10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Annual Report Pursuant to Section l3 or l5(d)

of the Securities Exchange Act of l934

For the fiscal year ended June 30, 2004 Commission File Number 0-18927

TANDY BRANDS ACCESSORIES, INC.

(Exact name of Registrant as Specified in its Charter)

A Delaware Corporation	75-2349915
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

690 E. Lamar Blvd., Suite 200

Arlington, Texas 76011

(Address of Principal Executive Offices)

(817) 548-0090

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section l2(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of Class

Common Stock, Par Value $1.00 Per Share

      Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      The aggregate market value of the voting and non-voting common equity held by non-affiliates as of December 31, 2003 (computed by reference to the price at which the common equity was last sold on such date), was approximately $70,282,409.

      There were 6,397,480 shares of common stock, par value $1.00 per share, outstanding on September 17, 2004.

DOCUMENTS INCORPORATED BY REFERENCE:

      (a) Annual Report to Stockholders for Fiscal Year Ended June 30, 2004 (incorporated herein by reference in Parts I and II).

      (b) Definitive Proxy Statement for the Annual Meeting of Stockholders to be held October 14, 2004 (incorporated herein by reference in Part III).

TABLE OF CONTENTS

Restated Bylaws

Third Amendment to Credit Agreement

Form of Non-Employee Director Nonqualified Stock Option Agreement

Form of Employee Nonqualified Stock Option Agreement

Form of Non-Employee Director Restricted Stock Award Agreement

Form of Employee Restricted Stock Award Agreement

2004 Annual Report to Stockholders

List of Subsidiaries

Consent of Ernst & Young LLP

Certification of Chief Executive Officer

Certification of Chief Financial Officer

Section 1350 Certification by CEO & CFO

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

FORM 10-K

PART I

Item 1. Business.

What do we do?

      We are a leading designer, manufacturer and marketer of branded men’s, women’s and children’s accessories, including belts and small leather goods, such as wallets. Our product line also includes handbags, socks, scarves, gloves, hats, hair accessories, suspenders, cold weather accessories and sporting goods accessories. We market our merchandise under a broad portfolio of nationally recognized licensed and proprietary brand names, including Dockers®, Levi’s®, Levi Strauss Signature^TM, Jones New York®, Rolfs®, Haggar®, Woolrich®, Jordache®, Bugle Boy®, Canterbury®, Prince Gardner®, Princess Gardner®, Amity®, Accessory Design Group® and Tiger®, as well as private brands for major retail customers. We sell our products to a variety of retail outlets, including mass merchants, national chain stores, major department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores and the retail exchange operations of the United States military.

      In addition, we recently entered the men’s neckwear business, utilizing a direct-to-retailer sales model. We plan to design and promote men’s neckties which will be manufactured overseas and shipped directly to our retail customers in the United States, allowing our pricing to be very competitive compared to established neckwear suppliers. We also recently acquired Superior Merchandise Company. Through this acquisition, which was completed on July 1, 2004, we have added gift accessories to our product line that we will sell under the ETON® and licensed totes® brands.

What are our product lines?

Fiscal 2004 Product Line Sales (as a % of net sales)

Our primary products consist of belts and small leather goods, such as wallets, which accounted for approximately 54.6% and 21.1% of our net sales for fiscal 2004, respectively. Our other products include women’s handbags, socks, scarves, gloves, hats, hair accessories, suspenders, cold weather accessories, sporting goods accessories, and other fashion accessories. Collectively, these other products accounted for the remaining 24.3% of our net sales in fiscal 2004.      To facilitate our internal operations as well as our customer relationships, our products are generally organized along men’s and women’s product lines. As a result, we have two reportable segments: (1) men’s accessories and (2) women’s accessories. Men’s and boys’ products accounted for approximately 52.7% of net sales during fiscal

2004, and women’s and girls’ products accounted for approximately 47.3% of net sales during the same period. Financial information regarding our operations and assets by segment appears on page 32 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference.

Belts

      We, along with our predecessors, have been manufacturing and marketing belts for over 70 years, and belts remain our largest single product category, representing approximately 54.6%, 53.1% and 55.2% of net sales in fiscal 2004, 2003 and 2002, respectively. We compete in all four categories of the belt market: casual, work, dress and fashion. In fiscal 2004, we manufactured approximately 31.6% of the men’s belts we distributed and imported the balance, including all women’s belts, from China, Guatemala and various other countries.

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Fiscal 2004 Belt Sales
     Men’s belt sales increased by $6.3 million during 2004, but women’s belt sales decreased by $8 million during the same period, resulting in an overall decrease of $1.7 million, or 1.4%, in our total belt sales compared to fiscal 2003. The decrease in women’s belt sales was due to downward pressure on inventory replenishment by mass merchant customers and competitive market pressures. In fiscal 2004, sales of men’s and boys’ belts represented $87.2 million, or 74.2% of total belt sales, and women’s and girls’ belts represented $30.4 million, or 25.8% of total belt sales.

Small Leather Goods

Fiscal 2004 Small Leather Goods
Sales
     Our small leather goods consist primarily of men’s and women’s wallets sold under licensed, private and proprietary brands. Our small leather goods are primarily sourced from manufacturers in foreign countries, such as China, due to the labor-intensive nature of manufacturing small leather goods and the relatively low cost of labor in those countries. Sales of small leather goods accounted for approximately $45.3 million, or 21.1% of our net sales in fiscal 2004. Sales of small leather goods accounted for approximately 19.8% and 21.0% of our net sales in fiscal 2003 and 2002, respectively.

      In fiscal 2004, sales of men’s and boys’ small leather goods represented $18.3 million, or 40.4% of total small leather goods sales, and women’s and girls’ small leather goods represented $27.0 million, or 59.6% of our total small leather goods sales.

Other Accessories

      In addition to belts and small leather goods, we distribute accessories such as women’s handbags, socks, scarves, gloves, hats, hair accessories, men’s suspenders and sporting goods accessories. These products are marketed under certain of our proprietary brands, licensed brands and private brands. These other accessories complement our core belt and small leather goods products. We purchase all of our other accessory items, which are manufactured according to our design specifications, from foreign and domestic sources. In fiscal 2004, our sales of other accessories totaled $52.5 million, or 24.3% of our net sales. Sales of other accessories accounted for 27.1% and 23.8% of our net sales in fiscal 2003 and 2002, respectively.

What brands do we sell?

Fiscal 2004 Brand Sales
(as a % of net sales)
     Our brand sales consist of licensed brands, private brands and proprietary brands which accounted for approximately 8.1%, 57.5% and 34.4% of our net sales for fiscal 2004, respectively.

Exclusive License Agreements

      We have been awarded exclusive license agreements for several well recognized brands, including Dockers®, Levi’s®, Levi Strauss Signature^TM, Jones New York®, Bugle Boy®, Haggar®, Woolrich® and Jordache®. Through our acquisition of Superior Merchandise Company on July 1, 2004 we have also acquired an exclusive license agreement for totes® gift accessories.

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      Generally, our license agreements cover specific products and require us to pay annual royalties, ranging from 2% to 8% of net sales, based on minimum sales quotas or sales. The terms of the agreements are typically four to ten years, with options to extend the terms, provided certain sales or royalty minimums are achieved. For fiscal 2004, sales of our licensed products accounted for approximately $17.5 million, or 8.1% of our net sales, with no sales associated with any individual license agreement accounting for more than 5% of net sales.

Private Brand Products

      In fiscal 2004, private brand products accounted for approximately $123.9 million, or 57.5% of our net sales. In a private brand program we are responsible for designing, manufacturing and delivering unique products for select customers according to the customer’s individual requirements. These programs offer our customers exclusivity and pricing control over their products, both of which are important factors in the retail marketplace. We believe our flexible sourcing capabilities, advanced electronic inventory management and replenishment systems, and design, product development and merchandising expertise provide retailers with a superior alternative to direct sourcing of their private brand products. Our principal private brand programs include those for leading retailers such as:

•  Wal-Mart;

•  Target;

•  JCPenney;

•  Sears; and

•  Payless ShoeSource.

      Our principal private brand programs also include nationally recognized private brand names such as:

•  Farah®;

•  Faded Glory®;

•  Meeting Street®;

•  No Boundaries®;

•  St. John’s Bay®;

•  Xhilaration®;

•  Mossimo®; and

•  Cherokee®.

Proprietary Brands

      In addition to our licensed and private brands, we produce and market products under our own registered trademarks and trade names. We own leading and well recognized trademarks such as Rolfs®, Amity®, Canterbury®, Tiger®, Accessory Design Group®, Prince Gardner®, Princess Gardner®, and, through our acquisition of Superior Merchandise Company on July 1, 2004, the ETON® brand. We intend to build on the success of our proprietary brand portfolio by pursuing additional ownership opportunities and expanding the assortment of products we offer and the retail channels we serve with our proprietary brands. Net sales under our proprietary brands were approximately $74.0 million, or 34.4% of our net sales in fiscal 2004.

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Distribution of Our Key Brands

      Our key brands and each brand’s targeted distribution channels and primary products are as follows:

Brand	Distribution Channel	Products
Dockers®	National chain stores	Belts
	Department stores	Handbags
	Specialty stores	Small leather goods
		Cold weather accessories
Levi’s®	National chain stores	Belts
	Department stores	Small leather goods
	Specialty stores
Levi Strauss Signature TM	Mass merchants	Belts
	National chain stores	Small leather goods
		Casual multi-purpose bags
Jones New York®	Department stores	Belts
	Specialty stores	Small leather goods
Rolfs®	Department stores	Small leather goods
	Specialty stores
Haggar®	National chain stores	Belts
	Department stores	Small leather goods
	Catalogs
Woolrich®	Department stores	Belts
	Specialty stores	Small leather goods
Jordache®	National chain stores	Belts
Bugle Boy®	National chain stores	Belts
	Department stores	Small leather goods
Canterbury®	Specialty stores	Belts
	Golf pro shops	Small leather goods
Prince Gardner®	National chain stores	Small leather goods
	Specialty stores
Princess Gardner®	National chain stores	Small leather goods
	Specialty stores
Amity®	Mass merchants	Small leather goods
	National chain stores
Coletta®	Mass merchants	Handbags
	National chain stores
Accessory Design Group®	Mass merchants	Belts
	National chain stores	Women’s accessories
Tiger®	Mass merchants	Belts
	National chain stores

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Brand	Distribution Channel	Products
Stagg®	Mass merchants	Belts
	National chain stores	Small leather goods
ETON®	Department stores	Gift accessories
	Specialty stores
totes®	Department stores	Gift accessories
	Specialty stores

What are our channels of distribution?

      We sell our products to a variety of retail outlets, including the following:

      • department stores;

      • e-commerce websites;

      • specialty chains;

      • national chain stores;

      • mass merchants;

      • outlet stores;

      • the retail exchange operations of the United States military;

      • off-price stores;

      • golf pro shops;

      • sporting goods stores;

      • supermarkets;

      • individual specialty stores;

      • uniform stores;

      • catalog retailers;

      • TV shopping networks;

      • shoe stores;

      • drug stores;

      • wholesale clubs; and

      • office supply stores.

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Who are our customers?

      We maintain strong relationships with various major retailers in the United States and Canada, including the following:

Department Stores:	National Chains:	Mass Merchants:
Nordstrom;	Sears (U.S. & Canada);	Wal-Mart (U.S. and Canada);
Dillard’s;	JCPenney;	Target;
May Company;	Mervyn’s;	Shopko/Pamida;
Federated/ Macy’s;	AAFES;	Meijer;
Belk;	Structure;	Fred Meyer; and
Saks, Inc.;	Stein Mart;	Zellers (Canada).
Dayton Hudson;	TJ Maxx;
Kohl’s;	Marshall’s;
Stage;	Men’s Wearhouse; and
Boscov’s;	Moore’s (Canada).
Gottschalk’s;
Bon-Ton; and
The Bay (Canada).

      For fiscal 2004 and 2003, Wal-Mart accounted for 36.7% and 35.6% of our net sales, respectively, and Target accounted for 14.0% and 15.4%, respectively. No other customer accounted for 10% or more of our total revenues. In fiscal 2004, our top ten customers accounted for approximately 73.4% of net sales. A decision by Wal-Mart, Target or any other significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to decrease the amount of merchandise purchased from us or to change their manner of doing business with us could have a material adverse effect on our financial position and results of operations.

How do we maintain strong customer relations?

      We believe our success is due in large part to our strong customer relationships, strong sales and marketing organization and superior customer service. Factors which help facilitate these characteristics include our “quick response” distribution, vendor inventory management services, electronic data interchange capabilities and expertise in the communication of fashion and lifestyle concepts through product lines and innovative point-of-sale presentations. We develop and manage our accounts through the coordinated efforts of senior management, regional managers, account executives and an organization of salespeople and independent sales representatives. Members of our senior management or senior account executives manage our relationships with certain of our national accounts such as Wal-Mart, Shopko, Kohl’s, Dillard’s, JCPenney, Sears, Meijer’s and Target.

      We maintain in-store customer service relationships with various specialty stores, national chain stores and major department stores. We have a team of more than 141 sales associates in the United States and approximately 10 sales associates in Canada. These sales associates are organized on a regional basis and supervised by regional sales managers. Sales associates are responsible for overseeing accounts within a defined geographic territory, developing and maintaining business relationships with their respective customers, preparing and conducting line presentations, and assisting customers in the implementation of programs at the individual store level. In addition, sales associates may, depending on the needs of an individual customer, assist in the maintenance and presentation of merchandise on the selling floor. Our regional sales organization is supported by account executives. Sales personnel, other than senior managers, generally are compensated based on a combination of salary and commission.

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Did we have firm backlog orders for fiscal 2004 and the prior fiscal year?

      We had firm backlog orders at June 30, 2004 and 2003, totaling $10,258,000 and $9,593,000, respectively. Our backlog orders are fairly consistent throughout the year with a seasonal increase during the first and second quarter. Generally, whether we can fill our backlog orders is dependent on product availability. Historically, the amount of unfilled backlog orders has been immaterial. The backlog at June 30, 2004 may not be indicative of future results.

How do we merchandise and develop our products?

      Senior managers are responsible for generating profitable performance results by developing, planning, selling and implementing merchandise programs for their accounts. Individual senior managers develop and maintain business relationships with customers’ buyers and merchandise managers. Senior managers also develop and propose comprehensive programs relating to product mix, pricing and fixturing and they assist customers’ buyers and merchandise managers in the implementation of these programs. We coordinate the implementation of marketing programs through the efforts of senior and regional managers. Senior and regional managers are compensated based on a combination of salary and bonus tied to various measures of profitability and sales performance.

      Our product development and merchandising professionals work closely with our customers, suppliers and licensors to interpret market trends, develop new products and create and implement comprehensive merchandising programs which consist of packaging, point-of-sale fixturing and presentation materials. We believe our ability to design all of our products internally represents a significant competitive advantage because retail customers have become increasingly reliant on the design and merchandising expertise of their suppliers.

What is our competitive position?

      Competition in the fashion accessories industry is intense. The accessories market is highly fragmented, and management believes we are one of the largest competitors in the accessories industry. Based on our analysis, we have found that the sectors of the accessories industry we serve have grown at an average annual rate of 3-5% in recent years. In our opinion, this growth has resulted from:

•  the trend toward more casual attire, which has increased demand for accessories outside the traditional dress category;

•  increased consumer awareness of branded accessories as a fashion and lifestyle statement; and

•  a desire for newness and change in accessories styles.

      As a result of recent consolidation in the retail industry, retailers have increasingly chosen to consolidate their supply bases to a core group of companies that have the resources and expertise to meet the retailers’ increasing demands. We believe we are well positioned to continue to capitalize on these market trends.

      Our ability to remain competitive depends largely on our ability to maintain our customer relationships, create new designs and products and offer high quality merchandise at competitive prices. The following table summarizes our primary competitors:

Product Segment	Primary Competitors
Men’s and Boys’ Belts	Swank, Randa/Humphreys, Cipriani and Fossil
Men’s Wallets	Buxton, Randa/Humphreys, Mundi, Fossil, Swank and Cipriani
Women’s and Girls’ Belts	Cipriani, Liz Claiborne, Circa, Accessory Network and Fossil
Women’s Handbags	Nine West, Liz Claiborne, Kenneth Cole and Fossil
Women’s Personal Leather Goods	Buxton, Mundi, Fossil, Liz Claiborne and Nine West

      We compete on the basis of customer service, brand recognition, product quality and price. We believe our ability to compete successfully is based on our strong customer relationships, superior customer service,

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strong national brand portfolio, national distribution capabilities, proprietary inventory management systems, flexible sourcing and product design and innovation.

How do we seek to grow our business?

      We seek increased sales and earnings through a variety of means, including increased sales through our current operating units, as well as growth through the acquisition of assets and similar businesses. Since our incorporation in Delaware on November 1, 1990, we have acquired numerous businesses. Over the last three years, we made the following acquisitions:

	Name of Business
Date Acquired	or Assets Acquired	Product Lines	Brands Acquired
April 12, 2002	Certain assets of AA&E Leathercraft, Inc.	Sporting goods accessories	AA&E
July 1, 2004	Superior Merchandise Company	Gift accessories	ETON® and licensed totes® brand

Where and how do we manufacture our products?

      Our manufacturing facilities are located in Yoakum, Texas, and Scarborough, Ontario. These facilities have the capacity to manufacture approximately 5.8 million belts per year. During fiscal 2004, our manufacturing facilities operated at approximately 97% of capacity. We continually seek to increase the automation of our manufacturing operations. We believe we are one of the lowest-cost domestic belt producers because of our automated equipment, large production volumes and economies of scale in raw materials and finished goods sourcing.

      In fiscal 2004, we sourced certain finished products representing approximately 85% of our net sales from outside manufacturers, both domestic and foreign. We have strong relationships with a number of high quality, low-cost foreign manufacturers who provide particularly labor-intensive products, such as small leather goods, manufactured to our specifications.

      Our transactions with our foreign manufactures and suppliers are subject to the risks of doing business abroad. Imports into the United States (both finished goods and raw materials) are affected by, among other things, the cost of transportation, and imposition of import duties and restrictions. The United States, Canada, China and other countries in which our products are manufactured may, from time to time, impose new quotas, tariffs or other restrictions, or adjust presently prevailing quotas, duty or tariff levels, which could affect our operations and our ability to import products at current or increased levels. We cannot predict the likelihood or frequency of any such events occurring.

      Financial information regarding our net revenues, total assets and property, plant and equipment, by geographic location, appears on page 33 of our Annual Report to Stockholders, and is incorporated herein by reference.

To what extent is our business seasonal?

      Our quarterly sales and net income results are fairly consistent throughout the fiscal year, with a seasonal increase during the first and second quarter.

What are the sources and availability of our raw materials?

      Our raw materials requirements are limited to materials used in the manufacture of men’s belts, as this is the only product we manufacture ourselves. These raw materials consist primarily of leather hides and hardware, such as buckles, and are readily available from a variety of foreign and domestic sources. As a result, we have not experienced any significant disruption of product flow based on our raw materials needs.

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Are we subject to governmental regulations?

      Many of our products are manufactured in countries other than the United States. Accordingly, those countries and the United States may from time to time modify existing quotas, duties, tariffs, or import restrictions, or otherwise regulate or restrict imports in a manner which could be material and adverse to us. In addition, economic and political disruptions in Asia and other parts of the world from which we import goods could have an adverse effect on our ability to maintain an uninterrupted flow of products to our major customers.

      Due to the fact that we sell our products to retail exchange operations of the United States military, and thus are a supplier to the federal government, we must comply with all federal statutes applicable to federal government suppliers. Historically, we have not made any material modifications or accommodations as a result of government regulations.

How many employees do we have?

      We had approximately 1,224 employees as of June 30, 2004. We believe employee relations are generally good.

What role does intellectual property play in our business?

      We believe our trademarks, our licenses to use certain trademarks and our other proprietary rights in and to intellectual property are important to our success and our competitive position and we seek to protect our intellectual property rights against infringement. Specifically, we seek to protect our interests not only in our brands but in our designs as well. We devote considerable resources to the establishment and protection of our intellectual property on a nationwide basis and in selected foreign markets. Our trademarks remain valid and enforceable as long as the marks are used in connection with our products and services and the required registration renewals are filed.

What are our working capital practices?

      We do not enter into long-term agreements with any of our customers. Instead, we enter into a number of purchase order commitments with our customers for each of our lines every season. Due to the production time required by our foreign suppliers to produce and ship goods to our distribution centers, we attempt, based on internal estimates, to carry on hand inventory levels necessary for the timely shipment of initial shipment and replenishment orders of men’s and women’s accessories to our customers. A decision by the customer buyer of a group of stores or any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to significantly change the amount of merchandise purchased from us, or to change the customer buyer’s manner of doing business with us, may have a significant effect on our financial condition and results of operations. However, this exposure is mitigated in that we sell our products to a variety of retail partners throughout the United States and Canada.

Where can investors access additional information regarding Tandy Brands?

      Our website address is www.tandybrands.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed by our officers, directors and stockholders holding 10% or more of our common stock and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). You may also read and copy any reports, proxy statements or other information that we file with the SEC at the SEC’s public reference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation and location of the public reference room. Our SEC filings are also available to the public, free of charge, at the SEC’s website at www.sec.gov.

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Item 2. Properties.

      We own and lease numerous facilities throughout the United States and lease facilities in Canada and Hong Kong. We currently lease our corporate offices which are located in Arlington, Texas. On January 31, 2004, we renewed that lease for a period of 67 months at an average monthly expense of $51,654. We believe our properties are adequate and suitable for the particular uses involved. The following table summarizes our properties:

		Form of
Facility Location	Use	Ownership
Yoakum, Texas (4 facilities)	Leather product manufacturing, product distribution and administrative offices		Own
West Bend, Wisconsin	Distribution of small leather goods and handbags		Own
Scarborough, Ontario	Manufacture and distribution of leather goods		Lease
Dallas, Texas	Distribution of women’s accessories		Lease
Arlington, Texas	Corporate offices		Lease
New York, New York	Office space		Lease
San Francisco, California	Office space		Lease
Birmingham, Alabama	Office space		Lease
Minneapolis, Minnesota	Office space		Lease
Hong Kong	Office space		Lease

      The total space we owned, leased and occupied as of June 30, 2004, was as follows:

	Approximate Square Feet
	Owned		Leased		Total
Warehouse and Office		509,000		264,000		773,000
Factory		60,000		27,000		87,000
Total		569,000		291,000		860,000

Item 3. Legal Proceedings.

      We are not involved in any material pending legal proceedings, other than ordinary routine litigation incidental to our business. No material legal proceedings were terminated during the fourth quarter of fiscal 2004.

Item 4. Submission of Matters to a Vote of Security Holders.

      There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2004.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters.

What is the principal market for our common stock?

      The principal market for our common stock is the NASDAQ National Market System. Our common stock is listed on the NASDAQ National Market System under the symbol “TBAC.” Information regarding the high and low sales prices for our common stock for each full quarterly period within the two most recent fiscal years as reported on NASDAQ appears on page 46 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference.

How many common stockholders do we have?

      As of September 17, 2004, we had approximately 857 common stockholders of record.

Did we declare any cash dividends in fiscal 2004 or the prior fiscal year?

      While we did not declare any dividends in fiscal 2003, on August 12, 2003, our board of directors declared the company’s first quarterly dividend. During fiscal 2004, we declared and paid dividends as set forth in the following table:

Declaration Date	Record Date	Payable Date	Dividend per Share
August 12, 2003	September 30, 2003	October 31, 2003		$0.025
October 15, 2003	December 31, 2003	January 22, 2004		$0.025
January 22, 2004	March 31, 2004	April 20, 2004		$0.025
April 22, 2004	June 30, 2004	July 20, 2004		$0.025

      We expect quarterly dividends will continue to be paid in fiscal 2005. On August 12, 2004, our board of directors declared a dividend of $0.0275 per share payable to stockholders of record as of September 30, 2004. The payment of the dividend will occur on October 19, 2004. The payment of dividends in the future will be at the sole discretion of our board of directors and will depend on our profitability, financial condition, capital needs, future prospects, contractual restrictions and other factors deemed relevant by our board of directors.

How many shares of common stock are authorized for issuance under our equity compensation plans?

      The following table provides information regarding the number of shares of our common stock that may be issued on exercise of outstanding stock options and warrants under our existing equity compensation plans as of June 30, 2004. These plans are as follows:

•  the 1993 Employee Stock Option Plan;

•  the 1997 Employee Stock Option Plan;

•  the Nonqualified Formula Stock Option Plan for Non-Employee Directors;

•  the Nonqualified Stock Option Plan for Non-Employee Directors;

•  the 2002 Omnibus Plan;

•  the 1995 Stock Deferral Plan for Non-Employee Directors;

•  the Stock Purchase Program; and

•  nonqualified stock option agreements with certain non-employee directors.

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							(C)
	(A)			(B)			Number of Securities Remaining
	Number of Securities to			Weighted-Average			Available for Future Issuance
	be Issued upon Exercise			Exercise Price of			Under Equity Compensation Plans
	of Outstanding Options,			Outstanding Options,			(Excluding Securities Reflected in
Plan Category	Warrants and Rights			Warrants and Rights			Column (A))
Equity Compensation Plans Approved by Stockholders		984,601	(1)	$	11.43	(2)		422,656	(3)
Equity Compensation Plans Not Approved by Stockholders		19,250	(4)	$	6.09			202,484	(5)
Total		1,003,851		$	11.33			625,140

(1)	Includes options to purchase 54,300 shares of common stock under the 1993 Employee Stock Option Plan, 648,157 shares of common stock under the 1997 Employee Stock Option Plan, 87,337 shares of common stock under the Nonqualified Formula Stock Option Plan for Non-Employee Directors, and 172,432 shares of common stock under the 2002 Omnibus Plan. Also includes 22,375 shares of common stock issuable upon settlement of phantom stock units under the 1995 Stock Deferral Plan for Non-Employee Directors.
(2)	Calculation of weighted-average exercise price does not include phantom stock units credited to participants’ accounts under the 1995 Stock Deferral Plan for Non-employee Directors.
(3)	Includes 395,031 shares of common stock issuable under the 2002 Omnibus Plan and 27,625 shares of common stock issuable under the 1995 Stock Deferral Plan for Non-Employee Directors. Upon adoption of the 2002 Omnibus Plan by our stockholders at our 2002 annual stockholders’ meeting, the number of shares authorized and reserved for issuance under our previously existing stock option plans were transferred to the 2002 Omnibus Plan and are presently authorized and reserved for issuance under that plan. All shares of common stock authorized and reserved for issuance on the exercise of outstanding stock options under our previous stock option plans and the 2002 Omnibus Plan will, on the cancellation or expiration of any such stock options, automatically be authorized and reserved for issuance under the 2002 Omnibus Plan.
(4)	Includes options to purchase an aggregate of 19,250 shares of common stock under nonqualified stock option agreements for non-employee directors, dated October 16, 2001, with each of Dr. James F. Gaertner (4,250), Marvin J. Girouard (4,250), Gene Stallings (4,250), Roger R. Hemminghaus (2,500) and Colombe M. Nicholas (4,000). These options became fully vested six months after the date of grant and expire on October 16, 2011.
(5)	Includes 202,484 shares of common stock issuable under the Stock Purchase Program. The Stock Purchase Program was approved by our stockholders in December 1990; however, subsequent amendments to increase the number of shares of common stock available for issuance under the Stock Purchase Program were not required to be approved by our stockholders and therefore were not submitted to our stockholders for approval. The Stock Purchase Program is open to all full-time employees who are enrolled in the Tandy Brands Accessories, Inc. Employees Investment Plan. Under the Stock Purchase Program, participants may contribute 5% or 10% of their earnings and we match 25% or 50% of each participant’s contribution depending on their length of employment. The Stock Purchase Program purchases treasury stock, if available, or unissued common stock directly from the company at monthly average market prices. The participant’s shares are fully vested upon purchase and the participant may withdraw from the Stock Purchase Program at any time. The shares purchased under the Stock Purchase Program are distributed to participants annually.

12

Did the company repurchase any shares of common stock during the fourth quarter of fiscal 2004?

      The following table provides information regarding repurchases of shares of common stock made by us during the quarter ended June 30, 2004. All of such shares were purchased in the open market and held in a rabbi trust established under our Benefit Restoration Plan:

	(A)		(B)				(D)
					(C)		Maximum
					Total Number of		Number of Shares
	Total				Shares Purchased		that may Yet Be
	Number of		Average		as Part of Publicly		Purchased Under
	Shares		Price Paid		Announced Plans		the Plans or
Period	Purchased		Per Share		or Programs		Programs
April 1, 2004 to April 30, 2004		4,068	$	10.26		N/A		N/A
May 1, 2004 to May 31, 2004		652	$	10.65		N/A		N/A
June 1, 2004 to June 30, 2004		460	$	12.68		N/A		N/A
Total		5,180	$	10.53		N/A		N/A

Item 6. Selected Financial Data.

      The information required by this item appears on page 46 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      The information required by this item appears on pages 38 through 45 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

      The information required by this item appears on pages 42 and 43 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

      The information required by this item appears on pages 14 through 46 of our 2004 Annual Report to Stockholders, and is incorporated herein by reference. Following is a cross-reference for location of the required information:

	Page Number in the
	Tandy Brands
	Accessories, Inc.
	2004 Annual
Financial Statements and Supplementary Data	Report to Stockholders
Consolidated Statements of Income for the Years Ended June 30, 2004, 2003 and 2002		14
Consolidated Balance Sheets at June 30, 2004 and 2003		15
Consolidated Statements of Cash Flows for the Years Ended June 30, 2004, 2003 and 2002		16
Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2004, 2003 and 2002		17
Notes to Consolidated Financial Statements		18-35
Selected Unaudited Quarterly Financial Data		34
Report of Independent Registered Public Accounting Firm		36
Selected Financial Data		46

13

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

      None.

Item 9A. Controls and Procedures.

      We have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2004, our disclosure controls and procedures were effective in timely alerting them to material information (including information relating to our consolidated subsidiaries) required to be included in our filings under the Securities Exchange Act of 1934.

      There has been no change in our internal control over financial reporting during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

14

PART III

      The information required by Items 10 through 14 is included in our definitive Proxy Statement relating to our 2004 Annual Meeting of Stockholders, and is incorporated herein by reference. Following is a cross-reference for location of the required information:

			Page Number in the
		Caption in the	Tandy Brands
		Tandy Brands Accessories, Inc.	Accessories, Inc.
	Item	2004 Proxy Statement	2004 Proxy Statement
Item 10.	Directors and	“Proposal: Election of Directors”		5-7
	Executive Officers of
	the Registrant	“Executive Officers”		7
		“Section 16(a) Beneficial Ownership Reporting Compliance”		10
		“Corporate Governance — Has the Board of Directors adopted a Code of Ethics?”		16
		“Corporate Governance — What are the Board of Directors’ committees? What functions do they serve?”		16-17
Item 11.	Executive Compensation	“Executive Officer and Non-Employee Director Compensation — How do we compensate our executive officers?”		10-13
		“Executive Officer and Non-Employee Director Compensation — How do we compensate our non-employee directors?”		14
		“Stock Performance”		15
		“Corporate Governance — What are the Board of Directors’ committees? — What functions do they serve? — Compensation Committee Interlocks and Insider Participation”		18
		“Report of Compensation Committee”		22-23
Item 12.	Security Ownership of Certain Beneficial Owners and Management	“Security Ownership of Certain Beneficial Owners”		8-10
Item 13.	Certain Relationships and Related Transactions	“Certain Relationships and Related Transactions”		14-15
Item 14.	Principal Accountant Fees and Services	“Independent Auditor”		19-20

15

PART IV

Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.

      (a) The following documents are filed as a part of this report:

(1)	The financial statements listed in response to Item 8 of this report have been incorporated herein by reference to pages 14 through 35 of our 2004 Annual Report to Stockholders.
(2)	Financial Statement Schedule: Schedule II — Valuation and Qualifying Accounts and Report of Independent Registered Public Accounting Firm thereon. The financial statement schedule should be read in conjunction with the consolidated financial statements in our 2004 Annual Report to Stockholders. Financial statement schedules not included in this report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(3)	Exhibits: A list of the exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference.

      (b) Reports on Form 8-K.

      During the fourth quarter of fiscal 2004, we filed a Form 8-K on

•  April 21, 2004 to report the issuance of the press release announcing our financial results for the third quarter of fiscal 2004;

•  May 7, 2004 to report the issuance of the press release announcing the declaration of a quarterly dividend; and

•  June 3, 2004 to report the issuance of the press release announcing our agreement to acquire Superior Merchandise Company.

      During July and August 2004 we filed a Form 8-K on

•  July 1, 2004 to report the issuance of the press release announcing the completion of the previously announced acquisition of Superior Merchandise Company;

•  August 16, 2004 to report the issuance of the press release announcing our financial results for the fourth quarter and fiscal year ended June 30, 2004 and the declaration of a quarterly dividend; and

•  August 31, 2004 to report our entry into the third amendment to our credit facility.

16

SIGNATURES

      Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TANDY BRANDS ACCESSORIES, INC. (REGISTRANT)

/s/ J.S.B. JENKINS

J.S.B. Jenkins

President and Chief Executive Officer

Date: September 23, 2004

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date
/s/ DR. JAMES F. GAERTNER Dr. James F. Gaertner	Director and Chairman of the Board	September 23, 2004
/s/ J.S.B. JENKINS J.S.B. Jenkins	Director, President and Chief Executive Officer (principal executive officer)	September 23, 2004
/s/ C.A. RUNDELL, JR. C.A. Rundell, Jr.	Director	September 23, 2004
/s/ ROGER R. HEMMINGHAUS Roger R. Hemminghaus	Director	September 23, 2004
/s/ GENE STALLINGS Gene Stallings	Director	September 23, 2004
/s/ COLOMBE M. NICHOLAS Colombe M. Nicholas	Director	September 23, 2004
/s/ GEORGE C. LAKE George C. Lake	Director	September 23, 2004
/s/ MARK J. FLAHERTY Mark J. Flaherty	Chief Financial Officer (principal financial and accounting officer)	September 23, 2004

17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of

Tandy Brands Accessories, Inc.

      We have audited the consolidated financial statements of Tandy Brands Accessories, Inc. and subsidiaries as of June 30, 2004 and 2003, and for each of the three years in the period ended June 30, 2004, and have issued our report thereon dated July 30, 2004, except for footnote 16 to the consolidated financial statements, as to which the date is August 26, 2004, incorporated by reference in this Annual Report on Form 10-K. Our audits also included the financial statement schedule listed in Item 15(a) of this Annual Report on Form 10-K. The schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

      In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Fort Worth, Texas

July 30, 2004

18

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

For the Year Ended June 30,

			Additions
	Balance at								Balance at
	Beginning		Charged to Costs		Charged to Other				End of
Description	of Period		and Expenses		Accounts		Deductions(1)		Period
2004
Allowance for Doubtful Accounts And Returns	$	1,745,000	$	3,902,000	$	-0-	$	4,505,000	$	1,142,000
2003
Allowance for Doubtful Accounts And Returns	$	1,707,000	$	5,530,000	$	-0-	$	5,492,000	$	1,745,000
2002
Allowance for Doubtful Accounts And Returns	$	1,671,000	$	4,870,000	$	-0-	$	4,834,000	$	1,707,000

(1)  Represents uncollectible accounts written off, net of recoveries and application of allowances to sales returns.

19

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
		Exhibit Number and Description	Form	Date	File No.	Exhibit
(3) Articles of Incorporation and By-laws
	3.1	Certificate of Incorporation of Tandy Brands Accessories, Inc.	S-1	11/02/90	33-37588		3.1
	3.2	Restated Bylaws of Tandy Brands Accessories, Inc.**	N/A	N/A	N/A		N/A
(4) Instruments defining the rights of security holders, including indentures
	4.1	Certificate of Designations, Powers, Preferences, and Rights of Series A Junior Participating Cumulative Preferred Stock of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.1
	4.2	Form of Common Stock Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.2
	4.3	Form of Preferred Share Purchase Rights Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.3
	4.4	Form of Rights Certificate of Tandy Brands Accessories, Inc.	8-K	11/02/99	0-18927		4
	4.5	Amended and Restated Rights Agreement, dated October 19, 1999, between Tandy Brands Accessories, Inc. and Bank Boston, N.A	8-K	11/02/99	0-18927		4
	4.6	Amendment to Rights Agreement, dated October 19, 1999, between Tandy Brands Accessories, Inc. and Fleet National Bank (f.k.a. Bank Boston, N.A.)	10-Q	05/10/02	0-18927		4.7
(10) Material Contracts
	10.1	Tandy Brands Accessories, Inc. 1991 Stock Option Plan*	S-1	11/02/90	33-37588		10.8
	10.2	Form of Stock Option Agreement — 1991 Stock Option Plan*	S-1	11/02/90	33-37588		10.9
	10.3	Tandy Brands Accessories, Inc. Benefit Restoration Plan and related Trust Agreement and Amendments Nos. 1 and 2 thereto*	10-K	09/25/97	0-18927		10.14
	10.4	Form of Indemnification Agreement between Tandy Brands Accessories, Inc. and each of its Directors	S-1	12/17/90	33-37588		10.16
	10.5	Form of Indemnification Agreement between Tandy Brands Accessories, Inc. and each of its Officers	S-1	12/17/90	33-37588		10.17
	10.6	Tandy Brands Accessories, Inc. Non-Qualified Formula Stock Option Plan for Non-Employee Directors*	S-8	02/10/94	33-75114		28.1
	10.7	Tandy Brands Accessories, Inc. 1993 Employee Stock Option Plan and form of Stock Option Agreement thereunder*	S-8	02/10/94	33-75114		28.2
	10.8	Tandy Brands Accessories, Inc. Non-Qualified Stock Option Plan for Non-Employee Directors*	S-8	02/10/94	33-75114		28.3
	10.9	Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors*	S-8	06/03/96	33-08579		99.1

20

			Incorporated by Reference
			(if applicable)
		Exhibit Number and Description	Form	Date	File No.	Exhibit
10.1	0	Tandy Brands Accessories, Inc. 1997 Employee Stock Option Plan*	S-8	12/12/97	333-42211		99.1
10.1	1	Tandy Brands Accessories, Inc. Employees Investment Plan, as Amended and Restated effective July 1, 2000*	10-K	09/26/00	0-18927		10.39
10.1	2	Credit Agreement, dated as of June 27, 2001, among Tandy Brands Accessories, Inc. as the Borrower, Wells Fargo HSBC Trade Bank, N.A. as Administrative Agent and as Lender, certain Financial Institutions as Lenders and Wells Fargo Bank, N.A. as Arranger	10-K	09/25/01	0-18927		10.34
10.1	3	ISDA Master Agreement, dated as of June 27, 2001, between Tandy Brands Accessories, Inc. and Wells Fargo Bank, N.A	10-K	09/25/01	0-18927		10.35
10.1	4	Tandy Brands Accessories, Inc. Stock Purchase Program (as amended and restated effective October 18, 1991)*	S-8	03/27/92	33-46814		28.1
10.1	5	Limited Consent and Waiver, dated November 5, 2001, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A. as Administrative Agent under the Agreement	10-Q	11/13/01	0-18927		10.37
10.1	6	Amendment No. 2 to the Tandy Brands Accessories, Inc. 1997 Employee Stock Option Plan*	10-Q	5/10/02	0-18927		10.38
10.1	7	Amendment No. 4 to the Tandy Brands Accessories, Inc. Nonqualified Formula Stock Option Plan For Non-Employee Directors*	10-Q	5/10/02	0-18927		10.39
10.1	8	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Dr. James F. Gaertner*	S-8	5/15/02	33-88276		10.2
10.1	9	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Marvin J. Girouard*	S-8	5/15/02	33-88276		10.3
10.2	0	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Gene Stallings*	S-8	5/15/02	33-88276		10.4
10.2	1	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Roger R. Hemminghaus*	S-8	5/15/02	33-88276		10.5
10.2	2	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Colombe M. Nicholas*	S-8	5/15/02	33-88276		10.6
10.2	3	First Amendment to Credit Agreement, dated June 28, 2002, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A	10-K	9/27/02	0-18927		10.23

21

			Incorporated by Reference
			(if applicable)
		Exhibit Number and Description	Form	Date	File No.	Exhibit
10.2	4	Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-Q	11/12/02	0-18927		10.24
10.2	5	Tandy Brands Accessories, Inc. Supplemental Executive Retirement Plan*	10-Q	2/12/03	0-18927		10.25
10.2	6	Amendment No. 1 to the Tandy Brands Accessories, Inc. Stock Purchase Program*	10-Q	5/12/03	0-18927		10.27
10.2	7	Mid-Market Trust Agreement, dated August 19, 2001, between Tandy Brands Accessories, Inc. and State Street Bank and Trust Company relating to the Tandy Brands Accessories, Inc. Employees Investment Plan*	10-K	9/23/03	0-18927		10.28
10.2	8	Second Amendment to Credit Agreement, dated June 26, 2003, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A	10-K	9/23/03	0-18927		10.29
10.2	9	Amendment No. 1 to the Tandy Brands Accessories, Inc. Supplemental Executive Retirement Plan, effective January 1, 2003*	10-K	9/23/03	0-18927		10.30
10.3	0	Amendments Nos. 1-3 to the Tandy Brands Accessories, Inc. Employees Investment Plan, as Amended and Restated on July 1, 2000*	10-K	9/23/03	0-18927		10.31
10.3	1	Amendment No. 3 to the Tandy Brands Accessories, Inc. Benefit Restoration Plan, effective as of July 1, 2003*	10-K	9/23/03	0-18927		10.32
10.3	2	Form of Severance Agreement between Tandy Brands Accessories, Inc. and each of J.S.B. Jenkins, Stanley T. Ninemire and Mark J. Flaherty*	10-K	9/23/03	0-18927		10.33
10.3	3	Succession Agreement, dated July 1, 2001 between Tandy Brands Accessories, Inc. and Chase Texas, N.A. (the Former Trustee) and Comerica Bank — Texas (the Trustee), relating to the Tandy Brands Accessories, Inc. Benefit Restoration Plan*	10-K	9/23/03	0-18927		10.34
10.3	4	Succession Agreement, dated June 20, 2002, between Tandy Brands Accessories, Inc. and Comerica Bank — Texas, (the Trustee) relating to the Tandy Brands Accessories, Inc. Employees Investment Plan*	10-K	9/23/03	0-18927		10.35
10.3	5	Office Lease Agreement, dated January 31, 2004, between Koll Bren Fund VI, LP and Tandy Brands Accessories, Inc. relating to the corporate office	10-Q	2/12/04	0-18927		10.36
10.3	6	Amendment No. 2 to the Tandy Brands Accessories, Inc. Stock Purchase Program effective May 23, 1998*	10-Q	2/12/04	0-18927		10.37
10.3	7	Amendment No. 4 to the Tandy Brands Accessories, Inc. Employees Investment Plan dated December 22, 2003*	10-Q	2/12/04	0-18927		10.38
10.3	8	Third Amendment to Credit Agreement, dated August 26, 2004, among Tandy Brands Accessories, Inc.,Wells Fargo Bank, N.A., Comerica Bank, JPMorgan Chase Bank and Bank of America, N.A.**	N/A	N/A	N/A		N/A

22

				Incorporated by Reference
				(if applicable)
			Exhibit Number and Description	Form	Date	File No.	Exhibit
	10.3	9	Form of Non-Employee Director Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan* **	N/A	N/A	N/A		N/A
	10.4	0	Form of Employee Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan* **	N/A	N/A	N/A		N/A
	10.4	1	Form of Non-Employee Director Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan* **	N/A	N/A	N/A		N/A
	10.4	2	Form of Employee Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan* **	N/A	N/A	N/A		N/A
(13) Annual Report to security holders, Form 10-Q or quarterly report to security holders
	13.1		2004 Annual Report to Stockholders of Tandy Brands Accessories, Inc.**	N/A	N/A	N/A		N/A
(21) Subsidiaries of the registrant
	21.1		List of subsidiaries**	N/A	N/A	N/A		N/A
(23) Consents of experts and counsel
	23.1		Consent of Ernst & Young LLP**	N/A	N/A	N/A		N/A
(31) Rule 13a-14(a)/15d-14(a) Certifications
	31.1		Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Executive Officer)**	N/A	N/A	N/A		N/A
	31.2		Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Financial Officer)**	N/A	N/A	N/A		N/A
(32) Section 1350 Certifications
	32.1		Section 1350 Certification (Chief Executive Officer and Chief Financial Officer)**	N/A	N/A	N/A		N/A

*  Management contract or compensatory plan

**  Filed herewith

23 EX-3.2 2 d18322exv3w2.txt RESTATED BYLAWS EXHIBIT 3.2 RESTATED BYLAWS OF TANDY BRANDS ACCESSORIES, INC. . . . TABLE OF CONTENTS

Page ---- ARTICLE I OFFICES........................................................................ 1 SECTION 1. REGISTERED OFFICE.............................................................. 1 SECTION 2. OTHER OFFICES.................................................................. 1 ARTICLE II MEETINGS OF STOCKHOLDERS....................................................... 1 SECTION 1. PLACE OF MEETING............................................................... 1 SECTION 2. ANNUAL MEETINGS................................................................ 1 SECTION 3. SPECIAL MEETINGS............................................................... 1 SECTION 4. NOTICE......................................................................... 1 SECTION 5. QUORUM......................................................................... 1 SECTION 6. VOTES.......................................................................... 2 SECTION 7. LIST OF STOCKHOLDERS........................................................... 2 ARTICLE III DIRECTORS...................................................................... 3 SECTION 1. NUMBER......................................................................... 3 SECTION 2. TERM OF OFFICE................................................................. 3 SECTION 3. CHAIRMAN OF THE BOARD.......................................................... 3 SECTION 4. VACANCIES...................................................................... 3 SECTION 5. MEETINGS OF THE BOARD OF DIRECTORS............................................. 3 SECTION 6. QUORUM......................................................................... 4 SECTION 7. COMPENSATION................................................................... 4 SECTION 8. QUALIFICATIONS................................................................. 4 ARTICLE IV EXECUTIVE COMMITTEE AND OTHER COMMITTEES....................................... 4 SECTION 1. EXECUTIVE COMMITTEE............................................................ 4 SECTION 2. PROCEDURE...................................................................... 4 SECTION 3. POWERS......................................................................... 4 SECTION 4. MINUTES........................................................................ 4 SECTION 5. OTHER COMMITTEES............................................................... 5 ARTICLE V OFFICERS....................................................................... 5 SECTION 1. OFFICERS....................................................................... 5 SECTION 2. VACANCIES...................................................................... 5 SECTION 3. PRESIDENT...................................................................... 5 SECTION 4. VICE PRESIDENTS................................................................ 5 SECTION 5. TREASURER...................................................................... 5 SECTION 6. ASSISTANT TREASURERS........................................................... 6 SECTION 7. SECRETARY...................................................................... 6 SECTION 8. ASSISTANT SECRETARIES.......................................................... 6 SECTION 9. SUBORDINATE OFFICERS........................................................... 6 SECTION 10. COMPENSATION................................................................... 6 SECTION 11. REMOVAL........................................................................ 6 SECTION 12. BONDS.......................................................................... 6 ARTICLE VI CERTIFICATES OF STOCK.......................................................... 7

-i- TABLE OF CONTENTS

Page ---- SECTION 1. FORM AND EXECUTION OF CERTIFICATES............................................. 7 SECTION 2. TRANSFER OF SHARES............................................................. 7 SECTION 3. CLOSING OF TRANSFER BOOKS AND RECORD DATES..................................... 7 SECTION 4. LOST OR DESTROYED CERTIFICATES................................................. 8 ARTICLE VII CORPORATE SIGNATURES........................................................... 8 SECTION 1. EXECUTION OF NEGOTIABLE INSTRUMENTS............................................ 8 SECTION 2. EXECUTION OF AGREEMENTS........................................................ 8 SECTION 3. EXECUTION OF PROXIES........................................................... 9 ARTICLE VIII WAIVERS AND CONSENTS........................................................... 9 SECTION 1. WAIVERS........................................................................ 9 SECTION 2. CONSENTS....................................................................... 9 ARTICLE IX DIVIDENDS AND RESERVE FUNDS.................................................... 9 SECTION 1. DIVIDENDS...................................................................... 9 SECTION 2. RESERVE FUNDS.................................................................. 9 ARTICLE X INSPECTION OF BOOKS............................................................ 9 ARTICLE XI FISCAL YEAR.................................................................... 10 ARTICLE XII SEAL........................................................................... 10 ARTICLE XIII INDEMNIFICATION OF DIRECTORS AND OFFICERS...................................... 10 ARTICLE XIV AMENDMENTS..................................................................... 10 SECTION 1. BY STOCKHOLDERS................................................................ 10 SECTION 2. BY DIRECTORS................................................................... 10

-ii- TANDY BRANDS ACCESSORIES, INC. RESTATED BYLAWS ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be located in the City of Dover, County of Kent, State of Delaware, and the name of the resident agent in charge thereof shall be The Prentice-Hall Corporation System, Inc. SECTION 2. Other Offices. The principal office of the Corporation and such other offices as may be deemed appropriate shall be at such place or places as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Place of Meeting. All meetings of the stockholders for the election of directors shall be held at such place within or without the State of Delaware as the Board of Directors may designate, provided that notice shall be given to the stockholders entitled to vote at such meeting of the place so fixed at least ten (10) days prior to the day of the meeting. Meetings of stockholders for any other purpose may be held at such place and time as shall be stated in the notice of the meeting. SECTION 2. Annual Meetings. The first annual meeting of stockholders shall be held on the Wednesday preceding the second Thursday of November of each year commencing in 1991, if not a legal holiday, and if a legal holiday then on the next business day following, commencing at such time as the Board of Directors of the Corporation shall determine, at which meeting the stockholders shall elect directors by a plurality vote, and shall transact such other business as may properly be brought before such meeting. SECTION 3. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or the Certificate of Incorporation, may be called only by the board of directors by resolution adopted by a vote of the majority. SECTION 4. Notice. Written or printed notice of every meeting of stockholders, annual or special, stating the time and place thereof, and, if a special meeting, the purpose or purposes in general terms for which the meeting is called, shall be served upon or mailed to each stockholder entitled to vote at such meeting not less than ten (10) days prior to the day of such meeting, at his address as it appears upon the books of the Corporation, or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, then to the address designated in such request. SECTION 5. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat shall be requisite and shall constitute a quorum. If, however, such majority shall not be represented at any meeting of the stockholders regularly called, the holders of a majority of the shares present in person or by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented. At such adjourned meeting at which the requisite amount of shares entitled to vote thereat shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 6. Votes. Except as otherwise provided in the Certificate of Incorporation of the Corporation, each stockholder shall, at each meeting of stockholders, be entitled to one vote for each share of Common Stock entitled to vote and the vote, if any, which was fixed pursuant to the Certificate of Incorporation for each share of Preferred Stock which is registered in the stockholder's name on the books of the Corporation on the date on which the transfer books were closed, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting. At each such meeting every stockholder shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. At all meetings of the stockholders, a quorum being present, all matters shall be decided by a majority vote of the shares of stock entitled to vote held by stockholders present in person or by proxy, except as otherwise required by the Certificate of Incorporation or the laws of the State of Delaware. Unless so directed by the chairman of the meeting, or required by the laws of the State of Delaware, the vote thereat on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or in his name by his proxy, if there be such proxy, and shall state the number of shares voted by him and the number of votes to which each share is entitled. On a vote by ballot, the chairman shall appoint two inspectors of election, who shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability and who shall take charge of the polls and after the balloting shall make a certificate of the result of the vote taken; but no director or candidate for the office of director shall be appointed as such inspector. SECTION 7. List of Stockholders. At least ten (10) days before every election of directors, a complete list of stockholders entitled to vote at such election, arranged in alphabetical order, with the residence of each and the number of voting shares held by each shall be prepared by the Secretary. Such list shall be open at the principal offices of the Corporation or at the place where the election is to be held, for said ten (10) days, to the examination of any stockholder entitled to vote at that election and shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. -2- ARTICLE III DIRECTORS SECTION 1. Number. The business and property of the Corporation shall be conducted and managed by a Board consisting of such number of directors, but not less than three (3) nor more than nine (9), as may be fixed from time to time by resolution adopted by the Board. Directors need not be stockholders. SECTION 2. Term of Office. The directors shall be divided into three classes, Class I, Class II and Class III. The number of directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of directors by three, and if a fraction is also contained in such quotient then if such fraction is one-third (1/3), the extra director shall be a member of Class III, and if the fraction is two-thirds (2/3) one of the extra directors shall be a member of Class III and the other a member of Class II. Once the initial Board of Directors is divided into classes, Class I directors shall serve for a term expiring at the annual meeting of stockholders to be held in 1991, Class II directors shall serve for a term expiring at the annual meeting of stockholders to be held in 1992 and Class III directors shall serve for a term expiring at the annual meeting of stockholders to be held in 1993. Each director shall serve until his or her successor is elected and qualified. At each annual meeting of stockholders commencing with the annual meeting of stockholders to be held in 1991, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. SECTION 3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. SECTION 4. Vacancies. Except as otherwise provided in the Certificate of Incorporation, in the case of any increase in the number of directors, or in the case of any vacancy in the Board of Directors resulting from the death, resignation, removal or such other cause, such newly created directorship or vacancy shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Any director elected in accordance with this Section 4 shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and shall serve until such director's successor shall have been elected and qualified. SECTION 5. Meetings of the Board of Directors. Meetings of the Board of Directors shall be held at such place within or without the State of Delaware as may from time to time be fixed by resolution of the Board of Directors or by the Chairman of the Board, or by the President or as may be specified in the notice or waiver of notice of any meeting. Meetings may be held at any time upon the call of the Chairman of the Board, the President or the Secretary or -3- any two (2) of the directors then in office by oral, telegraphic, or written notice, duly served or sent or mailed to each director not less than one (1) day before such meeting. Meetings may be held at any time and place without notice if all the directors are present, or if those not present shall in writing or by telegram or cable waive notice thereof. A regular meeting of the Board of Directors may be held without notice immediately following the annual meeting of stockholders at the place where such annual meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board of Directors. SECTION 6. Quorum. One-third, but not less than two (2), of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, a fixed sum for attendance at each meeting of the Board of Directors and/or a stated fee as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of the Executive Committee and/or of other committees may be allowed like compensation and reimbursement of expenses for attending committee meetings. SECTION 8. Qualifications. No director may serve past the annual meeting following his or her 70th birthday. ARTICLE IV EXECUTIVE COMMITTEE AND OTHER COMMITTEES SECTION 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of two (2) or more members, to serve during the pleasure of the Board of Directors, to consist of such directors as the Board of Directors may from time to time designate. The Chairman of the Executive Committee shall be designated by the Board of Directors. SECTION 2. Procedure. The Executive Committee, by a vote of a majority of its members, shall fix its own times and places of meeting, shall determine the number of its members constituting a quorum for the transaction of business, and shall prescribe its own rules of procedure, no change in which shall be made save by a majority vote of its members. SECTION 3. Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all the powers of the Board of Directors in the management and direction of the business and affairs of the Corporation, to the extent permitted by law. SECTION 4. Minutes. The Executive Committee shall keep regular minutes of its proceedings and all action by the Executive Committee shall be reported to the Board of -4- Directors at its next meeting. Such action shall be subject to review by the Board of Directors, provided that no rights of third parties shall be affected by such review. SECTION 5. Other Committees. From time to time the Board of Directors, by the affirmative vote of a majority of the whole Board of Directors, may appoint other committees for any purpose or purposes, and such committees shall have such powers as shall be conferred by the resolution of appointment, and as shall be permitted by law. ARTICLE V OFFICERS SECTION 1. Officers. The Board of Directors shall elect, as officers, a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer and a Secretary, and in their discretion one or more Assistant Secretaries, and Assistant Treasurers. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders, and each shall hold office until the corresponding meeting of the Board of Directors in the next year and until his successor shall have been duly elected and qualified, or until he shall have died or resigned or shall have been removed in the manner provided herein. The powers and duties of two or more offices may be exercised and performed by the same person, except the offices of President and Secretary. SECTION 2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. SECTION 3. President. The President shall be the chief executive officer of the Corporation. Subject to the direction of the Board of Directors, he shall have and exercise direct charge of and general supervision over the business and affairs of the Corporation and shall perform such other duties as may be assigned to him from time to time by the Board of Directors. SECTION 4. Vice Presidents. The Vice Presidents shall, in the order of their seniority or in such order as may be specified by the Board of Directors, have and perform all the powers and duties of the President, in his absence or disability, and shall in addition have and exercise such powers and shall perform such duties as from time to time may be conferred upon or assigned to them by the Board of Directors or as may be delegated to them by the Chairman of the Board or the President. SECTION 5. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors; he may endorse for collection on behalf of the Corporation, checks, notes and other obligations; he may sign receipts and vouchers for payments made to the Corporation; singly or jointly with another person as the Board of Directors may authorize, he may sign checks of the Corporation and pay out and dispose of the proceeds under the direction of the Board of Directors; he shall cause to be kept correct books of account of all the business and transactions of the Corporation, shall see that adequate audits thereof are currently and regularly made, and -5- shall examine and certify the accounts of the Corporation; he shall render to the Board of Directors, the Executive Committee, the Chairman of the Board or to the President, whenever requested, an account of the financial condition of the Corporation; he may sign with the President or a Vice President, certificates of stock of the Corporation; and, in general, shall perform all the duties incident to the office of a treasurer of a corporation, and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 6. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the President or the Board of Directors shall prescribe. SECTION 7. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors in books provided for the purpose; he shall see that all notices are duly given in accordance with the provisions of law, the Certificate of Incorporation, and these Bylaws; he shall be custodian of the records and of the corporate seal or seals of the Corporation; he shall see that the corporate seal is affixed to all documents, the execution of which, on behalf of the Corporation, under its seal, is duly authorized and when the seal is so affixed he may attest the same; he may sign, with the President or a Vice President, certificates of stock of the Corporation; and, in general, he shall perform all duties incident to the office of a secretary of a corporation, and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 8. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the President or the Board of Directors shall prescribe. SECTION 9. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof. SECTION 10. Compensation. The Board of Directors shall have the power to fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. SECTION 11. Removal. Any officer of the Corporation may be removed, with or without cause, by a majority vote of the Board of Directors at a meeting called for that purpose. SECTION 12. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. -6- ARTICLE VI CERTIFICATES OF STOCK SECTION 1. Form and Execution of Certificates. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as may be prescribed from time to time by law and by the Board of Directors. The certificates of stock of each class and series now authorized or which may hereafter be authorized by the Certificate of Incorporation shall be consecutively numbered and signed by either the President or a Vice President together either with the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Where any such certificate is signed by a transfer agent or transfer clerk and by a registrar, the signatures of any such President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary upon such certificate may be facsimiles engraved or printed. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been placed upon, such certificate or certificates shall have ceased to be such, whether because of death, resignation or otherwise, before such certificate or certificates shall have been issued and delivered, such certificate or certificates may nevertheless be issued and delivered with the same effect as if such officer or officers had not ceased to be such at the date of its issue and delivery. SECTION 2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his attorney lawfully constituted, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. SECTION 3. Closing of Transfer Books and Record Dates. The Board of Directors may in its discretion prescribe, in advance, a record date not exceeding sixty (60) nor less than ten (10) days prior to the date of any meeting of the stockholders or prior to the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose without a meeting, during which no transfer of stock on the books of the Corporation may be made; or in lieu of prohibiting the transfer of stock, may fix, in advance, a record date not more then sixty (60) nor less than ten (10) days prior to the date of any meeting of stockholders or prior to the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose without a meeting, as the time as of which stockholders entitled to notice of and to vote at such a meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined; and all persons who were holders of record of voting stock at such time and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may also, in its discretion, fix in advance a date not exceeding sixty (60) days preceding the date fixed for the payment of any dividend or the making of any distribution, or for the delivery of -7- evidence of rights, or evidences of interests arising out of any issuance, change, conversion or exchange of capital stock, as a record date for the determination of the stockholders entitled to receive or participate in any such dividend, distribution, rights or interests, notwithstanding any transfer of any stock on the books of the Corporation after any record date fixed as aforesaid, or, at its option, in lieu of so fixing a record date, may prescribe in advance a period not exceeding sixty (60) days prior to the date for such payment, distribution or delivery during which no transfer of stock on the books of the Corporation may be made. SECTION 4. Lost or Destroyed Certificates. In case of the loss or destruction of any outstanding certificate of stock, a new certificate may be issued upon the following conditions: The owner of said certificate shall file with the Secretary of the Corporation an affidavit giving the facts in relation to the ownership, and in relation to the loss or destruction of said certificate, stating its number and the number of shares represented thereby; such affidavit to be in such form and contain such statements as shall satisfy the President and Secretary that said certificate has been accidentally destroyed or lost, and that a new certificate ought to be issued in lieu thereof. Upon being so notified, the President and Secretary shall require such owner to file with the Secretary a bond in such penal sum and in such form as they may deem advisable, and with a surety or sureties approved by them, to indemnify and save harmless the Corporation from any claim, loss, damage or liability which may be occasioned by the issuance of a new certificate in lieu thereof. Upon such bond being-so filed, a new certificate for the same number of shares shall be issued to the owner of the certificate so lost or destroyed; and the transfer agent and registrar of stock, if any, shall countersign and register such new certificate upon receipt of a written order signed by the said President and Secretary, and thereupon the Corporation will save harmless said transfer agent and registrar in the premises. Any Vice President may act hereunder in the stead of the President, and an Assistant Secretary in the stead of the Secretary. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issue of such new certificate may be surrendered. A new certificate may be issued without requiring any bond when in the judgment of the Board of Directors it is proper to do so. ARTICLE VII CORPORATE SIGNATURES SECTION 1. Execution of Negotiable Instruments. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, agent or agents, as shall be thereunto authorized from time to time by the Board of Directors. SECTION 2. Execution of Agreements. All contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments (except as provided in Sections 1 and 3 of this Article VII) shall be signed by the President or any Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer, or by such other officer or officers, agent or agents, as shall be thereunto authorized from time to time. -8- SECTION 3. Execution of Proxies. The President or a Vice President of the Corporation may authorize from time to time the signature and issuance of proxies to vote upon shares of stock of other companies standing in the name of the Corporation. All such proxies shall be signed in the name of the Corporation by the President or a Vice President and by the Secretary or an Assistant Secretary. ARTICLE VIII WAIVERS AND CONSENTS. SECTION 1. Waivers. Whenever under the provisions of any law or under the provisions of the Certificate of Incorporation of the Corporation or these Bylaws, the Corporation, or the Board of Directors or any committee thereof, is authorized to take any action after notice to stockholders or the directors or the members of such committee, or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of any period of time if, at any time before or after such action be completed, such requirements be waived in writing by the person or persons entitled to said notice or entitled to participate in the action to be taken, or, in the case of a stockholder, by his attorney thereunto authorized. SECTION 2. Consents. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board of Directors or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee. ARTICLE IX DIVIDENDS AND RESERVE FUNDS SECTION 1. Dividends. Except as otherwise provided by law or by the Certificate of Incorporation, the Board of Directors may declare dividends out of the surplus of the Corporation at such times and in such amounts as it may from time to time designate. SECTION 2. Reserve Funds. Before crediting net profits to the surplus in any year, there may be set aside out of the net profits of the Corporation for that year such sum or sums as the Board of Directors from time to time in its absolute discretion may deem proper as a reserve fund or funds to meet contingencies or for equalizing dividends or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall deem conducive to the interests of the Corporation. ARTICLE X INSPECTION OF BOOKS The Board of Directors shall determine from time to time whether, and if allowed when and under what conditions and regulations, the accounts and books of the Corporation (except such as may by statute be specifically open to inspection) or any of them shall be open to the inspection of the stockholders; and the stockholders' rights in this respect are and shall be restricted and limited accordingly. -9- ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall end on the thirtieth day of June of each year unless another date shall be fixed by resolution of the Board of Directors. After such date is fixed it may be changed for future fiscal years at any time or from time to time by further resolution of the Board of Directors. ARTICLE XII SEAL The corporate seal shall be circular in form and shall contain the name of the Corporation, the State of incorporation, and the words "Corporate Seal." ARTICLE XIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Each director and officer, whether or not then in office (and his heirs and administrators), shall be reimbursed by the Corporation to the full extent permitted by Section 145 of the General Corporation Law of the State of Delaware for all reasonable expenses incurred by, imposed upon him in connection with, or resulting from any action, suit or proceeding to which he may be made a party by reason of his being or having been a director or officer of the Corporation or any of its subsidiaries, or of any other corporation at the request of the Corporation. The Corporation may also make such reimbursement in the event of a settlement of any such action, suit or proceeding prior to final adjudication when such settlement appears to be in the interest of the Corporation. The foregoing right of reimbursement shall not be exclusive of other rights to which such director or officer may be entitled as a matter of law. ARTICLE XIV AMENDMENTS SECTION 1. By Stockholders. Except as otherwise provided in the Certificate of Incorporation of the Corporation, these Bylaws may be amended by the affirmative vote of the holders of 66 2/3% or more of the combined voting power of the outstanding voting stock, voting together as a single class and cast at any annual or special meeting of the stockholders if notice of the proposed amendment shall have been contained in the notice of the meeting. SECTION 2. By Directors. Except as otherwise specifically provided herein, these Bylaws may be amended by the affirmative vote of a majority of the Board of Directors, at any regular or special meeting thereof, if notice of the proposed amendment shall have been contained in the notice of such meeting. If any Bylaw regulating an impending election of directors is adopted or amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of the stockholders for the election of directors the Bylaw so adopted or amended or repealed together with a concise statement of the changes made. -10- EX-10.38 3 d18322exv10w38.txt THIRD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.38 EXECUTION COPY THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") made as of the 26th day of August, 2004, by and among TANDY BRANDS ACCESSORIES, INC. ("Borrower"), WELLS FARGO HSBC TRADE BANK, N. A. ("Agent"), and the lenders specified herein ("Lenders"). WHEREAS, Borrower, Agent and certain lenders entered into a Credit Agreement dated as of June 27, 2001 (the "Original Credit Agreement"), as amended by that First Amendment to Credit Agreement dated as of June 28, 2002, (the "First Amendment"; as amended by that Second Amendment to Credit Agreement dated as of June 26, 2002 (the "Second Amendment") the Original Credit Agreement and the First Amendment and the Second Amendment together, the "Credit Agreement"); and WHEREAS, Borrower has requested that Agent and Lenders make certain amendments to the Credit Agreement, and Agent and Lenders are willing to do so subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. DEFINED TERMS. All capitalized terms used but not otherwise defined in this Amendment shall have the meaning ascribed to them in the Credit Agreement. Unless otherwise specified, all section references herein refer to sections of the Credit Agreement. 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended as follows: 2.1 Recitals (a) First Recital The First Recital is revised to read as follows: "WHEREAS, Borrower has requested that Agent and Lenders provide Borrower with a $85,000,000.00 revolving credit facility (the "Revolving Credit Loan") to fund general corporate and working capital needs of Borrower and its Subsidiaries." 2.2 Definitions (a) Applicable Commitment Fee The chart in clause (b) in the definition of "Applicable Commitment Fee Percentage" is revised as follows: Tandy Brands Accessories, Inc. - Third Amendment 1

APPLICABLE COMMITMENT TOTAL FUNDED INDEBTEDNESS FEE TO EBITDA RATIO PERCENTAGE - ---------------------------------------------------------------- ----------- Less than 1.00 to 1.00 0.20% Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 0.25% Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00 0.30% Greater than or equal to 2.50 to 1.00 0.375%

(b) Applicable Margin The chart in clause (b) in the definition of "Applicable Margin" is revised as follows:

APPLICABLE MARGIN FOR TOTAL FUNDED INDEBTEDNESS EURODOLLAR TO EBITDA RATIO BORROWINGS - ------------------------------------------------------------------ ----------- Less than 1.00 to 1.00 1.000% Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00 1.125% Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00 1.250% Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00 1.500% Greater than or equal to 2.50 to 1.00 1.750%

(c) Fixed Charge Coverage Ratio The definition of "Fixed Charge Coverage Ratio" is amended to read as follows: Tandy Brands Accessories, Inc. - Third Amendment 2 "`FIXED CHARGE COVERAGE RATIO', means, for the four consecutive fiscal quarterly periods ending on the date of determination for Borrower and its Subsidiaries, the ratio of (a) EBITDA determined on a consolidated basis minus Capital Expenditures minus federal, state, local and foreign income taxes divided by (b) Interest Expense plus payments made in respect of Capitalized Lease Obligations plus any cash dividend made by Borrower or any of its Subsidiaries, plus any payments made by Borrower or any of its Subsidiaries in respect of the redemption, retirement, acquisition, or prepayment of any Borrower's capital stock, or any other equity interest, which are more than $5,000,000 in the aggregate during the term of this Agreement, plus, for any determination based on the quarterly period ending September 30, 2004 and thereafter, implied principal payments in an amount equal to one-fifth (1/5th) of Revolving Credit Loans in excess of $20,000,000 outstanding on the last day of each such quarterly period, plus any Investments in Sheldon." (d) Permitted Acquisitions The definition of "Permitted Acquisition" is revised to read as follows: "`Permitted Acquisition' means an acquisition of a business entity or assets (i) provided the aggregate amount of all consideration for all such acquisitions from the date of the Third Amendment until the Termination Date does not exceed $20,000,000 or (ii) for which Borrower has received the prior written consent of the Required Lenders." (e) Permitted Liens Clause (d) of the definition of "Permitted Liens" is revised to add the words "or other property" after the words "equipment or machinery" on line 16 of the definition. (f) Revolving Credit Notes The definition of "Revolving Credit Notes" is revised to read as follows: "`Revolving Credit Notes' means those certain Revolving Credit Promissory Notes dated as of the date of the Third Amendment in the form of Exhibit A attached hereto, executed by Borrower, as maker, and payable to the order of Lenders, as payee, in the aggregate original principal amount of $85,000,000.00, together with any renewals, extensions, or modifications thereof." Tandy Brands Accessories, Inc. - Third Amendment 3 (g) Security Documents The definition of "Security Documents" is deleted as is any reference to "Security Documents" in the Loan Documents. (h) H.A. Sheldon Canada, Ltd. The definition of "Sheldon" is added: " `Sheldon' means H. A. Sheldon Canada, Ltd." (i) Termination Date Clause (a) in the definition of "Termination Date" is revised to read as follows: "(a) November 30, 2007," (j) Third Amendment The definition of "Third Amendment" is added: "`Third Amendment' means the Third Amendment to the Credit Agreement dated August 26, 2004." (k) Total Funded Indebtedness The following is added to the end of the definition of "Total Funded Indebtedness:" "minus, Indebtedness or obligations to a Bank under letters of credit." (l) Total Revolving Credit Commitment The definition of "Total Revolving Credit Commitment" is revised to read as follows: "`Total Revolving Credit Commitment' shall mean the sum of the Lenders' Revolving Credit Commitments, as the same may be terminated or reduced from time to time in accordance with the provisions of this Agreement. As of the date of the Third Amendment, the Total Revolving Credit Commitment is $85,000,000.00." 2.3 Increases in the Total Revolving Credit Commitment Section 2.19, Increases in Total Revolving Credit Commitment, is added to the Credit Agreement as follows: Tandy Brands Accessories, Inc. - Third Amendment 4 "2.19 INCREASES IN TOTAL REVOLVING CREDIT COMMITMENT. The Borrower may request increases in the Total Revolving Credit Commitment as follows: (a) Provided there exists no Event of Default and subject to the conditions set forth under clause (e) below, upon thirty (30) Business Days notice to the Agent (which shall promptly notify the Lenders), the Borrower may, from time to time, request increases in the Total Revolving Credit Commitment in an amount not to exceed $25,000,000 in the aggregate; provided, that each increase of the Total Revolving Credit Commitment shall be in a minimum amount of $5,000,000, or integral multiples of $1,000,000 in excess thereof. At the time of sending such notice, the Borrower (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders). (b) Each Lender shall notify the Agent within such time period whether or not it agrees to increase its Revolving Credit Commitment and, if so, whether by an amount equal to, greater than, or less than its percentage share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Revolving Credit Commitment. (c) The Agent shall notify the Borrower and each Lender of the Lenders' responses to the request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Agent (which approval shall not be unreasonably withheld), the Borrower may also invite additional lenders to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Agent and its counsel. (d) If the Total Revolving Credit Commitment is increased in accordance with this subsection, the Agent and the Borrower shall determine the effective date (such date, the "Increase Effective Date) and the final allocation of such increase. The Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase in the Total Revolving Credit Commitment and the Increase Effective Date. (e) As conditions precedent to such increase, (i) the Borrower shall deliver to the Agent a certificate dated as of the Increase Effective Date signed by an Officer of the Borrower (y) certifying that each of the conditions set forth in Section 7.2 (a), (b), and (d) have been satisfied by the Borrower, and (z) certifying and attaching the resolutions adopted by the Borrower and (ii) the Borrower shall have paid all fees and expenses due and owing to the Agent and the Lenders. To the extent necessary to keep the outstanding Revolving Credit Loans ratable with any revised percentage shares of the Lenders arising from any nonratable increase in Tandy Brands Accessories, Inc. - Third Amendment 5 the Total Revolving Credit Commitment under this subsection, the Borrower shall prepay Revolving Credit Loans outstanding on the Increase Effective Date and/or Lenders shall make assignments pursuant to arrangements satisfactory to the Agent." 2.4 Security (a) Section 6.1 is deleted in its entirety. Further, any reference to "security," "security interest," and "security agreement" in the Loan Documents is hereby deleted. (b) Effective as of the effectiveness of this Amendment, Agent, the Lenders and WFB hereby release their security interest in the Collateral owned by the Borrower and its Subsidiaries. (c) As soon as practicable following the effectiveness of this Amendment, the Agent shall file the appropriate UCC Financing Statement Amendments (Form UCC3) terminating the Lenders' security interests in the Collateral and shall terminate any additional security filings. (d) As soon as practicable following the effectiveness of this Amendment, the Agent shall return to the Borrower the shares of stock pledged to the Lenders and the related stock powers. 2.5 After-Acquired Subsidiaries Section 9.14 is amended by deleting the words "and Security Agreement" following the words "Subsidiary Guaranty" on line 5 of such Section. 2.6 Limitations on Indebtedness (a) Clause (c) of Section 10.3 is revised to read as follows: "(c) Purchase money financing not to exceed $3,000,000 in any Fiscal Year;" (b) Clause (h) is added to Section 10.3 as follows: "(h) Indebtedness with respect to letters of credit (not subject to the terms and conditions of this Agreement), issued by a Bank, such letters of credit not to exceed $20,000,000 in amounts available to be drawn thereunder at any time." 2.7 Restricted Payments (a) Section 10.9 is amended to read as follows: Tandy Brands Accessories, Inc. - Third Amendment 6 "10.9 RESTRICTED PAYMENTS. The Borrower and its Subsidiaries may declare or pay any cash dividend; redeem, retire, otherwise acquire, or prepay, shares of their capital stock or any other equity interest; or make any other distribution of any property or cash to owners of an equity interest in their capacity as such, if, in respect to payments or distributions made by the Borrower, (a) such payment or distribution is in the form of the issuance of the Borrower's own stock, or (b) at the time of making such payment or distribution and as a result thereof there exists or would exist no Event of Default." 2.8 Investments (a) Section 10.11 beginning at subsection (c) is hereby amended to read in its entirety as follows: "(c) Investments made in connection with Borrower's Benefit Restoration Plan and Supplemental Employee Retirement Plan; and (d) Investments in Subsidiaries." 2.9 Capital Expenditures Section 10.13 is deleted in its entirety. 2.10 Leverage Ratio Section 10.14 is amended to read as follows: "10.14 LEVERAGE RATIO. Borrower shall not permit the ratio of (a) Total Funded Indebtedness, on a consolidated basis, as of the last day of each fiscal quarter of the Borrower beginning September 30, 2004, to (b) EBITDA, on a consolidated basis, for the four (4) fiscal quarters ending on the date of determination to exceed 3:00 to 1:00." 2.11 Fixed Charge Coverage Ratio Section 10.15 is amended to read as follows: "10.15 FIXED CHARGE COVERAGE RATIO. Borrower shall not permit the Fixed Charge Coverage Ratio as of the last day of each fiscal quarter of Borrower beginning September 30, 2004 to be less than 1.25:1.00." 2.12 Tangible Net Worth Section 10.16 is amended to read as follows: Tandy Brands Accessories, Inc. - Third Amendment 7 "10.16 TANGIBLE NET WORTH. The Tangible Net Worth of the Borrower and its Subsidiaries on a consolidated basis shall never be less than the sum of eighty percent (80%) of Tangible Net Worth as of June 30, 2004 plus (a) seventy-five percent (75%) of Consolidated Net Income earned after June 30, 2004 during any fiscal quarter, provided, however that fiscal quarters in which Consolidated Net Income is a negative amount will be excluded from the calculation of Consolidated Net Income earned after June 30, 2004, plus (b) an amount equal to 100% of the net proceeds of any equity offering by the Borrower or any of its Subsidiaries occurring after June 30, 2004." 2.13 Trading Asset Coverage Ratio Section 10.17 is amended to read as follows: "10.17 TRADING ASSET COVERAGE RATIO. Borrower shall not permit the ratio of (a) Total Funded Indebtedness plus outstanding Commercial Letters of Credit to (b) Trading Assets, as of the last date of each fiscal quarter of Borrower beginning September 30, 2004, to be not less than 1.00 to 1.00. "Trading Assets" means the sum of (i) seventy-five percent (75%) of net accounts receivable, plus (ii) fifty percent (50%) of inventory, plus (iii) 60% of outstanding Commercial Letters of Credit, all as of the date of determination." 2.14 Hedging Section 10.20 is deleted in its entirety. 2.15 Exhibit D Exhibit D, Subsidiaries - Tandy Brands Accessories, Inc. is revised as attached to this Amendment. 2.16 Schedule 2.1 Schedule 2.1, Revolving Credit Commitments, is revised as attached to this Amendment. 2.17 Withdrawal of Lender. On the date of execution of this Amendment by the parties hereto, Compass Bank shall cease to be a Lender under the Credit Agreement and shall have no rights or obligations under the Credit Agreement or the Loan Documents. The Total Revolving Credit Commitment shall be re-allocated among the remaining Lenders as set forth on revised Schedule 2.1 attached hereto. Tandy Brands Accessories, Inc. - Third Amendment 8 2.18 Joinder Agreement. As of the effectiveness of this Amendment, Bank of America, N.A. and JPMorgan Chase Bank shall each become a party to the Credit Agreement as a Lender, shall acquire all of the rights, powers and obligations of a Lender under the Credit Agreement, and shall each have a Revolving Credit Commitment equal to $14,000,000. From and after the effectiveness of this Amendment, all references to "Lenders" in the Credit Agreement and the other Loan Documents shall be deemed to include, in any event, Bank of America, N.A. and JPMorgan Chase Bank. 3. EFFECTIVENESS OF AMENDMENT. This Amendment shall be effective upon receipt by Agent of: (a) A copy or copies of this Amendment signed by each of the parties hereto; (b) The Amended and Restated Notes or Notes, as the case may be, executed in favor of each Lender; (c) A Confirmation of Guaranty executed by each Guarantor (other than Sheldon); (d) A release of Sheldon's Guaranty executed by Agent; (e) Additional Subsidiaries Supplements executed by TBAC-Acquisition, Inc. and Superior Merchandise Company; (f) A Compliance Certificate executed by Borrower; (g) A legal opinion to be furnished by counsel to the Borrower in form and substance satisfactory to the Agent; (h) Resolutions from the Borrower and each of the Guarantors, in form and substance satisfactory to the Agent, authorizing the execution and delivery of and performance under this Amendment and any documents or agreements entered into in connection therewith; and (i) Payment for all other fees and expenses due and owing by the Borrower. 4. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. (a) The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. Borrower, Tandy Brands Accessories, Inc. - Third Amendment 9 Agent and Lenders agree that the Credit Agreement and the Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. (b) To induce Agent and Lenders to enter into this Amendment, Borrower ratifies and confirms each representation and warranty set forth in the Credit Agreement as if such representations and warranties were made on the even date herewith, (except to the extent that such representations and warranties related solely to an earlier date and except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Credit Agreement) and further represents and warrants (i) that there has occurred since the date of the last financial statements delivered to Agent and Lenders no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Change, (ii) that no Event of Default exists on the date hereof, (iii) that Borrower is fully authorized to enter into this Amendment, and (iv) that the Guarantors signing the Confirmation of Guaranty attached hereto or executing Additional Subsidiaries Supplements are all of the Borrower's Subsidiaries as of the date of this Amendment (other than Sheldon). 5. BENEFITS. This Amendment shall be binding upon and inure to the benefit and Borrower, Agent and Lenders and their respective successors and assigns; provided, however, that Borrower may not, without the prior written consent of Agent and Lenders, assign any rights, powers, duties or obligations under this Amendment, the Credit Agreement or any of the other Loan Documents. 6. CONSTRUCTION. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas. 7. INVALID PROVISIONS. If any provision of this Amendment is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully several and the remaining provisions of this Amendment shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance. 8. ENTIRE AGREEMENT. The Credit Agreement, as amended by this Amendment, contains the entire agreement among the parties regarding the subject matter hereof and supersedes all prior written and oral agreements and understandings among the parties hereto regarding same. 9. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in the Credit Agreement to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. Tandy Brands Accessories, Inc. - Third Amendment 10 10. COUNTERPARTS. This Amendment may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same agreement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] Tandy Brands Accessories, Inc. - Third Amendment 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BORROWER: TANDY BRANDS ACCESSORIES, INC. By: /s/ Mark J. Flaherty -------------------------------------- Name: Mark J. Flaherty Title: Chief Financial Officer AGENT: WELLS FARGO HSBC TRADE BANK, N.A. By: /s/ Yousuf Omar ---------------------------------------- Name: Yousuf Omar Title: Senior Relationship Manager WELLS FARGO BANK, N. A. By: /s/ John Johnson ---------------------------------------- Name: /s/ John W. Johnson -------------------------------------- Title: Vice President ------------------------------------- Tandy Brands Accessories, Inc. - Third Amendment LENDERS: WELLS FARGO HSBC TRADE BANK, N. A. By: /s/ Yousuf Omar ---------------------------------------- Name: Yousuf Omar Title: Senior Relationship Manager Address: 1445 Ross Avenue, Suite 450 Dallas, TX 75202 Attention: Yousuf Omar Fax No.: 214-220-1585 Tandy Brands Accessories, Inc. - Third Amendment COMERICA BANK By: /s/ Corey R. Bailey ------------------------------------- Name: Corey R. Bailey ------------------------------------- Title: Vice - President - Texas Division ------------------------------------- Address: 8828 Stemmons, Suite 441 Dallas, TX 75247 Attention: Corey R. Bailey Fax No.: 214-589-1360 Tandy Brands Accessories, Inc. - Third Amendment COMPASS BANK, as withdrawing Lender By: /s/ Michael H. Keith -------------------------------------- Name: Michael H. Keith -------------------------------------- Title: Senior Vice President ------------------------------------- Address: 8080 N. Central Expressway Suite 250 Dallas, TX 75206 Attention: Michael Keith Fax No. 214-346-2746 Tandy Brands Accessories, Inc. - Third Amendment BANK OF AMERICA, N.A. By: /s/ Steven A. MacKenzie ----------------------------------- Name: Steven A. MacKenzie Title: Senior Vice President Address: 901 Main Street 67th Floor Dallas, Texas 75202 Attention: Steven A. MacKenzie Fax No. 214-209-3140 Tandy Brands Accessories, Inc. - Third Amendment JPMORGAN CHASE BANK By: /s/ Jerry Petrey --------------------------------- Name: Jerry Petrey Title: Vice President Address: 500 E. Border P.O. Box 250 Arlington, Texas 76004-0250 Attention: Jerry Petrey Fax No. 817-856-3183 Tandy Brands Accessories, Inc. - Third Amendment EXHIBIT D SUBSIDIARIES - TANDY BRANDS ACCESSORIES, INC.

Number of Jurisdiction Outstanding Shares of of Each Class of Owner of Jurisdictions Incorporation Capital Stock or Outstanding Shares Qualified as Foreign or Partnership Interest or Interests of Each Corporation or Subsidiary Organization Owned Such Class Owned Partnership - ---------------------------- ---------------- ------------------------- ------------------------- ------------------------ TBAC Prince Gardner, Inc. Delaware 1,000 Tandy Brands Texas Accessories, Inc. Amity/Rolfs, Inc. Delaware 1,000 Tandy Brands Wisconsin Accessories, Inc. TBAC Investments, Inc. Nevada 1,000 Tandy Brands Accessories, Inc. TBAC General Management Company Nevada 1,000 Tandy Brands Texas Accessories, Inc. Accessory Design Group, Inc. Delaware 1,000 Tandy Brands Texas Accessories, Inc. TBAC - Torel, Inc. Delaware 1,000 Tandy Brands Accessories, Inc. Tandy Brands Accessories Delaware 1,000 Tandy Brands Handbags, Inc. Accessories, Inc. Stagg Industries, Inc. Alabama 4,700 Class A common Tandy Brands 4,700 Class B common Accessories, Inc. H.A. Sheldon Canada, Ltd. Ontario, Canada 1,000 Tandy Brands Accessories, Inc. TBAC Investment Trust Pennsylvania 100 TBAC Investments, Inc. TBAC Management Company, LP Delaware 1% partnership interest General Partner - TBAC General Management Company 99% partnership interest Limited Partner - TBAC Investments, Inc. TBAC-Mass Merchant Quality Delaware 1,000 Accessory Design Group, Texas Control, Inc. Inc. TBAC-Acquisition, Inc. Delaware 1,000 Tandy Brands Texas Accessories, Inc. Superior Merchandise Company Louisiana 250 TBAC-Acquisition, Inc.

Tandy Brands Accessories, Inc. - Third Amendment SCHEDULE 2.1 Revolving Credit Commitments

Amount of Percentage of Commitment Commitment Wells Fargo HSBC Trade Bank, N. A. $35,000,000.00 41.176470588% Comerica Bank $22,000,000.00 25.882352941% Bank of America, N.A. $14,000,000.00 16.470588235% JPMorgan Chase Bank $14,000,000.00 16.470588235% Total: $85,000,000.00 100.00%

Tandy Brands Accessories, Inc. - Third Amendment CONFIRMATION OF GUARANTY Reference is made to the Credit Agreement dated as of June 27, 2001, as amended (the "Credit Agreement") among Tandy Brands Accessories, Inc. ("Borrower"), Wells Fargo HSBC Trade Bank, N. A. ("Agent"), and the lenders specified therein ("Lenders"). The undersigned Guarantors hereby confirm that their guaranty under the Subsidiary Guaranty dated as of June 27, 2001 for the benefit of Agent, Lenders, and Wells Fargo Bank, N. A., continues in full force and effect notwithstanding the Third Amendment to Credit Agreement dated as of August 26, 2004, which Third Amendment is hereby accepted and consented to by each Guarantor. In accordance herewith, the aforesaid guaranty shall be deemed to cover and support the Obligations at any time due from Borrower to Lenders pursuant to the Credit Agreement as the latter has been modified by the Third Amendment. This Confirmation of Guaranty shall be governed by and construed in accordance with the laws of the State of Texas. Dated this 26th day of August, 2004. ACCESSORY DESIGN GROUP, INC. By:__________________________________________ Name:________________________________________ Title:_______________________________________ AMITY/ROLFS, INC. By:__________________________________________ Name:________________________________________ Title:_______________________________________ Tandy Brands Accessories, Inc. - Third Amendment TANDY BRANDS ACCESSORIES HANDBAGS, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC INVESTMENTS, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC GENERAL MANAGEMENT COMPANY By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC MANAGEMENT COMPANY L.P. BY: TBAC GENERAL MANAGEMENT COMPANY, ITS GENERAL PARTNER By: ________________________________ Name: ______________________________ Title: _____________________________ TBAC PRINCE GARDNER, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ Tandy Brands Accessories, Inc. - Third Amendment STAGG INDUSTRIES, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC - TOREL, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC - MASS MERCHANT QUALITY CONTROL, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ TBAC INVESTMENT TRUST By: ____________________________________ Name: __________________________________ Title: _________________________________ ACCEPTED as of the date first written above. BORROWER: TANDY BRANDS ACCESSORIES, INC. By: _________________________________ Name: _______________________________ Title: ______________________________ Tandy Brands Accessories, Inc. - Third Amendment COMPLIANCE CERTIFICATE August 26, 2004 Reference is made to that certain Credit Agreement dated as of June 27, 2001 among Tandy Brands Accessories, Inc. ("Borrower"), Wells Fargo HSBC Trade Bank, N. A. ("Agent"), and the lenders specified therein ("Lenders"), as amended by and among Borrower, Agent, and Lenders (the "Credit Agreement"). Terms which are defined in the Credit Agreement and which are used but not defined herein shall have the meanings given them in the Credit Agreement. The undersigned, ______________, Borrower's _________, hereby certifies in the name, and on behalf, of Borrower that Borrower has made a thorough inquiry into all matters certified herein and based upon such inquiry, experience, and the advice of counsel, does hereby further certify that: 1. All representations and warranties made by Borrower in any Loan Document delivered on or before the date hereof (including, without limitation, the representations and warranties contained in Section 4 of the Third Amendment to Credit Agreement of even date herewith) are true in all material respects on and as of the date hereof (except to the extent that such representations and warranties related solely to an earlier date and except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Credit Agreement) as if such representations and warranties had been made as of the date hereof. 2. No Event of Default exists on the date hereof. 3. Borrower has performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date hereof. IN WITNESS WHEREOF, this instrument is executed by the undersigned as of the date first above written. TANDY BRANDS ACCESSORIES, INC. By: ____________________________________ Name: __________________________________ Title: _________________________________ Tandy Brands Accessories, Inc. - Third Amendment AMENDED AND RESTATED PROMISSORY NOTE U.S. $35,000,000.00 August 26, 2004 FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of WELLS FARGO HSBC TRADE BANK, N. A., a national banking association (the "Lender"), for the account of its Applicable Lending Office (as defined in that certain Credit Agreement, dated as of June 27, 2001, as amended, by and among the Borrower, the Lender, certain other lenders from time to time parties thereto (collectively, the "Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association, as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national banking association, as arranger (as amended, modified or supplemented from time to time, the "Credit Agreement") (capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement) or any other office designated by the Agent, the lesser of (i) the principal sum of THIRTY FIVE MILLION DOLLARS ($35,000,000.00), or (ii) the aggregate unpaid principal amount of all Advances made by the Lender to the Borrower under the Revolving Credit Commitment. The Borrower promises to pay interest on the unpaid principal amount of each such Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day funds. Each Advance under the Revolving Credit Commitment made by the Lender to the Borrower and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Amended and Restated Promissory Note (this "Note"), provided, however, that failure of the Lender to make such notation or any error therein shall not in any manner affect the obligation of the Borrower to repay such Advances in accordance with the terms of this Note. This Note is one of the Revolving Credit Notes referred to in, and is subject to and entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances under the Revolving Credit Commitment by the Lender to the Borrower from time to time pursuant to Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to exceed at any time the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration and any other notice of any kind, except as provided in the Credit Agreement. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. This Note is in renewal and extension, but not in extinguishment or novation, of that certain promissory note dated as of June 26, 2003, made by Borrower payable to the order of Lender in the principal amount of $27,500,000.00. TANDY BRANDS ACCESSORIES, INC. By: /s/ Mark J. Flaherty ------------------------------------ Name: Mark J. Flaherty ---------------------------------- Title: Chief Financial Officer --------------------------------- AMENDED AND RESTATED PROMISSORY NOTE U.S. $22,000,000.00 August 26, 2004 FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of COMERICA BANK, a Michigan banking corporation (the "Lender"), for the account of its Applicable Lending Office (as defined in that certain Credit Agreement, dated as of June 27, 2001, as amended, by and among the Borrower, the Lender, certain other lenders from time to time parties thereto (collectively, the "Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association, as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national banking association, as arranger (as amended, modified or supplemented from time to time, the "Credit Agreement") (capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement) or any other office designated by the Agent, the lesser of (i) the principal sum of TWENTY TWO MILLION DOLLARS ($22,000,000.00), or (ii) the aggregate unpaid principal amount of all Advances made by the Lender to the Borrower under the Revolving Credit Commitment. The Borrower promises to pay interest on the unpaid principal amount of each such Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day funds. Each Advance under the Revolving Credit Commitment made by the Lender to the Borrower and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Amended and Restated Promissory Note (this "Note"), provided, however, that failure of the Lender to make such notation or any error therein shall not in any manner affect the obligation of the Borrower to repay such Advances in accordance with the terms of this Note. This Note is one of the Revolving Credit Notes referred to in, and is subject to and entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances under the Revolving Credit Commitment by the Lender to the Borrower from time to time pursuant to Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to exceed at any time the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration and any other notice of any kind, except as provided in the Credit Agreement. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. This Note is in renewal and extension, but not in extinguishment or novation, of that certain promissory note dated as of June 26, 2003, made by Borrower payable to the order of Lender in the principal amount of $18,500,000.00. TANDY BRANDS ACCESSORIES, INC. By: /s/ Mark J. Flaherty ------------------------------------ Name: Mark J. Flaherty ---------------------------------- Title: Chief Financial Officer --------------------------------- REVOLVING CREDIT PROMISSORY NOTE U.S. $14,000,000.00 August 26, 2004 FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of BANK OF AMERICA, N.A., a national banking association (the "Lender"), for the account of its Applicable Lending Office (as defined in that certain Credit Agreement, dated as of June 27, 2001, as amended, by and among the Borrower, the Lender, certain other lenders from time to time parties thereto (collectively, the "Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association, as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national banking association, as arranger (as amended, modified or supplemented from time to time, the "Credit Agreement") (capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement) or any other office designated by the Agent, the lesser of (i) the principal sum of FOURTEEN MILLION DOLLARS ($14,000,000.00), or (ii) the aggregate unpaid principal amount of all Advances made by the Lender to the Borrower under the Revolving Credit Commitment. The Borrower promises to pay interest on the unpaid principal amount of each such Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day funds. Each Advance under the Revolving Credit Commitment made by the Lender to the Borrower and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Revolving Credit Promissory Note (this "Note"), provided, however, that failure of the Lender to make such notation or any error therein shall not in any manner affect the obligation of the Borrower to repay such Advances in accordance with the terms of this Note. This Note is one of the Revolving Credit Notes referred to in, and is subject to and entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances under the Revolving Credit Commitment by the Lender to the Borrower from time to time pursuant to Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to exceed at any time the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration and any other notice of any kind, except as provided in the Credit Agreement. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. TANDY BRANDS ACCESSORIES, INC. By: /s/ Mark J. Flaherty ------------------------------------ Name: Mark J. Flaherty ---------------------------------- Title: Chief Financial Officer --------------------------------- REVOLVING CREDIT PROMISSORY NOTE U.S. $14,000,000.00 August 26, 2004 FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of JPMORGAN CHASE BANK, a New York banking corporation (the "Lender"), for the account of its Applicable Lending Office (as defined in that certain Credit Agreement, dated as of June 27, 2001, as amended, by and among the Borrower, the Lender, certain other lenders from time to time parties thereto (collectively, the "Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association, as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national banking association, as arranger (as amended, modified or supplemented from time to time, the "Credit Agreement") (capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement) or any other office designated by the Agent, the lesser of (i) the principal sum of FOURTEEN MILLION DOLLARS ($14,000,000.00), or (ii) the aggregate unpaid principal amount of all Advances made by the Lender to the Borrower under the Revolving Credit Commitment. The Borrower promises to pay interest on the unpaid principal amount of each such Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day funds. Each Advance under the Revolving Credit Commitment made by the Lender to the Borrower and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Revolving Credit Promissory Note (this "Note"), provided, however, that failure of the Lender to make such notation or any error therein shall not in any manner affect the obligation of the Borrower to repay such Advances in accordance with the terms of this Note. This Note is one of the Revolving Credit Notes referred to in, and is subject to and entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances under the Revolving Credit Commitment by the Lender to the Borrower from time to time pursuant to Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to exceed at any time the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration and any other notice of any kind, except as provided in the Credit Agreement. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. TANDY BRANDS ACCESSORIES, INC. By: /s/ Mark J. Flaherty ------------------------------------ Name: Mark J. Flaherty ---------------------------------- Title: Chief Financial Officer --------------------------------- August 26, 2004 H.A. Sheldon Canada, Ltd. c/o Tandy Brands Accessories, Inc. 690 E. Lamar, Suite 200 Arlington, Texas 76011-3862 Re: Release of Sheldon as a Guarantor under the Guaranty (each as hereinafter defined) Gentlemen: Reference is hereby made to (i) that certain Subsidiary Guaranty dated as of June 27, 2001 (as amended, supplemented and otherwise modified, the "Guaranty"), executed by certain Subsidiaries of Tandy Brands Accessories, Inc., a Delaware corporation ("Borrower"), from time to time party thereto (each a "Guarantor") including, without limitation, H.A. Sheldon Canada, Ltd., an Ontario, Canada corporation ("Sheldon"), for the benefit of Wells Fargo HSBC Trade Bank, N.A., a national banking association, in its capacity as Agent for the Lenders party to the Credit Agreement described below ("Agent") and Banks; and (ii) that certain Credit Agreement, dated as of June 27, 2001, by and among Borrower, Agent, WFB and the other Lenders signatory thereto from time to time (as amended from time to time, the "Credit Agreement"). Unless otherwise indicated, all terms used herein shall have the same meanings as in the Credit Agreement. Sheldon has unconditionally guaranteed the Obligations of Borrower in favor of Agent, for itself and the benefit of Lenders, and WFB, pursuant to the Guaranty. Sheldon has requested that Agent, on behalf of itself and Lenders, and WFB each release Sheldon from any obligations it may have under the Guaranty and Agent, on behalf of itself and Lenders, and WFB are each willing to do so. Effective as of the date hereof, Agent, on behalf of itself and Lenders, and WFB each hereby releases Sheldon from any obligations it may have under the Guaranty and any and all claims, actions, and demands whatsoever thereunder and from any and all responsibilities and obligations which were created under the Credit Agreement and Loan Documents. Nothing herein shall release any other Guarantor from all or any portion of its obligations under the Guaranty, the Credit Agreement or any other Loan Document. This letter agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. This letter agreement shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of Texas, without regard to conflicts of laws principals. Very truly yours, WELLS FARGO HSBC TRADE BANK, N.A., individually and in its capacity as Agent for the Lenders party to the Credit Agreement By:_____________________________________ Name:___________________________________ Title:__________________________________ WELLS FARGO BANK, N.A. By:_____________________________________ Name:___________________________________ Title:__________________________________ ACCEPTED AND AGREED TO BY: WELLS FARGO HSBC TRADE BANK, N.A. By:__________________________________ Name:________________________________ Title:_______________________________ COMERICA BANK By:__________________________________ Name:________________________________ Title:_______________________________ BANK OF AMERICA, N.A. By:__________________________________ Name:________________________________ Title:_______________________________ JPMORGAN CHASE BANK By:__________________________________ Name:________________________________ Title:_______________________________ ACCEPTED AND RELIED UPON: H.A. SHELDON CANADA, LTD. By:__________________________________ ADDITIONAL SUBSIDIARIES SUPPLEMENT This ADDITIONAL SUBSIDIARIES SUPPLEMENT, dated August 26, 2004 to the Subsidiary Guaranty, dated as of June 27, 2001 (as amended, supplemented and otherwise modified, the "Guaranty", attached hereto as Exhibit A), made by certain Subsidiaries of Tandy Brands Accessories, Inc., a Delaware corporation ("Borrower"), from time to time parties thereto (collectively, the "Guarantors"). RECITALS: WHEREAS, the Guaranty provides that any Subsidiary of Borrower, although not a Guarantor thereunder at the time of the initial execution thereof, may become a Guarantor under the Guaranty upon the delivery to the Agent of a supplement in substantially the form of this Additional Subsidiaries Supplement; and WHEREAS, the undersigned was not a Subsidiary of Borrower on the date of the Guaranty and, therefore, was not a party to the Guaranty but now desires to become a Guarantor thereunder; NOW, THEREFORE, the undersigned hereby agrees as follows: The undersigned agrees to be bound by all of the provisions of the Guaranty applicable to a Guarantor thereunder and agrees that it shall, on the date this Additional Subsidiaries Supplement is accepted by the Agent, become a Guarantor, for all purposes of the Guaranty to the same extent as if originally a party thereto with the representations and warranties contained therein being deemed to be made by the undersigned as of the date hereof. Unless otherwise defined herein, capitalized terms which are defined in the Guaranty are used herein as so defined. IN WITNESS WHEREOF, the undersigned has caused this Additional Subsidiaries Supplement to be executed and delivered by a duly authorized officer on the date first above written. SUPERIOR MERCHANDISE COMPANY, a Louisiana corporation By:_____________________________________ Name:___________________________________ Title:__________________________________ Address: 690 E. Lamar Suite 200 Arlington, Texas 76011-3862 ADDITIONAL SUBSIDIARIES SUPPLEMENT This ADDITIONAL SUBSIDIARIES SUPPLEMENT, dated August 26, 2004 to the Subsidiary Guaranty, dated as of June 27, 2001 (as amended, supplemented and otherwise modified, the "Guaranty", attached hereto as Exhibit A), made by certain Subsidiaries of Tandy Brands Accessories, Inc., a Delaware corporation ("Borrower"), from time to time parties thereto (collectively, the "Guarantors"). RECITALS: WHEREAS, the Guaranty provides that any Subsidiary of Borrower, although not a Guarantor thereunder at the time of the initial execution thereof, may become a Guarantor under the Guaranty upon the delivery to the Agent of a supplement in substantially the form of this Additional Subsidiaries Supplement; and WHEREAS, the undersigned was not a Subsidiary of Borrower on the date of the Guaranty and, therefore, was not a party to the Guaranty but now desires to become a Guarantor thereunder; NOW, THEREFORE, the undersigned hereby agrees as follows: The undersigned agrees to be bound by all of the provisions of the Guaranty applicable to a Guarantor thereunder and agrees that it shall, on the date this Additional Subsidiaries Supplement is accepted by the Agent, become a Guarantor, for all purposes of the Guaranty to the same extent as if originally a party thereto with the representations and warranties contained therein being deemed to be made by the undersigned as of the date hereof. Unless otherwise defined herein, capitalized terms which are defined in the Guaranty are used herein as so defined. IN WITNESS WHEREOF, the undersigned has caused this Additional Subsidiaries Supplement to be executed and delivered by a duly authorized officer on the date first above written. TBAC-ACQUISITION, INC., a Delaware corporation By:_____________________________________ Name:___________________________________ Title:__________________________________ Address: 690 E. Lamar Suite 200 Arlington, Texas 76011-3862 EX-10.39 4 d18322exv10w39.txt FORM OF NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.39 NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT PURSUANT TO THE TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN THIS NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as of this _____ day of ___________, _______, between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Company"), and ___________, a member of the Board of Directors of the Company ("Director"). W I T N E S S E T H: WHEREAS, the Company desires to carry out the purposes of the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the "Plan"), by affording Director the opportunity to purchase shares of the common stock, $1.00 par value per share ("Common Stock"), of the Company. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Grant of Option. The Company hereby grants to Director the right and option (the "Option") to purchase an aggregate of ___________ shares (the "Shares") of Common Stock, such Shares being subject to adjustment as provided in Paragraph 8 hereof, on the terms and conditions herein set forth. 2. Purchase Price. The purchase price of the Shares shall be $___________ per Share, such purchase price being 100% of the Fair Market Value (as defined in the Plan) of the Shares on the date first appearing above (the "Date of Grant"). 3. Exercise of Option. Unless expired as provided in Paragraph 5 below, and subject to the special provisions of Paragraph 6 below, the Option shall be exercisable and one hundred percent (100%) vested six (6) months after the Date of Grant. 4. Manner of Exercise, Payment of Purchase Price. (a) Subject to the terms and conditions of this Agreement, the Option shall be exercised by the delivery of written notice to the Company setting forth the number of shares of Common Stock with respect to which the Option is to be exercised and the date of exercise thereof which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Such notice of exercise shall be signed by Director and shall be irrevocable when given. (b) The notice of exercise shall be accompanied by the full payment of the purchase price for the Shares. The purchase price may be paid by (i) cash, check, bank draft, or money order payable to the order of the Company, (ii) Common Stock (including Restricted Stock (as defined in the Plan)) owned by Director on the date of exercise, and/or (iii) in any other form of valid consideration as provided in the Plan. In the event Director wishes to pay all or any portion of the purchase price by delivering shares of Common Stock, Director shall, not less than fourteen (14) days prior to the date of exercise, give written notice to the Assistant Secretary of the Company requesting approval of such payment method, setting forth the particulars of the proposed payment method. The Committee (as defined in the Plan) shall approve, disapprove or modify the proposed payment method within fourteen (14) days of its receipt of the request. The failure of the Committee to respond to the request within the time period required shall be deemed an approval of Director's proposed payment method. (c) Upon receipt of the purchase price, and subject to the terms of Paragraph 11, the certificate or certificates representing the Shares purchased shall be registered in the name of the person or persons so exercising the Option. If the Option shall be exercised by Director and, if Director shall so request in the notice exercising the Option, the Shares shall be registered in the name of Director and another person as joint tenants with right of survivorship, and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised by any person or persons other than Director, pursuant to Paragraph 7 hereof or otherwise, such notice shall be accompanied by appropriate proof satisfactory to the Company of the right of such person or persons to exercise the Option. All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable. 5. Expiration of Option. The Option shall expire and become null and void upon the happening of whichever of the following events shall first occur: (a) expiration of thirty-six (36) months after Director ceases to be a member of the Board of Directors for any reason other than Director's resignation at the request of the Company for Cause, death or Total and Permanent Disability (as defined in the Plan); (b) a period of thirty-six (36) months shall have elapsed since Director's cessation of service due to Director's death; (c) a period of thirty-six (36) months shall have elapsed since Director's cessation of service due to Total and Permanent Disability (as defined in the Plan); (d) a period of ten (10) years shall have elapsed since the Date of Grant; or (e) Director shall resign at the request of the Company for Cause. For purposes of this Agreement, "Cause" shall mean (i) Director's willful, material and irreparable breach of any agreement that governs the terms and conditions of his or her service to the Company; (ii) Director's breach of any fiduciary or other material duty to the Company or its stockholders; (iii) Director's gross negligence or gross incompetence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of written notice of such negligence) of any of Director's material duties and responsibility; (iv) Director's dishonesty, fraud or willful misconduct with respect to the business or affairs of the Company or any of its subsidiaries; or (v) Director's conviction of a felony crime. Except as provided in Paragraph 6, only those portions of the Option exercisable as of the date of termination of Director's service may be exercised, whether such termination is by retirement or otherwise. 6. Acceleration of Exercise Dates. Notwithstanding the provisions of Paragraph 3: (a) upon Director's cessation of service due to death or Total and Permanent Disability (as defined in the Plan), the Option shall be immediately exercisable, until the expiration date provided in Paragraph 5 above, for the entire number of Shares covered hereby; provided 2 however, if Director dies during either of the thirty-six (36) month periods described in clauses (a) or (c) of Paragraph 5, the Option may be exercised, but only to the extent exercisable on the date of Director's death, by the persons or persons entitled to exercise the Option at any time within the thirty-six (36) month period described in clauses (a) or (c) of Paragraph 5, whichever is applicable, or within twelve (12) months after the date of such death, whichever is the longer period, but in no event after a period of ten (10) years has elapsed since the Date of Grant; (b) upon Director's retirement, the Committee may, in its discretion, permit the Option to be immediately exercisable, until the expiration date provided in clause (a) of Paragraph 5 above, for the entire number of Shares covered hereby; and (c) upon any Change of Control of the Company (as defined in the Plan) the Option may be exercised for a period of sixty (60) days following the date of the Change of Control for the entire number of Shares covered hereby. 7. Option Nontransferable. Except as otherwise herein provided, the Option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option or any right or privilege conferred hereby, contrary to the provisions hereof, the Option and the rights and privileges conferred hereby shall immediately become null and void. Notwithstanding the foregoing, upon the death of Director, the Option may be exercised by Director's executor, administrator, legatee or distributee as the case may be, in accordance with Paragraph 6. References herein to Director shall include, where applicable, a permitted transferee. 8. Adjustments of Shares Subject to Option. If the outstanding shares of Common Stock shall at any time be changed or exchanged by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares or a dividend payable in stock, then the aggregate number of Shares subject to this Agreement and the purchase price of such Shares shall be automatically adjusted such that Director's proportionate interest shall be maintained as before the occurrence of such event. The determination of any such adjustment by the Committee shall be final, binding and conclusive. 9. No Contract. Neither the granting of the Option, the exercise of any part hereof, nor any provision of this Agreement shall constitute or be evidence of any understanding, express or implied, on the part of the Company to continue the service of Director as a member of the Board of Directors for any specified period. 10. Rights as Stockholder. The Option shall not entitle Director or any permitted transferee to any rights of a stockholder of the Company or to any notice of proceedings of the Company with respect to any Shares issuable upon exercise of the Option unless and until the Option has been exercised for such Shares and such Shares have been registered in Director's (or permitted transferee's) name upon the stock records of the Company. 11. Restriction on Issuance of Shares. The Company shall not be required to issue or deliver any certificates for Shares purchased upon the exercise of the Option prior to: (a) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable; (b) the completion of any listing, registration or other qualification of such Shares on any securities exchange or inter-dealer quotation system 3 or under any state or federal law or ruling or regulation of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable; and (c) the determination by the Committee that Director has tendered to the Company any federal, state or local tax owed by Director as a result of exercising the Option when the Company has a legal liability to satisfy such tax. In addition, if the Common Stock reserved for issuance upon the exercise of the Option shall not then be registered under the Securities Act of 1933, the Company may upon Director's exercise of an Option, require Director or his permitted transferee to represent in writing that the Shares being acquired are for investment and not with a view to distribution, and may mark the certificate for the Shares with a legend restricting transfer and may issue stop transfer orders relating to such certificate to the Company's transfer agent. 12. Lapse of Option. This Agreement shall be null and void in the event Director shall fail to sign and return a counterpart hereof to the Company within thirty (30) days of its delivery to Director. 13. Construction. The Committee shall have authority to make reasonable constructions of the Option and to correct any defect or supply any omission or reconcile any inconsistency in the Option, and to prescribe reasonable rules and regulations relating to the administration of the Option. 14. Notice. Any notice relating to this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address as may be hereafter specified by the Company, to the attention of the Company's Assistant Secretary. All notices to Director shall be delivered to Director at Director's address specified below or to such other address as may be hereafter specified by Director. 15. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision, provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 16. Binding Effect. This Agreement shall be binding upon the permitted transferees, heirs, executors, administrators, and successors of the parties hereto. 17. No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 18. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 19. Governing Instrument and Law. The Option and any Shares issued hereunder shall in all respects be governed by the terms and provisions of the Plan, which terms and provisions are hereby incorporated herein by reference, and by the laws of the State of Texas, 4 and in the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. 20. Entire Agreement. The Plan and this Agreement constitute the entire contract between the parties hereto with regard to the subject matter hereof. 21. Nonqualified Stock Option. The Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code and shall not be so construed. TANDY BRANDS ACCESSORIES, INC. By: ____________________________________________ J.S.B. Jenkins President and Chief Executive Officer Accepted and Agreed: DIRECTOR: ________________________________ Date: ___________________________________ ________________________________ Address: ________________________ ________________________ EX-10.40 5 d18322exv10w40.txt FORM OF EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.40 EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT PURSUANT TO THE TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN THIS EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as of this ______ day of ____________, _________, between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Company"), and ________________, an employee of the Company or one or more of its subsidiaries ("Employee"). W I T N E S S E T H: WHEREAS, the Company desires to carry out the purposes of the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the "Plan"), by affording Employee the opportunity to purchase shares of the common stock, $1.00 par value per share ("Common Stock"), of the Company. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Grant of Option. The Company hereby grants to Employee the right and option (the "Option") to purchase an aggregate of ____ shares (the "Shares") of Common Stock, such Shares being subject to adjustment as provided in Paragraph 8 hereof, on the terms and conditions herein set forth. 2. Purchase Price. The purchase price of the Shares shall be $__________ per Share, such purchase price being 100% of the Fair Market Value (as defined in the Plan) of the Shares on the date first appearing above (the "Date of Grant"). 3. Exercise of Option. Unless expired as provided in Paragraph 5 below, and subject to the special provisions of Paragraph 6 below, the Option may be exercised from time to time in whole or in part for not more than 33-1/3% of the entire number of Shares at any time after the first anniversary of the Date of Grant, and an additional 33-1/3% of the total Shares on or after each of the two (2) succeeding anniversaries of the Date of Grant. 4. Manner of Exercise; Payment of Purchase Price. (a) Subject to the terms and conditions of this Agreement, the Option shall be exercised by the delivery of written notice to the Company setting forth the number of shares of Common Stock with respect to which the Option is to be exercised and the date of exercise thereof which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Such notice of exercise shall be signed by Employee and shall be irrevocable when given. (b) The notice of exercise shall be accompanied by the full payment of the purchase price for the Shares. The purchase price may be paid by (1) cash, check, bank draft, or money order payable to the order of the Company, (2) Common Stock (including Restricted Stock (as defined in the Plan)) owned by Employee on the date of exercise, and/or (3) in any other form of valid consideration as provided in the Plan. In the event Employee wishes to pay all or any portion of the purchase price by delivering shares of Common Stock, Employee shall, not less than fourteen (14) days prior to the date of exercise, give written notice to the Secretary or Assistant Secretary of the Company requesting approval of such payment method, setting forth the particulars of the proposed payment method. The Committee (as defined in the Plan) shall approve, disapprove or modify the proposed payment method within fourteen (14) days of its receipt of the request. The failure of the Committee to respond to the request within the time period required shall be deemed an approval of Employee's proposed payment method. (c) Upon receipt of the purchase price, and subject to the terms of Paragraph 11, the certificate or certificates representing the Shares purchased shall be registered in the name of the person or persons so exercising the Option. If the Option shall be exercised by Employee and, if Employee shall so request in the notice exercising the Option, the Shares shall be registered in the name of Employee and another person as joint tenants with right of survivorship, and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised pursuant to Paragraph 7 hereof, by any person or persons other than Employee, such notice shall be accompanied by appropriate proof satisfactory to the Company of the right of such person or persons to exercise the Option. All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable. 5. Expiration of Option. The Option shall expire and become null and void upon the happening of whichever of the following events shall first occur: (a) expiration of three (3) months after Employee ceases to be employed by the Company or any of its subsidiaries for any reason other than termination for cause, retirement, or due to death or Total and Permanent Disability (as defined in the Plan); (b) a period of twelve (12) months shall have elapsed since Employee's death; (c) a period of thirty-six (36) months shall have elapsed since Employee's cessation of employment due to Total and Permanent Disability (as defined in the Plan); (d) a period of thirty-six (36) months shall have elapsed since Employee's retirement; (e) a period of ten (10) years shall have elapsed since the Date of Grant; or (f) Employee's employment shall have been terminated for cause as determined by the Committee or the Board of Directors of the Company. Except as provided in Paragraph 6, only those portions of the Option exercisable as of the date of termination of Employee's employment may be exercised, whether such termination is by retirement or otherwise. 6. Acceleration of Exercise Dates. Notwithstanding the provisions of Paragraph 3 above relating to the exercise of the Option in installments: (a) upon Employee's death or cessation of employment due to Total and Permanent Disability (as defined in the Plan), the Option shall be immediately exercisable, until the expiration date provided in Paragraph 5 above, for the entire number of Shares covered hereby; (b) upon Employee's retirement, the Committee may, in its discretion, permit the Option to be immediately exercisable, until the expiration date provided in Paragraph 5 above, for the entire number of Shares covered hereby; and (c) upon any Change of Control of the Company (as defined in the Plan), the Option may be exercised for a period of sixty (60) days following the date of the Change of Control for the entire number of Shares covered hereby. 7. Option Nontransferable. Except as otherwise herein provided, the Option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right or privilege conferred hereby, contrary to the provisions hereof, the Option and the rights and privileges conferred hereby shall immediately become null and void. Notwithstanding the foregoing, upon the death of Employee, the Option may be exercised by Employee's executor, 2 administrator, legatee or distributee as the case may be, in accordance with Paragraph 6. References herein to Employee shall include, where applicable, a permitted transferee. 8. Adjustments of Shares Subject to Option. If the outstanding shares of Common Stock shall at any time be changed or exchanged by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares or a dividend payable in stock, then the aggregate number of Shares subject to this Agreement and the purchase price of such Shares shall be automatically adjusted such that Employee's proportionate interest shall be maintained as before the occurrence of such event. The determination of any such adjustment by the Committee shall be final, binding and conclusive. 9. No Contract. This Agreement does not constitute a contract for employment and shall not affect the right of the Company to terminate Employee's employment for any reason whatsoever. 10. Rights as Stockholder. This Option shall not entitle Employee or any permitted transferee to any rights of a stockholder of the Company or to any notice of proceedings of the Company with respect to any Shares issuable upon exercise of the Option unless and until the Option has been exercised for such Shares and such Shares have been registered in the Employee's (or permitted transferee's) name upon the stock records of the Company. 11. Restriction on Issuance of Shares. The Company shall not be required to issue or deliver any certificates for Shares purchased upon the exercise of an Option prior to: (a) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable; (b) the completion of any listing, registration or other qualification of such Shares on any securities exchange or inter-dealer quotation system or under any state or federal law or ruling or regulation of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable; and (c) the determination by the Committee that Employee has tendered to the Company any federal, state or local tax owed by Employee as a result of exercising the Option when the Company has a legal liability to satisfy such tax. In addition, if the Common Stock reserved for issuance upon the exercise of the Option shall not then be registered under the Securities Act of 1933, the Company may upon Employee's exercise of the Option, require Employee or his permitted transferee to represent in writing that the Shares being acquired are for investment and not with a view to distribution, and may mark the certificate for the Shares with a legend restricting transfer and may issue stop transfer orders relating to such certificate to the Company's transfer agent. 12. Lapse of Option. This Agreement shall be null and void in the event Employee shall fail to sign and return a counterpart hereof to the Company within thirty (30) days of its delivery to Employee. 13. Construction. The Committee shall have authority to make reasonable constructions of the Option and to correct any defect or supply any omission or reconcile any inconsistency in the Option, and to prescribe reasonable rules and regulations relating to the administration of the Option. 14. Notice. Any notice relating to this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address as may be hereafter specified by the Company, to the attention of the Company's Secretary or Assistant Secretary. All notices to Employee 3 shall be delivered to Employee at Employee's address specified below or to such other address as may be hereafter specified by Employee. 15. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision, provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 16. Binding Effect. This Agreement shall be binding upon the permitted transferees, heirs, executors, administrators, and successors of the parties hereto. 17. No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 18. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 19. Governing Instrument and Law. This Option and any Shares issued hereunder shall in all respects be governed by the terms and provisions of the Plan, which terms and provisions are hereby incorporated herein by reference, and by the laws of the State of Texas, and in the event of a conflict between the terms of this Agreement and the terms of the Plan (copy attached), the terms of the Plan shall control. 20. Entire Agreement. The Plan and this Agreement constitute the entire contract between the parties hereto with regard to the subject matter hereof. 21. Nonqualified Stock Option. This Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code and shall not be so construed. TANDY BRANDS ACCESSORIES, INC. By: _______________________________________ J.S.B. Jenkins President and Chief Executive Officer Accepted and Agreed: EMPLOYEE: _________________________________ Date: _______________________________ _________________________________ Address:_________________________ _________________________ 4 EX-10.41 6 d18322exv10w41.txt FORM OF NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD AGREEMENT EXHIBIT 10.41 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD AGREEMENT PURSUANT TO THE TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN This NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD AGREEMENT is made as of this _____ day of __________, _______ (the "Date of Grant"), between Tandy Brands Accessories, Inc., a Delaware corporation (the "Company"), and ___________, a member of the Board of Directors of the Company ("Director"). W I T N E S S E T H: WHEREAS, the Company desires to carry out the purposes of the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the "Plan") by awarding Director with shares of the common stock, $1.00 par value per share ("Common Stock"), of the Company. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Grant of Award. Pursuant to the Plan, the Company hereby grants _________ shares of Common Stock (the "Restricted Shares") to Director to be issued as hereinafter provided in Director's name subject to certain restrictions thereon as hereinafter set forth. 2. Issuance and Delivery of Restricted Shares. The Restricted Shares shall be issued upon acceptance and execution hereof by Director and upon satisfaction of the terms of this Agreement. The certificates representing the Restricted Shares awarded hereunder shall be held in escrow by the Assistant Secretary of the Company as provided in Section 10. 3. Vesting of Restricted Shares. (a) Subject to Section 4 below, one-third of the Restricted Shares shall become fully vested and shall no longer be subject to forfeiture on the first anniversary of the Date of Grant, an additional one-third of the Restricted Shares shall become fully vested and shall no longer be subject to forfeiture on the second anniversary of the Date of Grant and the remaining one-third of the Restricted Shares shall become fully vested and shall no longer be subject to forfeiture on the third anniversary of the Date of Grant. (b) Notwithstanding anything to the contrary in this Agreement, 100% of the Restricted Shares shall become fully vested and shall no longer be subject to forfeiture (i) upon the death or Total and Permanent Disability (as defined in the Plan) of Director during Director's term as a member of the Board of Directors of the Company; (ii) upon Director's Termination of Service (as defined in the Plan) as a result of not being nominated for or elected to a new term as a member of the Board of Directors of the Company; or (iii) upon Director's resignation as a member of the Board of Directors of the Company at the request and for the convenience of the Company other than for Cause. For purposes of this Agreement, "Cause" shall mean (i) Director's willful, material and irreparable breach of any agreement that governs the terms and conditions of his or her service to the Company; (ii) Director's breach of any fiduciary or other material duty to the Company or its stockholders; (iii) Director's gross negligence or gross incompetence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of written notice of such negligence) of any of Director's material duties and responsibility; (iv) Director's dishonesty, fraud or willful misconduct with respect to the business or affairs of the Company or any of its subsidiaries; or (v) Director's conviction of a felony crime. 4. Forfeiture of Restricted Shares. Upon Director's Termination of Service (as defined in the Plan) for any reason except as a result of (i) Director's death or Total and Permanent Disability (as defined in the Plan); (ii) Director's not being nominated for or elected to a new term as a member of the Board of Directors of the Company; or (iii) Director's resignation as a member of the Board of Directors of the Company at the request and for the convenience of the Company other than for Cause, all nonvested Restricted Shares held by Director shall, immediately upon the occurrence of such event, be forfeited and, except as provided in Section 5 below, no compensation or other amounts shall be paid to Director with respect thereto. Such forfeited Restricted Shares shall cease to be outstanding and shall no longer confer on Director any rights as a stockholder with respect to the forfeited Restricted Shares as of the date of forfeiture and upon such forfeiture, Director shall cease to have any further rights or claims with respect to such forfeited Restricted Shares. 5. Repurchase of Shares in Case of Forfeiture. (a) In the event Director has paid any consideration (such consideration hereinafter referred to as the "Purchase Price") to the Company for the Restricted Shares, upon Director's forfeiture of Restricted Shares as a result of an event described in Section 4 hereof, the Company shall repurchase all of such forfeited Restricted Shares and each such forfeited Restricted Share shall be returned to the Company as contemplated by the Plan. The repurchase price of the Restricted Shares to be sold to the Company under this Section 5 (the "Repurchase Price") shall be equal to the Purchase Price paid by Director for the Restricted Shares that have been forfeited. (b) The Company shall repurchase the Restricted Shares as soon as is administratively practical (but in any event within five (5) business days after the event of forfeiture) by the tender to Director of the Repurchase Price. Tender of the Repurchase Price to Director shall be effected by delivery via certified mail of a check in the amount of the Repurchase Price. (c) The Repurchase Price shall be paid to Director only after the Company has received from Director all necessary assignments (including the Assignment Separate From Certificate in the form of Exhibit A), endorsements, certificates of authority, tax releases, consents to transfer, instruments and evidences of title as may be reasonably required by the Company and its counsel. (d) If the Company (or its assignees) shall make available, at the time and place and in the amount and form provided in this Agreement, the Repurchase Price for the Restricted Shares to be repurchased in accordance with the provisions of this Section 5, then from and after such time, the person from whom such Restricted Shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such Repurchase Price in accordance with this 2 Section 5 and the Plan), and such shares shall be deemed purchased in accordance with the applicable provisions hereof and the Company (or its assignees) shall be deemed the owner and holder of such Restricted Shares, whether or not the certificates therefor have been delivered as required by this Agreement. 6. Restrictions on Transfer. (a) The Restricted Shares may not be resold, pledged as security or otherwise transferred, assigned or encumbered by Director prior to the date such Restricted Shares are no longer subject to forfeiture, unless specifically agreed in writing by the Company. (b) Director hereby agrees that Director shall make no disposition of the Restricted Shares unless and until: (1) The forfeiture restrictions applicable to such Restricted Shares have lapsed; (2) Director shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition, unless there is then in effect a registration statement under the Securities Act of 1933 (the "Securities Act") covering such proposed disposition and such disposition is made in accordance with such registration statement; (3) Director shall have complied with all requirements of this Agreement applicable to the disposition of the Restricted Shares; and (4) If reasonably requested by the Company, Director shall have provided the Company an opinion of counsel in form and substance satisfactory to the Company, that (A) the proposed disposition does not require registration of the Restricted Shares under the Securities Act or (B) all appropriate action necessary for compliance with the registration requirements of the Securities Act or of any exemption from registration available under the Securities Act (including Rule 144) has been taken; provided, however, that in no event shall an opinion of counsel be required if there is then in effect a registration statement under the Securities Act covering such proposed disposition. (c) The Company shall not be required (i) to transfer on its books any Restricted Shares that have been sold or transferred in violation of the provisions of this Section 6, or (ii) to treat as the owner of the Restricted Shares, or otherwise to accord voting or dividend rights to, any transferee to whom the Restricted Shares have been transferred in contravention of this Agreement. References herein to Director shall include, where applicable, a permitted transferee. 3 7. Restrictive Legend. In order to reflect the restrictions on transfer of the Restricted Shares, the stock certificates for the Restricted Shares will be endorsed with the following legend: On the face of the certificate: "Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate." On the reverse: "The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Tandy Brands Accessories, Inc. 2002 Omnibus Plan, a copy of which is on file at the principal office of the Company in Arlington, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan." 8. Investment Representations. In connection with the grant of the Restricted Shares, Director represents to the Company the following: (a) Director is accepting the Restricted Shares for Director's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Director has no present intention of selling, granting any participation in, or otherwise distributing the Shares. By executing this Agreement, Director further represents that Director does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Restricted Shares. (b) Director understands that the Restricted Shares are characterized as "restricted securities" under the Securities Act and may not be resold or transferred unless the Restricted Shares are first registered under the federal securities laws or unless an exemption from such registration is available. Accordingly, Director hereby acknowledges that Director is prepared to hold the Restricted Shares for an indefinite period and that Director is aware that Rule 144 of the Securities and Exchange Commission promulgated under the Securities Act is not presently available to exempt the sale of the Restricted Shares from the registration requirements of the Securities Act. 9. Stockholder Rights. Unless and until such time as the Restricted Shares are forfeited by Director pursuant to Section 4, Director shall have all the rights of a stockholder, including voting and dividend rights, with respect to the Restricted Shares, including the Restricted Shares held in escrow under Section 10, subject, however, to the transfer restrictions of Section 6. 4 10. Escrow. (a) Deposit. Upon issuance, the certificates for the Restricted Shares shall be deposited in escrow with the Assistant Secretary of the Company to be held in accordance with the provisions of this Section 10. Each deposited certificate shall be accompanied by a duly executed Assignment Separate from Certificate in the form of Exhibit A. The deposited certificates, together with any other assets or securities that may be deposited from time to time with the Company pursuant to the requirements of the Plan, shall remain in escrow until such time or times as the certificates (or other assets or securities) are to be released or otherwise surrendered for cancellation in accordance with the Plan. Upon delivery of the certificates (or other assets or securities) to the Company, Director shall be issued an instrument of deposit acknowledging the number of Restricted Shares (or other assets or securities) delivered in escrow to the Assistant Secretary of the Company. (b) Release or Surrender. The Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be subject to the following terms and conditions relating to their release from escrow or their surrender to the Company for repurchase and/or cancellation: (1) As the interest of Director in the Restricted Shares (or any other assets and securities issued with respect thereto) vests in accordance with Section 3, the certificates for such vested shares (as well as all other assets and securities issued with respect thereto) shall be released from escrow and delivered to Director within five (5) business days following the date such Restricted Shares become so vested, provided such Restricted Shares have not been forfeited pursuant to Section 4. (2) Upon Director's Termination of Service (as defined in the Plan), any escrowed Restricted Shares (or other assets and securities issued with respect thereto) in which Director is at the time vested shall be promptly released from escrow, provided such Restricted Shares have not been forfeited pursuant to Section 4. (3) Should Director forfeit Restricted Shares pursuant to Section 4, then the escrowed certificates for such forfeited Restricted Shares (as well as all other assets and securities issued with respect thereto) shall be surrendered to the Company for cancellation concurrently with such forfeiture. Should the Company be required to repurchase the forfeited Restricted Shares pursuant to Section 5, then, concurrently with the payment of the Repurchase Price to Director for such forfeited Restricted Shares (and all other assets and securities issued with respect thereto), the escrowed certificates for such forfeited Restricted Shares (as well as all other assets and securities issued with respect thereto) shall be surrendered to the Company for cancellation. To facilitate the performance or observance by Director of this Section 10(b)(3), Director hereby irrevocably appoints (which appointment is coupled with an interest) the Company as the attorney-in-fact of Director to transfer any Restricted Shares (as well as other assets and securities issued with respect thereto) so forfeited to the Company, and Director agrees that the transfer of stock certificates (as well as all other assets 5 and securities issued with respect thereto) with respect to forfeited Restricted Shares shall be specifically performable by the Company in a court of equity or law. 11. Section 83(b) Election. Director understands that under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the difference between the Purchase Price, if any, paid for the Restricted Shares and their fair market value on the date any forfeiture restrictions applicable to such Restricted Shares lapse will be reportable as ordinary income at that time. Director understands that Director may elect to be taxed at the time the Restricted Shares are acquired hereunder to the extent the fair market value of the Restricted Shares differs from the Purchase Price, if any, rather than when and as such Restricted Shares cease to be subject to such forfeiture restrictions, by filing an election under Section 83(b) of the Code with the I.R.S. within thirty (30) days after the Date of Grant. If the fair market value of the Restricted Shares at the Date of Grant equals the Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as Exhibit B hereto. Director understands that failure to make this filing within the 30-day period will result in the recognition of ordinary income by Director (in the event the fair market value of the Restricted Shares increases after the Date of Grant) as the forfeiture restrictions lapse. DIRECTOR ACKNOWLEDGES THAT IT IS DIRECTOR'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF DIRECTOR REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON DIRECTOR'S BEHALF. DIRECTOR IS RELYING SOLELY ON DIRECTOR'S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE AN 83(b) ELECTION. 12. Miscellaneous Provisions. (a) Director Undertaking. Director hereby agrees to take whatever additional action and execute whatever additional documents the Company may in its judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions, including, without limitation, those set forth in Section 4 and Section 10(b)(3), imposed on either Director or the Restricted Shares pursuant to the express provisions of the Plan and this Agreement. (b) Adjustment of Restricted Shares. The Restricted Shares subject to this Agreement and the vesting provisions applicable thereto will be adjusted from time to time, as determined by the Company, pursuant to Articles 13, 14 and 15 of the Plan. (c) Assignment. The rights and benefits of the Company under this Agreement shall be transferable to any one or more persons or entities. Except as provided in Section 6, the rights and obligations of Director hereunder may only be assigned with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the permitted transferees, heirs, executors, administrators, and successors of the parties hereto. (d) No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 6 (e) Entire Agreement. The Plan and this Agreement constitute the entire contract between the parties hereto with regard to the subject matter hereof. (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Lapse of this Agreement. This Agreement shall be null and void in the event Director shall fail to sign and return a counterpart hereof to the Company within thirty (30) days of its delivery to Director. (h) No Contract for Service. This Agreement does not constitute a contract for service as a member of the Company's Board of Directors and shall not affect the right of the Company to request Director's resignation as a member of the Board of Directors for any reason whatsoever. (i) Construction. The Company shall have authority to make reasonable constructions of this Agreement and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe reasonable rules and regulations relating to the administration of this Agreement. (j) Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision, provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. (k) Notice. Any notice relating to this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address as may be hereafter specified by the Company, to the attention of the Company's Assistant Secretary. All notices to Director shall be delivered to Director at Director's address specified below or to such other address as may be hereafter specified by Director. (l) Governing Instrument and Law. This Agreement and any Restricted Shares issued hereunder shall in all respects be governed by the terms and provisions of the Plan, which terms and provisions are hereby incorporated herein by reference, and by the laws of the State of Texas, and in the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. 7 TANDY BRANDS ACCESSORIES, INC. By: ________________________________________ J.S.B. Jenkins President and Chief Executive Officer Agreed and Accepted: DIRECTOR(1) __________________________________________ __________________________________________ Address: __________________________________ __________________________________ - -------- (1) I have received, completed, executed and retained the I.R.C. Section 83(b) election that was attached hereto as Exhibit B. As set forth in Section 11 above, I understand that I, and not the Company, will be responsible for completing the form and filing the election with the appropriate office of the federal and state tax authorities and that if such filing is not completed within thirty (30) days after the date of this Agreement, I will forfeit the significant tax benefits of Section 83(b). I understand further that such filing should be made by registered or certified mail, return receipt requested, and that I must retain two (2) copies of the completed form for filing with my state and federal tax returns for the current tax year and an additional copy for my records. 8 EXHIBIT A ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED _____________________________ hereby sells, assigns and transfers unto TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Company"), ______________________ (_________) shares of the common stock of the Company standing in the name of _________________ on the books of the Company represented by Certificate No. __________ herewith and does hereby irrevocably constitute and appoint the Assistant Secretary of the Company Attorney-in-Fact to transfer the said stock on the books of the within named Company with full power of substitution and resubstitution in the premises. Dated: _____________________ ___________________________________ ________________________________________ (Signature) (Signature of Spouse, if any) ___________________________________ ________________________________________ (Print Name) (Print Name) EXHIBIT B FORM OF 83(B) ELECTION The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in his or her gross income for the current taxable year, the amount of any compensation taxable to him or her in connection with his or her receipt of the property described below: (1) The name, address, taxpayer identification number and taxable year of the undersigned are as follows: Name of Taxpayer: _________________________ Spouse: _________________________ Address of Taxpayer: _________________________ Taxpayer ID No.: _________________________ Spouse's ID No.: _________________________ Taxable Year: Calendar Year ___________ (2) The property with respect to which the election is being made is __________ shares of the common stock of Tandy Brands Accessories, Inc., a Delaware corporation (the "Company"). (3) The property was issued on ______________, ________. (4) The property is subject to forfeiture if the undersigned taxpayer's provision of services to the Company is terminated under certain circumstances. The forfeiture restrictions lapse in a series of installments over a three-year period ending on _____________, ____________. (5) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $______ per share. (6) The amount paid for such property is $_________ per share. (7) A copy of this statement was furnished to the Company for whom the undersigned taxpayer rendered the service underlying the transfer of property. (8) This statement is executed as of: ____________________, ________. Taxpayer Spouse of Taxpayer (if any) ____________________________________ __________________________________ (Signature) (Signature) ____________________________________ __________________________________ (Print Name) (Print Name) CONSENT OF SPOUSE I, __________, spouse of ___________________ ("Director"), have read and approve the foregoing Agreement. In consideration of granting to Director ____________ shares of the common stock of Tandy Brands Accessories, Inc. as set forth in the Agreement, I hereby appoint Director as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws of the State of Texas or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _________________, ________. Spouse of Director _______________________________ (Signature) _______________________________ (Print Name) EX-10.42 7 d18322exv10w42.txt FORM OF EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT EXHIBIT 10.42 EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT PURSUANT TO THE TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN This EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT is made as of this ____ day of ___________, __________ (the "Date of Grant"), between Tandy Brands Accessories, Inc., a Delaware corporation (the "Company"), and ___________, an employee of the Company or one of its subsidiaries ("Employee"). W I T N E S S E T H: WHEREAS, the Company desires to carry out the purposes of the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the "Plan") by awarding Employee with shares of the common stock, $1.00 par value per share ("Common Stock"), of the Company. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Grant of Award. Pursuant to the Plan, the Company hereby grants _________ shares of Common Stock (the "Restricted Shares") to Employee to be issued as hereinafter provided in Employee's name subject to certain restrictions thereon as hereinafter set forth. 2. Issuance and Delivery of Restricted Shares. The Restricted Shares shall be issued upon acceptance and execution hereof by Employee and upon satisfaction of the terms of this Agreement. The certificates representing the Restricted Shares awarded hereunder shall be held in escrow by the Assistant Secretary of the Company as provided in Section 10. 3. Vesting of Restricted Shares. The Restricted Shares shall become fully vested and shall no longer be subject to forfeiture upon the third anniversary of the Date of Grant. 4. Forfeiture of Restricted Shares. Upon Employee's voluntary or involuntary Termination of Service (as defined in the Plan) for any reason or for no reason, including, without limitation, upon the death or Total and Permanent Disability (as defined in the Plan) of Employee, all nonvested Restricted Shares held by Employee shall, immediately upon the occurrence of such event, be forfeited and, except as provided in Section 5 below, no compensation or other amounts shall be paid to Employee with respect thereto. Such forfeited Restricted Shares shall cease to be outstanding and shall no longer confer on Employee any rights as a stockholder with respect to the forfeited Restricted Shares as of the date of forfeiture and upon such forfeiture, Employee shall cease to have any further rights or claims with respect to such forfeited Restricted Shares. 5. Repurchase of Shares in Case of Forfeiture. (a) In the event Employee has paid any consideration (such consideration hereinafter referred to as the "Purchase Price") to the Company for the Restricted Shares, upon Employee's forfeiture of Restricted Shares as a result of an event described in Section 4 hereof, the Company shall repurchase all of such forfeited Restricted Shares and each such forfeited Restricted Share shall be returned to the Company as contemplated by the Plan. The repurchase price of the Restricted Shares to be sold to the Company under this Section 5 (the "Repurchase Price") shall be equal to the Purchase Price paid by Employee for the Restricted Shares that have been forfeited. (b) The Company shall repurchase the Restricted Shares as soon as is administratively practical (but in any event within five (5) business days after the event of forfeiture) by the tender to Employee of the Repurchase Price. Tender of the Repurchase Price to Employee shall be effected by delivery via certified mail of a check in the amount of the Repurchase Price. (c) The Repurchase Price shall be paid to Employee only after the Company has received from Employee all necessary assignments (including the Assignment Separate From Certificate in the form of Exhibit A), endorsements, certificates of authority, tax releases, consents to transfer, instruments and evidences of title as may be reasonably required by the Company and its counsel. (d) If the Company (or its assignees) shall make available, at the time and place and in the amount and form provided in this Agreement, the Repurchase Price for the Restricted Shares to be repurchased in accordance with the provisions of this Section 5, then from and after such time, the person from whom such Restricted Shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such Repurchase Price in accordance with this Section 5 and the Plan), and such shares shall be deemed purchased in accordance with the applicable provisions hereof and the Company (or its assignees) shall be deemed the owner and holder of such Restricted Shares, whether or not the certificates therefor have been delivered as required by this Agreement. 6. Restrictions on Transfer. (a) The Restricted Shares may not be resold, pledged as security or otherwise transferred, assigned or encumbered by Employee prior to the date such Restricted Shares are no longer subject to forfeiture, unless specifically agreed in writing by the Company. (b) Employee hereby agrees that Employee shall make no disposition of the Restricted Shares unless and until: (1) The forfeiture restrictions applicable to such Restricted Shares have lapsed; (2) Employee shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition, unless there is then in effect a registration statement under the Securities Act of 1933 (the "Securities Act") covering such proposed disposition and such disposition is made in accordance with such registration statement; (3) Employee shall have complied with all requirements of this Agreement applicable to the disposition of the Restricted Shares; and 2 (4) If reasonably requested by the Company, Employee shall have provided the Company an opinion of counsel in form and substance satisfactory to the Company, that (A) the proposed disposition does not require registration of the Restricted Shares under the Securities Act or (B) all appropriate action necessary for compliance with the registration requirements of the Securities Act or of any exemption from registration available under the Securities Act (including Rule 144) has been taken, provided, however, that in no event shall an opinion of counsel be required if there is then in effect a registration statement under the Securities Act covering such proposed disposition. (c) The Company shall not be required (i) to transfer on its books any Restricted Shares that have been sold or transferred in violation of the provisions of this Section 6, or (ii) to treat as the owner of the Restricted Shares, or otherwise to accord voting or dividend rights to, any transferee to whom the Restricted Shares have been transferred in contravention of this Agreement. References herein to Employee shall include, where applicable, a permitted transferee. 7. Restrictive Legend. In order to reflect the restrictions on transfer of the Restricted Shares, the stock certificates for the Restricted Shares will be endorsed with the following legend: On the face of the certificate: "Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate." On the reverse: "The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Tandy Brands Accessories, Inc. 2002 Omnibus Plan, a copy of which is on file at the principal office of the Company in Arlington, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan." 8. Investment Representations. In connection with the grant of the Restricted Shares, Employee represents to the Company the following: (a) Employee is accepting the Restricted Shares for Employee's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Employee has no present intention of selling, granting any participation in, or otherwise distributing the Shares. By executing this Agreement, Employee further represents that Employee does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Restricted Shares. 3 (b) Employee understands that the Restricted Shares are characterized as "restricted securities" under the Securities Act and may not be resold or transferred unless the Restricted Shares are first registered under the federal securities laws or unless an exemption from such registration is available. Accordingly, Employee hereby acknowledges that Employee is prepared to hold the Restricted Shares for an indefinite period and that Employee is aware that Rule 144 of the Securities and Exchange Commission promulgated under the Securities Act is not presently available to exempt the sale of the Restricted Shares from the registration requirements of the Securities Act. 9. Stockholder Rights. Unless and until such time as the Restricted Shares are forfeited by Employee pursuant to Section 4, Employee shall have all the rights of a stockholder, including voting and dividend rights, with respect to the Restricted Shares, including the Restricted Shares held in escrow under Section 10, subject, however, to the transfer restrictions of Section 6. 10. Escrow. (a) Deposit. Upon issuance, the certificates for the Restricted Shares shall be deposited in escrow with the Assistant Secretary of the Company to be held in accordance with the provisions of this Section 10. Each deposited certificate shall be accompanied by a duly executed Assignment Separate from Certificate in the form of Exhibit A. The deposited certificates, together with any other assets or securities that may be deposited from time to time with the Company pursuant to the requirements of the Plan, shall remain in escrow until such time or times as the certificates (or other assets or securities) are to be released or otherwise surrendered for cancellation in accordance with the Plan. Upon delivery of the certificates (or other assets or securities) to the Company, Employee shall be issued an instrument of deposit acknowledging the number of Restricted Shares (or other assets or securities) delivered in escrow to the Assistant Secretary of the Company. (b) Release or Surrender. The Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be subject to the following terms and conditions relating to their release from escrow or their surrender to the Company for repurchase and/or cancellation: (1) As the interest of Employee in the Restricted Shares (or any other assets and securities issued with respect thereto) vests in accordance with Section 3, the certificates for such vested shares (as well as all other assets and securities issued with respect thereto) shall be released from escrow and delivered to Employee within 5 business days following the date such Restricted become so vested, provided such Restricted Shares have not been forfeited pursuant to Section 4. (2) Upon Employee's Termination of Service (as defined in the Plan), any escrowed Restricted Shares (or other assets and securities issued with respect thereto) in which Employee is at the time vested shall be promptly released from escrow, provided such Restricted Shares have not been forfeited pursuant to Section 4. 4 (3) Should Employee forfeit Restricted Shares pursuant to Section 4, then the escrowed certificates for such forfeited Restricted Shares (as well as all other assets and securities issued with respect thereto) shall be surrendered to the Company for cancellation concurrently with such forfeiture. Should the Company be required to repurchase the forfeited Restricted Shares pursuant to Section 5, then, concurrently with the payment of the Repurchase Price to Employee for such forfeited Restricted Shares (and all other assets and securities issued with respect thereto), the escrowed certificates for such forfeited Restricted Shares (as well as all other assets and securities issued with respect thereto) shall be surrendered to the Company for cancellation. To facilitate the performance or observance by Employee of this Section 10(b)(3), Employee hereby irrevocably appoints (which appointment is coupled with an interest) the Company as the attorney-in-fact of Employee to transfer any Restricted Shares (as well as other assets and securities issued with respect thereto) so forfeited to the Company, and Employee agrees that the transfer of stock certificates (as well as all other assets and securities issued with respect thereto) with respect to forfeited Restricted Shares shall be specifically performable by the Company in a court of equity or law. 11. Section 83(b) Election. Employee understands that under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the difference between the Purchase Price, if any, paid for the Restricted Shares and their fair market value on the date any forfeiture restrictions applicable to such Restricted Shares lapse will be reportable as ordinary income at that time. Employee understands that Employee may elect to be taxed at the time the Restricted Shares are acquired hereunder to the extent the fair market value of the Restricted Shares differs from the Purchase Price, if any, rather than when and as such Restricted Shares cease to be subject to such forfeiture restrictions, by filing an election under Section 83(b) of the Code with the I.R.S. within thirty (30) days after the Date of Grant. If the fair market value of the Restricted Shares at the Date of Grant equals the Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as Exhibit B hereto. Employee understands that failure to make this filing within the 30-day period will result in the recognition of ordinary income by Employee (in the event the fair market value of the Restricted Shares increases after the date of purchase) as the forfeiture restrictions lapse. EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE'S BEHALF. EMPLOYEE IS RELYING SOLELY ON EMPLOYEE'S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE AN 83(b) ELECTION. 12. Miscellaneous Provisions. (a) Employee Undertaking. Employee hereby agrees to take whatever additional action and execute whatever additional documents the Company may in its judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions, including, without limitation, those set forth in Section 4 and Section 10(b)(3), imposed on either Employee or the Restricted Shares pursuant to the express provisions of the Plan and this Agreement. 5 (b) Adjustment of Restricted Shares. The Restricted Shares subject to this Agreement and the vesting provisions applicable thereto will be adjusted from time to time, as determined by the Company, pursuant to Articles 13, 14 and 15 of the Plan. (c) Assignment. The rights and benefits of the Company under this Agreement shall be transferable to any one or more persons or entities. Except as provided in Section 6, the rights and obligations of Employee hereunder may only be assigned with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the permitted transferees, heirs, executors, administrators, and successors of the parties hereto. (d) No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. (e) Entire Agreement. The Plan and this Agreement constitute the entire contract between the parties hereto with regard to the subject matter hereof. (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Lapse of this Agreement. This Agreement shall be null and void in the event Employee shall fail to sign and return a counterpart hereof to the Company within thirty (30) days of its delivery to Employee. (h) No Contract for Employment. This Agreement does not constitute a contract for employment and shall not affect the right of the Company to terminate Employee's employment for any reason whatsoever. (i) Construction. The Company shall have authority to make reasonable constructions of this Agreement and to correct any defect or supply any omission or reconcile any inconsistency in this Agreement, and to prescribe reasonable rules and regulations relating to the administration of this Agreement. (j) Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision, provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. (k) Notice. Any notice relating to this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address as may be hereafter specified by the Company, to the attention of the Company's Assistant Secretary. All notices to Employee shall be delivered to Employee at Employee's address specified below or to such other address as may be hereafter specified by Employee. 6 (l) Governing Instrument and Law. This Agreement and any Restricted Shares issued hereunder shall in all respects be governed by the terms and provisions of the Plan, which terms and provisions are hereby incorporated herein by reference, and by the laws of the State of Texas, and in the event of a conflict between the terms of this Agreement and the terms of the Plan (copy attached), the terms of the Plan shall control. TANDY BRANDS ACCESSORIES, INC. By: _____________________________________ J.S.B. Jenkins President and Chief Executive Officer Agreed and Accepted: EMPLOYEE(1) _________________________________________ _________________________________________ Address:_________________________________ ___________________________________ ___________________________________ - ------------ (1) I have received, completed, executed and retained the I.R.C. Section 83(b) election that was attached hereto as Exhibit B. As set forth in Section 11 above, I understand that I, and not the Company, will be responsible for completing the form and filing the election with the appropriate office of the federal and state tax authorities and that if such filing is not completed within thirty (30) days after the date of this Agreement, I will forfeit the significant tax benefits of Section 83(b). I understand further that such filing should be made by registered or certified mail, return receipt requested, and that I must retain two (2) copies of the completed form for filing with my state and federal tax returns for the current tax year and an additional copy for my records. 7 EXHIBIT A ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED _____________________________ hereby sells, assigns and transfers unto TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Company"), ______________________ (_________) shares of the common stock of the Company standing in the name of _________________ on the books of the Company represented by Certificate No. __________ herewith and does hereby irrevocably constitute and appoint the Assistant Secretary of the Company Attorney-in-Fact to transfer the said stock on the books of the within named Company with full power of substitution and resubstitution in the premises. Dated:______________ _________________________________ _______________________________ (Signature) (Signature of Spouse, if any) _________________________________ _______________________________ (Print Name) (Print Name) EXHIBIT B FORM OF 83(B) ELECTION The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in his or her gross income for the current taxable year, the amount of any compensation taxable to him or her in connection with his or her receipt of the property described below: (1) The name, address, taxpayer identification number and taxable year of the undersigned are as follows: Name of Taxpayer: _________________________________ Spouse: _________________________________ Address of Taxpayer: _________________________________ Taxpayer ID No.: _________________________________ Spouse's ID No.: _________________________________ Taxable Year: Calendar Year ___________________ (2) The property with respect to which the election is being made is __________ shares of the common stock of Tandy Brands Accessories, Inc., a Delaware corporation (the "Company"). (3) The property was issued on ____________, ___________. (4) The property is subject to forfeiture if for any reason the undersigned taxpayer's provision of services to the Company is terminated. The forfeiture restrictions lapse on _________________,____________ . (5) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $______ per share. (6) The amount paid for such property is $___________ per share. (7) A copy of this statement was furnished to the Company for whom the undersigned taxpayer rendered the service underlying the transfer of property. (8) This statement is executed as of: ____________________, __________. Taxpayer Spouse of Taxpayer (if any) ________________________ _________________________ (Signature) (Signature) ________________________ _________________________ (Print Name) (Print Name) CONSENT OF SPOUSE I, ________________, spouse of ___________________ ("Employee"), have read and approve the foregoing Agreement. In consideration of granting to Employee, ____________ shares of the common stock of Tandy Brands Accessories, Inc. as set forth in the Agreement, I hereby appoint Employee as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws of the State of Texas or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _________________, ____________. Spouse of Employee _________________________________ (Signature) _________________________________ (Print Name) EX-13.1 8 d18322exv13w1.htm 2004 ANNUAL REPORT TO STOCKHOLDERS

EXHIBIT 13

     COLOR YOUR WORLD TANDY BRANDS ACCESSORIES, INC. ANNUAL REPORT 2004

     COLOR Inspiring Tandy Brands’ bold, expressive, trend-right fashions. This year it’s all about color. Throughout the pages of this report, we explore the many ways that colors communicate — each has its own distinct personality. Our company’s fashion-forward brands also have distinct personalities. And all are responding to the trend toward bright, bold colors. As a fashion industry leader, Tandy Brands Accessories, Inc. is using fiery oranges, brilliant yellows and eye-popping reds to create a bright 2005 for our shareholders.

     financial highlights Tandy Brands Acessories, Inc. and Subsidiaries (dollars in thousands, except per share amounts) 2004 2003 2002 Total Revenues ........................................................ $215,420 $224,487 $205,769 Gross Profit ................................................................ 75,285 78,088 72,063 Operating Income ...................................................... 13,711 15,371 13,385 Net Income (1) .............................................................. 7,037 7,136 6,293 Diluted Earnings Per Share ........................................ 1.10 1.18 1.08 Working Capital .......................................................... 81,635 89,282 78,217 Total Assets ................................................................. 135,574 147,986 132,778 Stockholders’ Equity .................................................... 99,899 90,054 80,664 Book Value Per Share (2) ............................................. 15.84 14.96 13.67 (1) Includes cumulative effect of accounting change for SFAS No. 142 of ($581), or ($.10) per diluted share, in 2003. See Note 8 for effect on net income for 2002 due to change to non-amortization of goodwill. (2) Book value per share is total stockholders’ equity divided by the number of shares of stock issued and outstanding at that date.

     Fiscal 2004 Consolidated Product Line Sales Mens Product Line Womens Product Line

     letter to shareholders

Dear Shareholders:

We are pleased to share with you the highlights and challenges of this past year, as well as some exciting opportunities for the company in 2005. Throughout the pages of this report, we’ll also take a look at the way different colors can affect our moods, our thinking and our interaction with the things around us. Colors, specifically strong, bold, fashion colors, should certainly inspire and benefit our business this coming year.

Profitable and Financially Strong

Tandy Brands continues to be very profitable and financially stable. Our debt is at its lowest point since 1994 — only $10 million. During the past year, we reduced debt by $20 million as we generated $23 million in cash flow from the operations of the company.

Fashion trends and their impact on the marketplace drive the business of Tandy Brands Accessories. As we saw in fiscal 2003, when fashion accessory trends are strong, our sales accelerate. In fiscal 2004, the fashion trends for women’s accessories weakened, which led to a decrease in sales compared to 2003. This decrease was offset in part by

strong sales in our men’s accessories for the year. Based on the strong fashion color trends for accessories this season, we anticipate that women’s fashion accessories will return to normalized sales levels during 2005.

Cash Dividend Initiated

The board of directors and company management continue to seek ways to increase shareholder value. Because of the company’s strong cash flow, the board initiated payment of the company’s first quarterly cash dividends. As a result, shareholders received $0.10 per share over the past year. We are pleased to announce that the board has increased the September quarterly dividend to $0.0275 per share, a 10 percent increase over the same quarter last year.

Competitive Advantage Through Technology

During fiscal 2004, we invested over $3 million in systems and equipment to enhance our operating and manufacturing efficiencies. Our superior service capabilities allow us to continue to gain various competitive advantages. We have been recognized by Wal-Mart for being among the first group of suppliers to begin using the new Radio Frequency Identification (RFID) technology. Additionally, our superior distribution capabilities earned Target’s Operational Vendor of the Year Award.

     target award

2

New Products

Each year we look for new opportunities to increase market share. We are very enthusiastic about two new product categories to be introduced this next year.

As men’s dress fashion-accessory trends strengthened, we saw new opportunity in the men’s jewelry business. Focusing primarily on cufflinks and tie accessories in exciting colors and styles, we recently obtained significant placement for our new products in a wide variety of department stores for 2005.

We have also introduced men’s neckwear to our product offerings. We have a talented sales and product team to create and promote a great line of neckwear, but a new aspect of this business will be in its delivery. We will be producing and shipping this product directly to our customers from offshore factories so that our pricing is very competitive as compared to established neckwear suppliers.

Gift Business Acquisition

On the first day of fiscal 2005, we acquired Superior Merchandise Company and opened up an entirely new product category — gift accessories. Selling under the totes^®, ETON^® and a variety of private-label brands, we expect to generate sales of over $12 million this year.

This acquisition strengthens our position in the department store channel and provides excellent growth opportunities for the future.

Looking Ahead to a Colorful 2005

We are excited about the upcoming year. The new, bright, color trends in men’s and women’s fashion accessories, which you can see throughout this annual report, are generating strong customer interest in our product lines. We are enthusiastic about the growth opportunities for Tandy Brands Accessories in 2005, and we are confident that our recent new product introductions and gift business acquisition will provide increased sales and increased earnings for the company. Finally, because of our financial strength and strong cash flow, the company is well-positioned to take advantage of future growth opportunities to increase shareholder value.

Thank you for continuing to support Tandy Brands. We hope you enjoy this colorful look at fiscal 2004.

James F. Gaertner

Chairman of the Board

J.S.B. Jenkins
President and Chief Executive Officer

3

     rolfs

     Orange the color of friendship In nature, orange works closely with other colors to create f ire, autumn leaves and sunsets. It’s a team player and yet it commands its own attention. Orange makes people smile. It is deliciously appetizing. In fashion, orange turns accent pieces into exclamation points.

     LEVI’S

     PINK Pink is a close cousin to red. It shares the excitement, but adds a touch of sweetness. It’s a color of many moods. In vivid tones, pink can be shocking. It can be fresh, or it can remind us of the pastel ‘50s. Pink is as fashionable and versatile as the Tandy Brands products it colors. the color of caring & sharing

     DOCKERS WOMEN

     green Green is the official color of nature — from the stunning array of greens in a forest to the cool blue-green of a peaceful lake. Foods that are good for you, like spinach and broccoli, are green. In the wrong hands, green can become an avocado refrigerator. In the right hands, it can be a refreshing development in fashion. the color of life

     JONES NEW YORK

     brown It’s no accident that many wallets are brown. But the richness of brown is deeper and more meaningful. Brown is down-to -earth, lasting. It’s the color of the family dining table and your favorite old reading chair. As a color, brown is an anchor that allows other colors to go wild. the color of richness

     ACCESSORY DESIGN GROUP

     red What can we say about red that red doesn’t say for itself. It’s the color of stop signs and Valentine roses. It’s brash, warm, it arouses the senses. You can almost taste red. In fashion, red can be loud or it can be classic. It can be an underline or it can be the message. the color of passion

     Consolidated Statements of Income Tandy Brands Accessories, Inc. and Subsidiaries (Dollars in thousands, except per share amounts)

	Year Ended June 30,
	2004			2003			2002
Net sales	$	215,420		$	224,487		$	205,769
Cost of goods sold		140,135			146,399			133,706
Gross margin		75,285			78,088			72,063
Selling, general and administrative expenses		57,519			58,450			53,297
Depreciation and amortization		4,055			4,267			5,381
Total operating expenses		61,574			62,717			58,678
Operating income		13,711			15,371			13,385
Interest expense		(2,357	)		(2,833	)		(3,152	)
Royalty and other income		128			101			70
Income before provision for income taxes and cumulative effect of accounting change		11,482			12,639			10,303
Provision for income taxes		4,445			4,922			4,010
Net income before cumulative effect of accounting change		7,037			7,717			6,293
Cumulative effect of accounting change for SFAS No. 142, net of income taxes of $369,000		—			(581	)		—
Net income	$	7,037		$	7,136		$	6,293
Earnings per common share:
Before cumulative effect of accounting change	$	1.13		$	1.30		$	1.09
Cumulative effect of accounting change		—			(.10	)		—
	$	1.13		$	1.20		$	1.09
Earnings per common share — assuming dilution:
Before cumulative effect of accounting change	$	1.10		$	1.28		$	1.08
Cumulative effect of accounting change		—			(.10	)		—
	$	1.10		$	1.18		$	1.08
Dividends declared per share	$	0.10		$	—		$	—
Common shares outstanding		6,229			5,952			5,779
Common shares outstanding — assuming dilution		6,389			6,046			5,833

14 The accompanying notes are an integral part of these consolidated financial statements.

     Consolidated Balance Sheets Graphic Tandy Brands Accessories, Inc. and Subsidiaries (Dollars in thousands)

	June 30,
	2004			2003
Assets
Current assets:
Cash and cash equivalents	$	6,086		$	3,814
Accounts receivable, net of allowances of $1,142 and $1,745		33,427			41,672
Inventories		57,086			62,156
Deferred income taxes		4,009			4,757
Other current assets		1,613			1,250
Total current assets		102,221			113,649
Property, plant and equipment, at cost:
Buildings		8,243			7,925
Leasehold improvements		1,661			1,560
Machinery and equipment		24,677			22,400
		34,581			31,885
Accumulated depreciation		(20,206	)		(17,261	)
Net property, plant and equipment		14,375			14,624
Other assets:
Goodwill, net of accumulated amortization of $7,143		11,655			11,641
Other intangibles, net of accumulated amortization of $4,240 and $3,874		4,534			4,900
Supplemental Executive Retirement Plan intangible asset		1,255			1,456
Other noncurrent assets		1,534			1,716
Total other noncurrent assets		18,978			19,713
	$	135,574		$	147,986
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,224		$	14,522
Accrued payroll and bonuses		3,804			4,193
Accrued expenses		2,558			5,652
Total current liabilities		20,586			24,367
Other liabilities:
Notes payable		10,000			30,000
Deferred income taxes		2,066			1,776
Supplemental Executive Retirement Plan liability		1,721			1,607
Other noncurrent liabilities		1,302			182
Total other liabilities		15,089			33,565
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $1 par value; 1,000,000 shares authorized; none issued		—			—
Common stock, $1 par value; 10,000,000 shares authorized; 6,305,886 shares and 6,019,286 shares issued and outstanding as of June 30, 2004 and 2003, respectively		6,306			6,019
Additional paid in capital		26,765			23,802
Retained earnings		67,843			61,429
Cumulative other comprehensive income		(121	)		(1,196	)
Shares held by Benefit Restoration Plan Trust		(894	)		—
Total stockholders’ equity		99,899			90,054
	$	135,574		$	147,986

The accompanying notes are an integral part of these consolidated financial statements. 15

     Consolidated Statements of Cash Flows Tandy Brands Accessories, Inc. and Subsidiaries (Dollars in thousands)

	2004			2003			2002
Cash flows from operating activities:
Net income	$	7,037		$	7,136		$	6,293
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation		3,863			3,677			3,774
Amortization		366			503			1,523
Amortization of debt origination costs		116			269			219
Deferred taxes		392			(95	)		(388	)
Income tax benefit of exercise of employee stock options		257			—			—
Cumulative effect of accounting change, net of tax		—			581			—
Other		90			100			(674	)
Change in assets and liabilities, net of effects from acquisitions:
Accounts receivable		8,245			(7,973	)		996
Inventories		5,070			(9,338	)		9,761
Other assets		(655	)		(122	)		(548	)
Accounts payable		(298	)		1,767			3,347
Accrued expenses		(1,470	)		1,503			1,963
Net cash provided by (used for) operating activities		23,013			(1,992	)		26,266
Cash flows from investing activities:
Purchases of property and equipment		(3,118	)		(2,444	)		(2,716	)
Purchase of assets of AA&E Leathercraft, Inc.		—			—			(995	)
Net cash used for investing activities		(3,118	)		(2,444	)		(3,711	)
Cash flows from financing activities:
Sale of stock to Stock Purchase Program		1,640			1,381			1,131
Exercise of employee stock options		1,203			363			141
Dividends		(466	)		—			—
Proceeds from borrowings		36,950			66,145			65,432
Payments under borrowings		(56,950	)		(66,145	)		(82,832	)
Net cash provided by (used for) financing activities		(17,623	)		1,744			(16,128	)
Net increase (decrease) in cash and cash equivalents		2,272			(2,692	)		6,427
Cash and cash equivalents at beginning of period		3,814			6,506			79
Cash and cash equivalents at end of period	$	6,086		$	3,814		$	6,506
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	2,686		$	2,560		$	2,720
Income taxes		4,717			4,662			3,602

16 The accompanying notes are an integral part of these consolidated financial statements.

     Consolidated Statements of Stockholders’ Equity Tandy Brands Accessories, Inc. and Subsidiaries (Dollars in thousands)

	Common Stock				Additional Paid in			Retained			Cumulative Other Comprehensive			Shares Held by Benefit Restoration			Treasury Stock						Total Stockholders'
	Shares		Amount		Capital			Earnings			Loss			Plan Trust			Shares			Amount			Equity
Balance at June 30, 2001		5,882,926	$	5,883	$	22,572		$	48,000		$	(670	)		—			(212,011	)	$	(1,650	)	$	74,135
Comprehensive income:
Net income		—		—		—			6,293			—			—			—			—			6,293
Other comprehensive income, net of tax:
Currency translation adjustments, net of tax of $3		—		—		—			—			5			—			—			—			5
Fair value of interest rate swap, net of tax of $659		—		—		—			—			(1,041	)		—			—			—			(1,041	)
Comprehensive income																								5,257
Sale of stock to the Tandy Brands Accessories, Inc. Stock Purchase Program		—		—		(7	)		—			—			—			145,751			1,138			1,131
Sale of unissued common stock to employees for exercise of stock options		12,958		13		101			—			—			—			—			—			114
Sale of unissued common stock to directors for exercise of stock options		3,289		3		24			—			—			—			—			—			27
Balance at June 30, 2002		5,899,173		5,899		22,690			54,293			(1,706	)		—			(66,260	)		(512	)		80,664
Comprehensive income:
Net income		—		—		—			7,136			—			—			—			—			7,136
Other comprehensive income, net of tax:
Currency translation adjustments, net of tax of $332		—		—		—			—			488			—			—			—			488
Fair value of interest rate swap, net of tax of $13		—		—		—			—			22			—			—			—			22
Comprehensive income																								7,646
Sale of stock to the Tandy Brands Accessories, Inc. Stock Purchase Program		72,941		73		796			—			—			—			66,260			512			1,381
Sale of unissued common stock to employees for exercise of stock options		44,587		44		298			—			—			—			—			—			342
Sale of unissued common stock to directors for exercise of stock options		2,585		3		18			—			—			—			—			—			21
Balance at June 30, 2003		6,019,286		6,019		23,802			61,429			(1,196	)		—			—			—			90,054
Comprehensive income:
Net income		—		—		—			7,037			—			—			—			—			7,037
Other comprehensive income, net of tax:
Currency translation adjustments, net of tax of $39		—		—		—			—			57			—			—			—			57
Fair value of interest rate swap, net of tax of $646		—		—		—			—			1,018			—			—			—			1,018
Comprehensive income																								8,112
Dividends		—		—		—			(623	)		—			—			—			—			(623	)
Shares held by Benefit Restoration Plan Trust		—		—		—			—			—			(894	)		—			—			(894	)
Sale of stock to the Tandy Brands Accessories, Inc. Stock Purchase Program		117,299		118		1,522			—			—			—			—			—			1,640
Restricted stock issued to officers		22,800		23		252			—			—			—			—			—			275
Restricted stock issued to directors		3,720		4		54			—			—			—			—			—			58
Unearned compensation on restricted stock		—		—		(183	)		—			—			—			—			—			(183	)
Sale of unissued common stock to employees for exercise of stock options		140,320		140		1,296			—			—			—			—			—			1,436
Sale of unissued common stock to directors for exercise of stock options		2,461		2		22			—			—			—			—			—			24
Balance at June 30, 2004		6,305,886	$	6,306	$	26,765		$	67,843		$	(121	)	$	(894	)		—		$	—		$	99,899

The accompanying notes are an integral part of these consolidated financial statements. 17

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company and Basis of Presentation

Tandy Brands Accessories, Inc. (the “Company”) designs, manufactures and markets fine leather goods, handbags and fashion accessories for men, women and children. We sell our products through all major retail distribution channels throughout the United States and Canada, including mass merchants, national chain stores, department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores and the retail exchange operations of the United States military.

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for our conclusions. We continually evaluate the information used to make these estimates as the business and economic environment changes. Actual results may differ from these estimates under different assumptions or conditions.

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain prior year amounts have been reclassified to conform to the fiscal 2004 presentation.

Cash and Cash Equivalents

We consider cash on hand, deposits in banks and short-term investments with original maturities of less than three months as cash and cash equivalents.

Inventories

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) or market. Cost includes materials, direct and indirect labor and factory overhead. Market, with respect to raw materials, is replacement cost; and for work-in-process and finished goods, it is net realizable value.

Inventories consist of the following:

	June 30,
	2004		2003
Raw materials	$	3,776,000	$	4,789,000
Work-in-process		1,204,000		1,032,000
Finished goods		52,106,000		56,335,000
	$	57,086,000	$	62,156,000

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Depreciation is primarily calculated at the following rates using the straight-line method:

Buildings	3%
Leasehold improvements	The lesser of the life of the lease or asset
Machinery and equipment	10% to 50%

Maintenance and repairs are charged to expense as incurred. Renewals and betterments which materially prolong the useful lives of the assets are capitalized. The cost and the related accumulated depreciation of property retired or sold are removed from the accounts, and gains or losses from retirements and sales are recognized in the consolidated statements of income.

Impairment of Long-Lived Assets

We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset is impaired. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated fair value, based on future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

18

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Values of Financial Instruments

Our financial instruments consist primarily of cash, trade receivables, trade payables, debt instruments and interest rate swaps. The carrying values of cash, trade receivables and trade payables are considered to be representative of their respective fair values. The potential impact of market conditions on the fair value of our indebtedness is not expected to be material. Given that such lines of credit bear interest at floating market interest rates, the fair value of amounts borrowed approximates carrying value. See Note 5 for information regarding our interest rate swap agreement, which expired on June 27, 2004.

Goodwill and Other Intangibles

Effective July 1, 2002, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” This Statement changed the accounting for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach. During the first quarter of fiscal 2003, we recorded a transitional goodwill impairment charge of $950,000 ($581,000, net of tax), presented as a cumulative effect of an accounting change. The charge related to our women’s accessories segment of products. Prior to the adoption of SFAS No. 142, we amortized goodwill and other intangible assets using the straight-line method over their estimated useful lives, which range from three to forty years. We continue to amortize finite-lived intangibles, primarily trade names, over their useful lives. See Note 8.

Foreign Currency Translation

The functional currency for our Canadian subsidiary is the Canadian dollar. The assets and liabilities of the subsidiary are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and resulting translation gains or losses are accumulated in other comprehensive income (loss) as a separate component of stockholders’ equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each year. Cumulative other comprehensive loss included currency translation adjustments of ($121,000), ($177,000) and ($665,000), net of tax of ($82,000), ($120,000) and ($453,000) at June 30, 2004, 2003 and 2002, respectively.

Revenues

We recognize revenue when merchandise is shipped and title to the goods has passed to the customer. We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances and customer returns, at the time the revenue is recognized based upon historical experience, current trends in the retail industry and individual customer and product experience.

We perform periodic credit evaluations of our customers’ financial condition and reserve against accounts deemed uncollectible based upon historical losses and customer specific events. After all collection efforts are exhausted and the account is deemed uncollectible, it is written off against the reserve for doubtful accounts. Credit losses have historically been within management’s expectations and we generally do not require collateral. During the second quarter of fiscal 2004, we recorded a bad debt recovery of approximately $651,000 arising from a customer’s bankruptcy court settlement and receipt of payment of accounts receivable previously reserved by the Company.

Major Customers

Consolidated net sales to Wal-Mart accounted for approximately 37%, 36% and 39% of our sales in fiscal 2004, 2003 and 2002, respectively. Both men’s and women’s accessories sales include revenues from Wal-Mart. Additionally, consolidated net sales to Target accounted for approximately 14%, 15% and 13% of our sales in fiscal 2004, 2003 and 2002, respectively. Women’s accessories sales include revenues from Target. No other customers accounted for 10% or more of our total revenues.

Advertising Costs

We expense advertising costs as they are incurred. Advertising costs were $1,786,000, $2,079,000 and $2,224,000 in fiscal 2004, 2003 and 2002, respectively, consisting primarily of shows and conventions as well as display and print advertising.

19

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation

We may, with the approval of our Board of Directors, grant stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. We account for stock option grants using the intrinsic value method in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and, accordingly, we recognize no compensation expense for the stock option grants. The following table reflects the impact on net income if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation for fiscal 2004, 2003 and 2002 (dollars in thousands, except per share amounts):

	2004			2003			2002
Net income:
As reported	$	7,037		$	7,136		$	6,293
Stock-based compensation expense		150			—			—
Net income	$	7,187		$	7,136		$	6,293
Compensation expense per SFAS No. 123		(625	)		(496	)		(562	)
Pro forma	$	6,562		$	6,640		$	5,731
Earnings per share:
As reported	$	1.13		$	1.20		$	1.09
Pro forma	$	1.05		$	1.12		$	0.99
Earnings per share — assuming dilution:
As reported	$	1.10		$	1.18		$	1.08
Pro forma	$	1.03		$	1.10		$	0.98

Pro forma information regarding net income and earnings per share is required by SFAS No. 123, “Accounting for Stock-Based Compensation,” and has been determined as if we had accounted for our stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for fiscal 2004, 2003 and 2002: dividend yield of 1.0% for 2004 and 0.0% for 2003 and 2002; expected volatility of 0.238%, 0.270% and 0.334% for fiscal 2004, 2003 and 2002, respectively; a risk-free interest rate of 5.25%, 5.25% and 6.50% for fiscal 2004, 2003 and 2002, respectively; and an expected holding period of seven years. Using these assumptions for the options granted during fiscal 2004, 2003 and 2002, the weighted-average fair value of such options on the date of grant was $4.76, $4.76 and $2.76, respectively.

The Black-Scholes valuation models are used in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and the average life of options. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.

Derivative Instruments and Hedging Activities

Our risk management policy as it relates to derivative investments is to mitigate, subject to market conditions, against interest rate risk. We do not enter into any derivative investments for the purpose of speculative investment. Our overall risk management philosophy is re-evaluated as business conditions change. For information regarding our interest rate swap, which expired during fiscal 2004, see Note 5.

Impact of Recently Issued Accounting Standards

In December 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 132R, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This Statement amends the disclosure requirements of SFAS No. 132 to require additional disclosures about plan assets and obligations, cash flows, investment policy and measurement dates. The required disclosures have been included in Notes 9 and 10.

NOTE 2 — ACQUISITIONS

On April 12, 2002, we acquired certain assets of AA&E Leathercraft, Inc. (“AA&E”) for approximately $995,000 in cash. The cash purchase price was provided by drawing on our existing credit facility. The assets included, but were not limited to, wholesale accounts receivable, wholesale inventory, certain machinery and equipment, and a 10,000-square-foot building located in Yoakum, Texas. AA&E is a manufacturer and distributor of leather sporting goods accessories. We combined AA&E with existing product offerings in our men’s accessories segment. See Note 13. We used the purchase method of accounting for this acquisition which resulted in goodwill of approximately $164,000. Other intangibles related to the consideration given for non-compete agreements of approximately $75,000 are being amortized over 7 years. The pro forma effects of this acquisition are not material.

20

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 2 — ACQUISITIONS (continued)

On June 3, 2004, we announced an agreement to purchase all of the equity interest in Superior Merchandise Company (“Superior”) for approximately $10,000,000 in cash and the retirement of all of Superior’s debt. Based in New Orleans, Superior, which also operates under the name ETON^®, is a gift accessory company that sells under both the ETON^® and the licensed totes^® brands. The pro forma effects of this acquisition are not expected to be material. We completed this transaction on July 1, 2004. See Note 16.

NOTE 3 — EARNINGS PER SHARE

The following sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts):

	Year Ended June 30,
	2004		2003			2002
Numerator for basic and diluted earnings per share:
Net income before cumulative effect of accounting change	$	7,037	$	7,717		$	6,293
Cumulative effect of accounting change for SFAS No. 142, net of income taxes		—		(581	)		—
Net income	$	7,037	$	7,136		$	6,293
Denominator:
Weighted-average shares outstanding		6,208		5,934			5,765
Contingently issuable shares		21		18			14
Denominator for basic earnings per share — weighted-average shares		6,229		5,952			5,779
Effect of dilutive securities:
Employee stock options		132		78			46
Director stock options		28		16			8
Dilutive potential common shares		160		94			54
Denominator for earnings per share — assuming dilution — adjusted weighted-average shares		6,389		6,046			5,833
Earnings per common share:
Before cumulative effect of accounting change	$	1.13	$	1.30		$	1.09
Cumulative effect of accounting change		—		(.10	)		—
	$	1.13	$	1.20		$	1.09
Earnings per share — assuming dilution:
Before cumulative effect of accounting change	$	1.10	$	1.28		$	1.08
Cumulative effect of accounting change		—		(.10	)		—
	$	1.10	$	1.18		$	1.08

Options to purchase approximately 265,000 shares of common stock at prices ranging from $13.38-$17.75 per share were outstanding during fiscal year 2004 but were not included in the computation of earnings per share - assuming dilution because the options’ exercise prices were greater than the average market price of the common shares and therefore, the effect would be antidilutive.

NOTE 4 — STOCK REPURCHASE PROGRAM

On September 10, 1999, our Board of Directors approved a plan to repurchase, from time to time in the open market or through privately negotiated transactions, shares of our common stock at an aggregate purchase price of up to $2,000,000, and on October 17, 2000, our Board increased the plan by up to an additional $2,000,000. On April 21, 2001, our Board determined to temporarily discontinue any purchases under the stock repurchase plan. Since such time, the Board has not authorized management to resume repurchases under the plan. As a result, no shares were repurchased during fiscal 2004, 2003 or 2002. During fiscal 2004, no treasury shares were reissued to our employee Stock Purchase Program. During 2003 and 2002, 66,260 and 145,751 shares of treasury stock, respectively, were reissued to our employee Stock Purchase Program.

21

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 5 — CREDIT ARRANGEMENTS

On June 26, 2003, we amended our committed secured revolving credit facility (“credit facility”) with certain financial institutions. The amendment to the credit facility extended the expiration of the agreement from June 27, 2004, to November 30, 2006, and reduced the facility from $80,000,000 to $60,000,000. Of this amount, $10,000,000 was a sub-limit of the credit facility (“swing line”) which could be used for same-day advances to be provided solely by the administrative agent (a financial institution) of the credit facility. Both the credit facility and swing line bore interest at variable rates with short-term durations. The credit facility could be used for borrowings and letters of credit. The credit facility was guaranteed by substantially all of our subsidiaries, was secured by substantially all of our assets and the assets of our subsidiaries, and required the maintenance of certain financial covenants which, if not met, could adversely impact our liquidity. Our credit facility permitted the payment of dividends and did not require us to enter into a new interest rate swap agreement (see below) against the borrowings under the credit facility. The credit facility also included a commitment fee based on certain financial performance objectives ranging from 25 to 37.5 basis points on the unused balance. Principal payments on the credit facility are due on the expiration date. At June 30, 2004, we had borrowings under the credit facility of $10,000,000 bearing interest at 2.82%. Our interest rate swap agreement (see description below) expired on June 27, 2004, and is not included in our effective interest rate on that date. As of June 30, 2003, we had borrowings under the credit facility of $30,000,000 bearing interest at 5.60%, including the interest rate swap agreement that was in effect at that time. At June 30, 2004 and 2003, we had no borrowings under the swing line. Given that our credit facility bears interest at floating market interest rates, the fair value of amounts borrowed approximate carrying value. On August 26, 2004, we amended our credit facility. See Note 16 for additional information regarding this subsequent event.

At June 30, 2004 and 2003, we had outstanding letters of credit under the credit facility of $4,447,000 and $7,352,000, respectively, which were used in conjunction with merchandise procurement.

We also have a Canadian line of credit for approximately $746,000 secured by a letter of credit from a U.S. bank. At June 30, 2004 and 2003, there were no borrowings under this line of credit.

We are subject to interest rate risk on our long-term debt. We manage our exposure to changes in interest rates. We hedged our exposure to changes in interest rates on a portion of our variable debt by entering into an interest rate swap agreement to lock in a fixed interest rate for a portion of these borrowings. On July 1, 2001, we entered into a three-year interest rate swap agreement with the administrative agent of our credit facility converting $30,000,000 of outstanding indebtedness from a variable to a fixed interest rate. The average receive rate was based on a 90-day LIBOR rate. At June 30, 2003, the receive and pay rates related to the interest rate swap were 1.29% and 5.60%, respectively. Interest differentials paid or received under the swap agreement are reflected as an adjustment to interest expense when paid. Prior to June 26, 2003, the interest rate swap agreement represented a valid cash flow hedge investment under SFAS No. 133. As such, during fiscal 2003, changes in the fair value of the interest rate swap were recognized in other comprehensive income. As of June 27, 2004, the interest rate swap agreement expired and is therefore not reflected on our balance sheet at June 30, 2004. The fair value of the swap agreement at June 30, 2003, was approximately ($1,665,000), and was included in accrued liabilities at June 30, 2003. At June 30, 2003 and 2002, the balance in other comprehensive income, related to the swap agreement, was approximately ($1,019,000), net of tax of $646,000, and ($1,041,000), net of tax of $659,000, respectively. We do not expect the potential impact of market conditions on the fair value of our indebtedness to be material.

In conjunction with the amendment to our credit facility during fiscal 2003, we discontinued hedge accounting on this swap. The change in the fair value of the swap agreement and balance in other comprehensive income was charged to interest expense during 2004, for the remaining term of the swap. We held the swap until two days before maturity on June 27, 2004. At that time, we canceled the swap with no penalty, and on June 28, 2004, we paid $20,000,000 on the outstanding debt.

At June 30, 2004, we had credit availability under our credit facility and our Canadian line of credit as follows:

	June 30, 2004
Total credit facility	$	60,746,000
Less:
Debt outstanding		10,000,000
Outstanding letters of credit		4,447,000
Canadian standby letter of credit		746,000
Credit available	$	45,553,000

Under the credit facilities described above, future payments required for debt maturities will be $10,000,000 in fiscal year 2007.

22

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 6 — INCOME TAXES

Significant components of our deferred tax assets and liabilities as of June 30, 2004 and 2003, are as follows:

	2004			2003
Deferred tax assets:
Accounts receivable valuation	$	386,000		$	601,000
Inventory valuation		2,340,000			2,399,000
Interest rate swap		—			646,000
Foreign interest income		951,000			866,000
Other, net		332,000			245,000
Total deferred tax assets		4,009,000			4,757,000
Deferred tax liabilities:
Goodwill and other intangibles		(1,142,000	)		(950,000	)
Depreciation		(924,000	)		(826,000	)
Total deferred tax liabilities		(2,066,000	)		(1,776,000	)
Net deferred tax asset	$	1,943,000		$	2,981,000

Significant components of the provision (benefit) for income taxes are as follows:

	2004		2003		2002
Current:
Federal	$	3,341,000	$	4,189,000	$	4,215,000
Foreign		118,000		53,000		(88,000	)
State and local		594,000		406,000		271,000
		4,053,000		4,648,000		4,398,000
Deferred:
Federal		373,000		249,000		(369,000	)
State and local		19,000		25,000		(19,000	)
		392,000		274,000		(388,000	)
Income tax provision	$	4,445,000	$	4,922,000	$	4,010,000

The following table reconciles the statutory federal income tax rate to the effective income tax rate:

	2004			2003			2002
Statutory rate		34.0	%		34.0	%		34.0	%
State and local taxes, net of federal income tax benefit		3.4	%		3.5	%		2.5	%
Other, net		1.3	%		1.4	%		2.4	%
		38.7	%		38.9	%		38.9	%

23

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 7 — COMMITMENTS

We lease property, which includes office, manufacturing and warehouse facilities, under operating leases expiring through the year 2010 with varying renewal and escalation clauses. Total rental expense for all of our leased properties for fiscal 2004, 2003 and 2002 totaled $2,237,000, $2,165,000 and $2,251,000, respectively.

We have entered into licensing agreements with other companies for the purpose of using their trademarks on our products. Royalty expense related thereto for fiscal 2004, 2003 and 2002 totaled $1,429,000, $1,821,000 and $1,960,000, respectively.

Future minimum rental and royalty commitments as of June 30, 2004, are as follows:

Fiscal Year	Amount
2005	$	3,609,000
2006		3,342,000
2007		2,342,000
2008		1,542,000
2009		1,554,000
Thereafter		560,000
	$	12,949,000

NOTE 8 — GOODWILL

Effective July 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” This Statement changed the accounting for goodwill from an amortization approach to an impairment-only approach. The SFAS No. 142 goodwill impairment model is a two-step process. The first step compares the fair value of a reporting unit that has goodwill assigned to its carrying value. We estimated the fair value of a reporting unit using a discounted cash flow analysis. If the fair value of the reporting unit is determined to be less than its carrying value, a second step is performed to compute the amount of goodwill impairment, if any. Step two allocates the fair value of the reporting unit to the reporting unit’s net assets other than goodwill. The excess of the fair value of the reporting unit over the amounts assigned to its net assets other than goodwill is considered the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the carrying value of its goodwill. Any shortfall represents the amount of goodwill impairment.

Using the SFAS No. 142 approach described above, we recorded a transitional goodwill impairment charge during the first quarter of fiscal 2003 of $950,000 ($581,000, net of tax), presented as a cumulative effect of accounting change. This charge related to our women’s accessories segment of products.

The following table illustrates the gross carrying amount and accumulated amortization of our acquired intangible assets as of June 30, 2004, compared to the previous year (in thousands):

	2004			2003
Amortized intangible assets (various, principally trade names):
Gross carrying amount	$	8,774		$	8,774
Accumulated amortization		(4,240	)		(3,874	)
Net amortized intangible assets	$	4,534		$	4,900

Amortization expense for acquired finite-lived intangible assets during the year ended June 30, 2004, was $366,000. The following table illustrates our estimated amortization expense through June 30, 2009:

Estimated amortization expense:
Fiscal year ending 6/30/05	$	361,000
Fiscal year ending 6/30/06		361,000
Fiscal year ending 6/30/07		361,000
Fiscal year ending 6/30/08		361,000
Fiscal year ending 6/30/09		359,000

24

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 8 — GOODWILL (continued)

The following table reconciles net income, earnings per common share and earnings per share — assuming dilution, adjusted to exclude amortization expense recognized in such periods related to goodwill (dollars in thousands, except per share amounts):

	Year Ended June 30,
	2004		2003		2002
Reported net income before cumulative effect of accounting change	$	7,037	$	7,717	$	6,293
Add back after-tax amounts:
Goodwill amortization		—		—		622
Adjusted net income before cumulative effect of accounting change	$	7,037	$	7,717	$	6,915
Earnings per common share before cumulative effect of accounting change:
Reported net income	$	1.13	$	1.30	$	1.09
Goodwill amortization		—		—		.11
Adjusted basic earnings per common share before cumulative effect of accounting change	$	1.13	$	1.30	$	1.20
Earnings per share — assuming dilution before cumulative effect of accounting change:
Reported net income	$	1.10	$	1.28	$	1.08
Goodwill amortization		—		—		.11
Adjusted earnings per share — assuming dilution before cumulative effect of accounting change	$	1.10	$	1.28	$	1.19

The following table illustrates the changes in the carrying amount of goodwill by reportable segment for the year ended June 30, 2004:

	Men's		Women's
	Accessories		Accessories			Total
June 30, 2002	$	9,733	$	2,734		$	12,467
Impairment losses		—		(950	)		(950	)
Other (1)		124		—			124
June 30, 2003	$	9,857	$	1,784		$	11,641
Other (1)		14		—			14
June 30, 2004	$	9,871	$	1,784		$	11,655

(1) Difference due to foreign currency translation adjustments.

25

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 9 — STOCK OPTIONS

Employee Stock Options

Our officers and key management employees are eligible to receive options to purchase shares of our common stock under the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (see description below). In addition, many of our officers and key management employees have received options under our prior stock option plans. All options are granted at the market price as of the date of grant and have a contractual life of ten years. Options are generally exercisable annually at a rate of one-third per year beginning one year after the grant date. The following table reflects employee stock option activity from June 30, 2001, to June 30, 2004:

	Number			Weighted-Average
	of Shares			Exercise Price
Outstanding at June 30, 2001		755,928		$	12.94
Options granted		180,000		$	5.63
Options exercised		(12,958	)	$	8.70
Options canceled or expired		(80,956	)	$	11.13
Outstanding at June 30, 2002		842,014		$	11.62
Options granted		179,000		$	11.67
Options exercised		(44,587	)	$	7.68
Options canceled or expired		(97,900	)	$	15.02
Outstanding at June 30, 2003		878,527		$	11.40
Options granted		149,350		$	12.07
Options exercised		(140,320	)	$	8.40
Options canceled or expired		(35,750	)	$	19.75
Outstanding at June 30, 2004		851,807		$	11.66
Exercisable on June 30, 2004		534,352		$	12.19

The following table segregates outstanding options granted to employees into groups based on price ranges of less than and greater than $10 per share as of June 30, 2004:

	$5.63-$9.25		$11.67-$17.56
All outstanding options:
Number of shares		272,918		578,889
Weighted-average exercise price	$	6.90	$	13.91
Weighted-average remaining contractual life	6.6 years		7.4 years
Exercisable options:
Number of shares		216,365		317,987
Weighted-average exercise price	$	7.23	$	15.56

Omnibus Plan

The Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the “Omnibus Plan”) was approved by our stockholders on October 16, 2002. The purpose of the Omnibus Plan is to attract and retain the services of key management employees and Board members through the granting of incentive stock options, non-qualified stock options, performance units, stock appreciation rights or restricted stock. All grants under the Omnibus Plan have a maximum contractual life of ten years. Any grants under the Omnibus Plan will be made at the fair market value of our common stock and specific vesting terms will be addressed in each award. All shares available for grant under our prior option plans on October 16, 2002, were transferred to the Omnibus Plan and are authorized and reserved for issuance under the Omnibus Plan. All shares of common stock presently authorized and reserved for issuance on the exercise of outstanding stock options under our prior stock option plans will, on the cancellation or expiration of any such stock options, automatically be authorized and reserved for issuance in connection with the Omnibus Plan.

At June 30, 2004 and 2003, the number of shares available for grant under the Omnibus Plan was 395,031 and 514,840, respectively.

26

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 9 — STOCK OPTIONS (continued)

Non-Employee Director Stock Options

Our non-employee directors are also eligible for awards under the Omnibus Plan. The Omnibus Plan provides that, when a non-employee director is first elected or appointed to the Board, he or she will be granted a non-qualified stock option to purchase 5,000 shares of our common stock or, if the Board so elects, an alternative form of award (other than an incentive stock option) with a value substantially equivalent to the value of such non-qualified stock option. The Omnibus Plan also provides that concurrently with each regular annual election of the Board of Directors, each continuing non-employee director (other than our Chairman) will receive a non-qualified stock option to purchase 2,500 shares of our common stock and our Chairman will receive a non-qualified stock option to purchase 4,425 shares of our common stock. If the Board so elects, non-employee directors and our Chairman may receive an alternative form of award (other than an incentive stock option) with a value substantially equivalent to the value of a non-qualified stock option to purchase 2,500 and 4,425 shares of our common stock, respectively.

On October 15, 2003, each of our non-employee directors, other than the Chairman of the Board, was granted a stock option to purchase 1,500 shares of common stock at an exercise price of $15.60 and 645 shares of restricted stock. Our Chairman was granted a stock option to purchase 2,657 shares of common stock at an exercise price of $15.60 per share and 1,140 shares of restricted stock. The options became fully vested six months after the date of grant. The restricted stock awards will become fully vested on October 15, 2006, with one-third of the shares vesting on each anniversary of the date of the grant. Generally, upon the death, disability, resignation or termination of a non-employee director, that director’s shares become fully vested. These shares of stock, while not transferable, bear rights of ownership, including voting and dividend rights, during the vesting period.

Compensation expense of $58,000 related to the restricted stock awards granted to our non-employee directors was recorded during fiscal 2004.

Many of our non-employee directors have also received options to purchase shares of our common stock under our prior stock option plans. The options are generally exercisable beginning six months after the date of grant. During fiscal 2004, 2003 and 2002, our non-employee directors exercised options to purchase 2,461, 2,585 and 3,289 shares of our common stock, respectively.

The following table reflects non-employee director stock option transactions from June 30, 2001, to June 30, 2004:

	Number			Weighted-Average
	of Shares			Exercise Price
Outstanding at June 30, 2001		95,258		$	11.57
Options granted		45,282		$	6.09
Options exercised		(3,289	)	$	8.13
Options canceled or expired		—			—
Outstanding at June 30, 2002		137,251		$	10.25
Options granted		14,425		$	9.23
Options exercised		(2,585	)	$	8.13
Options canceled or expired		(19,618	)	$	13.37
Outstanding at June 30, 2003		129,473		$	9.71
Options granted		8,657		$	15.60
Options exercised		(2,461	)	$	9.88
Options canceled or expired		(6,000	)	$	19.00
Outstanding at June 30, 2004		129,669		$	9.67
Exercisable on June 30, 2004		129,669		$	9.67

27

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 9 — STOCK OPTIONS (continued)

The following table segregates outstanding options granted to non-employee directors into groups based on price ranges of less than $10 or greater than or equal to $10 per share as of June 30, 2004:

	$6.09-$9.23		$10.00-$17.75
All outstanding options:
Number of shares		84,827		44,842
Weighted-average exercise price	$	7.13	$	14.47
Weighted-average remaining contractual life	6.4 years		5.1 years
Exercisable options:
Number of shares		84,827		44,842
Weighted-average exercise price	$	7.13	$	14.47

Other Non-Employee Director Stock Plans

In fiscal 1995, our stockholders adopted the Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors (the “Deferral Plan”). The Deferral Plan was established to provide non-employee directors an equity interest in the Company in order to attract and retain well-qualified individuals to serve as non-employee directors and to enhance the identity of interests between the non-employee directors and our stockholders. The Deferral Plan provides the directors with an election to defer the receipt of their annual and committee chair retainer fees until a future date determined by each director. The payment of such fees will be in the form of phantom stock units which will ultimately be settled in shares of our common stock. All amounts deferred are credited to a bookkeeping reserve account we maintain in phantom stock units which are equivalent in value to our common stock. The phantom stock units representing shares are calculated by dividing the deferred cash amount by the average closing price of the stock for each day of the period during which such cash amount would have been paid but for the deferral election. We record compensation expense for the amount of the directors’ retainer fees. We benefit from cash retained when directors elect to defer their retainer fees and receive phantom stock units. The Deferral Plan, which became active in 1996, provides for the issuance of up to 50,000 shares of our common stock to non-employee directors. During fiscal 2004, 2003 and 2002, 2,885, 3,411 and 4,030 phantom stock units, respectively, were issued under the Deferral Plan. Amounts recorded as compensation expense related to the Deferral Plan for fiscal 2004, 2003 and 2002 were $40,096, $34,150 and $31,470, respectively.

NOTE 10 — EMPLOYEE BENEFIT PLANS

The Tandy Brands Accessories, Inc. Employees Investment Plan Trust (the “401(k) Plan”) is open to substantially all full-time employees who have completed one year of service. Under the 401(k) Plan, an eligible employee may contribute up to 10% of his or her annual compensation to the 401(k) Plan on a pre-tax basis. We, at our discretion, match 100% of employee contributions up to 5% of compensation. The 401(k) Plan allows participants to direct the investment of both employee and matching employer contributions from a variety of investment alternatives, one of which is our common stock. All contributions made to the 401(k) Plan prior to July 1, 2002, are fully vested and are held in a fund invested primarily in our common stock.

The Tandy Brands Accessories, Inc. Stock Purchase Program (the “Program”) is open to all full-time employees who are enrolled in the 401(k) Plan. Under the Program, participants may contribute 5% or 10% of their earnings and we match 25% or 50% of each participant’s contribution depending on their length of employment. The Program purchases treasury stock, if available (see Note 4), or unissued common stock directly from the Company at monthly average market prices. The participant’s shares are fully vested upon purchase and the participant may withdraw from the Program at any time. The shares purchased under the Program are distributed to participants annually.

The Tandy Brands Accessories, Inc. Benefit Restoration Plan Trust (the “BRP”) is a non-qualified plan of deferred compensation, the purpose of which is to restore retirement benefits on behalf of a select group of our management and highly compensated employees who are eligible to make contributions to the 401(k) Plan, the amount of which is reduced due to limitations imposed by Sections 401(a)(17) and 402(g) of the Internal Revenue Code of 1986, as amended. For any plan year, a participant may elect to defer, on a pre-tax basis, 5% of his gross salary and wages otherwise payable to him by us during such plan year, reduced by the total contributions he made during such plan year to the 401(k) Plan. Participants may direct the investment of their contributions in various investment alternatives, including our common stock. We make quarterly matching contributions in cash to the BRP on the participant’s behalf equal to 150% of the amount the participant deferred during such calendar quarter. Our matching contributions are required to be invested only in our common stock. All payments of benefits from the BRP will be made solely in cash in either a single, lump-sum distribution or in monthly installments over a certain period, not to exceed 10 years. The liability associated with the BRP of $1,087,000 is included in other noncurrent liabilities.

28

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 10 — EMPLOYEE BENEFIT PLANS (continued)

Our total contributions to these plans were approximately $1,162,000, $1,211,000 and $917,000 in fiscal 2004, 2003 and 2002, respectively.

On July 1, 2003, our executive officers were awarded a total of 22,800 shares of restricted stock, which will become fully vested on July 1, 2006. These shares of stock, while not transferable, bear rights of ownership, including voting and dividend rights, during the three-year vesting period. There are no performance requirements related to vesting, only continued employment through the vesting date. Compensation expense in the amount of approximately $92,000 related to the restricted stock awards granted to our executive officers was recorded during fiscal 2004. At June 30, 2004, the Company had unearned compensation recorded in the amount of $183,000 relating to these shares, which will be recorded as compensation expense in the amount of approximately $23,000 per quarter through June 30, 2006.

On January 1, 2003, we adopted the Tandy Brands Accessories, Inc. Supplemental Executive Retirement Plan (the “SERP”) for a select group of our executive officers. The SERP provides that at normal retirement (age 65) a participant will receive, in the form of a 100% joint and survivor annuity, an annual benefit (or actuarially equivalent lump-sum at the time of retirement in lieu of such joint and survivor annuity) which will generally be equal to 2% of the average of the participant’s highest annual gross salary and bonus (without reduction for any deductions) for three complete fiscal years over the last 10 fiscal years of the participant’s employment, multiplied by the participant’s years of service up to a maximum of 30 years, and reduced by the participant’s Social Security retirement benefits and the participant’s benefits under the Tandy Brands Accessories, Inc. Employees Investment Plan when expressed in the form of a single-life annuity commencing with the participant’s normal retirement age. If the participant has at least 15 years of service with the Company and retires at or after age 55 but before age 65, the benefit would be reduced by 5% for each year the participant’s retirement precedes age 65. A participant is also eligible for a benefit if the participant becomes disabled or if the participant terminates service with us after completing 15 years of service and the participant’s termination of service is not as a result of normal retirement, early retirement or disability. If the participant begins receiving a disability benefit or a termination benefit at or after age 55 but before age 65, the benefit would be reduced by 5% for each year the benefit distribution precedes age 65. The SERP also provides for a pre-retirement death benefit if the participant dies after reaching normal retirement or early retirement age but before receiving distributions under the SERP.

29

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 10 — EMPLOYEE BENEFIT PLANS (continued)

For the year ended June 30, 2004 and 2003, we recorded expenses related to the SERP of approximately $266,000 and $151,000, respectively. This plan is not currently funded and therefore has no plan assets. Measurement of obligations under the SERP is calculated as of each fiscal year-end. The discount rate used to determine the actuarial present value of the projected benefit obligation under the SERP was 7.5% as of June 30, 2004 and 2003, and the assumed weighted-average rate increase in future compensation levels was 4.0% as of June 30, 2004 and 2003. We anticipate that there will be no SERP benefits paid during the next five years. Contributions to the SERP during fiscal 2005 are expected to be approximately $400,000.

The following table provides a reconciliation of benefit obligations and funded status of the SERP as of June 30, 2004 and 2003 (dollars in thousands):

	2004			2003
Change in projected benefit obligation:
Projected benefit obligation, beginning of year	$	2,134		$	—
Service cost		15			7
Interest cost		160			74
Actuarial loss/(gain)		(24	)		—
Plan amendments		—			2,053
Projected benefit obligation, end of year	$	2,285		$	2,134
Reconciliation of funded status:
Funded status	$	(2,285	)	$	(2,134	)
Unrecognized prior service cost		1,843			1,983
Unrecognized prior net loss/(gain)		(24	)		—
Accrued benefit liability	$	(466	)	$	(151	)
Amounts recognized in the balance sheet:
Accrued benefit liability	$	(1,721	)	$	(1,607	)
Intangible asset		1,255			1,456
Net amount recognized	$	(466	)	$	(151	)
Components of net periodic benefit cost:
Service cost	$	15		$	7
Interest cost		160			74
Amortization of prior service cost		140			70
	$	315		$	151
Additional information for SERP:
Accumulated benefit obligation	$	1,721		$	1,607

At June 30, 2004, we had 1,725,503 shares authorized and reserved for future issuance under all of our stock incentive plans, including outstanding options under the Omnibus Plan and our prior stock option plans.

NOTE 11 — DIVIDENDS

During fiscal 2004, we declared dividends as set forth in the following table:

Declaration Date	Record Date	Payable Date	Dividend per Share
August 12, 2003	September 30, 2003	October 31, 2003	$	0.025
October 15, 2003	December 31, 2003	January 22, 2004	$	0.025
January 22, 2004	March 31, 2004	April 20, 2004	$	0.025
April 22, 2004	June 30, 2004	July 20, 2004	$	0.025

30

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 12 — PREFERRED STOCK AND PREFERRED SHARE PURCHASE RIGHTS

Preferred Stock

Without any further action by the holders of our common stock, our Board of Directors is authorized to approve and determine the issuance of preferred stock, as well as the dividend rights, dividend rate, conversion or exchange rights, voting rights, rights and terms of redemption, liquidation preferences and sinking fund terms of any series of preferred stock, the number of shares constituting any series of preferred stock and the designation thereof. No shares of preferred stock have been issued. In connection with the adoption of our Preferred Share Purchase Rights Plan (the “Rights Plan”), we have designated and reserved for issuance upon exercise of such rights 150,000 shares of Series A Junior Participating Cumulative Preferred Stock.

Should the Board of Directors elect to exercise its authority to issue any additional series of preferred stock, the rights, preferences and privileges of holders of our common stock would be made subject to the rights, preferences and privileges of such additional series.

Preferred Share Purchase Rights

Prior to the spin-off of the Company, our Board of Directors authorized the Rights Plan. In conjunction with the spin-off, each share of our common stock was distributed with one preferred share purchase right (collectively, the “Rights”), which entitles the registered holder to purchase from the Company one one-hundredth (1/100) of a share of Series A Junior Participating Cumulative Preferred Stock at a price of $36 per one one-hundredth (1/100) of a share, subject to adjustment. The Rights Plan is designed to deter coercive or unfair takeover tactics and to prevent an acquirer from gaining control of the Company without offering a fair price to all of our stockholders. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by our Board of Directors, except pursuant to an offer conditioned upon a substantial number of Rights being acquired. The description and terms of the Rights are set forth in a Rights Agreement between the Company and BankBoston N.A., as Rights Agent.

On November 2, 1999, our Board of Directors renewed the Rights Plan. The amended and restated Rights Plan was adopted in the normal course of updating and extending the predecessor Rights Plan, which was scheduled to expire on December 31, 2000, and not in response to any acquisition proposal. The expiration date of the Rights Plan was extended to October 19, 2009. The amended and restated Rights Plan was altered to reflect prevailing stockholder Rights Plan terms, such as lowering the share ownership level which triggers the exercise of the Rights and eliminating the continuing director provision. The amended and restated Rights Plan provides for an increase in the exercise price of the Rights under the Rights Plan from $36.00 to $70.00.

NOTE 13 — DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

We sell our products to a variety of retail outlets, including mass merchants, national chain stores, major department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores and the retail exchange operations of the United States military. Our Company and our corresponding customer relationships are organized along men’s and women’s product lines. As a result, we have two reportable segments: (1) men’s accessories, consisting of belts, wallets, suspenders and other small leather goods, and (2) women’s accessories, consisting of belts, wallets, handbags, socks, scarves, hats and hair accessories. General corporate expenses are allocated to each segment based on the respective segment’s asset base. Depreciation and amortization expense related to assets recorded on our corporate accounting records are allocated to each segment as described above. Management measures profit or loss on each segment based upon income or loss before taxes, utilizing accounting policies consistent in all material respects with those described in Note 1. No inter-segment revenue is recorded.

31

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 13 — DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (continued)

Information regarding operations and assets by reportable segment is as follows (dollars in thousands):

	Year Ended June 30,
	2004			2003			2002
Revenue from external customers:
Men’s accessories	$	113,558		$	108,816		$	107,525
Women’s accessories		101,862			115,671			98,244
	$	215,420		$	224,487		$	205,769
Operating income (1):
Men’s accessories	$	12,612		$	8,500		$	8,528
Women’s accessories		1,099			6,871			4,857
	$	13,711		$	15,371		$	13,385
Interest expense	$	(2,357	)	$	(2,833	)	$	(3,152	)
Other income (2)		128			101			70
Income before income taxes and cumulative effect of accounting change	$	11,482		$	12,639		$	10,303
Depreciation and amortization expense:
Men’s accessories	$	2,137		$	2,351		$	3,382
Women’s accessories		1,918			1,916			1,999
	$	4,055		$	4,267		$	5,381
Capital expenditures:
Men’s accessories	$	475		$	331		$	274
Women’s accessories		1,102			335			1,596
Corporate		1,541			1,778			1,120
	$	3,118		$	2,444		$	2,990
Total assets:
Men’s accessories	$	70,144		$	71,275		$	65,201
Women’s accessories		44,584			55,997			46,157
Corporate		20,846			20,714			21,420
	$	135,574		$	147,986		$	132,778

(1)	Operating income consists of net sales less cost of sales and specifically identifiable selling, general and administrative expenses.
(2)	Other income includes royalty income on corporate trade names and other income not specifically identifiable to a segment.

32

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 13 — DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (continued)

Our net revenues, total assets and property, plant and equipment as of June 30, 2004, 2003 and 2002, by geographic location, were as follows (dollars in thousands):

	2004		2003		2002
Net revenues:
United States	$	208,570	$	217,849	$	199,013
Canada (1)		6,850		6,638		6,756
	$	215,420	$	224,487	$	205,769
Total assets:
United States	$	129,686	$	142,361	$	127,609
Canada (1)		5,888		5,625		5,169
	$	135,574	$	147,986	$	132,778
Property, plant and equipment, at cost:
United States	$	34,089	$	31,426	$	29,061
Canada (1)		492		459		380
	$	34,581	$	31,885	$	29,441

(1) Sales reported for our Canadian subsidiary are converted to U.S. dollars at the average exchange rate for each of the fiscal years above. Total assets and property, plant and equipment are converted at the exchange rate as of June 30 for each year. Our Canadian subsidiary is reported in our men’s accessories reporting segment.

NOTE 14 — RELATED-PARTY TRANSACTIONS

During fiscal 2004, 2003 and 2002, we purchased inventory of approximately $44,327,000, $53,307,000 and $35,221,000, respectively, from a supplier who is a stockholder of the Company. At June 30, 2004 and 2003, the total purchase amount listed above also included unpaid invoices in the amount of $4,478,000 and $1,314,000, respectively. The merchandise is purchased at amounts which we believe approximate fair market value. Although the potential exposure for product flow interruption may be significant in the event of loss of such supplier, this exposure is mitigated because the inventory may be purchased from various other sources.

33

     Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 15 — SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of our quarterly financial data (dollars in thousands, except per share amounts) for the two years ended June 30, 2004, is set forth below:

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Fiscal 2004
Net sales	$	64,232	$	64,159	$	42,560	$	44,469
Gross profit		21,630		22,081		15,383		16,191
Income before income taxes		4,691		6,358		225		208
Net income	$	2,845	$	3,909	$	132	$	151
Earnings per common share	$	.47	$	.63	$	.02	$	.02
Earnings per common share — assuming dilution	$	.45	$	.61	$	.02	$	.02

	First			Second		Third		Fourth
	Quarter			Quarter		Quarter		Quarter
Fiscal 2003
Net sales	$	60,028		$	66,222	$	47,011	$	51,226
Gross profit		20,785			23,229		16,512		17,562
Income before income taxes and cumulative effect of accounting change		3,922			5,935		1,694		1,088
Net income before cumulative effect of accounting change	$	2,395		$	3,627	$	1,032	$	663
Cumulative effect of accounting change for
SFAS No. 142, net of income taxes		(581	)		—		—		—
Net income	$	1,814		$	3,627	$	1,032	$	663
Earnings per common share:
Before cumulative effect of accounting change	$	.41		$	.61	$	.17	$	.11
Cumulative effect of accounting change		(.10	)		—		—		—
	$	.31		$	.61	$	.17	$	.11
Earnings per common share — assuming dilution:
Before cumulative effect of accounting change	$	.40		$	.60	$	.17	$	.11
Cumulative effect of accounting change		(.10	)		—		—		—
	$	.30		$	.60	$	.17	$	.11

34

Notes To Consolidated Financial Statements Tandy Brands Accessories, Inc. and Subsidiaries

NOTE 16 — SUBSEQUENT EVENTS

On July 1, 2004, we completed our previously announced acquisition of all the equity interest in Superior. The total purchase price was $10,000,000 and was funded entirely with cash. In addition, we retired all of Superior’s outstanding debt totaling approximately $806,000. Superior, which also operates under the name of ETON^®, primarily markets and distributes men’s and women’s gift accessories under both the ETON^® and the licensed totes^® brands. We estimate that goodwill from this acquisition will be approximately $7,500,000. The pro forma effects of this acquisition are not material. For fiscal 2005 we will report the operating results of Superior under our men’s accessories reporting segment.

On August 12, 2004, our Board of Directors declared the Company’s fifth consecutive quarterly dividend. The dividend of $0.0275 per share will be payable to stockholders of record as of September 30, 2004. The payment of the dividend will occur on October 19, 2004.

On August 26, 2004, we amended our committed secured revolving credit facility with certain financial institutions. The amendment extended the expiration of our agreement from November 30, 2006, to November 30, 2007, and increased the facility from $60,000,000 to $85,000,000. Of this amount, $10,000,000 is a sub-limit of the credit facility (“swing line”) which may be used for same-day advances to be provided solely by the administrative agent (a financial institution) of the credit facility. Both the credit facility and swing line bear interest at variable rates with short-term durations. The credit facility may be used for borrowings and letters of credit. The amended facility contains an accordion feature to increase the facility by up to an additional $25,000,000 by adding a financial institution at a later date. Although the previous credit facility was secured by substantially all of our assets and the assets of our subsidiaries, the amended facility is unsecured. The amended facility requires the maintenance of certain financial covenants which, if not met, could adversely impact our liquidity. Our amended credit facility permits the payment of dividends and does not require us to enter into an interest rate swap agreement against the borrowings under the credit facility. The credit facility also includes a commitment fee based on certain financial performance objectives ranging from 20 to 37.5 basis points on the unused balance. Principal payments on the credit facility are due on the expiration date. The amended credit facility is guaranteed by all of our subsidiaries, except our Canadian subsidiary.

35

Report of Independent Registered Public Accounting Firm Tandy Brands Accessories, Inc. and Subsidiaries

To the Board of Directors of Tandy Brands Accessories, Inc.

We have audited the accompanying consolidated balance sheets of Tandy Brands Accessories, Inc. and subsidiaries as of June 30, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tandy Brands Accessories, Inc. and subsidiaries at June 30, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2004, in conformity with U.S. generally accepted accounting principles.

As described in Note 1 to the consolidated financial statements, effective July 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

Fort Worth, Texas
July 30, 2004, except for footnote 16,
as to which the date is August 26, 2004

36

Report of Management Tandy Brands Accessories, Inc. and Subsidiaries

TO OUR STOCKHOLDERS:

Management is responsible for the preparation and the integrity of the accompanying consolidated financial statements and related notes, which have been prepared in accordance with accounting principles generally accepted in the United States and include amounts based upon our estimates and judgments, as required. The consolidated financial statements have been audited by Ernst & Young LLP, our independent registered public accounting firm. In connection with their audits we have made available to Ernst & Young LLP all financial records and related data. The accompanying independent auditors’ report expresses an independent professional opinion on the fairness of presentation of management’s financial statements.

Management maintains a system of internal controls over financial reporting. We believe this system provides reasonable assurance that transactions are properly recorded and reported in the financial statements, assets are properly safeguarded and accounted for, and records are maintained so as to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States.

The Board of Directors, through the activities of its Audit Committee consisting solely of independent directors, provides oversight of the process of reporting financial information. The committee meets periodically with management and our independent registered public accounting firm and internal auditors to review internal accounting controls, audit results, financial reporting, and accounting principles and practices. Both our independent and internal auditors have full and free access to the Audit Committee, with and without management present.

President and Chief Executive Officer
Chief Financial Officer

37

Management’s Discussion and Analysis of Financial Condition and Results of Operations Graphic Tandy Brands Accessories, Inc. and Subsidiaries

General

Tandy Brands Accessories, Inc. is a leading designer, manufacturer and marketer of branded men’s, women’s and children’s accessories, including belts and small leather goods such as wallets. Our product line also includes handbags, socks, scarves, gloves, hats, hair accessories, suspenders, cold weather accessories and sporting goods accessories. Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, including DOCKERS^® , LEVI’S^® , LEVI STRAUSS SIGNATURE™, JONES NEW YORK^® , ROLFS^® , HAGGAR^® , WOOLRICH^® , JORDACHE^® , BUGLE BOY^® , CANTERBURY^® , PRINCE GARDNER^® , PRINCESS GARDNER^® , AMITY^® , STAGG^® , ACCESSORY DESIGN GROUP^® and TIGER^® , as well as private brands for major retail customers. We sell our products through all major retail distribution channels throughout the United States and Canada, including mass merchants, national chain stores, department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores and the retail exchange operations of the United States military.

Our Company and our corresponding customer relationships are organized along men’s and women’s product lines. As a result, we have two reportable segments: (1) men’s accessories, consisting of belts, wallets, suspenders and other small leather goods, and (2) women’s accessories, consisting of belts, wallets, handbags, socks, scarves, hats and hair accessories. The following provides an overview of sales and gross margin data from our reportable segments for fiscal 2004 compared to the previous two fiscal years (see Note 13 to our consolidated financial statements for certain other financial information with regard to our men’s and women’s accessories segments):

	Year Ended June 30,
	2004			2003			2002
	(Dollars in thousands)
Net sales:
Men’s accessories	$	113,558		$	108,816		$	107,525
Women’s accessories		101,862			115,671			98,244
Total net sales	$	215,420		$	224,487		$	205,769
Gross margin:
Men’s accessories	$	44,360		$	41,409		$	40,236
Women’s accessories		30,925			36,679			31,827
Total gross margin	$	75,285		$	78,088		$	72,063
Gross margin as percentage of sales:
Men’s accessories		39.1	%		38.1	%		37.4	%
Women’s accessories		30.4	%		31.7	%		32.4	%
Total		34.9	%		34.8	%		35.0	%

The principal market for our common stock is the NASDAQ National Market System. Our common stock is listed on the NASDAQ National Market under the symbol “TBAC.” As of September 1, 2004, we had approximately 861 stockholders of record.

Challenges and Opportunities

Fiscal 2004 presented many challenges and opportunities for us. Downward pressure on women’s accessories inventory replenishment by mass merchant customers, competitive market pressures and weakened trends in women’s fashion accessories contributed to a decrease in sales compared to fiscal 2003. However, this decrease was offset in part by strong sales in men’s accessories. We continue to seek increased accessory sales and earnings in both our men’s and women’s segments through a variety of means, including increased sales through our current operating units as well as growth through acquisitions of similar businesses. We anticipate a return to normalized sales and earnings growth for our women’s accessories segment during the course of fiscal 2005.

To that end, on May 10, 2004, we announced that we were entering the men’s neckwear business, utilizing a direct-to-retailer sales model. We plan to design and promote men’s neckties which will be manufactured overseas and shipped directly to our retail customers in the United States, allowing our pricing to be very competitive compared to established neckwear suppliers. In addition, on June 3, 2004, we announced our agreement to acquire Superior Merchandise Company (“Superior”). Through this acquisition, which was completed on July 1, 2004, we have added gift accessories to our product line that we will sell under the ETON^® and licensed totes^® brands.

We also initiated a quarterly dividend program that resulted in payments to our stockholders of $.025 per share in each quarter of fiscal 2004. On August 12, 2004, our Board of Directors declared a dividend for the first quarter of fiscal 2005 of $.0275 per share, payable to stockholders of record as of September 30, 2004. This dividend reflects a 10% increase over the dividend paid in the same period last year.

As you read the following discussion and analysis, you should refer to our consolidated financial statements and the accompanying notes presented elsewhere in this Annual Report.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations Tandy Brands Accessories, Inc. and Subsidiaries

FISCAL 2004 COMPARED TO FISCAL 2003

Net Sales and Gross Margin

The following table illustrates sales and gross margin data from our reportable segments for the year ended June 30, 2004, compared to last year:

	Year Ended June 30,
							% Increase/
	2004			2003			(Decrease)
	(Dollars in thousands)
Net sales:
Men’s accessories	$	113,558		$	108,816			4.4	%
Women’s accessories		101,862			115,671			(11.9	%)
Total net sales	$	215,420		$	224,487			(4.0	%)
Gross margin:
Men’s accessories	$	44,360		$	41,409			7.1	%
Women’s accessories		30,925			36,679			(15.7	%)
Total gross margin	$	75,285		$	78,088			(3.6	%)
Gross margin as percentage of sales:
Men’s accessories		39.1	%		38.1	%		1.0	%
Women’s accessories		30.4	%		31.7	%		(1.3	%)
Total		34.9	%		34.8	%		0.1	%

Net sales decreased $9.1 million compared to last year. The overall decrease was attributable to lower sales volume in women’s mass merchant accessories. Net sales of men’s accessories increased $4.7 million compared to last year due to higher men’s and boys’ mass merchant belt sales during fiscal 2004. Net sales of women’s accessories decreased $13.8 million due to lower sales to mass merchants during fiscal 2004. The shortfall in our women’s mass merchant category was due to downward pressure on inventory replenishment by mass merchant customers, competitive market pressures and fewer item-driven fashion trends.

Gross margins decreased $2.8 million in fiscal 2004 compared to fiscal 2003. This decrease was primarily due to the decrease in women’s accessories gross margins which decreased $5.8 million, or 15.7%, in fiscal 2004 compared to fiscal 2003. The decrease in gross margins for women’s accessories was due to higher than anticipated customer allowances and direct sales shipments of women’s accessories to Target and Payless ShoeSource, which have lower than average gross margins. The decrease in gross margins for women’s accessories was offset by gross margins for men’s accessories, which increased $3.0 million compared to last year. The improvement in gross margins for men’s accessories was due to an increase in margins for department store sales of men’s belts, small leather goods and accessory assortments compared to last year. Although we anticipate gross margin percentages to approximate historical levels in future periods, any material changes in sales mix, such as higher mass merchant accessory sales or direct shipments, could lower our gross margin percentages during a particular season.

Operating Expenses

The following table illustrates selling, general and administrative expenses and depreciation and amortization expenses for our reportable segments for fiscal 2004 compared to fiscal 2003:

	Year Ended June 30,
					% Increase/
	2004		2003		(Decrease)
	(Dollars in thousands)
Selling, general and administrative expenses:
Men’s accessories	$	29,574	$	30,384		(2.7	%)
Women’s accessories		27,945		28,066		(0.4	%)
Total	$	57,519	$	58,450		(1.6	%)
Depreciation and amortization expense:
Men’s accessories	$	2,137	$	2,351		(9.1	%)
Women’s accessories		1,918		1,916		0.1	%
Total	$	4,055	$	4,267		(5.0	%)
Interest expense	$	2,357	$	2,833		(16.8	%)

39

Management’s Discussion and Analysis of Financial Condition and Results of Operations Tandy Brands Accessories, Inc. and Subsidiaries

Selling, general and administrative expenses decreased $0.9 million in fiscal 2004 compared to fiscal 2003. This decrease was due primarily to a bad debt recovery of approximately $651,000 arising from a customer’s bankruptcy court settlement and payment of accounts receivable that we had previously reserved. Other decreases in expenses were attributable to variable costs related to lower sales, such as reduced royalty, customer freight and shipping supplies expense during fiscal 2004 compared to the prior year. Telecommunication expense also decreased by approximately $300,000 due to the change to web-based EDI transmissions.

Depreciation and amortization expense decreased due to certain intangibles that were fully amortized during the prior fiscal year, having reached the end of their useful lives.

Interest expense for fiscal 2004 decreased $0.5 million compared to fiscal 2003. This decrease was primarily related to lower interest rates as well as lower debt levels compared to the prior year.

The effective tax rates for fiscal 2004 and fiscal 2003 were 38.7% and 38.9%, respectively. The effective tax rate was lower for 2004 due to lower effective state and local tax rates.

Net Income

Net income for fiscal 2004 decreased 8.8% to $7.0 million, or $1.10 per diluted share, compared to net income of $7.7 million, or $1.28 per diluted share, for fiscal 2003, before the cumulative effect of accounting change resulting from the adoption of SFAS No. 142. During fiscal 2003 we recorded the cumulative effect of an accounting change resulting from the adoption of SFAS No. 142 in the amount of $581,000, net of tax. Net income for fiscal 2003, including the cumulative effect of the accounting change, was $7.1 million, or $1.18 per diluted share. The decrease in net income in fiscal 2004 was primarily due to reduced sales of women’s mass merchant accessories.

FISCAL 2003 COMPARED TO FISCAL 2002

Net Sales and Gross Margin

The following table illustrates sales and gross margin data from our reportable segments for the year ended June 30, 2003, compared to the year ended June 30, 2002:

	Year Ended June 30,
							% Increase/
	2003			2002			(Decrease)
	(Dollars in thousands)
Net sales:
Men’s accessories	$	108,816		$	107,525			1.2	%
Women’s accessories		115,671			98,244			17.7	%
Total net sales	$	224,487		$	205,769			9.1	%
Gross margin:
Men’s accessories	$	41,409		$	40,236			2.9	%
Women’s accessories		36,679			31,827			15.2	%
Total gross margin	$	78,088		$	72,063			8.4	%
Gross margin as a percentage of sales:
Men’s accessories		38.1	%		37.4	%		0.7	%
Women’s accessories		31.7	%		32.4	%		(0.7	%)
Total		34.8	%		35.0	%		(0.2	%)

Net sales increased $18.7 million in fiscal 2003 compared to fiscal 2002. The overall increase was attributable to higher sales volume in existing women’s product lines. Net sales of men’s accessories increased $1.3 million in fiscal 2003 compared to the previous year. This sales increase was attributable to higher men’s mass merchant accessories sales during the first two quarters of fiscal 2003. Net sales of women’s accessories increased $17.4 million in fiscal 2003 compared to fiscal 2002. During fiscal 2003, results were particularly strong in our women’s department store business, with small leather goods and branded belts, such as LEVI’S^®, DOCKERS^® and our ROLFS^® handbags, selling well. Women’s mass merchant accessories generated especially strong results through the sale of handbags, socks, fashion hosiery and other accessories that successfully reflected the latest fashion trends. Due to the continued fashion trend in women’s belts, the women’s mass merchant accessory division accounted for $11.5 million of the $17.4 million overall increase in women’s accessories net sales.

40

Management’s Discussion and Analysis of Financial Condition and Results of Operations Tandy Brands Accessories, Inc. and Subsidiaries

Gross margins increased $6.0 million in fiscal 2003 compared to fiscal 2002. As a percentage of sales, gross margins decreased 0.2% in fiscal 2003 compared to the previous year. Gross margins for men’s accessories and women’s accessories increased $1.2 million and $4.8 million, respectively, in fiscal 2003 compared to fiscal 2002. As a percentage of sales, men’s accessories gross margins increased 0.7% in fiscal 2003 compared to fiscal 2002. This improvement was due to an increase in the higher margin department store sales of men’s small leather goods and belts compared to the previous year. Women’s accessories gross margins as a percentage of sales decreased 0.7% in fiscal 2003 compared to fiscal 2002. This decrease was due to a greater sales mix weighted towards women’s mass merchant accessories during fiscal 2003, higher than anticipated customer allowances and direct sales shipments of women’s accessories to Payless ShoeSource, which have lower than average gross margins.

Operating Expenses

The following table illustrates selling, general and administrative expenses and depreciation and amortization expenses for our reportable segments for fiscal 2003 compared to 2002:

	Year Ended June 30,
					% Increase/
	2003		2002		(Decrease)
	(Dollars in thousands)
Selling, general and administrative expenses:
Men’s accessories	$	30,384	$	28,343		7.2	%
Women’s accessories		28,066		24,954		12.5	%
Total	$	58,450	$	53,297		9.7	%
Depreciation and amortization expense:
Men’s accessories	$	2,351	$	3,382		(30.5	%)
Women’s accessories		1,916		1,999		(4.2	%)
Total	$	4,267	$	5,381		(20.7	%)
Interest expense	$	2,833	$	3,152		(10.1	%)

Selling, general and administrative expenses increased $5.2 million in fiscal 2003 compared to fiscal 2002. This increase resulted primarily from nonrecurring costs associated with the implementation of distribution software in our Dallas, Texas, distribution center totaling $290,000 and higher compensation expenses, including severance costs totaling $430,000 and management bonus expenses which exceeded that of the prior year by $482,000. Other expense increases were variable costs related to increased sales during fiscal 2003, compared to the prior year.

Depreciation and amortization expenses as a percentage of net sales for fiscal 2003 decreased 0.7% compared to fiscal 2002. We attribute this decrease primarily to the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” pursuant to which goodwill is no longer amortized. See Note 8 to our consolidated financial statements. Goodwill amortization expense for 2002 was approximately $1,000,000.

Interest expense for fiscal 2003 decreased $0.3 million compared to fiscal 2002. This decrease was primarily related to lower interest rates as well as lower debt levels compared to the same period in the prior year.

The effective tax rate for fiscal 2003 was 38.9%, which was consistent with the same period in the prior year.

Net Income

Net income for fiscal 2003 increased 13.4% to $7.1 million, or $1.18 per diluted share, compared to net income of $6.3 million, or $1.08 per diluted share, for fiscal 2002. Net income, before the cumulative effect of accounting change resulting from the adoption of SFAS No. 142, for fiscal 2003 increased 22.6% to $7.7 million, or $1.28 per diluted share, compared to net income of $6.3 million, or $1.08 per diluted share, for fiscal 2002. The increase in fiscal 2003 net income was due primarily to the overall increase in women’s accessories net sales.

In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” Under the new rules, goodwill is no longer amortized but is reviewed annually for impairment. Separable intangible assets that do not have an indefinite life will continue to be amortized over their useful lives.

The adoption of SFAS No. 142 is considered a change in accounting principle. The cumulative effect of adopting this standard resulted in a non-cash, after-tax charge in the first quarter of fiscal 2003 of $581,000, or $(0.10) per diluted share, which does not affect our on-going operations. The adoption of SFAS No. 142 will result in an annual reduction in amortization expense of approximately $1,000,000 due to goodwill no longer being amortized.

41

Management’s Discussion and Analysis of Financial Condition and Results of Operations Graphic Tandy Brands Accessories, Inc. and Subsidiaries

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 2004, our operating activities provided cash of $23.0 million compared to a $2.0 million use of cash during fiscal 2003. The cash provided from operations during fiscal 2004 was attributable to reduced inventory levels and lower accounts receivable at June 30, 2004, due to the timing of customer payments. The usage of cash during fiscal 2003 was attributable to the timing of women’s fall season inventory procurement, higher inventory commitments to support required stock levels for certain key retail customers and accounts receivable related to shipments completed during the fourth quarter of fiscal 2003. Historically, we have generated less cash flow from operations during periods of growth, such as post integration of acquisitions or increased inventory commitments related to certain key retail customers. We anticipate this trend to continue in the future in light of our acquisition of Superior during fiscal 2005. See Note 16 to our consolidated financial statements and the “Subsequent Events” section that follows for additional information about our acquisition of Superior on July 1, 2004, for $10,000,000 in cash and the retirement of $806,000 of Superior’s debt.

Capital expenditures totaled $3.1 million for fiscal 2004 compared to $2.4 million for fiscal 2003. We attribute this increase to the implementation of a new software application at our West Bend, Wisconsin, distribution center and the purchase of additional computer hardware and leasehold improvements at our distribution center in Dallas, Texas, during fiscal 2004. We anticipate that our capital expenditures for fiscal 2005 will approximate our capital investments of property and equipment completed during fiscal 2004. We expect to fund such capital commitments through cash flows from operations and drawing on our existing credit facility.

The primary sources of liquidity for our various expenditures have been cash flows from operations and borrowings under bank credit arrangements. As of June 30, 2004, we had a $60,000,000 committed secured revolving credit facility that could be used for general corporate purposes, including working capital requirements, acquisition activities and funding of letters of credit. The credit facility was secured by substantially all of our assets and the assets of our subsidiaries and required the maintenance of certain financial covenants, which if not met, could adversely impact our liquidity. On August 26, 2004, we amended our credit facility. See Notes 5 and 16 to our consolidated financial statements and the “Subsequent Events” section that follows. We also have a Canadian line of credit for approximately $746,000 secured by a letter of credit from a U.S. bank. As of June 30, 2004, we had credit availability under our credit facilities of approximately $45,600,000. See Note 5.

Under the above credit facilities, future payments required for debt maturities would be $10,000,000 in fiscal year 2007.

We believe we have adequate financial resources and access to sufficient credit facilities to satisfy our future working capital needs.

While we did not declare any dividends in fiscal 2003, during fiscal 2004, we declared dividends as set forth in the following table:

Declaration Date	Record Date	Payable Date	Dividend per Share
August 12, 2003	September 30, 2003	October 31, 2003		$	0.025
October 15, 2003	December 31, 2003	January 22, 2004		$	0.025
January 22, 2004	March 31, 2004	April 20, 2004		$	0.025
April 22, 2004	June 30, 2004	July 20, 2004		$	0.025

We expect that quarterly dividends will continue to be paid in fiscal 2005. See Note 16 to our consolidated financial statements and the “Subsequent Events” section that follows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate risk on our long-term debt. The effect of a one-percent increase or decrease in the interest rate on our long-term debt could lower or increase our operating results by $100,000. We manage our exposure to changes in interest rates. We hedged our exposure to changes in interest rates on a portion of our variable debt by entering into an interest rate swap agreement to lock in a fixed interest rate for a portion of these borrowings. On July 1, 2001, we entered into a three-year interest rate swap agreement with the administrative agent of our credit facility, converting $30,000,000 of outstanding indebtedness from a variable to a fixed interest rate. The average receive rate was based on a 90-day LIBOR rate. At June 30, 2003, the receive and pay rates related to the interest rate swap were 1.29% and 5.60%, respectively. Interest differentials paid or received under the swap agreement are reflected as an adjustment to interest expense when paid. Prior to June 26, 2003, the interest rate swap agreement represented a valid cash flow hedge investment under SFAS No. 133. As such, during fiscal 2003, changes in the fair value of the interest rate swap were recognized in other comprehensive income. As of June 27, 2004, the interest rate swap agreement expired and is therefore not reflected on our balance sheet at June 30, 2004. The fair value of the swap agreement at June 30, 2003, was approximately ($1,665,000), and was included in accrued liabilities at June 30, 2003. At June 30, 2003 and 2002, the balance in other comprehensive income, related to the swap agreement, was approximately ($1,019,000), net of tax of $646,000, and ($1,041,000), net of tax of $659,000, respectively. We do not expect the potential impact of market conditions on the fair value of our indebtedness to be material.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations Graphic Tandy Brands Accessories, Inc. and Subsidiaries

In addition to interest rate risk on our long-term debt, we are also exposed to market risk with respect to changes in the global price level of certain commodities used in the production of our products. We routinely purchase leather hides during the year for use in the manufacture of men’s belts. We also purchase a substantial amount of leather items from third-party suppliers. An unanticipated material increase in the market price of leather could increase the cost of these products to us and therefore have a negative effect on our results of operations.

CONTRACTUAL OBLIGATIONS

The following is a summary of our significant contractual cash obligations for the periods indicated that existed as of June 30, 2004, and, except for purchase obligations, is based on information appearing in the notes to our consolidated financial statements (dollars in thousands):

			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Long-term debt (1)	$	10,000	$	—	$	10,000	$	—	$	—
Operating leases (2)		8,887		1,712		3,519		3,096		560
Payments under royalty licenses (2)		4,062		1,897		2,165		—		—
Supplemental Executive Retirement Plan		2,285		—		—		—		2,285
Purchase obligations (3)		34,094		34,094		—		—		—
Total contractual obligations	$	59,328	$	37,703	$	15,684	$	3,096	$	2,845

(1)	Our current interest rate is 2.82%. Interest on the debt above is expensed and paid monthly. See “Subsequent Events” section that follows for additional information on our long-term debt.
(2)	See Note 7 to our consolidated financial statements for a discussion of our future minimum rental and royalty commitments.
(3)	Purchase orders in the ordinary course of business that may be cancelled without penalty. Purchase obligations include outstanding letters of credit of $4.5 million which primarily represent inventory purchase commitments which typically mature in two to six months. See Note 5 to our consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.

The use of estimates is pervasive throughout the consolidated financial statements, but the accounting policies and estimates considered most critical are as follows:

Revenues

We recognize revenue when merchandise is shipped and title to the goods has passed to the customer. We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances and customer returns, at the time the revenue is recognized, based upon historical experience, current trends in the retail industry and individual customer and product experience.

We perform periodic credit evaluations of our customers’ financial conditions and reserve against accounts deemed uncollectible based upon historical losses and customer specific events. After all collection efforts are exhausted and the account is deemed uncollectible, it is written off against the reserve for doubtful accounts. Credit losses have historically been within management’s expectations and we generally do not require collateral. During fiscal 2004, we recorded a bad debt recovery of approximately $651,000 arising from a customer’s bankruptcy court settlement and payment of accounts receivable that we had previously reserved.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations Tandy Brands Accessories, Inc. and Subsidiaries

Inventories

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) or market. Cost includes materials, direct and indirect labor and factory overhead. Market, with respect to raw materials, is replacement cost; and for work-in-process and finished goods, it is net realizable value. If circumstances arise in which the market value of items in inventory declines below cost, an inventory markdown would be estimated and charged to expense in the period identified. If we incorrectly anticipate these trends or unexpected events occur, the results of operations could be materially affected. We closely monitor fashion trend items and anticipate additional inventory markdowns if market indications in fashion trends justify further reserves. Historically, such inventory markdowns have been within management’s expectations.

Goodwill

We adopted the provisions of SFAS No. 142, effective July 1, 2002. This Statement changed the accounting for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach. The SFAS No. 142 goodwill impairment model is a two-step process. The first step compares the fair value of a reporting unit that has goodwill assigned to its carrying value. We estimate the fair value of a reporting unit using discounted cash flow analysis. If the fair value of the reporting unit is determined to be less than its carrying value, a second step is performed to compute the amount of goodwill impairment, if any. Step two allocates the fair value of the reporting unit to the reporting unit’s net assets other than goodwill. The excess of the fair value of the reporting unit over the amounts assigned to its net assets other than goodwill is considered the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the carrying value of its goodwill. Any shortfall represents the amount of goodwill impairment.

Using the SFAS No. 142 approach described above, we recorded a transitional goodwill impairment charge during the first quarter of fiscal 2003 of $950,000 ($581,000, net of tax), presented as a cumulative effect of accounting change. This charge related to our women’s accessories segment of products.

We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. In evaluating impairment, we estimate the sum of the expected future cash flows derived from such goodwill. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors.

Derivatives

Our risk management policy as it relates to derivative investments is to mitigate, subject to market conditions, against interest rate risk. We do not enter into any derivative investments for the purpose of speculative investment. Our overall risk management philosophy is re-evaluated as business conditions arise.

SEASONALITY

Historically, our quarterly sales and net income results are fairly consistent throughout the fiscal year, with a seasonal increase during the first and second quarter. The following table presents the percentage of the total annual net sales and net income that occurred in each quarter of fiscal 2004 and 2003:

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Net sales
Fiscal 2004		29.8	%		29.8	%		19.8	%		20.6	%
Fiscal 2003		26.7	%		29.5	%		21.0	%		22.8	%
Net Income (1)
Fiscal 2004		40.4	%		55.6	%		1.9	%		2.1	%
Fiscal 2003		25.4	%		50.8	%		14.5	%		9.3	%

(1) Includes cumulative effect of accounting change for SFAS No. 142 of ($581,000), or ($.10) per diluted share, in fiscal 2003.

INFLATION

Although our operations are affected by general economic trends, we do not believe that inflation has had a material effect on our operating results during the past three fiscal years.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations Tandy Brands Accessories, Inc. and Subsidiaries

SUBSEQUENT EVENTS

On July 1, 2004, we completed our previously announced acquisition of all the equity interest in Superior. The total purchase price was $10,000,000 and was funded entirely with cash. In addition, we retired all of Superior’s outstanding debt, totaling approximately $806,000. Superior, which also operates under the name of ETON^® , primarily markets and distributes men’s and women’s gift accessories under both the ETON^® and the licensed totes^® brands. We estimate goodwill from this acquisition will be approximately $7,500,000. The pro forma effects of this acquisition are not material. For fiscal 2005 we will report the operating results of Superior under our men’s accessories reporting segment.

On August 12, 2004, our Board of Directors declared the Company’s fifth consecutive quarterly dividend. The dividend of $0.0275 per share will be payable to stockholders of record as of September 30, 2004. The payment of the dividend will occur on October 19, 2004.

On August 26, 2004, we amended our committed secured revolving credit facility with certain financial institutions. The amendment extended the expiration of our agreement from November 30, 2006, to November 30, 2007, and increased the facility from $60,000,000 to $85,000,000. Of this amount, $10,000,000 is a sub-limit of the credit facility (“swing line”) which may be used for same-day advances to be provided solely by the administrative agent (a financial institution) of the credit facility. Both the credit facility and swing line bear interest at variable rates with short-term durations. The credit facility may be used for borrowings and letters of credit. The amended facility contains an accordion feature to increase the facility by up to an additional $25,000,000 by adding a financial institution at a later date. Although the previous credit facility was secured by substantially all of our assets and the assets of our subsidiaries, the amended facility is unsecured. The amended facility requires the maintenance of certain financial covenants which, if not met, could adversely impact our liquidity. Our amended credit facility permits the payment of dividends and does not require us to enter into an interest rate swap agreement against the borrowings under the credit facility. The credit facility also includes a commitment fee based on certain financial performance objectives ranging from 20 to 37.5 basis points on the unused balance. Principal payments on the credit facility are due on the expiration date. The amended credit facility is guaranteed by all of our subsidiaries, except our Canadian subsidiary.

WEBSITE ACCESS TO COMPANY REPORTS

Our website address is www.tandybrands.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed by our officers, directors and stockholders holding 10% or more of our common stock and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this annual report contain forward-looking statements that are based on current expectations, estimates and projections about the industry in which we operate, management’s beliefs and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

45

Selected Financial Data Tandy Brands Accessories, Inc. and Subsidiaries (Dollars in thousands, except per share amounts)

	Year Ended June 30,
	2004		2003			2002		2001		2000
Income Statement Data:
Net sales	$	215,420	$	224,487		$	205,769	$	195,793	$	187,742
Gross profit		75,285		78,088			72,063		65,761		66,199
Operating income		13,711		15,371			13,385		10,785		15,257
Interest expense		2,357		2,833			3,152		3,584		3,236
Net income before cumulative effect of accounting change	$	7,037	$	7,717		$	6,293	$	4,440	$	8,649
Cumulative effect of accounting change for SFAS No. 142, net of income taxes (1)		—		(581	)		—		—		—
Net income (2)	$	7,037	$	7,136		$	6,293	$	4,440	$	8,649
Earnings per share:
Before cumulative effect of accounting change	$	1.13	$	1.30		$	1.09	$	0.79	$	1.50
Cumulative effect of accounting change (1)		—		(.10	)		—		—		—
	$	1.13	$	1.20		$	1.09	$	0.79	$	1.50
Earnings per share — assuming dilution:
Before cumulative effect of accounting change	$	1.10	$	1.28		$	1.08	$	0.79	$	1.49
Cumulative effect of accounting change (1)		—		(.10	)		—		—		—
	$	1.10	$	1.18		$	1.08	$	0.79	$	1.49
Cash dividends per common share	$	.10	$	—		$	—	$	—	$	—

	Year Ended June 30,
	2004		2003		2002		2001		2000
Balance Sheet Data:
Working capital	$	81,635	$	89,282	$	78,217	$	86,383	$	80,085
Total assets		135,574		147,986		132,778		136,984		122,593
Long-term debt		10,000		30,000		30,000		47,400		41,075
Stockholders’ equity		99,899		90,054		80,664		74,135		69,874

(1) See Note 8 to our consolidated financial statements for discussion of SFAS No. 142.

(2) Net income includes the net pre-tax benefit arising from the early terminations of licensing agreements of $1,600,000 in fiscal 2000.

PRICE RANGE OF COMMON STOCK
Quoted by quarter for the two fiscal years ended June 30, 2004

Fiscal 2004	High		Low
September	$	15.22	$	11.95
December	$	16.05	$	14.10
March	$	15.98	$	12.87
June	$	13.87	$	13.02

Fiscal 2003	High		Low
September	$	12.24	$	8.83
December	$	9.99	$	8.15
March	$	10.51	$	9.22
June	$	12.50	$	9.99

46

DIRECTORS

Dr. James F. Gaertner 1, 2, 3 Chairman of the Board President Sam Houston State University

J.S.B. Jenkins President and Chief Executive Officer Tandy Brands Accessories, Inc. C.A. Rundell, Jr. 1, 3 Private Investor Gene Stallings 2, 3 Collegiate and Professional Football Coach, Rancher, Author and Private Investor Colombe M. Nicholas 2, 3 Private Investor Roger R. Hemminghaus 1, 3 Chairman Emeritus Ultramar Diamond Shamrock George C. Lake Founder and Managing Partner Lake Real Estate and Investments CORPORATE DATA Corporate Of.ces 690 East Lamar Boulevard Suite 200 Arlington, Texas 76011 817-548-0090 www.tandybrands.com Annual Meeting 10:00 a.m., October 14, 2004 Wyndham Arlington Hotel 1500 Convention Center Drive Arlington, Texas 76011 Common Stock Transfer Agent and Registrar EquiServe www.equiserve.com 781-575-3120 Corporate Counsel Winstead Sechrest & Minick P.C. The Company’s common stock is traded on the NASDAQ National Market System under the trading symbol TBAC. The Company’s Form 10-K Report for the year ended June 30, 2004, as .led with the Securities and Exchange Commission, is available without charge upon request to Mark J. Flaherty at the address of the Corporate Of.ces. OFFICERS J.S.B. Jenkins President and Chief Executive Of.cer Stanley T. Ninemire Executive Vice President Mark J. Flaherty Chief Financial Of.cer W. Mike Baggett Secretary Seated left to right, Dr. James F. Gaertner and J.S.B. Jenkins Standing left to right, George Lake, Roger Hemminghaus, Gene Stallings, Colombe Nicholas, C.A. Rundell, Jr. 1 Audit Committee 2 Human Resource and Compensation Committee 3 Nomination Committee

47

690 East Lamar Boulevard Suite 200 Arlington, Texas 76011 817-548-0090 www.tandybrands.com TBAC-AR-04

EX-3.2

                                                                     EXHIBIT 3.2

                                RESTATED BYLAWS
                                       OF
                         TANDY BRANDS ACCESSORIES, INC.


                                                                               .
                                                                               .
                                                                               .

                                TABLE OF CONTENTS



                                                                                                   Page
                                                                                                   ----
                                                                                                
ARTICLE I         OFFICES........................................................................    1
      SECTION 1.  REGISTERED OFFICE..............................................................    1
      SECTION 2.  OTHER OFFICES..................................................................    1

ARTICLE II        MEETINGS OF STOCKHOLDERS.......................................................    1
      SECTION 1.  PLACE OF MEETING...............................................................    1
      SECTION 2.  ANNUAL MEETINGS................................................................    1
      SECTION 3.  SPECIAL MEETINGS...............................................................    1
      SECTION 4.  NOTICE.........................................................................    1
      SECTION 5.  QUORUM.........................................................................    1
      SECTION 6.  VOTES..........................................................................    2
      SECTION 7.  LIST OF STOCKHOLDERS...........................................................    2

ARTICLE III       DIRECTORS......................................................................    3
      SECTION 1.  NUMBER.........................................................................    3
      SECTION 2.  TERM OF OFFICE.................................................................    3
      SECTION 3.  CHAIRMAN OF THE BOARD..........................................................    3
      SECTION 4.  VACANCIES......................................................................    3
      SECTION 5.  MEETINGS OF THE BOARD OF DIRECTORS.............................................    3
      SECTION 6.  QUORUM.........................................................................    4
      SECTION 7.  COMPENSATION...................................................................    4
      SECTION 8.  QUALIFICATIONS.................................................................    4

ARTICLE IV        EXECUTIVE COMMITTEE AND OTHER COMMITTEES.......................................    4
      SECTION 1.  EXECUTIVE COMMITTEE............................................................    4
      SECTION 2.  PROCEDURE......................................................................    4
      SECTION 3.  POWERS.........................................................................    4
      SECTION 4.  MINUTES........................................................................    4
      SECTION 5.  OTHER COMMITTEES...............................................................    5

ARTICLE V         OFFICERS.......................................................................    5
      SECTION 1.  OFFICERS.......................................................................    5
      SECTION 2.  VACANCIES......................................................................    5
      SECTION 3.  PRESIDENT......................................................................    5
      SECTION 4.  VICE PRESIDENTS................................................................    5
      SECTION 5.  TREASURER......................................................................    5
      SECTION 6.  ASSISTANT TREASURERS...........................................................    6
      SECTION 7.  SECRETARY......................................................................    6
      SECTION 8.  ASSISTANT SECRETARIES..........................................................    6
      SECTION 9.  SUBORDINATE OFFICERS...........................................................    6
      SECTION 10. COMPENSATION...................................................................    6
      SECTION 11. REMOVAL........................................................................    6
      SECTION 12. BONDS..........................................................................    6

ARTICLE VI        CERTIFICATES OF STOCK..........................................................    7


                                       -i-



                               TABLE OF CONTENTS



                                                                                                   Page
                                                                                                   ----
                                                                                                
      SECTION 1. FORM AND EXECUTION OF CERTIFICATES.............................................    7
      SECTION 2. TRANSFER OF SHARES.............................................................    7
      SECTION 3. CLOSING OF TRANSFER BOOKS AND RECORD DATES.....................................    7
      SECTION 4. LOST OR DESTROYED CERTIFICATES.................................................    8

ARTICLE VII      CORPORATE SIGNATURES...........................................................    8
      SECTION 1. EXECUTION OF NEGOTIABLE INSTRUMENTS............................................    8
      SECTION 2. EXECUTION OF AGREEMENTS........................................................    8
      SECTION 3. EXECUTION OF PROXIES...........................................................    9

ARTICLE VIII     WAIVERS AND CONSENTS...........................................................    9
      SECTION 1. WAIVERS........................................................................    9
      SECTION 2. CONSENTS.......................................................................    9

ARTICLE IX       DIVIDENDS AND RESERVE FUNDS....................................................    9
      SECTION 1. DIVIDENDS......................................................................    9
      SECTION 2. RESERVE FUNDS..................................................................    9

ARTICLE X        INSPECTION OF BOOKS............................................................    9

ARTICLE XI       FISCAL YEAR....................................................................   10

ARTICLE XII      SEAL...........................................................................   10

ARTICLE XIII     INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................   10

ARTICLE XIV      AMENDMENTS.....................................................................   10
      SECTION 1. BY STOCKHOLDERS................................................................   10
      SECTION 2. BY DIRECTORS...................................................................   10


                                      -ii-



                         TANDY BRANDS ACCESSORIES, INC.
                                 RESTATED BYLAWS

                                    ARTICLE I
                                     OFFICES

      SECTION 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located in the City of Dover, County of Kent,
State of Delaware, and the name of the resident agent in charge thereof shall be
The Prentice-Hall Corporation System, Inc.

      SECTION 2. Other Offices. The principal office of the Corporation and such
other offices as may be deemed appropriate shall be at such place or places as
the Board of Directors may from time to time appoint or the business of the
Corporation may require.

                                   ARTICLE II
                            MEETINGS OF STOCKHOLDERS

      SECTION 1. Place of Meeting. All meetings of the stockholders for the
election of directors shall be held at such place within or without the State of
Delaware as the Board of Directors may designate, provided that notice shall be
given to the stockholders entitled to vote at such meeting of the place so fixed
at least ten (10) days prior to the day of the meeting. Meetings of stockholders
for any other purpose may be held at such place and time as shall be stated in
the notice of the meeting.

      SECTION 2. Annual Meetings. The first annual meeting of stockholders shall
be held on the Wednesday preceding the second Thursday of November of each year
commencing in 1991, if not a legal holiday, and if a legal holiday then on the
next business day following, commencing at such time as the Board of Directors
of the Corporation shall determine, at which meeting the stockholders shall
elect directors by a plurality vote, and shall transact such other business as
may properly be brought before such meeting.

      SECTION 3. Special Meetings. Special meetings of the stockholders for any
purpose or purposes, unless otherwise prescribed by statute or the Certificate
of Incorporation, may be called only by the board of directors by resolution
adopted by a vote of the majority.

      SECTION 4. Notice. Written or printed notice of every meeting of
stockholders, annual or special, stating the time and place thereof, and, if a
special meeting, the purpose or purposes in general terms for which the meeting
is called, shall be served upon or mailed to each stockholder entitled to vote
at such meeting not less than ten (10) days prior to the day of such meeting, at
his address as it appears upon the books of the Corporation, or, if such
stockholder shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, then to
the address designated in such request.

      SECTION 5. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, the presence in person or by
proxy at any meeting of stockholders of the holders of a majority of the shares
of the capital stock of the Corporation issued and outstanding and entitled to
vote thereat shall be requisite and shall constitute a



quorum. If, however, such majority shall not be represented at any meeting of
the stockholders regularly called, the holders of a majority of the shares
present in person or by proxy and entitled to vote thereat shall have power to
adjourn the meeting to another time, or to another time and place, without
notice other than announcement of adjournment at the meeting, and there may be
successive adjournments for like cause and in like manner until the requisite
amount of shares entitled to vote at such meeting shall be represented. At such
adjourned meeting at which the requisite amount of shares entitled to vote
thereat shall be represented, any business may be transacted which might have
been transacted at the meeting as originally notified.

      SECTION 6. Votes. Except as otherwise provided in the Certificate of
Incorporation of the Corporation, each stockholder shall, at each meeting of
stockholders, be entitled to one vote for each share of Common Stock entitled to
vote and the vote, if any, which was fixed pursuant to the Certificate of
Incorporation for each share of Preferred Stock which is registered in the
stockholder's name on the books of the Corporation on the date on which the
transfer books were closed, if closed, or on the date set by the Board of
Directors for the determination of stockholders entitled to vote at such
meeting. At each such meeting every stockholder shall be entitled to vote in
person, or by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to the meeting in
question, unless said instrument provides for a longer period during which it is
to remain in force.

      At all meetings of the stockholders, a quorum being present, all matters
shall be decided by a majority vote of the shares of stock entitled to vote held
by stockholders present in person or by proxy, except as otherwise required by
the Certificate of Incorporation or the laws of the State of Delaware. Unless so
directed by the chairman of the meeting, or required by the laws of the State of
Delaware, the vote thereat on any question need not be by ballot.

      On a vote by ballot, each ballot shall be signed by the stockholder
voting, or in his name by his proxy, if there be such proxy, and shall state the
number of shares voted by him and the number of votes to which each share is
entitled. On a vote by ballot, the chairman shall appoint two inspectors of
election, who shall first take and subscribe an oath or affirmation faithfully
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of their ability and who shall take charge of the polls
and after the balloting shall make a certificate of the result of the vote
taken; but no director or candidate for the office of director shall be
appointed as such inspector.

      SECTION 7. List of Stockholders. At least ten (10) days before every
election of directors, a complete list of stockholders entitled to vote at such
election, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each shall be prepared by the Secretary. Such
list shall be open at the principal offices of the Corporation or at the place
where the election is to be held, for said ten (10) days, to the examination of
any stockholder entitled to vote at that election and shall be produced and kept
at the time and place of election during the whole time thereof, and subject to
the inspection of any stockholder who may be present.

                                      -2-



                                  ARTICLE III
                                   DIRECTORS

      SECTION 1. Number. The business and property of the Corporation shall be
conducted and managed by a Board consisting of such number of directors, but not
less than three (3) nor more than nine (9), as may be fixed from time to time by
resolution adopted by the Board. Directors need not be stockholders.

      SECTION 2. Term of Office. The directors shall be divided into three
classes, Class I, Class II and Class III. The number of directors in each class
shall be the whole number contained in the quotient arrived at by dividing the
authorized number of directors by three, and if a fraction is also contained in
such quotient then if such fraction is one-third (1/3), the extra director
shall be a member of Class III, and if the fraction is two-thirds (2/3) one of
the extra directors shall be a member of Class III and the other a member of
Class II. Once the initial Board of Directors is divided into classes, Class I
directors shall serve for a term expiring at the annual meeting of stockholders
to be held in 1991, Class II directors shall serve for a term expiring at the
annual meeting of stockholders to be held in 1992 and Class III directors shall
serve for a term expiring at the annual meeting of stockholders to be held in
1993. Each director shall serve until his or her successor is elected and
qualified. At each annual meeting of stockholders commencing with the annual
meeting of stockholders to be held in 1991, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election.

      SECTION 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the stockholders and of the Board of Directors.

      SECTION 4. Vacancies. Except as otherwise provided in the Certificate of
Incorporation, in the case of any increase in the number of directors, or in the
case of any vacancy in the Board of Directors resulting from the death,
resignation, removal or such other cause, such newly created directorship or
vacancy shall only be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. When one or more directors shall resign from the Board of
Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as herein provided in the filling of other vacancies.

      Any director elected in accordance with this Section 4 shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and shall serve until such
director's successor shall have been elected and qualified.

      SECTION 5. Meetings of the Board of Directors. Meetings of the Board of
Directors shall be held at such place within or without the State of Delaware as
may from time to time be fixed by resolution of the Board of Directors or by the
Chairman of the Board, or by the President or as may be specified in the notice
or waiver of notice of any meeting. Meetings may be held at any time upon the
call of the Chairman of the Board, the President or the Secretary or

                                      -3-



any two (2) of the directors then in office by oral, telegraphic, or written
notice, duly served or sent or mailed to each director not less than one (1) day
before such meeting. Meetings may be held at any time and place without notice
if all the directors are present, or if those not present shall in writing or by
telegram or cable waive notice thereof. A regular meeting of the Board of
Directors may be held without notice immediately following the annual meeting of
stockholders at the place where such annual meeting is held. Regular meetings of
the Board may also be held without notice at such time and place as shall from
time to time be determined by resolution of the Board of Directors.

      SECTION 6. Quorum. One-third, but not less than two (2), of the directors
shall constitute a quorum for the transaction of business. If at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time without notice other
than announcement of the adjournment at the meeting, and at such adjourned
meeting at which a quorum is present any business may be transacted which might
have been transacted at the meeting as originally notified.

      SECTION 7. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors, a fixed sum for
attendance at each meeting of the Board of Directors and/or a stated fee as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefore. Members
of the Executive Committee and/or of other committees may be allowed like
compensation and reimbursement of expenses for attending committee meetings.

      SECTION 8. Qualifications. No director may serve past the annual meeting
following his or her 70th birthday.

                                   ARTICLE IV
                    EXECUTIVE COMMITTEE AND OTHER COMMITTEES

      SECTION 1. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, appoint an Executive Committee of two
(2) or more members, to serve during the pleasure of the Board of Directors, to
consist of such directors as the Board of Directors may from time to time
designate. The Chairman of the Executive Committee shall be designated by the
Board of Directors.

      SECTION 2. Procedure. The Executive Committee, by a vote of a majority of
its members, shall fix its own times and places of meeting, shall determine the
number of its members constituting a quorum for the transaction of business, and
shall prescribe its own rules of procedure, no change in which shall be made
save by a majority vote of its members.

      SECTION 3. Powers. During the intervals between the meetings of the Board
of Directors, the Executive Committee shall possess and may exercise all the
powers of the Board of Directors in the management and direction of the business
and affairs of the Corporation, to the extent permitted by law.

      SECTION 4. Minutes. The Executive Committee shall keep regular minutes of
its proceedings and all action by the Executive Committee shall be reported to
the Board of

                                      -4-



Directors at its next meeting. Such action shall be subject to review by the
Board of Directors, provided that no rights of third parties shall be affected
by such review.

      SECTION 5. Other Committees. From time to time the Board of Directors, by
the affirmative vote of a majority of the whole Board of Directors, may appoint
other committees for any purpose or purposes, and such committees shall have
such powers as shall be conferred by the resolution of appointment, and as shall
be permitted by law.

                                    ARTICLE V
                                    OFFICERS

      SECTION 1. Officers. The Board of Directors shall elect, as officers, a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Treasurer and a Secretary, and in their discretion
one or more Assistant Secretaries, and Assistant Treasurers. Such officers shall
be elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders, and each shall hold office until the
corresponding meeting of the Board of Directors in the next year and until his
successor shall have been duly elected and qualified, or until he shall have
died or resigned or shall have been removed in the manner provided herein. The
powers and duties of two or more offices may be exercised and performed by the
same person, except the offices of President and Secretary.

      SECTION 2. Vacancies. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.

      SECTION 3. President. The President shall be the chief executive officer
of the Corporation. Subject to the direction of the Board of Directors, he shall
have and exercise direct charge of and general supervision over the business and
affairs of the Corporation and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors.

      SECTION 4. Vice Presidents. The Vice Presidents shall, in the order of
their seniority or in such order as may be specified by the Board of Directors,
have and perform all the powers and duties of the President, in his absence or
disability, and shall in addition have and exercise such powers and shall
perform such duties as from time to time may be conferred upon or assigned to
them by the Board of Directors or as may be delegated to them by the Chairman of
the Board or the President.

      SECTION 5. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositaries as shall, from time to time, be selected by the Board of
Directors; he may endorse for collection on behalf of the Corporation, checks,
notes and other obligations; he may sign receipts and vouchers for payments made
to the Corporation; singly or jointly with another person as the Board of
Directors may authorize, he may sign checks of the Corporation and pay out and
dispose of the proceeds under the direction of the Board of Directors; he shall
cause to be kept correct books of account of all the business and transactions
of the Corporation, shall see that adequate audits thereof are currently and
regularly made, and

                                      -5-



shall examine and certify the accounts of the Corporation; he shall render to
the Board of Directors, the Executive Committee, the Chairman of the Board or to
the President, whenever requested, an account of the financial condition of the
Corporation; he may sign with the President or a Vice President, certificates of
stock of the Corporation; and, in general, shall perform all the duties incident
to the office of a treasurer of a corporation, and such other duties as from
time to time may be assigned to him by the Board of Directors.

      SECTION 6. Assistant Treasurers. The Assistant Treasurers in order of
their seniority shall, in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer and shall perform such other
duties as the President or the Board of Directors shall prescribe.

      SECTION 7. Secretary. The Secretary shall keep the minutes of all meetings
of the stockholders and of the Board of Directors in books provided for the
purpose; he shall see that all notices are duly given in accordance with the
provisions of law, the Certificate of Incorporation, and these Bylaws; he shall
be custodian of the records and of the corporate seal or seals of the
Corporation; he shall see that the corporate seal is affixed to all documents,
the execution of which, on behalf of the Corporation, under its seal, is duly
authorized and when the seal is so affixed he may attest the same; he may sign,
with the President or a Vice President, certificates of stock of the
Corporation; and, in general, he shall perform all duties incident to the office
of a secretary of a corporation, and such other duties as from time to time may
be assigned to him by the Board of Directors.

      SECTION 8. Assistant Secretaries. The Assistant Secretaries in order of
their seniority shall, in the absence or disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties as the President or the Board of Directors shall prescribe.

      SECTION 9. Subordinate Officers. The Board of Directors may appoint such
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority and perform such duties as the Board
of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.

      SECTION 10. Compensation. The Board of Directors shall have the power to
fix the compensation of all officers of the Corporation. It may authorize any
officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers.

      SECTION 11. Removal. Any officer of the Corporation may be removed, with
or without cause, by a majority vote of the Board of Directors at a meeting
called for that purpose.

      SECTION 12. Bonds. The Board of Directors may require any officer of the
Corporation to give a bond to the Corporation, conditional upon the faithful
performance of his duties, with one or more sureties and in such amount as may
be satisfactory to the Board of Directors.

                                      -6-



                                   ARTICLE VI
                              CERTIFICATES OF STOCK

      SECTION 1. Form and Execution of Certificates. The interest of each
stockholder of the Corporation shall be evidenced by a certificate or
certificates for shares of stock in such form as may be prescribed from time to
time by law and by the Board of Directors. The certificates of stock of each
class and series now authorized or which may hereafter be authorized by the
Certificate of Incorporation shall be consecutively numbered and signed by
either the President or a Vice President together either with the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and may be countersigned and registered in such manner as the Board
of Directors may prescribe, and shall bear the corporate seal or a printed or
engraved facsimile thereof. Where any such certificate is signed by a transfer
agent or transfer clerk and by a registrar, the signatures of any such
President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary upon such certificate may be facsimiles engraved or printed.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been placed upon, such certificate or
certificates shall have ceased to be such, whether because of death, resignation
or otherwise, before such certificate or certificates shall have been issued and
delivered, such certificate or certificates may nevertheless be issued and
delivered with the same effect as if such officer or officers had not ceased to
be such at the date of its issue and delivery.

      SECTION 2. Transfer of Shares. The shares of the stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof in
person or by his attorney lawfully constituted, upon surrender for cancellation
of certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof or
guaranty of the authenticity of the signature as the Corporation or its agents
may reasonably require. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person whether or not
it shall have express or other notice thereof, except as otherwise expressly
provided by law.

      SECTION 3. Closing of Transfer Books and Record Dates. The Board of
Directors may in its discretion prescribe, in advance, a record date not
exceeding sixty (60) nor less than ten (10) days prior to the date of any
meeting of the stockholders or prior to the last day on which the consent or
dissent of stockholders may be effectively expressed for any purpose without a
meeting, during which no transfer of stock on the books of the Corporation may
be made; or in lieu of prohibiting the transfer of stock, may fix, in advance, a
record date not more then sixty (60) nor less than ten (10) days prior to the
date of any meeting of stockholders or prior to the last day on which the
consent or dissent of stockholders may be effectively expressed for any purpose
without a meeting, as the time as of which stockholders entitled to notice of
and to vote at such a meeting or whose consent or dissent is required or may be
expressed for any purpose, as the case may be, shall be determined; and all
persons who were holders of record of voting stock at such time and no others
shall be entitled to notice of and to vote at such meeting or to express their
consent or dissent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any record date fixed as aforesaid.
The Board of Directors may also, in its discretion, fix in advance a date not
exceeding sixty (60) days preceding the date fixed for the payment of any
dividend or the making of any distribution, or for the delivery of

                                      -7-



evidence of rights, or evidences of interests arising out of any issuance,
change, conversion or exchange of capital stock, as a record date for the
determination of the stockholders entitled to receive or participate in any such
dividend, distribution, rights or interests, notwithstanding any transfer of any
stock on the books of the Corporation after any record date fixed as aforesaid,
or, at its option, in lieu of so fixing a record date, may prescribe in advance
a period not exceeding sixty (60) days prior to the date for such payment,
distribution or delivery during which no transfer of stock on the books of the
Corporation may be made.

      SECTION 4. Lost or Destroyed Certificates. In case of the loss or
destruction of any outstanding certificate of stock, a new certificate may be
issued upon the following conditions:

      The owner of said certificate shall file with the Secretary of the
Corporation an affidavit giving the facts in relation to the ownership, and in
relation to the loss or destruction of said certificate, stating its number and
the number of shares represented thereby; such affidavit to be in such form and
contain such statements as shall satisfy the President and Secretary that said
certificate has been accidentally destroyed or lost, and that a new certificate
ought to be issued in lieu thereof. Upon being so notified, the President and
Secretary shall require such owner to file with the Secretary a bond in such
penal sum and in such form as they may deem advisable, and with a surety or
sureties approved by them, to indemnify and save harmless the Corporation from
any claim, loss, damage or liability which may be occasioned by the issuance of
a new certificate in lieu thereof. Upon such bond being-so filed, a new
certificate for the same number of shares shall be issued to the owner of the
certificate so lost or destroyed; and the transfer agent and registrar of stock,
if any, shall countersign and register such new certificate upon receipt of a
written order signed by the said President and Secretary, and thereupon the
Corporation will save harmless said transfer agent and registrar in the
premises. Any Vice President may act hereunder in the stead of the President,
and an Assistant Secretary in the stead of the Secretary. In case of the
surrender of the original certificate, in lieu of which a new certificate has
been issued, or the surrender of such new certificate, for cancellation, the
bond of indemnity given as a condition of the issue of such new certificate may
be surrendered. A new certificate may be issued without requiring any bond when
in the judgment of the Board of Directors it is proper to do so.

                                   ARTICLE VII
                              CORPORATE SIGNATURES

      SECTION 1. Execution of Negotiable Instruments. All checks and drafts on
the Corporation's bank accounts and all bills of exchange and promissory notes,
and all acceptances, obligations and other instruments for the payment of money,
shall be signed by such officer or officers, agent or agents, as shall be
thereunto authorized from time to time by the Board of Directors.

      SECTION 2. Execution of Agreements. All contracts, agreements,
endorsements, assignments, transfers, stock powers, or other instruments (except
as provided in Sections 1 and 3 of this Article VII) shall be signed by the
President or any Vice President and by the Secretary or any Assistant Secretary
or the Treasurer or any Assistant Treasurer, or by such other officer or
officers, agent or agents, as shall be thereunto authorized from time to time.

                                      -8-



      SECTION 3. Execution of Proxies. The President or a Vice President of the
Corporation may authorize from time to time the signature and issuance of
proxies to vote upon shares of stock of other companies standing in the name of
the Corporation. All such proxies shall be signed in the name of the Corporation
by the President or a Vice President and by the Secretary or an Assistant
Secretary.

                                  ARTICLE VIII
                              WAIVERS AND CONSENTS.

      SECTION 1. Waivers. Whenever under the provisions of any law or under the
provisions of the Certificate of Incorporation of the Corporation or these
Bylaws, the Corporation, or the Board of Directors or any committee thereof, is
authorized to take any action after notice to stockholders or the directors or
the members of such committee, or after the lapse of a prescribed period of
time, such action may be taken without notice and without the lapse of any
period of time if, at any time before or after such action be completed, such
requirements be waived in writing by the person or persons entitled to said
notice or entitled to participate in the action to be taken, or, in the case of
a stockholder, by his attorney thereunto authorized.

      SECTION 2. Consents. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board of Directors or of such committee
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or of such committee.

                                   ARTICLE IX
                           DIVIDENDS AND RESERVE FUNDS

      SECTION 1. Dividends. Except as otherwise provided by law or by the
Certificate of Incorporation, the Board of Directors may declare dividends out
of the surplus of the Corporation at such times and in such amounts as it may
from time to time designate.

      SECTION 2. Reserve Funds. Before crediting net profits to the surplus in
any year, there may be set aside out of the net profits of the Corporation for
that year such sum or sums as the Board of Directors from time to time in its
absolute discretion may deem proper as a reserve fund or funds to meet
contingencies or for equalizing dividends or for repairing or maintaining any
property of the Corporation or for such other purpose as the Board of Directors
shall deem conducive to the interests of the Corporation.

                                   ARTICLE X
                               INSPECTION OF BOOKS

      The Board of Directors shall determine from time to time whether, and if
allowed when and under what conditions and regulations, the accounts and books
of the Corporation (except such as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the stockholders;
and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.

                                      -9-



                                   ARTICLE XI
                                   FISCAL YEAR

      The fiscal year of the Corporation shall end on the thirtieth day of June
of each year unless another date shall be fixed by resolution of the Board of
Directors. After such date is fixed it may be changed for future fiscal years at
any time or from time to time by further resolution of the Board of Directors.

                                  ARTICLE XII
                                      SEAL

      The corporate seal shall be circular in form and shall contain the name of
the Corporation, the State of incorporation, and the words "Corporate Seal."

                                  ARTICLE XIII
                    INDEMNIFICATION OF DIRECTORS AND OFFICERS

      Each director and officer, whether or not then in office (and his heirs
and administrators), shall be reimbursed by the Corporation to the full extent
permitted by Section 145 of the General Corporation Law of the State of Delaware
for all reasonable expenses incurred by, imposed upon him in connection with, or
resulting from any action, suit or proceeding to which he may be made a party by
reason of his being or having been a director or officer of the Corporation or
any of its subsidiaries, or of any other corporation at the request of the
Corporation. The Corporation may also make such reimbursement in the event of a
settlement of any such action, suit or proceeding prior to final adjudication
when such settlement appears to be in the interest of the Corporation. The
foregoing right of reimbursement shall not be exclusive of other rights to which
such director or officer may be entitled as a matter of law.

                                   ARTICLE XIV
                                   AMENDMENTS

      SECTION 1. By Stockholders. Except as otherwise provided in the
Certificate of Incorporation of the Corporation, these Bylaws may be amended by
the affirmative vote of the holders of 66 2/3% or more of the combined voting
power of the outstanding voting stock, voting together as a single class and
cast at any annual or special meeting of the stockholders if notice of the
proposed amendment shall have been contained in the notice of the meeting.

      SECTION 2. By Directors. Except as otherwise specifically provided herein,
these Bylaws may be amended by the affirmative vote of a majority of the Board
of Directors, at any regular or special meeting thereof, if notice of the
proposed amendment shall have been contained in the notice of such meeting. If
any Bylaw regulating an impending election of directors is adopted or amended or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of the stockholders for the election of directors the Bylaw so
adopted or amended or repealed together with a concise statement of the changes
made.

                                      -10-

EX-10.38

                                                                  EXHIBIT 10.38

                                                                  EXECUTION COPY

                               THIRD AMENDMENT TO
                                CREDIT AGREEMENT

      THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") made as of the
26th day of August, 2004, by and among TANDY BRANDS ACCESSORIES, INC.
("Borrower"), WELLS FARGO HSBC TRADE BANK, N. A. ("Agent"), and the lenders
specified herein ("Lenders").

      WHEREAS, Borrower, Agent and certain lenders entered into a Credit
Agreement dated as of June 27, 2001 (the "Original Credit Agreement"), as
amended by that First Amendment to Credit Agreement dated as of June 28, 2002,
(the "First Amendment"; as amended by that Second Amendment to Credit Agreement
dated as of June 26, 2002 (the "Second Amendment") the Original Credit Agreement
and the First Amendment and the Second Amendment together, the "Credit
Agreement"); and

      WHEREAS, Borrower has requested that Agent and Lenders make certain
amendments to the Credit Agreement, and Agent and Lenders are willing to do so
subject to the terms and conditions set forth herein;

      NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

      1.    DEFINED TERMS. All capitalized terms used but not otherwise defined
in this Amendment shall have the meaning ascribed to them in the Credit
Agreement. Unless otherwise specified, all section references herein refer to
sections of the Credit Agreement.

      2.    AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:

            2.1   Recitals

                  (a)   First Recital

                        The First Recital is revised to read as follows:

                  "WHEREAS, Borrower has requested that Agent and Lenders
                  provide Borrower with a $85,000,000.00 revolving credit
                  facility (the "Revolving Credit Loan") to fund general
                  corporate and working capital needs of Borrower and its
                  Subsidiaries."

            2.2   Definitions

                  (a)   Applicable Commitment Fee

                        The chart in clause (b) in the definition of "Applicable
                  Commitment Fee Percentage" is revised as follows:

Tandy Brands Accessories, Inc. - Third Amendment

                                       1




                                                                                     APPLICABLE
                                                                                     COMMITMENT
                   TOTAL FUNDED INDEBTEDNESS                                            FEE
                        TO EBITDA RATIO                                              PERCENTAGE
- ----------------------------------------------------------------                    -----------
                                                                                 
Less than 1.00 to 1.00                                                                  0.20%
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00                        0.25%
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00                       0.30%
Greater than or equal to 2.50 to 1.00                                                  0.375%


                  (b)   Applicable Margin

                        The chart in clause (b) in the definition of "Applicable
                  Margin" is revised as follows:



                                                                                     APPLICABLE
                                                                                     MARGIN FOR
                     TOTAL FUNDED INDEBTEDNESS                                       EURODOLLAR
                          TO EBITDA RATIO                                            BORROWINGS
- ------------------------------------------------------------------                   -----------
                                                                                  
Less than 1.00 to 1.00                                                                 1.000%
Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00                       1.125%
Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00                       1.250%
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00                      1.500%
Greater than or equal to 2.50 to 1.00                                                  1.750%


                  (c)   Fixed Charge Coverage Ratio

                        The definition of "Fixed Charge Coverage Ratio" is
                  amended to read as follows:

Tandy Brands Accessories, Inc. - Third Amendment

                                       2


                  "`FIXED CHARGE COVERAGE RATIO', means, for the four
                  consecutive fiscal quarterly periods ending on the date of
                  determination for Borrower and its Subsidiaries, the ratio of
                  (a) EBITDA determined on a consolidated basis minus Capital
                  Expenditures minus federal, state, local and foreign income
                  taxes divided by (b) Interest Expense plus payments made in
                  respect of Capitalized Lease Obligations plus any cash
                  dividend made by Borrower or any of its Subsidiaries, plus any
                  payments made by Borrower or any of its Subsidiaries in
                  respect of the redemption, retirement, acquisition, or
                  prepayment of any Borrower's capital stock, or any other
                  equity interest, which are more than $5,000,000 in the
                  aggregate during the term of this Agreement, plus, for any
                  determination based on the quarterly period ending September
                  30, 2004 and thereafter, implied principal payments in an
                  amount equal to one-fifth (1/5th) of Revolving Credit Loans in
                  excess of $20,000,000 outstanding on the last day of each such
                  quarterly period, plus any Investments in Sheldon."

                  (d)   Permitted Acquisitions

                        The definition of "Permitted Acquisition" is revised to
                  read as follows:

                  "`Permitted Acquisition' means an acquisition of a business
                  entity or assets (i) provided the aggregate amount of all
                  consideration for all such acquisitions from the date of the
                  Third Amendment until the Termination Date does not exceed
                  $20,000,000 or (ii) for which Borrower has received the prior
                  written consent of the Required Lenders."

                  (e)   Permitted Liens

                        Clause (d) of the definition of "Permitted Liens" is
                  revised to add the words "or other property" after the words
                  "equipment or machinery" on line 16 of the definition.

                  (f)   Revolving Credit Notes

                        The definition of "Revolving Credit Notes" is revised to
                  read as follows:

                  "`Revolving Credit Notes' means those certain Revolving Credit
                  Promissory Notes dated as of the date of the Third Amendment
                  in the form of Exhibit A attached hereto, executed by
                  Borrower, as maker, and payable to the order of Lenders, as
                  payee, in the aggregate original principal amount of
                  $85,000,000.00, together with any renewals, extensions, or
                  modifications thereof."

Tandy Brands Accessories, Inc. - Third Amendment

                                       3


                  (g)   Security Documents

                        The definition of "Security Documents" is deleted as is
                  any reference to "Security Documents" in the Loan Documents.

                  (h)   H.A. Sheldon Canada, Ltd.

                        The definition of "Sheldon" is added:

                  " `Sheldon' means H. A. Sheldon Canada, Ltd."

                  (i)   Termination Date

                        Clause (a) in the definition of "Termination Date" is
                  revised to read as follows:

                  "(a) November 30, 2007,"

                  (j)   Third Amendment

                        The definition of "Third Amendment" is added:

                  "`Third Amendment' means the Third Amendment to the Credit
                  Agreement dated August 26, 2004."

                  (k)   Total Funded Indebtedness

                        The following is added to the end of the definition of
                  "Total Funded Indebtedness:"

                  "minus, Indebtedness or obligations to a Bank under letters of
                  credit."

                  (l)   Total Revolving Credit Commitment

                        The definition of "Total Revolving Credit Commitment" is
                  revised to read as follows:

                  "`Total Revolving Credit Commitment' shall mean the sum of the
                  Lenders' Revolving Credit Commitments, as the same may be
                  terminated or reduced from time to time in accordance with the
                  provisions of this Agreement. As of the date of the Third
                  Amendment, the Total Revolving Credit Commitment is
                  $85,000,000.00."

            2.3   Increases in the Total Revolving Credit Commitment

                        Section 2.19, Increases in Total Revolving Credit
                  Commitment, is added to the Credit Agreement as follows:

Tandy Brands Accessories, Inc. - Third Amendment

                                       4


                  "2.19 INCREASES IN TOTAL REVOLVING CREDIT COMMITMENT. The
                  Borrower may request increases in the Total Revolving Credit
                  Commitment as follows:

                  (a) Provided there exists no Event of Default and subject to
                  the conditions set forth under clause (e) below, upon thirty
                  (30) Business Days notice to the Agent (which shall promptly
                  notify the Lenders), the Borrower may, from time to time,
                  request increases in the Total Revolving Credit Commitment in
                  an amount not to exceed $25,000,000 in the aggregate;
                  provided, that each increase of the Total Revolving Credit
                  Commitment shall be in a minimum amount of $5,000,000, or
                  integral multiples of $1,000,000 in excess thereof. At the
                  time of sending such notice, the Borrower (in consultation
                  with the Agent) shall specify the time period within which
                  each Lender is requested to respond (which shall in no event
                  be less than ten (10) Business Days from the date of delivery
                  of such notice to the Lenders).

                  (b) Each Lender shall notify the Agent within such time period
                  whether or not it agrees to increase its Revolving Credit
                  Commitment and, if so, whether by an amount equal to, greater
                  than, or less than its percentage share of such requested
                  increase. Any Lender not responding within such time period
                  shall be deemed to have declined to increase its Revolving
                  Credit Commitment.

                  (c) The Agent shall notify the Borrower and each Lender of the
                  Lenders' responses to the request made hereunder. To achieve
                  the full amount of a requested increase and subject to the
                  approval of the Agent (which approval shall not be
                  unreasonably withheld), the Borrower may also invite
                  additional lenders to become Lenders pursuant to a joinder
                  agreement in form and substance satisfactory to the Agent and
                  its counsel.

                  (d) If the Total Revolving Credit Commitment is increased in
                  accordance with this subsection, the Agent and the Borrower
                  shall determine the effective date (such date, the "Increase
                  Effective Date) and the final allocation of such increase. The
                  Agent shall promptly notify the Borrower and the Lenders of
                  the final allocation of such increase in the Total Revolving
                  Credit Commitment and the Increase Effective Date.

                  (e) As conditions precedent to such increase, (i) the Borrower
                  shall deliver to the Agent a certificate dated as of the
                  Increase Effective Date signed by an Officer of the Borrower
                  (y) certifying that each of the conditions set forth in
                  Section 7.2 (a), (b), and (d) have been satisfied by the
                  Borrower, and (z) certifying and attaching the resolutions
                  adopted by the Borrower and (ii) the Borrower shall have paid
                  all fees and expenses due and owing to the Agent and the
                  Lenders. To the extent necessary to keep the outstanding
                  Revolving Credit Loans ratable with any revised percentage
                  shares of the Lenders arising from any nonratable increase in

Tandy Brands Accessories, Inc. - Third Amendment

                                       5


                  the Total Revolving Credit Commitment under this subsection,
                  the Borrower shall prepay Revolving Credit Loans outstanding
                  on the Increase Effective Date and/or Lenders shall make
                  assignments pursuant to arrangements satisfactory to the
                  Agent."

            2.4   Security

                  (a) Section 6.1 is deleted in its entirety. Further, any
                  reference to "security," "security interest," and "security
                  agreement" in the Loan Documents is hereby deleted.

                  (b) Effective as of the effectiveness of this Amendment,
                  Agent, the Lenders and WFB hereby release their security
                  interest in the Collateral owned by the Borrower and its
                  Subsidiaries.

                  (c) As soon as practicable following the effectiveness of this
                  Amendment, the Agent shall file the appropriate UCC Financing
                  Statement Amendments (Form UCC3) terminating the Lenders'
                  security interests in the Collateral and shall terminate any
                  additional security filings.

                  (d) As soon as practicable following the effectiveness of this
                  Amendment, the Agent shall return to the Borrower the shares
                  of stock pledged to the Lenders and the related stock powers.

            2.5   After-Acquired Subsidiaries

                  Section 9.14 is amended by deleting the words "and Security
            Agreement" following the words "Subsidiary Guaranty" on line 5 of
            such Section.

            2.6   Limitations on Indebtedness

                  (a) Clause (c) of Section 10.3 is revised to read as follows:

                  "(c) Purchase money financing not to exceed $3,000,000 in any
                  Fiscal Year;"

                  (b) Clause (h) is added to Section 10.3 as follows:

                  "(h) Indebtedness with respect to letters of credit (not
                  subject to the terms and conditions of this Agreement), issued
                  by a Bank, such letters of credit not to exceed $20,000,000 in
                  amounts available to be drawn thereunder at any time."

            2.7   Restricted Payments

                  (a) Section 10.9 is amended to read as follows:

Tandy Brands Accessories, Inc. - Third Amendment

                                       6


                  "10.9 RESTRICTED PAYMENTS. The Borrower and its Subsidiaries
                  may declare or pay any cash dividend; redeem, retire,
                  otherwise acquire, or prepay, shares of their capital stock or
                  any other equity interest; or make any other distribution of
                  any property or cash to owners of an equity interest in their
                  capacity as such, if, in respect to payments or distributions
                  made by the Borrower, (a) such payment or distribution is in
                  the form of the issuance of the Borrower's own stock, or (b)
                  at the time of making such payment or distribution and as a
                  result thereof there exists or would exist no Event of
                  Default."

            2.8   Investments

                  (a) Section 10.11 beginning at subsection (c) is hereby
                  amended to read in its entirety as follows:

                  "(c)  Investments made in connection with Borrower's Benefit
                        Restoration Plan and Supplemental Employee Retirement
                        Plan; and

                  (d) Investments in Subsidiaries."

            2.9   Capital Expenditures

                        Section 10.13 is deleted in its entirety.

            2.10  Leverage Ratio

                        Section 10.14 is amended to read as follows:

                  "10.14 LEVERAGE RATIO. Borrower shall not permit the ratio of
                  (a) Total Funded Indebtedness, on a consolidated basis, as of
                  the last day of each fiscal quarter of the Borrower beginning
                  September 30, 2004, to (b) EBITDA, on a consolidated basis,
                  for the four (4) fiscal quarters ending on the date of
                  determination to exceed 3:00 to 1:00."

            2.11  Fixed Charge Coverage Ratio

                        Section 10.15 is amended to read as follows:

                  "10.15 FIXED CHARGE COVERAGE RATIO. Borrower shall not permit
                  the Fixed Charge Coverage Ratio as of the last day of each
                  fiscal quarter of Borrower beginning September 30, 2004 to be
                  less than 1.25:1.00."

            2.12  Tangible Net Worth

                        Section 10.16 is amended to read as follows:

Tandy Brands Accessories, Inc. - Third Amendment

                                       7


                  "10.16 TANGIBLE NET WORTH. The Tangible Net Worth of the
                  Borrower and its Subsidiaries on a consolidated basis shall
                  never be less than the sum of eighty percent (80%) of Tangible
                  Net Worth as of June 30, 2004 plus (a) seventy-five percent
                  (75%) of Consolidated Net Income earned after June 30, 2004
                  during any fiscal quarter, provided, however that fiscal
                  quarters in which Consolidated Net Income is a negative amount
                  will be excluded from the calculation of Consolidated Net
                  Income earned after June 30, 2004, plus (b) an amount equal to
                  100% of the net proceeds of any equity offering by the
                  Borrower or any of its Subsidiaries occurring after June 30,
                  2004."

            2.13  Trading Asset Coverage Ratio

                        Section 10.17 is amended to read as follows:

                  "10.17 TRADING ASSET COVERAGE RATIO. Borrower shall not permit
                  the ratio of (a) Total Funded Indebtedness plus outstanding
                  Commercial Letters of Credit to (b) Trading Assets, as of the
                  last date of each fiscal quarter of Borrower beginning
                  September 30, 2004, to be not less than 1.00 to 1.00. "Trading
                  Assets" means the sum of (i) seventy-five percent (75%) of net
                  accounts receivable, plus (ii) fifty percent (50%) of
                  inventory, plus (iii) 60% of outstanding Commercial Letters of
                  Credit, all as of the date of determination."

            2.14  Hedging

                        Section 10.20 is deleted in its entirety.

            2.15  Exhibit D

                        Exhibit D, Subsidiaries - Tandy Brands Accessories, Inc.
                  is revised as attached to this Amendment.

            2.16  Schedule 2.1

                        Schedule 2.1, Revolving Credit Commitments, is revised
                  as attached to this Amendment.

            2.17  Withdrawal of Lender.

                        On the date of execution of this Amendment by the
                  parties hereto, Compass Bank shall cease to be a Lender under
                  the Credit Agreement and shall have no rights or obligations
                  under the Credit Agreement or the Loan Documents. The Total
                  Revolving Credit Commitment shall be re-allocated among the
                  remaining Lenders as set forth on revised Schedule 2.1
                  attached hereto.

Tandy Brands Accessories, Inc. - Third Amendment

                                       8


            2.18  Joinder Agreement.

                        As of the effectiveness of this Amendment, Bank of
                  America, N.A. and JPMorgan Chase Bank shall each become a
                  party to the Credit Agreement as a Lender, shall acquire all
                  of the rights, powers and obligations of a Lender under the
                  Credit Agreement, and shall each have a Revolving Credit
                  Commitment equal to $14,000,000. From and after the
                  effectiveness of this Amendment, all references to "Lenders"
                  in the Credit Agreement and the other Loan Documents shall be
                  deemed to include, in any event, Bank of America, N.A. and
                  JPMorgan Chase Bank.

      3.    EFFECTIVENESS OF AMENDMENT. This Amendment shall be effective upon
receipt by Agent of:

                  (a) A copy or copies of this Amendment signed by each of the
                  parties hereto;

                  (b) The Amended and Restated Notes or Notes, as the case may
                  be, executed in favor of each Lender;

                  (c) A Confirmation of Guaranty executed by each Guarantor
                  (other than Sheldon);

                  (d) A release of Sheldon's Guaranty executed by Agent;

                  (e) Additional Subsidiaries Supplements executed by
                  TBAC-Acquisition, Inc. and Superior Merchandise Company;

                  (f) A Compliance Certificate executed by Borrower;

                  (g) A legal opinion to be furnished by counsel to the Borrower
                  in form and substance satisfactory to the Agent;

                  (h) Resolutions from the Borrower and each of the Guarantors,
                  in form and substance satisfactory to the Agent, authorizing
                  the execution and delivery of and performance under this
                  Amendment and any documents or agreements entered into in
                  connection therewith; and

                  (i) Payment for all other fees and expenses due and owing by
                  the Borrower.

      4.    RATIFICATIONS, REPRESENTATIONS AND WARRANTIES.

                  (a) The terms and provisions set forth in this Amendment shall
                  modify and supersede all inconsistent terms and provisions set
                  forth in the Credit Agreement and, except as expressly
                  modified and superseded by this Amendment, the terms and
                  provisions of the Credit Agreement are ratified and confirmed
                  and shall continue in full force and effect. Borrower,

Tandy Brands Accessories, Inc. - Third Amendment

                                       9


                  Agent and Lenders agree that the Credit Agreement and the Loan
                  Documents, as amended hereby, shall continue to be legal,
                  valid, binding and enforceable in accordance with their
                  respective terms.

                  (b) To induce Agent and Lenders to enter into this Amendment,
                  Borrower ratifies and confirms each representation and
                  warranty set forth in the Credit Agreement as if such
                  representations and warranties were made on the even date
                  herewith, (except to the extent that such representations and
                  warranties related solely to an earlier date and except to the
                  extent that the facts upon which such representations are
                  based have been changed by the transactions contemplated in
                  the Credit Agreement) and further represents and warrants (i)
                  that there has occurred since the date of the last financial
                  statements delivered to Agent and Lenders no event or
                  circumstance that has resulted or could reasonably be expected
                  to result in a Material Adverse Change, (ii) that no Event of
                  Default exists on the date hereof, (iii) that Borrower is
                  fully authorized to enter into this Amendment, and (iv) that
                  the Guarantors signing the Confirmation of Guaranty attached
                  hereto or executing Additional Subsidiaries Supplements are
                  all of the Borrower's Subsidiaries as of the date of this
                  Amendment (other than Sheldon).

      5.    BENEFITS. This Amendment shall be binding upon and inure to the
benefit and Borrower, Agent and Lenders and their respective successors and
assigns; provided, however, that Borrower may not, without the prior written
consent of Agent and Lenders, assign any rights, powers, duties or obligations
under this Amendment, the Credit Agreement or any of the other Loan Documents.

      6.    CONSTRUCTION. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.

      7.    INVALID PROVISIONS. If any provision of this Amendment is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully several and the remaining provisions of this Amendment shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

      8.    ENTIRE AGREEMENT. The Credit Agreement, as amended by this
Amendment, contains the entire agreement among the parties regarding the subject
matter hereof and supersedes all prior written and oral agreements and
understandings among the parties hereto regarding same.

      9.    REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all
other agreements, documents or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the Credit
Agreement, as amended hereby, are hereby amended so that any reference in the
Credit Agreement to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.

Tandy Brands Accessories, Inc. - Third Amendment

                                       10



      10.   COUNTERPARTS. This Amendment may be separately executed in any
number of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same agreement.

             [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

Tandy Brands Accessories, Inc. - Third Amendment

                                       11



      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                    BORROWER:

                                    TANDY BRANDS ACCESSORIES, INC.

                                    By: /s/ Mark J. Flaherty
                                       --------------------------------------
                                    Name:  Mark J. Flaherty
                                    Title: Chief Financial Officer

                                    AGENT:

                                    WELLS FARGO HSBC TRADE
                                    BANK, N.A.

                                    By: /s/ Yousuf Omar
                                       ----------------------------------------
                                    Name:  Yousuf Omar
                                    Title: Senior Relationship Manager

                                    WELLS FARGO BANK, N. A.

                                    By: /s/ John Johnson
                                       ----------------------------------------
                                    Name: /s/ John W. Johnson
                                         --------------------------------------
                                    Title: Vice President
                                          -------------------------------------

Tandy Brands Accessories, Inc. - Third Amendment



                                    LENDERS:

                                    WELLS FARGO HSBC TRADE BANK, N. A.


                                    By: /s/ Yousuf Omar
                                       ----------------------------------------
                                    Name:      Yousuf Omar
                                    Title:     Senior Relationship Manager
                                    Address:   1445 Ross Avenue, Suite 450
                                               Dallas, TX 75202
                                    Attention: Yousuf Omar
                                    Fax No.:   214-220-1585

Tandy Brands Accessories, Inc. - Third Amendment


                                    COMERICA BANK

                                    By:    /s/ Corey R. Bailey
                                           -------------------------------------
                                    Name:  Corey R. Bailey
                                           -------------------------------------
                                    Title: Vice - President - Texas Division
                                           -------------------------------------
                                    Address:     8828 Stemmons, Suite 441
                                                 Dallas, TX 75247
                                    Attention:   Corey R. Bailey
                                    Fax No.:     214-589-1360

Tandy Brands Accessories, Inc. - Third Amendment


                                    COMPASS BANK, as withdrawing Lender

                                    By:  /s/ Michael H. Keith
                                         --------------------------------------
                                    Name: Michael H. Keith
                                         --------------------------------------
                                    Title: Senior Vice President
                                          -------------------------------------
                                    Address:   8080 N. Central Expressway
                                               Suite 250
                                               Dallas, TX 75206
                                    Attention: Michael Keith
                                    Fax No.    214-346-2746

Tandy Brands Accessories, Inc. - Third Amendment


                                    BANK OF AMERICA, N.A.

                                    By: /s/ Steven A. MacKenzie
                                       -----------------------------------
                                    Name:        Steven A. MacKenzie
                                    Title:       Senior Vice President
                                    Address:     901 Main Street
                                                 67th Floor
                                                 Dallas, Texas  75202
                                    Attention:   Steven A. MacKenzie
                                    Fax No.      214-209-3140

Tandy Brands Accessories, Inc. - Third Amendment


                                    JPMORGAN CHASE BANK

                                    By:  /s/ Jerry Petrey
                                         ---------------------------------
                                    Name:      Jerry Petrey
                                    Title:     Vice President
                                    Address:   500 E. Border
                                               P.O. Box 250
                                               Arlington, Texas 76004-0250
                                    Attention: Jerry Petrey
                                    Fax No.    817-856-3183

Tandy Brands Accessories, Inc. - Third Amendment


                                    EXHIBIT D

                  SUBSIDIARIES - TANDY BRANDS ACCESSORIES, INC.



                                                           Number of
                                  Jurisdiction        Outstanding Shares
                                       of              of Each Class of               Owner of               Jurisdictions
                                 Incorporation         Capital Stock or          Outstanding Shares       Qualified as Foreign
                                       or            Partnership Interest       or Interests of Each         Corporation or
          Subsidiary              Organization               Owned                Such Class Owned            Partnership
- ----------------------------    ----------------   -------------------------  ------------------------- ------------------------
                                                                                           
TBAC Prince Gardner, Inc.        Delaware            1,000                             Tandy Brands        Texas
                                                                                    Accessories, Inc.
Amity/Rolfs, Inc.                Delaware            1,000                             Tandy Brands        Wisconsin
                                                                                    Accessories, Inc.
TBAC Investments, Inc.           Nevada              1,000                             Tandy Brands
                                                                                    Accessories, Inc.
TBAC General Management Company  Nevada              1,000                             Tandy Brands        Texas
                                                                                    Accessories, Inc.
Accessory Design Group, Inc.     Delaware            1,000                             Tandy Brands        Texas
                                                                                    Accessories, Inc.
TBAC - Torel, Inc.               Delaware            1,000                             Tandy Brands
                                                                                    Accessories, Inc.
Tandy Brands Accessories         Delaware            1,000                             Tandy Brands
Handbags, Inc.                                                                      Accessories, Inc.
Stagg Industries, Inc.           Alabama             4,700 Class A common              Tandy Brands
                                                     4,700 Class B common           Accessories, Inc.
H.A. Sheldon Canada, Ltd.        Ontario, Canada     1,000                             Tandy Brands
                                                                                    Accessories, Inc.
TBAC Investment Trust            Pennsylvania        100                        TBAC Investments, Inc.
TBAC Management Company, LP      Delaware            1% partnership interest        General Partner -
                                                                                TBAC General Management
                                                                                         Company
                                                     99% partnership interest       Limited Partner -
                                                                                           TBAC
                                                                                    Investments, Inc.
TBAC-Mass Merchant Quality       Delaware            1,000                       Accessory Design Group,   Texas
Control, Inc.                                                                              Inc.
TBAC-Acquisition, Inc.           Delaware            1,000                             Tandy Brands        Texas
                                                                                    Accessories, Inc.
Superior Merchandise Company     Louisiana           250                          TBAC-Acquisition, Inc.


Tandy Brands Accessories, Inc. - Third Amendment


                                  SCHEDULE 2.1

                          Revolving Credit Commitments



                                                     Amount of                    Percentage of
                                                    Commitment                     Commitment
                                                                            
Wells Fargo HSBC Trade Bank, N. A.                     $35,000,000.00               41.176470588%
Comerica Bank                                          $22,000,000.00               25.882352941%
Bank of America, N.A.                                  $14,000,000.00               16.470588235%
JPMorgan Chase Bank                                    $14,000,000.00               16.470588235%

                                              Total:   $85,000,000.00                 100.00%


Tandy Brands Accessories, Inc. - Third Amendment


                            CONFIRMATION OF GUARANTY

      Reference is made to the Credit Agreement dated as of June 27, 2001, as
amended (the "Credit Agreement") among Tandy Brands Accessories, Inc.
("Borrower"), Wells Fargo HSBC Trade Bank, N. A. ("Agent"), and the lenders
specified therein ("Lenders"). The undersigned Guarantors hereby confirm that
their guaranty under the Subsidiary Guaranty dated as of June 27, 2001 for the
benefit of Agent, Lenders, and Wells Fargo Bank, N. A., continues in full force
and effect notwithstanding the Third Amendment to Credit Agreement dated as of
August 26, 2004, which Third Amendment is hereby accepted and consented to by
each Guarantor. In accordance herewith, the aforesaid guaranty shall be deemed
to cover and support the Obligations at any time due from Borrower to Lenders
pursuant to the Credit Agreement as the latter has been modified by the Third
Amendment. This Confirmation of Guaranty shall be governed by and construed in
accordance with the laws of the State of Texas.

Dated this 26th day of August, 2004.

                                 ACCESSORY DESIGN GROUP, INC.

                                 By:__________________________________________
                                 Name:________________________________________
                                 Title:_______________________________________

                                 AMITY/ROLFS, INC.

                                 By:__________________________________________
                                 Name:________________________________________
                                 Title:_______________________________________

Tandy Brands Accessories, Inc. - Third Amendment


                                        TANDY BRANDS ACCESSORIES HANDBAGS, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC INVESTMENTS, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC GENERAL MANAGEMENT COMPANY

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC MANAGEMENT COMPANY L.P.
                                            BY: TBAC GENERAL MANAGEMENT COMPANY,
                                                ITS GENERAL PARTNER

                                            By: ________________________________
                                            Name: ______________________________
                                            Title: _____________________________

                                        TBAC PRINCE GARDNER, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

Tandy Brands Accessories, Inc. - Third Amendment


                                        STAGG INDUSTRIES, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC - TOREL, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC - MASS MERCHANT QUALITY CONTROL,
                                        INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        TBAC INVESTMENT TRUST

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

ACCEPTED as of the date first written above.

BORROWER:

TANDY BRANDS ACCESSORIES, INC.

By: _________________________________
Name: _______________________________
Title: ______________________________

Tandy Brands Accessories, Inc. - Third Amendment


                             COMPLIANCE CERTIFICATE

                                 August 26, 2004

      Reference is made to that certain Credit Agreement dated as of June 27,
2001 among Tandy Brands Accessories, Inc. ("Borrower"), Wells Fargo HSBC Trade
Bank, N. A. ("Agent"), and the lenders specified therein ("Lenders"), as amended
by and among Borrower, Agent, and Lenders (the "Credit Agreement"). Terms which
are defined in the Credit Agreement and which are used but not defined herein
shall have the meanings given them in the Credit Agreement. The undersigned,
______________, Borrower's _________, hereby certifies in the name, and on
behalf, of Borrower that Borrower has made a thorough inquiry into all matters
certified herein and based upon such inquiry, experience, and the advice of
counsel, does hereby further certify that:

      1.    All representations and warranties made by Borrower in any Loan
Document delivered on or before the date hereof (including, without limitation,
the representations and warranties contained in Section 4 of the Third Amendment
to Credit Agreement of even date herewith) are true in all material respects on
and as of the date hereof (except to the extent that such representations and
warranties related solely to an earlier date and except to the extent that the
facts upon which such representations are based have been changed by the
transactions contemplated in the Credit Agreement) as if such representations
and warranties had been made as of the date hereof.

      2.    No Event of Default exists on the date hereof.

      3.    Borrower has performed and complied with all agreements and
conditions required in the Loan Documents to be performed or complied with by it
on or prior to the date hereof.

      IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
the date first above written.

                                        TANDY BRANDS ACCESSORIES, INC.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

Tandy Brands Accessories, Inc. - Third Amendment


                              AMENDED AND RESTATED
                                 PROMISSORY NOTE

U.S. $35,000,000.00                                              August 26, 2004

FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of WELLS FARGO
HSBC TRADE BANK, N. A., a national banking association (the "Lender"), for the
account of its Applicable Lending Office (as defined in that certain Credit
Agreement, dated as of June 27, 2001, as amended, by and among the Borrower, the
Lender, certain other lenders from time to time parties thereto (collectively,
the "Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking
association, as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A.,
a national banking association, as arranger (as amended, modified or
supplemented from time to time, the "Credit Agreement") (capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Credit
Agreement) or any other office designated by the Agent, the lesser of (i) the
principal sum of THIRTY FIVE MILLION DOLLARS ($35,000,000.00), or (ii) the
aggregate unpaid principal amount of all Advances made by the Lender to the
Borrower under the Revolving Credit Commitment.

The Borrower promises to pay interest on the unpaid principal amount of each
such Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of
America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan
Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day
funds. Each Advance under the Revolving Credit Commitment made by the Lender to
the Borrower and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Amended and Restated Promissory Note (this
"Note"), provided, however, that failure of the Lender to make such notation or
any error therein shall not in any manner affect the obligation of the Borrower
to repay such Advances in accordance with the terms of this Note.

This Note is one of the Revolving Credit Notes referred to in, and is subject to
and entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances under the Revolving
Credit Commitment by the Lender to the Borrower from time to time pursuant to
Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to
exceed at any time the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.



The Borrower hereby waives presentment, demand, protest, notice of intent to
accelerate, notice of acceleration and any other notice of any kind, except as
provided in the Credit Agreement. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

This Note is in renewal and extension, but not in extinguishment or novation, of
that certain promissory note dated as of June 26, 2003, made by Borrower payable
to the order of Lender in the principal amount of $27,500,000.00.

                                        TANDY BRANDS ACCESSORIES, INC.

                                        By:  /s/ Mark J. Flaherty
                                            ------------------------------------
                                        Name:  Mark J. Flaherty
                                              ----------------------------------
                                        Title:  Chief Financial Officer
                                               ---------------------------------



                              AMENDED AND RESTATED
                                 PROMISSORY NOTE

U.S. $22,000,000.00                                              August 26, 2004

FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of COMERICA
BANK, a Michigan banking corporation (the "Lender"), for the account of its
Applicable Lending Office (as defined in that certain Credit Agreement, dated as
of June 27, 2001, as amended, by and among the Borrower, the Lender, certain
other lenders from time to time parties thereto (collectively, the "Lenders"),
Wells Fargo HSBC Trade Bank, N.A., a national banking association, as agent for
the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national banking
association, as arranger (as amended, modified or supplemented from time to
time, the "Credit Agreement") (capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Credit Agreement) or any other
office designated by the Agent, the lesser of (i) the principal sum of TWENTY
TWO MILLION DOLLARS ($22,000,000.00), or (ii) the aggregate unpaid principal
amount of all Advances made by the Lender to the Borrower under the Revolving
Credit Commitment.

The Borrower promises to pay interest on the unpaid principal amount of each
such Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of
America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan
Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day
funds. Each Advance under the Revolving Credit Commitment made by the Lender to
the Borrower and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Amended and Restated Promissory Note (this
"Note"), provided, however, that failure of the Lender to make such notation or
any error therein shall not in any manner affect the obligation of the Borrower
to repay such Advances in accordance with the terms of this Note.

This Note is one of the Revolving Credit Notes referred to in, and is subject to
and entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances under the Revolving
Credit Commitment by the Lender to the Borrower from time to time pursuant to
Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to
exceed at any time the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.



The Borrower hereby waives presentment, demand, protest, notice of intent to
accelerate, notice of acceleration and any other notice of any kind, except as
provided in the Credit Agreement. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

This Note is in renewal and extension, but not in extinguishment or novation, of
that certain promissory note dated as of June 26, 2003, made by Borrower payable
to the order of Lender in the principal amount of $18,500,000.00.

                                        TANDY BRANDS ACCESSORIES, INC.

                                        By:  /s/ Mark J. Flaherty
                                            ------------------------------------
                                        Name:  Mark J. Flaherty
                                              ----------------------------------
                                        Title:  Chief Financial Officer
                                               ---------------------------------



                        REVOLVING CREDIT PROMISSORY NOTE

U.S. $14,000,000.00                                              August 26, 2004

FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of BANK OF
AMERICA, N.A., a national banking association (the "Lender"), for the account of
its Applicable Lending Office (as defined in that certain Credit Agreement,
dated as of June 27, 2001, as amended, by and among the Borrower, the Lender,
certain other lenders from time to time parties thereto (collectively, the
"Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association,
as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national
banking association, as arranger (as amended, modified or supplemented from time
to time, the "Credit Agreement") (capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement) or
any other office designated by the Agent, the lesser of (i) the principal sum of
FOURTEEN MILLION DOLLARS ($14,000,000.00), or (ii) the aggregate unpaid
principal amount of all Advances made by the Lender to the Borrower under the
Revolving Credit Commitment.

The Borrower promises to pay interest on the unpaid principal amount of each
such Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of
America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan
Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day
funds. Each Advance under the Revolving Credit Commitment made by the Lender to
the Borrower and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Revolving Credit Promissory Note (this
"Note"), provided, however, that failure of the Lender to make such notation or
any error therein shall not in any manner affect the obligation of the Borrower
to repay such Advances in accordance with the terms of this Note.

This Note is one of the Revolving Credit Notes referred to in, and is subject to
and entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances under the Revolving
Credit Commitment by the Lender to the Borrower from time to time pursuant to
Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to
exceed at any time the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

The Borrower hereby waives presentment, demand, protest, notice of intent to
accelerate, notice of acceleration and any other notice of any kind, except as
provided in the Credit Agreement.



No failure to exercise, and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of such rights.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

                                        TANDY BRANDS ACCESSORIES, INC.

                                        By:  /s/ Mark J. Flaherty
                                            ------------------------------------
                                        Name:  Mark J. Flaherty
                                              ----------------------------------
                                        Title:  Chief Financial Officer
                                               ---------------------------------



                        REVOLVING CREDIT PROMISSORY NOTE

U.S. $14,000,000.00                                              August 26, 2004

FOR VALUE RECEIVED, the undersigned, TANDY BRANDS ACCESSORIES, INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of JPMORGAN
CHASE BANK, a New York banking corporation (the "Lender"), for the account of
its Applicable Lending Office (as defined in that certain Credit Agreement,
dated as of June 27, 2001, as amended, by and among the Borrower, the Lender,
certain other lenders from time to time parties thereto (collectively, the
"Lenders"), Wells Fargo HSBC Trade Bank, N.A., a national banking association,
as agent for the Lenders (the "Agent"), and Wells Fargo Bank, N.A., a national
banking association, as arranger (as amended, modified or supplemented from time
to time, the "Credit Agreement") (capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement) or
any other office designated by the Agent, the lesser of (i) the principal sum of
FOURTEEN MILLION DOLLARS ($14,000,000.00), or (ii) the aggregate unpaid
principal amount of all Advances made by the Lender to the Borrower under the
Revolving Credit Commitment.

The Borrower promises to pay interest on the unpaid principal amount of each
such Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of
America to Wells Fargo HSBC Trade Bank, N.A., as Agent, at San Francisco Loan
Center, 201 3rd Street, 8th floor, San Francisco, California 94103, in same day
funds. Each Advance under the Revolving Credit Commitment made by the Lender to
the Borrower and all payments made on account of principal thereof, shall be
recorded by the Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Revolving Credit Promissory Note (this
"Note"), provided, however, that failure of the Lender to make such notation or
any error therein shall not in any manner affect the obligation of the Borrower
to repay such Advances in accordance with the terms of this Note.

This Note is one of the Revolving Credit Notes referred to in, and is subject to
and entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances under the Revolving
Credit Commitment by the Lender to the Borrower from time to time pursuant to
Section 2.1 of the Credit Agreement in an aggregate outstanding amount not to
exceed at any time the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this Note, and (ii) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and also for prepayments on account
of principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.



The Borrower hereby waives presentment, demand, protest, notice of intent to
accelerate, notice of acceleration and any other notice of any kind, except as
provided in the Credit Agreement. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

                                        TANDY BRANDS ACCESSORIES, INC.

                                        By:  /s/ Mark J. Flaherty
                                            ------------------------------------
                                        Name:  Mark J. Flaherty
                                              ----------------------------------
                                        Title:  Chief Financial Officer
                                               ---------------------------------



                                 August 26, 2004

H.A. Sheldon Canada, Ltd.
c/o Tandy Brands Accessories, Inc.
690 E. Lamar, Suite 200
Arlington, Texas  76011-3862

Re:   Release of Sheldon as a Guarantor under the Guaranty (each as hereinafter
defined)

Gentlemen:

      Reference is hereby made to (i) that certain Subsidiary Guaranty dated as
of June 27, 2001 (as amended, supplemented and otherwise modified, the
"Guaranty"), executed by certain Subsidiaries of Tandy Brands Accessories, Inc.,
a Delaware corporation ("Borrower"), from time to time party thereto (each a
"Guarantor") including, without limitation, H.A. Sheldon Canada, Ltd., an
Ontario, Canada corporation ("Sheldon"), for the benefit of Wells Fargo HSBC
Trade Bank, N.A., a national banking association, in its capacity as Agent for
the Lenders party to the Credit Agreement described below ("Agent") and Banks;
and (ii) that certain Credit Agreement, dated as of June 27, 2001, by and among
Borrower, Agent, WFB and the other Lenders signatory thereto from time to time
(as amended from time to time, the "Credit Agreement"). Unless otherwise
indicated, all terms used herein shall have the same meanings as in the Credit
Agreement.

      Sheldon has unconditionally guaranteed the Obligations of Borrower in
favor of Agent, for itself and the benefit of Lenders, and WFB, pursuant to the
Guaranty. Sheldon has requested that Agent, on behalf of itself and Lenders, and
WFB each release Sheldon from any obligations it may have under the Guaranty and
Agent, on behalf of itself and Lenders, and WFB are each willing to do so.

      Effective as of the date hereof, Agent, on behalf of itself and Lenders,
and WFB each hereby releases Sheldon from any obligations it may have under the
Guaranty and any and all claims, actions, and demands whatsoever thereunder and
from any and all responsibilities and obligations which were created under the
Credit Agreement and Loan Documents. Nothing herein shall release any other
Guarantor from all or any portion of its obligations under the Guaranty, the
Credit Agreement or any other Loan Document.

      This letter agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one
agreement.

      This letter agreement shall be governed by, and shall be construed and
enforced in accordance with, the internal laws of the State of Texas, without
regard to conflicts of laws principals.



                                        Very truly yours,

                                        WELLS FARGO HSBC TRADE BANK, N.A.,
                                        individually and in its capacity as
                                        Agent for the Lenders party to the
                                        Credit Agreement

                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________

                                        WELLS FARGO BANK, N.A.

                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________



ACCEPTED AND AGREED TO BY:

WELLS FARGO HSBC TRADE BANK, N.A.

By:__________________________________
Name:________________________________
Title:_______________________________

COMERICA BANK

By:__________________________________
Name:________________________________
Title:_______________________________

BANK OF AMERICA, N.A.

By:__________________________________
Name:________________________________
Title:_______________________________

JPMORGAN CHASE BANK

By:__________________________________
Name:________________________________
Title:_______________________________



ACCEPTED AND RELIED UPON:

H.A. SHELDON CANADA, LTD.

By:__________________________________



                       ADDITIONAL SUBSIDIARIES SUPPLEMENT

      This ADDITIONAL SUBSIDIARIES SUPPLEMENT, dated August 26, 2004 to the
Subsidiary Guaranty, dated as of June 27, 2001 (as amended, supplemented and
otherwise modified, the "Guaranty", attached hereto as Exhibit A), made by
certain Subsidiaries of Tandy Brands Accessories, Inc., a Delaware corporation
("Borrower"), from time to time parties thereto (collectively, the
"Guarantors").

                                    RECITALS:

      WHEREAS, the Guaranty provides that any Subsidiary of Borrower, although
not a Guarantor thereunder at the time of the initial execution thereof, may
become a Guarantor under the Guaranty upon the delivery to the Agent of a
supplement in substantially the form of this Additional Subsidiaries Supplement;
and

      WHEREAS, the undersigned was not a Subsidiary of Borrower on the date of
the Guaranty and, therefore, was not a party to the Guaranty but now desires to
become a Guarantor thereunder;

      NOW, THEREFORE, the undersigned hereby agrees as follows:

      The undersigned agrees to be bound by all of the provisions of the
Guaranty applicable to a Guarantor thereunder and agrees that it shall, on the
date this Additional Subsidiaries Supplement is accepted by the Agent, become a
Guarantor, for all purposes of the Guaranty to the same extent as if originally
a party thereto with the representations and warranties contained therein being
deemed to be made by the undersigned as of the date hereof.

      Unless otherwise defined herein, capitalized terms which are defined in
the Guaranty are used herein as so defined.

      IN WITNESS WHEREOF, the undersigned has caused this Additional
Subsidiaries Supplement to be executed and delivered by a duly authorized
officer on the date first above written.

                                        SUPERIOR MERCHANDISE COMPANY,
                                        a Louisiana corporation

                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________
                                        Address: 690 E. Lamar
                                                 Suite 200
                                                 Arlington, Texas  76011-3862



                       ADDITIONAL SUBSIDIARIES SUPPLEMENT

      This ADDITIONAL SUBSIDIARIES SUPPLEMENT, dated August 26, 2004 to the
Subsidiary Guaranty, dated as of June 27, 2001 (as amended, supplemented and
otherwise modified, the "Guaranty", attached hereto as Exhibit A), made by
certain Subsidiaries of Tandy Brands Accessories, Inc., a Delaware corporation
("Borrower"), from time to time parties thereto (collectively, the
"Guarantors").

                                    RECITALS:

      WHEREAS, the Guaranty provides that any Subsidiary of Borrower, although
not a Guarantor thereunder at the time of the initial execution thereof, may
become a Guarantor under the Guaranty upon the delivery to the Agent of a
supplement in substantially the form of this Additional Subsidiaries Supplement;
and

      WHEREAS, the undersigned was not a Subsidiary of Borrower on the date of
the Guaranty and, therefore, was not a party to the Guaranty but now desires to
become a Guarantor thereunder;

      NOW, THEREFORE, the undersigned hereby agrees as follows:

      The undersigned agrees to be bound by all of the provisions of the
Guaranty applicable to a Guarantor thereunder and agrees that it shall, on the
date this Additional Subsidiaries Supplement is accepted by the Agent, become a
Guarantor, for all purposes of the Guaranty to the same extent as if originally
a party thereto with the representations and warranties contained therein being
deemed to be made by the undersigned as of the date hereof.

      Unless otherwise defined herein, capitalized terms which are defined in
the Guaranty are used herein as so defined.

      IN WITNESS WHEREOF, the undersigned has caused this Additional
Subsidiaries Supplement to be executed and delivered by a duly authorized
officer on the date first above written.

                                        TBAC-ACQUISITION, INC.,
                                        a Delaware corporation

                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________
                                        Address: 690 E. Lamar
                                                 Suite 200
                                                 Arlington, Texas  76011-3862

EX-10.39

                                                                  EXHIBIT 10.39

                              NON-EMPLOYEE DIRECTOR
                       NONQUALIFIED STOCK OPTION AGREEMENT

                                 PURSUANT TO THE

                TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN

      THIS NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT (this
"Agreement") is made as of this _____ day of ___________, _______, between TANDY
BRANDS ACCESSORIES, INC., a Delaware corporation (the "Company"), and
___________, a member of the Board of Directors of the Company ("Director").

                              W I T N E S S E T H:

      WHEREAS, the Company desires to carry out the purposes of the Tandy Brands
Accessories, Inc. 2002 Omnibus Plan (the "Plan"), by affording Director the
opportunity to purchase shares of the common stock, $1.00 par value per share
("Common Stock"), of the Company.

      NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

      1. Grant of Option. The Company hereby grants to Director the right and
option (the "Option") to purchase an aggregate of ___________ shares (the
"Shares") of Common Stock, such Shares being subject to adjustment as provided
in Paragraph 8 hereof, on the terms and conditions herein set forth.

      2. Purchase Price. The purchase price of the Shares shall be $___________
per Share, such purchase price being 100% of the Fair Market Value (as defined
in the Plan) of the Shares on the date first appearing above (the "Date of
Grant").

      3. Exercise of Option. Unless expired as provided in Paragraph 5 below,
and subject to the special provisions of Paragraph 6 below, the Option shall be
exercisable and one hundred percent (100%) vested six (6) months after the Date
of Grant.

      4. Manner of Exercise, Payment of Purchase Price.

            (a) Subject to the terms and conditions of this Agreement, the
      Option shall be exercised by the delivery of written notice to the Company
      setting forth the number of shares of Common Stock with respect to which
      the Option is to be exercised and the date of exercise thereof which shall
      be at least three (3) days after giving such notice unless an earlier time
      shall have been mutually agreed upon. Such notice of exercise shall be
      signed by Director and shall be irrevocable when given.

            (b) The notice of exercise shall be accompanied by the full payment
      of the purchase price for the Shares. The purchase price may be paid by
      (i) cash, check, bank draft, or money order payable to the order of the
      Company, (ii) Common Stock (including Restricted Stock (as defined in the
      Plan)) owned by Director on the date of



      exercise, and/or (iii) in any other form of valid consideration as
      provided in the Plan. In the event Director wishes to pay all or any
      portion of the purchase price by delivering shares of Common Stock,
      Director shall, not less than fourteen (14) days prior to the date of
      exercise, give written notice to the Assistant Secretary of the Company
      requesting approval of such payment method, setting forth the particulars
      of the proposed payment method. The Committee (as defined in the Plan)
      shall approve, disapprove or modify the proposed payment method within
      fourteen (14) days of its receipt of the request. The failure of the
      Committee to respond to the request within the time period required shall
      be deemed an approval of Director's proposed payment method.

            (c) Upon receipt of the purchase price, and subject to the terms of
      Paragraph 11, the certificate or certificates representing the Shares
      purchased shall be registered in the name of the person or persons so
      exercising the Option. If the Option shall be exercised by Director and,
      if Director shall so request in the notice exercising the Option, the
      Shares shall be registered in the name of Director and another person as
      joint tenants with right of survivorship, and shall be delivered as
      provided above to or upon the written order of the person or persons
      exercising the Option. In the event the Option shall be exercised by any
      person or persons other than Director, pursuant to Paragraph 7 hereof or
      otherwise, such notice shall be accompanied by appropriate proof
      satisfactory to the Company of the right of such person or persons to
      exercise the Option. All Shares that shall be purchased upon the exercise
      of the Option as provided herein shall be fully paid and nonassessable.

      5. Expiration of Option. The Option shall expire and become null and void
upon the happening of whichever of the following events shall first occur: (a)
expiration of thirty-six (36) months after Director ceases to be a member of the
Board of Directors for any reason other than Director's resignation at the
request of the Company for Cause, death or Total and Permanent Disability (as
defined in the Plan); (b) a period of thirty-six (36) months shall have elapsed
since Director's cessation of service due to Director's death; (c) a period of
thirty-six (36) months shall have elapsed since Director's cessation of service
due to Total and Permanent Disability (as defined in the Plan); (d) a period of
ten (10) years shall have elapsed since the Date of Grant; or (e) Director shall
resign at the request of the Company for Cause. For purposes of this Agreement,
"Cause" shall mean (i) Director's willful, material and irreparable breach of
any agreement that governs the terms and conditions of his or her service to the
Company; (ii) Director's breach of any fiduciary or other material duty to the
Company or its stockholders; (iii) Director's gross negligence or gross
incompetence in the performance or intentional nonperformance (continuing for
ten (10) days after receipt of written notice of such negligence) of any of
Director's material duties and responsibility; (iv) Director's dishonesty, fraud
or willful misconduct with respect to the business or affairs of the Company or
any of its subsidiaries; or (v) Director's conviction of a felony crime. Except
as provided in Paragraph 6, only those portions of the Option exercisable as of
the date of termination of Director's service may be exercised, whether such
termination is by retirement or otherwise.

      6. Acceleration of Exercise Dates. Notwithstanding the provisions of
Paragraph 3: (a) upon Director's cessation of service due to death or Total and
Permanent Disability (as defined in the Plan), the Option shall be immediately
exercisable, until the expiration date provided in Paragraph 5 above, for the
entire number of Shares covered hereby; provided

                                       2



however, if Director dies during either of the thirty-six (36) month periods
described in clauses (a) or (c) of Paragraph 5, the Option may be exercised, but
only to the extent exercisable on the date of Director's death, by the persons
or persons entitled to exercise the Option at any time within the thirty-six
(36) month period described in clauses (a) or (c) of Paragraph 5, whichever is
applicable, or within twelve (12) months after the date of such death, whichever
is the longer period, but in no event after a period of ten (10) years has
elapsed since the Date of Grant; (b) upon Director's retirement, the Committee
may, in its discretion, permit the Option to be immediately exercisable, until
the expiration date provided in clause (a) of Paragraph 5 above, for the entire
number of Shares covered hereby; and (c) upon any Change of Control of the
Company (as defined in the Plan) the Option may be exercised for a period of
sixty (60) days following the date of the Change of Control for the entire
number of Shares covered hereby.

      7. Option Nontransferable. Except as otherwise herein provided, the Option
and the rights and privileges conferred hereby may not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option or any right or privilege conferred hereby, contrary to the provisions
hereof, the Option and the rights and privileges conferred hereby shall
immediately become null and void. Notwithstanding the foregoing, upon the death
of Director, the Option may be exercised by Director's executor, administrator,
legatee or distributee as the case may be, in accordance with Paragraph 6.
References herein to Director shall include, where applicable, a permitted
transferee.

      8. Adjustments of Shares Subject to Option. If the outstanding shares of
Common Stock shall at any time be changed or exchanged by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, combination of shares or a dividend payable in stock, then the aggregate
number of Shares subject to this Agreement and the purchase price of such Shares
shall be automatically adjusted such that Director's proportionate interest
shall be maintained as before the occurrence of such event. The determination of
any such adjustment by the Committee shall be final, binding and conclusive.

      9. No Contract. Neither the granting of the Option, the exercise of any
part hereof, nor any provision of this Agreement shall constitute or be evidence
of any understanding, express or implied, on the part of the Company to continue
the service of Director as a member of the Board of Directors for any specified
period.

      10. Rights as Stockholder. The Option shall not entitle Director or any
permitted transferee to any rights of a stockholder of the Company or to any
notice of proceedings of the Company with respect to any Shares issuable upon
exercise of the Option unless and until the Option has been exercised for such
Shares and such Shares have been registered in Director's (or permitted
transferee's) name upon the stock records of the Company.

      11. Restriction on Issuance of Shares. The Company shall not be required
to issue or deliver any certificates for Shares purchased upon the exercise of
the Option prior to: (a) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be
necessary or advisable; (b) the completion of any listing, registration or other
qualification of such Shares on any securities exchange or inter-dealer
quotation system

                                       3



or under any state or federal law or ruling or regulation of any governmental
body which the Company shall, in its sole discretion, determine to be necessary
or advisable; and (c) the determination by the Committee that Director has
tendered to the Company any federal, state or local tax owed by Director as a
result of exercising the Option when the Company has a legal liability to
satisfy such tax. In addition, if the Common Stock reserved for issuance upon
the exercise of the Option shall not then be registered under the Securities Act
of 1933, the Company may upon Director's exercise of an Option, require Director
or his permitted transferee to represent in writing that the Shares being
acquired are for investment and not with a view to distribution, and may mark
the certificate for the Shares with a legend restricting transfer and may issue
stop transfer orders relating to such certificate to the Company's transfer
agent.

      12. Lapse of Option. This Agreement shall be null and void in the event
Director shall fail to sign and return a counterpart hereof to the Company
within thirty (30) days of its delivery to Director.

      13. Construction. The Committee shall have authority to make reasonable
constructions of the Option and to correct any defect or supply any omission or
reconcile any inconsistency in the Option, and to prescribe reasonable rules and
regulations relating to the administration of the Option.

      14. Notice. Any notice relating to this Agreement shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200,
Arlington, Texas 76011 or to such other address as may be hereafter specified by
the Company, to the attention of the Company's Assistant Secretary. All notices
to Director shall be delivered to Director at Director's address specified below
or to such other address as may be hereafter specified by Director.

      15. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

      16. Binding Effect. This Agreement shall be binding upon the permitted
transferees, heirs, executors, administrators, and successors of the parties
hereto.

      17. No Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.

      18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

      19. Governing Instrument and Law. The Option and any Shares issued
hereunder shall in all respects be governed by the terms and provisions of the
Plan, which terms and provisions are hereby incorporated herein by reference,
and by the laws of the State of Texas,

                                       4



and in the event of a conflict between the terms of this Agreement and the terms
of the Plan, the terms of the Plan shall control.

      20. Entire Agreement. The Plan and this Agreement constitute the entire
contract between the parties hereto with regard to the subject matter hereof.

      21. Nonqualified Stock Option. The Option is not intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code and shall not be so construed.

                                TANDY BRANDS ACCESSORIES, INC.

                                By: ____________________________________________
                                    J.S.B. Jenkins
                                    President and Chief Executive Officer
Accepted and Agreed:

DIRECTOR:

________________________________       Date: ___________________________________
________________________________
Address: ________________________
         ________________________

EX-10.40

                                                                  EXHIBIT 10.40

                                    EMPLOYEE
                       NONQUALIFIED STOCK OPTION AGREEMENT

                                 PURSUANT TO THE

                TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN

      THIS EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is
made as of this ______ day of ____________, _________, between TANDY BRANDS
ACCESSORIES, INC., a Delaware corporation (the "Company"), and ________________,
an employee of the Company or one or more of its subsidiaries ("Employee").

                              W I T N E S S E T H:

      WHEREAS, the Company desires to carry out the purposes of the Tandy Brands
Accessories, Inc. 2002 Omnibus Plan (the "Plan"), by affording Employee the
opportunity to purchase shares of the common stock, $1.00 par value per share
("Common Stock"), of the Company.

      NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

      1. Grant of Option. The Company hereby grants to Employee the right and
option (the "Option") to purchase an aggregate of ____ shares (the "Shares") of
Common Stock, such Shares being subject to adjustment as provided in Paragraph 8
hereof, on the terms and conditions herein set forth.

      2. Purchase Price. The purchase price of the Shares shall be $__________
per Share, such purchase price being 100% of the Fair Market Value (as defined
in the Plan) of the Shares on the date first appearing above (the "Date of
Grant").

      3. Exercise of Option. Unless expired as provided in Paragraph 5 below,
and subject to the special provisions of Paragraph 6 below, the Option may be
exercised from time to time in whole or in part for not more than 33-1/3% of the
entire number of Shares at any time after the first anniversary of the Date of
Grant, and an additional 33-1/3% of the total Shares on or after each of the two
(2) succeeding anniversaries of the Date of Grant.

      4. Manner of Exercise; Payment of Purchase Price.

            (a) Subject to the terms and conditions of this Agreement, the
      Option shall be exercised by the delivery of written notice to the Company
      setting forth the number of shares of Common Stock with respect to which
      the Option is to be exercised and the date of exercise thereof which shall
      be at least three (3) days after giving such notice unless an earlier time
      shall have been mutually agreed upon. Such notice of exercise shall be
      signed by Employee and shall be irrevocable when given.

            (b) The notice of exercise shall be accompanied by the full payment
      of the purchase price for the Shares. The purchase price may be paid by
      (1) cash, check, bank draft, or money order payable to the order of the
      Company, (2) Common Stock (including Restricted Stock (as defined in the
      Plan)) owned by Employee on the date of exercise, and/or (3) in any other
      form of valid consideration as provided in the Plan. In the event Employee
      wishes to pay all or any portion of the purchase price by delivering
      shares of Common Stock, Employee shall, not less



      than fourteen (14) days prior to the date of exercise, give written notice
      to the Secretary or Assistant Secretary of the Company requesting approval
      of such payment method, setting forth the particulars of the proposed
      payment method. The Committee (as defined in the Plan) shall approve,
      disapprove or modify the proposed payment method within fourteen (14) days
      of its receipt of the request. The failure of the Committee to respond to
      the request within the time period required shall be deemed an approval of
      Employee's proposed payment method.

            (c) Upon receipt of the purchase price, and subject to the terms of
      Paragraph 11, the certificate or certificates representing the Shares
      purchased shall be registered in the name of the person or persons so
      exercising the Option. If the Option shall be exercised by Employee and,
      if Employee shall so request in the notice exercising the Option, the
      Shares shall be registered in the name of Employee and another person as
      joint tenants with right of survivorship, and shall be delivered as
      provided above to or upon the written order of the person or persons
      exercising the Option. In the event the Option shall be exercised pursuant
      to Paragraph 7 hereof, by any person or persons other than Employee, such
      notice shall be accompanied by appropriate proof satisfactory to the
      Company of the right of such person or persons to exercise the Option. All
      Shares that shall be purchased upon the exercise of the Option as provided
      herein shall be fully paid and nonassessable.

      5. Expiration of Option. The Option shall expire and become null and void
upon the happening of whichever of the following events shall first occur: (a)
expiration of three (3) months after Employee ceases to be employed by the
Company or any of its subsidiaries for any reason other than termination for
cause, retirement, or due to death or Total and Permanent Disability (as defined
in the Plan); (b) a period of twelve (12) months shall have elapsed since
Employee's death; (c) a period of thirty-six (36) months shall have elapsed
since Employee's cessation of employment due to Total and Permanent Disability
(as defined in the Plan); (d) a period of thirty-six (36) months shall have
elapsed since Employee's retirement; (e) a period of ten (10) years shall have
elapsed since the Date of Grant; or (f) Employee's employment shall have been
terminated for cause as determined by the Committee or the Board of Directors of
the Company. Except as provided in Paragraph 6, only those portions of the
Option exercisable as of the date of termination of Employee's employment may be
exercised, whether such termination is by retirement or otherwise.

      6. Acceleration of Exercise Dates. Notwithstanding the provisions of
Paragraph 3 above relating to the exercise of the Option in installments: (a)
upon Employee's death or cessation of employment due to Total and Permanent
Disability (as defined in the Plan), the Option shall be immediately
exercisable, until the expiration date provided in Paragraph 5 above, for the
entire number of Shares covered hereby; (b) upon Employee's retirement, the
Committee may, in its discretion, permit the Option to be immediately
exercisable, until the expiration date provided in Paragraph 5 above, for the
entire number of Shares covered hereby; and (c) upon any Change of Control of
the Company (as defined in the Plan), the Option may be exercised for a period
of sixty (60) days following the date of the Change of Control for the entire
number of Shares covered hereby.

      7. Option Nontransferable. Except as otherwise herein provided, the Option
and the rights and privileges conferred hereby may not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
option or any right or privilege conferred hereby, contrary to the provisions
hereof, the Option and the rights and privileges conferred hereby shall
immediately become null and void. Notwithstanding the foregoing, upon the death
of Employee, the Option may be exercised by Employee's executor,

                                       2


administrator, legatee or distributee as the case may be, in accordance with
Paragraph 6. References herein to Employee shall include, where applicable, a
permitted transferee.

      8. Adjustments of Shares Subject to Option. If the outstanding shares of
Common Stock shall at any time be changed or exchanged by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, combination of shares or a dividend payable in stock, then the aggregate
number of Shares subject to this Agreement and the purchase price of such Shares
shall be automatically adjusted such that Employee's proportionate interest
shall be maintained as before the occurrence of such event. The determination of
any such adjustment by the Committee shall be final, binding and conclusive.

      9. No Contract. This Agreement does not constitute a contract for
employment and shall not affect the right of the Company to terminate Employee's
employment for any reason whatsoever.

      10. Rights as Stockholder. This Option shall not entitle Employee or any
permitted transferee to any rights of a stockholder of the Company or to any
notice of proceedings of the Company with respect to any Shares issuable upon
exercise of the Option unless and until the Option has been exercised for such
Shares and such Shares have been registered in the Employee's (or permitted
transferee's) name upon the stock records of the Company.

      11. Restriction on Issuance of Shares. The Company shall not be required
to issue or deliver any certificates for Shares purchased upon the exercise of
an Option prior to: (a) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be
necessary or advisable; (b) the completion of any listing, registration or other
qualification of such Shares on any securities exchange or inter-dealer
quotation system or under any state or federal law or ruling or regulation of
any governmental body which the Company shall, in its sole discretion, determine
to be necessary or advisable; and (c) the determination by the Committee that
Employee has tendered to the Company any federal, state or local tax owed by
Employee as a result of exercising the Option when the Company has a legal
liability to satisfy such tax. In addition, if the Common Stock reserved for
issuance upon the exercise of the Option shall not then be registered under the
Securities Act of 1933, the Company may upon Employee's exercise of the Option,
require Employee or his permitted transferee to represent in writing that the
Shares being acquired are for investment and not with a view to distribution,
and may mark the certificate for the Shares with a legend restricting transfer
and may issue stop transfer orders relating to such certificate to the Company's
transfer agent.

      12. Lapse of Option. This Agreement shall be null and void in the event
Employee shall fail to sign and return a counterpart hereof to the Company
within thirty (30) days of its delivery to Employee.

      13. Construction. The Committee shall have authority to make reasonable
constructions of the Option and to correct any defect or supply any omission or
reconcile any inconsistency in the Option, and to prescribe reasonable rules and
regulations relating to the administration of the Option.

      14. Notice. Any notice relating to this Agreement shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the Company at its main office at 690 E. Lamar Boulevard, Suite No. 200,
Arlington, Texas 76011 or to such other address as may be hereafter specified by
the Company, to the attention of the Company's Secretary or Assistant Secretary.
All notices to Employee

                                       3


shall be delivered to Employee at Employee's address specified below or to such
other address as may be hereafter specified by Employee.

      15. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

      16. Binding Effect. This Agreement shall be binding upon the permitted
transferees, heirs, executors, administrators, and successors of the parties
hereto.

      17. No Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.

      18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

      19. Governing Instrument and Law. This Option and any Shares issued
hereunder shall in all respects be governed by the terms and provisions of the
Plan, which terms and provisions are hereby incorporated herein by reference,
and by the laws of the State of Texas, and in the event of a conflict between
the terms of this Agreement and the terms of the Plan (copy attached), the terms
of the Plan shall control.

      20. Entire Agreement. The Plan and this Agreement constitute the entire
contract between the parties hereto with regard to the subject matter hereof.

      21. Nonqualified Stock Option. This Option is not intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code and shall not be so construed.

                                 TANDY BRANDS ACCESSORIES, INC.

                                 By: _______________________________________
                                     J.S.B. Jenkins
                                     President and Chief Executive Officer

Accepted and Agreed:

EMPLOYEE:

_________________________________      Date: _______________________________
_________________________________
Address:_________________________
        _________________________

                                       4

EX-10.41

                                                                  EXHIBIT 10.41
                              NON-EMPLOYEE DIRECTOR
                        RESTRICTED STOCK AWARD AGREEMENT

                                 PURSUANT TO THE

                TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN

      This NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD AGREEMENT is made as of
this _____ day of __________, _______ (the "Date of Grant"), between Tandy
Brands Accessories, Inc., a Delaware corporation (the "Company"), and
___________, a member of the Board of Directors of the Company ("Director").

                              W I T N E S S E T H:

      WHEREAS, the Company desires to carry out the purposes of the Tandy Brands
Accessories, Inc. 2002 Omnibus Plan (the "Plan") by awarding Director with
shares of the common stock, $1.00 par value per share ("Common Stock"), of the
Company.

      NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

      1. Grant of Award. Pursuant to the Plan, the Company hereby grants
_________ shares of Common Stock (the "Restricted Shares") to Director to be
issued as hereinafter provided in Director's name subject to certain
restrictions thereon as hereinafter set forth.

      2. Issuance and Delivery of Restricted Shares. The Restricted Shares shall
be issued upon acceptance and execution hereof by Director and upon satisfaction
of the terms of this Agreement. The certificates representing the Restricted
Shares awarded hereunder shall be held in escrow by the Assistant Secretary of
the Company as provided in Section 10.

      3. Vesting of Restricted Shares.

            (a) Subject to Section 4 below, one-third of the Restricted Shares
      shall become fully vested and shall no longer be subject to forfeiture on
      the first anniversary of the Date of Grant, an additional one-third of the
      Restricted Shares shall become fully vested and shall no longer be subject
      to forfeiture on the second anniversary of the Date of Grant and the
      remaining one-third of the Restricted Shares shall become fully vested and
      shall no longer be subject to forfeiture on the third anniversary of the
      Date of Grant.

            (b) Notwithstanding anything to the contrary in this Agreement, 100%
      of the Restricted Shares shall become fully vested and shall no longer be
      subject to forfeiture (i) upon the death or Total and Permanent Disability
      (as defined in the Plan) of Director during Director's term as a member of
      the Board of Directors of the Company; (ii) upon Director's Termination of
      Service (as defined in the Plan) as a result of not being nominated for or
      elected to a new term as a member of the Board of Directors of the
      Company; or (iii) upon Director's resignation as a member of the Board of
      Directors of the Company at the request and for the convenience of the
      Company other than for Cause. For purposes of this Agreement, "Cause"
      shall mean (i) Director's willful, material and irreparable breach of any
      agreement that governs the terms and conditions of his or her service to
      the Company; (ii) Director's breach of any fiduciary or other material



      duty to the Company or its stockholders; (iii) Director's gross negligence
      or gross incompetence in the performance or intentional nonperformance
      (continuing for ten (10) days after receipt of written notice of such
      negligence) of any of Director's material duties and responsibility; (iv)
      Director's dishonesty, fraud or willful misconduct with respect to the
      business or affairs of the Company or any of its subsidiaries; or (v)
      Director's conviction of a felony crime.

      4. Forfeiture of Restricted Shares. Upon Director's Termination of Service
(as defined in the Plan) for any reason except as a result of (i) Director's
death or Total and Permanent Disability (as defined in the Plan); (ii)
Director's not being nominated for or elected to a new term as a member of the
Board of Directors of the Company; or (iii) Director's resignation as a member
of the Board of Directors of the Company at the request and for the convenience
of the Company other than for Cause, all nonvested Restricted Shares held by
Director shall, immediately upon the occurrence of such event, be forfeited and,
except as provided in Section 5 below, no compensation or other amounts shall be
paid to Director with respect thereto. Such forfeited Restricted Shares shall
cease to be outstanding and shall no longer confer on Director any rights as a
stockholder with respect to the forfeited Restricted Shares as of the date of
forfeiture and upon such forfeiture, Director shall cease to have any further
rights or claims with respect to such forfeited Restricted Shares.

      5. Repurchase of Shares in Case of Forfeiture.

            (a) In the event Director has paid any consideration (such
      consideration hereinafter referred to as the "Purchase Price") to the
      Company for the Restricted Shares, upon Director's forfeiture of
      Restricted Shares as a result of an event described in Section 4 hereof,
      the Company shall repurchase all of such forfeited Restricted Shares and
      each such forfeited Restricted Share shall be returned to the Company as
      contemplated by the Plan. The repurchase price of the Restricted Shares to
      be sold to the Company under this Section 5 (the "Repurchase Price") shall
      be equal to the Purchase Price paid by Director for the Restricted Shares
      that have been forfeited.

            (b) The Company shall repurchase the Restricted Shares as soon as is
      administratively practical (but in any event within five (5) business days
      after the event of forfeiture) by the tender to Director of the Repurchase
      Price. Tender of the Repurchase Price to Director shall be effected by
      delivery via certified mail of a check in the amount of the Repurchase
      Price.

            (c) The Repurchase Price shall be paid to Director only after the
      Company has received from Director all necessary assignments (including
      the Assignment Separate From Certificate in the form of Exhibit A),
      endorsements, certificates of authority, tax releases, consents to
      transfer, instruments and evidences of title as may be reasonably required
      by the Company and its counsel.

            (d) If the Company (or its assignees) shall make available, at the
      time and place and in the amount and form provided in this Agreement, the
      Repurchase Price for the Restricted Shares to be repurchased in accordance
      with the provisions of this Section 5, then from and after such time, the
      person from whom such Restricted Shares are to be repurchased shall no
      longer have any rights as a holder of such shares (other than the right to
      receive payment of such Repurchase Price in accordance with this

                                       2



      Section 5 and the Plan), and such shares shall be deemed purchased in
      accordance with the applicable provisions hereof and the Company (or its
      assignees) shall be deemed the owner and holder of such Restricted Shares,
      whether or not the certificates therefor have been delivered as required
      by this Agreement.

      6. Restrictions on Transfer.

            (a) The Restricted Shares may not be resold, pledged as security or
      otherwise transferred, assigned or encumbered by Director prior to the
      date such Restricted Shares are no longer subject to forfeiture, unless
      specifically agreed in writing by the Company.

            (b) Director hereby agrees that Director shall make no disposition
      of the Restricted Shares unless and until:

                  (1) The forfeiture restrictions applicable to such Restricted
            Shares have lapsed;

                  (2) Director shall have notified the Company of the proposed
            disposition and provided a written summary of the terms and
            conditions of the proposed disposition, unless there is then in
            effect a registration statement under the Securities Act of 1933
            (the "Securities Act") covering such proposed disposition and such
            disposition is made in accordance with such registration statement;

                  (3) Director shall have complied with all requirements of this
            Agreement applicable to the disposition of the Restricted Shares;
            and

                  (4) If reasonably requested by the Company, Director shall
            have provided the Company an opinion of counsel in form and
            substance satisfactory to the Company, that (A) the proposed
            disposition does not require registration of the Restricted Shares
            under the Securities Act or (B) all appropriate action necessary for
            compliance with the registration requirements of the Securities Act
            or of any exemption from registration available under the Securities
            Act (including Rule 144) has been taken; provided, however, that in
            no event shall an opinion of counsel be required if there is then in
            effect a registration statement under the Securities Act covering
            such proposed disposition.

            (c) The Company shall not be required (i) to transfer on its books
      any Restricted Shares that have been sold or transferred in violation of
      the provisions of this Section 6, or (ii) to treat as the owner of the
      Restricted Shares, or otherwise to accord voting or dividend rights to,
      any transferee to whom the Restricted Shares have been transferred in
      contravention of this Agreement. References herein to Director shall
      include, where applicable, a permitted transferee.

                                       3



      7. Restrictive Legend. In order to reflect the restrictions on transfer of
the Restricted Shares, the stock certificates for the Restricted Shares will be
endorsed with the following legend:

            On the face of the certificate:

            "Transfer of this stock is restricted in accordance with
            conditions printed on the reverse of this certificate."

            On the reverse:

            "The shares of stock evidenced by this certificate are
            subject to and transferable only in accordance with that
            certain Tandy Brands Accessories, Inc. 2002 Omnibus
            Plan, a copy of which is on file at the principal office
            of the Company in Arlington, Texas. No transfer or
            pledge of the shares evidenced hereby may be made except
            in accordance with and subject to the provisions of said
            Plan. By acceptance of this certificate, any holder,
            transferee or pledgee hereof agrees to be bound by all
            of the provisions of said Plan."

      8. Investment Representations. In connection with the grant of the
Restricted Shares, Director represents to the Company the following:

            (a) Director is accepting the Restricted Shares for Director's own
      account, not as a nominee or agent, and not with a view to the resale or
      distribution of any part thereof, and that Director has no present
      intention of selling, granting any participation in, or otherwise
      distributing the Shares. By executing this Agreement, Director further
      represents that Director does not have any contract, undertaking,
      agreement or arrangement with any person to sell, transfer or grant
      participations to such person or to any third person with respect to any
      of the Restricted Shares.

            (b) Director understands that the Restricted Shares are
      characterized as "restricted securities" under the Securities Act and may
      not be resold or transferred unless the Restricted Shares are first
      registered under the federal securities laws or unless an exemption from
      such registration is available. Accordingly, Director hereby acknowledges
      that Director is prepared to hold the Restricted Shares for an indefinite
      period and that Director is aware that Rule 144 of the Securities and
      Exchange Commission promulgated under the Securities Act is not presently
      available to exempt the sale of the Restricted Shares from the
      registration requirements of the Securities Act.

      9. Stockholder Rights. Unless and until such time as the Restricted Shares
are forfeited by Director pursuant to Section 4, Director shall have all the
rights of a stockholder, including voting and dividend rights, with respect to
the Restricted Shares, including the Restricted Shares held in escrow under
Section 10, subject, however, to the transfer restrictions of Section 6.

                                       4



      10. Escrow.

            (a) Deposit. Upon issuance, the certificates for the Restricted
      Shares shall be deposited in escrow with the Assistant Secretary of the
      Company to be held in accordance with the provisions of this Section 10.
      Each deposited certificate shall be accompanied by a duly executed
      Assignment Separate from Certificate in the form of Exhibit A. The
      deposited certificates, together with any other assets or securities that
      may be deposited from time to time with the Company pursuant to the
      requirements of the Plan, shall remain in escrow until such time or times
      as the certificates (or other assets or securities) are to be released or
      otherwise surrendered for cancellation in accordance with the Plan. Upon
      delivery of the certificates (or other assets or securities) to the
      Company, Director shall be issued an instrument of deposit acknowledging
      the number of Restricted Shares (or other assets or securities) delivered
      in escrow to the Assistant Secretary of the Company.

            (b) Release or Surrender. The Restricted Shares, together with any
      other assets or securities held in escrow hereunder, shall be subject to
      the following terms and conditions relating to their release from escrow
      or their surrender to the Company for repurchase and/or cancellation:

                  (1) As the interest of Director in the Restricted Shares (or
            any other assets and securities issued with respect thereto) vests
            in accordance with Section 3, the certificates for such vested
            shares (as well as all other assets and securities issued with
            respect thereto) shall be released from escrow and delivered to
            Director within five (5) business days following the date such
            Restricted Shares become so vested, provided such Restricted Shares
            have not been forfeited pursuant to Section 4.

                  (2) Upon Director's Termination of Service (as defined in the
            Plan), any escrowed Restricted Shares (or other assets and
            securities issued with respect thereto) in which Director is at the
            time vested shall be promptly released from escrow, provided such
            Restricted Shares have not been forfeited pursuant to Section 4.

                  (3) Should Director forfeit Restricted Shares pursuant to
            Section 4, then the escrowed certificates for such forfeited
            Restricted Shares (as well as all other assets and securities issued
            with respect thereto) shall be surrendered to the Company for
            cancellation concurrently with such forfeiture. Should the Company
            be required to repurchase the forfeited Restricted Shares pursuant
            to Section 5, then, concurrently with the payment of the Repurchase
            Price to Director for such forfeited Restricted Shares (and all
            other assets and securities issued with respect thereto), the
            escrowed certificates for such forfeited Restricted Shares (as well
            as all other assets and securities issued with respect thereto)
            shall be surrendered to the Company for cancellation. To facilitate
            the performance or observance by Director of this Section 10(b)(3),
            Director hereby irrevocably appoints (which appointment is coupled
            with an interest) the Company as the attorney-in-fact of Director to
            transfer any Restricted Shares (as well as other assets and
            securities issued with respect thereto) so forfeited to the Company,
            and Director agrees that the transfer of stock certificates (as well
            as all other assets

                                       5



            and securities issued with respect thereto) with respect to
            forfeited Restricted Shares shall be specifically performable by the
            Company in a court of equity or law.

      11. Section 83(b) Election. Director understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price, if any, paid for the Restricted Shares and their
fair market value on the date any forfeiture restrictions applicable to such
Restricted Shares lapse will be reportable as ordinary income at that time.
Director understands that Director may elect to be taxed at the time the
Restricted Shares are acquired hereunder to the extent the fair market value of
the Restricted Shares differs from the Purchase Price, if any, rather than when
and as such Restricted Shares cease to be subject to such forfeiture
restrictions, by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days after the Date of Grant. If the fair market value
of the Restricted Shares at the Date of Grant equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit B hereto. Director understands that failure to make this filing within
the 30-day period will result in the recognition of ordinary income by Director
(in the event the fair market value of the Restricted Shares increases after the
Date of Grant) as the forfeiture restrictions lapse. DIRECTOR ACKNOWLEDGES THAT
IT IS DIRECTOR'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
ELECTION UNDER SECTION 83(b), EVEN IF DIRECTOR REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON DIRECTOR'S BEHALF. DIRECTOR IS RELYING
SOLELY ON DIRECTOR'S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT
TO FILE AN 83(b) ELECTION.

      12. Miscellaneous Provisions.

            (a) Director Undertaking. Director hereby agrees to take whatever
      additional action and execute whatever additional documents the Company
      may in its judgment deem necessary or advisable in order to carry out or
      effect one or more of the obligations or restrictions, including, without
      limitation, those set forth in Section 4 and Section 10(b)(3), imposed on
      either Director or the Restricted Shares pursuant to the express
      provisions of the Plan and this Agreement.

            (b) Adjustment of Restricted Shares. The Restricted Shares subject
      to this Agreement and the vesting provisions applicable thereto will be
      adjusted from time to time, as determined by the Company, pursuant to
      Articles 13, 14 and 15 of the Plan.

            (c) Assignment. The rights and benefits of the Company under this
      Agreement shall be transferable to any one or more persons or entities.
      Except as provided in Section 6, the rights and obligations of Director
      hereunder may only be assigned with the prior written consent of the
      Company. This Agreement shall be binding upon and inure to the benefit of
      the permitted transferees, heirs, executors, administrators, and
      successors of the parties hereto.

            (d) No Waiver. No waiver of any breach or condition of this
      Agreement shall be deemed to be a waiver of any other or subsequent breach
      or condition, whether of like or different nature.

                                       6



            (e) Entire Agreement. The Plan and this Agreement constitute the
      entire contract between the parties hereto with regard to the subject
      matter hereof.

            (f) Counterparts. This Agreement may be executed in counterparts,
      each of which shall be deemed to be an original, but all of which together
      shall constitute one and the same instrument.

            (g) Lapse of this Agreement. This Agreement shall be null and void
      in the event Director shall fail to sign and return a counterpart hereof
      to the Company within thirty (30) days of its delivery to Director.

            (h) No Contract for Service. This Agreement does not constitute a
      contract for service as a member of the Company's Board of Directors and
      shall not affect the right of the Company to request Director's
      resignation as a member of the Board of Directors for any reason
      whatsoever.

            (i) Construction. The Company shall have authority to make
      reasonable constructions of this Agreement and to correct any defect or
      supply any omission or reconcile any inconsistency in this Agreement, and
      to prescribe reasonable rules and regulations relating to the
      administration of this Agreement.

            (j) Severability. In the event that any provision of this Agreement
      becomes or is declared by a court of competent jurisdiction to be illegal,
      unenforceable or void, this Agreement shall continue in full force and
      effect without said provision, provided that no such severability shall be
      effective if it materially changes the economic benefit of this Agreement
      to any party.

            (k) Notice. Any notice relating to this Agreement shall be given in
      writing and shall be deemed effective upon personal delivery or upon
      deposit in the United States mail, registered or certified, postage
      prepaid and addressed to the Company at its main office at 690 E. Lamar
      Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address
      as may be hereafter specified by the Company, to the attention of the
      Company's Assistant Secretary. All notices to Director shall be delivered
      to Director at Director's address specified below or to such other address
      as may be hereafter specified by Director.

            (l) Governing Instrument and Law. This Agreement and any Restricted
      Shares issued hereunder shall in all respects be governed by the terms and
      provisions of the Plan, which terms and provisions are hereby incorporated
      herein by reference, and by the laws of the State of Texas, and in the
      event of a conflict between the terms of this Agreement and the terms of
      the Plan, the terms of the Plan shall control.

                                       7



                                    TANDY BRANDS ACCESSORIES, INC.

                                    By: ________________________________________
                                        J.S.B. Jenkins
                                        President and Chief Executive Officer

Agreed and Accepted:

DIRECTOR(1)

__________________________________________
__________________________________________
Address: __________________________________
         __________________________________

- --------
(1) I have received, completed, executed and retained the I.R.C. Section 83(b)
election that was attached hereto as Exhibit B. As set forth in Section 11
above, I understand that I, and not the Company, will be responsible for
completing the form and filing the election with the appropriate office of the
federal and state tax authorities and that if such filing is not completed
within thirty (30) days after the date of this Agreement, I will forfeit the
significant tax benefits of Section 83(b). I understand further that such filing
should be made by registered or certified mail, return receipt requested, and
that I must retain two (2) copies of the completed form for filing with my state
and federal tax returns for the current tax year and an additional copy for my
records.

                                       8



                                    EXHIBIT A

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

      FOR VALUE RECEIVED _____________________________ hereby sells, assigns and
transfers unto TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the
"Company"), ______________________ (_________) shares of the common stock of the
Company standing in the name of _________________ on the books of the Company
represented by Certificate No. __________ herewith and does hereby irrevocably
constitute and appoint the Assistant Secretary of the Company Attorney-in-Fact
to transfer the said stock on the books of the within named Company with full
power of substitution and resubstitution in the premises.

Dated: _____________________

___________________________________     ________________________________________
(Signature)                             (Signature of Spouse, if any)

___________________________________     ________________________________________
(Print Name)                            (Print Name)



                                    EXHIBIT B

                             FORM OF 83(B) ELECTION

      The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in his or her gross income
for the current taxable year, the amount of any compensation taxable to him or
her in connection with his or her receipt of the property described below:

      (1) The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:

            Name of Taxpayer:    _________________________
            Spouse:              _________________________
            Address of Taxpayer: _________________________

            Taxpayer ID No.:     _________________________
            Spouse's ID No.:     _________________________
            Taxable Year:        Calendar Year ___________

      (2) The property with respect to which the election is being made is
__________ shares of the common stock of Tandy Brands Accessories, Inc., a
Delaware corporation (the "Company").

      (3) The property was issued on ______________, ________.

      (4) The property is subject to forfeiture if the undersigned taxpayer's
provision of services to the Company is terminated under certain circumstances.
The forfeiture restrictions lapse in a series of installments over a three-year
period ending on _____________, ____________.

      (5) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms will never
lapse) is $______ per share.

      (6) The amount paid for such property is $_________ per share.

      (7) A copy of this statement was furnished to the Company for whom the
undersigned taxpayer rendered the service underlying the transfer of property.

      (8) This statement is executed as of: ____________________, ________.

Taxpayer                                    Spouse of Taxpayer (if any)

____________________________________        __________________________________
(Signature)                                 (Signature)

____________________________________        __________________________________
(Print Name)                                (Print Name)



                                CONSENT OF SPOUSE

      I, __________, spouse of ___________________ ("Director"), have read and
approve the foregoing Agreement. In consideration of granting to Director
____________ shares of the common stock of Tandy Brands Accessories, Inc. as set
forth in the Agreement, I hereby appoint Director as my attorney-in-fact in
respect to the exercise of any rights under the Agreement and agree to be bound
by the provisions of the Agreement insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property
laws of the State of Texas or similar laws relating to marital property in
effect in the state of our residence as of the date of the signing of the
foregoing Agreement.

      Dated: _________________, ________.

                                              Spouse of Director

                                              _______________________________
                                              (Signature)

                                              _______________________________
                                              (Print Name)

EX-10.42

                                                                  EXHIBIT 10.42

                                    EMPLOYEE
                        RESTRICTED STOCK AWARD AGREEMENT

                                 PURSUANT TO THE

                TANDY BRANDS ACCESSORIES, INC. 2002 OMNIBUS PLAN

      This EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT is made as of this ____ day
of ___________, __________ (the "Date of Grant"), between Tandy Brands
Accessories, Inc., a Delaware corporation (the "Company"), and ___________, an
employee of the Company or one of its subsidiaries ("Employee").

                              W I T N E S S E T H:

      WHEREAS, the Company desires to carry out the purposes of the Tandy Brands
Accessories, Inc. 2002 Omnibus Plan (the "Plan") by awarding Employee with
shares of the common stock, $1.00 par value per share ("Common Stock"), of the
Company.

      NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

      1. Grant of Award. Pursuant to the Plan, the Company hereby grants
_________ shares of Common Stock (the "Restricted Shares") to Employee to be
issued as hereinafter provided in Employee's name subject to certain
restrictions thereon as hereinafter set forth.

      2. Issuance and Delivery of Restricted Shares. The Restricted Shares shall
be issued upon acceptance and execution hereof by Employee and upon satisfaction
of the terms of this Agreement. The certificates representing the Restricted
Shares awarded hereunder shall be held in escrow by the Assistant Secretary of
the Company as provided in Section 10.

      3. Vesting of Restricted Shares. The Restricted Shares shall become fully
vested and shall no longer be subject to forfeiture upon the third anniversary
of the Date of Grant.

      4. Forfeiture of Restricted Shares. Upon Employee's voluntary or
involuntary Termination of Service (as defined in the Plan) for any reason or
for no reason, including, without limitation, upon the death or Total and
Permanent Disability (as defined in the Plan) of Employee, all nonvested
Restricted Shares held by Employee shall, immediately upon the occurrence of
such event, be forfeited and, except as provided in Section 5 below, no
compensation or other amounts shall be paid to Employee with respect thereto.
Such forfeited Restricted Shares shall cease to be outstanding and shall no
longer confer on Employee any rights as a stockholder with respect to the
forfeited Restricted Shares as of the date of forfeiture and upon such
forfeiture, Employee shall cease to have any further rights or claims with
respect to such forfeited Restricted Shares.

      5. Repurchase of Shares in Case of Forfeiture.

            (a) In the event Employee has paid any consideration (such
      consideration hereinafter referred to as the "Purchase Price") to the
      Company for the Restricted Shares, upon Employee's forfeiture of
      Restricted Shares as a result of an event described in Section 4 hereof,
      the Company shall repurchase all of such forfeited Restricted Shares



      and each such forfeited Restricted Share shall be returned to the Company
      as contemplated by the Plan. The repurchase price of the Restricted Shares
      to be sold to the Company under this Section 5 (the "Repurchase Price")
      shall be equal to the Purchase Price paid by Employee for the Restricted
      Shares that have been forfeited.

            (b) The Company shall repurchase the Restricted Shares as soon as is
      administratively practical (but in any event within five (5) business days
      after the event of forfeiture) by the tender to Employee of the Repurchase
      Price. Tender of the Repurchase Price to Employee shall be effected by
      delivery via certified mail of a check in the amount of the Repurchase
      Price.

            (c) The Repurchase Price shall be paid to Employee only after the
      Company has received from Employee all necessary assignments (including
      the Assignment Separate From Certificate in the form of Exhibit A),
      endorsements, certificates of authority, tax releases, consents to
      transfer, instruments and evidences of title as may be reasonably required
      by the Company and its counsel.

            (d) If the Company (or its assignees) shall make available, at the
      time and place and in the amount and form provided in this Agreement, the
      Repurchase Price for the Restricted Shares to be repurchased in accordance
      with the provisions of this Section 5, then from and after such time, the
      person from whom such Restricted Shares are to be repurchased shall no
      longer have any rights as a holder of such shares (other than the right to
      receive payment of such Repurchase Price in accordance with this Section 5
      and the Plan), and such shares shall be deemed purchased in accordance
      with the applicable provisions hereof and the Company (or its assignees)
      shall be deemed the owner and holder of such Restricted Shares, whether or
      not the certificates therefor have been delivered as required by this
      Agreement.

      6. Restrictions on Transfer.

            (a) The Restricted Shares may not be resold, pledged as security or
      otherwise transferred, assigned or encumbered by Employee prior to the
      date such Restricted Shares are no longer subject to forfeiture, unless
      specifically agreed in writing by the Company.

            (b) Employee hereby agrees that Employee shall make no disposition
      of the Restricted Shares unless and until:

                  (1) The forfeiture restrictions applicable to such Restricted
            Shares have lapsed;

                  (2) Employee shall have notified the Company of the proposed
            disposition and provided a written summary of the terms and
            conditions of the proposed disposition, unless there is then in
            effect a registration statement under the Securities Act of 1933
            (the "Securities Act") covering such proposed disposition and such
            disposition is made in accordance with such registration statement;

                  (3) Employee shall have complied with all requirements of this
            Agreement applicable to the disposition of the Restricted Shares;
            and

                                       2



                  (4) If reasonably requested by the Company, Employee shall
            have provided the Company an opinion of counsel in form and
            substance satisfactory to the Company, that (A) the proposed
            disposition does not require registration of the Restricted Shares
            under the Securities Act or (B) all appropriate action necessary for
            compliance with the registration requirements of the Securities Act
            or of any exemption from registration available under the Securities
            Act (including Rule 144) has been taken, provided, however, that in
            no event shall an opinion of counsel be required if there is then in
            effect a registration statement under the Securities Act covering
            such proposed disposition.

            (c) The Company shall not be required (i) to transfer on its books
      any Restricted Shares that have been sold or transferred in violation of
      the provisions of this Section 6, or (ii) to treat as the owner of the
      Restricted Shares, or otherwise to accord voting or dividend rights to,
      any transferee to whom the Restricted Shares have been transferred in
      contravention of this Agreement. References herein to Employee shall
      include, where applicable, a permitted transferee.

      7. Restrictive Legend. In order to reflect the restrictions on transfer of
the Restricted Shares, the stock certificates for the Restricted Shares will be
endorsed with the following legend:

            On the face of the certificate:

            "Transfer of this stock is restricted in accordance with
            conditions printed on the reverse of this certificate."

            On the reverse:

            "The shares of stock evidenced by this certificate are
            subject to and transferable only in accordance with that
            certain Tandy Brands Accessories, Inc. 2002 Omnibus
            Plan, a copy of which is on file at the principal office
            of the Company in Arlington, Texas. No transfer or
            pledge of the shares evidenced hereby may be made except
            in accordance with and subject to the provisions of said
            Plan. By acceptance of this certificate, any holder,
            transferee or pledgee hereof agrees to be bound by all
            of the provisions of said Plan."

      8. Investment Representations. In connection with the grant of the
Restricted Shares, Employee represents to the Company the following:

            (a) Employee is accepting the Restricted Shares for Employee's own
      account, not as a nominee or agent, and not with a view to the resale or
      distribution of any part thereof, and that Employee has no present
      intention of selling, granting any participation in, or otherwise
      distributing the Shares. By executing this Agreement, Employee further
      represents that Employee does not have any contract, undertaking,
      agreement or arrangement with any person to sell, transfer or grant
      participations to such person or to any third person with respect to any
      of the Restricted Shares.

                                       3



            (b) Employee understands that the Restricted Shares are
      characterized as "restricted securities" under the Securities Act and may
      not be resold or transferred unless the Restricted Shares are first
      registered under the federal securities laws or unless an exemption from
      such registration is available. Accordingly, Employee hereby acknowledges
      that Employee is prepared to hold the Restricted Shares for an indefinite
      period and that Employee is aware that Rule 144 of the Securities and
      Exchange Commission promulgated under the Securities Act is not presently
      available to exempt the sale of the Restricted Shares from the
      registration requirements of the Securities Act.

      9. Stockholder Rights. Unless and until such time as the Restricted Shares
are forfeited by Employee pursuant to Section 4, Employee shall have all the
rights of a stockholder, including voting and dividend rights, with respect to
the Restricted Shares, including the Restricted Shares held in escrow under
Section 10, subject, however, to the transfer restrictions of Section 6.

      10. Escrow.

            (a) Deposit. Upon issuance, the certificates for the Restricted
      Shares shall be deposited in escrow with the Assistant Secretary of the
      Company to be held in accordance with the provisions of this Section 10.
      Each deposited certificate shall be accompanied by a duly executed
      Assignment Separate from Certificate in the form of Exhibit A. The
      deposited certificates, together with any other assets or securities that
      may be deposited from time to time with the Company pursuant to the
      requirements of the Plan, shall remain in escrow until such time or times
      as the certificates (or other assets or securities) are to be released or
      otherwise surrendered for cancellation in accordance with the Plan. Upon
      delivery of the certificates (or other assets or securities) to the
      Company, Employee shall be issued an instrument of deposit acknowledging
      the number of Restricted Shares (or other assets or securities) delivered
      in escrow to the Assistant Secretary of the Company.

            (b) Release or Surrender. The Restricted Shares, together with any
      other assets or securities held in escrow hereunder, shall be subject to
      the following terms and conditions relating to their release from escrow
      or their surrender to the Company for repurchase and/or cancellation:

                  (1) As the interest of Employee in the Restricted Shares (or
            any other assets and securities issued with respect thereto) vests
            in accordance with Section 3, the certificates for such vested
            shares (as well as all other assets and securities issued with
            respect thereto) shall be released from escrow and delivered to
            Employee within 5 business days following the date such Restricted
            become so vested, provided such Restricted Shares have not been
            forfeited pursuant to Section 4.

                  (2) Upon Employee's Termination of Service (as defined in the
            Plan), any escrowed Restricted Shares (or other assets and
            securities issued with respect thereto) in which Employee is at the
            time vested shall be promptly released from escrow, provided such
            Restricted Shares have not been forfeited pursuant to Section 4.

                                       4



                  (3) Should Employee forfeit Restricted Shares pursuant to
            Section 4, then the escrowed certificates for such forfeited
            Restricted Shares (as well as all other assets and securities issued
            with respect thereto) shall be surrendered to the Company for
            cancellation concurrently with such forfeiture. Should the Company
            be required to repurchase the forfeited Restricted Shares pursuant
            to Section 5, then, concurrently with the payment of the Repurchase
            Price to Employee for such forfeited Restricted Shares (and all
            other assets and securities issued with respect thereto), the
            escrowed certificates for such forfeited Restricted Shares (as well
            as all other assets and securities issued with respect thereto)
            shall be surrendered to the Company for cancellation. To facilitate
            the performance or observance by Employee of this Section 10(b)(3),
            Employee hereby irrevocably appoints (which appointment is coupled
            with an interest) the Company as the attorney-in-fact of Employee to
            transfer any Restricted Shares (as well as other assets and
            securities issued with respect thereto) so forfeited to the Company,
            and Employee agrees that the transfer of stock certificates (as well
            as all other assets and securities issued with respect thereto) with
            respect to forfeited Restricted Shares shall be specifically
            performable by the Company in a court of equity or law.

      11. Section 83(b) Election. Employee understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price, if any, paid for the Restricted Shares and their
fair market value on the date any forfeiture restrictions applicable to such
Restricted Shares lapse will be reportable as ordinary income at that time.
Employee understands that Employee may elect to be taxed at the time the
Restricted Shares are acquired hereunder to the extent the fair market value of
the Restricted Shares differs from the Purchase Price, if any, rather than when
and as such Restricted Shares cease to be subject to such forfeiture
restrictions, by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days after the Date of Grant. If the fair market value
of the Restricted Shares at the Date of Grant equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit B hereto. Employee understands that failure to make this filing within
the 30-day period will result in the recognition of ordinary income by Employee
(in the event the fair market value of the Restricted Shares increases after the
date of purchase) as the forfeiture restrictions lapse. EMPLOYEE ACKNOWLEDGES
THAT IT IS EMPLOYEE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A
TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE REQUESTS THE COMPANY OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE'S BEHALF. EMPLOYEE IS
RELYING SOLELY ON EMPLOYEE'S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER
OR NOT TO FILE AN 83(b) ELECTION.

      12. Miscellaneous Provisions.

            (a) Employee Undertaking. Employee hereby agrees to take whatever
      additional action and execute whatever additional documents the Company
      may in its judgment deem necessary or advisable in order to carry out or
      effect one or more of the obligations or restrictions, including, without
      limitation, those set forth in Section 4 and Section 10(b)(3), imposed on
      either Employee or the Restricted Shares pursuant to the express
      provisions of the Plan and this Agreement.

                                       5



            (b) Adjustment of Restricted Shares. The Restricted Shares subject
      to this Agreement and the vesting provisions applicable thereto will be
      adjusted from time to time, as determined by the Company, pursuant to
      Articles 13, 14 and 15 of the Plan.

            (c) Assignment. The rights and benefits of the Company under this
      Agreement shall be transferable to any one or more persons or entities.
      Except as provided in Section 6, the rights and obligations of Employee
      hereunder may only be assigned with the prior written consent of the
      Company. This Agreement shall be binding upon and inure to the benefit of
      the permitted transferees, heirs, executors, administrators, and
      successors of the parties hereto.

            (d) No Waiver. No waiver of any breach or condition of this
      Agreement shall be deemed to be a waiver of any other or subsequent breach
      or condition, whether of like or different nature.

            (e) Entire Agreement. The Plan and this Agreement constitute the
      entire contract between the parties hereto with regard to the subject
      matter hereof.

            (f) Counterparts. This Agreement may be executed in counterparts,
      each of which shall be deemed to be an original, but all of which together
      shall constitute one and the same instrument.

            (g) Lapse of this Agreement. This Agreement shall be null and void
      in the event Employee shall fail to sign and return a counterpart hereof
      to the Company within thirty (30) days of its delivery to Employee.

            (h) No Contract for Employment. This Agreement does not constitute a
      contract for employment and shall not affect the right of the Company to
      terminate Employee's employment for any reason whatsoever.

            (i) Construction. The Company shall have authority to make
      reasonable constructions of this Agreement and to correct any defect or
      supply any omission or reconcile any inconsistency in this Agreement, and
      to prescribe reasonable rules and regulations relating to the
      administration of this Agreement.

            (j) Severability. In the event that any provision of this Agreement
      becomes or is declared by a court of competent jurisdiction to be illegal,
      unenforceable or void, this Agreement shall continue in full force and
      effect without said provision, provided that no such severability shall be
      effective if it materially changes the economic benefit of this Agreement
      to any party.

            (k) Notice. Any notice relating to this Agreement shall be given in
      writing and shall be deemed effective upon personal delivery or upon
      deposit in the United States mail, registered or certified, postage
      prepaid and addressed to the Company at its main office at 690 E. Lamar
      Boulevard, Suite No. 200, Arlington, Texas 76011 or to such other address
      as may be hereafter specified by the Company, to the attention of the
      Company's Assistant Secretary. All notices to Employee shall be delivered
      to Employee at Employee's address specified below or to such other address
      as may be hereafter specified by Employee.

                                       6



            (l) Governing Instrument and Law. This Agreement and any Restricted
      Shares issued hereunder shall in all respects be governed by the terms and
      provisions of the Plan, which terms and provisions are hereby incorporated
      herein by reference, and by the laws of the State of Texas, and in the
      event of a conflict between the terms of this Agreement and the terms of
      the Plan (copy attached), the terms of the Plan shall control.

                                       TANDY BRANDS ACCESSORIES, INC.

                                       By: _____________________________________
                                           J.S.B. Jenkins
                                           President and Chief Executive Officer

Agreed and Accepted:

EMPLOYEE(1)

_________________________________________
_________________________________________
Address:_________________________________
      ___________________________________
      ___________________________________

- ------------
(1) I have received, completed, executed and retained the I.R.C. Section 83(b)
election that was attached hereto as Exhibit B. As set forth in Section 11
above, I understand that I, and not the Company, will be responsible for
completing the form and filing the election with the appropriate office of the
federal and state tax authorities and that if such filing is not completed
within thirty (30) days after the date of this Agreement, I will forfeit the
significant tax benefits of Section 83(b). I understand further that such filing
should be made by registered or certified mail, return receipt requested, and
that I must retain two (2) copies of the completed form for filing with my state
and federal tax returns for the current tax year and an additional copy for my
records.

                                       7



                                    EXHIBIT A

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

      FOR VALUE RECEIVED _____________________________ hereby sells, assigns and
transfers unto TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the
"Company"), ______________________ (_________) shares of the common stock of the
Company standing in the name of _________________ on the books of the Company
represented by Certificate No. __________ herewith and does hereby irrevocably
constitute and appoint the Assistant Secretary of the Company Attorney-in-Fact
to transfer the said stock on the books of the within named Company with full
power of substitution and resubstitution in the premises.

Dated:______________

_________________________________                _______________________________
(Signature)                                      (Signature of Spouse, if any)

_________________________________                _______________________________
(Print Name)                                     (Print Name)



                                    EXHIBIT B

                             FORM OF 83(B) ELECTION

      The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in his or her gross income
for the current taxable year, the amount of any compensation taxable to him or
her in connection with his or her receipt of the property described below:

      (1) The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:

          Name of Taxpayer:     _________________________________
          Spouse:               _________________________________
          Address of Taxpayer:  _________________________________

          Taxpayer ID No.:      _________________________________
          Spouse's ID No.:      _________________________________
          Taxable Year:         Calendar Year ___________________

      (2) The property with respect to which the election is being made is
__________ shares of the common stock of Tandy Brands Accessories, Inc., a
Delaware corporation (the "Company").

      (3) The property was issued on ____________, ___________.

      (4) The property is subject to forfeiture if for any reason the
undersigned taxpayer's provision of services to the Company is terminated. The
forfeiture restrictions lapse on _________________,____________ .

      (5) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms will never
lapse) is $______ per share.

      (6) The amount paid for such property is $___________ per share.

      (7) A copy of this statement was furnished to the Company for whom the
undersigned taxpayer rendered the service underlying the transfer of property.

      (8) This statement is executed as of: ____________________, __________.

Taxpayer                                            Spouse of Taxpayer (if any)

________________________                            _________________________
(Signature)                                         (Signature)

________________________                            _________________________
(Print Name)                                        (Print Name)



                                CONSENT OF SPOUSE

      I, ________________, spouse of ___________________ ("Employee"), have read
and approve the foregoing Agreement. In consideration of granting to Employee,
____________ shares of the common stock of Tandy Brands Accessories, Inc. as set
forth in the Agreement, I hereby appoint Employee as my attorney-in-fact in
respect to the exercise of any rights under the Agreement and agree to be bound
by the provisions of the Agreement insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property
laws of the State of Texas or similar laws relating to marital property in
effect in the state of our residence as of the date of the signing of the
foregoing Agreement.

      Dated:  _________________, ____________.

                                               Spouse of Employee

                                               _________________________________
                                               (Signature)

                                               _________________________________
                                               (Print Name)

EX-13.1

exv13w1

EX-21.1

Exhibit 21.1
List of Subsidiaries

Subsidiaries of	State or Other Jurisdiction of	Names Under Which Such
the Registrant	Incorporation or Organization	Subsidiaries Do Business
Accessory Design Group, Inc.	A Delaware Corporation	Accessory Design Group, Inc. Accessory Design Group
TBAC—Prince Gardner, Inc.	A Delaware Corporation	TBAC-Prince Gardner, Inc. Prince Gardner
H.A. Sheldon Canada, Ltd.	A Canadian Corporation	1088258 Ontario, Inc. H.A. Sheldon Canada Ltd.
Amity/Rolfs, Inc.	A Delaware Corporation	Amity/Rolfs, Inc.
TBAC General Management Company	A Nevada Corporation	TBAC General Management Company
TBAC Investments, Inc.	A Nevada Corporation	TBAC Investments, Inc.
TBAC Investment Trust	A Pennsylvania Business Trust	TBAC Investment Trust
TBAC Management Company, L.P.	A Delaware Limited Partnership	TBAC Management Company, L.P.
Tandy Brands Accessories Handbags, Inc.	A Delaware Corporation	Tandy Brands Accessories Handbags, Inc.
Stagg Industries, Inc.	An Alabama Corporation	Stagg Industries, Inc.
TBAC—Torel, Inc.	A Delaware Corporation	TBAC—Torel, Inc.
TBAC—Mass Merchant Quality Control, Inc.	A Delaware Corporation	TBAC—Mass Merchant Quality Control, Inc.
Superior Merchandise Company	A Louisiana Corporation	Superior Merchandise ETON
TBAC—Acquisition, Inc.	A Delaware Corporation	TBAC—Acquisition, Inc.

EX-23.1

Exhibit 23.1
Consent of Ernst & Young LLP

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report on Form 10-K of Tandy Brands Accessories, Inc. of our report dated July 30, 2004, except for footnote 16 of the consolidated financial statements, as to which the date is August 26, 2004, included in the 2004 Annual Report to Stockholders of Tandy Brands Accessories, Inc.

We also consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-41262, 33-46814, 33-91996, 33-75114, 333-08579, 333-42211, 333-94251, 333-38526, 333-55436, 333-88276, 333-105283, 333-105294 and 333-109526) of (i) our report dated July 30, 2004, except for footnote 16 of the consolidated financial statements as to which the date is August 26, 2004, with respect to the consolidated financial statements of Tandy Brands Accessories, Inc. included in the 2004 Annual Report to Stockholders of Tandy Brands Accessories, Inc. and (ii) our report dated July 30, 2004, with respect to the financial statement schedule included in this Annual Report on Form 10-K for the year ended June 30, 2004.

	/s/ ERNST & YOUNG LLP
Fort Worth, Texas September 16, 2004

EX-31.1

Exhibit 31.1
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
(Chief Executive Officer)

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, J.S.B. Jenkins, certify that:

1.	I have reviewed this annual report on Form 10-K of Tandy Brands Accessories, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 23, 2004 /s/ J.S.B. Jenkins
J.S.B. Jenkins
Chief Executive Officer

EX-31.2

Exhibit 31.2
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
(Chief Financial Officer)

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Mark J. Flaherty, certify that:

1.	I have reviewed this annual report on Form 10-K of Tandy Brands Accessories, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 23, 2004 /s/ Mark J. Flaherty
Mark J. Flaherty
Chief Financial Officer

EX-32.1

Exhibit 32.1
Section 1350 Certification
(Chief Executive Officer and Chief Financial Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 10-K of Tandy Brands Accessories, Inc. (the “Company”) for the fiscal year ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, J.S.B. Jenkins and Mark J. Flaherty, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 23, 2004	/s/ J.S.B. Jenkins J.S.B. Jenkins Chief Executive Officer
	/s/ Mark J. Flaherty Mark J. Flaherty Chief Financial Officer