-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KXEb0ZS8TJ8l+v6A9j2xDj0eazeA+OrMDlieuLB8r82+By27xBH7Pp2D1qw1KJHb mg2KpwMB+/S65Yh0Wb6jaw== 0000950134-98-004221.txt : 19980514 0000950134-98-004221.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950134-98-004221 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TANDY BRANDS ACCESSORIES INC CENTRAL INDEX KEY: 0000869487 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 752349915 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18927 FILM NUMBER: 98618553 BUSINESS ADDRESS: STREET 1: 690 E LAMAR BLVD STE 200 CITY: ARLINGTON STATE: TX ZIP: 76011 BUSINESS PHONE: 8175480090 MAIL ADDRESS: STREET 1: 690 E LAMAR BLVD CITY: ARLINGTON STATE: TX ZIP: 76011 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q Quarterly Report Pursuant To Section 13 or 15 (d) of the Securities Exchange Act of 1934 -------------------- For the Period Ended March 31, 1998 Commission File Number 0-18927 TANDY BRANDS ACCESSORIES, INC. (Exact name of registrant as specified in its charter) Delaware 75-2349915 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 690 East Lamar Boulevard, Suite 200, Arlington, TX 76011 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (817)-548-0090 Former name, former address and former fiscal year, if changed since last report: Not Applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 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 X No Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Number of shares outstanding at March 31, 1998 Common stock, $1 par value 5,576,017 2 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES Form 10-Q Quarter Ended March 31, 1998 TABLE OF CONTENTS PART I -- FINANCIAL INFORMATION
Item Page No. -------- 1. Financial Statements 3 - 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 INDEX TO EXHIBITS 12
2 3 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES File Number 0-18927 Form 10-Q Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)
Three Months Nine Months Ended Ended March 31 March 31 ----------------------- ----------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Gross sales, less discounts, returns and allowances $ 32,970 $ 23,922 $ 100,658 $ 77,462 Royalty, interest and other income 14 31 128 82 --------- --------- --------- --------- Total revenues 32,984 23,953 100,786 77,544 --------- --------- --------- --------- Costs and expenses: Cost of goods sold 20,947 14,985 63,488 48,706 Selling, general and administrative 8,936 6,984 25,128 20,979 Depreciation and amortization 463 430 1,343 1,304 Interest expense 363 313 989 953 --------- --------- --------- --------- Total costs and expenses 30,709 22,712 90,948 71,942 --------- --------- --------- --------- Income before provision for income taxes 2,275 1,241 9,838 5,602 Provision for income taxes 891 496 3,791 2,094 ========= ========= ========= ========= Net income $ 1,384 $ 745 $ 6,047 $ 3,508 ========= ========= ========= ========= Earnings per common share $ 0.25 $ 0.14 $ 1.09 $ 0.65 ========= ========= ========= ========= Earnings per common share - assuming dilution $ 0.24 $ 0.14 $ 1.07 $ 0.64 ========= ========= ========= ========= Common shares outstanding 5,587 5,470 5,564 5,437 ========= ========= ========= ========= Common shares outstanding - assuming dilution 5,716 5,506 5,662 5,463 ========= ========= ========= ========= Cash dividends per common share None None None None
The accompanying notes are an integral part of these condensed financial statements. 3 4 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES File Number 0-18927 Form 10-Q Condensed Consolidated Balance Sheets (Dollars in thousands)
March 31, June 30, 1998 1997 ---------- ---------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 1,006 $ 554 Accounts receivable, net 23,272 15,210 Inventories: Raw materials and work in process 5,081 5,982 Finished goods 28,719 26,278 Other current assets 2,629 2,489 ---------- ---------- Total current assets 60,707 50,513 ---------- ---------- Property and equipment, at cost 10,735 9,652 Accumulated depreciation (5,523) (4,797) ---------- ---------- Net property and equipment 5,212 4,855 ---------- ---------- Other assets: Goodwill, less amortization 7,445 7,941 Other assets, less amortization 2,047 2,055 ---------- ---------- Total other assets 9,492 9,996 ---------- ---------- TOTAL ASSETS $ 75,411 $ 65,364 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,508 $ 3,180 Accrued expenses 4,793 3,979 ---------- ---------- Total current liabilities 6,301 7,159 ---------- ---------- Other liabilities: Notes payable 19,700 15,850 Other noncurrent liabilities 332 226 ---------- ---------- Total other liabilities 20,032 16,076 ---------- ---------- Stockholders' equity: Preferred stock, $1 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $1 par value, 10,000,000 shares authorized, 5,576,017 shares and 5,490,091 shares issued and outstanding as of March 31, 1998, and June 30, 1997, respectively 5,576 5,490 Additional paid-in capital 19,687 18,732 Retained earnings 23,815 17,907 ---------- ---------- Total stockholders' equity 49,078 42,129 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 75,411 $ 65,364 ========== ==========
The accompanying notes are an integral part of these condensed financial statements. 4 5 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES File Number 0-18927 Form 10-Q Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)
Nine Months Ended March 31, -------------------------- 1998 1997 ---------- ---------- Cash flows from operating activities: Net income $ 6,047 $ 3,508 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation 828 801 Amortization 620 640 Other (10) (100) Change in assets and liabilities: Accounts receivable (8,062) (4,192) Inventories (1,540) (7,221) Other assets (86) 384 Accounts payable (1,672) (3,048) Accrued expenses 920 1,437 ---------- ---------- Net cash used for operating activities (2,955) (7,791) ---------- ---------- Cash flows from investing activities: Purchases of property and equipment (1,484) (775) ---------- ---------- Net cash used for investing activities (1,484) (775) ---------- ---------- Cash flows from financing activities: Exercise of employee stock options, net of purchase of treasury stock 222 -- Sale of stock to stock purchase program 819 611 Proceeds from borrowings 40,750 38,650 Payments under borrowings (36,900) (30,400) ---------- ---------- Net cash provided by financing activities 4,891 8,861 ---------- ---------- Net increase in cash and cash equivalents 452 295 Cash and cash equivalents at beginning of period 554 88 ========== ========== Cash and cash equivalents at end of period $ 1,006 $ 383 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 822 $ 954 Income taxes 4,094 1,577
The accompanying notes are an integral part of these condensed financial statements. 5 6 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES Notes to Condensed Financial Statements (Unaudited) Note 1 - Accounting Principles. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ended June 30, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Tandy Brands Accessories, Inc. and Subsidiaries Annual Report on Form 10-K for the year ended June 30, 1997. Certain fiscal 1997 amounts have been reclassified to conform with the fiscal 1998 presentation. Note 2 - Impact of New Accounting Standards. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Dilutive earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to SFAS No. 128 requirements. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 130 requires that an enterprise report, by major component and as a single total, the change in its equity during the period from nonowner sources, and SFAS No. 131 establishes annual and interim reporting requirements for an enterprise's operating segments and related disclosures about its products and services, geographical areas in which it operates and major customers. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted. Effects of the adoption of these statements during fiscal year 1999 will primarily be limited to the form and content of the Company's disclosures and is not expected to materially impact the Company's consolidated financial position or statements of operations, stockholders' equity and cash flows. Note 3 - Credit Arrangements. On March 31, 1998 the Company amended the $25,000,000 unsecured line of credit with a bank to $30,000,000. Of this amount $20,000,000 is a committed facility which was scheduled to expire on April 30, 1999 was extended to April 30, 2000. The $5,000,000 uncommitted facility was increased to $10,000,000. Each facility may be used for borrowings or letters of credit. Note 4 - Subsequent Events. On May 12, 1998, TBAC-AR Acquisition, Inc. ("AR"), a wholly owned subsidiary of the Company, acquired certain assets of AR Accessories Group, Inc. through an auction held in the Bankruptcy Court for the Eastern District of Wisconsin. The assets included, but were not limited to wholesale accounts receivable, wholesale inventory, certain machinery and equipment, the distribution center located in West Bend, Wisconsin and related trade names including "Amity" and "Rolfs". The cash purchase price of approximately $18,550,000 was provided by drawing on existing bank lines. 6 7 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES Notes to Condensed Financial Statements (Unaudited) Note 5 - Earnings Per Share. The following sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Nine Months Ended Ended March 31 March 31 --------------------- --------------------- 1998 1997 1998 1997 ------- ------- ------- ------- Numerator for basic and diluted earnings per share: $ 1,384 $ 745 $ 6,047 $ 3,508 ======= ======= ======= ======= Net income Denominator: Weighted average shares outstanding 5,569 5,461 5,548 5,432 Contingently issuable shares 18 9 16 5 ------- ------- ------- ------- Denominator for basic earnings per share - weighted average shares 5,587 5,470 5,564 5,437 Effect of dilutive securities: Employee stock options 114 33 86 25 Director stock options 15 3 16 1 ------- ------- ------- ------- Dilutive potential common shares 129 36 98 26 Denominator for diluted earnings per share - adjusted weighted - average shares 5,716 5,506 5,662 5,463 ======= ======= ======= ======= Basic earnings per share $ 0.25 $ 0.14 $ 1.09 $ 0.65 ======= ======= ======= ======= Diluted earnings per share $ 0.24 $ 0.14 $ 1.07 $ 0.64 ======= ======= ======= =======
7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES GENERAL Tandy Brands Accessories, Inc. (the "Company") manufactures and markets men's, women's and children's accessories. The Company's business is conducted primarily in the United States. Historically, the Company's sales and operating results are generally consistent throughout the fiscal year, but there is normally a seasonal increase during the second quarter. Although the Company's operations are affected by general economic trends, the Company does not believe that inflation has had a material effect on the results of operations. On May 12, 1998, TBAC-AR Acquisition, Inc. ("AR"), a wholly owned subsidiary of the Company, acquired certain assets of AR Accessories Group, Inc. through an auction held in the Bankruptcy Court for the Eastern District of Wisconsin. AR Accessories Group was a manufacturer and distributor of men's and women's small leather goods. The assets included, but were not limited to wholesale accounts receivable, wholesale inventory, certain machinery and equipment, the distribution center located in West Bend, Wisconsin and related trade names including "Amity" and "Rolfs". The cash purchase price of approximately $18,550,000 was provided by drawing on existing bank lines. RESULTS OF OPERATIONS Three and Nine Months Ended March 31, 1998 Compared to the Three and Nine Months Ended March 31, 1997 For the three month period ended March 31, 1998, net sales increased 37.8% to $32,970,000 as compared to net sales of $23,922,000 for the same period last year. Net income for the third quarter increased 85.8% to $1,384,000 or $.24 per share, compared to net income of $745,000 or $.14 per share, for the same three months last year. For the nine month period ended March 31, 1998, net sales increased 29.9% to $100,658,000 as compared to net sales of $77,462,000 for the same period last year. Net income for the nine month period increased 72.4% to $6,047,000 or $1.07 per share, compared to net income of $3,508,000 or $.64 per share, for the same nine months last year. Women's products had net sales increases over the prior year in the comparable three and nine month periods of $8,287,000 and $20,693,000, respectively. The women's product net sales for the three-month period of fiscal 1998 were higher than normal expectations due to increased spring shipments to certain mass merchants. Women's product net sales for the nine-month period of fiscal 1998 were higher than the same period last year due in part to initial order shipments of scarves, women's and children's socks, hair goods and Jones New York(R) handbags to certain key customers in addition to increased women's accessories sales. Men's products had net sales increases over the prior year in the comparable three and nine month periods of $761,000 and $2,503,000, respectively. The men's products had net sales increases for the three and nine month periods of fiscal 1998 due to increased retail store distribution under the Haggar(R) and Greg Norman Collection(R) brand names. For the three and nine month periods gross margins decreased 0.9% and 0.2% to 36.5% and 36.9%, respectively, as compared to the same periods for the prior year. During the three and nine month periods increases in men's gross margins offset lower women's product sales gross margins. 8 9 Selling, general and administrative expenses as a percentage of net sales for the three and nine months ended March 31, 1998 decreased 2.1% as compared to the same periods of the prior year. A portion of this decrease resulted from a larger mix of women's product sales, which, on a percentage of sales basis, incur lower variable selling expenses than men's product sales. Additionally, the majority of the sales increases for the three and nine month periods of fiscal 1998 were to customers on which no sales commissions are paid, which decreased selling costs as a percentage of sales. Although the Company's selling, general and administrative expenses were favorably impacted by the larger mix of women's product sales, the Company anticipates that such expenses in the future will be in line with historical trends. The effective tax rate for the nine months ended March 31, 1998 was 38.5% compared to 37.4% for the same prior year period due to increased state income taxes. LIQUIDITY AND CAPITAL RESOURCES Generally, the Company's primary sources of liquidity are cash flows from operations and the Company's lines of credit. The Company has two unsecured domestic bank credit lines aggregating $55,000,000, which can be used for seasonal borrowings and letters of credit. The Company's borrowings under its credit lines were $19,700,000 and $22,850,000 as of March 31, 1998 and 1997, respectively. See Note 3 for discussion of the amendment to certain credit arrangements. For the nine months ended March 31, 1998, the Company's operating activities used cash of $2,955,000 compared to $7,791,000 for the same period last year. The decrease was attributable to cash receipts collected from the increase in second quarter of fiscal 1998 sales which were used to fund the purchase of inventory during the three months ended March 31, 1998. Capital expenditures were $1,484,000 for the nine months ended March 31, 1998. The increase of $709,000 over the same prior year period is due primarily to the purchase of software applications for the Company's management information systems. The Company believes that its sources of liquidity are sufficient to fund its operations. FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of financial condition and results of operations and other sections of this Form 10-Q contain forward looking statements that are based on current expectations, estimates and projections about the industry in which the Company operates, management's beliefs and assumptions made by management. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of the Company. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," or variations of such words and similar expressions are intended to identify such 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 forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 9 10 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 1998. The exhibits filed as a part of this report are listed below. Exhibit No. Description 10 Material Contracts 27 Financial Data Schedules 10 11 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TANDY BRANDS ACCESSORIES, INC. (Registrant) /s/ J.S.B. Jenkins ---------------------------------------------- J.S.B. Jenkins President and Chief Executive Officer /s/ Stanley T. Ninemire ---------------------------------------------- Stanley T. Ninemire Senior Vice President, Chief Financial Officer and Treasurer Date: May 13, 1998 11 12 TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES EXHIBIT INDEX
Incorporated by Reference (If applicable) ------------------------------------------------------- Exhibit Number and Description Form Date File No. Exhibit --------- ------------ ----------- ---------- (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 11/02/90 33-37588 4.1 4.2 Form of Common Stock Certificate of Tandy Brands Accessories, Inc. S-1 11/02/90 33-37588 4.2 4.3 Form of Preferred Share Purchase Rights Certificate of Tandy Brands Accessories, Inc. S-1 11/02/90 33-37588 4.3 4.4 Rights Agreement dated November 7, 1990, between Tandy Brands Accessories, Inc. and First National Bank of Boston S-1 11/02/90 33-37588 10.5 (10) Material Contracts 10.23 Amendments No. 4 and 5 to the Credit Agreement between Tandy Brands Accessories, Inc. and Chase Bank (Texas Commerce) of Texas dated June 30, 1994 N/A N/A N/A N/A (27) Financial Data Schedule 27.1 Financial Data Schedule N/A N/A N/A N/A 27.2 Financial Data Schedule N/A N/A N/A N/A 27.3 Financial Data Schedule N/A N/A N/A N/A 27.4 Financial Data Schedule N/A N/A N/A N/A 27.5 Financial Data Schedule N/A N/A N/A N/A
12 EX-10.23 2 4TH AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.23 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as of December 2, 1997 (the "Effective Date"), is by and between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation, ("Borrower"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association whose principal office is located in Houston, Texas (the "Bank"). PRELIMINARY STATEMENT The Bank and the Borrower have entered into an Amended and Restated Revolving Credit Agreement dated as of June 30, 1994 which has been amended by a First Amendment dated as of April 30, 1995, a Second Amendment dated as of April 30, 1996 and a Third Amendment dated as of April 30, 1997 (the "Credit Agreement"). All capitalized terms defined in the Credit Agreement and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. The Bank and the Borrower have agreed to amend the Credit Agreement to the extent set forth herein, in order to revise how the commitment fee is calculated. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Bank and the Borrower hereby agree as follows: Section 1. Section 2.3 of the Credit Agreement is amended and restated to read as follows: "2.3 Commitment Fee. The Borrower agrees to pay to the Bank a commitment fee at the rate of 1/4 of 1% per annum on the average daily unused portion of the Commitment computed on the basis of a 365/366 day year consisting of twelve months having the respective number of days actually contained in each calendar month. In calculating the average daily unused portion of the Commitment, amounts outstanding under the $5,000,000.00 discretionary line of credit extended by the Bank to the Borrower shall be considered "usage" under the Commitment. Such commitment fee shall be payable on the last day of each calendar quarter during the term of this Agreement, commencing December 31, 1997." Section 2. The Borrower hereby represents and warrants to the Bank that after giving effect to the execution and delivery of this Amendment: (a) the representations and warranties set forth in the Credit Agreement are true and correct on the date hereof as though made on and as of such date; and (b) no Event of Default, or event which with passage of time, the giving of notice or both would become an Event of Default, has occurred and is continuing as of the date hereof. Section 3. This Amendment shall become effective as of the Effective Date upon its execution and delivery by each of the parties named in the signature lines below, and the "Agreement" as used in the Credit Agreement shall also refer to the Credit Agreement as amended by this Amendment. Section 4. The Borrower further acknowledges that each of the other Loan Documents is in all other respects ratified and confirmed, and all of the rights, powers and privileges created thereby or thereunder are ratified, extended, carried forward and remain in full force and effect except as the Credit Agreement is amended by this Amendment. Section 5. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute but one and the same agreement. Section 6. This Amendment shall be included within the definition of "Loan Documents" as used in the Agreement. Section 7. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. THE BORROWER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE BORROWER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. Page 1 of 2 Pages 2 Fourth Amendment to Credit Agreement TANDY BRANDS ACCESSORIES, INC. December 2, 1997 THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed effective as of the Effective Date. BORROWER: TANDY BRANDS ACCESSORIES, INC. By: /s/ STAN NINEMIRE ----------------------------------------------------------------------------- Name: Stan Ninemire --------------------------------------------------------------------------- Title: Senior Vice President and Chief Financial Officer -------------------------------------------------------------------------- Address for mail delivery: Tandy Brands Accessories, Inc. 690 East Lamar, Suite 200 Arlington, Texas 76011 Attention: Bruce Cole Telecopy No: (817) 548-1144 BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: ----------------------------------------------------------------------------- Name: Jerry Petrey --------------------------------------------------------------------------- Title: Vice President -------------------------------------------------------------------------- Address for mail delivery: 500 East Border Street Arlington, Texas 76010 Attention: Jerry Petrey Telecopy No: (817) 856-3125 Page 2 of 2 Pages 3 FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as of March 31, 1998 (the "Effective Date"), is by and between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation, ("Borrower"), and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, formerly known as Texas Commerce Bank National Association, a national banking association whose principal office is located in Houston, Texas (the "Bank"). PRELIMINARY STATEMENT The Bank and the Borrower have entered into an Amended and Restated Revolving Credit Agreement dated as of June 30, 1994 which has been amended by a First Amendment dated as of April 30, 1995, a Second Amendment dated as of April 30, 1996, a Third Amendment dated as of April 30, 1997 and a Fourth Amendment dated as of December 2, 1997 (the "Credit Agreement"). All capitalized terms defined in the Credit Agreement and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. The Bank and the Borrower have agreed to amend the Credit Agreement to the extent set forth herein, and in order to, among other things, renew, modify and extend the Commitment to Borrower for the issuance of letters of credit and money borrowings for the purpose of financing and supporting the general corporate purposes, including, without limitation, the working capital, the letters of credit needs and acquisition financing and treasury stock purchase requirements of the Borrower. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Bank and the Borrower hereby agree as follows: Section 1. Section 1.1 of the Credit Agreement entitled, "Definitions" is amended by substituting the following for the definition of Termination Date: "Termination Date" shall mean the earlier to occur of: (i) April 30, 2000; or (ii) that date as specified by the Bank pursuant to Section 10 hereof." Section 2. Section 2.1 of the Credit Agreement entitled, "Note and Terms of Commitment" is amended by substituting the following for Section 2.1 of the Credit Agreement: "2.1 Note and Terms of Commitment Subject to the terms and conditions hereof, the Bank agrees to make advances or loans to Borrower from time to time before the Termination Date, not to exceed at any one time outstanding the amount of the Commitment. Advances shall take the form of Loans under the Note or issuances of Letters of Credit by Bank. The Loans shall be evidenced by, and shall bear interest and be payable as provided in the Note executed by Borrower dated as of March 31, 1998 and delivered to Bank, which is given in renewal, extension and modification of that certain promissory note dated April 30, 1997 in the principal amount of $20,000,000.00 (including all prior notes of which said note represents a renewal, extension, modification, increase, substitution, rearrangement or replacement thereof, the "Renewed Note"). Each Loan shall be in an amount not less than that amount provided for in the Note. Borrower shall have the right to borrow, repay and reborrow under the Note provided that at no time shall the sum of the aggregate amount outstanding of: (i) Loans, and (ii) L/C Obligations (as defined in Section 3) exceed the amount of the Commitment." Section 3. Section 2.3 of the Credit Agreement is amended and restated to read as follows: "2.3 Commitment Fee. The Borrower agrees to pay to the Bank a commitment fee at the rate of 1/4 of 1% per annum on the average daily unused portion of the Commitment computed on the basis of a 365/366 day year consisting of twelve months having the respective number of days actually contained in each calendar month. In calculating the average daily unused portion of the Commitment, amounts outstanding under the $10,000,000.00 discretionary line of credit extended by the Bank to the Borrower shall be considered "usage" under the Commitment. Such commitment fee shall be payable on the last day of each calendar quarter during the term of this Agreement, commencing December 31, 1997." Section 4. The Borrower hereby represents and warrants to the Bank that after giving effect to the execution and delivery of this Amendment: (a) the representations and warranties set forth in the Credit Agreement are true and correct on the date hereof as though made on and as of such date; and (b) no Event of Default, or event which with passage of time, the giving of notice or both would become an Event of Default, has occurred and is continuing as of the date hereof. Section 5. This Amendment shall become effective as of the Effective Date upon its execution and delivery by each of the parties named in the signature lines below, and the term "Agreement" as used in the Credit Agreement shall also refer to the Credit Agreement as amended by this Amendment. Section 6. The Borrower further acknowledges that each of the other Loan Documents is in all other respects ratified and confirmed, and all of the rights, powers and privileges created thereby or thereunder are ratified, extended, carried forward and remain in full force and effect except as the Credit Agreement is amended by this Amendment. Page 1 of 2 Pages 4 Section 7. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute but one and the same agreement. Section 8. This Amendment shall be included within the definition of "Loan Documents" as used in the Agreement. Section 9. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. THE BORROWER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE BORROWER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed effective as of the Effective Date. BORROWER: TANDY BRANDS ACCESSORIES, INC. By: /s/ STAN NINEMIRE ----------------------------------------------------------------------------- Name: Stan Ninemire --------------------------------------------------------------------------- Title: Senior Vice President and Chief Financial Officer -------------------------------------------------------------------------- Address for mail delivery: Tandy Brands Accessories, Inc. 690 East Lamar, Suite 200 Arlington, Texas 76011 Attention: Bruce Cole Telecopy No: (817) 548-1144 BANK: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: /s/ JERRY PETREY ----------------------------------------------------------------------------- Name: Jerry Petrey --------------------------------------------------------------------------- Title: Vice President -------------------------------------------------------------------------- Address for mail delivery: 500 East Border Street Arlington, Texas 76010 Attention: Jerry Petrey Telecopy No: (817) 856-3125 Page 2 of 2 Pages 5 PROMISSORY NOTE FOR DISCRETIONARY LOANS (this "Note") U.S. $10,000,000.00 March 31, 1998 FOR VALUE RECEIVED, TANDY BRANDS ACCESSORIES, INC. (the "Maker"), a Delaware corporation, promises to pay to the order of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, formerly known as Texas Commerce Bank National Association, (the "Bank") on or before April 30, 1999, (the "Termination Date"), at its banking house at 712 Main Street, Houston, Texas 77002 or at such other location as the Bank may designate, in lawful money of the United States of America, the lesser of: (i) the principal sum of TEN MILLION AND NO/100THS (U.S. $10,000,000.00) (the "Maximum Loan Total"); or (ii) the aggregate unpaid principal amount of all loans made by the Bank at its sole and absolute discretion hereunder (each such loan being a "Loan"), which may be outstanding on the Termination Date. Each Loan shall be due and payable on the maturity date agreed to by the Bank and the Maker with respect to such Loan (the "Maturity Date"). In no event shall any Maturity Date fall on a date after the Termination Date. SUBJECT TO THE LIMITATIONS SET FORTH HEREIN, MAKER MAY BORROW, REPAY AND REBORROW HEREUNDER AT BANK'S SOLE DISCRETION AND THERE IS NO LIMITATION ON THE NUMBER OF LOANS MADE HEREUNDER AT BANK'S SOLE DISCRETION SO LONG AS THE TOTAL UNPAID PRINCIPAL AMOUNT AT ANYTIME OUTSTANDING DOES NOT EXCEED THE MAXIMUM LOAN TOTAL. The Loans may be either Libor Loans, Negotiated Rate Loans or Alternate Base Rate Loans. The Maker shall pay interest on each Alternate Base Rate Loan for the interest Period with respect thereto at a rate per annum equal to the lesser of: (i) the Alternate Base Rate in effect from time to time (the "Effective Alternate Base Rate"); or (ii) the Highest Lawful Rate, which interest shall be due and payable on the last day of each calendar quarter and on the last day of each Interest Period. The Maker shall pay interest on each Negotiated Rate Loan for the Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the Negotiated Rate for such Interest Period, which interest shall be due and payable on the last day of each such Interest Period. The Maker shall pay interest on each Libor Loan for the Interest Period with respect thereto at a rate per annum equal to the lesser of: (i) the Adjusted Libor Rate for such Interest Period plus three-quarters of one percent (3/4%) (the "Effective Libor Rate"); or (ii) the Highest Lawful Rate, which interest shall be due and payable on the last day of each such Interest Period, and if such Interest Period has a duration exceeding three months, on the day that is three months after the commencement of such Interest Period. Any amount not paid when due with respect to principal (whether at Maturity Date, by acceleration or otherwise), costs, expenses, and to the extent permitted by applicable law, interest, shall bear interest at a rate per annum equal to the lesser of: (i) the Alternate Base Rate in effect from time to time plus three percent (3%); or (ii) the Highest Lawful Rate, which interest shall be due and payable on demand. The principal of any Loan shall be deemed past due if not paid on or before the Maturity Date or any earlier maturity date resulting from acceleration in accordance with the terms of this Note or as provided by law or otherwise. Interest accrued and unpaid with respect to any Loan shall be deemed past due if not paid on or before the applicable interest payment due date as provided for herein. Notwithstanding the foregoing, if at any time the effective rate of interest which would otherwise be payable on any Loan evidenced by this Note exceeds the Highest Lawful Rate, the rate of interest to accrue on the unpaid principal balance of such Loan during all such times shall be limited to the Highest Lawful Rate, but any subsequent reductions in such interest rate shall not become effective to reduce such interest rate below the Highest Lawful Rate until the total amount of interest accrued on the unpaid principal balance of such Loan equals the total amount of interest which would have accrued if the Effective Alternate Base Rate, Negotiated Rate or Effective Libor Rate whichever is applicable, had at all times been in effect. Each Loan shall be in an amount not less than $100,000.00 and an integral multiple of $25,000.00. Interest with respect to Alternate Base Rate Loans shall be calculated on the basis of a 365 day year or 366 day year, as the case may be, for the actual number of days elapsed. Interest with respect to Negotiated Rate Loans or Libor Rate Loans shall be calculated on the basis of a 360 day year for the actual days elapsed, unless such calculation would result in a usurious interest rate, in which case such interest shall be calculated on the basis of a 365 day or 366 day year, as the case may be. The following terms shall have the respective meanings indicated: "Adjusted Libor Rate" means a per annum interest rate determined by Bank by dividing: (i) the Libor Rate by (ii) Statutory Reserves provided that Statutory Reserves is greater than zero, otherwise Adjusted Libor Rate means a per annum interest rate equal to the Libor Rate. "Libor Rate" means with respect to any Libor Loan for any Interest Period the interest rate determined by Bank by reference to the British Bankers' Association Interest Settlement Rates (as set forth by any service selected by Bank which has been nominated by the British Bankers' Association as an authorized information vender for the purpose of displaying such rates including but not limited to Bloomberg, Reuters or Telerate) to be the rate at approximately 11:00 a.m. London time, two Business Days prior to the commencement of such Interest Period for dollar deposits in an amount comparable to such Libor Loan with a maturity comparable to such Interest Period. "Alternate Base Rate" shall mean for any day, a rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%) equal to the greatest of: (a) the Prime Rate in effect on such day; and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum determined from time to time by the Bank as its prime rate in effect at its principal office in Houston, Texas; each change in the Prime Rate shall be effective on the date such change is determined; without special notice to the Maker or any other person or entity. THE PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY Page 1 of 5 Pages 6 Promissory Note for Discretionary Loans TANDY BRANDS ACCESSORIES,. INC. March 31, 1998 REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED TO ANY CUSTOMER AND ANY STATEMENT, REPRESENTATION OR WARRANTY IN THAT REGARD OR TO THAT EFFECT IS EXPRESSLY DISCLAIMED BY BANK. BANK MAY MAKE LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Bank from three Federal funds brokers of recognized standing selected by Bank. If for any reason the Bank shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, for any reason, including the inability or failure of the Bank to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Alternate Base Rate Loan" means a Loan which bears interest at a rate determined by reference to the Alternate Base Rate. "Assessment Rate" means, for any date, the annual rate (rounded upwards, if not already a whole multiple of 1/16 of 1%, to the next higher 1/16 of 1%) most recently estimated by the Bank as the then current net annual assessment rate that will be employed in determining amounts payable by the Bank to the Federal Deposit Insurance Corporation for insurance by the Corporation of time deposits made in dollars at its domestic offices. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Borrowing Date" means any Business Day on which the Bank shall make a Loan hereunder. "Business Day" means a day: (i) on which the Bank and commercial banks in New York City are generally open for business; and (ii) with respect to Libor Loans, on which dealings in United States Dollar deposits are carried out in the London interbank market. "Credit Agreement" shall mean that certain Amended and Restated Credit Agreement dated June 30, 1994 by and between Maker and Bank, as amended by a First Amendment dated April 30, 1995, a Second Amendment dated April 30, 1996, a Third Amendment dated April 30, 1997, a Fourth Amendment dated December 2, 1997, a Fifth Amendment dated March 31, 1998 and as it may be further amended, restated or supplemented from time to time. "Highest Lawful Rate" as used herein shall mean the maximum nonusurious interest rate permitted from time to time to be contracted for, taken, reserved, charged or received on any Loan under applicable federal or Texas laws, whichever permits the higher lawful rate; provided, however, that in the event: (i) such maximum nonusurious interest rate shall, at any time or times during the term of a Loan evidenced hereby, be reduced to a rate less than the maximum nonusurious rate in effect on the date of such Loan; and (ii) applicable law permits contracting for, taking, reserving, charging, and receiving on such Loan throughout the duration thereof the maximum nonusurious rate in effect on the date such Loan was made, then and at all such times the Highest Lawful Rate shall be the maximum nonusurious rate permitted to be contracted for, taken, reserved, charged or received on such Loan under applicable law in effect on the date of such Loan. At all such times, if any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the indicated (weekly) rate ceiling as defined in Article 5069-1D.001 et. seq., as amended, of the Texas Revised Civil Statutes. "Interest Period" means, with respect to any Loan, the period commencing on the Borrowing Date and ending on the Maturity Date, consistent with the following provisions. The duration of each Interest Period shall be: (a) in the case of an Alternate Base Rate Loan, a period of up to 90 days; (b) in the case of a Negotiated Rate Loan, a period of not longer than 30 days; and (c) in the case of a Libor Loan, 1, 2, 3, or 6 months. in each case as selected by the Maker and agreed to by the Bank at Bank's sole discretion. The Maker's choice of Interest Period is also subject to the following limitations: (i) No Interest Period shall end on a date after the Termination Date; and (ii) If the last day of an Interest Period would be a day other than a Business Day, the Interest Period shall end on the next succeeding Business Day. "Libor Loan" means a Loan which bears interest by reference to the Adjusted Libor Rate. "Negotiated Rate" means, with respect to each Negotiated Rate Loan hereunder, the rate of interest per annum quoted by the Bank to the Maker at the time of the borrowing request with respect to such Negotiated Rate Loan as the rate such Negotiated Rate Loan shall bear for the requested Interest Period. "Negotiated Rate Loan" means a Loan which bears interest at a rate determined by reference to the Negotiated Rate. Page 2 of 5 Pages 7 Promissory Note for Discretionary Loans TANDY BRANDS ACCESSORIES, INC. March 31, 1998 "Statutory Reserves" shall mean the difference (expressed as a decimal) of the number one minus the aggregate of the maximum reserve percentages (including, without limitation, any marginal, special, emergency, or supplemental reserves) expressed as a decimal established by the Board and any other banking authority to which the Bank is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include, without limitation, those imposed under such Regulation D. Libor Loans shall be deemed to constitute Eurocurrency Liabilities and as such shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Bank under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. The unpaid principal balance of this Note at any time shall be the total of all Loans made by the Bank to or for the benefit of the Maker, less the amount of all payments of principal made hereon by or for the account of the Maker. The Bank's records shall serve as presumptive evidence of any and all amounts outstanding hereunder. Any Loan which the Bank agrees in its sole discretion to make hereunder shall be made on the Maker's irrevocable notice, given not later than 10:00 A.M. (Houston time) on, in the case of Libor Loans, the third Business Day prior to the proposed Borrowing Date, or in the case of Alternate Base Rate Loans or Negotiated Rate Loans, the first Business Day prior to the proposed Borrowing Date, from the Maker to the Bank. Each such notice of a requested borrowing (a "Notice of Requested Borrowing") under this paragraph may be oral or written, and shall specify: (i) the requested amount of such Loan; (ii) the proposed Borrowing Date; (iii) whether the requested Loan is to be an Alternate Base Rate Loan, Libor Rate Loan or Negotiated Rate Loan; and (iv) the Interest Period for such Loan. If any Notice of Requested Borrowing shall be oral, the Maker shall deliver to the Bank prior to the Borrowing Date a confirmatory written Notice of Requested Borrowing. If any domestic or foreign law, treaty, rule or regulation (whether now in effect or hereinafter enacted or promulgated, including Regulation D of the Board of Governors of the Federal Reserve System) or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law): (a) changes, imposes, modifies, applies or deems applicable any reserve, special deposit or similar requirements in respect of any such Loan or against assets of, deposits with or for the account of, or credit extended or committed by, the Bank; or (b) imposes on the Bank or the interbank eurocurrency deposit and transfer market or the market for domestic bank certificates or deposit any other condition affecting any such Loan; and the result of any of the foregoing is to impose a cost to the Bank of agreeing to make, funding or maintaining any such Loan or to reduce the amount of any sum receivable by the Bank in respect of any such Loan, then the Bank may notify the Maker in writing of the happening of such event and Maker shall upon demand pay to the Bank such additional amounts as will compensate the Bank for such costs. Without prejudice to the survival of any other agreement of the Maker under this Note, the obligations of the Maker under this paragraph shall survive the termination of this Note. The Maker may on any Business Day prepay the outstanding principal amount of any Alternate Base Rate Loan, in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid. Partial prepayments shall be in an aggregate principal amount of $100,000.00 or a greater integral multiple of $25,000.00. Except as specified in this paragraph, the Maker shall have no right to prepay any Loan. The Maker will indemnify the Bank against, and reimburse the Bank on demand for, any loss, cost or expense incurred or sustained by the Bank (including without limitation any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Bank to fund or maintain Loans bearing interest at the Negotiated Rate or the Libor Rate) as a result of: (a) any payment or prepayment (whether permitted by the Bank or required hereunder or otherwise) of all or a portion of any Negotiated Rate Loan or Libor Loan on a day other than Maturity Date of such Loan; (b) any payment or prepayment, whether required hereunder or otherwise, of any Negotiated Rate Loan or Libor Loan made after the delivery of a Notice of Requested Borrowing but before the applicable Borrowing Date if such payment or prepayment prevents the proposed Loan from becoming fully effective; or (c) the failure of any Negotiated Rate Loan or Libor Loan to be made by the Bank due to any action or inaction of the Maker. For purposes of this paragraph, funding losses arising by reason of liquidation or reemployment of deposits or other funds acquired by the Bank to fund or maintain Loans bearing interest at the Negotiated Rate or the Libor Rate shall be calculated as the remainder obtained by subtracting: (i) the yield (reflecting both stated interest rate and discount, if any) to maturity of obligations of the United States Treasury in an amount equal or comparable to such Loan for the period of time commencing on the date of the payment, prepayment or change of rate as provided above and ending on the last day of the subject Interest Period; from (ii) the interest payable at the Negotiated Rate or the Libor Rate for the period commencing on the date of such payment, prepayment or change of rate and ending on the last day of such Interest Period. Such funding losses and other costs and expenses shall be calculated and billed by the Bank and such bill shall, as to the costs incurred, be conclusive absent manifest error. If after the date of this Note, the Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Bank's capital as a consequence of making any Loans hereunder to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank's policies with respect to capital adequacy) by an amount deemed by the Bank in good faith to be material, then from time to time, the Maker shall pay to the Bank such additional amount or amounts as will compensate the Bank for such reduction. Page 3 of 5 Pages 8 Promissory Note for Discretionary Loans TANDY BRANDS ACCESSORIES, INC. March 31, 1998 A certificate of the Bank setting forth such amount or amounts as shall be necessary to compensate the Bank as specified in the immediately preceding paragraphs above shall be delivered as soon as practicable to the Maker and shall be conclusive and binding, absent manifest error. The Maker shall pay the Bank the amount shown as due on any such certificate within 15 days after Bank delivers such certificate. In preparing such certificate, the Bank may employ such assumptions and allocations of costs and expenses as it shall in good faith deem reasonable and may use any reasonable averaging and attribution method. If any payment of interest or principal herein provided for is not paid when due, or if there shall exist a Default under that certain Amended and Restated Revolving Credit Agreement dated as of June 30, 1994 by and between Maker and Bank, as amended from time to time, or if the Maker shall default under or with respect to any other debts, obligations or liabilities of the Maker due to the Bank, (whether such debts, obligations or liabilities be direct or indirect, primary or secondary, joint or several, fixed or contingent and whether such debt, obligations or liabilities are evidenced by note, open account, overdraft, endorsement, application for letter of credit, guaranty or otherwise), then the owner or holder of this Note may at its option, by notice to the Maker, (i) declare the unpaid principal balance of all Loans, all accrued and unpaid interest thereon and all other amounts payable under this Note to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts shall become and be forthwith due and payable in full, without presentment demand, protest, notice of intent to accelerate, notice of actual acceleration or further notice of any kind, all of which are hereby expressly waived by the Maker, (ii) terminate the Line of Credit (as hereinafter defined), and (iii) exercise any and all other rights, powers and remedies granted pursuant to any provision of any of the Loan Documents or under any applicable law. If default is made in the payment of this Note and it is placed in the hands of an attorney for collection, or collected through probate or bankruptcy proceedings, or if suit is brought on the same, the Maker agrees to pay attorneys' fees and all costs and expenses. This Note is issued by the Maker to evidence Loans outstanding from time to time not to exceed the Maximum Loan Total in the aggregate, pursuant to a $10,000,000.00 uncommitted discretionary line of credit (the "Line of Credit") extended by the Bank to the Maker. THE BANK IS NOT OBLIGATED IN ANY WAY TO MAKE ANY LOANS HEREUNDER, AND ALL ADVANCES HEREUNDER AND ANY LOANS SHALL BE AT THE BANK'S SOLE AND ABSOLUTE DISCRETION. This Note is given in renewal, increase and modification of that certain promissory note dated April 30, 1997, executed by Maker and payable to the order of the Bank in the principal amount of $5,000,000.00. THE BANK IS NOT OBLIGATED IN ANY WAY TO MAKE ANY LOANS HEREUNDER AND NOTHING HEREIN OR IN ANY OTHER AGREEMENTS OR OTHER WRITINGS EXECUTED OR DELIVERED IN CONNECTION WITH THE LINE OF CREDIT OR THIS NOTE IS INTENDED OR TO BE CONSTRUED AS A COMMITMENT ON THE PART OF THE BANK OR ANY SUBSEQUENT OWNER OR HOLDER OF THIS NOTE TO MAKE ANY LOAN HEREUNDER OR UNDER THE LINE OF CREDIT. ALL LOANS HEREUNDER OR UNDER THE LINE OF CREDIT SHALL BE AT THE SOLE AND ABSOLUTE DISCRETION OF THE BANK OR ANY SUBSEQUENT OWNER OR HOLDER OF THIS NOTE AND THE BANK OR ANY SUBSEQUENT OWNER OR HOLDER OF THIS NOTE MAY, FOR ANY REASON OR NO REASON AT ALL, REFUSE TO MAKE ANY LOAN TO THE MAKER HEREUNDER OR UNDER THE LINE OF CREDIT. The Maker warrants and represents to the Bank, and to all other owners and/or holders of any indebtedness evidenced hereby, that all Loans evidenced by this Note are for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use, as such terms are used in Chapter One of the Texas Credit Code, Article 5069-1.01 et. seq., as amended, of the Texas Revised Civil Statutes. The Maker warrants and represents to the Bank and to all other owners or holders of this Note that no Loans shall be used for the purchase or carrying of any "margin stock" within the meaning of Regulation "U" of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, as in effect on the date hereof. Except as otherwise specified in this Note, the Maker and any and all co-makers, endorsers, guarantors and sureties hereby severally waive grace, presentment, demand, notice of default, notice of intent to accelerate, notice of acceleration, and all other demands and notices of any nature or type whatsoever, in connection with the delivery, acceptance, performance, default, dishonor or enforcement of, or entry of judgment in connection with this Note, and further waive the filing of suit hereon for the purpose of fixing liability. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE MAKER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE MAKER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE MAKER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY. THE MAKER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE MAKER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE MAKER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES. Page 4 of 5 Pages 9 Promissory Note for Discretionary Loans TANDY BRANDS ACCESSORIES, INC. March 31, 1998 The Maker and the Bank expressly agree that Chapter 346 of the Texas Finance Code, as amended (which regulates certain revolving loan accounts and revolving tri-party accounts) shall not apply to this Note or to any Loan. It is the intention of Maker and Bank to comply with usury laws in force in the State of Texas and in the United States of America as applicable. Anything in this Note to the contrary notwithstanding, the Maker shall never be required to pay unearned interest on this Note and shall never be required to pay interest on this Note at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest which would otherwise be payable under this Note would exceed the Highest Lawful Rate, or if the holder of the Note shall receive any unearned interest or shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable under this Note to a rate in excess of the Highest Lawful Rate, then: (i) the amount of interest which would otherwise be payable under this Note shall be reduced to the amount allowed under applicable law; and (ii) any unearned interest paid by the Maker or any interest paid by the Maker in excess of the Highest Lawful Rate shall, at the option of the holder of this Note, be either refunded to the Maker or credited on the principal of this Note. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received by the Bank or any holder of this Note that are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate shall be made, to the extent permitted by usury laws applicable to the Bank (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the full stated term of the Loans evidenced by this Note all interest at any time contracted for, charged or received by the Bank in connection therewith. The Bank reserves the right in its sole discretion without notice to Maker, to sell participations or assign its interest, or both in all or part of the Loans, the Note, or the Line of Credit. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Maker has executed this Note effective the day, month and year first aforesaid. TANDY BRANDS ACCESSORIES, INC. By: /s/ STAN NINEMIRE ------------------------------- Name: Stan Ninemire ----------------------------- Title: Senior Vice President, CFO ---------------------------- Acknowledged for purposes of notice pursuant to the above cited statute by: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: /s/ JERRY PETREY ----------------------------------------- Jerry Petrey Vice President Page 5 of 5 Pages 10 PROMISSORY NOTE FOR LOANS (this "Note") U.S. $20,000,000.00 March 31, 1998 FOR VALUE RECEIVED, TANDY BRANDS ACCESSORIES, INC. (the "Maker"), a Delaware corporation, promises to pay to the order of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, formerly known as Texas Commerce Bank National Association, (the "Bank") on or before April 30, 2000, (the "Termination Date"), at its banking house at 712 Main Street, Houston, Texas 77002 or at such other location as the Bank may designate, in lawful money of the United States of America, the lesser of: (i) the principal sum of TWENTY MILLION AND NO/100THS (U.S. $20,000,000.00) (the "Commitment"); or (ii) the aggregate unpaid principal amount of all loans made by the Bank hereunder (each such loan being a "Loan"), which may be outstanding on the Termination Date. Each Loan shall be due and payable on the maturity date agreed to by the Bank and the Maker with respect to such Loan (the "Maturity Date"). In no event shall any Maturity Date fall on a date after the Termination Date. SUBJECT TO THE LIMITATIONS SET FORTH HEREIN, MAKER MAY BORROW, REPAY AND REBORROW HEREUNDER AND THERE IS NO LIMITATION ON THE NUMBER OF LOANS MADE HEREUNDER SO LONG AS THE TOTAL UNPAID PRINCIPAL AMOUNT AT ANYTIME OUTSTANDING DOES NOT EXCEED THE COMMITMENT. The Loans may be either Negotiated Rate Loans, Alternate Base Rate Loans or Libor Loans. The Maker shall pay interest on each Alternate Base Rate Loan for the Interest Period with respect thereto at a rate per annum equal to the lesser of: (i) the Alternate Base Rate in effect from time to time (the "Effective Alternate Base Rate"); or (ii) the Highest Lawful Rate, which interest shall be due and payable on the last day of each calendar quarter and on the last day of each Interest Period. The Maker shall pay interest on each Negotiated Rate Loan for the Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the Negotiated Rate for such Interest Period, which interest shall be due and payable on the last day of each such Interest Period, and if such Interest Period has a duration exceeding ninety days, on each ninetieth day during such Interest Period. The Maker shall pay interest on each Libor Loan for the Interest Period with respect thereto on the unpaid principal amount thereof at a rate per annum equal to the lesser of: (i) the Adjusted Libor Rate plus three-quarters of one percent (3/4%) (the "Effective Libor Rate"); or (ii) the Highest Lawful Rate, which interest shall be due and payable on the last day of each such Interest Period, and if such Interest Period has a duration exceeding three months on the day that is three months after the commencement of such Interest Period. Any amount not paid when due with respect to principal (whether at Maturity Date, by acceleration or otherwise), costs, expenses, and to the extent permitted by applicable law, interest, shall bear interest at a rate per annum equal to the lesser of: (i) the Alternate Base Rate in effect from time to time plus three percent (3%); or (ii) the Highest Lawful Rate, which interest shall be due and payable on demand. The principal of any Loan shall be deemed past due if not paid on or before the Maturity Date or any earlier maturity date resulting from acceleration in accordance with the terms of this Note or as provided by law or otherwise. Interest accrued and unpaid with respect to any Loan shall be deemed past due if not paid on or before the applicable interest payment due date as provided for herein. Notwithstanding the foregoing, if at any time the effective rate of interest which would otherwise be payable on any Loan evidenced by this Note exceeds the Highest Lawful Rate, the rate of interest to accrue on the unpaid principal balance of such Loan during all such times shall be limited to the Highest Lawful Rate, but any subsequent reductions in such interest rate shall not become effective to reduce such interest rate below the Highest Lawful Rate until the total amount of interest accrued on the unpaid principal balance of such Loan equals the total amount of interest which would have accrued if the Effective Alternate Base Rate, Negotiated Rate, or Effective Libor Rate whichever is applicable, had at all times been in effect. Each Alternate Base Rate, Negotiated Rate or Libor Rate Loan shall be in an amount not less than $250,000.00 and an integral multiple of $100,000.00. Interest with respect to Alternate Base Rate Loans shall be calculated on the basis of a 365 day year or 366 day year, as the case may be, for the actual number of days elapsed. Interest with respect to Negotiated Rate Loans and Libor Loans shall be calculated on the basis of a 360 day year for the actual days elapsed, unless such calculation would result in a usurious interest rate, in which case such interest shall be calculated on the basis of a 365 day or 366 day year, as the case may be. The following terms shall have the respective meanings indicated: "Adjusted Rate" means a per annum interest rate determined by Bank by dividing: (i) the Rate by (ii) Statutory Reserves provided that Statutory Reserves is greater than zero, otherwise Adjusted Libor Rate means a per annum interest rate equal to the Libor Rate. "Libor Rate" means with respect to any Libor Loan for any Interest Period the interest rate determined by Bank by reference to the British Bankers' Association Interest Settlement Rates (as set forth by any service selected by Bank which has been nominated by the British Bankers' Association as an authorized information vender for the purpose of displaying such rates including but not limited to Bloomberg, Reuters or Telerate) to be the rate at approximately 11:00 a.m. London time, two Business Days prior to the commencement of such Interest Period for dollar deposits in an amount comparable to such Libor Loan with a maturity comparable to such Interest Period. "Alternate Base Rate" shall mean for any day, a rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%) equal to the greatest of: (a) the Prime Rate in effect on such day; (b) the Base CD Rate in effect on such day plus 1%; and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum determined from time to time by the Bank as its prime rate in effect at its principal office in Houston, Texas; each change in the Prime Rate shall be effective on the date such change is determined; without special notice to the Maker or any other person or entity. THE PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED TO ANY CUSTOMER AND ANY STATEMENT, Page 1 of 5 Pages 11 Promissory Note TANDY BRANDS ACCESSORIES, INC. March 31, 1998 REPRESENTATION OR WARRANTY IN THAT REGARD OR TO THAT EFFECT IS EXPRESSLY DISCLAIMED BY BANK. BANK MAY MAKE LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE. "Base CD Rate" shall mean an interest rate per annum determined by the Bank to be the sum of: (a) the rate per annum obtained by dividing: (i) the Three-Month Secondary CD Rate by (ii) Statutory Reserves; plus (b) the Assessment Rate. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the Secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Bank from three New York City negotiable certificate of deposit dealers of recognized standing selected by Bank. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Bank from three Federal funds brokers of recognized standing selected by Bank. If for any reason the Bank shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Bank to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "Alternate Base Rate Loan" means a Loan which bears interest at a rate determined by reference to the Alternate Base Rate. "Assessment Rate" means, for any date, the annual rate (rounded upwards, if not already a whole multiple of 1/16 of 1%, to the next higher 1/16 of 1%) most recently estimated by the Bank as the then current net annual assessment rate that will be employed in determining amounts payable by the Bank to the Federal Deposit Insurance Corporation for insurance by the Corporation of time deposits made in dollars at its domestic offices. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Borrowing Date" means any Business Day on which the Bank shall make a Loan hereunder. "Business Day" means a day: (i) on which the Bank and commercial banks in New York City are generally open for business; and (ii) with respect to Libor Loans, on which dealings in United States Dollar deposits are carried out in the London interbank market. "Credit Agreement" shall mean that certain Amended and Restated Credit Agreement dated June 30, 1994 by and between Maker and Bank, as amended by a First Amendment dated April 30, 1995, a Second Amendment dated April 30, 1996, a Third Amendment dated April 30, 1997, a Fourth Amendment dated December 2, 1997, a Fifth Amendment dated March 30, 1998 and as it may be further amended, restated or supplemented from time to time. "Highest Lawful Rate" as used herein shall mean the maximum nonusurious interest rate permitted from time to time to be contracted for, taken, reserved, charged or received on any Loan under applicable federal or Texas laws, whichever permits the higher lawful rate; provided, however, that in the event: (i) such maximum nonusurious interest rate shall, at any time or times during the term of a Loan evidenced hereby, be reduced to a rate less than the maximum nonusurious rate in effect on the date of such Loan; and (ii) applicable law permits contracting for, taking, reserving, charging, and receiving on such Loan throughout the duration thereof the maximum nonusurious rate in effect on the date such Loan was made, then and at all such times the Highest Lawful Rate shall be the maximum nonusurious rate permitted to be contracted for, taken, reserved, charged or received on such Loan under applicable law in effect on the date of such Loan. At all such times, if any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the indicated (weekly) rate ceiling as defined in Article 5069-1 D.001, et seq., as amended of the Texas Revised Civil Statutes. "Interest Period" means, with respect to any Loan, the period commencing on the Borrowing Date and ending on the Maturity Date, consistent with the following provisions. The duration of each Interest Period shall be: (a) in the case of an Alternate Base Rate Loan, a period of up to 90 days; and (b) in the case of a Negotiated Rate Loan, a period of less than 90 days; and (c) in the case of a Libor Loan, 1, 2, 3 or 6 months; in each case as selected by the Maker and agreed to by the Bank. The Maker's choice of Interest Period is also subject to the following limitations: (i) No Interest Period shall end on a date after the Termination Date; and (ii) If the last day of an Interest Period would be a day other than a Business Day, the Interest Period shall end on the next succeeding Business Day (unless the Interest Period relates to a Libor Loan and Page 2 of 5 Pages 12 Promissory Note TANDY BRANDS ACCESSORIES, INC. March 31, 1998 the next succeeding Business Day is in a different calendar month than the day on which the Interest Period would otherwise end, in which case the Interest Period shall end on the next preceding Business Day). "Libor Loan" means a Loan which bears interest at a rate determined by reference to the adjusted Libor Rate. "Negotiated Rate" means, with respect to each Negotiated Rate Loan hereunder, the rate of interest per annum quoted by the Bank to the Maker at the time of the borrowing request with respect to such Negotiated Rate Loan as the rate such Negotiated Rate Loan shall bear for the requested Interest Period. "Negotiated Rate Loan" means a Loan which bears interest at a rate determined by reference to the Negotiated Rate. "Statutory Reserves" shall mean the difference (expressed as a decimal) of the number one minus the aggregate of the maximum reserve percentages (including, without limitation, any marginal, special, emergency, or supplemental reserves) expressed as a decimal established by the Board and any other banking authority to which the Bank is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include, without limitation, those imposed under such Regulation D. Libor Loans shall be deemed to constitute Eurocurrency Liabilities and as such shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Bank under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. The unpaid principal balance of this Note at any time shall be the total of all Loans made by the Bank to or for the benefit of the Maker, less the amount of all payments of principal made hereon by or for the account of the Maker. The Bank's records shall serve as presumptive evidence of any and all amounts outstanding hereunder. Any Loan which the Bank agrees to make hereunder shall be made on the Makes irrevocable notice, given not later than 10:00 A.M. (Houston time) on, in the case of Libor Loans, the third Business Day prior to the proposed Borrowing Date, or in the case of Alternate Base Rate Loans or Negotiated Rate Loans, the first Business Day prior to the proposed Borrowing Date, from the Maker to the Bank. Each such notice of a requested borrowing (a "Notice of Requested Borrowing") under this paragraph may be oral or written, and shall specify: (i) the requested amount of such Loan; (ii) the proposed Borrowing Date; (iii) whether the requested Loan is to be an Alternate Base Rate Loan, Negotiated Rate Loan, or Libor Loan; and (iv) the Interest Period for such Loan. If any Notice of Requested Borrowing shall be oral, the Maker shall deliver to the Bank prior to the Borrowing Date a confirmatory written Notice of Requested Borrowing, substantially in the form of Exhibit B attached to the Credit Agreement. If at any time the Bank determines in good faith (which determination shall be conclusive) that any change in any applicable law, rule or regulation or in the interpretation, application or administration thereof makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for the Bank or its foreign branch or, branches to maintain or fund any Loan by means of dollar deposits obtained in the London interbank market (any of the above being described as a "Libor Event"), then, at the option of the Bank, the aggregate principal amount of the Bank's Libor Loans then outstanding, which Loans are directly affected by such Eurodollar Event, shall be prepaid by the Maker. Upon the occurrence of any Libor Event, and at any time thereafter so long as such Eurodollar Event shall continue, the Bank may exercise its aforesaid option by giving written notice thereof to the Maker. Any prepayment of any Libor Loan which is required under the preceding paragraph shall be made, together with accrued and unpaid interest and all other amounts payable to the Bank under this Note with respect to such prepaid Libor Loan on the date stated in the notice to the Maker referred to above, which date ("required prepayment date") shall be not less than 15 days from the date of such notice. If any Libor Loan is required to be prepaid under the preceding paragraph, the Bank shall make on the required prepayment date an Alternate Base Rate Loan in the same principal amount and with an Interest Period ending on the same day as the Libor Loan so prepaid. If any domestic or foreign law, treaty, rule or regulation (whether now in effect or hereinafter enacted or promulgated, including Regulation D of the Board of Governors of the Federal Reserve System) or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law): (a) changes, imposes, modifies, applies (or deems applicable any reserve, special deposit or similar requirements in respect of any such Loan or against assets of, deposits with or for the account of, or credit extended or committed by, the Bank; or (b) imposes on the Bank or the interbank eurocurrency deposit and transfer market or the market for domestic bank certificates or deposit any other condition affecting any such Loan; and the result of any of the foregoing is to impose a cost to the Bank of agreeing to make, funding or maintaining any such Loan or to reduce the amount of any sum receivable by the Bank in respect of any such Loan, then the Bank may notify the Maker in writing of the happening of such event and Maker shall upon demand pay to the Bank such additional amounts as will compensate the Bank for such costs. Without prejudice to the survival of any other agreement of the Maker under this Note, the obligations of the Maker under this paragraph shall survive the termination of this Note. The Maker may on any Business Day prepay the outstanding principal amount of any Alternate Base Rate Loan, in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid. Partial prepayments shall be in an aggregate principal amount of $50,000.00 or a greater integral multiple of $100,000.00. Except as specified in this paragraph, the Maker shall have no right to prepay any Loan. Page 3 of 5 Pages 13 Promissory Note TANDY BRANDS ACCESSORIES, INC. March 31, 1998 The Maker will indemnify the Bank against, and reimburse the Bank on demand for, any loss, cost or expense incurred or sustained by the Bank (including without limitation any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Bank to fund or maintain Loans bearing interest at the Negotiated Rate, or the Libor Rate) as a result of: (a) any payment or prepayment (whether permitted by the Bank or required hereunder or otherwise) of all or a portion of any Negotiated Rate Loan or Libor Loan on a day other than Maturity Date of such Loan; (b) any payment or prepayment, whether required hereunder or otherwise, of any Negotiated Rate Loan or Libor Loan made after the delivery of a Notice of Requested Borrowing but before the applicable Borrowing Date if such payment or prepayment prevents the proposed Loan from becoming fully effective; or (c) the failure of any Negotiated Rate Loan or Libor Loan to be made by the Bank due to any action or inaction of the Maker. For purposes of this paragraph, funding losses arising by reason of liquidation or reemployment of deposits or other funds acquired by the Bank to fund or maintain Loans bearing interest at the Negotiated Rate, or Libor Rate shall be calculated as the remainder obtained by subtracting: (i) the yield (reflecting both stated interest rate and discount, if any) to maturity of obligations of the United States Treasury in an amount equal or comparable to such Loan for the period of time commencing on the date of the payment, prepayment or change of rate as provided above and ending on the last day of the subject Interest Period; from (ii) the interest payable at the Negotiated Rate, or Libor Rate for the period commencing on the date of such payment, prepayment or change of rate and ending on the last day of such Interest Period. Such funding losses and other costs and expenses shall be calculated and billed by the Bank and such bill shall, as to the costs incurred, be conclusive absent manifest error. If after the date of this Note, the Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Bank's capital as a consequence of making any Loans hereunder to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank's policies with respect to capital adequacy) by an amount deemed by the Bank in good faith to be material, then from time to time, the Maker shall pay to the Bank such additional amount or amounts as will compensate the Bank for such reduction. A certificate of the Bank setting forth such amount or amounts as shall be necessary to compensate the Bank as specified in the immediately preceding paragraphs above shall be delivered as soon as practicable to the Maker and shall be conclusive and binding, absent manifest error. The Maker shall pay the Bank the amount shown as due on any such certificate within 15 days after Bank delivers such certificate. In preparing such certificate, the Bank may employ such assumptions and allocations of costs and expenses as it shall in good faith deem reasonable and may use any reasonable averaging and attribution method. If any payment of interest or principal herein provided for is not paid when due, or any other Default shall occur and be in existence under the Credit Agreement, then the owner or holder of this Note may at its option, as provided for in the Credit Agreement or any other Loan Document (i) declare the unpaid principal balance of all Loans, all accrued and unpaid interest thereon and all other amounts payable under this Note to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts shall become and be forthwith due and payable in full, without presentment, demand, protest, notice of intent to accelerate, notice of actual acceleration or further notice of any kind, all of which are hereby expressly waived by the Maker; (ii) terminate the Commitment; and (iii) exercise any and all other rights, powers and remedies granted pursuant to any provision of any of the Loan Documents or under any applicable law. If default is made in the payment of this Note and it is placed in the hands of an attorney for collection, or collected through probate or bankruptcy proceedings, or if suit is brought on the same, the Maker agrees to pay attorneys' fees and all costs and expenses. This Note is issued by the Maker to evidence Loans outstanding from time to time not to exceed in the aggregate the Commitment under a $20,000,000.00 revolving line of credit extended by the Bank to the Maker extended pursuant to the terms of the Credit Agreement. Capitalized terms used in this Note but not defined in this Note shall have the meanings assigned to them in the Credit Agreement. This Note is given in renewal, extension and modification of the promissory note dated April 30, 1997, executed by Maker and payable to the order of the Bank in the principal amount of $20,000,000.00. The Maker warrants and represents to the Bank, and to all other owners and/or holders of any indebtedness evidenced hereby, that all Loans evidenced by this Note are for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use, as such terms are used in Chapter One of the Texas Credit Code, Article 5069-1.01 et. seq., as amended of the Texas Revised Civil Statutes. The Maker warrants and represents to the Bank and to all other owners or holders of this Note that no Loans shall be used for the purchase or carrying of any "margin stock" within the meaning of Regulation "U" of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, as in effect on the date hereof. Except as otherwise specified in this Note, the Maker and any and all co-makers, endorsers, guarantors and sureties hereby severally waive grace, presentment, demand, notice of default, notice of intent to accelerate, notice of acceleration, and all other demands and notices of any nature or type whatsoever, in connection with the delivery, acceptance, performance, default, dishonor or enforcement of, or entry of judgment in connection with this Note, and further waive the filing of suit hereon for the purpose of fixing liability. Page 4 of 5 Pages 14 Promissory Note TANDY BRANDS ACCESSORIES, INC. March 31, 1998 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE MAKER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE MAKER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE MAKER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY. THE MAKER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE MAKER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE MAKER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES. The Maker and the Bank expressly agree that Chapter 346 of the Texas Finance Code, as amended (which regulates certain revolving credit loan accounts and revolving tri-party accounts) shall not apply to this Note or to any Loan. It is the intention of Maker and Bank to comply with usury laws in force in the State of Texas and in the United States of America as applicable. Anything in this Note to the contrary notwithstanding, the Maker shall never be required to pay unearned interest on this Note and shall never be required to pay interest on this Note at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest which would otherwise be payable under this Note would exceed the Highest Lawful Rate, or if the holder of the Note shall receive any unearned interest or shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable under this Note to a rate in excess of the Highest Lawful Rate, then: (i) the amount of interest which would otherwise be payable under this Note shall be reduced to the amount allowed under applicable law; and (ii) any unearned interest paid by the Maker or any interest paid by the Maker in excess of the Highest Lawful Rate shall, at the option of the holder of this Note, be either refunded to the Maker or credited on the principal of this Note. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received by the Bank or any holder of this Note that are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate shall be made, to the extent permitted by usury laws applicable to the Bank (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the full stated term of the Loans evidenced by this Note all interest at any time contracted for, charged or received by the Bank in connection therewith. The Bank reserves the right in its sole discretion without notice to Maker, to sell participations or assign its interest, or both in all or part of the Loans, the Note, or the Commitment. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Maker has executed this Note effective the day, month and year first aforesaid. TANDY BRANDS ACCESSORIES, INC. By: /s/ STAN NINEMIRE ------------------------------- Name: Stan Ninemire ----------------------------- Title: Senior Vice President, CFO ---------------------------- Acknowledged for purposes of notice pursuant to the above cited statute by: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: /s/ JERRY PETREY ----------------------------------------- Jerry Petrey Vice President Page 5 of 5 Pages EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS ACCESSORIES, INC.'S MARCH 31, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS. 9-MOS JUN-30-1998 MAR-31-1998 1,006 0 25,091 1,819 33,800 60,707 10,735 5,523 75,411 6,301 19,700 0 0 5,576 43,502 75,411 100,658 100,658 63,488 63,488 1,343 0 989 9,838 3,791 6,047 0 0 0 6,047 1.09 1.07
EX-27.2 4 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS ACCESSORIES, INC.'S MARCH 31, 1997 FORM 10-Q (RESTATED AS REQUIRED BY REGULATION S-K ITEM 601(c)(2)(iii).) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS. 9-MOS JUN-30-1997 MAR-31-1997 383 0 19,152 1,214 33,831 54,100 10,101 5,007 69,079 11,056 16,850 0 0 5,470 35,451 69,079 77,462 77,462 48,706 48,706 1,304 0 954 5,602 2,094 3,508 0 0 0 3,508 .65 .64
EX-27.3 5 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS ACCESSORIES, INC.'S DECEMBER 31, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS. 6-MOS JUN-30-1998 DEC-31-1997 948 0 24,300 2,138 36,479 62,060 10,208 5,304 76,626 8,338 20,636 0 0 5,562 41,844 76,626 67,688 67,688 42,541 42,541 880 0 626 7,563 2,900 4,663 0 0 0 4,663 .84 .82
EX-27.4 6 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS ACCESSORIES, INC.'S DECEMBER 31, 1996 FORM 10-Q (RESTATED AS REQUIRED BY REGULATION S-K ITEM 601(c)(2)(iii).) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS. 6-MOS JUN-30-1997 DEC-31-1996 551 0 15,623 877 32,797 50,789 9,745 4,759 65,805 9,723 15,800 0 0 5,447 35,567 65,805 53,540 53,540 33,721 33,721 874 0 641 4,361 1,598 2,763 0 0 0 2,763 .51 .51
EX-27.5 7 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS ACCESSORIES, INC.'S SEPTEMBER 30, 1997 AND 1996, FORM 10-Q (RESTATED AS REQUIRED BY REGULATION S-K ITEM 601(c)(2)(iii).) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILINGS. DOLLARS ARE IN THOUSANDS. 3-MOS 9-MOS JUN-30-1998 JUN-30-1997 SEP-30-1997 SEP-30-1996 656 361 0 0 22,685 16,951 1,650 1,003 35,096 26,412 59,064 1,797 9,866 9,461 5,053 4,517 73,742 66,493 7,720 11,222 21,100 16,800 0 0 0 0 5,544 5,417 39,066 32,738 73,742 66,493 30,865 23,661 30,865 23,661 19,249 14,728 19,249 14,728 437 446 0 0 274 286 3,132 1,681 1,200 618 1,932 1,063 0 0 0 0 0 0 1,932 1,063 .35 .20 .35 .20
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