On December 21, 2015, Talon International, Inc. entered into an amended and restated credit agreement with Princess Investment Holdings, Inc., which amended existing loan and reimbursement agreement, dated August 10, 2015, with Princess Investment to, among other things, increase the borrowing availability under the loan agreement from $3,000,000 to $6,000,000 and extend the maturity date of the loan to December 21, 2020. Princess Investment may be deemed an affiliate of Kutula Holdings Ltd., a significant stockholder of company which also has the contractual right to designate a director to Board of Directors. Princess Investment will make advances under the Revolving Loan from time to time as requested by us.

the company may prepay the Revolving Loan at any time, and amounts prepaid may be re-borrowed through November 21, 2020. The Revolving Loan will accrue interest on the unpaid principal balance at an annual rate of 11.5%. Interest on the Revolving Loan for the period from December 21, 2015 through December 1, 2016 will accrue and be added to principal on December 1, 2016, and thereafter interest will be payable monthly in arrears.

No principal payments will be due during the period ending December 31, 2017. Thereafter, principal will payable $25,000 per month during the twelve months ended December 31, 2018, $35,000 per month during the twelve months ended December 31, 2019 and $50,000 per month during the twelve months ended December 31, 2020, with the remaining outstanding principal amount payable on the Maturity Date. The Restated Credit Agreement continues to require payment of a $60,000 loan fee at maturity.

The payment and performance of all indebtedness and other obligations to Princess Investment, including all borrowings under the Restated Credit Agreement, are guaranteed by subsidiaries Talon Technologies, Inc. and Tag-It Pacific Limited pursuant to a Guaranty Agreement entered into on August 10, 2015, as amended on December 21, 2015. The payment and performance of all of indebtedness and other obligations to Princess Investment under the Restated Credit Agreement and related agreements are secured by liens on substantially all of assets and the assets of subsidiary guarantors pursuant to a Pledge and Security Agreement entered into on August 10, 2015, as amended on December 21, 2015.