Document:

exh10-3.htm

EXHIBIT 10.3

 

                    July 30, 2010

 

Talon International, Inc.

(f/k/a Tag-It Pacific, Inc.)

21900 Burbank Blvd., Suite 270

Woodland Hills, CA 91367

 

Attention:  Mr. Lonnie D. Schnell, CEO

 

	
  

	
Re:

	
Amendment No. 6 to Loan Agreement

 

Dear Sirs:

 

Reference is made to the Revolving Credit and Term Loan Agreement dated as of June 27, 2007, as amended by Amendment No. 1 dated July 30, 2007, Amendment No. 2 dated November 19, 2007, Amendment No. 3 dated March 31, 2008, Amendment No. 4 dated March 31, 2009 and Amendment No. 5 dated June 30, 2010 (collectively, the “Loan Agreement”), by and between Bluefin Capital, LLC (“Bluefin”) and Talon International, Inc. (f/k/a Tag-It Pacific, Inc.) (the “Borrower”).  The Loan Agreement and all of the Loan Documents have been assigned to and are held by CVC California, LLC (the “Lender”), which is an entity under common control with Bluefin.  All capitalized terms used herein without definition have the respective meanings ascribed to them in the Loan Agreement.

 

Pursuant to the Loan Agreement and each of the Notes, the Revolving Credit Commitment expires, and each of the Notes and all other Obligations become due and payable in full, on July 30, 2010.  In connection with the conversion, on or about the date hereof, of all outstanding principal, interest, fees and other amounts in respect of the outstanding Loans into shares of Series B Preferred Stock of the Borrower (the “Debt Conversion”), the Borrower has requested, and the Lender has agreed, to amend the Revolving Credit Commitment so as to extend the maturity thereof and reduce the maximum permitted principal amount thereof, and to effect certain other modifications with respect to the Loan Agreement as more fully set forth below.  In furtherance of the foregoing, the Lender and the Borrower hereby agree as follows:

 

1.           Amendments.

 

(a)           The definition of “Maturity Date” contained in Article I of the Loan Agreement is hereby amended to refer to July 31, 2012 instead of July 30, 2010.

 

               (b)           The definition of “Maximum Revolver Amount” contained in Article I of the Loan Agreement is hereby amended so as to read in full as follows:

 

“Maximum Revolver Amount” shall mean, at any date, (a) $3,000,000, minus (b) the amount of the Debenture Reserve (if any) as at the date of determination.”

 

  

  

  

 

(c)          In the definition of “Borrowing Base”, the advance rate applicable to Eligible Accounts in clause (a) of such definition is hereby reduced to 75%, and the advance rate applicable to Eligible Inventory in clause (b) of such definition is hereby reduced to 40%.

 

(d)          In furtherance of the foregoing amendments, and to effect certain other changes with respect to the terms of the Revolving Credit Commitment, the Borrower is executing and delivering to the Lender, simultaneously with the execution and delivery of this Amendment No. 6, an Amended and Restated Revolving Credit Note in the maximum principal amount of $3,000,000, and such Amended and Restated Revolving Credit Note shall henceforth constitute the “Revolving Credit Note” under the Loan Agreement and the other Loan Documents.

 

(e)          Effective as of the date of the Debt Conversion, there shall be no further accrual of any fees under Section 2.03(b)(i) of the Loan Agreement, and such Section 2.03(b)(i) shall thereupon be deleted from the Loan Agreement.

 

(f)          Section 6.16 of the Loan Agreement is hereby amended so as to read in full as follows:

 

“Section 6.16.  Capital Expenditures.  Make aggregate Capital Expenditures in excess of $750,000 in any Fiscal Year.”

 

(g)          In consideration of the extension and amendments set forth herein, the Borrower shall pay to the Lender a non-refundable fee in the amount of $60,000.  The Borrower hereby authorizes the Lender to debit such amount to the Borrower’s revolving credit loan account with the Lender.

 

2.           Waivers.  Effective upon the Debt Conversion, the Lender hereby waives all Events of Default then existing.

 

3.           Reaffirmation.

 

(a)           The Borrower hereby reaffirms all of its representations and warranties in the Loan Documents on and as of the date hereof, as if expressly made on and as of the date hereof.

 

(b)           The Borrower hereby (i) confirms the ongoing validity of all of the Obligations outstanding on the date hereof and on the effectiveness of this Amendment No. 6 (after giving effect to this Amendment No. 6), (b) confirms that such Obligations are owing without reservation, defense, counterclaim or offset, (c) confirms that, after giving effect to this Amendment No. 6, neither the Borrower nor any Subsidiary has any claims or causes of action against the Lender or any of its Affiliates, managers or officers, and (d) acknowledges, confirms and agrees that none of the amendments to be effected by this Amendment No. 6 shall constitute a novation of the Obligations (if any) outstanding immediately prior to the effectiveness of this Amendment No. 6.

 

  

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(c)           The Borrower hereby reaffirms the validity of all of the liens and security interests heretofore granted to the Lender as collateral security for the Obligations, and acknowledges that all of such liens and security interests, and all collateral heretofore pledged as security for the Obligations, continues to be and remains collateral for the Obligations (including, without limitation, the extended Revolving Credit Commitment) from and after the effectiveness of this Amendment No. 6.

 

4.          Representations and Warranties.  Each of the Lender and the Borrower hereby represents and warrants that (a) this Amendment No. 6 has been duly and validly authorized by all necessary corporate or company action on such party’s part, (b) this Amendment No. 6 has been duly executed and delivered by such party’s duly authorized officer, and (c) this Amendment No. 6 constitutes such party’s valid and binding obligation, enforceable against such party in accordance with its terms.

 

5.          Ongoing Force and Effect; Waiver and Amendment.  Except as expressly set forth herein, all of the terms and conditions of the Loan Agreement and the other Loan Documents remain unchanged and in full force and effect.  All references to the Loan Agreement in any other Loan Documents shall hereafter mean and refer to the Loan Agreement as amended by this Amendment No. 6.  This Amendment No. 6 may not be amended or modified, nor may any performance required hereunder be waived, except pursuant to a written agreement signed by the party to be charged therewith.

 

6.          Governing Law.  This Amendment No. 6 shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws principles.

 

[The remainder of this page is intentionally blank]

 

  

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Kindly confirm your agreement to the foregoing by countersigning a counterpart copy of this Amendment No. 6 in the space provided below.

 

 

	  	
Very truly yours,

 

CVC CALIFORNIA, LLC

 

By:         /s/ Gary E. Jaggard          

Gary E. Jaggard, Managing Director

 

Acknowledged, Confirmed and Agreed To:

 

TALON INTERNATIONAL, INC.

(f/k/a Tag-It Pacific, Inc.)

 

By:      /s/ Lonnie D. Schnell                                                                                                 

    Lonnie D. Schnell, Chief Executive Officer

  

4exh10-4.htm

EXHIBIT 10.4

 

AMENDED AND RESTATED

REVOLVING CREDIT NOTE

 

	
$3,000,000

	
July 30, 2010

 

FOR VALUE RECEIVED, the undersigned, TALON INTERNATIONAL, INC., a Delaware corporation f/k/a Tag-It Pacific, Inc. (the “Maker”), hereby promises to pay to CVC CALIFORNIA, LLC, a Delaware limited liability company (“CVC”), or registered assigns (hereinafter, collectively with CVC, referred to as the “Payee”), on July 31, 2012, (or sooner by reason of an Event of Default or required prepayment in accordance with the Loan Agreement hereinafter described), the principal sum of Three Million ($3,000,000) Dollars or, if less, the aggregate unpaid principal amount of all Revolving Credit Advances made by the Payee to the Maker pursuant to that certain Revolving Credit and Term Loan Agreement dated as of June 27, 2007 by and between CVC (assignee of Bluefin Capital, LLC) and the Maker (as same has been and may hereafter be amended, modified, supplemented and/or restated from time to time, the “Loan Agreement”), together with interest (computed as hereinafter provided) on any and all principal amounts outstanding hereunder from time to time from the date hereof until payment in full hereof, at the rate of (a) twelve (12%) percent per annum with respect to periods from the date hereof through and including July 31, 2011, and (b) fourteen (14%) percent per annum with respect to all periods from and after August 1, 2011; provided, however, that during the continuance of any Event of Default under the Loan Agreement, the interest rate otherwise applicable hereunder shall be increased by five hundred (500) basis points.  All interest shall be computed on the daily unpaid principal balance hereof based on a three hundred sixty (360) day year, and shall be payable monthly in arrears on the first day of each calendar month commencing September 1, 2010, and upon maturity or acceleration hereof.

 

The Maker shall have the right, at any time and from time to time, to prepay all or any portion of the principal balance of this Note upon written notice to the Payee, stating the amount of the prepayment.  In addition, the Maker shall be required to make principal payments hereunder, without requirement of notice or demand, as and to the extent provided in Section 2.01(d) of the Loan Agreement.

 

Unless the Maker shall be otherwise notified in writing by CVC, all principal and interest hereunder are payable in lawful money of the United States of America at the office of CVC set forth in the Loan Agreement in immediately available funds.  Payments of principal and/or interest hereunder shall be made, at the Payee’s option, by debiting any demand deposit account(s) in the name of the Maker at the Payee (or any agent of the Payee) or in such other reasonable manner as may be designated by the Payee in writing to the Maker and in any event shall be made in immediately available funds.  The Maker hereby irrevocably authorizes the Payee to so debit any and all such demand deposit accounts.

 

The Maker hereby waives presentment, demand, dishonor, protest, notice of protest, diligence and any other notice or action otherwise required to be given or taken under the law in connection with the delivery, acceptance, performance, default, enforcement or collection of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended, modified or subordinated (by forbearance or otherwise) from time to time, without in any way affecting

 

  

  

  

the liability of the Maker.  The Maker hereby further waives the benefit of any exemption under the homestead exemption laws, if any, or any other exemption, appraisal or insolvency laws, and consents that the Payee may release or surrender, exchange or substitute any personal property or other collateral security now held or which may hereafter be held as security for the payment of this Note.

 

This Note is the Revolving Credit Note issued pursuant to the terms of the Loan Agreement and is secured pursuant to the provisions of certain “Security Documents” referred to in the Loan Agreement.  This Note is entitled to all of the benefits of the Loan Agreement and said Security Documents, including provisions governing the payment and the acceleration of maturity hereof, which agreements and instruments are hereby incorporated by reference herein and made a part hereof.  The occurrence and continuance of an Event of Default thereunder shall constitute a default under this Note and shall entitle the Payee to accelerate the entire indebtedness hereunder and take such other action as may be provided for in the Loan Agreement and/or any and all other instruments evidencing and/or securing the indebtedness under this Note, or as may be provided under the law.

 

In the event that any holder of this Note shall, during the continuance of any Event of Default, exercise or endeavor to exercise any of its remedies hereunder or under the Loan Agreement or any of the Security Documents, the Maker shall pay all reasonable costs and expenses incurred in connection therewith, including, without limitation, reasonable attorneys’ fees, all of which costs and expenses shall be obligations under and part of this Note; and the holder hereof may take judgment for all such amounts in addition to all other sums due hereunder.

 

No consent or waiver by the holder hereof with respect to any action or failure to act which, without such consent or waiver, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Maker and by the holder hereof.

 

All agreements between the Maker and the Payee are hereby expressly limited to provide that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Payee for the use, forbearance or detention of the indebtedness evidenced hereby exceed the maximum amount which the Payee is permitted to receive under applicable law.  If, from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Security Documents or the Loan Agreement, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall automatically be reduced to the limit of such validity, and if from any circumstance the Payee shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance of any of the Maker’s Obligations (as such term is defined in the Loan Agreement) to the Payee, and not to the payment of interest hereunder.  To the extent permitted by applicable law, all sums paid or agreed to be paid for the use, forbearance or detention of the indebtedness evidenced by this Note shall be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full, to the end that the rate or amount of interest on account of such indebtedness does not exceed any applicable usury ceiling.  As used herein, the term “applicable law” shall mean the law in effect as of the date hereof, provided, however, that

 

  

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in the event there is a change in the law which results in a higher permissible rate of interest, then this Note shall be governed by such new law as of its effective date.  This provision shall control every other provision of all agreements between the Maker and the Payee.

 

This Note shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that such laws are superseded by Federal enactments.

 

This Note amends, restates and supersedes in its entirety the Revolving Credit Note dated June 27, 2007 in the maximum principal amount of $5,000,000 issued by the Maker to Bluefin Capital, LLC (which Revolving Credit Note has been assigned to CVC), provided that this Note does not effect a novation of the outstanding obligations (if any) under such prior Revolving Credit Note (all of which obligations shall henceforth be evidenced by this Note).

 

IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its duly authorized officers as of the date first set forth above.

 

	  	
TALON INTERNATIONAL, INC.

By:         /s/ Lonnie Schnell         

Name:    Lonnie Schnell

Title:      Chief Executive Officer

  

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