8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): July 12, 2013

TALON INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware	1-13669	95-4654481
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

21900 Burbank Blvd., Suite 270 

Woodland Hills, California     91367

(Address of Principal Executive Offices)     (Zip Code)

(818) 444-4100

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange ct (17 CFR 240.14d-2(B))

☐ Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange Act (17 CFR 240.13e-4c))

Item 1.01. Entry into a Material Definitive Agreement

Preferred Stock Redemption and Private Placement of Common Stock

Preferred Stock Redemption

On July 12, 2013, Talon International, Inc. (“Talon” or the “Company”) entered into a Securities Redemption Agreement (the “Redemption Agreement”) with CVC California, LLC (“CVC”). CVC was holder of all the previously outstanding shares of Talon’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”). Pursuant to the Redemption Agreement, the Company repurchased from CVC all of the 407,160 outstanding shares of Series B Preferred Stock for an aggregate purchase price of $18,800,000, which purchase price was paid by delivery of (1) $13,000,000 in cash and (2) the issuance to CVC by Talon of a promissory note dated July 12, 2013 in the principal amount of $5,800,000 (the “Promissory Note”).

The Promissory Note accrues interest in the amount of 1% per annum, is due and payable in full on January 12, 2014, and includes discounts for early repayments that decrease over time. The Promissory Note further requires mandatory prepayments equal to a specified portion of the proceeds received by Talon with respect to future secured debt financing transactions, as well as customary default provisions.

In connection with the redemption in full of the Series B Preferred Stock, Mark Hughes resigned from Talon’s Board of Directors effective July 12, 2013.

In addition, pursuant to the Redemption Agreement, the Stockholders Agreement dated July 30, 2010 among the Company, CVC, Lonnie D. Schnell and Larry Dyne (the “Stockholders Agreement”) was terminated effective July 12, 2013. The Stockholders Agreement had provided for, among other things, the grant of a right of first refusal and tag-along rights to CVC regarding shares of the Company’s voting securities held by Lonnie Schnell and Larry Dyne.

Private Placement of Common Stock

In order to provide additional funds necessary for the redemption of the Series B Preferred Stock, on July 12, 2013 Talon raised $5,500,000 of new equity capital through the offer and sale, in a private placement transaction, of 61,111,109 shares of Talon common stock at a price of $0.09 per share (the “Private Placement”). The closing of the Private Placement was expressly conditioned upon the contemporaneous closing of the transactions under the Redemption Agreement. The closing price of Talon's common stock was $0.058 per share on Friday, July 12, 2013, the last trading day prior to public announcement of the equity financing and redemption transactions.

At the closing of the Private Placement, Talon entered into a series of Subscription Agreements, each dated July 12, 2013 (the “Subscription Agreements”) with each of the purchasers in the Private Placement (collectively, the “Private Placement Purchasers”). The shares of Talon common stock offered and sold under the Subscription Agreements were offered and sold in reliance on Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder.

The Subscription Agreement entered into with Kutula Holdings Ltd. (“Kutula”), the lead investor in the Private Placement, grants Kutula the right to nominate one member of the Talon Board of Directors, so long as Kutula continues to hold at least 15,500,000 of the shares (as adjusted for stock splits and the like) purchased pursuant to its Subscription Agreement, subject to certain disclosure requirements and other limitations. A copy of the Kutula Subscription Agreement is attached as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference.

In connection with the Subscription Agreements, the Company also entered into a Registration Rights Agreement dated July 12, 2013 with the Private Placement Purchasers (the “Registration Rights Agreement“). The Registration Rights Agreement provides for demand registration rights, such that upon the demand of holders of at least 25% of the shares issued in the Private Placement and subject to certain conditions, the Company will file a Form S-1 registration statement covering the shares issued in the Private Placement and requested to be included in such registration. The Registration Rights Agreement also provides certain piggyback rights, in which the holders of shares acquired in the Private Placement have the right to include those shares in a Company-initiated registration.

Zipper Holdings, LLC, a company controlled by Mark Dyne, the Chairman of the Board of Talon, acquired 8,333,333 shares of Common Stock in the Private Placement.  Because of Mr. Dyne’s personal interest in the Private Placement, Mr. Dyne recused himself from voting as a member of the Board on the Private Placement and the Redemption.  Additionally, because of his personal relationship with CVC, Mark Hughes recused himself from voting as a member of the Board on the Redemption.

Incorporation by Reference

The foregoing descriptions of the Redemption Agreement, Promissory Note, Subscription Agreements and Registration Rights Agreement are qualified in their entirety by reference to the full text of such agreements, which are attached as Exhibits 10.1 through 10.5 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.

Item 1.02. Termination of a Material Definitive Agreement.

The information disclosed under the heading “Preferred Stock Redemption” in Item 1.01 of this Current Report on Form 8-K regarding the termination of the Stockholders Agreement is incorporated by reference into this Item 1.02.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information disclosed under the heading “Preferred Stock Redemption” in Item 1.01 of this Current Report on Form 8-K regarding the Promissory Note is incorporated by reference into this Item 2.03.

Item 3.02. Unregistered Sales of Equity Securities.

The information disclosed under the subheadings “Private Placement of Common Stock” in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.

Item 5.01. Changes in Control of Registrant.

The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 5.01.

Prior the closing of the redemption of the Series B Preferred Stock and the Private Placement, CVC was the controlling stockholder of Talon and beneficially owned approximately 64.7% of Talon’s outstanding voting shares. Immediately following the closing of the redemption of the Series B Preferred Stock, CVC owns 1,750,000 shares of Talon common stock, or less than 5% of Talon’s outstanding common stock.

Kutula, the lead investor in the Private Placement, purchased 38,888,889 shares in the Private Placement, which represents 42.8% of the Talon’s outstanding common stock. No other Private Placement Purchaser purchased more than 8,333,333 shares in the Private Placement.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 On July 12, 2013, concurrently with the closing of the transactions under the Redemption Agreement, Mark Hughes resigned as a member of the Talon Board of Directors.

Item 7.01. Regulation FD Disclosure.

 On July 15, 2013, Talon issued a press release regarding the redemption of the Preferred Stock and the Private Placement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.

The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d)	Exhibits
10.1	Securities Redemption Agreement dated July 12, 2013 among Talon International, Inc., CVC California, LLC, Lonnie D. Schnell and Larry Dyne.
10.2	$5,800,000 Promissory Note dated July 12, 2013 issued by Talon International, Inc. in favor of CVC California, LLC
10.3	Subscription Agreement dated July 12, 2013 between Talon International, Inc. and Kutula Holdings Ltd.
10.4	Form of Subscription Agreement dated July 12, 2013
10.5	Registration Rights Agreement dated July 12, 2013 among Talon International, Inc., Kutula Holdings Ltd., Perrtech Pty Limited, Zipper Holdings, LLC, Fairways Investments, LLC and Manifest Capital, LLC.
99.1	Press release issued by Talon International, Inc. dated July 15, 2013

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TALON INTERNATIONAL, INC.
Date:     July 16, 2013	By:	/s/ Lonnie D. Schnell
		Lonnie D. Schnell, Chief Executive Officer

EX-10

EXHIBIT 10.1

SECURITIES REDEMPTION AGREEMENT

THIS AGREEMENT (this “Agreement”), dated as of the 12^th day of July, 2013, is made by and among CVC CALIFORNIA, LLC, a Delaware limited liability company (“Seller”), TALON INTERNATIONAL, INC., a Delaware corporation (“Buyer”), and, with respect to Section 4.3 of this Agreement only, Lonnie D. Schnell and Larry Dyne.

Article I.
PURCHASE AND SALE; PRICE

1.1     Purchase and Sale of Shares. Concurrently with the execution and delivery of this Agreement, Seller shall sell and deliver to Buyer, and Buyer shall purchase and redeem from Seller, an aggregate of 407,160 shares (the “Shares”) of Series B Convertible Preferred Stock of Buyer (the “Series B Preferred Stock”), for the consideration set forth in Section  below.

1.2     Purchase Price. Concurrently with the execution and delivery of this Agreement and in consideration of the sale, conveyance, transfer and delivery of the Shares provided for in this Agreement, Buyer shall pay to Seller an aggregate purchase price for the Shares (the “Purchase Price”) of $18,800,000, to be paid as follows:

(a)     $13,000,000 (the “Cash Payment”) by wire transfer of immediately available funds to such bank account of Seller as Seller will designate in writing to Buyer; and

(b)     $5,800,000 by delivery to Seller of a one percent (1%) promissory note issued by Buyer (in the form designated as Exhibit 1.2(b) hereto) and payable to the order of Seller in the principal amount of $5,800,000 and with a term of six (6) months (the “Note”).

1.3     Deliveries. Concurrently with the execution and delivery of this Agreement, (i) Seller shall transfer and assign to Buyer all of the Shares by delivering one or more certificates representing the Shares, duly endorsed for transfer to Buyer or accompanied by an appropriate stock power in respect of the Shares executed by Buyer, and (ii) Buyer shall deliver the Cash Payment and the Note in the manner provided for in Section  above.

Article II.
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows:

2.1     Corporate Organization, etc. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.

2.2     Authorization, etc. Seller has the full legal right, authorization, and capacity to execute and deliver, and to perform its obligations under, this Agreement and to sell, transfer and deliver the Shares. Seller has taken all action necessary to authorize its execution, delivery and performance of its obligations under this Agreement. This Agreement has been duly executed and delivered by Seller and constitutes the valid obligation of Seller, and is legally binding on and enforceable against Seller in accordance with its terms.

1

2.3     No Conflict. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under any provision of any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller or its properties or assets, or (ii) violate any provision of law, or any order, judgment or decree of any court or other governmental authority applicable to Seller.

2.4     Title to Shares. Seller has good and valid right, title and interest to the Shares, all of which are owned by the Seller free and clear of any charge, equitable interest, lien, pledge, security interest, or other similar interest or right (collectively, “Lien”). Seller has the full legal right, power and authority, and any approval required by law, to sell, assign, transfer and deliver the Shares under this Agreement and to make the representations, warranties, covenants and agreements made by Seller under this Agreement. Buyer will acquire good and valid title to the Shares being sold and transferred by Seller hereunder, in each case free and clear of all Liens, other that those created or suffered by Buyer. Seller has not entered into any agreements, understandings or undertakings with respect to the Shares being sold and transferred by Seller under this Agreement pursuant to which Seller is or may become obligated, directly or indirectly, to transfer, dispose of, or assign the Shares, or which would result in any person placing a Lien upon the Shares.

2.5     Governmental Authorities. Seller is not required to submit any notice, report or other filing with and no consent, approval or authorization is required by any governmental or regulatory authority in connection with Seller’s execution or delivery of this Agreement or the consummation of the transactions contemplated hereby.

2.6     No Consents. No approvals, authorizations, consents, orders or other actions of, or filings with, any person are required to be obtained or made by Seller in connection with the execution of and the consummation of this Agreement and the transactions contemplated under this Agreement.

2.7     Acknowledgment. Seller acknowledges that: (i) Buyer possesses material non-public information about Buyer, including, without, limitation, information concerning Buyer’s financial condition and results of operations from April 1, 2013 through the date hereof, which information has not been publicly disclosed as of the date of this Agreement; (ii) Buyer has made available for inspection by Seller information about Buyer and its operations including, without limitation, Buyer’s financial results for the period from April 1, 2013 through the date hereof; and (iii) Seller has had an opportunity to discuss with Buyer and its directors and/or executive officers, Buyer’s business, management and financial affairs, and Seller has had an opportunity to receive answers to its satisfaction to any questions Seller may have.

2

2.8     No Other Representations. Except as expressly set forth in this Article II, Seller makes no representations or warranties in connection with the transactions contemplated by this Agreement. Without limitation of the foregoing, Seller makes no representations or warranties regarding Buyer or its business, operations, assets, liabilities, financial condition or prospects.

Article III.
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

3.1     Corporate Organization, etc. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

3.2     Authorization, etc. Buyer has the full legal right, authorization, and capacity to execute and deliver, and to perform its obligations under, this Agreement and to purchase, redeem and pay for the Shares in accordance herewith. Buyer has taken all action necessary to authorize its execution, delivery and performance of its obligations under this Agreement and the Note. This Agreement and the Note have been duly executed and delivered by Buyer and constitute the valid obligations of Buyer, and are legally binding on and enforceable against Buyer in accordance with their respective terms.

3.3     No Conflict. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under any provision of any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or its properties or assets, or (ii) violate any provision of law, the certificate of incorporation or by-laws of Buyer, or any order, judgment or decree of any court or other governmental authority applicable to Buyer.

3.4     Governmental Authorities. Buyer is not required to submit any notice, report or other filing with and no consent, approval or authorization is required by any governmental or regulatory authority in connection with Buyer’s execution or delivery of this Agreement or the consummation of the transactions contemplated hereby.

3.5     No Consents. No approvals, authorizations, consents, orders or other actions of, or filings with, any person are required to be obtained or made by Buyer in connection with the execution of and the consummation of this Agreement and the transactions contemplated under this Agreement.

3.6     Adequate Capital and Surplus. Buyer has adequate capital and legally available surplus in order to redeem the Shares in accordance with the terms of this Agreement, without violation of the Delaware General Corporation Law.

3.7     Equity Proceeds. Not less than $5,500,000 of the Cash Payment represents the proceeds of one or more equity issuances by Buyer subsequent to June 1, 2013.

3

3.8     Secured Indebtedness. On the date hereof, after giving effect to the Cash Payment, neither Buyer nor any of its subsidiaries is obligated in respect of any indebtedness for money borrowed which is secured by a lien on any asset of Buyer or any of its subsidiaries.

3.9     Investment Intent. Buyer is acquiring the Shares hereunder for its own account, and not with a view to any resale or distribution thereof in violation of any applicable federal or state securities laws.

Article IV.
ADDITIONAL COVENANTS

4.1     Resignations. Concurrently with the execution and delivery of this Agreement, Seller shall deliver to the Chairman of the Board of Directors of Buyer, the resignation of Mark Hughes as a member of the Board of Directors of Buyer, which resignation shall be effective immediately.

4.2     Confidentiality. Seller will hold in strict confidence and not disclose to any other party (other than its counsel and other advisors), without Buyer’s prior consent, all material non-public information received by Seller from Buyer or any of Buyer’s officers, directors, employees, agents, counsel or auditors in connection with the transactions contemplated hereby, except as may be required by applicable law (including, without limitation, the filing of required reports under the Securities Act of 1934, as amended, to report the transactions contemplated hereby) or as otherwise contemplated herein.

4.3     Termination of Stockholders Agreement. Buyer, Seller, Lonnie D. Schnell and Larry Dyne hereby agree that the Stockholders Agreement, dated as of July 30, 2010, by and among such parties (the “Stockholders Agreement”) is hereby terminated and of no further force and effect, and none of the parties thereto shall have any further rights or claims against, or obligations to, any other party thereto in respect thereof, and their respective liabilities and obligations thereunder shall be irrevocably and unconditionally released. Without limitation of the foregoing, the sale, transfer and redemption of the Shares hereunder shall not trigger any tag-along rights under Section 4.6, and none of the payments to be received by Seller in respect of the Shares shall trigger any payment obligation under Section 5, of the Stockholders Agreement.

4.4     Waiver of Preemptive Right. Buyer is issuing and selling up to 66,666,667 shares of Common Stock at a purchase price of $0.09 per share (the “Offering”) and is using the proceeds of such Offering to fund a portion of the Cash Payment. Seller acknowledges that pursuant to Section 7 of the Stockholders Agreement, Buyer is entitled to purchase its pro rata portion of the shares of Common Stock to be sold in the Offering. Seller hereby waives all Seller’s rights under the Stockholders Agreement or otherwise to purchase any of the shares of Common Stock in the Offering.

4.5     Mutual Releases. In consideration of the mutual covenants and agreements contained in this Agreement, Buyer and Seller hereby release, acquit and forever discharge one another and their respective managers, directors, officers, partners, employees and affiliates (collectively. “Affiliates”) from and in respect of any and all demands, claims, controversies, damages, suits, actions, causes of action, accounts, covenants, agreements, debts, liabilities and sums of money due and owing, or that may become due and owing, of any kind whatsoever, at common law, statutory or otherwise, which either such party has or might have, known or unknown, now existing or that might arise hereafter, directly or indirectly attributable to any transactions or dealings between Buyer and Seller on or prior to the date hereof; provided, that these mutual releases shall not constitute or effect any release of any obligations under this Agreement or the Note.

4

Article V.
MISCELLANEOUS PROVISIONS

5.1     Amendment and Modification. This Agreement may be amended, modified and supplemented only by written agreement of Seller and Buyer.

5.2     Waiver of Compliance; Consents. Any failure of Seller on the one hand, or Buyer on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived in writing by Buyer or Seller, respectively, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section .

5.3     Expenses. Except as otherwise provided in the Note, each party will pay its own legal, accounting and other expenses incurred by such party or on its behalf in connection with this Agreement and the transactions contemplated herein; provided, that Buyer shall, promptly upon request of Seller, pay or reimburse Seller for Seller’s costs associated with its legal review and negotiation of this Agreement and the Note and compliance with applicable securities laws in relation to the transactions contemplated herein, up to an aggregate maximum of $40,000.

5.4     Investigations; Survival of Warranties. The respective representations and warranties and covenants of Seller and Buyer contained herein are true, accurate and correct and shall not be deemed waived or otherwise affected by any investigation made by any party hereto or by the occurrence of the Closing. Each and every such representation and warranty shall survive the Closing Date.

5.5     Notices. Any notice, request, consent or communication (collectively, a “Notice”) under this Agreement shall be effective only if it is in writing and (i) personally delivered, (ii) sent by certified or registered mail, return receipt requested, postage prepaid, or (iii) sent by a nationally recognized overnight delivery service, with delivery confirmed, addressed as follows:

5

(a)           If to Seller, to:

CVC California, LLC
c/o Comvest Capital, LLC
525 Okeechobee Blvd., Suite 1050
West Palm Beach, Florida 33401
Attn: Robert O’Sullivan
Telephone: (561) 727-1800
Facsimile: (561) 727-2100

with a copy to:

Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attn: Alan I. Annex, Esq.
Telephone: (212) 801-9200
Facsimile: (212) 801-6400

(b)           If to Buyer, to:

Talon International, Inc.
21900 Burbank Blvd., Suite 270
Woodland Hills, California 91367
Attn: Lonnie Schnell
Telephone: (818) 444-4100
Facsimile: (818) 444-4110

with a copy to:

Stubbs Alderton & Markiles, LLP
15260 Ventura Boulevard, 20th Floor
Sherman Oaks, California 91403
Attn: John J. McIlvery, Esq.
Telephone: (818) 444-4500
Facsimile: (818) 444-6302

or such other persons or addresses as shall be furnished in writing by any party to the other party. A Notice shall be deemed to have been given as of the date when (i) personally delivered, (ii) five (5) days after the date when deposited with the United States mail, properly addressed, or (iii) when receipt of a Notice sent by an overnight delivery service is confirmed by such overnight delivery service, as the case may be, unless the sending party has actual knowledge that a Notice was not received by the intended recipient.

5.6     Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties to this Agreement without the prior written consent of all other parties.

6

5.7     Governing Law. This Agreement shall be governed by the laws of the State of California (regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of California) as to all matters including, but not limited to, matters of validity, construction, effect, performance and remedies.

5.8     Counterparts; Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile or electronically transmitted signatures with full binding legal effect.

5.9     Neutral Interpretation. This Agreement constitutes the product of the negotiation of the parties hereto and the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship hereof.

5.10     Headings. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

5.11     Entire Agreement. This Agreement, which term as used throughout includes the Exhibits hereto, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(Signatures on Following Page)

7

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first hereinabove set forth.

BUYER: TALON INTERNATIONAL, INC.
By:	/s/ Lonnie D. Schnell
Name:	Lonnie D. Schnell
Title:	Chief Executive Officer

SELLER: CVC CALIFORNIA, LLC
By:	/s/ Robert O’Sullivan
Name:	Robert O’Sullivan
Title:	Managing Director

Acknowledged and Agreed
With Respect to Section 4.3 Only:

/s/ Lonnie D. Schnell                                                              
Lonnie D. Schnell

/s/ Larry Dyne                                                                          
Larry Dyne

8

EX-10

EXHIBIT 10.2

$5,800,000.00	July 12, 2013
	Woodland Hills, California

TALON INTERNATIONAL, INC.
PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, TALON INTERNATIONAL, INC., a Delaware corporation (“Borrower”), hereby absolutely and unconditionally promises to pay to the order of CVC CALIFORNIA, LLC, a Delaware limited liability company (“Lender” and, together with the Borrower, the “Parties”), in lawful money of the United States of America, and in immediately available funds, subject to Section 3 below, the principal sum of Five Million Eight Hundred Thousand Dollars and Zero cents ($5,800,000.00), together with interest on the unpaid principal balance of this Note, at the rate of One Percent (1.0%) per annum, until paid in full; provided, however, that during the continuance of any Event of Default (as such term is defined in Section 4 below), the unpaid principal balance of this Note shall bear interest at the lesser of Fifteen Percent (15%) per annum or the highest rate permitted by applicable law, which interest shall be payable on demand. Interest shall be calculated on the basis of a year of 365 days and charged for the actual number of days elapsed.

1.     Maturity Date. The principal amount of this Note, and any accrued but unpaid interest thereon, shall be due and payable in full on January 12, 2014 (the “Maturity Date”).

2.     Method of Payment. All payments of principal, interest and all other amounts payable in respect of this Note shall be made in lawful money of the United States of America to Lender at such address as designated from time to time by Lender in writing to Borrower or by electronic wire funds transfer of immediately available funds pursuant to written instructions provided to Borrower by Lender. If any payment of principal or interest on this Note is due on a day that is not a business day, such payment will be due on the next succeeding business day (with additional interest thereon for the period of such delay).

3.     Prepayments.

3.1     Voluntary Prepayments. Borrower may prepay this Note, in whole or in part, at any time and from time to time in its discretion without premium or penalty. Any partial prepayment shall not affect the obligation to continue to pay in full the amount of the payments hereunder until the entire unpaid principal balance hereof and all accrued interest hereon has been paid in full.

3.2     Mandatory Prepayments. To the extent that, at any time and from time to time while this Note is outstanding, the Borrower and/or any of its subsidiaries receives Available Debt Proceeds, the Borrower shall, immediately upon receipt of Available Debt Proceeds, make a prepayment under this Note in an amount equal to fifty percent (50%) of such Available Debt Proceeds. For purposes of this Note, “Available Debt Proceeds” means any and all aggregate net proceeds received by the Borrower and/or any of its subsidiaries with respect to indebtedness for borrowed money (“Indebtedness”) incurred after the date of issuance of this Note to the extent in excess of the first $1,250,000 (in the aggregate as to all such Indebtedness) of such net proceeds; provided, however, that nothing contained in this Section 3.2 shall be deemed to permit the incurrence of any Indebtedness in violation of Section 4(d) below. In determining the amount of net proceeds, there shall be deducted from gross proceeds only the reasonable costs and expenses incurred by the Borrower and its subsidiaries which are directly related to the subject financing transaction, and no deduction shall be made or taken for any amounts paid or payable to affiliates of the Borrower or any of its subsidiaries (other than payment or reimbursement of incidental travel and entertainment expenses incurred in connection with the subject financing transaction).

1

3.3     Prepayment Terms and Discounts. Any prepayments of the obligations under this Note shall be applied first to interest and then to principal. Notwithstanding anything to the contrary set forth in this Note, in the event that this Note is prepaid in full in advance of the of the Maturity Date, the following discounts shall be applied to the obligations hereunder: (a) the principal amount of this Note shall be deemed reduced by Two Hundred Thousand Dollars ($200,000) if the entire principal amount (as discounted) and all accrued interest on this Note is paid in full on or prior to September 12, 2013 (the “First Incentive Date”); (b) the principal amount of this Note shall be deemed reduced by One Hundred Fifty Thousand Dollars ($150,000) if the entire principal amount (as discounted) and all accrued interest on this Note is paid in full subsequent to the First Incentive Date and on or prior to October 12, 2013 (the “Second Incentive Date”); and (c) the principal amount of this Note shall be deemed reduced by One Hundred Thousand Dollars ($100,000) if the entire principal amount (as discounted) and all accrued interest on this Note is paid in full subsequent to the Second Incentive Date and on or prior to November 12, 2013.

4.     Defaults. The occurrence of any one or more of the following events will constitute an event of default hereunder (“Event of Default”):

(a)     if Borrower fails to pay when due any payment of principal or interest on this Note; or

(b)     if Borrower, or any subsidiary of Borrower accounting for 5% or more of Borrower’s consolidated gross revenues, under the laws of any jurisdiction: (i) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official with respect to its business or assets; (ii) makes a general assignment for the benefit of its creditors; (iii) admits in writing its inability to pay generally its debts as they mature; (iv) takes advantage, as against its creditors, of any insolvency, bankruptcy or other such law or statute; or (v) institutes a proceeding with respect to Borrower or any such subsidiary, or has an involuntary proceeding instituted against it, seeking a judgment of insolvency, bankruptcy, or any other similar relief under any bankruptcy, insolvency, or other similar law affecting creditors’ rights, or seeking or obtaining the appointment of a receiver, liquidator, trustee, custodian, conservator, sequestrator or other such person with respect to Borrower or any such subsidiary, that (in the case of an involuntary proceeding) is not dismissed within sixty (60) days thereafter; or

(c)     if Borrower pays any dividend or distribution upon or in respect of any of its capital stock, returns any capital or makes any distribution of assets on or in respect of any of its capital stock, redeems any shares of its capital stock, or establishes any sinking fund for any such purpose; or

2

(d)     if Borrower or any of its subsidiaries, without the express prior written consent of Lender, incurs or becomes obligated in respect of Indebtedness in an aggregate principal amount at any time outstanding in excess of the sum of (i) the then outstanding principal amount of this Note plus (ii) $4,500,000; or

(e)     if Borrower or any of its subsidiaries grants or suffers to exist any lien or encumbrance on any of its assets to secure any Indebtedness which, when aggregated with all other outstanding Indebtedness of Borrower and its subsidiaries, is in an outstanding principal amount in excess of the sum of (i) the then outstanding principal amount of this Note plus (ii) $4,500,000.

Upon the occurrence and during the continuance of an Event of Default hereunder (unless waived in writing by Lender), Lender may, at its option, by written notice to Borrower, declare the entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon, and all other amounts payable hereunder, immediately due and payable; provided, however, that upon the occurrence of any Event of Default as described in Section 4(b) above, the entire unpaid principal balance of this Note and all accrued and unpaid interest thereon and all other amounts payable hereunder shall automatically become due and payable, without requirement of any notice or demand.

5.     Miscellaneous.

5.1     Expenses. Borrower agrees to pay all costs and expenses (including without limitation attorney’s fees) incurred by Lender in connection with or related to the enforcement of any obligations under this Note, whether or not suit be brought.

5.2     Waiver. All amounts payable under this Note shall be payable in full when due, without deduction or offset. Borrower hereby waives grace, diligence, presentment, demand, notice of demand, dishonor, notice of dishonor, protest, notice of protest, any and all exemption rights against the indebtedness evidenced by this Note and the right to plead any statute of limitations as a defense to the repayment of all or any portion of this Note, and interest thereon, to the fullest extent allowed by law, and all compensation of cross-demands pursuant to California Code of Civil Procedure Section 431.70. No delay, omission or failure on the part of Lender in exercising any right or remedy hereunder, and no forbearance or course of dealing, shall operate as a waiver of such right or remedy or any other right or remedy of Lender.

5.3     Successors; Assignment. All of the terms, agreements, covenants, representations, warranties, and conditions of this Note are binding upon, and inure to the benefit of and are enforceable by, the Parties and their respective successors and permitted assigns; provided, however, that Borrower may not assign or transfer this Note or any of its obligations hereunder without the express prior written consent of Lender, which consent may be withheld, conditioned or delayed in Lender’s sole discretion.

3

5.4     Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then three business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, or if (and then one business day after) it is sent by prepaid nationally recognized guaranteed overnight delivery or courier service such as Federal Express, and addressed to the intended recipient as set forth below:

If to Borrower:

CVC California, LLC
c/o Comvest Capital, LLC
525 Okeechobee Blvd., Suite 1050
West Palm Beach, FL 33401
Attn: Robert O’Sullivan
Telephone: (561) 727-1800
Facsimile: (561) 727-2100

If to Lender:

Talon International, Inc.
21900 Burbank Blvd., Ste. 270
Woodland Hills, CA 91367
Attn: Lonnie Schnell
Telephone: (818) 444-4100
Facsimile: (818) 444-4110

Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other notice in the manner herein set forth.

5.5     Time. Time is of the essence in the performance of this Note.

5.6     Headings. The article and section headings contained in this Note are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Note.

5.7     Governing Law. This Note and the performance of the obligations of the Parties hereunder shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law principles (other than Section 5-1401 of the New York General Obligations Law).

5.8     Amendments and Waivers. No amendment, modification, replacement, termination, or cancellation of any provision of this Note shall be valid, unless the same shall be in writing and signed by each Party sought to be bound by such amendment, modification, replacement, termination or cancellation. No waiver by any Party of any default hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.

4

5.9     Severability. If any provision of this Note should be held unenforceable or void, that provision shall be deemed severable from the remaining provisions and shall in no way affect the validity of this Note except that if such provision relates to the payment of any monetary sum, then Lender may, at its option, accelerate this Note and all outstanding principal and accrued interest thereon shall be immediately due and payable.

5.10   Collection Costs. In the event of default or breach by Borrower of any obligations or other provisions set forth in this Note, Borrower agrees to pay on demand all costs of collection, including reasonable attorneys’ fees, incurred by Lender in connection therewith.

5.11   Authority. Borrower hereby represents and warrants to Lender that, by its execution below, Borrower has the full corporate power, authority and legal right to execute and deliver this Note and that the indebtedness evidenced hereby constitutes a valid and binding obligation of Borrower without exception or limitation.

5.12   Remedies. The rights and remedies of Lender under and in respect of this Note are cumulative and in addition to any other rights or remedies otherwise available to Lender at law or in equity. Nothing herein will be considered an election of remedies.

[The remainder of this page is intentionally blank]

5

IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above written.

BORROWER: TALON INTERNATIONAL, INC.
By:	/s/ Lonnie D. Schnell
	Lonnie D. Schnell
Its:	Chief Executive Officer

S-1

EX-10

EXHIBIT 10.3

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered into as of the date set forth on the signature page to this Agreement, between Talon International, Inc., a Delaware corporation (the “Company”), and the investor identified on the signature page to this Agreement (the “Investor”).

RECITALS

A.     Subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company proposes to issue and sell up to $5.5 million in shares of Common Stock, par value $.001 per share (the “Common Stock”), of the Company at a purchase price of $0.09 per share (the “Offering Price”), in each case pursuant to an offering (the “Offering”) to one or more potential investors, including the Investor.

B.     The Company desires to sell to the Investor, and the Investor desires to buy from the Company, in the Offering the number of shares of the Common Stock (the “Shares”) set forth on the signature page of this Agreement, upon the terms and conditions and subject to the provisions hereinafter set forth.

Agreement

NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     Purchase and Sale of Securities. Subject to the terms and conditions of this Agreement, the Investor subscribes for and agrees to purchase and acquire from the Company, and the Company agrees to sell and issue to the Investor, the Shares in the manner set forth in Section 2 hereof, at the Offering Price and for the aggregate consideration set forth on the signature page of this Agreement (the “Purchase Price”).

2.     Terms of Purchase and Sale of Securities. The closing of the transactions contemplated hereby (the “Closing”) shall take place at such time and on such date as is determined by the Company as soon as practicable following satisfaction of the closing conditions set forth in Section 7. On or before July 12, 2013, the Investor shall deliver the Purchase Price to Stubbs, Alderton & Markiles LLP, legal counsel to the Company (the “Escrow Agent”), by wire transfer of immediately available funds in accordance with the following wire transfer instructions:

Account Name:     
Address:          
ABA Routing#:     
SWIFT:          
Account #:          
Ref:               

The Purchase Price will be held by the Escrow Agent and released to the Company at Closing against delivery to the Investor of stock certificates representing the Shares pursuant to the terms and conditions of that certain Closing Escrow Agreement by and among the Investor, the Company and the Escrow Agent in the form attached hereto as Exhibit B (the “Escrow Agreement” and together with this Agreement, the “Transaction Documents”).

3.     Representations and Warranties of the Company. In order to induce the Investor to enter into this Agreement and consummate the transactions contemplated hereby, the Company represents and warrants to the Investor as follows:

3.1     Incorporation. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on the business, condition (financial or otherwise) or prospects of the Company (a “Material Adverse Effect”). Except for short-term investments and investments that are not material to the Company, the Company does not own any shares of stock or any other equity or long-term debt securities of any corporation or have any equity interest in any firm, partnership, limited liability company, joint venture, association or other entity, except as disclosed in the SEC Documents (as defined below). Complete and correct copies of the certificate of incorporation (the “Certificate of Incorporation”) and bylaws (the “Bylaws”) of the Company as in effect on the Effective Date have been filed by the Company with the SEC. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents and to carry on its business as now conducted.

3.2     Capitalization. The authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, of which 24,900,808 shares are outstanding on the date hereof; and (ii) 3,000,000 shares of preferred stock, of which 250,000 shares have been designated “Series A Preferred Stock”, no shares of which are outstanding on the date hereof, and 407,160 shares have been designated “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”), all of which are outstanding on the date hereof. Each share of Series B Preferred Stock is convertible into 100 shares of Common Stock. The outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive or similar rights to subscribe for or purchase securities. Except for (i) options and restricted stock units for shares of Common Stock or other equity awards issued to directors, employees and consultants of the Company pursuant to the employee benefits plans (the “Benefit Plans”) disclosed in the SEC Documents, of which options to purchase 6,084,600 shares of Common Stock and 7,057,000 restricted stock units are outstanding, and (ii) the Series B Preferred Stock, there are no existing options, warrants, calls, preemptive (or similar) rights, subscriptions or other rights, agreements, arrangements or commitments of any character obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of the capital stock of the Company or other equity interests in the Company or any securities convertible into or exchangeable for such shares of capital stock or other equity interests. Except for the Securities Redemption Agreement (as defined below) proposed to be entered into between the Company and CVC California, LLC, as described in Section 6 below, there are no outstanding or contemplated contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests. The issuance of the Shares contemplated hereby, along with all other shares to be issued in the Offering, will not result in an over-issuance of shares of Common Stock under the Certificate of Incorporation, giving effect to the issuance of shares of Common Stock reserved for issuance pursuant to the Benefit Plans.

2

3.3     Valid Issuance of the Shares. The Shares being purchased by the Investor hereunder will, upon issuance pursuant to the terms hereof, be duly authorized and validly issued, fully paid and nonassessable. No preemptive rights or other rights to subscribe for or purchase the Company’s capital stock exist with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company shall be required for the issuance and sale of the Shares by the Company.

3.4     Enforceability. The execution, delivery, and performance of the Transaction Documents by the Company have been duly authorized by all requisite corporate action. This Agreement has been duly executed and delivered by the Company, and, upon its execution by the Investor, shall constitute the legal, valid, and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

3.5     No Violations. The execution, delivery, and performance of the Transaction Documents and the Securities Redemption Agreement (as defined below) by the Company, and the Series B Redemption (as defined below), do not and will not violate or conflict with any provision of the Company’s Certificate of Incorporation or Bylaws, each as amended and in effect on the date hereof, and do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under (except such consents as have been obtained as of the date hereof), or result in the creation of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company, or any material instrument or agreement to which the Company is a party or by which the Company or its properties are bound, except such consents as have been obtained as of the date hereof. The Company is not otherwise in violation of its Certificate of Incorporation, Bylaws or other organizational documents, nor is the Company in violation, in any material respects, of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company. The Company is not in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in the performance of any material bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company is a party or by which the Company is bound or by which the property of the Company is bound, which would be reasonably expected to have a Material Adverse Effect.

3

3.6     Approvals. Neither the execution, delivery, and performance by the Company of the Transaction Documents and the Securities Redemption Agreement, nor the offer and sale of the Shares contemplated hereby or by the Offering, nor the Series B Redemption, require the consent of, action by or in respect of, or filing with, any person, governmental body, agency, or official, other than those consents that have been obtained and filings that have been made pursuant to applicable state securities laws (“State Acts”) and post-sale filings pursuant to applicable state and federal securities laws, which the Company undertakes to file within the applicable time period, and other consents which have been obtained as of the date hereof.

3.7     SEC Documents. The Company has made available to Investor true and complete copies of all reports or registration statements the Company has filed with the Securities Exchange Commission (“SEC”) under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”), for all periods subsequent to December 31, 2011, all in the form so filed (collectively the “SEC Documents”). The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date of this Agreement. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and none of the SEC Documents filed under the Exchange Act contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed document with the SEC. None of the SEC Documents filed under the Securities Act contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading at the time such SEC Documents became effective under the Securities Act.

3.8     Financial Statements. The Company’s financial statements, including the notes thereto, included in the SEC Documents (the “Financial Statements”) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied (except as may be indicated in the notes thereto) and present fairly the Company’s consolidated financial position at the dates thereof and of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments which were not or are not expected to be material). The Company has implemented and maintains a system of internal controls meeting the requirements of the SEC and the Sarbanes-Oxley Act of 2002 as applicable to the Company on the date hereof. Since March 31, 2013, except as disclosed in the SEC Documents, there has been no Material Adverse Effect and there has been no material adverse change (actual or threatened) in the assets, liabilities (contingent or other), affairs, operations, prospects or condition (financial or other) of the Company.

4

3.9       Absence of Litigation. Except as disclosed in the SEC Documents, there is no action, suit or proceeding or, to the Company’s knowledge, any investigation, pending, or to the Company’s knowledge, threatened by or before any court, governmental body or regulatory agency against the Company that is required to be disclosed in the SEC Documents and is not so disclosed. The Company has not received any written or oral notification of, or request for information in connection with, any formal or informal inquiry, investigation or proceeding from the SEC or the Financial Industry Regulatory Authority, Inc. The foregoing includes, without limitation, any such action, suit, proceeding or investigation that questions any of the Transaction Documents or the right of the Company to execute, deliver and perform under same.

3.10     Taxes. The Company has filed all required federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a material tax deficiency which has been or might be asserted or threatened against it.

3.11     Brokers or Finders. The Company has not dealt with any broker or finder in connection with the transactions contemplated by this Agreement, and the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

3.12     Securities Laws. Assuming that all of the representations and warranties of the Investor set forth in Section 4, and all of the representations and warranties of the other Investors participating in the Offering, are true and correct, the offer and sale of the Shares in the Offering have been and will have been conducted and completed in compliance with the Securities Act.

4.     Representations and Warranties of the Investor. In order to induce the Company to enter into this Agreement and consummate the transaction contemplated hereby, the Investor represents and warrants to the Company the following:

4.1     Authority. If a corporation, partnership, limited partnership, limited liability company, or other form of entity, the Investor is duly organized or formed, as the case may be, validly existing, and in good standing under the laws of its jurisdiction of organization or formation, as the case may be. The Investor has all requisite individual or entity right, power, and authority to execute, deliver, and perform the Transaction Documents to which it is a party.

4.2     Enforceability. To the extent Investor is an entity, the execution, delivery, and performance by the Investor of the Transaction Documents to which it is a party have been duly authorized by all requisite entity action, as the case may be. This Agreement has been duly executed and delivered by the Investor, and, upon its execution by the Company, shall constitute the legal, valid, and binding obligation of the Investor, enforceable against Investor in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

5

4.3     No Violations. The execution, delivery, and performance by the Investor of the Transaction Documents to which it is a party do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Investor pursuant to, any material instrument or agreement to which the Investor is a party or by which the Investor or its properties may be bound or affected, and, if Investor is an entity, do not or will not violate or conflict with any provision of the articles of incorporation or bylaws, partnership agreement, operating agreement, trust agreement, or similar organizational or governing document of the Investor, as applicable.

4.4     Knowledge of Investment and its Risks. The Investor has knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Investor’s investment in the Shares. The Investor understands that an investment in the Company represents a high degree of risk and there is no assurance that the Company’s business or operations will be successful. The Investor has considered carefully the risks attendant to an investment in the Company, and that, as a consequence of such risks, the Investor could lose Investor’s entire investment in the Company.

4.5     Investment Intent. The Investor hereby represents and warrants that (i) the Shares are being acquired for investment for the Investor’s own account, and not as a nominee or agent and not with a view to the resale or distribution of all or any part of the Shares, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing any of the Shares within the meaning of and in violation of the Securities Act, and (ii) the Investor does not have any contracts, understandings, agreements, or arrangements, directly or indirectly, with any person and/or entity to distribute, sell, transfer, or grant participations to such person and/or entity with respect to, any of the Shares. The Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

4.6     Investor Status. The Investor is an “accredited investor” as that term is defined by Rule 501 of Regulation D promulgated under the Securities Act.

4.7     No Registration. The Investor understands that Investor may be required to bear the economic risk of Investor’s investment in the Company for an indefinite period of time. The Investor further understands that (i) neither the offering nor the sale of the Shares has been registered under the Securities Act or any applicable State Acts in reliance upon exemptions from the registration requirements of such laws, (ii) the Shares must be held by he, she or it indefinitely unless the sale or transfer thereof is subsequently registered under the Securities Act and any applicable State Acts, or an exemption from such registration requirements is available, and (iii) the Company will rely upon the representations and warranties made by the Investor in this Agreement in order to establish such exemptions from the registration requirements of the Securities Act and any applicable State Acts.

6

4.8     Transfer Restrictions. The Investor will not transfer any of the Shares unless such transfer is registered or exempt from registration under the Securities Act and such State Acts, and, if requested by the Company in the case of an exempt transaction, the Investor has furnished an opinion of counsel reasonably satisfactory to the Company that such transfer is so exempt. The Investor understands and agrees that (i) the certificates evidencing the Shares will bear appropriate legends indicating such transfer restrictions placed upon the Shares, (ii) the Company shall have no obligation to honor transfers of any of Shares in violation of such transfer restrictions, and (iii) the Company shall be entitled to instruct any transfer agent or agents for the securities of the Company to refuse to honor such transfers.

4.9     Principal Address. The Investor’s principal residence, if an individual, or principal executive office, if an entity, is set forth on the signature page of this Agreement.

4.10     Foreign Investors.  If the Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code), the Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares.  The Investor’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of the Investor’s jurisdiction.

5.     Independent Nature of Investor’s Obligations and Rights. The obligations of the Investor under the Transaction Documents to which it is a party are several and not joint with the obligations of any other purchaser of Shares, and the Investor shall not be responsible in any way for the performance of the obligations of any other purchaser of Shares under any Transaction Document or otherwise. The decision of the Investor to purchase Shares pursuant to the Transaction Documents has been made by the Investor independently of any other purchaser of Shares. Nothing contained herein or in any other Transaction Document, and no action taken by any purchaser of Shares pursuant thereto, shall be deemed to constitute such purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the purchasers of Shares are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. The Investor acknowledges that no other purchaser of Shares has acted as agent for the Investor in connection with making its investment hereunder and that no other purchaser of Shares will be acting as agent of the Investor in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents. The Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other purchaser of Shares to be joined as an additional party in any proceeding for such purpose.

7

6.     Securities Redemption Agreement. The Company proposes to purchase and redeem from CVC California, LLC (“CVC”), 407,160 shares (the “Series B Shares”) of Series B Preferred Stock for an aggregate purchase price of $18,800,000 pursuant to a securities redemption agreement to be entered into between the Company and CVC, substantially in the form attached hereto as Exhibit A (the “Securities Redemption Agreement”). Such redemption is referred to herein as the “Series B Redemption.” Additionally, the Company proposes to refinance the Note (as defined in the Securities Redemption Agreement) on or before its six-month maturity date.

7.     Conditions Precedent.

7.1     Conditions to the Obligation of the Investor to Consummate the Closing. The obligation of the Investor to consummate the Closing and to purchase and pay for the Shares being purchased by it pursuant to this Agreement is subject to the satisfaction of the following conditions precedent:

(a)     The representations and warranties of the Company contained herein shall be true and correct on the date of the Closing with the same force and effect as though made on the date of the Closing.

(b)     The Company shall have entered into the Securities Redemption Agreement and the Series B Redemption shall be scheduled to close contemporaneously with (or immediately following) the Closing.

(c)     The Escrow Agreement shall have been executed and delivered by the Company and the Escrow Agent.

(d)     The Company shall have executed and delivered to the Investor the Registration Rights Agreement in substantially the form attached hereto as Exhibit C.

(e)     The Company shall have received and accepted Subscription Agreements and funds for not less than 61,111,109 Shares and $5,500,000 in the Offering.

(f)     The Company shall have performed all obligations and conditions required to be performed or observed by the Company under this Agreement and the other Transaction Documents on or prior to the Closing.

Notwithstanding anything contained herein to the contrary, if, for any reason, the Company and CVC have not entered into the Securities Redemption Agreement on or before July 31, 2013 (the “Redemption Closing Deadline”), then: (1) the Escrow Agent or the Company (as applicable) shall promptly return to the Investor the aggregate Purchase Price originally deposited by the Investor into escrow in accordance with Section 2 hereof; (2) the Escrow Agent or the Investor (as applicable) shall promptly return to the Company the certificates representing the Shares originally deposited by the Company into escrow; and (3) both the Company and the Investor shall thereafter be released from any and all obligations hereunder (including but not limited to the Investor’s obligation to purchase, and the Company’s obligation to sell, the Shares as contemplated herein).

8

7.2     Conditions to the Obligation of the Company to Consummate the Closing. The obligation of the Company to consummate the Closing and to issue and sell to the Investor the Shares to be purchased by it at the Closing is subject to the satisfaction of the following conditions precedent:

(a)     The representations and warranties of the Investor contained herein shall be true and correct on the date of the Closing with the same force and effect as though made on the date of the Closing.

(b)     The Escrow Agreement shall have been executed and delivered by the Investor and the Escrow Agent.

(c)     The Company and CVC shall have executed and delivered the Securities Redemption Agreement.

(d)     The Investor shall have performed all obligations and conditions required to be performed or observed by the Investor under this Agreement and the other Transaction Documents on or prior to the Closing.

8.     Expenses. Each party will pay its own legal, accounting and other expenses incurred by such party or on its behalf in connection with this Agreement and the transactions contemplated herein; provided, that the Company shall pay or reimburse the legal fees and expenses incurred by Paul Hastings LLP, counsel to the Investor and other investors in the Offering incurred in connection with the legal review and negotiation of this Agreement, up to an aggregate maximum of $50,000.

9.     Waiver of Conflicts. Each party to this Agreement acknowledges that Stubbs Alderton & Markiles, LLP (“SAM”), counsel for the Company, may have in the past performed and may continue to perform legal services for the Investor or its affiliates in matters unrelated to the transactions described in this Agreement, including the representation of the Investor or its affiliates in matters of a similar nature to the transactions contemplated by this Agreement. The applicable rules of professional conduct require that SAM inform the parties hereunder of this representation and obtain their consent.  SAM has served as outside general counsel to the Company and has negotiated the terms of this Agreement and the transactions contemplated hereby solely on behalf of the Company. Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; (b) acknowledge that with respect to this Agreement and the transaction contemplated hereby, SAM has represented solely the Company, and not the Investor or any stockholder, director or employee of the Company or any Investor; and (c) gives its informed consent to SAM’s representation of the Investor (if applicable) in such unrelated matters and to SAM’s representation of the Company in connection with this Agreement and the transactions contemplated hereby.

10.     Further Assurances. The parties hereto will, upon reasonable request, execute and deliver all such further assignments, endorsements and other documents as may be necessary in order to perfect the purchase by the Investor of the Shares.

9

11.     Investigations; Survival of Warranties. The respective representations and warranties and covenants of Investor and the Company contained herein are true, accurate and correct and shall not be deemed waived or otherwise affected by any investigation made by any party hereto or by the occurrence of the Closing. Each and every such representation and warranty shall survive the date of the Closing.

12.     Entire Agreement; No Oral Modification. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect thereto and may not be amended or modified except in a writing signed by both of the parties hereto.

13.     Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and assigns; however, nothing in this Agreement, expressed or implied, is intended to confer on any other person other than the parties hereto, or their respective heirs, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

14.     Counterparts. This Agreement may be executed in any number of counterparts, including by electronic signature, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

15.     Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the United States of America and the State of California, both substantive and remedial, except to the extent of the application of the Delaware General Corporations Law.

16.     Prevailing Parties. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party shall be entitled to receive and the nonprevailing party shall pay upon demand reasonable attorneys’ fees in addition to any other remedy.

17.     Notices. All communication hereunder shall be in writing and, if sent to Investor shall be mailed, delivered, telegraphed or sent by facsimile or electronic mail, and confirmed to an Investor at the address set forth on the signature page of this Agreement, or if sent to the Company, shall be mailed, delivered, telegraphed or sent by facsimile or electronic mail and confirmed to the Company at Talon International, Inc., 21900 Burbank Blvd., Ste. 270, Woodland Hills, California 91367, Attention: Chief Executive Officer, facsimile number (818) 444-4110.

18.     Headings. The section headings herein are included for convenience only and are not to be deemed a part of this Agreement.

19.     Board Representation.

19.1     So long as the Investor continues to beneficially own at least 15,500,000 shares of Common Stock (as adjusted to reflect appropriate arithmetic adjustment in the event of any stock splits, stock dividends, combinations of shares, recapitalizations or other such events relating to the Common Stock occurring subsequent to the Closing) (the “Share Threshold”), the Investor shall have the right to nominate one (1) director to the Board of Directors of the Company (the “Investor Director”). As a condition to such nomination and/or appointment to the Board, (i) the Investor and/or the nominee shall provide to the Company all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in a proxy statement as a nominee and to serving as a director if elected), (ii) the Investor and/or the nominee shall also comply with all applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations thereunder with respect to such nomination and/or appointment to the Board, and (iii) the nominee shall be reasonably acceptable to the Board.

10

19.2     The initial Investor Director shall be appointed to the Board by the then-existing directors on the Board, who shall, by resolution, expand the size of the Board by one seat (to the extent there is not then a vacancy on the Board) and appoint the Investor’s nominee to fill the vacancy caused by such expansion.

19.3     Following the initial appointment to the Board of the Investor Director, any subsequent election of the Investor Director to the Board shall occur (i) at the annual meeting of holders of capital stock or (ii) at any special meeting of holders of capital stock if such meeting is called for the purpose of electing directors. If at any time when the Investor has the right to nominate the Investor Director, the Investor Director then serving on the Board dies or resigns from the Board, the Investor shall have the right to cause the vacancy caused by such death or resignation to be filled by nominating a replacement director and the remaining directors on the Board shall vote to cause the Investor’s nominee to be appointed to the Board in accordance with the Company’s Bylaws. The Investor may, in its sole discretion, determine not to nominate and/or cause the appointment of the Investor Director as provided herein from time to time. Once the Investor beneficially owns less than the Share Threshold, the Investor Director shall continue to serve such director’s then current term on the Board and the Investor shall have no further rights under this Agreement to nominate and/or cause the appointment of any directors to the Company’s Board.

19.4     Notwithstanding anything in this Section 19 to the contrary, (i) each of the Board’s obligations under this Section 19 are subject to its fiduciary duties and no director shall be required to do anything or take any action which he or she believes would be contrary to his or her fiduciary duties and (ii) if an Investor’s nominee for election to the Board is presented to the Company’s stockholders at an annual or special meeting at which directors are to be elected, and that nominee is not elected by the Company’s stockholders, the Company’s Board of Directors shall have no obligation to expand the size of the Board and appoint an Investor Director to the Board.

11

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 12^th day of July, 2013.

COMPANY: TALON INTERNATIONAL, INC., a Delaware corporation
By:	/s/ Lonnie D. Schnell
Name:	Lonnie D. Schnell
Title:	Chief Executive Officer

INVESTOR: KUTULA HOLDINGS LTD.
By:	/s/ Jean-Paul Defesche
Name:	Jean-Paul Defesche
Title:	Director

 

38,888,889	X	$0.09	=	$3,500,000.01
Number of Shares		Offering Price		Purchase Price

 S-1

EX-10

EXHIBIT 10.4

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered into as of the date set forth on the signature page to this Agreement, between Talon International, Inc., a Delaware corporation (the “Company”), and the investor identified on the signature page to this Agreement (the “Investor”).

RECITALS

A.     Subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company proposes to issue and sell up to $5.5 million in shares of Common Stock, par value $.001 per share (the “Common Stock”), of the Company at a purchase price of $0.09 per share (the “Offering Price”), in each case pursuant to an offering (the “Offering”) to one or more potential investors, including the Investor.

B.     The Company desires to sell to the Investor, and the Investor desires to buy from the Company, in the Offering the number of shares of the Common Stock (the “Shares”) set forth on the signature page of this Agreement, upon the terms and conditions and subject to the provisions hereinafter set forth.

Agreement

NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     Purchase and Sale of Securities. Subject to the terms and conditions of this Agreement, the Investor subscribes for and agrees to purchase and acquire from the Company, and the Company agrees to sell and issue to the Investor, the Shares in the manner set forth in Section 2 hereof, at the Offering Price and for the aggregate consideration set forth on the signature page of this Agreement (the “Purchase Price”).

2.     Terms of Purchase and Sale of Securities. The closing of the transactions contemplated hereby (the “Closing”) shall take place at such time and on such date as is determined by the Company as soon as practicable following satisfaction of the closing conditions set forth in Section 7. On or before July 12, 2013, the Investor shall deliver the Purchase Price to Stubbs, Alderton & Markiles LLP, legal counsel to the Company (the “Escrow Agent”), by wire transfer of immediately available funds in accordance with the following wire transfer instructions:

Account Name:     
Address:          
ABA Routing#:     
SWIFT:          
Account #:          
Ref:               

The Purchase Price will be held by the Escrow Agent and released to the Company at Closing against delivery to the Investor of stock certificates representing the Shares pursuant to the terms and conditions of that certain Closing Escrow Agreement by and among the Investor, the Company and the Escrow Agent in the form attached hereto as Exhibit B (the “Escrow Agreement” and together with this Agreement, the “Transaction Documents”).

3.     Representations and Warranties of the Company. In order to induce the Investor to enter into this Agreement and consummate the transactions contemplated hereby, the Company represents and warrants to the Investor as follows:

3.1     Incorporation. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on the business, condition (financial or otherwise) or prospects of the Company (a “Material Adverse Effect”). Except for short-term investments and investments that are not material to the Company, the Company does not own any shares of stock or any other equity or long-term debt securities of any corporation or have any equity interest in any firm, partnership, limited liability company, joint venture, association or other entity, except as disclosed in the SEC Documents (as defined below). Complete and correct copies of the certificate of incorporation (the “Certificate of Incorporation”) and bylaws (the “Bylaws”) of the Company as in effect on the Effective Date have been filed by the Company with the SEC. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents and to carry on its business as now conducted.

3.2     Capitalization. The authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, of which 24,900,808 shares are outstanding on the date hereof; and (ii) 3,000,000 shares of preferred stock, of which 250,000 shares have been designated “Series A Preferred Stock”, no shares of which are outstanding on the date hereof, and 407,160 shares have been designated “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”), all of which are outstanding on the date hereof. Each share of Series B Preferred Stock is convertible into 100 shares of Common Stock. The outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive or similar rights to subscribe for or purchase securities. Except for (i) options and restricted stock units for shares of Common Stock or other equity awards issued to directors, employees and consultants of the Company pursuant to the employee benefits plans (the “Benefit Plans”) disclosed in the SEC Documents, of which options to purchase 6,084,600 shares of Common Stock and 7,057,000 restricted stock units are outstanding, and (ii) the Series B Preferred Stock, there are no existing options, warrants, calls, preemptive (or similar) rights, subscriptions or other rights, agreements, arrangements or commitments of any character obligating the Company to issue, transfer or sell, or cause to be issued, transferred or sold, any shares of the capital stock of the Company or other equity interests in the Company or any securities convertible into or exchangeable for such shares of capital stock or other equity interests. Except for the Securities Redemption Agreement (as defined below) proposed to be entered into between the Company and CVC California, LLC, as described in Section 6 below, there are no outstanding or contemplated contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or other equity interests. The issuance of the Shares contemplated hereby, along with all other shares to be issued in the Offering, will not result in an over-issuance of shares of Common Stock under the Certificate of Incorporation, giving effect to the issuance of shares of Common Stock reserved for issuance pursuant to the Benefit Plans.

2

3.3     Valid Issuance of the Shares. The Shares being purchased by the Investor hereunder will, upon issuance pursuant to the terms hereof, be duly authorized and validly issued, fully paid and nonassessable. No preemptive rights or other rights to subscribe for or purchase the Company’s capital stock exist with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company shall be required for the issuance and sale of the Shares by the Company.

3.4     Enforceability. The execution, delivery, and performance of the Transaction Documents by the Company have been duly authorized by all requisite corporate action. This Agreement has been duly executed and delivered by the Company, and, upon its execution by the Investor, shall constitute the legal, valid, and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

3.5     No Violations. The execution, delivery, and performance of the Transaction Documents and the Securities Redemption Agreement (as defined below) by the Company, and the Series B Redemption (as defined below), do not and will not violate or conflict with any provision of the Company’s Certificate of Incorporation or Bylaws, each as amended and in effect on the date hereof, and do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under (except such consents as have been obtained as of the date hereof), or result in the creation of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company, or any material instrument or agreement to which the Company is a party or by which the Company or its properties are bound, except such consents as have been obtained as of the date hereof. The Company is not otherwise in violation of its Certificate of Incorporation, Bylaws or other organizational documents, nor is the Company in violation, in any material respects, of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company. The Company is not in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in the performance of any material bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company is a party or by which the Company is bound or by which the property of the Company is bound, which would be reasonably expected to have a Material Adverse Effect.

3

3.6     Approvals. Neither the execution, delivery, and performance by the Company of the Transaction Documents and the Securities Redemption Agreement, nor the offer and sale of the Shares contemplated hereby or by the Offering, nor the Series B Redemption, require the consent of, action by or in respect of, or filing with, any person, governmental body, agency, or official, other than those consents that have been obtained and filings that have been made pursuant to applicable state securities laws (“State Acts”) and post-sale filings pursuant to applicable state and federal securities laws, which the Company undertakes to file within the applicable time period, and other consents which have been obtained as of the date hereof.

3.7     SEC Documents. The Company has made available to Investor true and complete copies of all reports or registration statements the Company has filed with the Securities Exchange Commission (“SEC”) under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”), for all periods subsequent to December 31, 2011, all in the form so filed (collectively the “SEC Documents”). The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date of this Agreement. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and none of the SEC Documents filed under the Exchange Act contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected by a subsequently filed document with the SEC. None of the SEC Documents filed under the Securities Act contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading at the time such SEC Documents became effective under the Securities Act.

3.8     Financial Statements. The Company’s financial statements, including the notes thereto, included in the SEC Documents (the “Financial Statements”) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied (except as may be indicated in the notes thereto) and present fairly the Company’s consolidated financial position at the dates thereof and of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments which were not or are not expected to be material). The Company has implemented and maintains a system of internal controls meeting the requirements of the SEC and the Sarbanes-Oxley Act of 2002 as applicable to the Company on the date hereof. Since March 31, 2013, except as disclosed in the SEC Documents, there has been no Material Adverse Effect and there has been no material adverse change (actual or threatened) in the assets, liabilities (contingent or other), affairs, operations, prospects or condition (financial or other) of the Company.

4

3.9       Absence of Litigation. Except as disclosed in the SEC Documents, there is no action, suit or proceeding or, to the Company’s knowledge, any investigation, pending, or to the Company’s knowledge, threatened by or before any court, governmental body or regulatory agency against the Company that is required to be disclosed in the SEC Documents and is not so disclosed. The Company has not received any written or oral notification of, or request for information in connection with, any formal or informal inquiry, investigation or proceeding from the SEC or the Financial Industry Regulatory Authority, Inc. The foregoing includes, without limitation, any such action, suit, proceeding or investigation that questions any of the Transaction Documents or the right of the Company to execute, deliver and perform under same.

3.10     Taxes. The Company has filed all required federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a material tax deficiency which has been or might be asserted or threatened against it.

3.11     Brokers or Finders. The Company has not dealt with any broker or finder in connection with the transactions contemplated by this Agreement, and the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

3.12     Securities Laws. Assuming that all of the representations and warranties of the Investor set forth in Section 4, and all of the representations and warranties of the other Investors participating in the Offering, are true and correct, the offer and sale of the Shares in the Offering have been and will have been conducted and completed in compliance with the Securities Act.

4.     Representations and Warranties of the Investor. In order to induce the Company to enter into this Agreement and consummate the transaction contemplated hereby, the Investor represents and warrants to the Company the following:

4.1     Authority. If a corporation, partnership, limited partnership, limited liability company, or other form of entity, the Investor is duly organized or formed, as the case may be, validly existing, and in good standing under the laws of its jurisdiction of organization or formation, as the case may be. The Investor has all requisite individual or entity right, power, and authority to execute, deliver, and perform the Transaction Documents to which it is a party.

4.2     Enforceability. To the extent Investor is an entity, the execution, delivery, and performance by the Investor of the Transaction Documents to which it is a party have been duly authorized by all requisite entity action, as the case may be. This Agreement has been duly executed and delivered by the Investor, and, upon its execution by the Company, shall constitute the legal, valid, and binding obligation of the Investor, enforceable against Investor in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

5

4.3     No Violations. The execution, delivery, and performance by the Investor of the Transaction Documents to which it is a party do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Investor pursuant to, any material instrument or agreement to which the Investor is a party or by which the Investor or its properties may be bound or affected, and, if Investor is an entity, do not or will not violate or conflict with any provision of the articles of incorporation or bylaws, partnership agreement, operating agreement, trust agreement, or similar organizational or governing document of the Investor, as applicable.

4.4     Knowledge of Investment and its Risks. The Investor has knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Investor’s investment in the Shares. The Investor understands that an investment in the Company represents a high degree of risk and there is no assurance that the Company’s business or operations will be successful. The Investor has considered carefully the risks attendant to an investment in the Company, and that, as a consequence of such risks, the Investor could lose Investor’s entire investment in the Company.

4.5     Investment Intent. The Investor hereby represents and warrants that (i) the Shares are being acquired for investment for the Investor’s own account, and not as a nominee or agent and not with a view to the resale or distribution of all or any part of the Shares, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing any of the Shares within the meaning of and in violation of the Securities Act, and (ii) the Investor does not have any contracts, understandings, agreements, or arrangements, directly or indirectly, with any person and/or entity to distribute, sell, transfer, or grant participations to such person and/or entity with respect to, any of the Shares. The Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

4.6     Investor Status. The Investor is an “accredited investor” as that term is defined by Rule 501 of Regulation D promulgated under the Securities Act.

4.7     No Registration. The Investor understands that Investor may be required to bear the economic risk of Investor’s investment in the Company for an indefinite period of time. The Investor further understands that (i) neither the offering nor the sale of the Shares has been registered under the Securities Act or any applicable State Acts in reliance upon exemptions from the registration requirements of such laws, (ii) the Shares must be held by he, she or it indefinitely unless the sale or transfer thereof is subsequently registered under the Securities Act and any applicable State Acts, or an exemption from such registration requirements is available, and (iii) the Company will rely upon the representations and warranties made by the Investor in this Agreement in order to establish such exemptions from the registration requirements of the Securities Act and any applicable State Acts.

6

4.8     Transfer Restrictions. The Investor will not transfer any of the Shares unless such transfer is registered or exempt from registration under the Securities Act and such State Acts, and, if requested by the Company in the case of an exempt transaction, the Investor has furnished an opinion of counsel reasonably satisfactory to the Company that such transfer is so exempt. The Investor understands and agrees that (i) the certificates evidencing the Shares will bear appropriate legends indicating such transfer restrictions placed upon the Shares, (ii) the Company shall have no obligation to honor transfers of any of Shares in violation of such transfer restrictions, and (iii) the Company shall be entitled to instruct any transfer agent or agents for the securities of the Company to refuse to honor such transfers.

4.9     Principal Address. The Investor’s principal residence, if an individual, or principal executive office, if an entity, is set forth on the signature page of this Agreement.

4.10     Foreign Investors.  If the Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code), the Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares.  The Investor’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of the Investor’s jurisdiction.

5.     Independent Nature of Investor’s Obligations and Rights. The obligations of the Investor under the Transaction Documents to which it is a party are several and not joint with the obligations of any other purchaser of Shares, and the Investor shall not be responsible in any way for the performance of the obligations of any other purchaser of Shares under any Transaction Document or otherwise. The decision of the Investor to purchase Shares pursuant to the Transaction Documents has been made by the Investor independently of any other purchaser of Shares. Nothing contained herein or in any other Transaction Document, and no action taken by any purchaser of Shares pursuant thereto, shall be deemed to constitute such purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the purchasers of Shares are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. The Investor acknowledges that no other purchaser of Shares has acted as agent for the Investor in connection with making its investment hereunder and that no other purchaser of Shares will be acting as agent of the Investor in connection with monitoring its investment in the Shares or enforcing its rights under the Transaction Documents. The Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other purchaser of Shares to be joined as an additional party in any proceeding for such purpose.

7

6.     Securities Redemption Agreement. The Company proposes to purchase and redeem from CVC California, LLC (“CVC”), 407,160 shares (the “Series B Shares”) of Series B Preferred Stock for an aggregate purchase price of $18,800,000 pursuant to a securities redemption agreement to be entered into between the Company and CVC, substantially in the form attached hereto as Exhibit A (the “Securities Redemption Agreement”). Such redemption is referred to herein as the “Series B Redemption.” Additionally, the Company proposes to refinance the Note (as defined in the Securities Redemption Agreement) on or before its six-month maturity date.

7.     Conditions Precedent.

7.1     Conditions to the Obligation of the Investor to Consummate the Closing. The obligation of the Investor to consummate the Closing and to purchase and pay for the Shares being purchased by it pursuant to this Agreement is subject to the satisfaction of the following conditions precedent:

(a)     The representations and warranties of the Company contained herein shall be true and correct on the date of the Closing with the same force and effect as though made on the date of the Closing.

(b)     The Company shall have entered into the Securities Redemption Agreement and the Series B Redemption shall be scheduled to close contemporaneously with (or immediately following) the Closing.

(c)     The Escrow Agreement shall have been executed and delivered by the Company and the Escrow Agent.

(d)     The Company shall have executed and delivered to the Investor the Registration Rights Agreement in substantially the form attached hereto as Exhibit C.

(e)     The Company shall have received and accepted Subscription Agreements and funds for not less than 61,111,108 Shares and $5,500,000 in the Offering.

(f)     The Company shall have performed all obligations and conditions required to be performed or observed by the Company under this Agreement and the other Transaction Documents on or prior to the Closing.

Notwithstanding anything contained herein to the contrary, if, for any reason, the Company and CVC have not entered into the Securities Redemption Agreement on or before July 31, 2013 (the “Redemption Closing Deadline”), then: (1) the Escrow Agent or the Company (as applicable) shall promptly return to the Investor the aggregate Purchase Price originally deposited by the Investor into escrow in accordance with Section 2 hereof; (2) the Escrow Agent or the Investor (as applicable) shall promptly return to the Company the certificates representing the Shares originally deposited by the Company into escrow; and (3) both the Company and the Investor shall thereafter be released from any and all obligations hereunder (including but not limited to the Investor’s obligation to purchase, and the Company’s obligation to sell, the Shares as contemplated herein).

8

7.2     Conditions to the Obligation of the Company to Consummate the Closing. The obligation of the Company to consummate the Closing and to issue and sell to the Investor the Shares to be purchased by it at the Closing is subject to the satisfaction of the following conditions precedent:

(a)     The representations and warranties of the Investor contained herein shall be true and correct on the date of the Closing with the same force and effect as though made on the date of the Closing.

(b)     The Escrow Agreement shall have been executed and delivered by the Investor and the Escrow Agent.

(c)     The Company and CVC shall have executed and delivered the Securities Redemption Agreement.

(d)     The Investor shall have performed all obligations and conditions required to be performed or observed by the Investor under this Agreement and the other Transaction Documents on or prior to the Closing.

8.     Expenses. Each party will pay its own legal, accounting and other expenses incurred by such party or on its behalf in connection with this Agreement and the transactions contemplated herein; provided, that the Company shall pay or reimburse the legal fees and expenses incurred by Paul Hastings LLP, counsel to the Investor and other investors in the Offering incurred in connection with the legal review and negotiation of this Agreement, up to an aggregate maximum of $50,000.

9.     Waiver of Conflicts. Each party to this Agreement acknowledges that Stubbs Alderton & Markiles, LLP (“SAM”), counsel for the Company, may have in the past performed and may continue to perform legal services for the Investor or its affiliates in matters unrelated to the transactions described in this Agreement, including the representation of the Investor or its affiliates in matters of a similar nature to the transactions contemplated by this Agreement. The applicable rules of professional conduct require that SAM inform the parties hereunder of this representation and obtain their consent.  SAM has served as outside general counsel to the Company and has negotiated the terms of this Agreement and the transactions contemplated hereby solely on behalf of the Company. Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; (b) acknowledge that with respect to this Agreement and the transaction contemplated hereby, SAM has represented solely the Company, and not the Investor or any stockholder, director or employee of the Company or any Investor; and (c) gives its informed consent to SAM’s representation of the Investor (if applicable) in such unrelated matters and to SAM’s representation of the Company in connection with this Agreement and the transactions contemplated hereby.

10.     Further Assurances. The parties hereto will, upon reasonable request, execute and deliver all such further assignments, endorsements and other documents as may be necessary in order to perfect the purchase by the Investor of the Shares.

9

11.     Investigations; Survival of Warranties. The respective representations and warranties and covenants of Investor and the Company contained herein are true, accurate and correct and shall not be deemed waived or otherwise affected by any investigation made by any party hereto or by the occurrence of the Closing. Each and every such representation and warranty shall survive the date of the Closing.

12.     Entire Agreement; No Oral Modification. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect thereto and may not be amended or modified except in a writing signed by both of the parties hereto.

13.     Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and assigns; however, nothing in this Agreement, expressed or implied, is intended to confer on any other person other than the parties hereto, or their respective heirs, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

14.     Counterparts. This Agreement may be executed in any number of counterparts, including by electronic signature, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

15.     Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the United States of America and the State of California, both substantive and remedial, except to the extent of the application of the Delaware General Corporations Law.

16.     Prevailing Parties. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party shall be entitled to receive and the nonprevailing party shall pay upon demand reasonable attorneys’ fees in addition to any other remedy.

17.     Notices. All communication hereunder shall be in writing and, if sent to Investor shall be mailed, delivered, telegraphed or sent by facsimile or electronic mail, and confirmed to an Investor at the address set forth on the signature page of this Agreement, or if sent to the Company, shall be mailed, delivered, telegraphed or sent by facsimile or electronic mail and confirmed to the Company at Talon International, Inc., 21900 Burbank Blvd., Ste. 270, Woodland Hills, California 91367, Attention: Chief Executive Officer, facsimile number (818) 444-4110.

18.     Headings. The section headings herein are included for convenience only and are not to be deemed a part of this Agreement.

10

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 12^th day of July, 2013.

COMPANY: TALON INTERNATIONAL, INC., a Delaware corporation
By:
Name:	Lonnie D. Schnell
Title:	Chief Executive Officer

INVESTOR:

Print Name of Investor

By:

Name:

Title: 

(Address)

IRS Tax Identification No. (if applicable)

Telephone Number

Fax Number

E-Mail Address

 

	X	$0.09	=
Number of Shares		Offering Price		Purchase Price

 S-1

EX-10

EXHIBIT 10.5

Registration Rights Agreement

This Registration Rights Agreement (the “Agreement”) is made and entered into as of the 12^th day of July, 2013 (the “Effective Date”), by and among Talon International, Inc., a Delaware corporation (the “Company”), and the parties set forth on the signature page and Exhibit A hereto (each, a “Purchaser” and collectively, the “Purchasers”).

Recitals

A.     The Purchasers have purchased shares of the Company’s Common Stock pursuant to Subscription Agreements entered into as of the date hereof (each, a “Subscription Agreement” and collectively, the “Subscription Agreements”) by and between the Company and each Purchaser.

B.     The Company and the Purchasers desire to set forth the registration rights to be granted by the Company to the Purchasers.

Now, Therefore, in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein and in the Subscription Agreements, the parties mutually agree as follows:

aGREement

1.     Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

“Blackout Period” means, with respect to a registration, a period commencing on the day immediately after the Company notifies the Holders that they are required, pursuant to Section 4(f), to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of its Board of Directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such registration statement, if any, would be seriously detrimental to the Company and its stockholders and ending on the earlier of (1) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (2) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume; provided, however, that (i) the Company shall limit its use of Blackout Periods to two (2) occasions in any twelve (12)-month period of no more than forty five (45) days each, and (ii) no Blackout Period may commence sooner than sixty (60) days after the end of a prior such Blackout Period.

“Business Day” means any day of the year, other than a Saturday, Sunday, or other day on which the Commission is required or authorized to close.

“Closing Date” means July 12, 2013, or such other time as is mutually agreed between the Company and the Purchasers for the closing of the sale referred to in Recital A above.

“Commission” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

“Common Stock” means the common stock, par value $0.001 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Family Member” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.

“Holder” means each Purchaser or any of such Purchaser’s respective successors and Permitted Assigns who acquire rights in accordance with this Agreement with respect to the Registrable Securities directly or indirectly from a Purchaser, including from any Permitted Assignee.

“Inspector” means any attorney, accountant, or other agent retained by a Purchaser for the purposes provided in Section 4(j).

“Majority Holders” means at any time Holders of a majority of the Registrable Securities outstanding at such time.

“Offering Price” means the Offering Price set forth in the Subscription Agreements.

“Permitted Assignee” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its shareholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a transferor, (f) a party to this Agreement or (g) any transferee of a Purchaser who acquires at least 2,500,000 Registrable Securities.

2

The terms “register,” “registered,” and “registration” refers to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

“Registrable Securities” means shares of Common Stock issued to each Purchaser pursuant to the Subscription Agreements, excluding (i) any Registrable Securities that have been publicly sold or may be sold immediately without registration under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise; (ii) any Registrable Securities sold by a person in a transaction pursuant to a registration statement filed under the Securities Act or (iii) any Registrable Securities that are at the time subject to an effective registration statement under the Securities Act.

“Registration Statement” means the registration statement required to be filed by the Company pursuant to Section 3(a).

“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Trading Day” means a day on the securities market which at the time constitutes the principal securities market for the Common Stock is open for general trading of securities.

2.     Term. This Agreement shall continue in full force and effect, unless terminated sooner hereunder, for a period ending on the earlier of (i) the date that is two (2) years from the Effective Date and (ii) such time as there are no Registrable Securities hereunder.

3.     Registration.

(a)     Demand for Registration on Form S-1. If the Company receives a written request from the Majority Holders that the Company file a Registration Statement with respect to at least twenty-five percent (25%) of the Registrable Securities then outstanding (a “Demand Notice”), the Company shall (i) within ten (10) days after the date such request is given, give notice of the Demand Notice to all other Holders and (ii) as promptly as reasonably practicable, and in any event not later than sixty (60) days after the delivery of the Demand Notice (the “Registration Filing Date”), file with the Commission a shelf registration statement on Form S-1 (or such other appropriate form as may be available to the Company at such time) relating to the resale by Holders of all of the Registrable Securities that the Holders requested to be registered in the Demand Notice and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the notice of the Demand Notice is delivered by the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification, or compliance pursuant to this Section 3(a), or keep such registration effective pursuant to Section 4: (i) in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities or blue sky laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so; or (ii) during any Blackout Period, in which case the Registration Filing Date shall be extended to the date immediately following the last day of such Blackout Period.

3

(b)     Piggyback Registration. If the Company shall determine to register for sale for cash any of its Common Stock, for its own account or for the account of others (other than the Holders), other than (i) a registration relating solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on Form S-8) or (ii) a registration relating solely to a Commission Rule 145 transaction, a registration on Form S-4 in connection with a merger, acquisition, divestiture, reorganization, or similar event, the Company shall promptly give to the Holders written notice thereof (and in no event shall such notice be given less than twenty (20) days prior to the filing of such registration statement), and shall, subject to Section 3(c), include in such registration (and any related qualification under blue sky laws or other compliance) (a “Piggyback Registration”), all of the Registrable Securities specified in a written request or requests, made within ten (10) days after receipt of such written notice from the Company, by any Holder or Holders. However, the Company may, without the consent of the Holders, withdraw such registration statement prior to it becoming effective if the Company or such other stockholders have elected to abandon the proposal to register the securities proposed to be registered thereby.

(c)     Underwriting. If a Piggyback Registration is for a registered public offering involving an underwriting, the Company shall so advise the Holders in writing or as a part of the written notice given pursuant to Section 3(b). In such event the right of any Holder to registration pursuant to Section 3(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and any other stockholders of the Company distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company or selling stockholders, as applicable. Notwithstanding any other provision of this Section 3(c), if the underwriter or the Company determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Company shall so advise all Holders (except those Holders who failed to timely elect to distribute their Registrable Securities through such underwriting or have indicated to the Company their decision not to do so), and the number of shares of Registrable Securities that may be included in the registration and underwriting, if any, shall be allocated among such Holders as follows:

(i)     In the event of a Piggyback Registration that is initiated by the Company, the number of shares that may be included in the registration and underwriting shall be allocated first to the Company and then, subject to obligations and commitments existing as of the date hereof, to all selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included; and

4

(ii)     In the event of a Piggyback Registration that is initiated by the exercise of demand registration rights by a stockholder or stockholders of the Company (other than the Holders), then the number of shares that may be included in the registration and underwriting shall be allocated first to such selling stockholders who exercised such demand and then, subject to obligations and commitments existing as of the date hereof, to all other selling stockholders, including the Holders, who have requested to sell in the registration, on a pro rata basis according to the number of shares requested to be included.

No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter. The Registrable Securities and/or other securities so withdrawn from such underwriting shall also be withdrawn from such registration; provided, however, that, if by the withdrawal of such Registrable Securities a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities pursuant to the terms and limitations set forth herein in the same proportion used above in determining the underwriter limitation.

4.     Registration Procedures. In the case of each registration, qualification, or compliance effected by the Company pursuant to Section 3 hereof, the Company will keep each Holder including securities therein reasonably advised in writing (which may include e-mail) as to the initiation of each registration, qualification, and compliance and as to the completion thereof. At its expense with respect to any registration statement filed pursuant to Section 3, the Company will:

(a)     prepare and file with the Commission with respect to such Registrable Securities, a registration statement on Form S-1 or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate, and which form shall be available for the sale of the Registrable Securities in accordance with the intended method(s) of distribution thereof, and use its commercially reasonable efforts to cause such registration statement to become and remain effective (other than during the period specified in Section 5(b)) at least for a period ending with the first to occur of (i) the sale of all Registrable Securities covered by the registration statement, (ii) the availability under Rule 144 for the Holder to immediately, freely resell without restriction all Registrable Securities covered by the registration statement, and (iii) one year after a registration statement filed pursuant to Section 3(a) is declared effective by the Commission (in either case, the “Effectiveness Period”); provided, however, if at the end of such one year period, any Holder is not able to immediately, freely resell all Registrable Securities that it owns, the Effectiveness Period shall continue until terminated pursuant to clause (i) or (ii); provided that no later than two business days before filing with the Commission a registration statement or prospectus or any amendments or supplements thereto, the Company shall (i) furnish to each Holder a copy of the “Plan of Distribution” and “Selling Shareholder” portions of the registration statement and the other portions of such documents proposed to be filed that the Company considers not to contain material, non-public information (excluding any exhibits other than applicable underwriting documents), in substantially the form proposed to be filed and (ii) notify each Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered;

5

(b)     if a registration statement is subject to review by the Commission, promptly respond to all comments and use commercially reasonable efforts to diligently pursue resolution of any comments to the satisfaction of the Commission;

(c)     prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective during the Effectiveness Period (but in any event at least until expiration of the 90-day period referred to in Section 4(3) of the Securities Act and Rule 174, or any successor thereto, thereunder, if applicable), and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended method(s) of disposition by the sellers thereof set forth in such registration statement;

(d)     furnish, without charge, to each Holder of Registrable Securities covered by such registration statement (i) a reasonable number of copies of such registration statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto as such Holder may request, (ii) such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any other prospectus filed under Rule 424 under the Securities Act) as such Holders may request, in conformity with the requirements of the Securities Act, and (iii) such other documents as such Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period;

(e)     use its commercially reasonable efforts to register or qualify such Registrable Securities under such other applicable securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by such registration statement reasonably requests as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable registration statement is deemed effective by the Commission) and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction;

(f)     as promptly as practicable after becoming aware of such event, notify each Holder of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event which comes to the Company’s attention if as a result of such event the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall promptly prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period;

6

(g)     comply, and continue to comply during the period that such registration statement is effective under the Securities Act, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such registration statement, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first full calendar month after registration statement is declared effective, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act.

(h)     as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement at the earliest possible time;

(i)     permit the Holders of Registrable Securities being included in the Registration Statement and their legal counsel, at such Holders’ sole cost and expense (except as otherwise specifically provided in Section 6) to review and have a reasonable opportunity to comment on the Registration Statement and all amendments and supplements thereto at least two Business Days prior to their filing with the Commission;

(j)     make available for inspection by any Holder and any Inspector retained by such Holder, at such Holder’s sole expense, all Records as shall be reasonably necessary to enable such Holder to exercise its due diligence responsibility, and cause the Company’s officers, directors, and employees to supply all information which such Holder or any Inspector may reasonably request for purposes of such due diligence; provided, however, that such Holder shall hold in confidence and shall not make any disclosure of any record or other information which the Company determines in good faith to be confidential, and of which determination such Holder is so notified at the time such Holder receives such information, unless (i) the disclosure of such record is necessary to avoid or correct a misstatement or omission in the Registration Statement and a reasonable time prior to such disclosure the Holder shall have informed the Company of the need to so correct such misstatement or omission and the Company shall have failed to correct such misstatement or omission, (ii) the release of such record is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or (iii) the information in such record has been made generally available to the public other than by disclosure in violation of this or any other agreement; provided, further, no Holder or Inspector who has received material, non-public information concerning the Company shall purchase or sell securities of the Company or communicate such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. The Company shall not be required to disclose any confidential information in such records to any Inspector (other than counsel for a Holder) until and unless such Inspector shall have entered into a confidentiality agreement with the Company with respect thereto, substantially in the form of this Section 4(j), which agreement shall permit such Inspector to disclose records to the Holder who has retained such Inspector. Each Holder agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the records deemed confidential. The Company shall hold in confidence and shall not make any disclosure of information concerning a Holder provided to the Company pursuant to this Agreement unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) disclosure of such information to the Staff of the Division of Corporation Finance is necessary to respond to comments raised by the Staff in its review of the Registration Statement, (iii) disclosure of such information is necessary to avoid or correct a misstatement or omission in the Registration Statement, (iv) release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (v) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning a Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Holder and allow such Holder, at such Holder’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information;

7

(k)     use its commercially reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be quoted on the principal securities market on which securities of the same class or series issued by the Company are then listed or traded;

(l)     provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities at all times;

(m)     cooperate with the Holders of Registrable Securities being offered pursuant to the Registration Statement to issue and deliver certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement after delivery of certificates to the Company and enable such certificates to be in such denominations or amounts as the Holders may reasonably request and registered in such names as the Holders may request; and

(n)     take all other reasonable actions necessary to expedite and facilitate disposition by the Holders of the Registrable Securities pursuant to the Registration Statement.

5.     Suspension of Offers and Sales.

(a)     Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) hereof or of the commencement of a Blackout Period, such Holder shall discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in Section 4(a)(iii) hereof shall be extended by the greater of (i) ten business days or (ii) the number of days during the period from and including the date of the giving of such notice pursuant to Section 4(f) hereof to and including the date when each Holder of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof.

8

(b)     If the Registrable Securities are registered for resale under an effective Registration Statement, the Holders shall cease any distribution of such Registrable Securities under such Registration Statement after the filing of the Company’s annual report on Form 10-K or other event that requires the filing of a post-effective amendment to any Registration Statement hereunder until such post-effective amendment is declared effective, so long as the Company has filed and is during such period actively pursuing effectiveness of such post-effective amendment with the staff of the Commission.

6.     Registration Expenses. The Company shall pay all expenses in connection with any registration, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with securities or blue sky laws, the fees and disbursements of counsel for the Company and of its independent accountants, and the fees and expenses of one special counsel to the Holders not to exceed $25,000; provided that, in any underwritten registration, each party shall pay for its own underwriting discounts and commissions and transfer taxes. Except as provided above in this Section 6 and Section 9, the Company shall not be responsible for the expenses of any attorney or other advisor employed by a Holder of Registrable Securities.

7.     Assignment of Rights. No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided, however, that a Holder may assign its rights under this Agreement without such restrictions to a Permitted Assignee as long as (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.

8.     Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing.

9

9.     Indemnification.

(a)     In the event of the offer and sale of Registrable Securities held by Holders under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Holder specifically stating that it is for use in the preparation thereof or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.

(b)     As a condition to including any Registrable Securities to be offered by a Holder in any registration statement filed pursuant to this Agreement, each such Holder agrees to be bound by the terms of this Section 9 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information about such Holder as a Holder of the Company furnished to the Company, and such Holder shall reimburse the Company, and each such director, officer, and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or settling and such loss, claim, damage, liability, action, or proceeding; provided, however, that such indemnity agreement found in this Section 9(b) shall in no event exceed the gross proceeds from the offering received by such Holder. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer by any Holder of such shares.

10

(c)     Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 9(a) or (b) hereof (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 9(a) or (b) hereof, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of investigation. Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.

(d)     In the event that an indemnifying party does not, or is not permitted to, assume the defense of an action pursuant to Section 9(c) or in the case of the expense reimbursement obligation set forth in Section 9(a) and (b), the indemnification required by Section 9(a) and (b) hereof shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.

(e)     If the indemnification provided for in this Section 9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.

11

(f)     Indemnification similar to that specified in the preceding subsections of this Section 9 (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.

10.     Rule 144. For a period of at least eighteen (18) months following the Closing Date, the Company will use its commercially reasonable efforts (a) to timely file all reports required to be filed by the Company after the date hereof under the Securities Act and the Exchange Act (including the reports pursuant to Section 13(a) or 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144) and the rules and regulations adopted by the Commission thereunder), (b) if the Company is not required to file reports pursuant to such sections, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell shares of Common Stock under Rule 144, and (c) to take such further action as any holder of shares of Common Stock may reasonably request, all to the extent required from time to time to enable the Purchasers to sell shares of Common Stock without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, including causing its attorneys to issue and deliver any appropriate legal opinion required to permit a Purchaser to sell shares of Common Stock under Rule 144 upon receipt of appropriate documentation relating to such sale.

11.     Independent Nature of Each Purchaser’s Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and each Purchaser shall not be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. The decision of each Purchaser to purchase Common Stock and enter into this Agreement has been made by each Purchaser independently of any other Purchaser. Nothing contained herein and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute such Purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser acknowledges that no other Purchaser has acted as agent for the Purchaser in connection with making its investment in Common Stock and that no other Purchaser will be acting as agent of the Purchaser in connection with monitoring its investment in the Common Stock or enforcing its rights under this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

12

12.     Miscellaneous

(a)     Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof.

(b)     Attorneys’ Fees. If any party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

(c)     Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, Permitted Assigns, executors and administrators of the parties hereto. In the event the Company merges with, or is otherwise acquired by, a direct or indirect subsidiary of a publicly traded company, the Company shall condition the merger or acquisition on the assumption by such parent company of the Company’s obligations under this Agreement.

(d)     Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.

(e)     Notices, etc. All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:

If to the Company: Talon International, Inc.
21900 Burbank Blvd., Ste. 270
Woodland Hills, California 91367
Attention: Chief Executive Officer
Facsimile: (818) 444-4110

If to the Purchasers: To each Purchaser at the address
set forth on Exhibit A

or at such other address as any party shall have furnished to the other parties in writing.

13

(f)     Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any Holder of any Registrable Securities, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereunder occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative.

(g)     Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

(h)     Severability. In the case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(i)     Amendments. The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and by the Majority Holders. The Purchasers acknowledge that by the operation of this Section 12(i), the Majority Holders may have the right and power to diminish or eliminate all rights of the Purchasers under this Agreement.

(j)     Limitation on Subsequent Registration Rights. After the date of this Agreement, the Company shall not, without the prior written consent of the Majority Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include.

[Signatures on following page]

14

This Registration Rights Agreement is hereby executed as of the date first above written.

COMPANY: TALON INTERNATIONAL, INC.,
By:	/s/ Lonnie D. Schnell
Name:	Lonnie D. Schnell
Its:	Chief Executive Officer

PURCHASERS: KUTULA HOLDINGS LTD.
By:	/s/ Jean-Paul Defesche
Name:	Jean-Paul Defesche
Its:	Director

PERRTECH PTY LIMITED
By:	/s/ Leonard Frederick Milner
Name:	Leonard Frederick Milner
Its:	Director

ZIPPER HOLDINGS, LLC
By:	/s/ Mark Dyne
Name:	Mark Dyne
Its:	Manager

FAIRWAY INVESTMENTS LLC
By:	/s/ Ronald Dyne
Name:	Ronald Dyne
Its:	Manager

MANIFEST CAPITAL, LLC
By:	/s/ Joseph Miller
Name:	Joseph Miller
Its:	President of Manifest Capital, Inc., its Manager

Signature Page to Registration Rights Agreement

EX-99

Exhibit 99.1

 

TALON INTERNATIONAL REDEEMS ALL SERIES B PREFERRED STOCK

Eliminates $25.9 million liquidation preference obligation

Completes $5.5 million strategic equity investment

LOS ANGELES – July 15, 2013 – Talon International, Inc. (OTCQB: TALN), a leading global supplier of zippers, apparel fasteners, trim and stretch technology products, announced today that it has redeemed all of the outstanding shares of its Series B convertible preferred stock for $13.0 million in cash and a short-term, low-interest bearing promissory note of $5.8 million, for a total consideration of $18.8 million.

The redemption of the preferred shares removes the Company’s current liquidation preference obligation of $25.9 million, which entitled the preferred shareholders to payment of the preference amount before payment to the common stockholders. The liquidation preference was scheduled to increase to $40.7 million at the time the preferred shares became mandatorily redeemable in 2016. The removal of this obligation results in an immediate benefit to common stockholders of approximately $7.0 million. The Company now has only common shares outstanding.

To complete the redemption, the Company received a $5.5 million strategic equity investment from a group of private investors, including a former Board member and the current Chairman of the Board. This investment, which consists of the sale of common stock at a price of $0.09 per share, together with the Company’s cash and the short-term note, enabled the Company to repurchase all of the Series B convertible preferred stock at a significant discount to its current liquidation preference amount.

Lonnie Schnell, Talon’s CEO stated, “The redemption of preferred shares and the successful equity raise that made it possible, are major achievements and important milestones for Talon International. The elimination of the preferred stock from our capital structure improves our risk profile, enhances our financial flexibility and removes a major impediment to creating value for common shareholders.”

As a result of the equity raise, Talon’s executive management team received shares of common stock upon settlement of previously issued restricted stock units, increasing management’s ownership by approximately 4.8 million shares.

Please refer to Talon’s SEC Form 8-K filing when available for additional details about the transactions.

Conference Call

Talon International will hold a conference call on Tuesday, July 16, 2013 to discuss today’s announcement. Mr. Schnell will host the call starting at 4:30 p.m. Eastern Time. A question and answer session will follow the presentation. To participate, dial the appropriate number 5-10 minutes prior to the start time, request the Talon International conference call and provide the conference ID.

Date: Tuesday, July 16, 2013

Time: 4:30 p.m. Eastern Time; 1:30 p.m. Pacific Time

Domestic callers: 1-877-317-6789

International callers: 1-412-317-6789

Conference ID#: TALON

Talon International, Inc.

Page 2

A replay of the call will be available after 7:30 p.m. Eastern Time on the same day and through August 16, 2013. The toll-free replay call-in number is 1-877-870-5176 for domestic callers and 1-858-384-5517 for international, using Conference ID number 10031571.

About Talon International, Inc.

Talon International, Inc. is a major supplier of customer zippers, complete trim solutions and stretch technology products to manufacturers of fashion apparel, specialty retailers, mass merchandisers, brand licensees and major retailers worldwide. Talon develops, manufactures and distributes custom zippers exclusively under its Talon® brand (“The World’s Original Zipper Since 1893”); designs, develops, manufactures, and distributes complete apparel trim solutions and products; and provides stretch technology for specialty waistbands all under its trademark and world renowned brands, Talon®, and TekFit® to major apparel brands and retailers. Leading retailers worldwide recognize and use Talon products including Abercrombie and Fitch, Polo Ralph Lauren, Kohl’s, J.C. Penney, FatFace, Victoria’s Secret, Wal-Mart, Tom Tailor, Phillips-Van Heusen, Juicy Couture, and many others. The company is headquartered in the greater Los Angeles area, and has offices and facilities throughout the United States, United Kingdom, Hong Kong, China, Taiwan, India, Indonesia and Bangladesh.

Forward Looking Statements

Except for historical information, this press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “should,” and “potential,” among others. These forward-looking statements are inherently difficult to predict and involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to the company’s views on market growth, changing trends in apparel retailing, new product introductions, the company’s ability to execute on its sales strategies, and the risk factors listed from time to time in Talon’s SEC reports, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2012. SEC-filed documents are available at no charge at the SEC’s website (www.sec.gov) or from the company. All forward-looking statements included in this release are based upon information available to Talon as of the date of this release, which may change.

# # #

Contacts:

Lisa Mueller (Investors)

Megan Klein (Media)

Financial Profiles, Inc.

Tel: 310-478-2700                               

TALON@finprofiles.com