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 Event of Default, and (ii) neither
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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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