TAG-IT PACIFIC, INC.
March 24, 2000
Grupo Industrial Cierres Ideal, S.A. de C.V.
Talon, Inc.
Antiguo Camino a San Xxxxxxx No. 284
Col. Los Angeles Deleg. Iztapalapa
Mexico D.F., 09830
Attention: Chief Executive Officer
Re: EXCLUSIVE DISTRIBUTION AGREEMENT
Gentlemen:
When signed by each of you and Tag-It Pacific, Inc., a Delaware corporation
("DISTRIBUTOR"), in the manner hereinafter provided, this letter agreement (this
"Agreement") shall constitute the binding agreement of Grupo Industrial Cierres
Ideal, S.A., a Mexican corporation and Talon, Inc., a Delaware corporation,
(collectively, "GICISA" or, individually by each of their names) and DISTRIBUTOR
with respect to the matters set forth herein unless subsequently superseded by a
long form agreement executed by the parties (the "Definitive Agreement").
TERRITORY:
United States, Canada, Mexican Maquiladoras and Hong Kong/ China. DISTRIBUTOR
can also ship the Products to any contractors, wherever located, who manufacture
for customers of Talon or DISTRIBUTOR located in the Territory.
APPOINTMENT:
During the Term, GICISA grants DISTRIBUTOR an exclusive license for the
Territory to use, license, market, sell, and distribute the Products (as defined
below), including the exclusive right to use the Talon trademark. Distributor to
be GICISA's sole and exclusive, authorized reseller for the distribution,
promotion, repackaging and sale of all Talon branded products and other products
(as defined below) in the Territory. GICISA will cease its sales of Products
bearing the "Talon" brand and other zippers into the Territory and will act to
prevent xxxx market sales of all such products into the Territory.
BRANDING:
DISTRIBUTOR will have the exclusive right in the Territory, During the Term, to
refer to itself as a "Talon International" or to operate a subsidiary under that
name to distribute the Products. (As hereinafter defined).
SUB-DISTRIBUTION:
DISTRIBUTOR may appoint subdistributors and dealers to market the Products
within the Territory.
PRODUCTS:
All Talon brand zippers including all currently manufactured by Talon and other
products as may be mutually agreed upon by the parties in the future and all
zippers manufactured by Cierres Ideal, provided however, that Cierres Ideal
retains the right to sell Cierres Ideal branded zippers manufactured by Cierres
Ideal to-Mexican Maquiladoras.
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
TERM:
XXXXXX years, automatically renewing for XXXX years if sales of DISTRIBUTOR
exceed XXXXXX dollars for the XXXXX XXX XXX term, and exceed XXX XXXX for the
XXX XX XX XX If such sales are not achieved, GICISA will have the discretion of
terminating the agreement by providing written notice to DISTRIBUTOR of XX XXXX
prior to the end of the term.
Page 2
SHOULD GICISA DECIDE TO ISSUE A TERMINATION NOTICE BUT DISTRIBUTOR MEETS THE
ABOVE SALES TARGET, GICISA SHALL REVOKE THE TERMINATION NOTICE AND THE TERM WILL
CONTINUE FOR XXXXXXXXXXXXXXXX.
CUSTOMER LISTS:
Upon signing GICISA will provide DISTRIBUTOR with all Customer lists for the
products and customer information relating customers of Talon in the Territory
(including, to the extent available, detailed sales information and credit
history).
DISTRIBUTOR'S
RESPONSIBILITIES:
DISTRIBUTOR will take XXXXX XXXXX XXXXX X XXXX X XXXX XX on XXXXXXXX XXX XXX XXX
XXX XXX XXXX XXX XXX X X X X X X X X X X after sale. X X X X X X X X X X X X X X
X X X X X X X X X X X X.
DISTRIBUTOR will do the following, where commercially reasonable, in the
Territory:
- Actively promote the sale of Products;
- Advertise the Products using methods customary in the apparel industry
including customary promotional and print pieces.
- Display the Products at major trade shows.
- Provide timely deliveries of the Products, subject to GICISA
delivering the Products within the time limits established herein.
- Maintain X X X X X X X X X X X X X X X X X customer records showing
the customer's name and address, date of sale, product type and
quantity and such other related information as may reasonably be
required by GICISA.
- Incorporate wherever permitted by DISTRIBUTOR's customers, Products
into DISTRIBUTOR's single source trim package.
- Dedicate a portion of its sales force or appoint subdistributors to
concentrate specifically on the X X X X X X X X X X X X X X X X X X X
X X marketing of Products.
- Place one or more of its own employees in Talon's manufacturing
facility to work in conjunction with Talon on production and delivery
schedules; GICISA will provide office space. X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X
- Immediately start efforts for Talon to be specified as an approved
zipper by DISTRIBUTOR's customer base and additional new customers;
- Create new marketing materials and catalogues to enhance Talon's
image.
- Establish, with Talon support an online catalogue through Tag-It
allowing Turnkey customers to place orders, check on hand
Page 3
inventory in GICISA's warehouses and monitor production and shipments.
Talon will provide work in process reports to support "inventory to be
available" reporting;
- Establish electronic data interchange capabilities for major
customers;
- Include Talon in quarterly management, sales and marketing strategy
meetings to be held in Los Angeles.
- DISTRIBUTOR and Talon will, on a X X X X X X subject to mutual
agreement on costs to be incurred, establish and implement a plan for
systems integration between DISTRIBUTOR and Talon Mexico.
GICISA will cooperate to implement the foregoing. GICISA will supply
dyed tape for color cards and sample product ranges for all Products.
SALES FORECAST:
DISTRIBUTOR's initial target sales forecast is attached X X X X X X X X X X X X
X X X X X X X X
TRANSFER OF SELECTED PERSONNEL:
DISTRIBUTOR or the subsidiary it establishes X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X XX XX X X X X X XX X X X XX X X X XX X X X X XXX X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X XX X X XX X X X X X X X X X X X
DISTRIBUTOR will assume no obligations or liabilities that Talon may have to any
of the Hired Employees or to any third party. GICISA and/or Talon, as
applicable, will hold DISTRIBUTOR harmless against any such liabilities.
Customer service and equipment service personnel will be offered employment,
subject to their willingness to relocate.
FIELD EQUIPMENT:
DISTRIBUTOR will maintain and move existing Talon field equipment (and provide
replacement parts) for a fee X X X X X X X X X X X X X X X X X X X X X Talon
will transfer existing inventory of parts to DISTRIBUTOR at no cost. X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X XX X X X X X
QUICK SERVICE EQUIPMENT:
Distributor will pay X XXXX to GICISA X X X X after Distribution agreement is
signed for the quick service equipment contained in Exhibit G, as mutually
agreed upon by both parties.
CAPACITY:
GICISA will maintain its current manufacturing capacity and will ensure
sufficient additional capacity to satisfy DISTRIBUTOR's projected requirements
as defined and agreed upon by both parties in writing , at the time of business
plan and budget approval.
Page 4
FORECASTS, CANCELLATION:
DISTRIBUTOR will furnish to GICISA not less than 30 days prior to the
commencement of each calendar quarter during the Term a preliminary forecast of
the quantity of Products that DISTRIBUTOR expects to order in that calendar
quarter.
DISTRIBUTOR can cancel any order or portion of an order, but if an order is
canceled within X X X of the scheduled delivery, DISTRIBUTOR will X X X X X X X
X (including an allocable portion of GICISA overhead and other allocations)
incurred by GICISA for the Products covered by the canceled order or portion
thereof, not to exceed the price charged to DISTRIBUTOR of the Products
involved.
DELIVERY, DELAYS:
DISTRIBUTOR may retain any early delivered Products and hold GICISA's invoice
until the date it would otherwise be due.
GICISA will confirm delivery dates on all orders of Products at the time of the
order delivery dates will be within 30 days from order unless later delivery
dates are specified by DISTRIBUTOR. If delivery is delayed more than X X X,
DISTRIBUTOR shall have the right to cancel the delayed Products without
liability. Early shipments of Products will be billed at the original order
delivery date.
TRANSITION ARRANGEMENTS:
Transition of distribution and support operations will be in accordance with the
transition plan attached as EXHIBIT "C".
PRICES:
X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X
X X X X X X X X X X XX X X X X X X X X X X X X X X X X X X X X X X X X XX X X X
X X X X X X X X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X X X X X
X X X X X X XX X X X X X X X X X X X X X X X X X X X X X X X X XX X X X X X X X
X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
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X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X
CREDIT TERMS:
GICISA will abide by all terms and conditions of sales as stipulated on the face
of DISTRIBUTOR purchase orders so long as they are not in conflict with the
provisions of this document. X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X XX X X
X X X X X X X X X X X X X X X X X X X X X X XX X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X
MOST FAVORED CUSTOMER:
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X
CUSTOMS AND DUTIES:
GICISA will obtain all customs, export and other governmental authorizations and
approvals and visas in connection with the Agreement.
LANGUAGE:
The English language version of this Agreement shall be the "official", binding
version of this Agreement, and all communications between the parties will be
conducted in the English language only.
JURISDICTION:
All disputes will be resolved pursuant to AAA arbitration in California by a
panel of three arbitrators except for emergency relief in actions in equity.
Each party submits to the exclusive jurisdiction of the courts of the United
States and California located in Los Angeles jurisdiction, attachment and
execution, whether on the basis of sovereignty or otherwise, to which it might
otherwise be entitled and further waives any claim that any such suit, action or
proceeding brought in any court in Los Angeles County has been brought in an
inconvenient forum.
Page 6
GOVERNING LAW:
The laws of the State of California as applied to contracts entered into and
performed solely within the State of California. The United Nations Convention
on Contracts for the International Sale of Goods (1980) shall not apply.
INTERPRETATION:
To resolve any inconsistency between this Agreement and its attachments, the
order of precedence shall be: (i) this document excluding attachments; then (ii)
Exhibits attached to this document.
EMPLOYEE NON-SOLICITATION:
During the X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X GICISA shall not directly or indirectly (x) solicit or encourage any
employee of DISTRIBUTOR to leave the employ of DISTRIBUTOR or (y) hire any
employee who has left the employment of DISTRIBUTOR if such hiring is proposed
to occur within one (1) year after the termination of such employee's employment
with DISTRIBUTOR.
WARRANTY:
GICISA warrants and represents that all Products (i) will be free of defects in
workmanship or materials and will be in accordance with their SPECIFICATIONS,
(ii) will be delivered to Tag-It free and clear of all liens and encumbrances,
and that good and valid title shall pass thereto as provided in this Agreement,
(iii) do not infringe the patents or intellectual property rights of others,
GICISA warrants that (a) it has the unencumbered right to grant to DISTRIBUTOR
all of the rights and licenses contemplated hereby (b) this Agreement has been
duly authorized and executed by GICISA and is a binding obligation of GICISA
enforceable in accordance with its terms.
OTHER RIGHTS AND OBLIGATIONS:
DISTRIBUTOR and GICISA shall each comply in all material respects with all
applicable laws, rules, regulations and requirements of any governmental body.
An "Event of Default" will have occurred:
(a) With respect to any party, if the other party shall fail to perform
any of its other material obligations under this Agreement if the breach is not
cured within 90 days after written notice thereof to the party in default;
(b) With respect to either party, if there is (A) a dissolution,
termination of existence, liquidation, insolvency or business failure of such
party, or the appointment of a custodian or receiver of any part of such party's
property, if such appointment is not terminated or dismissed within 30 days; (B)
a composition or an assignment or trust mortgage for the benefit of creditors by
such party; or (C) the commencement with respect to such party of any proceeding
under any applicable national or local bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors generally,
which proceeding, if initiated against such party, is not dismissed within 30
days.
Page 7
Upon an Event of Default, without limitation upon any and all rights and
remedies available to a non-defaulting party at law or in equity upon any breach
of this Agreement by the other party, the non-defaulting party may by written
notice terminate the agreement and/or cancel any or all orders issued hereunder,
without liability (for cancellation charges or otherwise) and may refuse to make
or take, as the case may be, further orders or deliveries.
Notwithstanding the above, if a party disputes in good faith the occurrence of a
material breach of this Agreement and such 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 non-breaching party, then the breaching party shall have an
additional 60-day period following such resolution in order to cure such
material breach and following such cure shall be fully reinstated of all rights
hereunder without prejudice.
STOCK ISSUANCE:
DISTRIBUTOR will, within 30 days from the Effective Date, issue to GICISA Series
B Preferred Stock as described in Exhibit F.
STOCK REPURCHASE:
Without limiting any other remedy that may be available to DISTRIBUTOR
hereunder, in the event that prior to the X X XX X X X X X X X X X X X X X X XX
X X X X GICISA commits an Event of Default or declares bankruptcy, DISTRIBUTOR
shall have the right to buy back a pro rata portion (based on the number of
Contract Years that have expired at the time of the Event of Default relative to
the X X X X initial term of this Agreement) of DISTRIBUTOR's Common Stock
purchased by or granted to GICISA pursuant to that certain Stock Purchase
Agreement, dated March 24, 2000, at the purchase price established in such
agreement, or for an aggregate price of X if no purchase price is established.
For example, if the Event of Default occurs after X X X X the repurchase right
will apply to 80% of the Shares.
PREPARATION OF LONG FORM DOCUMENTATION:
Counsel to the DISTRIBUTOR shall prepare the Definitive Agreement, but if for
any reason the parties do not negotiate and execute the Definitive Agreement,
this Agreement will remain binding and enforceable in accordance with its terms
PREPARATION OF LONG-FORM DOCUMENTATION:
Counsel to the DISTRIBUTOR shall prepare the Definitive Agreement, but if for
any reason the parties do not negotiate and execute the Definitive Agreement,
this Agreement will remain binding and enforceable in accordance with its terms.
EXPENSES:
Each party will bear its own expenses.
Page 8
COUNSEL TO DISTRIBUTOR:
Xxxxxx Xxxxxxxx, Esq.
Troop Xxxxxxx Pasich Reddick & Xxxxx, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Phone: (000) 000-0000
E-mail: XXXXXXXXX@XXXXXXXX.XXX
COUNSEL TO GICISA:
Xxxxxxxxx X. Xxxxxx
Chief Legal Counsel
Paseo de la Reforma 2608-PH
Col. Xxxxx Xxxxx
Xxxxxx X.X., 00000
Phone: 00 00 00 00
E-mail: XXXXXXXX@XXXXXXX.XXX
OTHER ITEMS:
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X XX X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X X X X
If the terms and provisions of this Agreement are acceptable to you, please
indicate your acceptance and approval by signing, or by causing to be signed on
your behalf, the enclosed copy of this Agreement and returning it to the
undersigned. This Agreement is subject to the approval of the Board of Directors
of DISTRIBUTOR to be evidenced by the signature of the Chairman of DISTRIBUTOR
below. This Agreement may be executed in counterparts (including by facsimile),
all of which, when taken together, shall constitute one original.
Very truly yours,
TAG-IT PACIFIC, INC., a Delaware corporation
By: _______________________________
Chief Executive Officer
Page 9
TAG-IT PACIFIC, INC., a Delaware corporation
By: _______________________________
Chairman
ACCEPTED:
GRUPO INDUSTRIAL CIERRES IDEAL, S.A. de C.V.,
a Mexican corporation
By: ________________________________
Name:
Its:
TALON, INC.,
a Delaware corporation
By: _________________________________
Name:
Its:
Page 10
X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X
X X X X X X X
-------------
X X X X X X X
X X X X X X X
X X X X X X X
X X X X X X X
X X X X X X X
X X X X X X X
X X X X X X X
X X X X X X X
Exhibit A-1
X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
---------------
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
X X X X X X X X
Exhibit B-1
EXHIBIT "B"
[TAG-IT PACIFIC, INC. LETTERHEAD]
TALON DISTRIBUTION - TRANSITION PLAN
The following document is intended as a draft for discussion purposes. This
document lays out Tag-It's expectations for the transition of the distribution
of Talon products to Tag-It Pacific.
TRANSITION PLAN
As soon as the distribution agreement is signed, Talon Inc. is to provide
Tag-It with 100% access to all US operations and company information,
including:
o Sales Force - we will start working with them immediately
o Operations - Tag-It Staff and consultants will start spending time at
Talon facilities and Talon/Coats distribution centers and
manufacturing plans
o Inventory system, including usage, projections, and all planning
systems used.
Talon will also agree to make every effort to ensure that no Talon
employees leave the company prior to the transition date, X X X X X X X X X
X X X X X X X X X X X X X . Specifically, X X X will seek to incentivize
certain key Talon employees, i.e. customer service and assembly and dying
technicians to remain and assist with the transition for a period of time.
During the transition planning period, Tag-It will set up all required
facilities, operations and sales systems required to completely take over
the business as of the transition date. There will be certain functions,
detailed below, which Tag-It will ask Talon to continue operating for short
periods following the transition date to serve as back-up to Tag-It
provided operations and services. These will strictly serve as back-up and
will only be called upon in the event that Tag-It is unable to perform a
certain function after the transition date.
TRANSITION DATE
The plan will call for a 100% conversion to take place X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X.
X X X X X X X X
o Talon sales force fully employed by X X X
o All customer orders will be taken by Tag-It
o All inventory held by and shipped by X X X
o All production orders will be placed by Tag-It to Mexico / N.C.
o All quick-service business (non-distributor) performed by Tag-It
o All orders invoiced by Tag-It
Exhibit C-1
KEY PERSONNEL
Tag-It will need to spend considerable time X X X X X X X X X X X X X X during
the transition period to assist in the following:
X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X
Talon agrees to allow both the above individuals to spend considerable time
working with Tag-It during this transition period.
PRODUCTION PLANNING
Talon agrees to coordinate manufacturing closely to Tag-It's needs. X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X.
Talon and Tag-It will jointly and both agree to allocate certain production
capacity in each production step X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X will be set on a quarterly basis, and will
not be altered by Talon without the agreement of Tag-It.
Talon agrees to work with Tag-It to implement a system whereby X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X These
individuals will be responsible for tracking production orders at Talon,
advising the US of order status, and acting as conduit for production and
shipping information. These individuals will be employed by X X X, however, X X
X X will provide work space, internet access, telephone and fax facility for
these employees. X X X X X X X X X X X X X
FINANCING
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
CUSTOMER EQUIPMENT
X X X will take over all maintenance and administration of customer equipment,
including customer contracts and billing and collections. X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Revenue from any
new equipment that Tag-It purchases and places with customers will X X X X X X X
X X X X X X X X X X X X X X
Exhibit C-2
INTERNAL PRODUCTION EQUIPMENT
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X. Talon will also assist Tag-It
in setting up this facility, in terms of providing technical expertise in
setting up and operating the assembly equipment. XXXXXX will cover all costs
related to relocating this equipment.
Talon will continue to operate it's X X X X X X X X X X X X X for a period of 1
month following the transition to act as a back-up facility.
SALES & MARKETING
On the transition date, Talon's existing sales representatives X X X X X X X X X
X X X and Tag-It Sales force to start selling Talon products as part of Tag-It
Turnkey.
During the transition and prior to the transition date, immediately following
signing of the agreement, Tag-It will start working closely with Talon Sales
Force, including:
o Interviewing each Talon Sales Rep to learn about their market areas
o Calling on customers jointly with Talon Sales Reps
During the transition, Tag-It will also:
o Develop new printed sales and marketing materials (excluding color
cards, which are to be provided by Talon)
o X X X X X X X X X X X X X X X X X X
ASSEMBLY & DISTRIBUTION
Tag-It to establish an assembly plant X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X . This plant will be fully operational by the
transition date. Talon will operate its existing facility, albeit at reduced
capacity for a period X X X X X X X X X X X X X X X X X X X X X X X X after
transition to act as back-up to Tag-It's facility.
Tag-It is to analyze needs for other distribution centers, and to be responsible
to set-up other facilities, before or after transition date as required. Tag-It
may negotiate X X X X to continue to use certain existing distribution
facilities.
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X
During the transition, Tag-It will be given complete access to Talon's Focus
system, including all sales histories, part numbering systems and part numbers
and usage and projections. Tag-It may either request that certain electronic
data be transferred from this system to Tag-It in order to eliminate the need to
recreate information such as part numbers, or may seek to continue to use X X X
X Focus system for a period after the transition in order to maintain
consistency of information systems, provided that X X X X is agreeable.
CUSTOMER SERVICE
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
Exhibit C-3
Talon must continue to operate its customer service facility X X X X X X X X for
a period X X X X X X X X X X X X X X X X X X X X X X X X X X X X as a back-up to
Tag-It's customer service operation should it be needed.
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
Exhibit C-4
X X X X X X X X
X X X X X X X X X X X X
X X X X X X X X X X X X X X X X
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
X X X X X X X X X X X X X X X X X X X X X X X X X X X X
----------------------------------------------------
X X X X X X X X X X X X
X X X X
X X X X X X X X X X X X X X X X X X X X X X X X
X X X X X X X X X X X X X X X X X X X X
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Exhibit D-1
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
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----------------------------------------------------
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Exhibit D-2
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
X X X X X X X X X X X X X X X X X X X X X X X X X X X X
----------------------------------------------------
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X X X X X X X X X X X X X X X X X X X X
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Exhibit D-3
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
X X X X X X X X X X X X X X X X X X X X X X X X X X X X
----------------------------------------------------
X X X X X X X X X X X X
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Exhibit D-4
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
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----------------------------------------------------
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Exhibit D-5
----------------------------------------------------
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----------------------------------------------------
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Exhibit D-6
----------------------------------------------------
X X X X X X X X
----------------------------------------------------
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Exhibit D-7
----------------------------------------------------
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Exhibit D-8
----------------------------------------------------
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Exhibit D-9
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Exhibit D-10
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Exhibit D-11
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Exhibit D-12
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Exhibit D-13
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Exhibit D-14
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Exhibit E-1
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Exhibit E-2
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Exhibit E-3
EXHIBIT "F"
TERMS OF TALON/TAG-IT
PACIFIC AGREEMENT EQUITY COMPONENT
In connection with the proposed relationship and transactions between
Tag-It Pacific, Inc., and GICISA, Tag-It Pacific would issue to GICISA 850,000
shares of a newly designated series of preferred stock of Tag-It Pacific (the
"PREFERRED STOCK") with the following rights, preferences and privileges:
Securities:
Series B Convertible Preferred Stock
Authorized Shares:
850,000
Dividend Provisions:
The holders of the Preferred Stock would be entitled to dividends equal to any
dividends payable on the Common Stock into which the Preferred Stock are
convertible.
Redemption:
The holders of the Preferred Stock would not be entitled to cause Tag-It Pacific
to redeem the Preferred Stock.
Conversion:
The Preferred Stock would automatically convert into Common Stock at any time
following the third anniversary of issuance if during any 30 day period
commencing on or after the third anniversary of issuance, the average per share
closing price of the Common Stock on the American Stock Exchange (or the
principal market upon which shares of Tag-It Pacific are then listed) for each
day of the 30 day period equals or exceeds $8.00 per share (subject to equitable
adjustment for stock splits, combinations and recapitalizations).
Initially, each share of Preferred would be convertible into a fraction of one
share of Common Stock equal to the sum of (a) one, minus (b) the fraction, the
numerator of which is $2.50, and the denominator of which is the average per
share closing price of the Common Stock on the American Stock Exchange (or the
principal market upon which shares of Tag-It Pacific are then listed) for each
day of the 30 day period prior to the conversion of the Preferred Stock.
The actual structure of the conversion feature and cashless payment mechanism
will be determined by Tag-It's accountants and Board based on financial
presentation and other considerations; provided that Tag-It would receive the
economic equivalent of a $2.50 per share payment upon conversion of the
Preferred Stock.
Exhibit F-1
Equitable adjustments would be made in respect of stock splits, reverse stock
splits, etc. The Preferred Stock may also be automatically converted to common
stock at the election of Tag-It.
Transfer Restrictions
GICISA may not sell or transfer any Preferred Shares prior to 30 months of
issuance. Thereafter the shares (or the Common Shares issuable upon conversion)
may be sold provided that any such sale (i) is in accordance with the volume
restrictions set forth in Rule 144 as currently in effect (and determined as if
the Shares were at the time of the proposed sale "restricted securities" as
currently defined under Rule 144 subject to the volume and manner of sale
restrictions of Rule 144 as currently in effect), or (ii) is part of a secondary
offering initiated by Tag-It, or (iii) is a block sale in a bona fide private
transaction to a third party financial or strategic investor. To the extent that
a block sale or any other sale not contemplated by the preceding clauses (i) or
(ii) is executed, Tag-It shall have the right of first refusal, which right will
be assignable, to purchase such shares upon the same (or economically
equivalent) terms and conditions as are set forth in the proposed block sale.
Registration Rights:
After three years, the Common Shares issuable upon conversion of the Preferred
Stock would be provided piggyback registration rights junior to those rights
currently outstanding, pari passu participation with any registration of shares
held by Xxxxx Xxxx, and junior to registration rights now or hereafter provided
to other members of the Dyne Family.
Voting Rights:
The holders of the Preferred Stock would not have voting rights except as
required by Delaware law.
Liquidation Preference:
In the event of any liquidation, dissolution, sale, merger or winding up of
Tag-It Pacific, the holders of the Preferred Stock would be entitled to receive,
in preference to the holders of Common Stock, $.001 per share of Preferred
Stock. Thereafter, the holders of the Common Stock would then participate pro
rata with respect to the remaining assets of Tag-It Pacific (without
participation by the holders of Preferred Stock).
Tag-Along/Drag Along
Pro rata -- In the context of a sale by Xxxxx Xxxx of a majority of his shares
Distribution Agreement:
The Preferred Stock would be issued upon execution of the proposed Distribution
Agreement.
The terms of the equity security set forth above will remain available through
March 21, 2000, so long as the price of Tag-It's Common Stock remains within the
range of $5 - $6 per share.
