EXHIBIT 10.21.3
Xxxxx 00, 0000
Xxxxx International, Inc.
(f/k/a Tag-It Pacific, Inc.)
00000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxx, CEO
Re: AMENDMENT NO. 3 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 and
Amendment No. 2 dated November 19, 2007 (collectively, the "LOAN AGREEMENT"), by
and between Bluefin Capital, LLC (the "LENDER") and Talon International, Inc.
(f/k/a Tag-It Pacific, Inc.) (the "BORROWER"). All capitalized terms used herein
without definition have the respective meanings ascribed to them in the Loan
Agreement.
This will confirm the agreement of the Lender and the Borrower to make
the following amendments to the Loan Agreement.
1. DEFINITIONS.
(a) The following additional definitions are hereby added to
Article 1 of the Loan Agreement in the appropriate alphabetical
sequence:
"ADDITIONAL NOTE" shall mean the promissory note of the
Borrower in the principal amount of $1,000,000 issued to the Lender
pursuant to Amendment No. 3.
"AMENDMENT NO. 2" shall mean the Amendment No. 2 to Loan
Agreement dated November 19, 2007 by and between the Lender and the
Borrower.
"AMENDMENT NO. 3" shall mean the Amendment No. 3 to Loan
Agreement dated March 31, 2008 by and between the Lender and the
Borrower.
(b) The definition of "EBITDA" is hereby amended by adding the
following new sentence at the end of the definition: "The calculation
of EBITDA hereunder shall exclude any gains or losses from the sale or
other disposition of shares of Cygne Design stock held by the Borrower
on the date of Amendment No. 3."
(c) The definition of "Notes" is hereby amended so as to
include therein the Additional Note.
2. AMENDMENTS TO BORROWING BASE.
(a) Clause (e) of the definition of "Eligible Account" is
hereby amended so as to read in full as follows: "(e) it has not
remained unpaid in whole or in part for a period exceeding either (i)
sixty (60) days after the original due date of the subject invoice, or
(ii) one hundred twenty (120) days after the date of the underlying
shipment or service;"
(b) The parenthetical phrase at the end of clause (c) of the
definition of "Eligible Inventory" is hereby amended so as to read as
follows: "(provided that up to $500,000 in value of inventory held by a
single vendor/supplier, and up to a maximum of $1,000,000 in the
aggregate held by all vendors/suppliers, for drop shipment to a
customer for the benefit of the Borrower or the subject Subsidiary may
be considered to be Eligible Inventory if it otherwise meets all other
criteria set forth in this definition)".
(c) The reference to "75%" in clause (a) of the definition of
"Borrowing Base" is hereby amended to "85%", and clause (c) of the
definition of "Borrowing Base" is hereby amended to read "(c)
Reserved,".
3. AFFIRMATIVE COVENANTS.
(a) Section 5.09 of the Loan Agreement is hereby amended,
retroactive to February, 4, , 2008, so as to read in full as follows:
SECTION 5.09. MANAGEMENT.Cause Xxxxxx X. Xxxxxxx to continue to be
employed or to function as the Chief Executive Officer of the Borrower
and Xxxxxxxx Xxxx to continue to be employed or to function as the
Executive Vice President-Sales of the Borrower, unless a successor is
appointed within sixty (60) days after the termination of the subject
individual's employment and such successor is reasonably satisfactory
to the Lender.
(b) Section 5.12 of the Loan Agreement, and paragraph 9 of
Amendment No. 2, are hereby replaced in their entirety by the following
new Section 5.12, which is hereby incorporated into the Loan Agreement:
SECTION 5.12. LANDLORD WAIVERS. Use all commercially reasonable efforts
to obtain (a) on or prior to June 30, 2008, in respect of all leased
Real Properties located in the United States, Landlord Waivers and/or
access agreements in form and substance reasonably satisfactory to the
Lender, and (b) within 90 days after such circumstance first arises, in
respect of any other location at which, at any time or from time to
time, there is stored or held any Collateral consisting of equipment,
or other Collateral having an aggregate fair market value in excess of
$100,000, bailee waivers, warehousemen's waivers, or other comparable
agreements in form and substance reasonably satisfactory to the Lender;
PROVIDED, HOWEVER, that (i) the failure to obtain any such waiver from
a warehouse facility shall not, in the absence of the failure of the
Borrower or its Subsidiary to use commercially reasonable efforts to
obtain such waiver, constitute a default or an
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Event of Default, and (ii) neither the Borrower nor any Subsidiary
shall be required to obtain waivers or access agreements from vendors
or suppliers holding Collateral only for drop shipment to the
Borrower's or any Subsidiary's customers on behalf of the Borrower or
any Subsidiary.
(c) Section 5.13 of the Loan Agreement, and paragraph 8 of
Amendment No. 2, are hereby replaced in their entirety by the following
new Section 5.13, which is hereby incorporated into the Loan Agreement:
SECTION 5.13. DEPOSIT ACCOUNTS. With respect to all bank accounts
and/or securities accounts maintained by the Borrower or any Subsidiary
on the date of Amendment No. 3, (a) if the account or securities
account is located in the United States or Hong Kong , obtain, on or
prior to June 30, 2008, the execution and delivery by the subject bank
or securities intermediary of a Control Agreement executed by the
Lender and the Borrower or its subject Subsidiary, failing which the
Borrower or the subject Subsidiary shall thereafter keep no more than
$50,000 (or the equivalent in local currency based upon then-prevailing
exchange rates) in the aggregate in any account (and $ 200,000 in the
aggregate as to all accounts held in any single country) held in such
country, and (b) if the bank account or securities account is located
in Indonesia, Vietnam or any country or territory not named in the
preceding clause (a) (excluding China), then no more than $50,000 (or
the equivalent in local currency based upon then-prevailing exchange
rates) in the aggregate may be held in accounts located in each such
country; and, upon opening any new bank account or securities account
(wherever located) subsequent to the date of Amendment No. 3, notify
the Lender thereof and cause the subject bank or securities
intermediary promptly to execute and deliver to the Lender a Control
Agreement in respect of such bank account or securities account, and if
the required Control Agreement is not entered into within sixty (60)
days after the opening of such account, then the Borrower or the
subject Subsidiary shall thereafter keep no more than $50,000 (or the
equivalent in local currency based upon then-prevailing exchange rates)
in the aggregate in any account (and $ 200,000 in the aggregate as to
all accounts held in any single country) held in any additional country
.
With respect all bank accounts and/or securities accounts maintained in
China (only) by the Borrower or any Subsidiary on the date of Amendment
No. 3, Borrower shall obtain, on or prior to June 30, 2008, the
execution and delivery by the subject bank or securities intermediary
of a Control Agreement executed by the Lender and the Borrower or its
subject Subsidiary, failing which the Borrower or the subject
Subsidiary shall thereafter agree with Lender upon the cash limits and
controls that the Borrower will employ in accounts in China.
4. NEGATIVE COVENANTS. Section 6.17 of the Loan Agreement is
hereby amended so as to read in full as follows:
SECTION 6.17. EBITDA; COVERAGE TEST. For any fiscal quarter of the
Borrower ending on any of the dates listed below, permit (a) EBITDA to
be less than $1.00, or (b) the ratio of (i) EBITDA for such fiscal
quarter, to (ii) the principal and
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interest payments on Indebtedness made or required to be made by the
Borrower and its Subsidiaries during such fiscal quarter (excluding
principal of the Convertible Debentures and principal payments made
from a matched source where such matched source makes the payment) to
be less than the required ratio corresponding to such date as set forth
in the following table:
QUARTER ENDING REQUIRED MINIMUM RATIO
------------------------------------------------------- ---------------------
June 30, 2008 ......................................... 1.75 : 1.00
September 30, 2008 .................................... 0.30 : 1.0
December 31, 2008 ..................................... 0.10 : 1.00
March 31, 2009 ........................................ .30.00 : 1.00
June 30, 2009 and each
fiscal quarter thereafter ........................... 1:00 : 1:00
; PROVIDED, HOWEVER, that (i) the failure to achieve the required
minimum EBITDA and/or ratio in any particular fiscal quarter shall not
constitute a default or an Event of Default if (and only if), (A) the
Borrower achieved the required minimum EBITDA and ratio in the
immediately preceding fiscal quarter (if applicable), and (B) within
ten (10) days after the end of such fiscal quarter, the Borrower pays
to the Lender a cash waiver fee in an amount equal to 1% of the sum of
(w) the principal balance of the Term Loan, plus (x) the greater of the
Maximum Revolver Amount or the outstanding principal amount of
Advances, determined as of the end of the subject fiscal quarter, and
(ii) the failure to achieve the required minimum EBITDA and/or ratio as
at the end of any two (2) consecutive fiscal quarters shall not
constitute a default or an Event of Default if (and only if) the
Borrower (A) has timely paid the waiver fee under clause (i) hereof in
respect of the first such fiscal quarter, and (B) pays to the Lender,
within ten (10) days after the end of the second such fiscal quarter, a
cash waiver fee in an amount equal to 2% of the sum of (y) the
principal balance of the Term Loan, plus (z) the greater of the Maximum
Revolver Amount or the outstanding principal amount of Advances,
determined as of the close of the second such fiscal quarter.
5. OTHER AMENDMENTS/WAIVERS.
(a) The Lender hereby waives any default or Event of Default
under Section 6.09 of the Loan Agreement arising by reason of the
Borrower's payment of severance compensation to former executives of
the Borrower in aggregate amounts not exceeding $547,000 in the first
quarter of the Fiscal Year ending December 31, 2008.
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(b) The Lender hereby waives any default or Event of Default
consisting of the sale by the Borrower, from time to time at
then-prevailing market prices, of common stock of Cygne Designs
currently held by the Borrower.
6. WARRANT REDEMPTION. Simultaneously with the execution and
delivery of this Amendment No. 3, the Lender is delivering to the Borrower, for
redemption by the Borrower, all of the Warrants (covering an aggregate of
2,100,000 shares of Common Stock), in consideration of which the Borrower is
paying to the Lender the sum of $1,000,000, constituting part of the Additional
Note being issued pursuant to paragraph 7 below. The Lender makes no
representations or warranties regarding the Warrants or the value thereof, other
than that the Lender has unencumbered title to the Warrants and full power and
authority to deliver the Warrants for redemption hereunder.
7. ADDITIONAL NOTE. In consideration of the waivers and
amendments provided in this Amendment No. 3, the Borrower is paying to the
Lender a waiver/amendment fee in the amount of $145,000; and in consideration of
the surrender of the Warrants for redemption, the Borrower is paying to the
Lender a redemption price of $1,000,000. The redemption amount shall be payable
pursuant to the 8.5% promissory note of the Borrower in the principal amount of
$1,000,000 due June 30, 2010, which is being issued by the Borrower to the
Lender simultaneously with the execution and delivery of this Amendment No. 3,
and the waiver/amendment fee will be paid by debiting such amount as an Advance
under the Borrower's revolving credit facility with the Lender. The Borrower's
obligations under such Additional Note shall constitute Obligations, which shall
be Guaranteed pursuant to the Guaranty Agreement and secured by the Collateral
pursuant to the Security Documents.
8. REGISTRATION. Section 7 of Amendment No. 2 extending the
required effective date for the Registration Statement in respect of all Shares
covered by the Registration Statement to April 15, 2008 is hereby further
extended to May 15, 2008.
9. EXPENSES. The Borrower shall pay or reimburse the Lender on
demand for its costs and expenses (including reasonable attorneys' fees)
incurred in connection with the preparation of this Amendment No. 3.
10. 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. 3 (after giving effect to this
Amendment No. 3), (b) confirms that such Obligations are owing without
reservation, defense, counterclaim or offset, (c) confirms that, after
giving effect to this Amendment No. 3, 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. 3 shall constitute a novation of any of the Obligations outstanding
immediately prior to the effectiveness of this Amendment No. 3.
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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 from and after the effectiveness of this
Amendment No. 3.
11. REPRESENTATIONS AND WARRANTIES. Each of the Lender and the
Borrower hereby represents and warrants that (a) this Amendment No. 3 has been
duly and validly authorized by all necessary corporate or company action on such
Party's part, (b) this Amendment No. 3 has been duly executed and delivered by
such party's duly authorized officer, and (c) this Amendment No. 3 constitutes
such party's valid and binding obligation, enforceable against such party in
accordance with its terms.
12. 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.
3. This Amendment No. 3 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.
13. GOVERNING LAW. This Amendment No. 3 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.
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Kindly confirm your agreement to the foregoing by countersigning a
counterpart copy of this Amendment No. 3 in the space provided below.
Very truly yours,
BLUEFIN CAPITAL, LLC
By: /S/ XXXX X. XXXXXXX
----------------------------------
Xxxx X. Xxxxxxx, Managing Director
Acknowledged, Confirmed and Agreed To:
TALON INTERNATIONAL, INC.
(f/k/a Tag-It Pacific, Inc.)
By: /S/ XXXXXX X. XXXXXXX
------------------------------------------
Xxxxxx X. Xxxxxxx, Chief Executive Officer
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