[CONFORMED COPY]
LOAN AND SECURITY AGREEMENT
PREAMBLE. THIS LOAN AND SECURITY AGREEMENT (as it may be amended or modified
from time to time, and together with all riders, schedules and exhibits attached
hereto, or incorporated by reference herein, this "AGREEMENT") is made by UPS
CAPITAL GLOBAL TRADE FINANCE CORPORATION, a Delaware corporation ("LENDER") with
each undersigned "Borrower" (as more particularly defined below, "BORROWER") as
of the "Closing Date" specified in the Transaction Data Schedule defined below
(the "CLOSING DATE"), for the purpose of evidencing the terms and conditions on
which Lender will extend financing to Borrower.
NOW, THEREFORE, to induce Lender to extend the financing provided for
herein, and for other good and valuable consideration, the sufficiency and
receipt of which are mutually acknowledged, Borrower agrees with Lender as
follows:
1. DEFINITIONS, TERMS AND REFERENCES
1.1. CERTAIN DEFINITIONS. In addition to such other terms as elsewhere
defined herein, as used in this Agreement and in any Exhibit or Schedule
attached hereto, the following terms shall have the following meanings:
"ACCOUNTS RECEIVABLE COLLATERAL" shall mean and include all accounts,
accounts receivable, contract rights, instruments, investment property, chattel
paper and general intangibles in the nature of payment obligations owing to
Borrower, including, without limitation, all rights of Borrower to payment for
goods sold or leased, or to be sold or to be leased, or for services rendered or
to be rendered, howsoever evidenced or incurred, together with all returned or
repossessed goods and all books, records, computer tapes, programs and ledger
books arising therefrom or relating thereto, all whether now owned or hereafter
acquired and howsoever arising.
"ACCOUNT DEBTOR" shall mean any Person who is obligated on any of the
Accounts Receivable Collateral or otherwise is obligated as a purchaser or
lessee of any of the Inventory Collateral.
"ADVANCE" shall mean an advance of borrowed funds made by Lender to
Borrower under the Line of Credit. The term "Advance" shall also include the
amount of any outstanding Letter of Credit opened pursuant to the Letter of
Credit Rider.
"AFFILIATE" shall mean, with respect to any Person, any other Person
Controlling, Controlled by or under common Control with such Person, and any
Subsidiary, shareholder, partner, member, director, manager, officer or employee
of such Person.
"AGREEMENT" shall mean this Loan and Security Agreement, as it may be
modified, amended or supplemented from time to time; together with any and all
schedules or exhibits attached hereto.
"APPLICABLE MARGIN" shall have the meaning specified for such term in
the Transaction Data Schedule.
"APPLICABLE RATE" shall mean the Base Rate PLUS the Applicable Margin.
"ASSIGNMENT OF CLAIMS ACT" shall mean the federal Assignment of Claims
Act of 1940, as it may be amended from time to time; together with all
regulations promulgated from time to time in respect thereof.
"BALANCES COLLATERAL" shall mean all cash or other property of Borrower
which may be left with Lender or in Lender's possession, custody or control now
or at any time hereafter, including any escrow deposits, security deposits or
▇▇▇▇▇▇▇ money. The foregoing term shall include funds from time to time on
deposit in any Lockbox Account.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as it
may be amended from time to time.
"BASE RATE" shall mean the interest rate published under the "MONEY
RATES" section of The Wall Street Journal (on each day on which it is published)
as the "prime rate" on such day, as such rate may change from time to time;
PROVIDED, HOWEVER, that if The Wall Street Journal shall cease to publish such
rate (or itself to be published) then, the "Base Rate" shall be the highest
among the prime, base or equivalent rates then publicly announced by Bank of
America, N.A., Chase Manhattan Bank and First Union National Bank (or their
respective successors-in-interest).
"BOOKED COST," in respect of Inventory Collateral, shall mean the
inventory cost accounting method employed by Borrower as of the Closing Date;
E.G., FIFO.
"BORROWER" shall mean each undersigned Person designated as "BORROWER"
on the signature page(s) to this Agreement, as each is described more
particularly on the Borrower Information Schedule. If more than one Person is so
identified and described, then, the term "BORROWER" shall mean each Person,
jointly and severally.
"BORROWER AGENT" shall mean Tag-It Pacific, Inc., a Delaware
corporation, acting in such capacity for itself and each other Person identified
as "Borrower" in this Agreement and any other Loan Document.
"BORROWER INFORMATION SCHEDULE" shall mean SCHEDULE "1" attached
hereto, as it may be modified or amended from time to time by mutual assent of
the parties hereto.
"BORROWING BASE" shall have the meaning specified for such term in the
Transaction Data Schedule.
"BORROWING BASE CERTIFICATE" shall mean a certificate submitted by
Borrower Agent to Lender demonstrating compliance with the Borrowing Base
Requirement, which report shall be substantially in the form of EXHIBIT "A".
"BORROWING BASE REQUIREMENT" shall have the meaning ascribed to such
term in Section 2.1.1.
"BORROWINGS" shall mean total Advances outstanding from time to time.
"BUSINESS DAY" shall mean a day on which Lender is open for the conduct
of its business at its principal office in Atlanta, Georgia.
"CLEARING BANK" shall have the meaning given to such term in Section
2.3.4.
"COLLATERAL" shall mean the property, or interests in property, of
Borrower described as such in Article 3, plus any other property, or interests
in property, of Borrower in which Lender has, or hereafter obtains or claims, a
Lien as security for the payment of the Obligations.
"COLLATERAL LOCATION" shall mean the Executive Office and each
additional location, if any, set forth and described as such on the Borrower
Information Schedule.
"COLLATERAL STATUS CERTIFICATE" shall mean a certificate, to be
substantially in the form of EXHIBIT "B" attached hereto, submitted by Borrower
Agent, reflecting the status of the Collateral.
"COMPLIANCE CERTIFICATE" shall mean a certificate, to be substantially
in the form of EXHIBIT "C" attached hereto, issued by a duly authorized officer
of Borrower Agent, confirming Borrower's continuing compliance with this
Agreement.
"CONSOLIDATED SUBSIDIARIES" shall mean those Subsidiaries of Borrower
(if any) existing from time to time which, for purposes of GAAP, are required to
be consolidated for financial reporting purposes.
"CONTROL," "CONTROLLED" or "CONTROLLING" shall mean, with respect to
any Person, the power to direct the management and policies of such Person,
directly, indirectly, whether through the ownership of voting securities or
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otherwise; PROVIDED, HOWEVER, that, in any event, any Person (or group of
Persons acting in concert) which owns directly or indirectly fifty percent (50%)
or more of the Equity Interests having ordinary voting power for the election of
directors (or other governing body) of an entity shall be deemed to "CONTROL"
such entity for purposes of this Agreement.
"DEBT" means all liabilities, obligations and indebtedness of a Person,
of any kind or nature, whether now or hereafter owing, arising, due or payable,
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise, and whether initiated,
assumed or acquired by such Person.
"DEFAULT CONDITION" shall mean the occurrence of any event which, after
satisfaction of any requirement for the giving of notice or the lapse of time,
or both, would become an Event of Default.
"DEFAULT RATE" shall mean that interest rate per annum equal to two
percent (2%) per annum in excess of the otherwise Applicable Rate payable on any
Obligation.
"DOLLARS" or "$" shall mean United States Dollars.
"EQUIPMENT COLLATERAL" shall mean all equipment and fixtures of
Borrower, whether now owned or hereafter acquired, wherever located within the
United States of America, including, without limitation, all machinery,
furniture, furnishings, leasehold improvements, computer hardware, motor
vehicles, forklifts, rolling stock, dies and tools used or useful in Borrower's
business operations.
"EQUITY INTERESTS" shall mean all capital stock, warrants and other
securities evidencing ownership of equity interests in a Person. In the case of
(i) a partnership, the foregoing includes partnership interests or shares; and
(ii) a limited liability company, the foregoing includes members' interests or
shares.
"EVENT OF DEFAULT" shall mean any of the events or conditions described
in Article 8, provided that any requirement for the giving of notice or the
lapse of time, or both, has been satisfied.
"EXECUTIVE OFFICE" shall mean the address of Borrower's chief executive
office and principal place of business, as designated on the Borrower
Information Schedule.
"EXCLUDED AFFILIATES" shall mean those Affiliates of Borrower listed on
SCHEDULE "5" annexed hereto.
"FISCAL YEAR", in respect of a Person, shall mean the fiscal year of
such Person, as employed by such Person as of the Closing Date, and designated
as such on the Borrower Information Schedule, as to Borrower. The terms "FISCAL
QUARTER" and "FISCAL MONTH" shall correspond accordingly thereto.
"FOREIGN SUBSIDIARIES" shall mean Subsidiaries of a Person which are
incorporated (or otherwise organized) under the laws of a jurisdiction outside
the United States of America.
"GAAP" shall mean generally accepted accounting principles consistently
applied for the fiscal period(s) in question.
"GICI" shall mean Grupo Industrial Cierres Ideal, S.A. de C.V.
"GICI DEBT" shall mean all Debt of Borrower to GICI outstanding on the
Closing Date pursuant to the Consignment Inventory Purchase Agreement, dated
September 30, 2000, between Borrower and GICI, as in effect on the Closing Date,
aggregating $2,830,024 in principal amount, and presently scheduled to mature on
April 1, 2002.
"GUARANTY" shall mean any agreement or other writing executed by a
Guarantor guaranteeing payment of any of the Obligations or otherwise giving
assurances to Lender in respect thereof.
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"GUARANTOR" shall mean, individually and collectively, any and all
Persons who either, as of the Closing Date, or thereafter, join in the execution
of any Guaranty. On the Closing Date, there are no Guarantors.
"HOME STATE" shall mean the State in which Borrower is incorporated or
otherwise organized (if Borrower is not a corporation), as set forth on the
Borrower Information Schedule.
"INITIAL TERM" shall mean the initial term of this Agreement, as
specified on the Transaction Data Schedule.
"INSOLVENT", in respect of a Person, shall mean that (i) such Person is
not able to pay its Debts generally as and when they become due; or (ii) the
total Debts and other liabilities of such Person, including contingent
liabilities, exceed the fair saleable value of the assets of such Person.
"INTANGIBLES COLLATERAL" shall mean all general intangibles of
Borrower, whether now existing or hereafter acquired or arising, including,
without limitation, all copyrights, royalties, tax refunds, rights to tax
refunds, trademarks, trade names, service marks, patent and proprietary rights,
blueprints, drawings, designs, trade secrets, plans, diagrams, schematics and
assembly and display materials relating thereto, all customer lists, all books
and records, all computer software and programs, and all rights of Borrower as
purchaser, lessee, licensee or indemnitee under any contract.
"INVENTORY COLLATERAL" shall mean all inventory of Borrower, whether
now owned or hereafter acquired, wherever located within the United States of
America, including, without limitation, all goods of Borrower held for sale or
lease or furnished or to be furnished under contracts of service, all goods held
for display or demonstration, goods on lease or consignment, spare parts, repair
parts, returned and repossessed goods, all raw materials, work-in-process,
finished goods, catalysts and supplies used or consumed in Borrower's business,
together with all documents, documents of title, dock warrants, dock receipts,
warehouse receipts, bills of lading or orders for the delivery of all, or any
portion, of the foregoing.
"LANDLORD'S AGREEMENT" shall mean an agreement from a landlord of, or
warehouse operator at, any Collateral Location pursuant to which such landlord
or warehouse operator has waived, released or subordinated in favor of Lender
any rights it has in respect of the Collateral, to be substantially in the form
of EXHIBIT "D" attached hereto (unless otherwise required or approved by
Lender).
"LIEN" shall mean any deed to secure debt, deed of trust, mortgage or
similar instrument, and any lien, security interest, preferential arrangement
which has the practical effect of constituting a security interest, security
title, pledge, charge, encumbrance or servitude of any kind, whether by
consensual agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof.
"LINE OF CREDIT" shall refer to the line of credit in the Maximum
Amount opened by Lender in favor of Borrower pursuant to the provisions of
Section 2.1.
"LOAN DOCUMENTS" shall mean this Agreement, the Master Note, any
financing statements covering portions of the Collateral, and any and all other
documents, instruments, certificates and agreements executed and/or delivered by
Borrower in connection herewith, or any one, more, or all of the foregoing, as
the context shall require.
"LOCKBOX ACCOUNT AGREEMENT" shall have the meaning given to such term
in Section 2.3.4.
"LOCKBOX ACCOUNTS" shall have the meaning given to such term in Section
2.3.4.
"MASTER NOTE" shall mean the master promissory note, dated of even date
herewith, as amended or supplemented from time to time, in a principal amount
equal to the maximum amount of the Line of Credit, evidencing Advances to be
obtained by Borrower under the Line of Credit, together with any renewals or
extensions thereof in whole or in part. The Master Note shall be substantially
in the form of EXHIBIT "E".
"MATERIAL ADVERSE CHANGE" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration or governmental investigation or
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proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any of
(a) the financial condition, operations, business, properties or prospects of
the Borrower and its Consolidated Subsidiaries, taken as a whole, (b) the rights
and remedies of the Lender under any of the Loan Documents or the ability of the
Borrower to perform its obligations under any of the Loan Documents or (c) the
legality, validity or enforceability of any of the Loan Documents.
"MATERIALITY THRESHOLD" shall mean One Hundred Thousand Dollars
($100,000).
"MAXIMUM AMOUNT" shall mean the maximum amount which is available for
borrowing under the Line of Credit (determined without regard to the Borrowing
Base Requirement), as specified on the Transaction Data Schedule.
"NOTE" shall mean any instrument at any time evidencing all or any
portion of any Obligations, including, particularly, the Master Note.
"NOTICE OF BORROWING" shall mean a notice of intended Borrowing,
executed by a duly authorized officer of Borrower Agent, in substantially the
form of EXHIBIT "F".
"OBLIGATIONS" shall mean any and all Debts of Borrower to Lender,
including, without limiting the generality of the foregoing, any Debt of
Borrower to Lender under any loan made to Borrower by Lender prior to the date
hereof and any and all extensions or renewals thereof in whole or in part; any
Debt of Borrower to Lender arising hereunder or as a result hereof, whether
evidenced by any Note, or constituting Advances or otherwise, and any and all
extensions or renewals thereof in whole or in part; any Debt of Borrower to
Lender under any later or future advances or loans made by Lender to Borrower,
and any and all extensions or renewals thereof in whole or in part; and any and
all future or additional Debts of Borrower to Lender whatsoever and in any
event, whether existing as of the date hereof or hereafter arising, whether
arising under a loan, lease, credit card arrangement, line of credit, letter of
credit or other type of financing, whether initiated, assumed or acquired by
Lender, and whether direct, indirect, absolute or contingent, as maker,
endorser, guarantor, surety or otherwise, howsoever evidenced.
"ORGANIZATION DOCUMENTS" shall mean the formation and governing
documents of a Person, as applicable. In the case of (i) a corporation, the
foregoing shall include its charter and bylaws; (ii) a partnership, the
foregoing shall include its partnership agreement; and (iii) a limited liability
company, the foregoing shall include its operating agreement.
"PERMITTED ENCUMBRANCES" shall mean: (i) Liens for taxes not yet due
and payable or being actively contested as permitted by this Agreement, but only
if such Liens do not adversely affect Lender's rights or the priority of
Lender's security interest in the Collateral; (ii) landlord's, processor's
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business, payment for which is not yet
due or which are being actively contested in good faith and by appropriate,
lawful proceedings, but only if such liens are and remain junior to liens
granted in favor of Lender; (iii) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (iv) deposits to secure the performance of utilities, leases,
statutory obligations and surety and appeal bonds and other obligations of a
like nature arising by statute or under customary terms regarding depository
relationships on deposits held by financial institutions with whom Borrower has
a banker-customer relationship; (v) typical restrictions imposed by licenses and
leases of software (including location and transfer restrictions); (vi) Liens in
favor of Lender; (vii) Liens granted by Borrower or any Subsidiary to vendors or
financiers of capital assets to secure the payment of Purchase Money Debt so
long as (A) such Debt is permitted to be incurred hereunder, (B) such Liens
extend only to the specific assets so purchased (or leased), secure only such
deferred payment obligation and related interest, fees and charges and no other
Debt, and (C) such Liens are promptly released upon the payment in full of such
Debt; and (viii) Liens in respect of certain Collateral in favor of ▇▇▇▇ ▇▇▇▇
existing on the Closing Date and subordinated to the Liens of Lender in the
Collateral pursuant to a Subordination Agreement.
"PERMITTED PREFERRED STOCK" shall mean preferred stock issued by
Borrower subsequent to the Closing Date in exchange for new cash equity capital
which has a coupon rate not in excess of ten percent (10%).
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"PERSON" shall mean any individual, partnership, corporation, limited
liability company, joint venture, joint stock company, trust, governmental unit
or other entity.
"PURCHASE MONEY DEBT" shall mean Debt incurred by Borrower or any
Subsidiary in connection with the acquisition (or leasing) of capital assets for
the cost thereof (including any for the deferred payment of any purchase price).
"PUT AGREEMENT" shall mean an agreement between a Borrower and a vendor
pursuant to which Borrower shall have the right to require such vendor to
repurchase inventory at cost under certain terms and conditions.
"REDEMPTION" shall mean (i) the payment of Subordinated Debt, when due
or (ii) the redemption, refunding or repurchase of any Permitted Preferred Stock
or Subordinated Debt (prior to its maturity).
"REDEMPTION CONDITIONS" shall mean the following conditions each of
which must be met to Lender's satisfaction prior to any payment being made in
respect of a Redemption under Sections 6.5 or 6.14 (herein, a "REDEMPTION
PAYMENT"); that is, no Redemption Payment shall be made: (i) in any one Fiscal
Quarter until Lender has received Borrower's reviewed financial statements for
the preceding Fiscal Quarter; (ii) if an Event of Default or Default Condition
then exists or would result therefrom; (iii) to the extent that the amount
thereof, if deemed paid on a pro forma basis, as of the last day of the
Borrower's most recently reported interim quarterly financial statements
delivered to Lender in accordance with Section 5.6, as described in clause (i)
above, would cause any violation of the financial covenants applicable to
Borrower set forth in SCHEDULE "2" as of the end of or for such Fiscal Quarter;
(iv) which, when aggregated with all Redemption Payments made in such Fiscal
Quarter and the three (3) preceding Fiscal Quarters would cause total Redemption
Payments made in such period to exceed fifty percent (50%) of "excess cash flow"
for the four (4) preceding Fiscal Quarters then ended, defined as an amount
equal to the sum of (i) EBITDA for such period of four (4) Fiscal Quarters,
MINUS (ii) the sum of (A) unfinanced Capital Expenditures for such period of
four (4) Fiscal Quarters, PLUS (B) Fixed Charges for such period of four (4)
Fiscal Quarters (where "EBITDA," "Capital Expenditures" and "Fixed Charges"
shall have the meanings given to such terms in SCHEDULE "2"); (v) if, after
giving effect to such Redemption Payment being made, "excess availability"
(defined as the amount by which the Borrowing Base, as then most recently
reported to Lender, exceeds the GREATER of (A) total Advances outstanding on the
determination date, or (B) the daily average amount of total Advances
outstanding within the immediately preceding thirty (30) day period ending on
the determination date) is less than ten percent (10%) of the amount determined
under said clause (B); and (vi) unless Lender first has received a certificate
from the chief financial officer or chief executive officer of Borrower
certifying Borrower's compliance in respect of clauses (i) through (v) (showing
computations in reasonable detail) in respect of such Redemption Payment.
"SANWA" shall mean Sanwa Bank, its successors and assigns.
"SANWA EQUIPMENT" shall mean the equipment of Borrower specified on
Schedule 3 annexed hereto and representing the assets underlying the obligation
of Borrower to repay Sanwa in the amount of $556,145.70 (the "Equipment Draw")
which is to be repaid by Lender to Sanwa on the Closing Date.
"SECURITIES COLLATERAL" shall mean all securities and investment
property now owned or hereafter acquired by Borrower, including, without
limitation, all Equity Interests owned by Borrower in any Subsidiary; PROVIDED,
HOWEVER, that, in the case of Foreign Subsidiaries of Borrower, the pledge of
Securities Collateral shall be limited to an amount not to exceed at any one
time sixty-five percent (65%) of the issued and outstanding shares of each class
of Equity Interests of each such Foreign Subsidiary owned by Borrower as of the
Closing Date or acquired by Borrower subsequent to the Closing Date.
"STOCK PLEDGE AGREEMENT" shall mean a stock pledge agreement, between
Borrower and Lender, concerning the pledge of certain Equity Interests owned by
Borrower in its Subsidiaries, to be substantially in the form of EXHIBIT "O".
"SUBORDINATED DEBT" shall mean: (i) the Debt described on SCHEDULE "4"
annexed hereto, existing on the Closing Date, which has been subordinated to the
Obligations pursuant to one or more Subordination Agreements being executed on
the Closing Date; and (ii) any other Debt (which, unless otherwise approved by
Lender, must be
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unsecured or secured by property which is not Collateral) owing
by Borrower from time to time which has been subordinated to the Obligations
pursuant to a Subordination Agreement.
"SUBORDINATION AGREEMENT" shall mean an agreement between or among
Borrower, Lender and any other creditor of Borrower pursuant to which such other
creditor shall agree to subordinate Debt of Borrower owing to it to the
Obligations. Unless otherwise accepted or approved in writing by Lender, each
Subordination Agreement shall be substantially in the form of EXHIBIT "G".
"SUBSIDIARY" shall mean any corporation, partnership, business
association or other entity (including any Subsidiary of any of the foregoing)
of which Borrower owns, directly or indirectly through one or more Subsidiaries,
fifty percent (50%) or more of the capital stock or other Equity Interest having
ordinary power for the election of directors or others performing similar
functions.
"TELEPHONE INSTRUCTION LETTER" shall mean a letter, dated the Closing
Date, issued by a duly authorized officer of Borrower Agent, in substantially
the form of EXHIBIT "H".
"TERMINATION DATE" shall mean the EARLIEST to occur of the following
dates: (i) that date on which, pursuant hereto, Lender terminates the Line of
Credit (or the Line of Credit is deemed automatically terminated) subsequent to
the occurrence of an Event of Default; or (ii) the last day of the Initial Term.
"TRANSACTION DATA SCHEDULE" shall mean SCHEDULE "2" attached hereto; as
it may be amended or modified from time to time with the mutual assent of the
parties hereto.
"UCC" shall mean the Uniform Commercial Code of New York, as in effect
from time to time.
1.2. USE OF DEFINED TERMS. All terms defined in this Agreement and the
Exhibits shall have the same defined meanings when used in any other Loan
Documents, unless the context shall require otherwise.
1.3. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall have the meanings generally attributed to such terms under GAAP.
1.4. UCC TERMS Any terms defined in Articles 8 or 9 of the UCC,
including "accounts", "chattel paper", "investment property," "securities,"
"instruments", "general intangibles", "inventory," "equipment" and "fixtures,"
shall have the same meanings given to such terms thereunder as and when used in
the Loan Documents.
2. THE FINANCING.
2.1. EXTENSIONS OF CREDIT.
2.1.1. LINE OF CREDIT. On the Closing Date, subject to fulfillment of
all conditions precedent set forth herein, Lender agrees to open the Line of
Credit in favor of Borrower so that, during the period from the Closing Date to,
but not including, the Termination Date, so long as there is not in existence
any Default Condition or Event of Default and the requested Borrowing, if made,
will not cause a Default Condition or Event of Default to exist, Borrower may
borrow and repay and reborrow Advances under the Line of Credit; SUBJECT,
HOWEVER, to the requirement that at no time shall the aggregate principal amount
of outstanding Advances under the Line of Credit exceed the LESSER of: (A) the
Maximum Amount or (B) the Borrowing Base (such requirements being generally
referred to herein as the "BORROWING BASE REQUIREMENT"); and SUBJECT, FURTHER,
to the requirement that if, at any time hereafter, the Borrowing Base
Requirement is not satisfied, Borrower will immediately repay the then principal
balance of the Master Note by that amount necessary to satisfy the Borrowing
Base Requirement. All proceeds so obtained under the Line of Credit may be used
by Borrower for working capital in such manner as Borrower may elect in the
ordinary course of its business operations. The Debts arising from Advances made
to or on behalf of Borrower under the Line of Credit shall be evidenced by the
Master Note, which shall be executed by Borrower and delivered to Lender on the
Closing Date. The outstanding principal amount of the Master Note may fluctuate
from time to time, but shall be due and payable in full on the Termination Date,
and shall bear interest from the date of each disbursement of principal until
paid in full at the Applicable Rate, payable in the manner described in Section
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2.2.1. Borrower Agent may request Advances under the Line of Credit by
giving to Lender a Notice of Borrowing not later than 1:00 p.m. (Atlanta,
Georgia time) on the date of the requested Advance; PROVIDED, HOWEVER, that, in
accordance with the Telephone Instruction Letter, Borrower Agent may provide
such instructions by telephone, PROVIDED that any such telephone request shall
be confirmed in writing not later than the Business Day following the
disbursement of the requested Advance. The Line of Credit shall terminate on the
Termination Date, but may be terminated earlier by Borrower, upon its giving at
least sixty (60) days advance written notice to Lender, SUBJECT, HOWEVER, to
Borrower's payment of any early termination fee then due (if so specified on the
Transaction Data Schedule).
2.2. INTEREST AND OTHER CHARGES.
2.2.1. INTEREST. Lender and Borrower agree that the interest rate
payable on the Borrowings shall be determined and paid as follows:
(a) LINE OF CREDIT. Outstanding Advances under the Line of Credit
shall bear interest at the Applicable Rate.
(b) PAYMENT OF INTEREST. Accrued interest on Borrowings shall be
due and payable monthly in arrears, on the first day of each calendar month, for
the preceding calendar month (or portion thereof), commencing on the first day
of the first calendar month following the Closing Date; and after maturity, on
demand.
(c) CALCULATION OF INTEREST AND FEES. Interest on Borrowings (and
any fees described in Section 2.2.2 computed on a per annum basis) shall be
calculated on the basis of a 360-day year and actual days elapsed. The
Applicable Rate shall change with each change in the Base Rate, as determined by
Lender, effective as of the opening of business on the Business Day of such
change.
(d) CHARGING OF INTEREST AND COSTS. Accrued and unpaid interest
on any Borrowings, any outstanding fees described in Section 2.2.2 and any
reimbursable costs and expenses specified in Section 10.6, may, when due and
payable, be paid, at Lender's option (without any obligation to do so), by
Lender's charging the Line of Credit for an Advance in the amount thereof; but
Borrower shall be and remain responsible for the payment of such sums to the
extent not so paid by Lender. Lender will include notice of the imposition of
any such charges in its monthly accounting statements delivered to Borrower.
2.2.2. FEES. In addition to the payment of interest at the Applicable
Rate, Borrower shall also be obligated to pay Lender all fees and charges
specified on the Transaction Data Schedule.
2.2.3. USURY SAVINGS PROVISIONS. Lender and Borrower hereby further
agree that the only charge imposed by Lender upon Borrower for the use of money
in connection herewith is and shall be interest at the Applicable Rate, and that
all other charges imposed by Lender upon Borrower in connection herewith, are
and shall be deemed to be charges made to compensate Lender for underwriting and
administrative services and costs, and other services and costs performed and
incurred, and to be performed and incurred, by Lender in connection with making
credit available to Borrower hereunder, and shall under no circumstances be
deemed to be charges for the use of money. In no contingency or event whatsoever
shall the aggregate of all amounts deemed interest hereunder or under the Notes
and charged or collected pursuant to the terms of this Agreement or pursuant to
the Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
applicable law and Lender shall promptly refund to Borrower any interest
received by Lender in excess of the maximum lawful rate or, if so requested by
Borrower, shall apply such excess to the principal balance of the Obligations.
It is the intent hereof that Borrower not pay or contract to pay, and that
Lender not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrower under
applicable law.
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2.3. GENERAL PROVISIONS AS TO PAYMENTS.
2.3.1. METHOD OF PAYMENT. Unless and except to the extent otherwise
approved in writing by Lender from time to time, payments of interest, fees and
principal pursuant to this Agreement must be received by Lender at an account
designated by Lender for such purpose no later than 1:00 p.m. (Atlanta, Georgia
time) on the date when due, in federal or other funds immediately available to
Lender in Atlanta, Georgia.
2.3.2. APPLICATION OF PAYMENT. Except as otherwise expressly set forth
herein, all payments received by Lender hereunder shall be applied, in
accordance with the then current billing statement applicable to the Borrowing,
first to accrued interest, then to fees, and then to principal due. Any
remaining funds shall be applied to the further reduction of principal.
Notwithstanding the foregoing, upon the occurrence of a Default Condition or
Event of Default, payments shall be applied to the Obligations in such order as
Lender, in its sole discretion, may elect.
2.3.3. CREDITING OF PAYMENTS. The receipt of any item of payment by
Lender shall be applied to reduce the Obligations, as provided in Section 2.3.2,
but, for purposes of computing interest charges hereunder, each such item of
payment shall be deemed paid and applied the number of Business Days after
actual receipt thereof specified as collection days on the Transaction Data
Schedule.
2.3.4. COLLECTIONS. Effective on the Closing Date, Borrower shall have
established, and thereafter Borrower shall maintain, with one or more banks
acceptable to Lender ("CLEARING BANKS"), lockbox accounts into which all
proceeds of Collateral, including, particularly, payments on Accounts Receivable
Collateral, shall be remitted ("LOCKBOX ACCOUNTS"). Lockbox Accounts may be in
Borrower's name, but if so, Borrower, Clearing Bank and Lender must have entered
into an agreement, to be substantially in the form of EXHIBIT "I" unless
otherwise required or approved by Lender (a "LOCKBOX ACCOUNT AGREEMENT")
pursuant to which, among other things, said Clearing Bank shall agree to remit
all collected funds in its Lockbox Account directly to Lender for application to
the Obligations as prescribed below. All collected funds deposited into a
Lockbox Account shall be remitted on a daily basis directly to Lender for
application to Lender as provided in Section 2.3.2. The foregoing shall be in
addition to, and not in limitation of, Lender's rights to collect Accounts
Receivable Collateral directly pursuant after and Event of Default has occurred
and while it is continuing, as provided hereinbelow.
3. SECURITY INTEREST.
3.1. GRANT OF SECURITY INTEREST. As security for the payment of all
Obligations, Borrower hereby grants to Lender a continuing, general lien upon
and security interest and security title in and to the following described
property, or interests in property, of Borrower, wherever located within the
United States of America (if tangible property), whether now existing or
hereafter acquired or arising (herein collectively called the "COLLATERAL"),
namely: (a) the Accounts Receivable Collateral; (b) the Inventory Collateral;
(c) the Equipment Collateral; (d) the Intangibles Collateral; (e) the Balances
Collateral; (f) the Securities Collateral; and (g) all products and/or proceeds
of any and all of the foregoing, including, without limitation, insurance
proceeds.
3.2. REPRESENTATIONS, WARRANTIES AND COVENANTS APPLICABLE TO
COLLATERAL. Borrower represents, warrants and covenants that:
3.2.1. GOOD TITLE. Borrower has (to the best of its knowledge, as to
the Intangibles Collateral) marketable title to the Collateral, free and clear
of all Liens, other than any Permitted Encumbrances.
3.2.2. RIGHT TO PLEDGE. Borrower has full (to the best of its
knowledge, as to the Intangibles Collateral) right, power and authority to grant
to Lender a security interest in the Collateral on the terms set forth herein,
and the grant of such security interest shall not result in Borrower being in
default of any other Debt or require Borrower to ▇▇▇▇▇ ▇ ▇▇▇▇ on any Collateral
to the holder of any such Debt.
3.2.3. SALE OF COLLATERAL. Borrower will not sell, lease, exchange, or
otherwise dispose of any of the Collateral without the prior written consent of
Lender, except that: (i) Borrower may sell portions of its inventory in the
ordinary course of business for cash, or on open account or on other terms of
payment ordinarily extended to its customers (but any bulk sales thereof shall
be prohibited except pursuant to Put Agreements) and (ii)
Page 9
Borrower may sell, exchange or otherwise dispose of portions of its equipment
which are obsolete, worn-out or unsuitable for continued use by Borrower if
either (A) such equipment is replaced promptly upon its disposition with
equipment constituting equipment having a market value equal to or greater than
the equipment so disposed of and in which Lender shall obtain and have a first
priority security interest pursuant hereto or, in any event ▇▇▇▇▇ ▇ ▇▇▇▇ or
permit a Lien to exist thereon, except for a Permitted Encumbrance or (B) the
fair market value of such Equipment Collateral does not exceed, in any one
Fiscal Year, the Materiality Threshold (without necessity of its replacement).
Upon the sale, exchange or other disposition of any Collateral permitted to be
sold hereunder, the security interest and lien created and provided for herein,
without break in continuity and without further formality or act, shall continue
in and attach to any proceeds thereof, including, without limitation, accounts,
contract rights, shipping documents, documents of title, bills of lading,
warehouse receipts, dock warrants, dock receipts and cash or noncash proceeds,
and in the event of any unauthorized sale or other disposition, shall continue
in the Collateral itself.
3.2.4. INSURANCE. Borrower will obtain and maintain insurance on that
portion of the Collateral consisting of tangible property with such companies,
in such amounts and against such risks as Lender may request, with loss payable
to Lender as its interests may appear. Such insurance shall not be cancellable
by Borrower, unless with the prior written consent of Lender, or by Borrower's
insurer, unless with at least thirty (30) days (or any lesser number of days
otherwise approved by Lender) advance written notice to Lender. In addition,
Borrower shall cause its insurer to provide Lender with at least thirty (30)
days advance written notice prior to insurer's nonrenewal of such insurance.
Borrower shall provide to Lender a copy of each such policy then in effect. All
proceeds received by Lender as loss payee of any such insurance shall be applied
to the Obligations, unless otherwise approved by Lender. Borrower shall file
with Lender on the Closing Date and annually thereafter a detailed list of such
insurance as then in effect, certified by Borrower's insurer, together with
copies of all policies of such insurance (if requested by Lender). Within thirty
(30) days after being requested by Lender to do so, Borrower will obtain such
additional insurance (or increase its existing coverage) as Lender may request
(but not more frequently than annually, unless an Event of Default then exists).
3.2.5. LOCATION. As of the Closing Date, the Collateral is situated
only at one or more of the Collateral Locations, and Borrower covenants with
Lender not to locate the Collateral at any location other than a Collateral
Location without giving at least thirty (30) days prior written notice to
Lender.
3.2.6. PRESERVATION. Hereafter, Borrower will take all necessary and
appropriate measures to obtain, maintain, protect and preserve the Collateral
including, without limitation, in the case of Intangibles Collateral
registration thereof with the appropriate state or federal governmental agency
or department.
4. GENERAL REPRESENTATIONS AND WARRANTIES. In order to induce Lender to
enter into this Agreement, Borrower hereby represents and warrants to Lender
(which representations and warranties, together with any other representations
and warranties of Borrower contained elsewhere in this Agreement, shall be
deemed to be renewed as of the date of each Advance), as set forth below:
4.1. EXISTENCE AND QUALIFICATION. Borrower is duly organized, validly
existing and in good standing under the laws of its Home State with its
principal place of business, chief executive office and office where it keeps
all of its books and records being located at the Executive Office, and Borrower
is duly qualified to do business in each other state in which a Collateral
Location is situated or wherein the conduct of its business or the ownership of
its property requires such qualification, except where the failure to do so
would not reasonably be expected to result in a Material Adverse Change.
Borrower has as its official name, as registered with the secretary of state of
its Home State, the words first inscribed hereinabove as its name, and, except
as may be described on the Borrower Information Schedule, has not done business
under any other name within the five (5) years preceding the Closing Date.
4.2. AUTHORITY; AND VALIDITY AND BINDING EFFECT. Borrower has the
power to make, deliver and perform under the Loan Documents, and to borrow
hereunder, and has taken all necessary and appropriate action to authorize the
execution, delivery and performance of the Loan Documents. This Agreement
constitutes, and the remainder of the Loan Documents, as and when executed and
delivered for value received, will constitute, the valid obligations of
Borrower, legally binding upon it and enforceable against it in accordance with
their respective terms.
Page 10
4.3. INCUMBENCY AND AUTHORITY OF SIGNING OFFICERS. Each undersigned
officer of Borrower holds the office specified hereinbelow and, in such
capacity, is duly authorized and empowered to execute, attest and deliver this
Agreement and the remainder of the Loan Documents for and on behalf of Borrower,
and to bind Borrower accordingly thereby.
4.4. NO MATERIAL LITIGATION. On the Closing Date, except as may be set
forth on the Borrower Information Schedule, there are no legal proceedings
pending (or, so far as Borrower knows, threatened), before any court or
administrative agency which, if adversely determined, could reasonably be
expected to result in a Material Adverse Change.
4.5. TAXES. As of the Closing Date, Borrower has filed or caused to be
filed all tax returns required to be filed by it and has paid (or made adequate
reserves for the payment of) all material taxes shown to be due and payable by
it on said returns or on any assessments made against it.
4.6. CAPITAL. All Equity Interests of Borrower issued and outstanding
on the Closing Date are validly and properly issued in accordance with all
applicable laws.
4.7. ORGANIZATION. The Organization Documents of Borrower are in full
force and effect under the laws of the state of its Home State, and all
amendments to the Organization Documents have been duly and properly made under
and in accordance with all applicable laws.
4.8. NO INSOLVENCY. After giving effect to the execution and delivery
of the Loan Documents and the extension of any credit or other financial
accommodations hereunder, Borrower will not be Insolvent.
4.9. NO VIOLATIONS. The execution, delivery and performance by
Borrower of this Agreement and the other Loan Documents have been duly
authorized by all necessary organizational action on the part of Borrower and do
not and will not require any consent or approval of the Shareholders of
Borrower, violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to Borrower or of any Organization Documents of Borrower, or
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Borrower
is a party or by which it or its properties may be bound or affected; and
Borrower is not in default under any such indenture, agreement, lease or
instrument or, to its knowledge, under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award.
4.10. FINANCIAL STATEMENTS. The financial statements of Borrower and
its Consolidated Subsidiaries for its most recently completed Fiscal Year and
for that portion of its current Fiscal Year ended with that Fiscal Month ended
closest to the Closing Date for which financial statements have been prepared,
including balance sheet, income statement and, if available, statement of
changes in cash flow, copies of which heretofore have been furnished to Lender,
are complete and accurately and fairly represent the financial condition of
Borrower and its Consolidated Subsidiaries, the results of its operations and
the transactions in its equity accounts as of the dates and for the periods
referred to therein, and have been prepared in accordance with GAAP. There are
no material liabilities, direct or indirect, fixed or contingent, of Borrower or
any such Consolidated Subsidiaries as of the date of such financial statements
which are not reflected therein or in the notes thereto. No Material Adverse
Change has occurred since the date of the balance sheet contained in the annual
audited financial statement of Borrower described hereinabove.
4.11. COMPLIANCE WITH LAWS. Borrower is in compliance with all
applicable laws, rules, regulations and orders of any governmental authority on
the Closing Date, excepting where the noncompliance with which would not
reasonably be expected to result in a Material Adverse Change. Borrower
possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, and (to the best of its knowledge) all patents, trademarks, service
marks, trade names, copyrights, licenses and other, similar rights, free from
burdensome restrictions, that are necessary for the ownership, maintenance and
operation of any of its properties and assets, except where the failure to do so
would not reasonably be expected to result in a Material Adverse Change; and
Borrower is not in material violation of any thereof. A complete and accurate
list of all such patents, trademarks, service marks, trade names, copyrights,
licenses and
Page 11
other, similar rights owned by Borrower in existence on the Closing
Date is set forth on the Borrower Information Schedule attached hereto.
4.12. SUBSIDIARIES. As of the Closing Date, Borrower has no
Subsidiaries except as may be described on the Borrower Information Schedule.
4.13. FEDERAL TAXPAYER IDENTIFICATION NUMBER. Borrower's federal
taxpayer identification number is as indicated on the Borrower Information
Schedule.
5. AFFIRMATIVE COVENANTS. Borrower covenants to Lender that from and after
the Closing Date, and so long as any amounts remain unpaid on account of any of
the Obligations or this Agreement remains effective (whichever is the last to
occur), Borrower will comply (and cause each Subsidiary to comply) with the
affirmative covenants set forth below:
5.1. RECORDS RESPECTING COLLATERAL. All records of Borrower and each
Subsidiary with respect to the Collateral will be kept at its Executive Office
and will not be removed from such address without the prior written consent of
Lender.
5.2. FURTHER ASSURANCES. Borrower shall duly execute and/or deliver
(or cause to be duly executed and/or delivered) to Lender any instrument,
invoice, document, document of title, dock warrant, dock receipt, warehouse
receipt, ▇▇▇▇ of lading, order, financing statement, assignment, waiver, consent
or other writing which may be reasonably necessary to Lender to carry out the
terms of this Agreement and any of the other Loan Documents and to perfect its
security interest in and facilitate the collection of the Collateral, the
proceeds thereof, and any other property at any time constituting security to
Lender. Borrower shall perform or cause to be performed such acts as Lender may
request to establish and maintain for Lender a valid and perfected security
interest in and security title to the Collateral, free and clear of any liens,
encumbrances or security interests other than Permitted Encumbrances.
5.3. RIGHT TO INSPECT AND CONDUCT AUDITS. Lender (or any Person or
Persons designated by it) shall have the continuing right to call at the
Executive Office or any Collateral Location at any time during regular business
hours with reasonable advance notice (absent an Event of Default then existing)
and, without hindrance or delay, inspect, audit, check and make extracts from
Borrower's or any Subsidiary's books, records, journals, orders, receipts and
any correspondence and other data relating to the Collateral, to Borrower's or
any Subsidiary's business or to any other transactions between the parties
hereto.
5.4. BORROWING BASE CERTIFICATES. On a weekly basis, or less
frequently if approved by Lender from time to time, Borrower Agent shall prepare
and deliver to Lender a Borrowing Base Certificate with respect to satisfaction
of the Borrowing Base Requirement as of the date of report submission, the
statements in which, in each instance, shall be certified as to truth and
accuracy by a duly authorized officer of Borrower.
5.5. COLLATERAL STATUS CERTIFICATES. Borrower Agent shall, as soon as
practicable, but in any event on or before fifteen (15) days after the end of
each Fiscal Month, furnish or cause to be furnished to Lender a Collateral
Status Certificate, certified by a duly authorized officer of Borrower Agent,
showing (i) the aggregate dollar value of the items comprising the Accounts
Receivable Collateral and the age of each individual item thereof as of the last
day of the preceding Fiscal Month (segregating such items in such manner and to
such degree as Lender may request), PLUS (ii) the type, dollar value and
location of the Inventory Collateral as at the end of the preceding Fiscal
Month, valued at the lower of its Booked Cost or market value, PLUS (iii) an
accounts payable aging. Additionally, Lender may, from time to time, verify the
individual account balances of any individual Account Debtors. Further, upon
request from Lender, made at any time hereafter, and, in any event, with the
above-described Collateral Status Certificate for the month of December in each
year, Borrower Agent shall furnish Lender with a then current Account Debtor
name and address list for Borrower.
5.6. PERIODIC FINANCIAL STATEMENTS. Borrower Agent shall, as soon as
practicable, and in any event within forty-five (45) days after the end of each
Fiscal Quarter, and within forty-five (45) days after the end of each Fiscal
Month, furnish to Lender unaudited financial statements of Borrower Agent and
each Consolidated Subsidiary, including balance sheets, income statements and
statements of cash flow, for the Fiscal
Page 12
Quarter (or Fiscal Month) ended, and for the Fiscal Year to date, on a
consolidated and consolidating basis. All such financial statements shall be
certified by a duly authorized officer of Borrower Agent to present fairly the
financial position and results of operations of Borrower Agent for the period
involved in accordance with GAAP (but for the omission of footnotes and subject
to year-end audit adjustments).
5.7. ANNUAL FINANCIAL STATEMENTS. Borrower Agent shall, as soon as
practicable, and in any event within one hundred (100) days after the end of
each Fiscal Year, furnish to Lender the annual audit report of Borrower Agent
and its Consolidated Subsidiaries, certified without material qualification by
independent certified public accountants selected by Borrower Agent and
reasonably acceptable to Lender, and prepared in accordance with GAAP, together
with relevant financial statements of Borrower Agent and such Subsidiaries for
the Fiscal Year then ended, on a consolidating and a consolidated basis.
5.8. COMPLIANCE CERTIFICATE. Borrower Agent shall, on a monthly basis
not later than forty-five (45) days after the close of each of its first eleven
(11) Fiscal Months and not later than one hundred (100) days after the close of
its Fiscal Year, certify to Lender, in a Compliance Certificate, that no Event
of Default and no Default Condition exists or has occurred, or, if an Event of
Default or Default Condition exists, specifying the nature and period of
existence thereof. Each such Compliance Certificate shall include a computation
showing Borrower's compliance with all financial covenants set forth on the
Transaction Data Schedule.
5.9. PAYMENT OF TAXES. Borrower shall pay and discharge all material
taxes, assessments and governmental charges upon it, its income and its
properties prior to the date on which penalties attach thereto, unless and to
the extent only that (i) such taxes, assessments and governmental charges are
being contested in good faith and by appropriate proceedings by Borrower, (ii)
Borrower maintains reasonable reserves on its books therefor and (iii) the
payment of such taxes does not result in a Lien upon any of the Collateral other
than a Permitted Encumbrance.
5.10. CHANGE OF PRINCIPAL PLACE OF BUSINESS, ETC. Borrower hereby
understands and agrees that if, at time hereafter, Borrower or any Subsidiary
elects to move its Executive Office, or if Borrower or any Subsidiary elects to
change its name, identity or its organization structure, Borrower Agent will
notify Lender in writing at least thirty (30) days prior thereto and, at
Lender's request, comply (or cause its Subsidiary to comply) with Section 5.2
hereof to the extent Lender determines that any new or additional actions need
to be undertaken in regard thereto.
5.11. WAIVERS. With respect to each of the Collateral Locations,
Borrower Agent will use its reasonable best efforts to obtain a Landlord
Agreement, to insure the priority of its security interest in that portion of
the Collateral situated at such locations. Should Borrower Agent be unable to
obtain any such Landlord Agreements, Borrower understands that Lender may impose
rent reserves on the Borrowing Base for each affected Collateral Location.
5.12. PRESERVATION OF EXISTENCE. Borrower shall preserve and maintain
(and cause its Subsidiaries to preserve and maintain) its organizational
existence, rights, franchises and privileges in its Home State, and qualify and
remain qualified to do business in each jurisdiction in which such qualification
is necessary or desirable in view of its business and operations or the
ownership of its properties.
5.13. COMPLIANCE WITH LAWS. Borrower and each of its Subsidiaries
shall comply with the requirements of all applicable laws, rules, regulations
and orders of any governmental authority, noncompliance with which would or
could reasonably be expected to result in a Material Adverse Change. Without
limiting the foregoing, each of Borrower and its Subsidiaries shall obtain and
maintain all permits, licenses and other authorizations which are required
under, and otherwise comply with, all federal, state, and local laws and
regulations.
5.14. CERTAIN REQUIRED NOTICES. Promptly, upon its receipt of notice
or knowledge thereof, Borrower Agent will report to Lender: (i) any lawsuit or
administrative proceeding in which Borrower or any Subsidiary is a defendant
which, if decided adversely to Borrower or such Subsidiary, could reasonably be
expected to result in a Material Adverse Change; or (ii) the existence and
nature of any Default Condition or Event of Default;
Page 13
5.15. SEC REPORTS. Promptly, upon its filing thereof with the
Securities and Exchange Commission, Borrower Agent shall provide Lender with
copies of its 10-K, 10-Q and other, similar reports.
6. NEGATIVE COVENANTS. Borrower covenants to Lender that from and after the
Closing Date, and so long as any amount remains unpaid on account of any of the
Obligations or this Agreement remains effective (whichever is the last to
occur), Borrower will not do (and will not permit any Subsidiary to do), any of
the things or acts set forth below, except with the prior written consent of
Lender or as otherwise may be set forth on the Transaction Data Schedule:
6.1. ENCUMBRANCES. Create, assume, or suffer to exist any Lien, EXCEPT
FOR Permitted Encumbrances. Notwithstanding the foregoing, Borrower may, from
time to time, in the ordinary course of its and its Foreign Subsidiaries'
respective foreign businesses, grant Liens (other than Permitted Encumbrances)
on inventory and equipment of Borrower or such Subsidiaries located outside the
United States of America in order to obtain financing for such foreign
businesses, PROVIDED, HOWEVER, that: (i) Lender has been granted the right of
first offer or first refusal, as the case may be, to extend such financing
itself, secured by such assets, and (ii) within a reasonable time thereafter,
Lender has declined to extend such financing either on terms mutually acceptable
to Borrower and Lender or, as applicable, terms substantially equivalent to
those offered to Borrower by any third party financier. In such event, to the
extent that any third party financier has required as a condition to its
proposed financing that a pledge of all or a portion of the Equity Interests in
the Foreign Subsidiary obtaining the benefit of such financing which already has
been pledged to Lender pursuant hereto, Lender shall, if no Event of Default or
Default Condition then exists, release or, if acceptable to the third party
financier, subordinate its Lien on such Equity Interests to permit the pledge
thereof to such third party financier.
6.2. DEBT. Incur, assume, or suffer to exist any Debt, EXCEPT FOR: (i)
Debt to Lender or any Affiliate of Lender; (ii) trade payables and contractual
obligations to suppliers and customers incurred in the ordinary course of
business; (iii) accrued pension fund and other employee benefit plan obligations
and liabilities (provided, however, that such Debt does not result in the
existence of any Event of Default or Default Condition under any other provision
of this Agreement); (iv) deferred taxes; (v) Debt resulting from endorsements of
negotiable instruments received in the ordinary course of its business; (vi)
Purchase Money Debt not to exceed the Materiality Threshold; (vii) Subordinated
Debt; and (viii) other Debt, to the extent set forth on SCHEDULE "7" annexed
hereto.
6.3. CONTINGENT LIABILITIES. Guarantee, endorse, become surety with
respect to or otherwise become directly or contingently liable for or in
connection with the obligations of any other person, firm, or corporation,
EXCEPT FOR (i) endorsements of negotiable instruments for collection in the
ordinary course of business; and (ii) those guaranties existing on the Closing
Date and disclosed on SCHEDULE "6" annexed hereto.
6.4. DIVIDENDS. Declare or pay any dividends on, or make any
distribution with respect to, its Equity Interests, except that (i) Subsidiaries
of Borrower may pay dividends and make other distributions to Borrower from time
to time and (ii) so long as no Event of Default exists, Borrower may pay
dividends on Permitted Preferred Stock.
6.5. REDEMPTION. Purchase, redeem, or otherwise acquire for value any
of its Equity Interests; PROVIDED, HOWEVER, that, subject to meeting all
Redemption Conditions in regard thereto, Borrower may make Redemptions of
Permitted Preferred Stock from time to time.
6.6. INVESTMENTS. Make any investment in cash or by delivery of
property to any Person, whether by acquisition of Equity Interests or Debt, or
by loan, advance or capital contribution, or otherwise, in any Person or
property of a Person (herein called, subject to the following exceptions,
"RESTRICTED INVESTMENTS"), EXCEPT for: (i) assets acquired from time to time in
the ordinary course of business; (ii) current assets arising from the sale of
goods or the provision of services in the ordinary course of business; (iii)
loans or advances made to employees for salary, commissions, travel or the like,
made in the ordinary course of business not to exceed, in aggregate amount, the
Materiality Threshold; (iv) loans and advances made by Borrower to its
Subsidiaries in the ordinary course of its and their business, not to exceed,
however, as to all Subsidiaries, for all such loans and advances outstanding at
any one time, the sum of $250,000 PROVIDED, HOWEVER, that the foregoing shall
not include, and no
Page 14
restriction shall apply to, payroll and like operating expenses incurred from
time to time in the ordinary course of business of Borrower's foreign
operations, to the extent accounted for as such under GAAP on Borrower's books;
and (v) other investments not to exceed, in aggregate amount, the Materiality
Threshold.
6.7. MERGERS. Dissolve or otherwise terminate its organizational
status; or enter into any merger, reorganization or consolidation; or make any
substantial change in the basic type of business conducted by Borrower and its
Subsidiaries, as of the Closing Date.
6.8. BUSINESS LOCATIONS. Transfer Executive Office, or open new
Collateral Locations, except upon at least thirty (30) days prior written notice
to Lender and after the delivery to Lender of financing statements, if required
by Lender, in form satisfactory to Lender, to perfect or continue the perfection
of Lender's Lien thereon.
6.9. AFFILIATE TRANSACTIONS. Enter into, or be a party to, or permit
any Subsidiary to enter into or be a party to, any transaction with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair and
reasonable terms which are fully disclosed to Lender (if in excess of the
Materiality Threshold) and are no less favorable to Borrower than would be
expected to be obtained in a comparable arm's length transaction with a Person
not an Affiliate.
6.10. SUBSIDIARIES. Create any Subsidiary or, except as provided in
Section 6.6, divest itself of any assets by transferring them to any Subsidiary
which exists on the Closing Date or is hereafter created with Lender's consent.
Notwithstanding the foregoing, however, Lender acknowledges receipt of prior
notice from Borrower that it intends to create a new Foreign Subsidiary,
headquartered in Guatemala, and Lender consents in advance thereto, provided
that not less than sixty-five percent (65%) of the Equity Interests in such
Subsidiary are pledged to Lender pursuant to a Stock Pledge Agreement promptly,
after, but in any event within ten (10) Business Days after, its creation.
6.11. FISCAL YEAR. Change its Fiscal Year, or permit any Subsidiary to
have a fiscal year different from the Fiscal Year of Borrower.
6.12. DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of any
of its properties, including any disposition of property as part of a sale and
leaseback transaction, to or in favor of any Person, except as otherwise
expressly permitted, as to certain Collateral, in Section 3.2.3.
6.13. FEDERAL TAXPAYER IDENTIFICATION NUMBER. Change or permit any
Subsidiary to change its federal taxpayer identification number without prior
written notice to Lender.
6.14. SUBORDINATED DEBT. Pay any Subordinated Debt except to the
extent expressly provided in the Subordination Agreement or as Lender otherwise
may consent from time to time; PROVIDED, HOWEVER, that nothing contained herein
shall prevent Borrower from: (i) refinancing existing Subordinated Debt with new
Subordinated Debt so long as the terms of the new Subordinated Debt are no less
favorable to Borrower than those then prevailing in respect of the refinanced
Subordinated Debt; or (ii) paying Subordinated Debt when due, or otherwise
redeeming, refunding or repurchasing Subordinated Debt from time to time, so
long as either (A) all Redemption Conditions are met in regard thereto or (B)
such Subordinated Debt is repaid, redeemed, refunded or repurchased solely from
the proceeds of cash equity (including Permitted Preferred Stock) contributed to
Borrower subsequent to the Closing Date.
6.15. RESTRICTIONS. Enter into or assume any agreement (other than the
Loan Documents) prohibiting or otherwise restricting (i) except as otherwise
provided in Section 6.1 in respect of certain Foreign Subsidiaries, the creation
or assumption of any Lien upon its or any Subsidiaries' properties, or (ii) the
ability of any Subsidiary to pay dividends or make other distributions or
transfers to Borrower.
6.16. DIFFERENT BUSINESS. Engage in any businesses other than
businesses of the same (or substantially similar) type engaged in by Borrower
and its Subsidiaries as of the Closing Date.
Page 15
7. FINANCIAL COVENANTS. Borrower covenants to Lender that, from and after
the Closing Date and so long as any amount remains on account of any of the
Obligations or this Agreement remains effective (whichever is the last to
occur), it will comply with the financial covenants (if any) set forth on the
Transaction Data Schedule, which are herewith incorporated by reference into
this Article 7.
8. EVENTS OF DEFAULT. The occurrence of any events or conditions set forth
below shall constitute an Event of Default hereunder, provided that any
requirement for the giving of notice or the lapse of time, or both, has been
satisfied:
8.1. OBLIGATIONS. Borrower shall fail to make any payment on any of
its Obligations, when due.
8.2. MISREPRESENTATIONS. Any material representations or warranties
made herein or in any of the Loan Documents or in any certificate or statement
furnished at any time hereunder or in connection with any of the Loan Documents
shall prove to have been untrue or misleading in any material respect when made
or furnished.
8.3. CERTAIN COVENANTS. Borrower shall default in the observance or
performance of any covenant or agreement contained in Articles 5, 6 or 7.
8.4. OTHER COVENANTS. Borrower, any Subsidiary or any Guarantor shall
default in the observance or performance of any covenant or agreement contained
herein, in any of the other Loan Documents or any Guaranty (other than a default
the performance or observance of which is dealt with specifically elsewhere in
this Article 8) UNLESS (i) with respect to this Agreement, such default is cured
to Lender's satisfaction within ten (10) Business Days after the sooner to occur
of receipt of notice of such default from Lender or the date on which such
default first becomes known to Borrower and (ii) with respect to any other Loan
Document or Guaranty, such default is cured within any applicable grace, cure or
notice and cure period contained therein or ten (10) Business Days, whichever is
the later.
8.5. OTHER DEBTS. Borrower, any Subsidiary or any Guarantor shall
default in connection with any agreement for Debt exceeding the Materiality
Threshold with any creditor, including Lender, which entitles said creditor to
accelerate the maturity thereof.
8.6. VOLUNTARY BANKRUPTCY. Borrower, any Subsidiary or any Guarantor
shall file a voluntary petition in bankruptcy or a voluntary petition or answer
seeking liquidation, reorganization, arrangement, readjustment of its debts, or
for any other relief under the Bankruptcy Code, or under any other act or law
pertaining to insolvency or debtor relief, whether state, Federal, or foreign,
now or hereafter existing; Borrower, any Subsidiary or any Guarantor shall enter
into any agreement indicating its consent to, approval of, or acquiescence in,
any such petition or proceeding; Borrower, any Subsidiary or any Guarantor shall
apply for or permit the appointment by consent or acquiescence of a receiver,
custodian or trustee of Borrower, any Subsidiary or any Guarantor for all or a
substantial part of its property; Borrower, any Subsidiary or any Guarantor
shall make an assignment for the benefit of creditors; or Borrower, any
Subsidiary or any Guarantor shall be or become Insolvent; or Borrower, any
Subsidiary or any Guarantor shall admit, in writing, its inability or failure to
pay its debts generally as such debts become due.
8.7. INVOLUNTARY BANKRUPTCY. There shall have been filed against
Borrower, any Subsidiary or any Guarantor an involuntary petition in bankruptcy
or seeking liquidation, reorganization, arrangement, readjustment of its debts
or for any other relief under the Bankruptcy Code, or under any other act or law
pertaining to insolvency or debtor relief, whether state, federal or foreign,
now or hereafter existing; Borrower, any Subsidiary or any Guarantor shall
suffer or permit the involuntary appointment of a receiver, custodian or trustee
of Borrower, any Subsidiary or any Guarantor or for all or a substantial part of
its property; or Borrower, any Subsidiary or any Guarantor shall suffer or
permit the issuance of a warrant of attachment, execution or similar process
against all or any substantial part of the property of Borrower, any Subsidiary
or any Guarantor; or any motion, complaint or other pleading is filed in any
bankruptcy case of any person or entity other than Borrower and such motion,
complaint or pleading seeks the consolidation of Borrower's assets and
liabilities with the assets and liabilities of such person or entity.
Page 16
8.8. DAMAGE, LOSS, THEFT OR DESTRUCTION OF COLLATERAL. There shall
have occurred material uninsured damage to, or loss, theft or destruction of,
any Collateral having a value, based on the lower of its depreciated cost or
market value, exceeding the Materiality Threshold.
8.9. JUDGMENTS. A final judgment or order for the payment of money is
rendered against Borrower, any Subsidiary or any Guarantor in an amount
exceeding the Materiality Threshold (exclusive of amounts covered by insurance)
and either (x) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (y) a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect for
any period of thirty (30) consecutive days.
8.10. DISAVOWAL OF CERTAIN OBLIGATIONS. Any Person (other than Lender)
party to a Guaranty or Subordination Agreement shall disavow its obligations
thereunder; or any such Guaranty or Subordination Agreement is alleged to be, or
determined by any governmental authority to be, invalid, unenforceable or
otherwise not binding on any Person party thereto (other than Lender), in whole
or in part.
8.11. MATERIAL ADVERSE CHANGE. There shall occur any Material Adverse
Change.
8.12. CHANGE OF CONTROL. Any Person, or group of Persons acting in
concert, not in Control of Borrower on the Closing Date, shall obtain Control of
the Borrower.
8.13. CHANGE IN EXECUTIVE MANAGEMENT. ▇▇▇▇▇ ▇▇▇▇ shall cease to be
actively involved in the day-to-day executive management of Borrower or Borrower
otherwise shall fail to maintain generally executive management satisfactory to
Lender having sufficient skill and experience in Borrower's industry to manage
Borrower competently and efficiently.
9. REMEDIES. Upon the occurrence or existence of any Event of Default, or
at any time thereafter, without prejudice to the rights of Lender to enforce its
claims against Borrower for damages for failure by Borrower to fulfill any of
its obligations hereunder, subject only to prior receipt by Lender of payment in
full of all Obligations then outstanding in a form acceptable to Lender, Lender
shall have all of the rights and remedies set forth below, and it may exercise
any one, more, or all of such remedies, in its sole discretion, without thereby
waiving any of the others; PROVIDED, HOWEVER, that, in addition to the
foregoing, if the Event of Default is in respect of Section 8.6 or 8.7, then,
automatically, immediately upon such Event of Default occurring, without
necessity of any further action on Lender's part, all commitments of Lender
hereunder and under all other Loan Documents shall terminate, and all
Obligations shall be immediately due and payable.
9.1. ACCELERATION OF THE OBLIGATIONS. Lender, at its option, may
terminate all commitments of Lender hereunder and under all other Loan
Documents, and declare all of the Obligations to be immediately due and payable,
whereupon the same shall become immediately due and payable without presentment,
demand, protest, notice of nonpayment or any other notice required by law
relative thereto, all of which are hereby expressly waived by Borrower, anything
contained herein to the contrary notwithstanding. If any note of Borrower to
Lender constituting Obligations, including, without limitation, any of the
Notes, shall be a demand instrument, however, the recitation of the right of
Lender to declare any and all Obligations to be immediately due and payable,
whether such recitation is contained in such note or in this Agreement, as well
as the recitation of the above events permitting Lender to declare all
Obligations due and payable, shall not constitute an election by Lender to waive
its right to demand payment under a demand at any time and in any event, as
Lender in its discretion may deem appropriate. Thereafter, Lender, at its
option, may, but shall not be obligated to, accept less than the entire amount
of Obligations due, if tendered, PROVIDED, HOWEVER, that unless then agreed to
in writing by Lender, no such acceptance shall or shall be deemed to constitute
a waiver of any Event of Default or a reinstatement of any commitments of Lender
hereunder or under all other Loan Documents.
9.2. DEFAULT. If Lender so elects, by further written notice to
Borrower, Lender may increase the rate of interest charged on the Notes then
outstanding for so long thereafter as Lender further shall elect by an amount
not to exceed the Default Rate.
Page 17
9.3. REMEDIES OF A SECURED PARTY. Lender shall thereupon have the
rights and remedies of a secured party under the UCC in effect on the date
thereof (regardless whether the same has been enacted in the jurisdiction where
the rights or remedies are asserted), including, without limitation, the right
to take possession of any of the Collateral or the proceeds thereof, to sell or
otherwise dispose of the same, to apply the proceeds therefrom to any of the
Obligations in such order as Lender, in its sole discretion, may elect. Lender
shall give Borrower written notice of the time and place of any public sale of
the Collateral or the time after which any other intended disposition thereof is
to be made. The requirement of sending reasonable notice shall be met if such
notice is given to Borrower at least ten (10) Business Days before such
disposition. Expenses of retaking, holding, insuring, preserving, protecting,
preparing for sale or selling or the like with respect to the Collateral shall
include, in any event, reasonable attorneys' fees and other legally recoverable
collection expenses, all of which shall constitute Obligations.
9.4. REPOSSESSION OF THE COLLATERAL. Lender may take the Collateral or
any portion thereof into its possession, by such means (without breach of the
peace) and through agents or otherwise as it may elect (and, in connection
therewith, demand that Borrower assemble the Collateral at a place or places and
in such manner as Lender shall prescribe), and sell, lease or otherwise dispose
of the Collateral or any portion thereof in its then condition or following any
commercially reasonable preparation or processing, which disposition may be by
public or private proceedings, by one or more contracts, as a unit or in
parcels, at any time and place and on any terms, so long as the same are
commercially reasonable and Borrower hereby waives all rights which Borrower has
or may have under applicable law to notice and to a judicial hearing prior to
seizure of any Collateral by Lender.
9.5. DIRECT NOTIFICATION. Lender may, additionally, in its sole
discretion, at any time that an Event of Default exists, direct Account Debtors
to make payments on the Accounts Receivable Collateral, or portions thereof,
directly to Lender, and the Account Debtors are hereby authorized and directed
to do so by Borrower upon Lender's direction, and the funds so received shall be
also deposited in a Lockbox Account, or, at the election of Lender, upon its
receipt thereof, be applied directly to repayment of the Obligations in such
order as Lender, in its sole discretion, shall determine.
9.6. OTHER REMEDIES. Unless and except to the extent expressly
provided for to the contrary herein, the rights of Lender specified herein shall
be in addition to, and not in limitation of, Lender's rights under the UCC, as
amended from time to time, or any other statute or rule of law or equity, or
under any other provision of any of the Loan Documents, or under the provisions
of any other document, instrument or other writing executed by Borrower or any
third party in favor of Lender, all of which may be exercised successively or
concurrently.
10. MISCELLANEOUS
10.1. WAIVER. Each and every right granted to Lender under this
Agreement, or any of the other Loan Documents, or any other document delivered
hereunder or in connection herewith or allowed it by law or in equity, shall be
cumulative and may be exercised from time to time. No failure on the part of
Lender to exercise, and no delay in exercising, any right shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. No waiver by Lender of any Default Condition or Event of Default shall
constitute a waiver of any subsequent Default Condition or Event of Default.
10.2. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
10.3. SURVIVAL. All representations, warranties and covenants made
herein and in the Loan Documents shall survive the execution and delivery hereof
and thereof. The terms and provisions of this Agreement shall continue in full
force and effect, notwithstanding the payment of one or more of the Notes or the
termination of the Line of Credit, until all of the Obligations have been paid
in full and Lender has terminated this Agreement in writing.
Page 18
10.4. ASSIGNMENTS. No assignment hereof or of any Loan Document shall
be made by Borrower without the prior written consent of Lender. Lender may
assign, or sell participations in, its right, title and interest herein and in
the Loan Documents at any time hereafter without notice to or consent of
Borrower.
10.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when fully executed shall be an original, and all of
said counterparts taken together shall be deemed to constitute one and the same
agreement.
10.6. REIMBURSEMENT. Borrower shall pay to Lender on demand all
reasonable out-of-pocket costs and expenses that Lender pays or actually incurs
in connection with the negotiation, preparation, consummation, amendment,
modification, enforcement and termination of this Agreement and the other Loan
Documents, including, without limitation: (a) fees and disbursements of legal
counsel; (b) costs and expenses of lien and title searches insurance; (c) actual
taxes, fees and other charges for recording any mortgages, filing any financing
statements and continuations, and other actions to perfect, protect and continue
the Lien of Lender in the Collateral; (d) sums paid or incurred to pay for any
amount or to take any action required of Borrower under the Loan Documents that
Borrower fails to pay or take; (e) costs of appraisals, inspections, field
audits and verifications of the Collateral, including, without limitation, costs
of travel, for inspections of the Collateral and Borrower's operations by
Lender; (f) costs and expenses of preserving and protecting the Collateral; and
(g) after an Event of Default, costs and expenses (including fees and
disbursements of legal counsel) paid or incurred to obtain payment of the
Obligations, enforce the Lender's Lien in any Collateral, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents or to defend any claim made or threatened against Lender arising out
of the transactions contemplated hereby (including, without limitation,
preparations for and consultations concerning any such matters). The foregoing
shall not be construed to limit any other provisions of the Loan Documents
regarding costs and expenses to be paid to Borrower. All of the foregoing costs
and expenses may, in the discretion of Lender, be charged as Advances. Borrower
will pay all expenses incurred by it in the transaction. In the event Borrower
becomes a debtor under the Bankruptcy Code, Lender's secured claim in such case
shall include interest on the Obligations and all fees, costs and charges
provided for herein (including, without limitation, reasonable attorneys' fees
actually incurred) all for the extent allowed by the Bankruptcy Code.
10.7. SUCCESSORS AND ASSIGNS. This Agreement and Loan Documents shall
be binding upon and inure to the benefit of the successors and permitted assigns
of the parties hereto and thereto.
10.8. SEVERABILITY. If any provision this Agreement or of any of the
Loan Documents or the application thereof to any party thereto or circumstances
shall be invalid or unenforceable to any extent, the remainder of such Loan
Documents and the application of such provisions to any other party thereto or
circumstance shall not be affected thereby and shall be enforced to the greatest
extent permitted by law.
10.9. NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been given or made when (i)
personally delivered , (ii) two (2) Business Days after deposited with a
reputable nationwide overnight delivery service, or (iii) five (5) Business Days
after deposited in the mail, registered or certified mail, postage prepaid,
addressed as follows: (i) for Lender, care of the address of Lender inscribed
beneath its signature hereinbelow and (ii) for Borrower, care of the address set
forth as its Executive Office on the Borrower Information Schedule (or to such
other address as may be designated hereafter in writing by the respective
parties hereto) except in cases where it is expressly provided herein or by
applicable law that such notice, demand or request is not effective until
received by the party to whom it is addressed.
10.10. ENTIRE AGREEMENT: AMENDMENTS. This Agreement, together with the
remaining Loan Documents, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof. Neither this Agreement nor any
Loan Document may be changed, waived, discharged, modified or terminated orally,
but only by an instrument in writing signed by the party against whom
enforcement is sought.
10.11. TIME OF ESSENCE. Time is of the essence in this Agreement and
the other Loan Documents.
Page 19
10.12. INTERPRETATION. No provision of this Agreement or any Loan
Document shall be construed against or interpreted to the disadvantage of any
party hereto by any court or other governmental or judicial authority by reason
of such party having or being deemed to have structured or dictated such
provision.
10.13. LENDER NOT A JOINT VENTURER. Neither this Agreement nor any
Loan Document shall in any respect be interpreted, deemed or construed as making
Lender a partner or joint venturer with Borrower or as creating any similar
relationship or entity, and Borrower agrees that it will not make any contrary
assertion, contention, claim or counterclaim in any action, suit or other legal
proceeding involving Lender and Borrower.
10.14. JURISDICTION. BORROWER AGREES THAT ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY LOAN DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA SITTING IN
THE CITY AND STATE OF NEW YORK, ALL AS LENDER MAY ELECT. BY EXECUTION OF THIS
AGREEMENT, BORROWER HEREBY SUBMITS TO EACH SUCH JURISDICTION, HEREBY EXPRESSLY
WAIVING WHATEVER RIGHTS MAY CORRESPOND TO IT BY REASON OF ITS PRESENT OR FUTURE
DOMICILE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION OR
TO SERVE PROCESS IN ANY MANNER PERMITTED OR REQUIRED BY LAW.
10.15. ACCEPTANCE. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, SHALL NOT BECOME EFFECTIVE UNLESS AND UNTIL DELIVERED TO LENDER AT
ITS PRINCIPAL OFFICE IN ATLANTA, ▇▇▇▇▇▇ COUNTY, GEORGIA AND ACCEPTED IN WRITING
BY LENDER AT SUCH OFFICE AS EVIDENCED BY ITS EXECUTION HEREOF.
10.16. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
any other day in which national banks within the State of Georgia are legally
authorized to close, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest hereunder or under the Notes.
10.17. CURE OF DEFAULTS BY LENDER. If, hereafter, Borrower defaults in
the performance of any duty or obligation to Lender hereunder or under any Loan
Document, Lender may, at its option, but without obligation, cure such default
and any costs, fees and expenses incurred by Lender in connection therewith
including, without limitation, for the purchase of insurance, the payment of
taxes and the removal or settlement of liens and claims, shall be deemed to be
advances against the Master Note, whether or not this creates an overadvance
thereunder, and shall be payable in accordance with its terms.
10.18. ATTORNEY-IN-FACT. Borrower hereby designates, appoints and
empowers Lender irrevocably as its attorney-in-fact, effective during any time
that an Event of Default exists, either in the name of Borrower or the name of
Lender, at Borrower's cost and expense, (i) to do any and all actions which
Lender may deem necessary or advisable to carry out the terms of this Agreement
or any other Loan Document upon the failure, refusal or inability of Borrower to
do so and (ii) to ask for, demand, ▇▇▇ for, collect, compromise, compound,
receive, receipt for and give acquittances for any and all sums owing or which
may become due upon any of the Collateral and, in connection therewith, to take
any and all actions as Lender may deem necessary or desirable to realize upon
any Collateral; and Borrower hereby agrees to indemnify and hold Lender harmless
from any costs, damages, expenses or liabilities arising against or incurred by
Lender in connection therewith, excluding any resulting from Lender's gross
negligence or willful misconduct..
10.19. SOLE BENEFIT. The rights and benefits set forth in this
Agreement and the other Loan Documents are for the sole and exclusive benefit of
the parties hereto and thereto and may be relied upon only by them.
10.20. INDEMNIFICATION. Borrower will hold Lender, its respective
directors, officers, employees, agents, Affiliates, successors and assigns
harmless from and indemnify Lender, its respective directors, officers,
employees, agents, Affiliates, successors and assigns against, all loss,
damages, costs and expenses
Page 20
(including, without limitation, reasonable attorney's fees, costs and expenses)
actually incurred by any of the foregoing, whether direct, indirect or
consequential, as a result of or arising from or relating to any "Proceedings"
(as defined below) by any Person, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any Person under any statute,
case or regulation (other than with respect to taxes on the income of Lender
derived herefrom), including, without limitation, any federal or state
securities laws or under any common law or equitable case or otherwise, arising
from or in connection with this Agreement (other than with respect to taxes on
the income of Lender derived herefrom), and any other of the transactions
contemplated by this Agreement, except to the extent such losses, damages, costs
or expenses are due to the willful misconduct or gross negligence of Lender. As
used herein, "PROCEEDINGS" shall mean actions, suits or proceedings before any
court, governmental or regulatory authority and shall include, particularly, but
without limitation, any actions concerning environmental laws, regulations or
rules. At the request of Lender, Borrower will indemnify any Person to whom
Lender transfers or sells all or any portion of its interest in the Obligations
or participations therein on terms substantially similar to the terms set forth
above. Lender shall not be responsible or liable to any Person for consequential
damages which may be alleged as a result of this Agreement or any of the
transactions contemplated hereby. The obligations of Borrower under this Section
shall survive the termination of this Agreement and payment of the Obligations.
10.21. JURY TRIAL WAIVER. EACH OF BORROWER AND LENDER HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED
TO ANY OF THE LOAN DOCUMENTS, OBLIGATIONS OR THE COLLATERAL.
10.22. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement, and all references in this Agreement to Articles, Sections,
Subsections, paragraphs, clauses, subclauses or Exhibits shall refer to the
corresponding Article, Section, Subsection, paragraph, clause, subclause of, or
Exhibit attached to, this Agreement, unless specific reference is made to the
articles, sections or other subdivisions divisions of or Exhibit to, another
document or instrument. Wherever in this Agreement reference is made to any
instrument, agreement or other document, including, without limitation, any of
the Loan Documents, such reference shall be understood to mean and include any
and all amendments thereto or modifications, restatements, renewals or
extensions thereof. Wherever in this Agreement reference is made to any statute,
such reference shall be understood to mean and include any and all amendments
thereof and all regulations promulgated pursuant thereto. Whenever any matter
set forth herein or in any Loan Document is to be consented to or be
satisfactory to Lender, or is to be determined, calculated or approved by
Lender, then, unless otherwise expressly set forth herein or in any such Loan
Document, such consent, satisfaction, determination, calculation or approval
shall be in Lender's sole discretion, exercised in good faith and, where
required by law, in a commercially reasonable manner, and shall be conclusive
absent manifest error.
11. CONDITIONS PRECEDENT. Unless waived in writing by Lender at or prior to
the execution and delivery of this Agreement, the conditions set forth below
shall constitute express conditions precedent to any obligation of Lender
hereunder.
11.1. OFFICER'S CERTIFICATE. Receipt by Lender of a certificate from a
duly authorized officer of Borrower, to be in form and substance substantially
similar to the certificate set forth on EXHIBIT "J", certifying to Lender (i)
that appropriate resolutions have been entered into by the board of directors
(or similar governing body) of Borrower incident hereto and that the officers of
Borrower whose signatures appear hereinbelow and on the other Loan Documents,
are duly authorized by the board of directors (or similar governing body) of
Borrower for and on behalf of Borrower to execute and deliver this Agreement and
the other Loan Documents and to bind Borrower accordingly thereby, and (ii) as
to the existence and status of Borrower's Organization Document.
11.2. STOCK PLEDGE AGREEMENT. Receipt by Lender of a Stock Pledge
Agreement from Borrower together with all certificates evidencing Borrower's
ownership interest in all Equity Interests of their respective Subsidiaries,
limited, in the case of Foreign Subsidiaries, to sixty-five percent (65%).
Page 21
11.3. GOOD STANDING CERTIFICATES. Receipt by Lender of a certificate
of good standing with respect to Borrower from the secretaries of state of the
state of incorporation of Borrower and of any state in which a Collateral
Location is situated, dated within thirty (30) days of the Closing Date.
11.4. LOAN DOCUMENTS. Receipt by Lender of this Agreement and all
other Loan Documents, each duly executed by Borrower in form and substance
acceptable to Lender.
11.5. INSURANCE. Receipt by Lender of a certificate respecting all
property and liability insurance required to be maintained by Borrower
hereunder, together with appropriate loss payee and additional insured
endorsements thereto, favoring Lender, all in form acceptable to Lender.
11.6. FINANCING STATEMENTS. Receipt by Lender of Uniform Commercial
Code financing statements respecting the Collateral, duly executed by Borrower
in respect of each Collateral Location, in form and substance acceptable to
Lender, but, in any event, including the property description set forth on
EXHIBIT "K".
11.7. OPINION OF COUNSEL. Receipt by Lender of an opinion of counsel
from independent legal counsel to Borrower in substantially the form of EXHIBIT
"L".
11.8. LANDLORD AGREEMENTS. Receipt by Lender of any Landlord
Agreements then obtained by Borrower, with respect to Collateral Locations
leased by Borrower as of the Closing Date.
11.9. DISBURSEMENTS LETTER. Receipt by Lender of a disbursements
letter, concerning the use of the proceeds of the initial extensions of credit
hereunder, to be substantially in the form of EXHIBIT "M" attached hereto.
11.10. PAYOFF LETTER. Receipt by Lender from any creditor to whom
Borrower has any Debts on the Closing Date which are being repaid from the
proceeds of an Advance of a payoff letter, to be substantially in the form of
EXHIBIT "N", together with, if such Debt is secured by any Collateral,
termination statements respecting the Lien(s) of such creditor.
11.11. INITIAL BORROWING BASE AND COLLATERAL STATUS REPORTS. Receipt
by Lender of a Borrowing Base Report together with accompanying documentation
required by Lender (each in form and substance required by Lender, but to
include in any event an accounts receivable and accounts payable aging and a
current customer and Account Debtor name and address list) which shall indicate
satisfaction of the Borrowing Base Requirement as of the date of the initial
Borrowing and if no funds are borrowed on the Closing Date indicating the amount
of Borrowings available under the Borrowing Base Requirement, each certified as
to truth and accuracy by a duly authorized officer of Borrower.
11.12. LOCKBOX ACCOUNT. Receipt by Lender of a duly executed Lockbox
Account Agreement in conjunction with the establishment of each Lockbox Account.
11.13. TRADEMARK ASSIGNMENT. Receipt by Lender of a collateral
assignment of U.S. registered trademarks owned by Borrower, to be substantially
in the form of EXHIBIT "P" attached hereto.
11.14. SUBORDINATION AGREEMENTS. Receipt by Lender of Subordination
Agreements from Monto Holdings Pty. Ltd., ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and the Estate
of ▇▇▇▇▇▇ ▇▇▇▇.
11.15. OTHER. Receipt by Lender of such other documents, certificates,
instruments and agreements as shall be required hereunder or provided for herein
or as Lender or Lender's counsel may require in connection herewith.
Page 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers, effective as of the
Closing Date.
"LENDER"
UPS CAPITAL GLOBAL TRADE FINANCE
CORPORATION
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: U.S. COUNTRY MANAGER
----------------------------------
Address for Notices:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Page 23
"BORROWER"
TAG-IT PACIFIC, INC.
By: /S/
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: PRESIDENT
-----------------------------
TALON INTERNATIONAL, INC.
By: /S/
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: PRESIDENT
-----------------------------
A.G.S. HOLDINGS, LLC
By: /S/
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: MANAGER
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: PRESIDENT
-----------------------------
TAG-IT, INC.
By: /S/
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: PRESIDENT
-----------------------------
Page 24
BORROWER: TAG-IT PACIFIC, INC. ET AL.
EXHIBITS TO LOAN AND SECURITY AGREEMENT
EXHIBIT A Borrowing Base Certificate
EXHIBIT B Collateral Status Certificate
EXHIBIT C Compliance Certificate
EXHIBIT D Landlord's Agreement
EXHIBIT E Master Note
EXHIBIT F Notice of Borrowing
EXHIBIT G Subordination Agreement
EXHIBIT H Telephone Instructions Letter
EXHIBIT I Lockbox Agreement
EXHIBIT J Officer's Certificate
EXHIBIT K UCC Financing Statement/Exhibit
EXHIBIT L Opinion of Counsel
EXHIBIT M Disbursement Letter
EXHIBIT N Payoff Letter
EXHIBIT O Stock Pledge Agreement
EXHIBIT P Collateral Assignment of Trademarks
EXHIBIT "A"
BORROWING BASE CERTIFICATE
BORROWER AGENT: TAG-IT PACIFIC, INC.
The undersigned, being an authorized officer having the title inscribed
below of Borrower Agent, and, in such capacity, being familiar with the matters
set forth herein and duly authorized and empowered to issue this Certificate for
and on behalf of Borrower, does hereby certify to UPS CAPITAL GLOBAL TRADE
FINANCE CORPORATION ("Lender"), in connection with and pursuant to that certain
Loan and Security Agreement, dated as of May __, 2001, between Borrower and
Lender (herein, as it may be amended to date, called the "LOAN AGREEMENT";
capitalized terms used herein, without definition, having the meaning given to
such terms in the Loan Agreement) that attached hereto as EXHIBIT "A" is a true,
correct and complete computation of the Borrowing Base as of _____________,
200__.
WITNESS my hand in my aforesaid capacity as of May __, 2001.
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------
Title: PRESIDENT
-----------------------
EXHIBIT "B"
COLLATERAL STATUS CERTIFICATE
BORROWER AGENT: TAG-IT PACIFIC, INC.
The undersigned, being an authorized officer having the title inscribed
below of Borrower Agent, and, in such capacity, being familiar with the matters
set forth herein and duly authorized and empowered to issue this Certificate for
and on behalf of Borrower, does hereby certify to UPS CAPITAL GLOBAL TRADE
FINANCE CORPORATION ("Lender"), in connection with and pursuant to that certain
Loan and Security Agreement, dated as of May __, 2001, between Borrower and
Lender (herein, as it may be amended to date, called the "LOAN AGREEMENT";
capitalized terms used herein, without definition, having the meaning given to
such terms in the Loan Agreement) as follows:
(a) attached hereto as EXHIBIT A is a true, correct and complete
listing of all Accounts Receivable Collateral existing as of the last day of the
Fiscal Month referenced therein, aged by invoice date;
(b) attached hereto as EXHIBIT B is a true, correct and complete
listing of all Inventory Collateral existing as of the last day of the Fiscal
Month referenced therein, segregated by type, dollar value and location;
(c) attached hereto as EXHIBIT C is a true, correct and complete
listing of all accounts payable of Borrower existing as of the last day of the
Fiscal Month referenced therein, aged by invoice date.
WITNESS my hand in my aforesaid capacity as of May __, 2001.
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------
Title: PRESIDENT
-----------------------
EXHIBIT "C"
COMPLIANCE CERTIFICATE
BORROWER AGENT: TAG-IT PACIFIC, INC.
The undersigned, being an authorized officer having the title inscribed
below of Borrower Agent, and, in such capacity, being familiar with the matters
set forth herein and duly authorized and empowered to issue this Certificate for
and on behalf of Borrower, does hereby certify to UPS CAPITAL GLOBAL TRADE
FINANCE CORPORATION ("Lender"), in connection with and pursuant to that certain
Loan and Security Agreement, dated as of May __, 2001, between Borrower and
Lender (herein, as it may be amended to date, called the "LOAN AGREEMENT";
capitalized terms used herein, without definition, having the meaning given to
such terms in the Loan Agreement) that, as of the date of this Certificate,
there exists no Event of Default or Default Condition.
Without limiting the generality of the foregoing, Borrower is in
compliance with all financial covenants set forth in the Transaction Data
Schedule attached to the Loan Agreement, as demonstrated by the computations set
forth on EXHIBIT "A" attached hereto.
WITNESS my hand in my aforesaid capacity as of _______ __, 200__.
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------
Title: PRESIDENT
-----------------------
EXHIBIT "D"
LANDLORD'S AGREEMENT
BORROWER: TAG-IT PACIFIC, INC.
TAG-IT, INC.
TALON INTERNATIONAL, INC.
A.G.S. STATIONERY, INC.
A.G.S. HOLDINGS, LLC
THIS LANDLORD'S AGREEMENT ("AGREEMENT"), made and entered into by the
undersigned landlord (the "Landlord") in favor of UPS CAPITAL GLOBAL TRADE
FINANCE CORPORATION ("LENDER") in respect of the subject Borrower.
WITNESSETH:
RECITALS:
A. Landlord is the landlord under the Lease described on EXHIBIT "A"
attached hereto (the "Lease"), covering the business premises likewise described
on said EXHIBIT "A" (the "PREMISES").
B. Borrower is the tenant of Landlord under the Lease and, in such
capacity, is operating its business on, or keeps property on, the Premises.
C. Borrower has notified Landlord that it has entered, or intends to enter,
into a certain financing arrangement (the "FINANCING ARRANGEMENT") with Lender,
pursuant to which Lender will make certain loans, advances and other financial
accommodations to Borrower.
D. Borrower intends to secure the payment and performance of its
obligations to Lender under the Financing Arrangement by granting to Lender a
security interest in, among other property of Borrower, all of its inventory,
books and records, equipment and trade fixtures, whether now owned or hereafter
acquired or existing (the "COLLATERAL"), portions of which are or hereafter may
be located on the Premises.
E. In connection therewith, pursuant to Lender's request, Borrower has
requested that Landlord execute this Agreement in favor of Lender.
F. Landlord has agreed, at Borrower's request and as an accommodation to
it, to execute this Agreement.
IN CONSIDERATION of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by
Landlord, Landlord acknowledges and agrees as follows in favor of Lender:
1. LIEN SUBORDINATION. Landlord acknowledges and agrees that: (a) the
security interest of Lender in the Collateral shall be superior to any lien,
right, title, claim or interest which Landlord may now or hereafter have
therein; (b) Landlord shall not assert as against Lender's security interest
therein any statutory, contractual or possessory lien, right, title, claim or
interest in the Collateral, including without limitation, rights of levy or
distraint for rent, all of which Landlord hereby subordinates to Lender for the
term of this Agreement; (c) Lender shall have access to the Collateral and the
Premises at all times hereafter during regular business hours to remove the
Collateral therefrom should Lender elect to enforce the security interest
granted in their favor in the Collateral, without hindrance or delay by
Landlord; and (d) all Collateral which is now located or hereafter may be
located on the Premises shall remain the property of Borrower.
2. TERMINATION OF THE LEASE OR SUBLEASE. If, after the date hereof,
Landlord intends to terminate the Lease or otherwise exercise any right it may
have to require Borrower to surrender the Premises or to remove any property of
Borrower (including the Collateral) from the Premises, Landlord will use its
best efforts to notify, Lender in writing at UPS Capital Global Trade Finance
Corporation, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, FAX ▇▇▇-▇▇▇-▇▇▇▇, of its intent to take such action and
to permit Lender to enter onto the Premises within such thirty (30) day period
in order to remove the Collateral therefrom, without charge, that Lender shall
promptly repair any damage to the Premises caused by such removal; and in either
such event, Landlord agrees to cooperate with Lender and not to hinder its
actions in protecting or realizing upon the Collateral. In addition thereto, the
Landlord agrees that the Lender may elect to keep the Collateral on the Premises
beyond thirty (30) days, but if Lender elects to do so, Lender must give
Landlord written notice to such effect within the initial thirty (30) day period
and, thereafter, pay Landlord rent on a per diem basis (based on the annual
rental then payable under the Lease, prorated to a daily rate) for the number of
days, not to exceed, however, a total of sixty (60) days beyond the initial
thirty (30) days prescribed above, in which the Lender uses the Premises for
such purpose.
3. TERM. This Agreement shall remain in full force and effect until the
Financing Arrangement has been terminated, and all obligations and liabilities
of Borrower to Lender arising therefrom have been paid and satisfied in full.
4. NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS. The provisions of this
Agreement may not be modified or terminated orally, and shall be binding upon
the successors, assigns and personal representatives of Landlord, and upon any
successor owner or transferee of the Premises, and shall inure to the benefit of
the successors and assigns of Lender.
IN WITNESS WHEREOF, Landlord has caused this Agreement to be executed, by
its duly authorized officer, agent or other representative as of the date first
above written.
Signed and delivered LANDLORD:
in the presence of:
----------------------------
-------------------------
Witness
_________________________ By:_________________________
Notary Public Name:____________________
Title:___________________
My Commission Expires:
---------------------
(NOTARY SEAL)
EXHIBIT "A"
Description of Lease:
Description of Premises:
(or add Exhibit)
WAREHOUSE OPERATOR'S AGREEMENT
BORROWER: TAG-IT PACIFIC, INC.
TAG-IT, INC.
TALON INTERNATIONAL, INC.
A.G.S. STATIONERY, INC.
A.G.S. HOLDINGS, LLC
THIS WAREHOUSE OPERATOR'S AGREEMENT ("AGREEMENT"), made and entered
into by the undersigned warehouse operator (the "OPERATOR") in favor of UPS
CAPITAL GLOBAL TRADE FINANCE CORPORATION ("LENDER") in respect of the subject
Borrower.
WITNESSETH:
RECITALS:
A. Operator operates a public warehouse at __________________________ (the
"Premises").
B. Borrower is using, or intends to use, the services of the Operator to
store certain inventory of the Borrower on the Premises from time to time (the
"Collateral").
C. Borrower has entered, or intends to enter, into a certain financing
arrangement (the "FINANCING ARRANGEMENT") with Lender, pursuant to which Lender
will make certain loans, advances and other financial accommodations to
Borrower.
D. Borrower intends to secure the payment and performance of its
obligations to Lender under the Financing Arrangement by granting to Lender a
security interest in, among other property of Borrower, the Collateral.
E. In connection therewith, pursuant to Lender's request, Borrower has
requested that Operator execute this Agreement in favor of Lender.
F. Operator has agreed, at Borrower's request and as an accommodation to
it, to execute this Agreement.
IN CONSIDERATION of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by
Operator, Operator acknowledges and agrees as follows in favor of Lender:
1. LIEN SUBORDINATION. Operator acknowledges and agrees that: (a) the
security interest of Lender in the Collateral shall be superior to any lien,
right, title, claim or interest which Operator may now or hereafter have
therein; (b) Operator shall not assert as against Lender's security interest
therein any statutory, contractual or possessory lien, right, title, claim or
interest in the Collateral, including without limitation, rights of levy or
distraint for rent, all of which Operator hereby subordinates to Lender for the
term of this Agreement; (c) Lender shall have access to the Collateral and the
Premises at all times hereafter during regular business hours to remove the
Collateral therefrom should Lender elect to enforce the security interest
granted in their favor in the Collateral, without hindrance or delay by
Operator; and (d) all Collateral which is now located or hereafter may be
located on the Premises shall remain the property of Borrower.
2. REMOVAL OF PROPERTY. If, after the date hereof, Operator intends to
exercise any right it may have to require Borrower to remove Collateral from the
Premises, Operator will use its best efforts to notify, Lender in writing at UPS
Capital Global Trade Finance Corporation, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, FAX ▇▇▇-▇▇▇-▇▇▇▇, of its intent to take such action and
to permit Lender to enter onto the Premises within such thirty (30) day period
in order to remove the Collateral therefrom, without charge, that Lender
Page 1
shall promptly repair any damage to the Premises caused by such removal; and in
either such event, Operator agrees to cooperate with Lender and not to hinder
its actions in protecting or realizing upon the Collateral. In addition thereto,
Operator agrees that the Lender may elect to keep the Collateral on the Premises
beyond thirty (30) days, but if Lender elects to do so, Lender must give
Operator written notice to such effect within the initial thirty (30) day period
and, thereafter, pay Operator its customary charges on a "per diem" basis for
the number of days, not to exceed, however, a total of sixty (60) days beyond
the initial thirty (30) days prescribed above, in which the Lender uses the
Premises for such purpose.
3. TERM. This Agreement shall remain in full force and effect until the
Financing Arrangement has been terminated, and all obligations and liabilities
of Borrower to Lender arising therefrom have been paid and satisfied in full.
4. NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS. The provisions of this
Agreement may not be modified or terminated orally, and shall be binding upon
the successors, assigns and personal representatives of Operator, and upon any
successor owner or transferee of the Premises, and shall inure to the benefit of
the successors and assigns of Lender.
IN WITNESS WHEREOF, Operator has caused this Agreement to be executed, by
its duly authorized officer, agent or other representative as of the date first
above written.
Signed and delivered OPERATOR:
in the presence of:
------------------------------
-------------------------
Witness
_________________________ By:___________________________
Notary Public Name:______________________
Title:_____________________
My Commission Expires:
---------------------
(NOTARY SEAL)
Page 2
EXHIBIT "E"
MASTER NOTE
1. FOR VALUE RECEIVED, the undersigned ("BORROWER"), promises to pay to the
order of UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION ("LENDER"), at the
principal office of Lender in Atlanta, Georgia, or at such other place as Lender
hereafter may direct in writing, in legal tender of the United States of
America, the principal sum of $20,000,000, or so much thereof as may be
disbursed and remain outstanding from time to time hereafter under that certain
"Line of Credit" opened by Lender in favor of Borrower pursuant to the terms of
that certain Loan and Security Agreement, dated as of the date specified below,
between Lender and Borrower (hereinafter, as it may be amended or supplemented
from time to time, called the "Loan Agreement"; all capitalized terms used
herein, but not expressly defined herein, shall have the meanings given to such
terms in the Loan Agreement), the terms and provisions of which are hereby
incorporated herein by reference and made a part hereof, on the Termination
Date, with interest thereon (computed on the daily outstanding principal
balance, for the actual number of days outstanding, on the basis of a 360 day
year) on each advance made hereunder from date of advance until paid in full at
a rate per annum equal to the Applicable Rate. Unless and except to the extent
otherwise expressly provided in the Loan Agreement, accrued interest on the
unpaid principal balance hereof from time to time outstanding shall be due and
payable monthly, commencing on the first day of the calendar month succeeding
the date hereof and continuing on the same day of each succeeding calendar month
thereafter and on demand for payment in full of the principal balance hereof.
2. Borrower agrees, in the event that this Note or any portion hereof is
collected by law or through an attorney at law, to pay all costs of collection,
including, without limitation, reasonable attorneys' fees.
3. This Note evidences borrowing under, is subject to and secured by, and
shall be paid and enforced in accordance with, the terms of the Loan Agreement,
and is the "Master Note" defined in Section 1.1 thereof.
4. Nothing herein shall limit any right granted to Lender by any other
instrument or by law or equity.
5. Borrower hereby waives presentment, demand, protest, notice of
presentment, demand, protest and nonpayment and any other notice required by law
relative hereto, except to the extent as otherwise may be provided for in the
Loan Agreement.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed as of May
__, 2001.
"BORROWER"
TAG-IT PACIFIC, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
[SIGNATURES CONTINUED ON PAGE TWO]
TAG-IT, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
TALON INTERNATIONAL, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
A.G.S. STATIONERY, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
A.G.S. HOLDINGS, LLC
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
Page 2
EXHIBIT "F"
NOTICE OF BORROWING
Date: May __, 2001
To: UPS Capital Global Trade Finance Corporation ("LENDER")
From: TAG-IT PACIFIC, INC., as Borrower Agent.
Re: Loan and Security Agreement, dated May __, 2001, made between Lender
and Borrower, as amended or modified from time to time (the "LOAN
AGREEMENT"; capitalized terms used herein, but not expressly defined
herein, shall have the meanings given to such terms in the Loan
Agreement).
Please take notice that on _______ __, 200_ (which is a Business Day),
we wish to obtain an Advance equal to $____________. In connection with the
foregoing, we hereby certify that: (i) no Default Condition or Event of Default
exists, and none will result from this Borrowing being made; and (ii) Borrower
is in compliance with the Borrowing Base Requirement and will remain so after
the Borrowing is obtained.
Borrower Agent
TAG-IT PACIFIC, INC.
By:
------------------------------
▇▇▇▇▇ ▇▇▇▇
President
EXHIBIT "G"
SUBORDINATION AGREEMENT
This Subordination Agreement (this "AGREEMENT"), dated as of May __, 2001,
is entered into by each of the undersigned (herein, individually and, if more
than one, collectively, called "SUBORDINATED CREDITOR") in favor of UPS CAPITAL
GLOBAL TRADE FINANCE CORPORATION ("SENIOR LENDER"), to determine the parties'
respective rights, remedies and interests with respect to certain debts,
liabilities or obligations owing to each by TAG-IT PACIFIC, INC., a Delaware
corporation, TAG-IT, INC., a California corporation, TALON INTERNATIONAL, INC.,
a Delaware corporation, A.G.S. STATIONERY, INC., a California corporation, and
A.G.S. HOLDINGS, LLC, a California limited liability company (individually and
collectively, "BORROWER"). This Agreement is made with respect to the following
facts:
A. Subordinated Creditor is a shareholder, partner or member of, or an
investor in, Borrower, or is otherwise affiliated with Borrower; and
has obtained, or hereafter may obtain, certain claims against Borrower
in the nature of money owed.
B. Senior Lender has extended or is proposing to extend various secured
financial accommodations to Borrower for the purposes of, among
others, providing working capital; however, Senior Lender is unwilling
to provide or continue such financial accommodations to Borrower
unless Subordinated Creditor subordinates its claims against Borrower
in the manner set forth below. Subordinated Creditor hereby
acknowledges and affirms that Senior Lender's financial accommodations
to Borrower constitute valuable consideration to Subordinated
Creditor.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, and to
induce Senior Lender to extend such financial accommodations to Borrower as it
may determine, and to better secure Senior Lender with respect to the foregoing,
the parties hereby agree as follows:
1. SUBORDINATION AND STANDBY.
a. INDEBTEDNESS. Unless and until all "SENIOR INDEBTEDNESS" (as hereinafter
defined) has been fully paid and satisfied in cash, and this Agreement has
ceased to be effective, Subordinated Creditor shall not accept or receive, by
setoff or in any other manner, from Borrower the whole or any part of any sums
which may now or hereafter be owing to Subordinated Creditor by Borrower, or any
of its predecessors, successors or assigns, including, without limitation, a
receiver, trustee or debtor in possession (the term "BORROWER," as used
hereinafter, shall include any such predecessors, successors or assigns) under
or in connection with the "SUBORDINATED INDEBTEDNESS" (as hereinafter defined);
PROVIDED, HOWEVER, that, notwithstanding the foregoing, unless and until the
Subordinated Creditor receives written notice from Senior Lender that an "Event
of Default" has occurred in respect of the Senior Indebtedness under the Loan
and Security Agreement (hereinafter defined), Subordinated Creditor may continue
to receive regularly scheduled payments of INTEREST ONLY on the Subordinated
Indebtedness, but NO PRINCIPAL unless Senior Lender consents thereto in writing
or such payment is then expressly permitted to occur under the terms of the Loan
and Security Agreement.
b. LIENS AND SECURITY INTERESTS. Any and all of Subordinated Creditor's
liens and security interests against any assets of Borrower securing the
Subordinated Indebtedness, whether now existing or hereafter granted or arising,
shall in each case be expressly subject, subordinate and inferior to the rights,
liens and interests held by Senior Lender with respect to the Senior
Indebtedness. Without limitation of the foregoing, but in furtherance thereof,
so long as this Agreement shall remain in effect:
(1) Subordinated Creditor shall not commence, prosecute or participate in
any other action, whether private, judicial, equitable, administrative or
otherwise, including, without limitation, any bankruptcy case against Borrower
or any of its assets, provided that, as more fully set forth in Section 5
hereof, Subordinated Creditor may file a proof of claim in a bankruptcy or
insolvency proceeding involving Borrower, which proof of claim shall indicate
Subordinated Creditor's subordination hereunder;
(2) Subordinated Creditor shall have no right either to possess any such
assets, enforce any security interests in, foreclose, levy or execute upon, or
collect or attach any such assets, whether by private or judicial action or
otherwise; and
(3) Subordinated Creditor shall neither take, nor consent to or acquiesce
in, the taking of, any action hereafter to set aside, challenge or otherwise
dispute the existence or priority of any Senior Indebtedness or the creation,
attachment, perfection or continuation of any lien or security interest of
Senior Lender in any assets of Borrower.
(c) Definitions.
(1) "SENIOR INDEBTEDNESS". The term "SENIOR INDEBTEDNESS" shall mean,
collectively, all "Obligations," as defined under that certain Loan and Security
Agreement, dated of even date herewith, between Borrower and Senior Lender (as
it may be amended or modified from time to time, the "LOAN AND SECURITY
Agreement"), whether for principal, premium, interest (including all interest
accruing after the initiation of any bankruptcy case, whether or not allowed),
fees, expenses, indemnities or otherwise.
(2) "SUBORDINATED INDEBTEDNESS". The term "SUBORDINATED INDEBTEDNESS" shall
mean, collectively, all indebtedness, liabilities and other obligations of
Borrower to Subordinated Creditor, whether the sums represent principal,
interest, dividends, costs, attorneys' fees, charges, or other obligations due
or not due, whether incurred directly or indirectly, whether absolute or
contingent, and whether now existing or hereafter existing. The term shall
include, particularly, but without limitation, all such indebtedness identified
as such or Schedule "4" to the Loan and Security Agreement.
2. Modifications of Indebtedness.
a. SENIOR INDEBTEDNESS. Senior Lender shall have the right, without notice
to Subordinated Creditor, to amend, supplement or modify the Senior
Indebtedness, in accordance with the terms of the Loan and Security Agreement,
including, without limitation, any extensions or shortening of time of payments
(even if such shortening causes any Senior Indebtedness to be due on demand or
otherwise), any revision of any amortization schedule with respect thereto, and
any increase in the amount of the Senior Indebtedness, and Subordinated Creditor
consents and agrees to any such amendment, supplement or modification.
b. SUBORDINATED INDEBTEDNESS. Subordinated Creditor understands and agrees
that no Subordinated Indebtedness may be created hereafter except as may be
permitted under the Loan and Security Agreement, and no document, instrument or
agreement evidencing all or any part of any Subordinated Indebtedness so created
may be modified or amended without Senior Lender's prior written consent, which
consent shall not be unreasonably withheld.
3. Subordinated Indebtedness Owed Only to Subordinated Creditor.
a. Subordinated Creditor warrants and represents that it has not previously
assigned any interest in the Subordinated Indebtedness, that no other party owns
an interest in any of the Subordinated Indebtedness (whether as joint holders,
participants or otherwise), and that the entire Subordinated Indebtedness is
owing only to Subordinated Creditor.
b. Subordinated Creditor covenants and agrees that the entire Subordinated
Indebtedness shall continue to be owing only to it; PROVIDED that Subordinated
Creditor may assign some or all of its interest in the Subordinated Indebtedness
after the assignee has executed and delivered to Senior Lender an agreement
subordinating, in the manner set forth herein, all rights, remedies and
interests with respect to the assigned Subordinated Indebtedness.
c. Subordinated Creditor further warrants and represents that the only
indebtedness owing by Borrower to it is the Subordinated Indebtedness (if any);
that to the best of its knowledge as of the date hereof, there is no default or
breach with respect to any of such indebtedness; and, specifically, that nothing
herein
Page 2
contained and nothing contained in any other document, instrument or agreement
with or in favor of Senior Lender constitutes a default or breach with respect
to any of such indebtedness.
4. PAYMENTS RECEIVED BY SUBORDINATED CREDITOR. If any payment, distribution
or any collateral proceeds thereof is received by Subordinated Creditor from
Borrower with respect to the Subordinated Indebtedness prior to the full payment
and satisfaction of all the Senior Indebtedness and termination of this
Agreement, Subordinated Creditor shall receive and hold the same in trust as
trustee for the benefit of Senior Lender and shall forthwith deliver such assets
to Senior Lender in precisely the form received (except for the endorsement or
assignment by Subordinated Creditor where necessary), for application on any of
the Senior Indebtedness, due or not due. In the event of the failure of
Subordinated Creditor to make any such endorsement or assignment to Senior
Lender, Senior Lender and any of its officers or agents are hereby irrevocably
authorized to make such endorsement or assignment.
5. CLAIMS IN BANKRUPTCY. In the event of any bankruptcy, assignment for the
benefit of creditors or similar proceedings against Borrower, Subordinated
Creditor shall file all claims it may have against Borrower, and shall direct
the debtor in possession or trustee in bankruptcy, as appropriate, to pay over
to Senior Lender all amounts due to Subordinated Creditor on account of the
Subordinated Indebtedness until the Senior Indebtedness has been paid in full in
cash. If Subordinated Creditor fails to file such claims as requested by Senior
Lender, Senior Lender may file such claims on Subordinated Creditor's own
behalf.
6. POSTPETITION FINANCING; LIENS. In the event of any bankruptcy case
against Borrower or any of the assets of Borrower, Subordinated Creditor hereby
expressly consents to the granting by Borrower to Senior Lender of senior liens
and priorities in connection with any post-petition financing of Borrower by
Senior Lender.
7. SALE OF ASSETS. In the event of a sale of some or all of the assets of
Borrower, whether initiated by Senior Lender; I.E., as part of a liquidation of
its liens and security interests, or initiated by Borrower with Senior Lender's
consent, Subordinated Creditor agrees to release any security interest, lien or
claim in such assets, or any of them, upon the request of Lender, whether or not
Subordinated Creditor will receive any proceeds from such sale. Should
Subordinated Creditor fail to do so within five (5) business days after its
receipt of Lender's request, Lender may, acting as Subordinated Creditor's
attorney-in-fact, do so itself in Subordinated Creditor's name.
8. LEGEND. Any instrument at any time evidencing any Subordinated
Indebtedness (herein, a "SUBORDINATED INSTRUMENT") will be forthwith inscribed
with a provision conspicuously indicating that payment thereon is subordinated
to the claims of Senior Lender under the Loan and Security Agreement, and copies
thereof will forthwith be delivered to Senior Lender. Any instrument evidencing
any of the Subordinated Indebtedness or any portion thereof which is hereafter
executed will, on the date thereof, be inscribed with the aforesaid legend, and
copies thereof will be delivered to Senior Lender on the date of its execution
or within five (5) business days thereafter.
9. ADDITIONAL REMEDIES. If Subordinated Creditor violates any of the terms
of this Agreement, in addition to any remedies in law, equity or otherwise,
Senior Lender may restrain such violation in any court of law and may interpose
this Agreement as a defense in any action by Subordinated Creditor.
10. SUBORDINATED CREDITOR'S WAIVERS.
a. All of the Senior Indebtedness shall be deemed to have been made or
incurred in reliance upon this Agreement. Subordinated Creditor expressly waives
all notice of the acceptance by Senior Lender of the subordination and other
provisions of this Agreement and agrees that Senior Lender has made no
warranties or representations with respect to the legality, validity,
enforceability, collectability or perfection of the Senior Indebtedness or any
liens or security interests held in connection therewith.
b. Subordinated Creditor agrees that Senior Lender shall be entitled to
manage and supervise its loans in accordance with applicable law and its usual
practices, modified from time to time as it deems appropriate under the
circumstances, without regard to the existence of any rights that Subordinated
Creditor may
Page 3
now or hereafter have in or to any assets. Senior Lender shall have no liability
to Subordinated Creditor as a result of any and all lawful actions which Senior
Lender takes or omits to take (including, without limitation, actions with
respect to the creation, perfection or continuation of its liens or security
interest, actions with respect to the occurrence of a Default, actions with
respect to the foreclosure upon, sale, release or failure to realize upon, any
of its collateral, and actions with respect to the collection of any claim for
all or any part of the Senior Indebtedness from any account debtor or any other
party), regardless of whether any such actions or omissions may affect Senior
Lender's rights to deficiency or Subordinated Creditor's rights of subrogation
or reimbursement.
c. Senior Lender may, from time to time, enter into agreements and
settlements with Borrower as it may determine, including, without limitation,
any substitution of collateral, any release of any lien or security interest and
any release of Borrower. Subordinated Creditor waives any and all rights it may
have to require Senior Lender to ▇▇▇▇▇▇▇▇ assets.
11. WAIVERS. No waiver shall be deemed to be made by Senior Lender or
Subordinated Creditor of any of their respective rights hereunder unless it is
in writing signed by the waiving party. Each such waiver shall be a waiver only
with respect to the specific instance involved and shall in no way impair the
rights of the waiving party or the obligations of the other party to the waiving
party in any other respect at any other time.
12. INFORMATION CONCERNING FINANCIAL CONDITION. Subordinated Creditor
hereby assumes responsibility for keeping itself informed of the financial
condition of Borrower and of all other circumstances bearing upon the risk of
nonpayment of the Senior Indebtedness, and agrees that Senior Lender shall have
no duty to advise it of information known to Senior Lender regarding such
condition or any such circumstances. In the event Senior Lender, in its sole
discretion, undertakes, at any time or from time to time, to provide any such
information to Subordinated Creditor, Senior Lender shall be under no obligation
(i) to provide any such information to Subordinated Creditor on any subsequent
occasion, (ii) to undertake any investigation not a part of its regular business
routine, or (iii) to disclose any information which, pursuant to its commercial
finance practices, Senior Lender wishes to maintain confidential.
13. THIRD PARTY BENEFICIARIES.
a. This Agreement is solely for the benefit of Senior Lender, Subordinated
Creditor and their respective successors and assigns, and neither Borrower nor
any other persons or entities are intended to be third party beneficiaries
hereunder or to have any right, benefit, priority or interest under, or because
of the existence of, or to have any right to enforce, this Agreement. Senior
Lender and Subordinated Creditor shall have the right to modify or terminate
this Agreement at any time without notice to or approval of Borrower or any
other person or persons.
b. Nothing in this Agreement is intended to or shall impair, as between
Borrower and its creditors other than Senior Lender and Subordinated Creditor,
the obligation of Borrower, which is absolute and unconditional, to pay to
Subordinated Creditor the principal of and interest on the Subordinated
Instrument and all of the Subordinated Indebtedness as and when the same shall
become due and payable in accordance with their terms, or affect the relative
rights of Subordinated Creditor and creditors of Borrower other than Senior
Lender.
c. Notwithstanding any of the foregoing, if any third party satisfies the
Senior Indebtedness owing to Senior Lender, Senior Lender may assign its rights
and remedies hereunder to such third party, and such third party shall be deemed
to be Senior Lender for all purposes of this Agreement. If a determination is
made in favor of any third party, including, without limitation, a trustee in
bankruptcy, that Senior Lender's liens or security interests are invalid,
avoidable or unperfected, the subordination set forth in Section 1 hereinabove
shall be deemed null and void, but only to the extent of such invalidity,
avoidability and imperfection.
14. NOTICES. For the purposes of this Agreement, written notices shall be
sent by U.S. first class mail, postage prepaid; or by U.S. certified mail,
return receipt requested, postage prepaid; or by personal delivery; or by
facsimile confirmed by the recipient; and addressed to the notified party at its
address set forth below its signature line, or such other address specified by
the party with like notice. Notices shall be deemed received five (5) business
days after deposit in the U.S. mail, if sent by first class mail; upon the date
set forth in
Page 4
the return receipt, if by certified mail; on the day of confirmation of delivery
by the recipient, if by facsimile; or on the day of transmittal by personal
delivery.
15. EFFECTIVENESS. This Agreement shall continue in effect until all Senior
Indebtedness has been fully paid and satisfied and all commitments of Senior
Lender in regard thereto have been terminated.
16. CONSENT TO JURISDICTION; ADDITIONAL WAIVERS. SUBORDINATED CREDITOR AND
SENIOR LENDER EACH CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN NEW YORK, NEW YORK. SUBORDINATED CREDITOR WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE
IN THE MANNER SET FORTH IN SECTION 14 OF THIS AGREEMENT. SUBORDINATED CREDITOR
AND SENIOR LENDER EACH WAIVES, TO THE FULLEST EXTENT EACH MAY EFFECTIVELY DO SO,
ANY DEFENSE OR OBJECTION BASED UPON FORUM NON CONVENIENS AND ANY DEFENSE OR
OBJECTION TO VENUE OF ANY ACTION INSTITUTED WITHIN NEW YORK, NEW YORK. EACH OF
THE PARTIES HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE
OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.
17. GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF GEORGIA, AND SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties' respective successors and assigns, subject
to the provisions hereof.
19. INTEGRATED AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the within matters and may not be
modified or amended except upon a writing signed by all parties.
20. AUTHORITY. Each of the signatories hereto certifies that such party has
all necessary authority to execute this Agreement.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
Page 5
WITNESS the hand of the Subordinated Creditor.
"Subordinated Creditor"
---------------------------------------
▇▇▇▇▇ ▇▇▇▇, Individually
Address for Notices:
C/O TAG-IT PACIFIC, INC.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
---------------------------------------
▇▇▇▇ ▇▇▇▇, Individually
Address for Notices:
C/O TAG-IT PACIFIC, INC.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
ESTATE OF ▇▇▇▇▇▇ ▇▇▇▇
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address for Notices:
C/O TAG-IT PACIFIC, INC.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
MONDO HOLDINGS ▇▇▇.▇▇▇.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
Address for Notices:
C/O TAG-IT PACIFIC, INC.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
---------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
Page 6
All of the foregoing is consented Accepted in Atlanta, Georgia
and agreed to as of the date first as of May __, 2001
set forth above:
"Borrower" UPS Capital Global Trade Finance
Corporation
TAG-IT PACIFIC, INC.
By: ________________________ By:
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ NAME:
------------------- -----------------------------
Title: PRESIDENT Title:
------------------- -----------------------------
Address for Notices:
TAG-IT, INC. UPS Capital Global Trade Finance
Corporation
Legal Department
By: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇.
------------------------------ Suite 360
Name: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------
Title: PRESIDENT
------------------
TALON INTERNATIONAL, INC.
By:
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
----------------------
Title: PRESIDENT
-------------------
A.G.S. STATIONERY, INC.
By:
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
----------------------
Title: PRESIDENT
-------------------
A.G.S. HOLDINGS, LLC
By:
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
----------------------
Title: MANAGER
-------------------
Page 7
EXHIBIT "H"
TELEPHONE INSTRUCTIONS LETTER
Date: May __, 2001
To: UPS Capital Global Trade Finance Corporation ("LENDER" or "YOU")
From: TAG-IT PACIFIC, INC. ("BORROWER AGENT")
Reference: Loan and Security Agreement of even date herewith between
Lender and Borrower (the "LOAN AGREEMENT"; capitalized terms used
herein, but not defined herein, shall have the meanings given to
such terms in the Loan Agreement)
From any Advance under the Loan Agreement which you make to Borrower, we
hereby authorize and direct you, on its behalf, to make disbursements from time
to time for its account to bank account number maintained with ________________
______________________________, upon receipt of telephone instructions from any
of the following persons or their respective designees:
NAME TITLE
You shall have no liability to Borrower whatsoever for acting upon any such
telephone instruction which you, in good faith, believe was given by any of the
above designated persons or their respective designees and you shall have no
duty to inquire as to the propriety of any disbursement.
You shall have the right to accept the telephone instructions of any of the
above designated persons or their respective designees unless and until actual
receipt by you from us of written notice of termination of the authority of any
such designated persons. Borrower may change persons designated to give you
telephone instructions only by delivering to you written notice of such change,
signed by Borrower Agent.
Unless and until you advise us to the contrary, each telephone instruction
from the above-named persons or their respective designees shall be followed by
a written confirmation of the request for disbursement in such form as you make
available from time to time to use for such purpose.
Very truly yours,
TAG-IT PACIFIC, INC., Borrower Agent
By:
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------
Title: PRESIDENT
---------------------------
EXHIBIT "I"
[REPLACED WITH ▇▇▇▇▇ FARGO BANK
"FOUR PARTY LOCKBOX AGREEMENT"]
EXHIBIT "J"
OFFICER'S CERTIFICATE
Borrower: TAG-IT PACIFIC, INC.
I hereby certify that:
1. I am a duly elected, qualified and serving Officer of Borrower having the
title inscribed below;
2. Borrower is a corporation organized and existing under the laws of the State
of Delaware, having its registered office and registered agent in such state;
3. Attached hereto as EXHIBIT "A" is a true, correct and complete copy of the
certificate of incorporation of Borrower as in effect on the date hereof;
4. Attached hereto as EXHIBIT "B" is a true, correct and complete copy of the
bylaws of Borrower as in effect on the date hereof;
5. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
resolutions of Borrower duly adopted at a meeting of the board of directors of
Borrower, held on or prior to the date hereof, at which a quorum was present and
acting throughout;
6. Said meeting was duly authorized by the bylaws and certificate of
incorporation (the "Organization Documents") of Borrower;
7. The actions taken at such meeting and reflected in said resolutions are
authorized by the Organization Documents of Borrower; and said resolutions are
now in full force and effect and have not been modified or amended.
So certified to as of May 30, 2001.
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
Tag-It Pacific, Inc.
OFFICER'S CERTIFICATE
Borrower: TAG-IT, INC.
I hereby certify that:
1. I am a duly elected, qualified and serving Officer of Borrower having the
title inscribed below;
2. Borrower is a corporation organized and existing under the laws of the State
of California, having its registered office and registered agent in such state;
3. Attached hereto as EXHIBIT "A" is a true, correct and complete copy of the
articles of incorporation of Borrower as in effect on the date hereof;
4. Attached hereto as EXHIBIT "B" is a true, correct and complete copy of the
bylaws of Borrower as in effect on the date hereof;
5. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
resolutions of Borrower duly adopted at a meeting of the board of directors of
Borrower, held on or prior to the date hereof, at which a quorum was present and
acting throughout;
6. Said meeting was duly authorized by the bylaws and articles of incorporation
(the "Organization Documents") of Borrower;
7. The actions taken at such meeting and reflected in said resolutions are
authorized by the Organization Documents of Borrower; and said resolutions are
now in full force and effect and have not been modified or amended.
So certified to as of May 30, 2001.
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President and Secretary
Tag-It, Inc.
OFFICER'S CERTIFICATE
Borrower: TALON INTERNATIONAL, INC.
I hereby certify that:
1. I am a duly elected, qualified and serving Officer of Borrower having the
title inscribed below;
2. Borrower is a corporation organized and existing under the laws of the State
of Delaware, having its registered office and registered agent in such state;
3. Attached hereto as EXHIBIT "A" is a true, correct and complete copy of the
certificate of incorporation of Borrower as in effect on the date hereof;
4. Attached hereto as EXHIBIT "B" is a true, correct and complete copy of the
bylaws of Borrower as in effect on the date hereof;
5. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
resolutions of Borrower duly adopted at a meeting of the board of directors of
Borrower, held on or prior to the date hereof, at which a quorum was present and
acting throughout;
6. Said meeting was duly authorized by the bylaws and certificate of
incorporation (the "Organization Documents") of Borrower;
7. The actions taken at such meeting and reflected in said resolutions are
authorized by the Organization Documents of Borrower; and said resolutions are
now in full force and effect and have not been modified or amended.
So certified to as of May 30, 2001.
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President and Secretary
Talon International, Inc.
OFFICER'S CERTIFICATE
Borrower: A.G.S. STATIONERY, INC.
I hereby certify that:
1. I am a duly elected, qualified and serving Officer of Borrower having the
title inscribed below;
2. Borrower is a corporation organized and existing under the laws of the State
of California, having its registered office and registered agent in such state;
3. Attached hereto as EXHIBIT "A" is a true, correct and complete copy of the
articles of incorporation of Borrower as in effect on the date hereof;
4. Attached hereto as EXHIBIT "B" is a true, correct and complete copy of the
bylaws of Borrower as in effect on the date hereof;
5. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
resolutions of Borrower duly adopted at a meeting of the board of directors of
Borrower, held on or prior to the date hereof, at which a quorum was present and
acting throughout;
6. Said meeting was duly authorized by the bylaws and articles of incorporation
(the "Organization Documents") of Borrower;
7. The actions taken at such meeting and reflected in said resolutions are
authorized by the Organization Documents of Borrower; and said resolutions are
now in full force and effect and have not been modified or amended.
So certified to as of May 30, 2001.
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President and Secretary
A.G.S. Stationery, Inc.
OFFICER'S CERTIFICATE
Borrower: A.G.S. HOLDINGS, LLC
I hereby certify that:
1. I am a duly elected, qualified and serving Manager of Borrower having the
title inscribed below;
2. Borrower is a limited liability company organized and existing under the laws
of the State of Delaware, having its registered office and registered agent in
such state;
3. Attached hereto as EXHIBIT "A" is a true, correct and complete copy of the
certificate of formation of Borrower as in effect on the date hereof;
4. Attached hereto as EXHIBIT "B" is a true, correct and complete copy of the
formation agreement of Borrower as in effect on the date hereof;
5. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
resolutions of Borrower duly adopted at a meeting of the managers of Borrower,
held on or prior to the date hereof, at which a quorum was present and acting
throughout;
6. Said meeting was duly authorized by the formation agreement and certificate
of formation (the "Organization Documents") of Borrower;
7. The actions taken at such meeting and reflected in said resolutions are
authorized by the Organization Documents of Borrower; and said resolutions are
now in full force and effect and have not been modified or amended.
So certified to as of May 30, 2001.
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Manager
A.G.S. Holdings, LLC
EXHIBIT "K"
EXHIBIT "A" TO UCC FINANCING STATEMENT
Debtor: __ TAG-IT PACIFIC, INC.
__ TAG-IT, INC.
__ TALON INTERNATIONAL, INC.
__ DELAWARE TALON INTERNATIONAL, INC.
__ A.G.S. STATIONERY, INC.
__ A.G.S. HOLDINGS, LLC
Secured Party: UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION
All of the following property, or interests in property, of Debtor, whether
now owned or hereafter acquired, wherever arising and wherever located in the
United States of America (if tangible property):
"ACCOUNTS RECEIVABLE COLLATERAL." All accounts, accounts receivable,
contract rights, instruments, chattel paper and general intangibles in the
nature of payment obligations owing to Debtor, including, without limitation,
all rights of Debtor to payment for goods sold or leased, or to be sold or to be
leased, or for services rendered or to be rendered, howsoever evidenced or
incurred, together with all returned or repossessed goods and all books,
records, computer tapes, programs and ledger books arising therefrom or relating
thereto, all whether now owned or hereafter acquired and howsoever arising.
"BALANCES COLLATERAL." All property of Debtor left with Secured Party or in
its possession, custody or control now or hereafter, including any escrow
deposits or ▇▇▇▇▇▇▇ money.
"SECURITIES COLLATERAL." All securities and investment property now owned
or hereafter acquired by Debtor limited, in the case of subsidiaries of Debtor
incorporated (or otherwise organized) in a jurisdiction outside the United
States of America, to not more than sixty-five percent (65%) of the issued and
outstanding equity interests owned by Debtor therein.
"EQUIPMENT COLLATERAL." All equipment and fixtures of Debtor, whether now
owned or hereafter acquired, wherever located in the United States of America,
including, without limitation, all machinery, furniture, furnishings, leasehold
improvements, computer hardware, motor vehicles, forklifts, rolling stock, dies
and tools used or useful in Debtor's business operations.
"INTANGIBLES COLLATERAL." All general intangibles of Debtor, whether now
existing or hereafter acquired or arising, including, without limitation, all
copyrights, royalties, tax refunds, rights to tax refunds, trademarks, trade
names, service marks, patent and proprietary rights, blueprints, drawings,
designs, trade secrets, plans, diagrams, schematics and assembly and display
materials relating thereto, all customer lists, all books and records, all
computer software and programs, and all rights of Debtor as purchaser, lessee,
licensee or indemnitee under any contract.
"INVENTORY COLLATERAL." All inventory of Debtor, whether now owned or
hereafter acquired, wherever located in the United States of America, including,
without limitation, all goods of Debtor held for sale or lease or furnished or
to be furnished under contracts of service, all goods held for display or
demonstration, goods on lease or consignment, spare parts, repair parts,
returned and repossessed goods, all raw materials, work-in-process, finished
goods, catalysts and supplies used or consumed in Debtor's business, together
with all documents, documents of title, dock warrants, dock receipts, warehouse
receipts, bills of lading or orders for the delivery of all, or any portion, of
the foregoing.
"PROCEEDS" AND "PRODUCTS." All proceeds and products of the foregoing.
EXHIBIT "L"
[AKIN, GUMP, STRAUSS, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
ATTORNEYS AT LAW]
May 31, 2001
UPS Capital Global Trade Finance Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: LOAN AND SECURITY AGREEMENT DATED MAY 30, 2001 AND OTHER DOCUMENTS BY
AND BETWEEN TAG-IT PACIFIC, INC., TALON INTERNATIONAL, INC., TAG-IT,
INC., A.G.S. HOLDINGS, LLC, A.G.S. STATIONERY, INC. AND UPS CAPITAL
GLOBAL TRADE FINANCE CORPORATION
Ladies and Gentlemen:
We are acting as special counsel to Tag-It Pacific, Inc., a Delaware
corporation ("TAG-IT"), Talon International, Inc., a Delaware corporation
("TALON"), Tag-It, Inc., a California Corporation ("TAG-IT, INC."), A.G.S.
Holdings LLC, a Delaware limited liability company, ("AGS HOLDINGS") and A.G.S.
Stationery, Inc., a California corporation ("AGS") (Tag-It, Talon, Tag-It, Inc.,
AGS Holdings and AGS are collectively referred to as the "BORROWERS"), in
connection with the financing transaction (the "TRANSACTION") pursuant to that
certain Loan and Security Agreement (the "AGREEMENT") dated as of May 30, 2001
by and among the Borrowers and UPS Capital Global Trade Finance Corporation, a
Delaware corporation (the "LENDER"). This opinion is rendered pursuant to
Section 11.6 of the Agreement. All capitalized terms used in this letter without
definition, have the meanings assigned to them in the Agreement.
In connection with this letter, we have examined executed originals or
copies of executed originals of each of the documents listed on Exhibit "A"
attached hereto (collectively the "TRANSACTION DOCUMENTS"), each of which is
dated the date hereof, unless otherwise noted. In addition, we have examined the
documents listed on Exhibit "B" attached hereto (collectively, the "DUE
DILIGENCE DOCUMENTS").
We have examined originals or certified copies of such corporate records of
the Borrowers and other certificates and documents of officials of the
Borrowers, public officials and
others as we have deemed appropriate for purposes of this letter. As to various
questions of fact relevant to this letter, we have relied, without independent
investigation, upon the Due Diligence Documents, a certificate of an officer of
each of the Borrowers, and the representations and warranties of each of the
parties in the Transaction Documents, all of which we assume to be true, correct
and complete. We have made no investigation or review of any matters relating to
the Borrowers or any other Person other than as expressly listed herein. We wish
to inform you that our knowledge is necessarily limited due to the limited scope
of our review. In addition, we have made no inquiry of the Borrowers or any
other person or entity (including governmental authorities), and no review of,
any judgments, orders, decrees, franchises, licenses, certificates, permits or
other public records or agreements to which any Borrower is a party other than
(1) the Good Standing Certificates, and (2) the matters set forth in the
officer's certificates listed on the attached Exhibit "C", and our "knowledge"
of any such matters is accordingly limited.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, and the conformity to authentic original
documents of all copies submitted to us as conformed, certified or reproduced
copies. We have also assumed: (a) the legal capacity of natural persons, (b) the
corporate or other power and due authorization of each person not a natural
person to (i) execute and deliver all documents reviewed by us, and (ii) perform
each of its obligations under, and to consummate the transactions contemplated
by, all such documents (other than the corporate power and corporate authority
of the Borrowers to execute and deliver, and to perform their obligations under,
the Transaction Documents), (c) the due execution and delivery of all documents
reviewed by us by all parties thereto (other than the due execution of the
Transaction Documents by the Borrowers), and (d) that each such document
constitutes the legal, valid and binding obligation of each party thereto,
enforceable against each such party in accordance with its terms (other than the
validity, binding effect or enforceability of the Transaction Documents against
the Borrowers).
Based upon the foregoing and subject to the assumptions, exceptions,
qualifications and limitations set forth hereinafter, we are of the opinion
that:
1. Each of Tag-It and Talon is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, the
jurisdiction of their organization. AGS and Tag-It, Inc. are duly
incorporated, validly existing and in good standing under the laws of
California, the jurisdiction of their organization. AGS Holdings is a
limited liability company duly formed and validly existing and in good
standing under the Limited Liability Company Act of the State of
Delaware (the "DLLCA") and has the limited liability company power and
authority to carry on its business as contemplated by the Transaction
Documents. Each of the Borrowers, except AGS Holdings, has all
requisite corporate power and corporate authority to enter into the
Transaction Documents, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. AGS Holdings has all
requisite limited liability company power and limited
Page 2
liability company authority to enter into the Transaction Documents,
to perform its obligations thereunder and to consummate the
transactions contemplated thereby.
2. The execution and delivery of the Transaction Documents by the
Borrowers and the performance by the Borrowers of their obligations
thereunder have been duly authorized by all necessary corporate or
company action on the part of the Borrowers. The Transaction Documents
have been duly and validly executed and delivered by the Borrowers.
The Transaction Documents constitute the valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with
their terms.
3. The execution and delivery of the Transaction Documents by each of the
Borrowers do not, and the due performance by each of the Borrowers of
their obligations under and in accordance with the terms of the
Transaction Documents will not, (a) result in any violation of the
current Certificate or Articles of Incorporation, or Certificate of
Formation, as the case may be, or the By-Laws or Formation Agreement,
as the case may be, of each of the Borrowers; or (b) result in any
violation of any order, writ, judgment or decree known by us to be
binding upon any of the Borrowers; or (c) assuming that the
Subordination Agreement, listed on Exhibit "B", is duly executed and
delivered by each of the parties thereto and in full force and effect,
breach or result in a default under any agreement or instrument (the
"MATERIAL AGREEMENTS") listed on Exhibit "D" attached hereto.
4. To our knowledge, there are no material pending or threatened lawsuits
against the Borrowers other than the matters previously disclosed to
the Lender, or other than those occurring in the ordinary course of
business or listed on Exhibit "E" attached hereto.
5. To our knowledge, no authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body (each, a "FILING") is required under any of the Included Laws for
the due execution and delivery of the Transaction Documents by the
Borrowers and the performance by the Borrowers of their obligations
under the Transaction Documents, except (i) Filings necessary in order
to obtain and maintain perfection of liens, (ii) routine Filings
necessary in connection with the conduct of each of the Borrower's
businesses, (iii) Filings necessary in connection with the exercise of
remedies under the Transaction Documents, (iv) such other Filings as
have been maintained or made, and (v) Filings required to maintain
corporate and similar standing and existence.
The opinion and other matters in this letter are qualified in their
entirety and subject to the following:
Page 3
A. We express no opinion as to the laws of any jurisdiction other than
the Included Laws. We have made no special investigation or review of
any published constitutions, treaties, laws, rules or regulations or
judicial or administrative decisions ("LAWS"), other than a review of
the Laws of (i) the State of California, (ii) the General Corporation
Law of the State of Delaware, (iii) the DLLCA and (iv) the Federal
Laws of the United States of America. For purposes of this opinion,
the term "INCLUDED LAWS" means the items described in clauses (i),
(ii), (iii) and (iv) of the preceding sentence that are, in our
experience, normally applicable to transactions of the type
contemplated in the Agreement. The term Included Laws specifically
excludes (a) any Laws of the State of Delaware that are not included
in the General Corporation Law of the State of Delaware or the DLLCA;
(b) Laws of any counties, cities, towns, municipalities and special
political subdivisions and any agencies thereof; (c) Laws relating to
land use, zoning and building code issues, taxes, environmental
issues, intellectual property laws, antitrust issues, Federal Reserve
Board margin regulation issues and securities law issues; and (d) the
conflicts of law rules of any state.
B. This letter and the matters addressed herein are as of the date hereof
or such earlier date as is specified herein, and we undertake no, and
hereby disclaim any, obligation to advise you of any change in any
matter set forth herein, whether based on a change in the law, a
change in any fact relating to the Borrowers or any other Person, or
any other circumstance. This opinion letter is limited to the matters
expressly stated herein and no opinions are to be inferred or may be
implied beyond the opinions expressly set forth herein.
C. When used in this letter, the phrases "KNOWN TO US", "TO OUR ACTUAL
KNOWLEDGE", "OUR BELIEF" and similar phrases (i) mean the conscious
awareness of facts or other information by (a) the lawyer in the firm
who signed this letter, (b) any lawyer in our firm actively involved
in negotiating and preparing this opinion and (c) solely as to
information relevant to a particular opinion, issue or confirmation
regarding a particular factual matter, any lawyer in our firm who is
responsible for providing the response concerning that particular
opinion, issue or confirmation, and (ii) do not require or imply (a)
any examination of this firm's, such lawyer's or any other person's or
entity's files, (b) that any inquiry be made of the client, any lawyer
(other than the lawyers described above), or any other person or
entity, or (c) any review or examination of any agreements, documents,
certificates, instruments or other matters (including, but not limited
to, the exhibits and schedules of the Transaction Documents and the
Due Diligence Documents and the various paper referred to in or
contemplated by the Transaction Documents and the Due Diligence
Documents and the respective exhibits and schedules thereto) other
than the Transaction Documents and the Due Diligence Documents.
Page 4
D. The opinions expressed in the first sentence of paragraph 1 as it
applies to the Borrowers are given solely on the basis of certificates
of the State agencies or officials (the "GOOD STANDING CERTIFICATES")
set forth in Exhibit "B" hereto and speak only as of the dates
indicated in such Exhibit rather than the date hereof. In determining
from which State agencies to obtain the Good Standing Certificates, we
have relied, without further inquiry, on the advice of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and Associates, Inc. The opinion is limited to the meaning ascribed to
such certificates by each applicable State agency and applicable Law.
E. The matters expressed in this letter are subject to and qualified and
limited by (i) applicable bankruptcy, insolvency, fraudulent transfer
and conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally; (ii) general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity); (iii) commercial reasonableness and
unconscionability and an implied covenant of good faith and fair
dealing; (iv) the power of the courts to award damages in lieu of
equitable remedies; and (v) securities laws and public policy
underlying such laws with respect to rights to indemnification and
contribution.
F. We express no opinion with respect to fairness of the Transaction
Documents or any other matter, and in rendering the opinions expressed
herein, we have assumed, with your consent, that a court of competent
jurisdiction would find all such matters were entirely fair. We have
assumed that no fraud, dishonesty, forgery, coercion, duress or breach
of fiduciary duty exists or will exist with respect to any of the
matters relevant to the opinions expressed in this letter.
G. We express no opinion as to (i) the compliance of the transactions
contemplated by the Transaction Documents with any regulations or
governmental requirements applicable to any party; (ii) the financial
condition or solvency of the Borrowers; (iii) the ability (financial
or otherwise) of the Borrowers or any other party to meet their
respective obligations under the Transaction Documents, other than the
corporate or limited liability company power and authority of the
Borrowers specifically addressed in the numbered paragraphs above;
(iv) the compliance with the Transaction Documents or the transactions
contemplated thereby, or as to the effect of any of the foregoing,
under antifraud provisions of the Federal and State securities laws,
rules and regulation; and (v) the conformity of the Transaction
Documents to any term sheet or commitment letter.
H. We note that the choice of law provisions in section 10.14 of the
Agreement , section 11(c) of the Pledge Agreement, and paragraph 7 of
the Collateral Assignment and Security Agreement (Trademarks) select
the laws of New York to apply to the Agreement. As explained in
paragraph A above, we are not
Page 5
expressing an opinion as to the Laws of that jurisdiction.
Accordingly, with respect to the opinions expressed in paragraphs 1,
2, 3, 4 and 5 of this letter, we have assumed, with your concurrence,
that the Laws of the State of California had been selected in such
choice of law provisions to be the governing law of the Agreement. We
note that this assumption is directly in conflict with specific terms
of the Agreement.
I. This letter is solely for your benefit, and no other person shall be
entitled to rely upon the opinion expressed herein. Without our prior
written consent, this letter may not be quoted in whole or in part or
otherwise referred to in any document and may not be furnished or
otherwise disclosed to or used by any other person, except for (i)
delivery of copies hereof to counsel for the addressees hereof, (ii)
inclusion of copies hereof in a closing file or (iii) as may be
required by applicable law.
This law firm is a registered limited liability partnership organized under
the laws of the State of Texas.
Very truly yours,
AKIN, GUMP, STRAUSS, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
Page 6
EXHIBIT A
TRANSACTION DOCUMENTS
1. Loan and Security Agreement, dated as of May 30, 2001, by and between
Tag-It Pacific, Inc., Talon International, Inc., Tag-It, Inc., A.G.S.
Holdings, LLC, A.G.S. Stationery, Inc. and UPS Capital Global Trade Finance
Corporation
2. Master Note, dated as of May 30, 2001, by and between Tag-It Pacific, Inc.,
Talon International, Inc., Tag-It, Inc., A.G.S. Holdings, LLC and A.G.S.
Stationery, Inc.
3. Pledge Agreement, dated as of May 30, 2001, by and between Tag-It Pacific,
Inc., A.G.S. Holdings, LLC and UPS Capital Global Trade Finance Corporation
4. Collateral Assignment and Security Agreement (Trademarks) dated as of May
30, 2001, executed by Tag-It Pacific, Inc. in favor of UPS Capital Global
Trade Finance Corporation
Page 7
EXHIBIT B
DUE DILIGENCE DOCUMENTS
1. Office of the Secretary of the State Delaware
a) Long Form Certificate of Good Standing dated May 29, 2001 for Tag-It
Pacific, Inc.
b) Long Form Certificate of Good Standing dated May 24, 2001 for Talon
International, Inc.
c) Long Form Certificate of Good Standing dated May 29, 2001 for A.G.S.
Holdings, LLC.
2. Office of the Secretary of the State of California
a) Certificate of Status of a Domestic Corporation for A.G.S. Stationery,
Inc. dated May 24, 2001.
b) Certificate of Status of a Domestic Corporation for Tag-It, Inc. dated
May 29, 2001
c) Certificate of Status of a Foreign Corporation for Tag-It Pacific,
Inc. dated May 24, 2001
d) Certificate of Status of a Foreign Corporation for Talon
International, Inc. dated May 24, 2001
3. Franchise Tax Board of the State of California
a) Letter of Good Standing for A.G.S. Stationery, Inc. dated May 24, 2001
b) Letter of Good Standing for Tag-It Pacific, Inc. dated May 29, 2001
c) Letter of Good Standing for Talon International, Inc. dated May 24,
2001
d) Letter of Good Standing for Tag-It, Inc., dated May 29, 2001
4. Tag-It Pacific, Inc.
a) Bylaws
b) Certificate of Incorporation, Certificates of Designation, Certificate
of Renewal, Certificate of Amendment certified by the Secretary of the
State of Delaware on March 16, 2001
c) Resolutions of the Board of Directors approving the Transaction dated
May 23, 2001
5. Talon International, Inc.
a) Bylaws
b) Certificate of Incorporation certified by the Secretary of the State
of Delaware on May 24, 2001
Page 8
c) Resolutions of the Board of Directors approving the Transaction dated
May 23, 2001
6. A.G.S. Stationery, Inc.
a) Bylaws
b) Articles of Incorporation certified by the Secretary of the State of
California on May 24, 2001
c) Resolutions of the Board of Directors approving the Transaction dated
May 23, 2001
7. A.G.S. Holdings, LLC
a) Formation Agreement
b) Certificate of Formation certified by the Secretary of the State of
Delaware on May 29, 2001
c) Resolutions of the Managers approving the Transaction dated May 23,
2001
8. Tag-It, Inc.
a) Bylaws
b) Articles of Incorporation certified by the Secretary of the State of
California on December 14, 2000
c) Resolutions of the Board of Directors approving the Transaction dated
May 23, 2001
9. Subordination Agreement dated as of May 30, 2001, by ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
Estate of ▇▇▇▇▇▇ ▇▇▇▇ and Monto Holdings Pty, Ltd. in favor of UPS Capital
Global Trade Finance Corporation
Page 9
EXHIBIT C
OFFICER'S CERTIFICATE
1. Officer's Certificate dated May 30, 2001 signed by ▇▇▇▇▇ ▇▇▇▇ on behalf of
Tag-It.
2. Officer's Certificate dated May 30, 2001 signed by ▇▇▇▇▇ ▇▇▇▇ on behalf of
Talon.
3. Officer's Certificate dated May 30, 2001 signed by ▇▇▇▇▇ ▇▇▇▇ on behalf of
AGS.
4. Manager's Certificate dated May 30, 2001 signed by ▇▇▇▇▇ ▇▇▇▇ on behalf of
AGS Holdings.
5. Officer's Certificate dated May 30, 2001 signed by ▇▇▇▇▇ ▇▇▇▇ on behalf of
Tag-It, Inc.
Page 10
EXHIBIT D
MATERIAL AGREEMENTS
1. Promissory Note, dated September 30, 1996, provided by Tag-It, Inc. to
▇▇▇▇▇▇ ▇▇▇▇.
2. Promissory Note, dated June 30, 1991, provided by Tag-It, Inc. to ▇▇▇▇▇▇
▇▇▇▇.
3. Promissory Note, dated January 31, 1997, provided by Tag-It Inc. to ▇▇▇▇
▇▇▇▇.
4. Promissory Note, dated January 19, 1995, provided by Pacific Trim & Belt,
Inc. to Monto Holdings Pty. Ltd.
5. Promissory Note, dated August 23, 1996, provided by Tag-It, Inc. to NPM
Investments, Inc.
6. Promissory Note, dated August 31, 1997, provided by ▇▇▇▇▇ ▇▇▇▇ to Tag-It,
Inc.
7. Promissory Note, dated August 31, 1997, provided by ▇▇▇▇▇▇ ▇▇▇▇ to Pacific
Trim & Belt, Inc.
8. Promissory Note, dated October 15, 1997, provided by ▇▇▇▇▇ ▇▇▇▇ to Tag-It,
Inc.
9. Promissory Note, dated October 15, 1997, provided by ▇▇▇▇▇▇ ▇▇▇▇ to Pacific
Trim & Belt, Inc.
10. Formation Agreement of AGS Holdings L.L.C., dated as of October 17, 1997.
11. Promissory Note, dated October 21, 1997, provided by Tag-It, Inc. to NPM
Investments, Inc.
12. Contract for Manufacturing Services between USA and Mexico, between Tag-It,
Inc. and Tagit de Mexico, S.A. de C.V.
13. Securities Purchase Agreement, dated December 31, 1997, between Tag-It
Pacific, Inc. and Cruttenden ▇▇▇▇ Bridge Fund, LLC. Amendment to Securities
Purchase Agreement, dated January 20, 1998, among Tag-It Pacific, Inc.,
Cruttenden ▇▇▇▇ Bridge Fund, LLC and Beta Research Corporation.
14. Series B Convertible Preferred Stock Agreement, dated as of April 3, 2000,
between the Registrant and Grupo Industrial Cierres Ideal, S.A. de C.V.
Page 11
15. Talon License and Distribution Agreement, dated April 3, 2000, between
Tag-It Pacific, Inc. and Grupo Industrial Cierres Ideal, S.A. de C.V.
16. Consignment Inventory Purchase Agreement, dated September 30, 2000, between
Tag-It Pacific, Inc. and Grupo Industrial Cierres Ideal, S.A. de C.V.
17. Guaranty, dated as of October 4, 2000, by A.G.S. Stationery, Inc. in favor
or ▇▇▇▇ ▇. ▇▇▇▇.
18. Guaranty, dated as of October 4, 2000, by Tag-It, Inc. in favor of ▇▇▇▇ ▇.
▇▇▇▇.
19. Guaranty, dated as of October 4, 2000, by Talon International, Inc. in
favor of ▇▇▇▇ ▇. ▇▇▇▇.
20. Intercreditor Agreement, dated as of October 4, 2000, by and among ▇▇▇▇ ▇.
▇▇▇▇, Sanwa Bank California, Tag-It Pacific, Inc., Tag-It, Inc., Talon
International, Inc. and A.G.S. Stationery, Inc.
21. Security Agreement, dated as of October 4, 2000, between A.G.S. Stationery,
Inc. and ▇▇▇▇ ▇. ▇▇▇▇.
22. Security Agreement, dated as of October 4, 2000, between Tag-It, Inc. and
▇▇▇▇ ▇. ▇▇▇▇.
23. Security Agreement, dated as of October 4, 2000, between Talon
International Inc. and ▇▇▇▇ ▇. ▇▇▇▇.
24. Security Agreement, dated as of October 4, 2000, between Tag-It Pacific,
Inc. and ▇▇▇▇ ▇. ▇▇▇▇.
25. Convertible Secured Subordinated Promissory Note, dated October 4, 2000,
provided by ▇▇▇▇ ▇. ▇▇▇▇ to Tag-It Pacific, Inc..
26. Trim Handling Agreement, dated as of December 29, 1999, among Tag-It
Pacific, Inc., Tarrant Apparel Group, Inc. & Tagmex and Tag-It de Mexico
S.A.
27. Supply Agreement entered into on December 22, 2000, by and between Tag-It
Pacific, Inc., ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and Azteca Production International,
Inc., AZT International SA D RL, and Commerce Investment Group, LLC.
28. Investor Rights Agreement entered into on December 22, 2000, by and between
Tag-It Pacific, Inc. and Commerce Investment Group, LLC.
29. Voting Agreement entered into on December 22, 2000, by and between Tag-It
Pacific, Inc., ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and Azteca Production International,
Inc., AZT International SA D RL, Commerce Investment Group, LLC, and ▇▇▇▇▇
▇▇▇▇.
Page 12
30. Right of First Refusal and Sale Agreement entered into on December 22,
2000, by and between Tag-It Pacific, Inc., ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and
Azteca Production International, Inc., AZT International SA D RL, Commerce
Investment Group, LLC, and ▇▇▇▇▇ ▇▇▇▇.
Page 13
EXHIBIT E
PENDING LITIGATION
1. Integrated Corporate Relations, Plaintiff v. Tag-It Pacific, Defendant.
Filed April 30, 2001, Fairfield county, Connecticut.
2. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Plaintiff v. Tag It Pacific Inc., Defendant. Filed
February 23, 2001, New York county, New York.
3. Mega Labels Develop Co. Ltd., Plaintiff, v. Tag It Pacific Hong Kong Ltd,
Tag It Pacific, Inc., Defendants. Filed March 21, 2001, Los Angeles,
California.
4. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Plaintiff v. Tag-It Pacific Inc., Defendant. Filed ▇▇▇▇▇
▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇.
Page 14
EXHIBIT "M"
DISBURSEMENT LETTER
May __, 2001
UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We refer to that certain Loan and Security Agreement, dated of even date
herewith, between you and Borrower. Capitalized terms used herein shall have the
meanings given to such terms in the Loan Agreement. From the proceeds of any
Borrowings which Borrower obtains on the Closing Date, as Borrower Agents, we
authorize and direct you to make the disbursements set forth on EXHIBIT "A" on
its behalf to the Persons, for the purposes and in the manner set forth therein.
Very truly yours,
TAG-IT PACIFIC, INC., Borrower Agent
By:
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Title: PRESIDENT
--------------------------------
EXHIBIT "A"
PAYMENT DISBURSEMENT
AMOUNT PAYEE PURPOSE INSTRUCTIONS
------- ----- ------- ------------
Page ▇
▇▇▇▇▇▇▇ "▇"
▇▇▇▇▇▇ LETTER
May ___, 2001
"BORROWER"
Tag-It Pacific, Inc.
Tag-It, Inc.
Talon International, Inc.
A.G.S. Stationery, Inc.
A.G.S. Holdings, LLC
------------------------------------
------------------------------------
Attn:
-------------------------------
"LENDER"
UPS Capital Global Trade Finance Corporation
Legal Department
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
-------------------------------
Ladies and Gentlemen:
Please be advised that there is owing by the Borrower to the undersigned this
date the sum of $______________ (the "PAYOFF") computed as set forth on EXHIBIT
"A" annexed hereto.
If immediately available funds in the full amount of the Payoff are
received by the undersigned by 3:00 p.m. today, then, all liens on property of
the Borrower claimed by the undersigned will be terminated and, within five (5)
business days hereafter, the undersigned will execute and deliver to the
Borrower appropriate notices of terminations and satisfactions for placement on
the public records.
Sincerely,
Name of Secured Party:
--------------------------------------------
By:
-----------------------------------------
Authorized Officer
Wiring Instructions:
________________________________
________________________________
________________________________
EXHIBIT "A"
Payment Disbursement
Amount Payee Purpose Instructions
------- ----- ------- ------------
Page 2
EXHIBIT "O"
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT, dated as of May __, 2001, made by the
undersigned ("PLEDGOR"), in favor of UPS CAPITAL GLOBAL TRADE FINANCE
CORPORATION, a Delaware corporation ("LENDER").
W I T N E S S E T H:
WHEREAS, Pledgor, together with the other parties identified as the
"Borrower" therein (the "BORROWER"), and Lender have entered into a Loan and
Security Agreement, dated as of even date herewith (as at any time amended,
modified or supplemented, the "CREDIT AGREEMENT"), pursuant to which, subject to
the terms and conditions set forth therein, Lender has agreed to make available
to the Borrowers certain credit facilities; and
WHEREAS, Pledgor is the record and beneficial owner of all of the
authorized, issued and outstanding shares of capital stock (or shares of other
Equity Interests) of those subsidiaries of Pledgor listed on SCHEDULE I attached
hereto (hereinafter sometimes called, collectively, the "ISSUERS" and,
individually, an "ISSUER"), all as more particularly described in said SCHEDULE
I attached hereto (the "PLEDGED SHARES"); and
WHEREAS, as a condition precedent (among others) to the extension of credit
facilities to the Borrowers under the Credit Agreement, Lender is requiring that
Pledgor shall have executed and delivered in favor of Lender this Agreement as
security for the Secured Obligations (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and to induce Lender to
provide financial accommodations to Pledgor under the Credit Agreement, Pledgor
hereby agrees in favor of Lender as follows:
1. DEFINITIONS. In addition to the terms defined hereinabove, unless
otherwise defined herein, TERMS DEFINED IN THE CREDIT AGREEMENT ARE USED HEREIN
AS THEREIN DEFINED, and the following shall have (unless otherwise provided
elsewhere in this Agreement) the following respective meanings (such meanings
being equally applicable to both the singular and plural form of the terms
defined):
"ACT" shall mean the Securities Act of 1933, as amended (or any similar
statute thereafter in effect).
"AGREEMENT" shall mean this Stock Pledge Agreement, and shall include all
further amendments, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes
operative.
"BANKRUPTCY CODE" shall mean ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, as amended from
time to time, and any successor statute thereto.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in Section
8 hereof.
"PLEDGED COLLATERAL" shall have the meaning assigned to such term in
Section 2 hereof.
"SECURED OBLIGATIONS" shall have the meaning assigned to such term in
Section 3 hereof.
"UCC" shall mean the Uniform Commercial Code of the State of Georgia.
2. PLEDGE. Pledgor hereby pledges, assigns, hypothecates, transfers and
grants to Lender, a first priority security interest in, all of the following
(all of the following, herein, collectively, the "PLEDGED COLLATERAL"):
(a) One hundred percent (100%) of the Pledged Shares and all certificates
(if any) representing the Pledged Shares, and all dividends, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares;
Page 1
(b) all additional shares of capital stock or other Equity Interests of any
of the Issuers from time to time acquired by Pledgor in any manner, including,
without limitation, stock dividends or distributions in connection with any
increase or reduction of capital, reclassification, merger, consolidation, sale
of assets, combination of shares, stock split, spin-off or split-off and the
certificates representing such shares, and all dividends, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and
(c) all options and rights, whether as an addition to, in substitution of
or in exchange for any such Pledged Shares and all such dividends, cash,
instruments and other property or proceeds.
Notwithstanding the foregoing, however, with respect to any Issuer which is a
Foreign Subsidiary, at no time hereafter shall more than sixty-five percent
(65%) of the issued and outstanding shares of capital stock or other Equity
Interests of such Issuer be pledged to Lender pursuant hereto and to the extent,
by operation of the foregoing, this limitation otherwise would be violated,
then, the pledge of such Equity Interests shall be deemed modified accordingly
to comport with such limitation.
3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged
Collateral is security for, the prompt payment in full when due, whether at
stated maturity, by acceleration or otherwise, and performance of all
"OBLIGATIONS," as that term is defined in the Credit Agreement, and all other
obligations arising hereunder (herein, collectively, the "SECURED OBLIGATIONS").
4. DELIVERY OF PLEDGED COLLATERAL. All certificates representing or
evidencing the Pledged Shares shall be delivered to and held by or on behalf of
Lender pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank. Pledgor hereby authorizes each Issuer, upon
demand by Lender, to deliver any certificates, instruments or other
distributions issued in connection with the Pledged Collateral directly to
Lender, in each case to be held by Lender, subject to the terms hereof. Lender
shall have the right, upon the occurrence of an Event of Default, in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Lender or any of its nominees, any or all of the Pledged Shares. In
addition, following an Event of Default, Lender shall have the right to exchange
certificates or instruments representing or evidencing Pledged Shares for
certificates or instruments of smaller or larger denominations.
5. REPRESENTATIONS AND WARRANTIES. To induce Lenders to enter into the
Credit Agreement, Pledgor makes the following representations and warranties to
Lender each and all of which shall survive the execution and delivery of this
Agreement until all Secured Obligations are indefeasibly satisfied in full and
there remain no outstanding commitments under the Loan Agreement:
(a) SOLE HOLDER OF RECORD. Pledgor is, and at the time of delivery of any
additional Pledged Shares to Lender pursuant to Section 4 hereof will be, the
sole holder of record and the sole beneficial owner of the Pledged Collateral
free and clear of any lien thereon or affecting the title thereto except for the
lien and security interest created by this Agreement.
(b) AUTHORIZED SHARES. All of the Pledged Shares have been duly authorized,
validly issued and are fully paid and non-assessable.
(c) NO RESTRICTIONS ON TRANSFER. There are no restrictions on transfer of
the Pledged Shares contained in any Organization Document of any Issuer which
have not otherwise been enforceably and legally waived by the necessary parties.
(d) NO VIOLATION OF SECURITIES REGULATIONS. None of the Pledged Shares have
been issued or transferred in violation of the securities registration,
securities disclosure or similar laws of any jurisdiction to which such issuance
or transfer may be subject.
(e) CAPITAL STOCK OF ISSUERS. On the date hereof, the authorized capital
stock (or other Equity Interests) of each Issuer consists of the number of
shares, with the number of shares issued and outstanding, that are described in
SCHEDULE I hereto. As of the date hereof, (i) no subscription, warrant, option
or other right to purchase
Page 2
or acquire any shares of any class of capital stock (or other Equity Interests)
of each Issuer is authorized and outstanding, and (ii) there is no commitment by
any Issuer to issue any such shares, warrants, options or other such rights or
securities. The Pledged Shares constitute one hundred percent (100%) of the
authorized, issued and outstanding shares of capital stock (or other Equity
Interests) of each Issuer (except for those Issuers constituting Foreign
Subsidiaries, in which case the Pledged Shares constitute only sixty-five
percent (65%) of such capital stock (or other Equity Interests) of such Issuer).
(f) FIRST PRIORITY SECURITY INTEREST. The pledge, assignment and delivery
of the Pledged Collateral pursuant to this Agreement will create a valid first
priority lien on and a first priority perfected security interest in the Pledged
Collateral and the proceeds thereof, securing the payment of the Secured
Obligations.
The foregoing representations and warranties shall be deemed to have been
made by Pledgor on the date of each borrowing by Pledgor under the Credit
Agreement on and as of such date of such borrowing as though made hereunder on
and as of such date.
6. COVENANTS. Pledgor covenants and agrees that until the Credit Agreement
has been irrevocably terminated and the Secured Obligations have been paid in
full:
(a) Without the prior written consent of Lender, Pledgor will not sell,
assign, transfer, convey, or otherwise dispose of its rights in or to the
Pledged Collateral or any interest therein; nor will Pledgor create, incur or
permit to exist any pledge, mortgage, lien, charge, encumbrance or any security
interest whatsoever with respect to any of the Pledged Collateral or any unpaid
dividends or other distributions or payments with respect thereto or the
proceeds thereof other than that created hereby.
(b) Pledgor will not, subsequent to the date of this Agreement, without the
prior written consent of Lender, cause or permit any Issuer to issue or grant
any warrants, stock options of any nature or other instruments convertible into
shares of any class of capital stock or issue any additional shares of capital
stock or sell or transfer any treasury stock.
(c) Pledgor will, at its expense, promptly execute, acknowledge and deliver
all such instruments and take all such action as Lender from time to time may
reasonably request in order to ensure to Lender the benefits of the lien and
security interest in and to the Pledged Collateral intended to be created by
this Agreement, including, but without limitation, delivering to Lender upon the
occurrence of an Event of Default, and during its continuance, irrevocable
proxies in respect of the Pledged Collateral in form satisfactory to Lender.
Until receipt thereof, after the occurrence of any Event of Default, this
Agreement shall constitute Pledgor's proxy to Lender or its nominee to vote all
shares of Pledged Collateral then registered in Pledgor's name during any such
period that an Event of Default shall be continuing.
(d) Pledgor has and will defend the title to the Pledged Collateral and the
lien and security interest of Lender thereon against the claim of any Person and
will maintain and preserve such lien and security interest until the date of
termination of the Credit Agreement and payment in full of the Secured
Obligations; PROVIDED, HOWEVER, that the foregoing shall be subject to the right
of Pledgor to obtain the release of the Pledged Collateral in respect of certain
Foreign Subsidiaries pursuant to the terms of the Credit Agreement.
(e) Pledgor will pay all taxes, assessments and charges levied, assessed or
imposed upon the Pledged Collateral before the same become delinquent or become
liens upon any of the Pledged Collateral except where the same may be contested
in good faith by appropriate proceedings and as to which adequate reserves have
been provided.
(f) Except as permitted by Section 7(a)(ii) hereof with respect to certain
cash dividends, and except as otherwise limited hereinabove with respect to the
capital stock (or other Equity Interests of Foreign Subsidiaries), Pledgor will
cause any additional Pledged Collateral issued to or received by it to be
forthwith deposited and pledged with Lender, in each case accompanied by
instruments of assignment in conformity with Section 4 hereof.
7. PLEDGOR'S RIGHTS; TERMINATION OF RIGHTS.
Page 3
(a) As long as no Event of Default shall have occurred and be continuing:
(i) Pledgor shall have the right, from time to time, to vote and give
consents with respect to the Pledged Collateral or any part thereof for all
purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement or any Other Document; PROVIDED, HOWEVER, that no vote shall be cast,
and no consent shall be given or action taken by Pledgor (without the prior
written consent of the Lender) which would have the effect of impairing the
position of Lender hereunder or which would authorize or effect (A) the
dissolution or liquidation, in whole or in part, of any Issuer, (B) the
consolidation or merger of any Issuer with any other Person, (C) the sale,
disposition or encumbrance of any material portion of the assets of any Issuer
or a business or division of any Issuer, (D) any change in the authorized number
of shares, the stated capital or the authorized shares of any Issuer or the
issuance of any additional shares of capital stock of any Issuer, or (E) the
alteration of the voting rights with respect to the capital stock of any Issuer;
(ii) Pledgor shall be entitled, from time to time, to collect and receive,
for Pledgor's own use, all dividends paid in respect of the Pledged Shares, to
the extent then permitted to be paid under the Credit Agreement, other than any
and all (A) dividends paid or payable other than in cash in respect of, and
instruments and other property received, receivable or otherwise distributed in
respect of, or in exchange for, any Pledged Collateral, (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution, and (C) cash
paid, payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Collateral; PROVIDED, HOWEVER, that until actually paid all rights to
such dividends shall remain subject to the lien created by this Agreement.
(b) All dividends (other than such cash dividends as are permitted to be
paid to Pledgor in accordance with clause (a)(ii) above) and all other
distributions in respect of any of the Pledged Shares, whenever paid or made,
shall be delivered to Lender to hold as Pledged Collateral and shall, if
received by Pledgor, be received in trust for the benefit of Lender, be
segregated from all other property or funds of Pledgor, and be forthwith
delivered to Lender as Pledged Collateral in the same form as so received (with
any necessary endorsement or assignment).
(c) Upon the occurrence of an Event of Default and during the continuance
thereof, all of Pledgor's rights to exercise voting and other consensual rights
pursuant to Section 7(a)(i) hereof and all of Pledgor's rights to receive any
cash dividends pursuant to Section 7(a)(ii) hereof shall cease and all such
rights shall thereupon become vested in Lender who shall have the sole and
exclusive right to exercise the voting and other consensual rights which Pledgor
would otherwise be authorized to exercise pursuant to Section 7(a)(i) hereof and
to receive and retain the dividends which Pledgor would otherwise be authorized
to receive and retain pursuant to Section 7(a)(ii) hereof; PROVIDED, HOWEVER,
that notwithstanding anything contained in this Agreement to the contrary, no
voting or other consensual rights shall be vested in Lender, unless and until
Lender gives written notice to Pledgor that Lender intends to have such voting
or other consensual rights vest in itself. Pledgor shall not be permitted to
exercise or refrain from exercising any voting rights or other powers if, in the
reasonable judgment of Lender, such action would have a material adverse effect
on the value of the Pledged Collateral, any part thereof or Lender's security
interest therein. Upon the occurrence of an Event of Default and during the
continuation thereof, Pledgor shall pay over to Lender any cash dividends
received by Pledgor with respect to the Pledged Collateral and any and all money
and other property paid over to or received by Lender, shall be retained by
Lender as Pledged Collateral hereunder and shall be applied in accordance with
the provisions hereof.
8. DEFAULTS AND REMEDIES.
(a) Any "Event of Default" (as that term is defined in the Credit
Agreement) shall constitute an "Event of Default" hereunder. Upon the occurrence
of an Event of Default and during the continuation of such Event of Default,
Lender may exercise all rights of a secured party under the UCC. In addition,
Lender is hereby authorized and empowered to (i) transfer and register in its
name or in the name of its nominee the whole or any part of the Pledged
Collateral, (ii) exercise the voting rights with respect thereto, (iii) exercise
all corporate rights with respect to the Pledged Collateral including, without
limitation, all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Collateral
as if it were the absolute owner thereof, including, but without limitation, the
right to exchange, at its discretion, any or all of the Pledged
Page 4
Collateral upon the merger, consolidation, reorganization, recapitalization or
other readjustment of any Issuer, as issuer thereof, or upon the exercise by any
Issuer of any right, privilege or option pertaining to any of the Pledged
Collateral, and, in connection therewith, to deposit and deliver any and all of
the Pledged Collateral with any committee, depository, transfer agent, registrar
or other designated agent upon such terms and conditions as it may determine,
all without liability except to account for property actually received by it,
(iv) collect and receive all cash dividends and other distributions made
thereon, (v) sell in one or more sales after ten (10) Business Days' notice of
the time and place of any public sale or of the time after which a private sale
is to take place (which notice Pledgor agrees is commercially reasonable), but
without any previous notice or advertisement, the whole or any part of the
Pledged Collateral and (vi) otherwise act with respect to the Pledged Collateral
as though Lender was the outright owner thereof. Any sale shall be made at a
public or private sale at Lender's place of business, or at any public building
in the City of Atlanta, Georgia or elsewhere to be named in the notice of sale,
either for cash or upon credit or for future delivery at such price as Lender
may deem commercially reasonable, and Lender may be the purchaser of the whole
or any part of the Pledged Collateral so sold and hold the same thereafter in
its own right free from any claim of Pledgor or any right of redemption, which
Pledgor hereby waives to the maximum extent permitted by applicable law. Each
sale shall be made to the highest bidder, but Lender reserves the right to
reject any and all bids at such sale which, in its discretion exercised in a
commercially reasonable manner, it shall deem inadequate. Demands of
performance, except as otherwise herein specifically provided for, notices of
sale, advertisements and the presence of property at sale are hereby waived and
any sale hereunder may be conducted by an auctioneer or any officer or agent of
Lender.
(b) If, at the original time or times appointed for the sale of the whole
or any part of the Pledged Collateral, the highest bid, if there be but one
sale, shall be inadequate to discharge in full all the Secured Obligations, or
if the Pledged Collateral be offered for sale in lots, if at any of such sales,
the highest bid for the lot offered for sale would indicate to Lender, in its
reasonable discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge all the Secured
Obligations, Lender may, on one or more occasions and in its reasonable
discretion, postpone any of said sales by public announcement at the time of
sale or the time of previous postponement of sale, and no other notice of such
postponement or postponements of sale need be given, any other notice being
hereby waived; PROVIDED, HOWEVER, that any sale or sales made after such
postponement shall be after ten (10) Business Days' notice to Pledgor.
(c) If, at any time Lender shall determine to exercise its rights to sell
the whole or any part of the Pledged Collateral hereunder, such Pledged
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Act, Lender may, in its reasonable
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Lender may deem necessary or advisable, and shall not be
required to effect such registration or to cause the same to be effected. In
addition to a private sale as provided above in this Section 8, if any of the
Pledged Collateral shall not be freely distributable to the public without
registration under the Act at the time of any proposed sale pursuant to this
Section 8, then Lender shall not be required to effect such registration or
cause the same to be effected but, in its discretion (subject only to applicable
requirements of law), may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (i) as to the financial
sophistication and ability of any Person permitted to bid or purchase at any
such sale, (ii) as to the content of legends to be placed upon any certificates
representing the Pledged Collateral sold in such sale, including restrictions on
future transfer thereof, (iii) as to the representations required to be made by
each Person bidding or purchasing at such sale relating to that Person's access
to financial information about Pledgor's and such Person's intentions as to the
holding of the Pledged Collateral so sold for investment, for its own account,
and not with a view of the distribution thereof, and (iv) as to such other
matters as Lender may, in its reasonable discretion, deem necessary or
appropriate in order that such sale (notwithstanding any failure so to register)
may be effected in compliance with the UCC and other laws affecting the
enforcement of creditors' rights and the Act and all applicable state securities
laws.
(d) Pledgor recognizes that Lender may be unable to effect a public sale of
any or all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof. Pledgor also acknowledges that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. Lender shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit Pledgor to cause
such securities to be registered for
Page 5
public sale under the Act, or under applicable state securities laws, even if
Pledgor would agree to do so.
9. APPLICATION OF PROCEEDS. Any cash held by Lender as Pledged Collateral
and all cash proceeds received by Lender in respect of any sale of, liquidation
of, or other realization upon all or any part of the Pledged Collateral shall be
applied or distributed by Lender as provided in the Credit Agreement.
10. TERMINATION. Promptly following the payment in full of the Secured
Obligations and the irrevocable termination of the Credit Agreement, Lender
shall deliver to Pledgor the Pledged Collateral pledged by Pledgor at the time
subject to this Agreement and all instruments of assignment executed in
connection therewith, free and clear of the liens hereof and, except as
otherwise provided herein, all of Pledgor's obligations hereunder shall at such
time terminate.
11. MISCELLANEOUS.
(a) NO ORAL CHANGES. No term, covenant or condition of this Agreement can
be changed or terminated orally.
(b) SUCCESSORS AND ASSIGNS. All of the rights, privileges, remedies and
options given to Lender hereunder shall inure to the benefit of their successors
and assigns; and all the terms, conditions, promises, covenants, provisions and
warranties of this Agreement shall inure to the benefit of and shall bind the
representatives, successors and assigns of Lender and Pledgor. Pledgor may not
assign this Agreement to any Person.
(c) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York.
(d) INJUNCTIVE RELIEF. Pledgor recognizes that, in the event that Pledgor
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to
Lender; therefore, Pledgor agrees that Lender, if Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
(e) NOTICES. Any notice or request hereunder shall be given to Pledgor or
to Lender in the manner prescribed therefor in the Credit Agreement.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same instrument.
(g) SECTION HEADINGS. Any section headings used herein are solely for the
convenience of the parties and shall be without legal effect.
(h) TIME OF ESSENCE. Time is of the essence in all matters pertaining to
the payment or performance by Pledgor of its obligations hereunder.
[SIGNATURES ON FOLLOWING PAGE]
Page 6
IN WITNESS WHEREOF, Pledgor has executed this Agreement or caused this
Agreement to be executed by its officers thereunto duly authorized as of the
date first above written.
TAG-IT PACIFIC, INC. ("TIP")
By:
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
--------------------------
A.G.S. HOLDINGS, LLC ("Holdings")
By:
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
--------------------------
Page 7
SCHEDULE I
PLEDGED SHARES
NUMBER NUMBER OF NUMBERS
OF SHARES OF PERCENTAGE
PLACE OF CLASS SHARES ISSUED AND PLEDGED CERTIFICATE OF SHARES
PLEDGOR ISSUER ORGANIZATION OF EQUITY AUTHORIZED OUTSTANDING SHARES NUMBERS* PLEDGED
--------- ------------------------ ------------ --------- ---------- ----------- -------- ----------- -----------
TIP Tag-It, Inc. CA (USA) Common 100%
TIP A.G.S. Holdings, LLC CA (USA) Members 100%
TIP Talon International, Inc. DE (USA) Common 100%
TIP Tag-It de Mexico S.A. de MEXICO Common 65%
C.V.
TIP Tag-It Printing & BVI (USA) Common 65%
Packaging Ltd.
Holdings A.G.S. Stationery, Inc. CA (USA) Common 100%
*If uncertificated, so state.
EXHIBIT "P"
COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT (TRADEMARKS)
THIS COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT (TRADEMARKS) (the
"AGREEMENT"), dated as of May __, 2001, made by the undersigned (the "COMPANY"),
to and in favor of UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION ("Lender"),
pursuant to a certain Loan and Security Agreement, dated of even date herewith,
between the Company (AMONG OTHER PARTIES IDENTIFIED AS "Borrower" therein) and
Lender (as it may be amended or modified from time to time, the "CREDIT
AGREEMENT"). Capitalized terms used herein, but not expressly defined herein,
shall have the meanings given to such terms in the Credit Agreement.
W I T N E S S E T H:
RECITALS.
A. The Company owns certain trademarks which are registered in, or
applications for registration which have been filed in, the United States Patent
and Trademark Office, and rights under certain Trademark Licenses, all as more
fully described on SCHEDULE I attached hereto and by reference made part hereof;
and
B. The Lender proposes to make certain loans to the Company pursuant to the
Credit Agreement; and
C. Pursuant to the Credit Agreement, the Company has assigned, conveyed,
mortgaged, pledged, hypothecated and transferred to the Lender all of its right,
title and interest in and to, and granted to the Lender a security interest in,
the property described therein, including, without limitation, (a) all of the
Company's Trademarks (as herein defined), whether presently existing or
hereafter acquired or arising, or in which the Company now has or hereafter
acquires rights and wherever located; (b) all of the Company's Trademark
Licenses (as herein defined), whether presently existing or hereafter acquired
or in which the Company now has or hereafter acquires rights and wherever
located; and (c) all products and proceeds any of the foregoing, as security for
all of the Obligations; and
D. As a condition precedent to the extension of such financial
accommodations pursuant to the Credit Agreement and in furtherance of the Credit
Agreement, including, without limitation, for purposes of perfecting the
security interests granted therein, the Lender has required that the Company
grant to the Lender a security interest in and a collateral assignment of the
Property (as herein defined);
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. For purposes of this Agreement and in addition to terms defined
elsewhere in this Agreement, the following terms shall have the meanings herein
specified (such meaning to be equally applicable to both the singular and plural
forms of the terms defined):
"TRADEMARK LICENSE" means any written agreement now or hereafter
in existence granting to the Company any right to use any Trademark,
including, without limitation, the agreements listed on SCHEDULE I
attached hereto.
"TRADEMARKS" means all of the following: (i) all trademarks,
trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision
thereof, including, without limitation, those listed on SCHEDULE I
attached hereto together with all the rights, benefits
and privileges derived therefrom and the goodwill of the business
symbolized thereby, (ii) all renewals thereof and (iii) all proceeds
of the foregoing.
2. As security for all of the Obligations, the Company hereby grants and
conveys a security interest to the Lender in, and collaterally assigns to the
Lender, all of its right, title and interest in, to and under the following
(collectively, the "PROPERTY"):
(a) each Trademark now or hereafter owned by the Company or in which
the Company now has or hereafter acquires rights and wherever located
and the goodwill of the business of the Company relating thereto or
represented thereby, including, without limitation, each Trademark
referred to in Schedule I hereto; and
(b) each Trademark License now or hereafter held by the Company or in
which the Company now has or hereafter acquires rights, to the extent
each of the Trademark Licenses does not prohibit assignment or the
granting of a security interest in the rights thereunder, and wherever
located, including, without limitation, the Trademark Licenses, if
any, referred to in SCHEDULE I hereto; and
(c) all products and proceeds of the foregoing, including, without
limitation, any claim by the Company against third parties for past,
present or future infringement of any Trademark or breach of Trademark
Licenses, if any, including, without limitation, any Trademark or
Trademark License referred to in SCHEDULE I hereto.
Notwithstanding the foregoing or anything else contained in this Agreement to
the contrary, the assignment set forth above shall not be effective as a
transfer of title to the Property unless and until the Lender exercises the
rights and remedies accorded to it under the Credit Agreement and by law with
respect to the realization upon its security interest in and collateral
assignment of the Property, and until such time the Company shall own, and may
use and enjoy the Property in connection with its business operations, and
exercise all incidents of ownership, including, without limitation, granting
licenses thereof in the ordinary course of business and enforcement of its
rights and remedies with respect to the Property, but with respect to all
Property being used in the Company's business, only in a manner consistent with
the preservation of the current substance, validity, registration and the
security interest and collateral assignment herein granted in such Property.
3. The Company does hereby further acknowledge and affirm that the
representations, warranties and covenants of the Company with respect to the
Property and the rights and remedies of the Lender with respect to the security
interest in and collateral assignment of the Property made and granted hereby
are more fully set forth in the Credit Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.
4. This Agreement shall terminate upon termination of the Credit Agreement.
At any time and from time to time prior to such termination, the Lender may
terminate its security interest in or reconvey to the Company any rights with
respect to any or all of the Property. Upon termination of this Agreement and
following a request from the Company, the Lender shall, at the expense of the
Company, execute and deliver to the Company all deeds, assignments and other
instruments as may be necessary or proper in the reasonable judgment of the
Company in order to evidence such termination, subject to any disposition of the
Property which may have been made by the Lender pursuant hereto or pursuant to
the Credit Agreement.
5. If at any time before the termination of this Agreement in accordance
with SECTION 4, the Company shall obtain or acquire rights to any new Trademark
or Trademark License, the provisions of SECTION 2 shall automatically apply
thereto and the Company shall comply with the terms of the Credit Agreement with
respect to such new Trademark or Trademark License. The Company authorizes the
Lender to modify this Agreement by amending SCHEDULE 1 to include any future
Trademarks and Trademark Licenses covered by SECTION 2 or by this SECTION 5.
6. The Company further agrees that (a) the Lender shall not have any
obligation or responsibility to protect or defend the Property and the Company
shall at its own expense protect, defend and maintain the same in accordance
with the terms and conditions set forth in the Credit Agreement, (b) the Company
shall forthwith advise
Page 2
the Lender promptly in writing upon detection of infringements of any of the
Property being used in the Company's business and (c) if the Company fails to
comply with the requirements of the preceding clause (a), the Lender may do so
in the Company's name or in its own name, but in any case at the Company's
expense, and the Company hereby agrees to reimburse the Lender for all expenses,
including attorneys' fees, incurred by the Lender in protecting, defending and
maintaining the Property.
7. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF GEORGIA, EXCEPT TO THE EXTENT THAT PERFECTION (AND THE
EFFECT OF PERFECTION AND NONPERFECTION) AND CERTAIN REMEDIES MAY BE GOVERNED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF GEORGIA.
[Signatures on Following Pages]
Page 3
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed under seal by its duly authorized officers as of the date first
above written.
TAG-IT PACIFIC, INC.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On May __, 2001, before me personally came ▇▇▇▇▇ ▇▇▇▇, to me personally
known and known to me to be the person described in and who executed the
foregoing instrument as the President of TAG-IT PACIFIC, INC., who being by me
duly sworn, did depose and say that he (she) is the President of said
corporation described in and which executed the foregoing instrument; that the
said instrument was signed by him (her) on behalf of said corporation by order
of its Board of Directors; that he (or she) signed his name thereto by like
order; and that he (or she) acknowledged said instrument to be the free act and
deed of said corporation.
Notary Public
My Commission Expires:
------------------------------------
[NOTARIAL SEAL]
SCHEDULE I
REGISTERED U.S. TRADEMARKS
NONE
PENDING U.S. TRADEMARK APPLICATIONS
NAME NUMBER
Tag-It 76172972
Tag It 76172906
Tag-It 76172905
Managed Trim Solution 76172907
Managed Trim Solution 76172904
TRADEMARK LICENSES
TRADEMARK LICENSES WITH RESPECT TO WHICH
THE COMPANY IS A LICENSOR:
NONE
TRADEMARKS AND TRADEMARK APPLICATIONS WITH
RESPECT TO WHICH THE COMPANY IS A LICENSEE:
NONE, except in ordinary course of business without registration, including
licensee to use name "Talon" in zippers.
BORROWER: TAG-IT PACIFIC, INC. ET AL.
SCHEDULES TO LOAN AND SECURITY AGREEMENT
Schedule "1" - Borrower Information Schedule
Schedule "2" - Transaction Data Schedule
Schedule "3" - Sanwa Lien/Sanwa Debt Schedule
Schedule "4" - Subordinated Debt at Closing Schedule
Schedule "5" - Excluded Affiliates Schedule
Schedule "6" - Existing Guaranties
Schedule "7" - Other Debt
SCHEDULE "1"
BORROWER INFORMATION SCHEDULE
[NOTE: IF MORE THAN ONE BORROWER EXISTS, COMPLETE ONE PER BORROWER]
NAME: TAG-IT PACIFIC, INC.
--------------------------------------------------------------------------
HOME STATE: DELAWARE
-------------------------------------------------------------------
TAXPAYER ID (FEIN) NO.: ▇▇-▇▇▇▇▇▇▇
---------------------------------------------------------
FISCAL YEAR ENDS: 12/31
-------------------------------------------------------------
"DOING BUSINESS" OR TRADE NAMES (IF ANY): NONE
--------------------------------------
EXECUTIVE OFFICE:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
TELEFAX: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
E-MAIL: @ .com
---------- -----------------
LEGAL COUNSEL: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
MMARKLILES @ AKINGUMP .com E-mail
-------------------------- --------------
CPA: ▇▇▇▇ ▇▇▇▇▇▇▇ - BDO ▇▇▇▇▇▇▇ Name
--------------------------------------------------
1900 AVENUE OF THE STARS, 11TH FLOOR Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
BSCHRUPP @BDO .com E-mail
-------------------------- --------------
INSURANCE AGENT: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ COMPANY Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
BANKER (DEPOSITORY) SEE ADDENDUM Name
--------------------------------------------------
Address
--------------------------------------------------
--------------------------------------------------
( )- Telephone
-------------------------------------------
( )- Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
SHAREHOLDERS (AND
SHAREHOLDINGS): SEE SHAREHOLDER PROFILE
------------------------------
EXECUTIVE OFFICERS: ▇▇▇▇▇ ▇▇▇▇ President & CEO
-----------------------------
Treasurer
-----------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Secretary
-----------------------------
Others:
▇▇▇▇▇ ▇▇▇▇▇▇▇ CFO
----------------------------- -------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ EXECUTIVE V.P.
------------------------------ -------------------------
LOCATION(S) OF OWNED LEASED/WAREHOUSED
COLLATERAL: WOODLAND HILLS, CA X
------------------------------ -------- ----------------
EXISTING LITIGATION:
1. INTEGRATED CORPORATE RELATIONS, PLAINTIFF V. TAG-IT PACIFIC, DEFENDANT.
FILED APRIL 30, 2001, FAIRFIELD COUNTY CT.
2. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, PLAINTIFF V. TAG-IT PACIFIC, INC., DEFENDANT. FILED
FEBRUARY 23, 2001, NEW YORK COUNTY, NEW YORK.
3. MEGA LABELS DEVELOP CO. LTD., PLAINTIFF V. TAG-IT PACIFIC HONG KONG LTD.,
TAG-IT PACIFIC, INC., DEFENDANTS. FILED MARCH 21, 2001, LOS ANGELES,
CALIFORNIA.
4. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, PLAINTIFF V. TAG-IT PACIFIC, INC., DEFENDANT. FILED MARCH
26, 2001, SOUTHERN DISTRICT OF NEW YORK.
SUBSIDIARIES (IF ANY):
TAG-IT, INC. - 100% OWNED BY TAG-IT PACIFIC, INC.
AGS HOLDINGS - 100% OWNED BY TAG-IT PACIFIC, INC.
TALON INTERNATIONAL - 100% OWNED BY TAG-IT PACIFIC, INC.
TAG-IT DE MEXICO - 100% OWNED BY TAG-IT PACIFIC, INC.
TAG-IT PACIFIC (HK) LTD. - 100% OWNED BY TAG-IT PACIFIC, INC.
EMPLOYEE BENEFIT PLAN(S):
SEE 10 K
Page 2
PATENTS, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS
OWNED BY BORROWER:
TAG-IT, TM, REG. PENDING, SERIAL #76172972
TAG-IT, TM, REG. PENDING, SERIAL #76172906
TAG-IT, TM, REG. PENDING, SERIAL #76172905
MANAGED TRIM SOLUTION, TM. REG. PENDING, SERIAL #7612907
MANAGED TRIM SOLUTION, TM. REG. PENDING, SERIAL #7612904
TAG-IT PACIFIC, INC. IS LICENSED TO USE, LICENSE, MARKET, SELL AND
DISTRIBUTE PRODUCTS UNDER THE ▇▇▇▇▇ ▇▇▇▇.
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: PRESIDENT & CEO
---------------------------- ----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT & CEO
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT & CEO
-----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT & CEO
-----------------------------
Page 3
SCHEDULE "1"
BORROWER INFORMATION SCHEDULE
[NOTE: IF MORE THAN ONE BORROWER EXISTS, COMPLETE ONE PER BORROWER]
NAME: TAG-IT, INC.
--------------------------------------------------------------------------
HOME STATE: DELAWARE
-------------------------------------------------------------------
TAXPAYER ID (FEIN) NO.: ▇▇-▇▇▇▇▇▇▇
---------------------------------------------------------
FISCAL YEAR ENDS: 12/31
-------------------------------------------------------------
"DOING BUSINESS" OR TRADE NAMES (IF ANY): NONE
--------------------------------------
EXECUTIVE OFFICE:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
TELEFAX: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
E-MAIL: @ .com
---------- -----------------
LEGAL COUNSEL: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
MMARKLILES @ AKINGUMP .com E-mail
-------------------------- --------------
CPA: ▇▇▇▇ ▇▇▇▇▇▇▇ - BDO ▇▇▇▇▇▇▇ Name
--------------------------------------------------
1900 AVENUE OF THE STARS, 11TH FLOOR Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
BSCHRUPP @BDO .com E-mail
-------------------------- --------------
INSURANCE AGENT: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ COMPANY Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
BANKER (DEPOSITORY) SANWA BANK (SEE ADDENDUM) Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. Address
--------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
( )- Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
SHAREHOLDERS (AND
SHAREHOLDINGS): SEE SHAREHOLDER PROFILE
------------------------------
EXECUTIVE OFFICERS: ▇▇▇▇▇ ▇▇▇▇ President & Secretary
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ CFO
----------------------------- -------------------------
LOCATION(S) OF OWNED LEASED/WAREHOUSED
COLLATERAL: WOODLAND HILLS, CA X
------------------------------ -------- ----------------
MIAMI X
------------------------------ -------- ----------------
MEXICO X
------------------------------ -------- ----------------
EXISTING LITIGATION: NONE
-----------------------------------------------------------
SUBSIDIARIES (IF ANY):
TAG-IT PACIFIC, INC.- WHOLLY OWNED SUBSIDIARY BY TAG-IT PACIFIC, INC.
EMPLOYEE BENEFIT PLAN(S): N/A
-----------------------------------------------------
Page 2
PATENTS, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS
OWNED BY BORROWER:
NONE
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: CEO
---------------------------- ----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 3
SCHEDULE "1"
BORROWER INFORMATION SCHEDULE
[NOTE: IF MORE THAN ONE BORROWER EXISTS, COMPLETE ONE PER BORROWER]
NAME: A.G.S. HOLDINGS, LLC
--------------------------------------------------------------------------
HOME STATE: CALIFORNIA
-------------------------------------------------------------------
TAXPAYER ID (FEIN) NO.: ▇▇-▇▇▇▇▇▇▇
---------------------------------------------------------
FISCAL YEAR ENDS: 12/31
-------------------------------------------------------------
"DOING BUSINESS" OR TRADE NAMES (IF ANY): NONE
--------------------------------------
EXECUTIVE OFFICE:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
TELEFAX: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
E-MAIL: @ .com
---------- -----------------
LEGAL COUNSEL: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
MMARKLILES @ AKINGUMP .com E-mail
-------------------------- --------------
CPA: ▇▇▇▇ ▇▇▇▇▇▇▇ - BDO ▇▇▇▇▇▇▇ Name
--------------------------------------------------
1900 AVENUE OF THE STARS, 11TH FLOOR Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
BSCHRUPP @BDO .com E-mail
-------------------------- --------------
INSURANCE AGENT: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ COMPANY Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
BANKER (DEPOSITORY) SEE ADDENDUM Name
--------------------------------------------------
Address
--------------------------------------------------
--------------------------------------------------
( )- Telephone
-------------------------------------------
( )- Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
SHAREHOLDERS (AND
SHAREHOLDINGS): WHOLLY-OWNED SUBSIDIARY OF TAG-IT PACIFIC, INC.
-------------------------------------------------------------
EXECUTIVE OFFICERS: ▇▇▇▇▇ ▇▇▇▇ President & Secretart
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ CFO
-----------------------------
LOCATION(S) OF OWNED LEASED/WAREHOUSED
COLLATERAL: NONE
------------------------------ -------- ----------------
EXISTING LITIGATION: NONE
-----------------------------------------------------------
SUBSIDIARIES (IF ANY): A.G.S. STATIONERY, INC.
------------------------------------------------------
EMPLOYEE BENEFIT PLAN(S): NONE
-----------------------------------------------------
PATENTS, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS
OWNED BY BORROWER:
NONE
Page 2
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: CEO
---------------------------- ----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. HOLDINGS, LLC
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: MANAGER
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 3
SCHEDULE "1"
BORROWER INFORMATION SCHEDULE
[NOTE: IF MORE THAN ONE BORROWER EXISTS, COMPLETE ONE PER BORROWER]
NAME: A.G.S. STATIONERY, INC.
--------------------------------------------------------------------------
HOME STATE: CALIFORNIA
-------------------------------------------------------------------
TAXPAYER ID (FEIN) NO.: ▇▇-▇▇▇▇▇▇▇
---------------------------------------------------------
FISCAL YEAR ENDS: 12/31
-------------------------------------------------------------
"DOING BUSINESS" OR TRADE NAMES (IF ANY): NONE
--------------------------------------
EXECUTIVE OFFICE:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
TELEFAX: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
E-MAIL: @ .com
---------- -----------------
LEGAL COUNSEL: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
MMARKLILES @ AKINGUMP .com E-mail
-------------------------- --------------
CPA: ▇▇▇▇ ▇▇▇▇▇▇▇ - BDO ▇▇▇▇▇▇▇ Name
--------------------------------------------------
1900 AVENUE OF THE STARS, 11TH FLOOR Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
BSCHRUPP @BDO .com E-mail
-------------------------- --------------
INSURANCE AGENT: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ COMPANY Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
BANKER (DEPOSITORY) SEE ADDENDUM Name
--------------------------------------------------
Address
--------------------------------------------------
--------------------------------------------------
( )- Telephone
-------------------------------------------
( )- Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
SHAREHOLDERS (AND
SHAREHOLDINGS): SEE SHAREHOLDER PROFILE
-------------------------------------------------------------
EXECUTIVE OFFICERS: ▇▇▇▇▇ ▇▇▇▇ President & Secretary
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ CFO
-----------------------------
LOCATION(S) OF OWNED LEASED/WAREHOUSED
COLLATERAL: WOODLAND HILLS, CA X
------------------------------ -------- ----------------
AZTECA/COMMERCE X
------------------------------ -------- ----------------
MEXICO X
------------------------------ -------- ----------------
EXISTING LITIGATION: NONE
-----------------------------------------------------------
SUBSIDIARIES (IF ANY): A.G.S. HOLDINGS, LLC. - WHOLLY OWNED SUBSIDIARY OF
AGS HOLDINGS LLC.
---------------------------------------------------------
EMPLOYEE BENEFIT PLAN(S): N/A
-----------------------------------------------------
Page 2
PATENTS, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS
OWNED BY BORROWER:
NONE
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: CEO
---------------------------- ----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 3
SCHEDULE "1"
BORROWER INFORMATION SCHEDULE
[NOTE: IF MORE THAN ONE BORROWER EXISTS, COMPLETE ONE PER BORROWER]
NAME: TALON INTERNATIONAL, INC.
--------------------------------------------------------------------------
HOME STATE: DELAWARE
-------------------------------------------------------------------
TAXPAYER ID (FEIN) NO.: ▇▇-▇▇▇▇▇▇▇
---------------------------------------------------------
FISCAL YEAR ENDS: 12/31
-------------------------------------------------------------
"DOING BUSINESS" OR TRADE NAMES (IF ANY): NONE
--------------------------------------
EXECUTIVE OFFICE:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
TELEFAX: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------
E-MAIL: @ .com
---------- -----------------
LEGAL COUNSEL: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
MMARKLILES @ AKINGUMP .com E-mail
-------------------------- --------------
CPA: ▇▇▇▇ ▇▇▇▇▇▇▇ - BDO ▇▇▇▇▇▇▇ Name
--------------------------------------------------
1900 AVENUE OF THE STARS, 11TH FLOOR Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
BSCHRUPP @BDO .com E-mail
-------------------------- --------------
INSURANCE AGENT: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ COMPANY Name
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ Address
--------------------------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telephone
-------------------------------------------
(▇▇▇)- ▇▇▇-▇▇▇▇ Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
BANKER (DEPOSITORY) NONE Name
--------------------------------------------------
Address
--------------------------------------------------
--------------------------------------------------
( )- Telephone
-------------------------------------------
( )- Telefax
-------------------------------------------
@ .com E-mail
-------------------------- --------------
SHAREHOLDERS (AND
SHAREHOLDINGS): SEE SHAREHOLDER PROFILE
-------------------------------------------------------------
EXECUTIVE OFFICERS: ▇▇▇▇▇ ▇▇▇▇ President & Secretary
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ CFO
-----------------------------
LOCATION(S) OF OWNED LEASED/WAREHOUSED
COLLATERAL: FLORIDA X
------------------------------ -------- ----------------
TEXAS X
------------------------------ -------- ----------------
EXISTING LITIGATION: NONE
-----------------------------------------------------------
SUBSIDIARIES (IF ANY): TAG-IT PACIFIC, INC. - WHOLLY OWNED SUBSIDIARY OF
TAG-IT PACIFIC, INC.
---------------------------------------------------------
EMPLOYEE BENEFIT PLAN(S): N/A
-----------------------------------------------------
Page 2
PATENTS, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS
OWNED BY BORROWER:
NONE
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: CEO
---------------------------- ----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 3
SCHEDULE "2"
TRANSACTION DATA SCHEDULE
CLOSING DATE: May 30, 2001
BORROWER(S): Tag-It Pacific, Inc., a Delaware corporation ET AL.
BORROWING BASE:
A sum determined by adding (i) an amount equal to
eighty-five percent (85%), or such lesser or greater
percentage which Lender may elect to establish from time to
time by at least ten (10) days' advance written notice to
Borrower in its good faith discretion, of the net dollar
amount of Eligible Accounts as at the date of determination
to (ii) an amount equal to fifty percent (50%), or such
lesser or greater percentage which Lender may elect to
establish from time to time by at least ten (10) days'
advance written notice to Borrower in its good faith
discretion, of the dollar amount of the Eligible Inventory,
valued at the lower of its Booked Cost or market value, at
the date of determination, not to exceed, in any event, as
to Eligible Inventory, the LESSER of (A) $10,000,000 or (B)
then current borrowing availability under the Line of Credit
determined by reference to Eligible Accounts without regard
to Eligible Inventory. Lender shall also be entitled to
impose such reserves against the Borrowing Base and
borrowing availability under the Line of Credit as it may
elect from time to time in its good faith discretion, by at
least ten (10) days' advance written notice to Borrower. As
used herein.
"ELIGIBLE ACCOUNTS" shall mean that portion of Borrower's
Accounts Receivable Collateral consisting of trade accounts
receivable actually billed in U.S. Dollars to, and owing to
Borrower by, its Account Debtors in the ordinary course of
its business, EXCLUDING, HOWEVER, in any event, any such
account: (i) with respect to which any portion thereof is
more than sixty (60) days past due date or more than one
hundred twenty (120) days past invoice date; (ii) which is
owing by any Affiliate of Borrower (except for Excluded
Affiliates); (iii) which is owing by any Account Debtor
having twenty-five percent (25%) or more in face value of
its then existing accounts with Borrower ineligible
hereunder pursuant to the operation and effect of clause (i)
above; (iv) which arises from any contract on which
Borrower's performance is assured by a performance,
completion or other bond; (v) constituting retainage which
has been withheld from Borrower pending contract completion,
to the extent thereof; (vi) constituting a service, warranty
or similar charge, to the extent thereof; (vii) which is
evidenced by a promissory note, other instrument or chattel
paper; (viii) which represents an accord and satisfaction in
respect of any prior account receivable; (ix) the assignment
of which is subject to any requirements set forth in the
Assignment of Claims Act (unless and except to the extent
that Borrower has complied therewith to Lender's
satisfaction); (x) which does not conform in any respect to
the warranties and representations set forth in the Loan
Documents in respect of Accounts Receivable Collateral; (xi)
which is owing by any Account Debtor whose accounts in face
amount with Borrower exceed twenty-five percent (25%) of
Borrower's Eligible Accounts, but only to the extent of such
excess; PROVIDED, however, that, notwithstanding the
foregoing, for Tarrant Apparel, the concentration limit
shall be increased to 40%, initially, reducing to 35% on
January 1, 2002, and reducing (and remaining at) 25% on
January 1, 2003; (xii) which is owing by, billed to or paid
by any Account Debtor not located in the United States of
America; unless and except to the extent that it is (A)
backed by a letter of credit issued to Borrower as
beneficiary by or through a bank which is acceptable to
Lender or (B) is insured under a policy of credit insurance
acceptable to Lender; (xiii) as to which a duly perfected,
first priority security interest does not exist at any time
in favor of Lender; (xiv) as to which any counterclaim,
defense, setoff, deduction or contra-account exists, to
the extent thereof; or (xv) which has otherwise been
determined by Lender in its good faith discretion not to be
an "Eligible Account" for purposes hereof.
"ELIGIBLE INVENTORY" shall mean that portion of the
Inventory Collateral consisting of new, saleable finished
goods inventory of Borrower, which (i) is at all times
subject to a duly perfected, first priority security
interest in favor of Lender; (ii) is in good and saleable
condition; (iii) is not on consignment from, or subject to,
any repurchase agreement with any supplier which prohibits
Lender's Lien thereon; (iv) does not constitute returned,
repossessed, damaged or slow-moving (>365 days) goods; (v)
conforms in all respects to the warranties and
representations set forth in the Loan Documents in respect
of Inventory Collateral; (vi) is not subject to a negotiable
document of title (unless issued or endorsed to Lender);
(vii) is not subject to any license or other agreement that
limits or restricts Borrower's or Lender's right to sell or
otherwise dispose of such inventory; (it being recognized
that inventory bearing the "Talon" brand shall not be
rendered ineligible by virtue of this clause alone); (viii)
is located only at a Collateral Location within the United
States with respect to which, if leased by Borrower, Lender
has received from the landlord at such location a Landlord's
Agreement; and (ix) which has not otherwise been determined
by Lender in its good faith discretion to be excluded from
"Eligible Inventory" for purposes hereof.
INITIAL TERM: Three (3) years
MAXIMUM AMOUNT: $20,000,000
APPLICABLE MARGIN: Two percent (2%) per annum
FEES: Borrower shall pay the following fees to Lender:
(a) LOAN ORIGINATION FEE. On the Closing Date, a fully
earned, non-refundable, one-time loan origination fee of $50,000.
(b) ANNUAL LOAN FEE. Annually on each anniversary of the
Closing Date, a fully earned, non-refundable loan fee equal to .125% of the
Maximum Amount.
(c) NON-USAGE FEE. Quarterly, on the first day of each
calendar quarter, commencing on the first of such dates following the Closing
Date, Borrower shall pay to Lender a fee equal to (x) .375% per annum, TIMES (y)
the difference between (A) the Maximum Amount, and (B) the aggregate amount of
outstanding Advances, determined on a daily average basis for the immediately
preceding calendar quarter (or portion thereof, as the case may be).
(d) EARLY TERMINATION FEE. If the Agreement is terminated
prior to the Termination Date, there shall be due and payable to Lender upon
such termination occurring, as liquidated damages for the loss of its bargain
and not as a penalty, a sum equal to the product of (i) the Maximum Amount,
multiplied by (ii) a percentage, equal to (A) three percent (3%), if the early
termination occurs on or before the first anniversary of the Closing Date, (B)
two percent (2%), if the early termination occurs after the first anniversary of
the Closing Date, but on or before the second anniversary of the Closing Date,
and (C) one percent (1%), if the early termination occurs after the second
anniversary of the Closing Date, but before the third anniversary of the Closing
Date.
(e) AUDIT FEES. With respect to field audits conducted by
Lender pursuant to Section 10.3, based on a ninety (90) day audit cycle (which
may be increased, in Lender's discretion, whenever an Event of Default exists),
Borrower shall reimburse Lender on demand the sum of $750 per day plus
out-of-pocket expenses.
Page 2
(f) MISCELLANEOUS FEES. Borrower shall also reimburse Lender
for returned item fees and bank service charges levied by any financial
institution on Lender in connection with remittances made or received in
furtherance hereof, plus a $25 handling fee. Wire transfer fees incurred by
Lender in such regards shall also be reimbursed at no less than $25 per wire.
COLLECTION DAYS: Three (3) Business Days
FINANCIAL COVENANTS. Borrower covenants to Lender that, from and after the date
hereof and so long as any amount remains on account of any of the Obligations or
the Agreement remains effective (whichever is the last to occur), it will comply
with the financial covenants set forth below, which are herewith incorporated by
reference into Article 7 of the Agreement:
(a) MINIMUM NET WORTH. Borrower shall have a minimum Net
Worth of at least (i) $13,000,000, on December 31, 2001; (ii) $13,750,000, on
December 31, 2002; and (iii) $14,250,000 on December 31, 2003 and each
succeeding December 31. As used herein, "NET WORTH" shall mean Borrower's book
net worth, determined on a consolidated basis for Borrower and its Consolidated
Subsidiaries in accordance with GAAP, by subtracting total liabilities from
total assets, with inventory calculated on a FIFO basis.
(b) CAPITAL EXPENDITURES. Borrower shall not expend, in
Capital Expenditures, (i) more than $100,000, for any one such expenditure (or
series of related expenditures) or (ii) more than $300,000, in the aggregate,
for all such expenditures in any one Fiscal Quarter; PROVIDED, HOWEVER, that, in
addition to the foregoing, during the one (1) year period following the Closing
Date Borrower may expend up to $1,000,000 in additional Capital Expenditures
related to its development of certain management information system
enhancements. As used herein, "CAPITAL EXPENDITURES" shall mean all expenditures
made in respect of the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, having a useful life of more than one (1)
year, including, without limitation, those arising in connection with the direct
or indirect acquisition of such assets by way of increased product or service
charges or offset items or in connection with Capital Leases. "CAPITAL LEASES"
shall mean any leases of Property than, in accordance with GAAP, should be
reflected as liabilities on the balance sheet of a Person.
(c) FIXED CHARGE COVERAGE RATIO. At the end of each Fiscal
Quarter, beginning with the Fiscal Quarter ending June 30, 2001, the Borrower
shall maintain a Fixed Charge Coverage Ratio (as defined below) of not less than
1.5:1. As used herein, "FIXED CHARGE COVERAGE RATIO" shall be defined as (i)
EBITDA (as defined hereinbelow) DIVIDED by (ii) Fixed Charges (as defined
hereinbelow). Where: (i) "EBITDA" means net income of Borrower and its
Consolidated Subsidiaries, determined in accordance with GAAP, for each period
of four (4) trailing Fiscal Quarters (excluding from such determination any
extraordinary gains or losses) PLUS, to the extent deducted from revenue in
determining such net income amount, the following: interest expense, taxes,
depreciation and amortization; and where (ii) FIXED CHARGES means, for the
corresponding fiscal period, interest expense (including interest on
Subordinated Debt), PLUS the current maturities of long-term Debt (including
payments on Capital Leases but excluding principal reductions in Subordinated
Debt) PLUS any dividends or distributions on Equity Interests.
(d) EXCESS BORROWING AVAILABILITY. On the Closing Date, and
for thirty (30) days thereafter or until Lender completes its initial audit,
whichever is sooner (the "Initial Excess Availability Period"), Borrower shall
have excess borrowing availability, as determined by Lender from review of
outstanding Borrowings and the Borrowing Base Requirement in place at the
Closing Date equal to not less than ten percent (10%) of outstanding Borrowings
at the Closing Date, excluding the amount of the Equipment Draw. Following the
Initial Excess Availability Period, and up until such date as the Borrower
refinances all or part of the Equipment Draw, the Borrower shall maintain excess
availability equal to the portion of such Equipment Draw not previously
refinanced. It is understood by the Borrower that the repayment to Lender for
such Equipment Draw, whether made through a single or multiple refinancings, and
regardless of the time period in which such Equipment Draw is refinanced in
total, will be equal to the full amount of such Equipment Draw on the Closing
Date. During the 30 day period following the Closing Date, Borrower shall pay
Lender a one-time fee of $15,000.
ADDITIONAL CONDITIONS
PRECEDENT:
Lender also shall have received the following from the
Borrower:
(a) Subordination Agreements, duly executed by Monto
Holdings Pty. Ltd., ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and the Estate of ▇▇▇▇▇▇ ▇▇▇▇.
Page 3
(b) Stock Certificates evidencing ownership in all direct
and indirect subsidiaries of Tag-It Pacific, Inc. (limited, in the case of
Foreign Subsidiaries, to 65% of the issued and outstanding shares of each class
of stock (or other Equity Interests) of such Foreign Subsidiary);
(c) completed background checks on Borrower's executive
officers satisfactory to Lender;
(d) a no-offset letter from Tarrant Apparel in form and
substance substantially similar to Exhibit "A" attached hereto or otherwise
satisfactory to Lender.
(e) a Subordination Agreement from GICI in respect of the
GICI Debt, which may be in the form previously executed by GICI in favor of
Sanwa Bank, if accompanied by Borrower's letter of confirmation in such regard,
to be substantially in the form of Exhibit "B" to this Schedule.
Page 4
Accepted: Approved:
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: PRESIDENT
---------------------------- ----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. HOLDINGS, LLC
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: MANAGER
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 5
Rider Schedule 2:
On the Closing Date, and for thirty (30) days thereafter or until Lender
completes its initial audit, whichever is sooner (the "Initial Excess
Availability Period"), Borrower shall have excess borrowing availability, as
determined by Lender from review of outstanding Borrowings and the Borrowing
Base Requirement in place at the Closing Date equal to not less than ten percent
(10%) of the outstanding Borrowings at the Closing Date, excluding the amount of
the Equipment Draw. Following the Initial Excess Availability Period, and up
until such date as the Borrower refinances all or part of the Equipment Draw,
the Borrower shall maintain excess availability equal to the portion of such
Equipment Draw not previously refinanced. It is understood by the Borrower that
the repayment to Lender for such Equipment Draw, whether made through a single
or multiple refinancings, and regardless of the time period in which such
Equipment Draw is refinanced in total, will be equal to the full amount of such
Equipment Draw on the Closing Date. During the 30 day period following the
Closing Date, Borrower shall pay Lender a one-time fee of $15,000.
Page 6
EXHIBIT "A" TO
SCHEDULE "2"
NO OFFSET LETTER
May 30, 2001
UPS Capital Global
Trade Finance Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We understand that you have proposed to extend credit or other
financial accommodations to Tag-It Pacific, Inc. and its subsidiaries
(collectively, the "Company"), upon the security of (among other assets) the
Company's inventory and accounts receivables, including accounts receivable
owing by ourselves to the Company (the "Tarrant Accounts"). The Company is
affiliated with us by common equity ownership.
As an inducement to your extending credit or other financial
accommodations to the Company upon such security, we agree that, so long as any
such financial accommodations remain outstanding, we will not impose as against
our payment obligations in respect of the Tarrant Accounts any right of setoff,
counterclaim, defense or objection we may have, whether now existing or arising
in the future, based on any debt, liability or obligation of the Company to us
not arising from the sale (or sales) which give rise to the Tarrant Accounts,
such as, but not limited to, (i) any intercompany loan or advance made by us to
the Company, (ii) any account payable of the Company to us arising from our
provision of goods or services to it, and (iii) any claim assigned to us by any
other of our affiliates.
We recognize that you will rely on this letter in extending credit to
the Company.
Sincerely,
Tarrant Apparel Company
By:
-------------------------------------
Authorized Officer
Name: ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Title: CEO
-------------------------------------
EXHIBIT "B" TO
SCHEDULE "2"
LETTER OF CONFIRMATION
May 30, 2001
UPS Capital Global
Trade Finance Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We refer to the Loan and Security Agreement, dated of even date
herewith, among you, us and our subsidiaries (the "Loan Agreement"). Capitalized
terms used herein, but not expressly defined herein, shall have the meanings
given to such terms in the Loan Agreement.
Pursuant to the Loan Agreement, a condition precedent to your extension
of credit thereunder is that Borrower obtain a Subordination Agreement from GICI
with respect to the GICI Debt. We have presented you with a letter agreement,
back dated to September 30, 2000, which we have obtained from GICI in order to
meet the foregoing condition. A copy of that letter is attached hereto as
EXHIBIT "A" (and is called below the "GICI Letter"). We have requested that you
consider the GICI Letter to operate as a Subordination Agreement. You have
agreed to do so, and to rely thereon in extending Credit to us, on the
understanding, based on our discussions with you, that, notwithstanding the due
date for payment of the GICI Debt set forth in the GICI Letter; I.E., April 1,
2002, consistent with the other terms of the GICI Letter, Borrower will not pay,
and GICI will not take action to receive payment for, any GICI Debt, until all
Obligations owing to you have been paid in full, which GICI understands may, and
likely will, be after April 1, 2002 (and could extend for up to three years or
more from the date of this letter). By this letter, we confirm that
understanding.
Tag-It Pacific, Inc.,
as Borrowers Agent
By:
----------------------
▇▇▇▇▇ ▇▇▇▇, President
SCHEDULE "3"
SANWA LIENS/SANWA DEBT
APPROVED: APPROVED:
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.,
FINANCE CORPORATION BORROWER AGENT
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
----------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
Title: U.S. Country Manager Title: President
VENDOR DESCRIPTION INVOICE # CHECK # CHECK DATE AMOUNT AMOUNT @ 80%
2000 Cut Rate Office furniture 7122 18612 12/13/1999 8,215.60 6,572.48
AC City Shelving racks 25059 wire 6/28/1999 16,443.00 13,154.40
Attorney's Software Printer 28385 17307 8/26/1999 3,790.00 3.032.00
Attorney's Software Server components 28342 17307 8/26/1999 2,550.00 2,040.00
Attorney's Software PC Monitor 28480 18148 11/3/1999 799.00 639.20
Attorney's Software Server firewall 28700 18148 11/3/1999 1,495.00 1,196.00
Coast to Coast Photocopier 180832 16530 6/11/1999 5,000.00 4,000.00
▇▇▇▇ Labeling Stamp machine 15840 16609 6/30/1999 15,000.00 12,000.00
Mifran-▇▇▇▇▇ Forklift 46210 visa 8/6/1999 7,500.00 6,000.00
Mifran-▇▇▇▇▇ Forklift 46054 16533 6/30/1999 7,150.00 5,720.00
Mifran-▇▇▇▇▇ Forklift 11280 16307 6/16/1999 500.00 400.00
Northern Steel Shelving racks 708 17034 8/11/1999 10,385.70 8,308.56
Pessani Button/rivet machines 247 18266 11/15/1999 8,796.00 7,036.80
Pessani Rivet conversion kits 26067 17700 9/24/1999 60,000.00 48,000.00
Pessani Rivet machines 245 16672 7/12/1999 25,151.50 20,121.20
Pessani Button/rivet machines various 18607 1/15/2000 84,242.35 67,393.88
Pessani Button/rivet machines 284 18561 12/10/1999 24,302.12 19,441.70
Pessani Button/rivet machines 50 18607 1/15/2000 55,757.55 44,606.04
Pessani Button/rivet machines 402 18561 12/10/1999 55,757.55 44.606.04
Weightronix Weight scales various visa no date 12,261.25 9,809.00
▇▇▇▇▇▇ Reconditioning Reconditioning vacuum systems 23927 15329 3/11/1999 5,410.00 4,328.00
▇▇▇▇▇▇ Reconditioning Reconditioning vacuum systems 23927B 16153 6/2/1999 48,690.00 38,952.00
MBS, Inc. Printing equipment 27467 visa 11/30/1999 23,750.00 19,000.00
2000 Cut Rate -- 000102 2/23/2000 1,669.42 1,335.54
2000 Cut Rate -- 000176 4/11/2000 2,762.07 2,209.66
2000 Cut Rate 7083 -- 1/6/2000 245.42 196.34
2000 Cut Rate 7149 -- 1/6/2000 813.16 650.53
2000 Cut Rate 7152 -- 1/6/2000 128.82 103.06
2000 Cut Rate 7222 -- 1/6/2000 453.57 362.86
Attorney Software 29306 -- 1/31/2000 1,747.08 1,397.66
Attorney Software 29307 -- 1/31/2000 7,541.07 6,032.86
Buy Com, Inc. -- 000106 2/24/2000 2,601.27 2,132.60
Buy Com, Inc. 5750647 -- 6/30/2000 2,665.75 2,132.60
Cyberian Outpost -- 000131 3/16/2000 3,799.90 3,039.92
DELL Marketing -- 000071 2/4/2000 1,391.02 1,112.82
DELL Marketing -- 000071 2/4/2000 1,582,63 1,266.10
DELL Marketing -- 000071 2/4/2000 1,890.04 1,512.03
DELL Marketing -- 000107 2/24/2000 1,391.01 1,112.81
DELL Marketing -- 000107 2/24/2000 1,446.22 1,156.98
DELL Marketing -- 000196 4/20/2000 1,545.83 1,236.66
DELL Marketing -- 000244 5/31/2000 24,337.85 9,470.28
DELL Marketing 320852403 -- 1/19/2000 1,510.06 1,208.05
DELL Marketing 385383575 -- 6/30/2000 4,272.64 3,418.11
DELL Marketing 389829177 -- 6/30/2000 3.793.09 3,034.47
DELL Marketing 389832510 -- 6/30/2000 3,803.94 3,043.15
DELL Marketing 389835778 -- 6/30/2000 3,815.85 3,052.68
Interface Systems 20004828 6/30/2000 1,938.00 1,550.40
Projector Zone 011200 -- 1/19/2000 3,995.00 3,196.00
Royce Digital Systems 50377 -- 4/28/2000 2,290.04 1,832.03
RSI ID Technologies 20000570 -- 1/26/2000 1,509.68 1,207.74
Talon Inc. -- -- 6/30/2000 69,200.00 55,360.00
TI-0416 Reclass Royce Printer -- -- 4/30/2000 27,758.00 22,206.40
Total Solutions 12 -- 5/31/2000 2,695.59 2,127.67
Total Solutions 15 -- 6/12/2000 9,643.90 7,715.12
Total Solutions 2341683 -- 5/25/2000 10,000.00 8,000.00
Total Solutions 6 -- 4/27/2000 4,355.24 3,484.19
▇▇▇▇▇▇▇ Computers -- 000233 5/25/2000 3,678.34 2,942.67
---------- ----------
695,182.12 556,145.70
========== ==========
SCHEDULE "4"
SUBORDINATED DEBT AT CLOSING
See Attached Exhibit A
APPROVED: APPROVED:
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.,
FINANCE CORPORATION BORROWER AGENT
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
Title: U.S. Country Mgr. Title: President
EXHIBIT "A"
Subordinated Debt Schedule:
Principal at
Lender Interest Rate 12/31/00 Repayment Date
--------------------------- ----------------- ------------------ ------------------
▇▇▇▇ ▇▇▇▇ 7.5% 19,313 On demand
7.0% 77,684 January 31, 2000
11.0% 513,750 See documents
Estate of ▇▇▇▇▇▇ ▇▇▇▇ 10.0% 19,333 On demand
13,522 On demand
735 On demand
Monto Holdings 10.0% 162,857 On demand
(started at
$124,626)
▇▇▇▇▇ ▇▇▇▇ 11.0% 35,500 On demand
149,500 On demand
GICISA -- 2,830,024 April 2002
----------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ 9/00 note: $513,750
Other debt: $96,997
Total: $610,747
Estate of ▇▇▇▇▇▇ ▇▇▇▇ Total: $33,590
Monto Holdings Total: $162,857
▇▇▇▇▇ ▇▇▇▇ Total: $185,000
GICISA Total: $2,830,024
SCHEDULE "5"
EXCLUDED AFFILIATES
1. Tarrant Apparel Group (and its affiliates)
2. Azteca Productions, Inc. (and its affiliates)
3. Grupo Industrial Cierres Ideal S.A. de C.V. (and its affiliates)
APPROVED: APPROVED:
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.,
FINANCE CORPORATION BORROWER AGENT
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
Title: U.S. Country Mgr. Title: President
SCHEDULE "6"
EXISTING GUARANTIES
1. Guaranty Agreement dated as of January 30, 2001, in favor of East Asia ▇▇▇▇▇▇
Limited.
2. Guaranty Agreement dated as of January 30, 2001, in favor of GE Capital (Hong
Kong) Ltd.
3. Guaranty Agreement dated as of October 4, 2000, by A.G.S. Stationery, Inc. in
favor of ▇▇▇▇ ▇▇▇▇.
4. Guaranty Agreement dated as of October 4, 2000, by Tag-It, Inc. in favor of
▇▇▇▇ ▇▇▇▇.
5. Guaranty Agreement dated as of October 4, 2000, by Talon International, Inc.
in favor of ▇▇▇▇ ▇▇▇▇.
APPROVED: APPROVED:
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.,
FINANCE CORPORATION BORROWER AGENT
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
Title: U.S. Country Mgr. Title: President
SCHEDULE "7"
OTHER DEBT
1. Receivables Purchase Agreement dated as of January 30, 2001, by and between
Tag-It Pacific Limited and East Asia ▇▇▇▇▇▇ Limited
2. Sale Contract dated as of January 30, 2001, by and between Tag-It Pacific
Limited and GE Capital (Hong Kong) Ltd.
APPROVED: APPROVED:
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.,
FINANCE CORPORATION BORROWER AGENT
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
Title: U.S. Country Mgr. Title: President
LETTER OF CREDIT RIDER
This Rider (the "RIDER") is incorporated by reference into and made an
integral part of that certain Loan and Security Agreement, dated May ___, 2001
(as modified hereby, and as otherwise modified or amended from time to time,
called the "LOAN AGREEMENT"), made between TAG-IT PACIFIC, INC., a Delaware
corporation, TAG-IT, INC., a California corporation, TALON INTERNATIONAL, INC.,
a Delaware corporation, A.G.S. Holdings, LLC, a California limited liability
company; and A.G.S. STATIONERY, INC., a California corporation (collectively,
"BORROWER") and UPS Capital Global Trade Finance Corporation ("LENDER").
1. DEFINED TERMS. Capitalized terms used hereinbelow, but not expressly
defined hereinbelow, shall have the meanings given to such terms in the Loan
Agreement.
2. LETTERS OF CREDIT. Borrower has proposed that the Line of Credit be
utilized from time to time, at Borrower's request, to support the issuance of
one or more letters of credit for the account of Borrower (each, a "LETTER OF
CREDIT," and, collectively, "LETTERS OF CREDIT"), either by Lender's making (or
joining with Borrower in making) application to the issuer(s) of such Letters of
Credit (the "ISSUERS" or an "ISSUER") therefor, or otherwise by Lender's
issuance of a risk participation or similar agreement in favor of the Issuer(s)
in regard thereto (the foregoing herein called, generally, a "RISK PARTICIPATION
ARRANGEMENT"). Lender has agreed to such proposal, SUBJECT, HOWEVER, to the
following terms, covenants and conditions:
A. NOTICE. Borrower shall give Lender at least five (5) Business Days
advance written notice of Borrower's request that Lender enter into a Risk
Participation Arrangement (a "RISK PARTICIPATION REQUEST") specifying the face
amount of the underlying Letter of Credit, its issuer, its expiry date, its
beneficiary and its purpose; e.g., whether "commercial" or "standby."
B. ACCEPTANCE OF RISK PARTICIPATION. Lender may accept or reject any Risk
Participation Request. Without limitation of the foregoing, no Risk
Participation Request will be accepted if:
(i) any Default Condition or Event of Default then exists;
(ii) the face amount of the Letter of Credit specified in the Risk
Participation Request, when added to all Advances then outstanding, would cause
the Margin Requirement to be exceeded;
(iii) the expiry date of the Letter of Credit specified in the Risk
Participation Request exceeds the EARLIER of: (i) one (1) year, or (ii) the
Termination Date;
(iv) the face amount of the Letter of Credit specified in the Risk
Participation Request, when aggregated with the face amounts of all Letters of
Credit for which Risk Participation Arrangements are then outstanding, exceeds
$3,000,000, or such lesser
or greater sum as Lender may establish or accept from time to time as an
absolute limit on Letters of Credit issued pursuant hereto;
(v) the Issuer has not been selected by, or approved by, Lender; or
(vi) Lender and the Issuer are unable to reach agreement on the terms of
the underlying Risk Participation Arrangement.
C. ACCEPTED RISK PARTICIPATIONS. Once Lender has entered into any Risk
Participation Arrangement with respect to a Letter of Credit, then:
(i) pending its expiry, the face amount of such Letter of Credit
(together with all other such Letters of Credit) shall be deemed an
outstanding Advance for purposes of determining Borrower's ongoing
compliance with the Margin Requirement; I.E., the amount thereof shall be
charged against the Line of Credit;
(ii) if Lender remits any payment to the Issuer in respect of such
Letter of Credit, whether upon a drawing therefor, in settlement thereof or
otherwise, the full amount of such payment shall be automatically charged
as an Advance (whether or not an Event of Default then exists or would be
caused thereby); and Lender shall reimburse itself from the proceeds
thereof; or, if such Advance cannot be made; I.E., if the Line of Credit
already has terminated, then, Borrower shall, on demand from Lender,
reimburse Lender for the full amount of such payment (the foregoing herein
called Borrower's "REIMBURSEMENT OBLIGATIONS").
D. REIMBURSEMENT OBLIGATIONS. Borrower's Reimbursement Obligations arising
from time to time hereunder shall:
(i) be continuing, absolute and unconditional;
(ii) constitute part of the Obligations and be secured by all
Collateral;
(iii) if not paid in full when due, either by the making of an Advance
or otherwise, bear interest until fully paid at the Default Rate; and
(iv) survive termination of the Line of Credit.
E. CASH IMPOSTS. If any Default Condition or Event of Default exists at any
time while any such Risk Participation Arrangement is in effect, Lender may
require that cash equal in amount to 110% of the undrawn amount of each
underlying Letter of Credit be posted with Lender by Borrower as additional
Collateral for the payment of Borrower's Reimbursement Obligations in regard
thereto; or, if Lender is then or thereafter enforcing its rights and remedies
respecting Collateral, Lender may reserve from the proceeds thereof such cash in
order to assure that the Reimbursement Obligations then outstanding shall be
paid when due.
F. LETTER OF CREDIT FEES. In consideration of Lender's entry into each Risk
Participation Arrangement, Borrower shall pay to Lender during the tenor thereof
(i) a fee equal to two percent (2%) per annum of the average daily undrawn
amount of each standby Letter of
Page 2
Credit, which shall be payable monthly in arrears; and (ii) the following in
respect of documentary Letters of Credit, shall include, but not be limited to:
Issuance: $125 per occurrence
Amendment: $125 per occurrence
Examination/
Negotiation:
Sight: 1/4%
Min.: $125
Time: .75 p.a.
Min.: $125
The foregoing fees shall be in addition to any fees or charges which Lender pays
to any Issuer in respect of each Letter of Credit, which shall also be
reimbursed to Lender by Borrower, upon demand.
G. INDEMNITY. Borrower shall indemnify and save Lender and hold Lender
harmless from any loss, damage, cost or expense which Lender incurs in entering
into, or performing under, any Risk Participation Arrangement.
3. STATUS OF LOAN DOCUMENT. This Rider shall constitute a Loan Document and
be governed and construed accordingly. In the event of any conflict between the
terms of this Rider and the terms of the Loan Agreement, the terms of this Rider
shall govern and control.
Page 3
Witness our hands as of the date first above written.
"LENDER" "BORROWER"
UPS CAPITAL GLOBAL TRADE TAG-IT PACIFIC, INC.
FINANCE CORPORATION
BY: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇
---------------------------- -----------------------------
Title: U.S. COUNTRY MGR. Title: PRESIDENT
---------------------------- ----------------------------
TAG-IT, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
TALON INTERNATIONAL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. HOLDINGS, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
A.G.S. STATIONERY, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: PRESIDENT
-----------------------------
Page 4