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ORNG.OB > SEC Filings for ORNG.OB > Form 8-K on 23-Dec-2011All Recent SEC Filings

Show all filings for ORANGE 21 INC.

Form 8-K for ORANGE 21 INC.


23-Dec-2011

Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligat


Item 1.01 Entry into a Material Definitive Agreement.

On December 21, 2011, Orange 21 Inc.'s wholly owned subsidiary, Orange 21 North America Inc. ("O21NA") entered into the Sixth Modification to Loan and Security Agreement (the "Modification") with BFI Business Finance ("BFI") in order to provide for certain modifications to O21NA's credit facility with BFI. The original Loan and Security Agreement with BFI was entered into on February 26, 2007.

Among other things, the Modification provides for changes to the borrowing base component of the BFI line of credit in order to (1) increase the advance rate against inventory to 35% of the current market cost of raw materials that constitute eligible inventory, (2) increase the maximum inventory advance sublimit up to (a) $2,000,000 during the period beginning on December 1, 2011 through September 30, 2012, (b) $1,750,000 during the period beginning on October 1, 2012 through December 31, 2012, and (c) $1,500,000 for all times thereafter, provided that in each case the maximum inventory advance sublimit shall not exceed 50% of the accounts receivable borrowing base, and (3) allow for advances of up to $1,000,000 against Canadian accounts receivable, subject to certain eligibility requirements. The Modification also decreased the maximum amount which may be borrowed under the BFI credit facility to $7,000,000, which also effectively results in a decrease to the loan fee payable on the maximum amount.

On December 21, 2011, O21NA also entered into an amendment and restatement of
(1) the $7.0 million Promissory Note originally issued on December 20, 2010 (the "Prior 2010 Costa Brava Note") to Costa Brava Partnership III, L.P. ("Costa Brava"), and (2) the $6.0 million Promissory Note originally issued on June 21, 2011 (the "Prior 2011 Costa Brava Note") evidencing a line of credit committed by Costa Brava. Costa Brava is an entity that beneficially owns approximately 49.0%, or 52.7% on an as converted basis, of Orange 21 Inc.'s common stock. Mr. Seth Hamot, Chairman of the Board of Directors of Orange 21 Inc., is the President and sole member of the sole general partner of Costa Brava.

The terms of the $7.0 million 2010 Costa Brava Promissory Note as amended and restated on December 21, 2011 (the "Restated 2010 Costa Brava Note") differ from the terms of the Prior 2010 Costa Brava Promissory Note in the following material respects:

the Restated 2010 Costa Brava Note matures on June 30, 2013, whereas the Prior 2010 Costa Brava Note matured on December 31, 2012;

interest on the Restated 2010 Costa Brava Note may be paid in kind on a monthly basis starting January 1, 2012 as an addition to the outstanding principal amount due, rather than paid in cash (at the option of O21NA);

The terms of the $6.0 million 2011 Costa Brava Promissory Note as amended and restated on December 21, 2011 (the "Restated 2011 Costa Brava Note") differ from the terms of the Prior 2011 Costa Brava Note in the following material respects:

the Restated 2011 Costa Brava Note matures on June 30, 2013, whereas the Prior 2011 Costa Brava Note matured on June 21, 2014;

interest on the Restated 2011 Costa Brava Note may be paid in kind on a monthly basis starting January 1, 2012 as an addition to the outstanding principal amount due, rather than paid in cash (at the option of O21NA);

Both the Restated 2010 Costa Brava Note and the Restated 2011 Costa Brava Note are subordinated to the amounts borrowed by O21NA from BFI. Other than described above, the terms and conditions of the Restated 2010 Costa Brava Note and Restated 2011 Costa Brava Note are otherwise generally similar to the terms and conditions of the Prior 2010 Costa Brava Note and Prior 2011 Costa Brava Note, respectively.

The foregoing summary of the terms of the promissory notes with BFI and Costa Brava are qualified in their entirety by reference to the promissory notes, copies of which are attached as Exhibits 10.1, 10.2 and 10.3 and incorporated herein by reference.




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

The information provided in response to Item 1.01 of this report is incorporated by reference into this Item 2.03.



Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.     Description

10.1            Sixth Modification to Loan and Security Agreement with BFI Business
                Finance

10.2            Amended and Restated $7.0 Million Promissory Note dated
                December 20, 2011 by Orange 21 North America Inc. in favor of Costa
                Brava Partnership III, L.P.

10.3            Amended and Restated $6.0 Million Promissory Note dated
                December 20, 2011 by Orange 21 North America Inc. in favor of Costa
                Brava Partnership III, L.P.


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