On December 31, 2013, Talon International, Inc., a Delaware corporation entered into a Commercial Credit Agreement (the Credit Agreement) with Union Bank, N.A. (the Bank). The Credit Agreement provides for a revolving loan commitment in the amount of up to $3,500,000 (the Revolving Credit Facility), consisting of revolving loans and a sublimit of letters of credit not to exceed a maximum aggregate principal amount of $1,000,000. Any loans under the Revolving Credit Facility will bear interest at 2.50% in excess of the Bank's Reference Rate, which is an index rate determined by the Bank from time to time as a means of pricing certain extensions of credit.

The Credit Agreement also provides for a term loan in the amount of $5,000,000 (the Term Credit Facility and together with the Revolving Credit Facility, the Credit Facilities). The Term Credit Facility will bear interest at a rate per annum equal to 2.75% in excess of the Reference Rate. On December 31, 2013, the Company used all of the proceeds of the Term Credit Facility and $800,000 of the proceeds of the Revolving Credit Facility to repay $5.8 million of the Company's existing indebtedness to CVC California, LLC, which indebtedness was scheduled to mature on January 12, 2014.

The Credit Agreement contains representations and warranties, affirmative, negative and financial covenants, and events of default, applicable to the Company and its subsidiaries which are customary for credit facilities of this type including maintaining a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.25:1.00 as of the close of each fiscal quarter and an Adjusted EBITDA (as defined in the Credit Agreement) of at least $2,750,000 as of the close of each fiscal quarter, for the 12-month period ended as of the last day of the quarter.