummation of this Agreement
and the transactions contemplated under this Agreement.

 

3.6     Adequate Capital and Surplus. Buyer has adequate capital and legally
available surplus in order to redeem the Shares in accordance with the terms of
this Agreement, without violation of the Delaware General Corporation Law.

 

3.7     Equity Proceeds. Not less than $5,500,000 of the Cash Payment represents
the proceeds of one or more equity issuances by Buyer subsequent to June 1,
2013.

 

 
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3.8     Secured Indebtedness. On the date hereof, after giving effect to the
Cash Payment, neither Buyer nor any of its subsidiaries is obligated in respect
of any indebtedness for money borrowed which is secured by a lien on any asset
of Buyer or any of its subsidiaries.

 

3.9     Investment Intent. Buyer is acquiring the Shares hereunder for its own
account, and not with a view to any resale or distribution thereof in violation
of any applicable federal or state securities laws.

 

Article IV.
ADDITIONAL COVENANTS

 

4.1     Resignations. Concurrently with the execution and delivery of this
Agreement, Seller shall deliver to the Chairman of the Board of Directors of
Buyer, the resignation of Mark Hughes as a member of the Board of Directors of
Buyer, which resignation shall be effective immediately.

 

4.2     Confidentiality. Seller will hold in strict confidence and not disclose
to any other party (other than its counsel and other advisors), without Buyer’s
prior consent, all material non-public information received by Seller from Buyer
or any of Buyer’s officers, directors, employees, agents, counsel or auditors in
connection with the transactions contemplated hereby, except as may be required
by applicable law (including, without limitation, the filing of required reports
under the Securities Act of 1934, as amended, to report the transactions
contemplated hereby) or as otherwise contemplated herein.

 

4.3     Termination of Stockholders Agreement. Buyer, Seller, Lonnie D. Schnell
and Larry Dyne hereby agree that the Stockholders Agreement, dated as of July
30, 2010, by and among such parties (the “Stockholders Agreement”) is hereby
terminated and of no further force and effect, and none of the parties thereto
shall have any further rights or claims against, or obligations to, any other
party thereto in respect thereof, and their respective liabilities and
obligations thereunder shall be irrevocably and unconditionally released.
Without limitation of the foregoing, the sale, transfer and redemption of the
Shares hereunder shall not trigger any tag-along rights under Section 4.6, and
none of the payments to be received by Seller in respect of the Shares shall
trigger any payment obligation under Section 5, of the Stockholders Agreement.

 

4.4     Waiver of Preemptive Right. Buyer is issuing and selling up to
66,666,667 shares of Common Stock at a purchase price of $0.09 per share (the
“Offering”) and is using the proceeds of such Offering to fund a portion of the
Cash Payment. Seller acknowledges that pursuant to Section 7 of the Stockholders
Agreement, Buyer is entitled to purchase its pro rata portion of the shares of
Common Stock to be sold in the Offering. Seller hereby waives all Seller’s
rights under the Stockholders Agreement or otherwise to purchase any of the
shares of Common Stock in the Offering.

 

4.5     Mutual Releases. In consideration of the mutual covenants and agreements
contained in this Agreement, Buyer and Seller hereby release, acquit and forever
discharge one another and their respective managers, directors, officers,
partners, employees and affiliates (collectively. “Affiliates”) from and in
respect of any and all demands, claims, controversies, damages, suits, actions,
causes of action, accounts, covenants, agreements, debts, liabilities and sums
of money due and owing, or that may become due and owing, of any kind
whatsoever, at common law, statutory or otherwise, which either such party has
or might have, known or unknown, now existing or that might arise hereafter,
directly or indirectly attributable to any transactions or dealings between
Buyer and Seller on or prior to the date hereof; provided, that these mutual
releases shall not constitute or effect any release of any obligations under
this Agreement or the Note.

 

 
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Article V.
MISCELLANEOUS PROVISIONS

 

5.1     Amendment and Modification. This Agreement may be amended, modified and
supplemented only by written agreement of Seller and Buyer.

 

5.2     Waiver of Compliance; Consents. Any failure of Seller on the one hand,
or Buyer on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be waived in writing by Buyer or Seller, respectively,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section .

 

5.3     Expenses. Except as otherwise provided in the Note, each party will pay
its own legal, accounting and other expenses incurred by such party or on its
behalf in connection with this Agreement and the transactions contemplated
herein; provided, that Buyer shall, promptly upon request of Seller, pay or
reimburse Seller for Seller’s costs associated with its legal review and
negotiation of this Agreement and the Note and compliance with applicable
securities laws in relation to the transactions contemplated herein, up to an
aggregate maximum of $40,000.

 

5.4     Investigations; Survival of Warranties. The respective representations
and warranties and covenants of Seller and Buyer contained herein are true,
accurate and correct and shall not be deemed waived or otherwise affected by any
investigation made by any party hereto or by the occurrence of the Closing. Each
and every such representation and warranty shall survive the Closing Date.

 

5.5     Notices. Any notice, request, consent or communication (collectively, a
“Notice”) under this Agreement shall be effective only if it is in writing and
(i) personally delivered, (ii) sent by certified or registered mail, return
receipt requested, postage prepaid, or (iii) sent by a nationally recognized
overnight delivery service, with delivery confirmed, addressed as follows:

 

 
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(a)           If to Seller, to:

 

CVC California, LLC
c/o Comvest Capital, LLC
525 Okeechobee Blvd., Suite 1050
West Palm Beach, Florida 33401
Attn: Robert O’Sullivan
Telephone: (561) 727-1800
Facsimile: (561) 727-2100

 

with a copy to:

 

Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attn: Alan I. Annex, Esq.
Telephone: (212) 801-9200
Facsimile: (212) 801-6400

 

(b)           If to Buyer, to:

 

Talon International, Inc.
21900 Burbank Blvd., Suite 270
Woodland Hills, California 91367
Attn: Lonnie Schnell
Telephone: (818) 444-4100
Facsimile: (818) 444-4110

 

with a copy to:

 

Stubbs Alderton & Markiles, LLP
15260 Ventura Boulevard, 20th Floor
Sherman Oaks, California 91403
Attn: John J. McIlvery, Esq.
Telephone: (818) 444-4500
Facsimile: (818) 444-6302

 

or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail, properly addressed, or (iii) when receipt of a
Notice sent by an overnight delivery service is confirmed by such overnight
delivery service, as the case may be, unless the sending party has actual
knowledge that a Notice was not received by the intended recipient.

 

5.6     Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties to this Agreement without the prior written consent of all other
parties.

 

 
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5.7     Governing Law. This Agreement shall be governed by the laws of the State
of California (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of the State of California) as to all
matters including, but not limited to, matters of validity, construction,
effect, performance and remedies.

 

5.8     Counterparts; Signatures. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile or electronically transmitted signatures with full binding
legal effect.

 

5.9     Neutral Interpretation. This Agreement constitutes the product of the
negotiation of the parties hereto and the enforcement hereof shall be
interpreted in a neutral manner, and not more strongly for or against any party
based upon the source of the draftsmanship hereof.

 

5.10     Headings. The article and section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

5.11     Entire Agreement. This Agreement, which term as used throughout
includes the Exhibits hereto, embodies the entire agreement and understanding of
the parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.

 

(Signatures on Following Page)

 

 
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the date first hereinabove set forth.

 

 

 

BUYER:

 

TALON INTERNATIONAL, INC.

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

 

 

 

 

SELLER:

 

CVC CALIFORNIA, LLC

                     By: /s/ Robert O’Sullivan     Name: Robert O’Sullivan    
Title:  Managing Director  

 

 

Acknowledged and Agreed
With Respect to Section 4.3 Only:

 

 

/s/ Lonnie D. Schnell                                            
                 
Lonnie D. Schnell

 

 

/s/ Larry
Dyne                                                                          
Larry Dyne

 

 

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