10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2013 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 Number)

3631 West Davis Suite A, Dallas, Texas 75211

(Address of principal executive offices and zip code)

214-519-5200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Par Value $1.00 Per Share (Title of class)	The NASDAQ Global Market (Name of each exchange on which registered)

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[  ] Yes  [x] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[  ] Yes  [x] No

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.

[x] Yes  [  ] No

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

[  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[x] Yes     [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [x]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [x] No

The aggregate market value of the voting common equity held by non-affiliates based upon the closing price of the common stock on the Nasdaq Global Market on December 31, 2012 was $9,849,710.  Shares of common stock held by executive officers and directors have been excluded.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were 7,161,713 shares of common stock, par value $1.00 per share, outstanding on September 25, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K:

Proxy Statement for our 2013 Annual Meeting of Stockholders – Part III Items 10, 11, 12, 13 and 14.

TABLE OF CONTENTS

PART I
Item 1	Business	3
Item 1A	Risk Factors	10
Item 1B	Unresolved Staff Comments	15
Item 2	Properties	15
Item 3	Legal Proceedings	15
Item 4	(Removed and Reserved)	15
PART II
Item 5	Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities	15
Item 6	Selected Financial Data	16
Item 7	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	17
Item 7A	Quantitative And Qualitative Disclosures About Market Risk	22
Item 8	Financial Statements And Supplementary Data	23
Item 9	Changes In And Disagreements With Accountants On Accounting And Financial Disclosure	41
Item 9A	Controls And Procedures	41
Item 9B	Other Information	42
PART III
Item 10	Directors, Executive Officers And Corporate Governance	43
Item 11	Executive Compensation	43
Item 12	Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters	43
Item 13	Certain Relationships And Related Transactions, And Director Independence	43
Item 14	Principal Accounting Fees And Services	43
PART IV
Item 15	Exhibits And Financial Statement Schedules	44
SIGNATURES		45

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References in this Annual Report on Form 10-K to “we,” “our,” “us,” or the “Company” refer to Tandy Brands Accessories, Inc. and its subsidiaries, unless the context requires otherwise.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify forward-looking statements.  In addition, any statements that refer to projections of our future financial performance, our anticipated results of operations and trends in our business, and other characterizations of future events or circumstances are forward-looking statements.  We have based these forward looking statements on our current expectations about future events, estimates and projections about the industry in which we operate, and the overall economic environment.  These statements are not guarantees of future performance.  Our actual results may differ materially from those suggested by these forward-looking statements as a result of a number of known and unknown risks and uncertainties that are difficult to predict including, without limitation, our ability to successfully capitalize on our restructuring initiatives, our ability to return to profitability, our ability to service our debt, our ability to comply with covenants contained in our financing arrangements, general economic and business conditions, competition in the accessories and gifts markets, acceptance of our product offerings and designs, issues relating to distribution, the termination or non-renewal of our material licenses, our ability to maintain proper inventory levels, a significant decrease in business from or loss of any of our major customers or programs, and others identified under “Risk Factors” on page 10.  Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements.  The forward-looking statements included in this report are made only as of the date hereof.  Except as required under federal securities laws and the rules and regulations of the United States Securities and Exchange Commission, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions, or otherwise.

PART I

ITEM 1 - BUSINESS

General

We are a leading designer and marketer of branded men’s, women’s and children’s accessories, including belts, gifts, and small leather goods.  Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, including SPERRY TOP-SIDER®, EDDIE BAUER®, TOTES®, MISS ME®, SAMSONITE®, AMERICAN TOURISTER®, WOLVERINE®, HAGGAR®, ARNOLD PALMER®, DOCKERS®, KODIAK®, TERRA®, ROLFS®, AMITY®, CANTERBURY®, PRINCE GARDNER®, PRINCESS GARDNER®, CHAMBERS BELT COMPANY®, ABSOLUTELY FRESH®, SURPLUS®, as well as private brands for major retail customers.  We sell our products through all major retail distribution channels throughout North America, including, without limitation, mass merchants, national chain stores, department stores, specialty stores, catalog retailers, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military.  We were incorporated as a Delaware corporation on November 1, 1990.

Significant Business Developments

Significant business developments in fiscal 2013 and through the financial statement issuance date included:

· December 2012 – Announced the execution of a licensing agreement with national brands Samsonite® and American Tourister®.

· March 2013 – Announced a broad restructuring plan, which was completed in June 2013, with anticipated annual cost savings of $6.0 million to $7.0 million, designed to improve customer service, increase profits, improve working capital efficiency, and reduce overhead.

· July 2013 – Announced new credit facilities with Salus Capital Partners, LLC and King Trade Capital and provided update on restructuring plan.

· July 2013 – Entered into agreements with two licensors and three vendors to convert outstanding accounts payable owed to these parties into subordinated notes payable.

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· August 2013 – Announced the appointment of Roger R. Hemminghaus, a director since June 2000 and our lead independent director, as Chief Executive Officer and Chairman and a new plan of responsibilities for existing members of the management team, both of which were in response to the resignation of Rod McGeachy, our previous Chairman, Chief Executive Officer and President.

· September 2013 – Entered into a first amendment to our credit agreement with our senior lender in which our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

Information about these business developments are incorporated herein by reference to Notes 1, 3, 4 and 14 of the notes to the consolidated financial statements included in Item 8 of this Annual Report.

Product Lines

Our primary products, which we sell under proprietary, licensed, and private brand names, consist of belts, gifts, and small leather goods, such as wallets.  For fiscal 2013, our product categories, expressed as a percentage of total net sales, were:

Belts	57.3%
Gifts	32.4%
Small leather goods	5.2%
Other products	5.1%

We are organized along product categories and have two reportable segments: (1) accessories, which include belts, small leather goods and other products, and (2) gifts.  In fiscal 2013, accessories represented 67.6% of our net sales and gifts accounted for 32.4% of our net sales.

Belts

We, along with our predecessors, have manufactured and marketed belts for over 90 years, and belts remain our largest single product category.  In fiscal 2013, belt sales of $65.3 million accounted for 57.3% of our net sales.  We serve a variety of consumers in the men’s, women’s, juniors, young men’s and children’s belts markets across four categories:  casual, work, dress and golf.  In connection with our March 2013 restructuring plan, we exited development and marketing of certain low-volume belts.  Sales of these belts were $3.1 million and $5.6 million in fiscal 2013 and 2012, respectively.  Sales of these belts are expected to be immaterial in fiscal 2014.

Gifts

We distribute a broad range of gifts, including products such as flashlights, tabletop games, novelty gifts, auto accessories, camping accessories and outdoor tools and gadgets.  Gift sales were $36.9 million, or 32.4%, of our net sales, in fiscal 2013.  In connection with our March 2013 restructuring plan, we exited development and marketing of certain low profit products and sales to certain customers who would not agree to the revised selling terms we adopted as part of our restructuring plan.  Sales of these gifts were $10.5 million and $4.8 million in fiscal 2013 and 2012, respectively.  Sales of these gifts are expected to be immaterial in fiscal 2014.

Small Leather Goods

Our small leather goods consist primarily of men’s and women’s wallets.  Sales of small leather goods were $5.9 million, or 5.2% of our net sales, in fiscal 2013.  In connection with our March 2013 restructuring plan, we exited development and marketing of certain low-volume small leather goods.  Sales of these small leather goods were $4.1 million and $5.8 million in fiscal 2013 and 2012, respectively.  Sales of these small leather goods are expected to be immaterial in fiscal 2014.

Other Products

Other products consist primarily of suspenders.  Sales of other products were $5.9 million, or 5.1% of our net sales, in fiscal 2013.

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Our Brands

We sell products under private brands, licensed brands and our own proprietary brands.  Our net sales by brand type in fiscal 2013 were (in millions):

Type	Net Sales		% of Total
Private brands	$	58.2		51.1	%
Licensed brands		45.1		39.6
Proprietary brands		10.7		9.3
	$	114.0

Private Brand Products

In fiscal 2013 private brand products accounted for $58.2 million, or 51.1% of our net sales.  In a private brand program we are responsible for designing and delivering products for select retailers according to their unique requirements.  These programs offer our customers exclusivity and pricing control over their products, both of which are important factors in the retail marketplace.  We believe our flexible sourcing capabilities, electronic inventory management and replenishment systems, and design, product development, and merchandising expertise provide retailers with a superior alternative to direct sourcing of their private brand products.  In connection with our 2013 restructuring plan, we exited development and marketing of certain low-volume private label belts and small leather goods.  Sales of these private brand belts and small leather goods are expected to reduce private brand belts and small leather goods sales by $2.1 million in fiscal 2014.

Licensed Brands

We have exclusive license agreements for several well recognized brands, including Sperry Top-Sider®, Eddie Bauer®, totes®, Miss Me®, Samsonite®, American Tourister®, Wolverine®, Haggar®, Arnold Palmer® and Dockers®.

Generally, our license agreements cover specific products and require us to pay royalties ranging from 3% to 10% of net sales.  The terms of the agreements are typically three to five years, with options to extend the terms, provided certain sales or royalty minimums are achieved.  For fiscal 2013, sales of licensed products accounted for $45.1 million, or 39.6% of our net sales.  Sales of totes® gifts were $29.7 million, or 26.1% of our net sales and sales of Eddie Bauer® gifts and accessories were $8.8 million, or 7.7% of our net sales.  No sales associated with any other individual license agreement accounted for more than 5% of our net sales in fiscal 2013.  We continually evaluate our portfolio of licensed brands and may discontinue or renew licenses when they expire, or acquire additional licenses to improve our portfolio.  In connection with our 2013 restructuring plan we ceased development and marketing of belts under the Elie Tahari® license and gifts under The Sharper Image® license.  Sales under these licenses were $843,000 and $331,000 in fiscal 2013 and 2012, respectively.  Sales under these licenses are expected to be immaterial in fiscal 2014.  Also, in connection with our 2013 restructuring plan we exited development and marketing of certain low profit products and sales to certain customers who would not agree to the revised selling terms we adopted as part of our restructuring plan.  Sales of these gifts are expected to reduce licensed brand gift sales by $9.7 million in fiscal 2014.

Additional information about our license agreements is incorporated herein by reference to Note 3 of the notes to the consolidated financial statements included in Item 8 of this Annual Report.

Proprietary Brands

In addition to our licensed and private brands, we market products under our own registered trademarks and trade names.  We own leading and well recognized trademarks such as Rolfs®, Amity®, Canterbury®, Prince Gardner®, Princess Gardner®, Chambers Belt Company®, Absolutely Fresh®, and Surplus®.  Net sales under our proprietary brands were $10.7 million, or 9.3% of our net sales, in fiscal 2013.  In connection with our 2013 restructuring plan we scaled back development and marketing of belts and small leather goods under certain of our proprietary brands.  Sales under these proprietary brands were $5.1 million and $7.3 million in fiscal 2013 and 2012, respectively.  Sales are expected to be immaterial in fiscal 2014.

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Product Distribution

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

Department stores	Office supply stores
Specialty stores	E-commerce websites
Mass merchants	National chain stores
United States military retail exchange operations	Outlet stores
Golf pro shops	Sporting goods stores
Supermarkets	Individual specialty stores
Uniform stores	Catalog retailers
TV shopping networks	Shoe stores
Drug stores	Wholesale clubs

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

Brand	Distribution Channel	Products
Sperry Top-Sider®	Department stores	Belts
	National chain stores Specialty stores	Small leather goods
Eddie Bauer®	Department stores	Belts
	National chain stores Wholesale clubs	Gifts Small leather goods
totes®	Mass merchants	Gifts
	National chain stores
	Department stores
	Specialty stores Wholesale clubs
Miss Me®	Department stores	Belts
	National chain stores Specialty stores
Samsonite/American Tourister®	Department stores National chain stores Specialty stores Wholesale clubs	Gifts
Wolverine®	National chain stores	Belts
	Specialty stores	Small leather goods
	Sporting goods stores	Gifts
Haggar®	Department stores	Belts Small leather goods
Arnold Palmer®	Specialty stores	Belts
	Golf pro shops
Dockers®	Department stores	Belts
	National chain stores

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Brand Distribution Channel Products

Kodiak®	Mass merchants	Belts
	Specialty stores
Terra®	Specialty stores	Belts
Rolfs®	National chain stores	Belts
	Department stores	Small leather goods
	Specialty stores
Amity®	Mass merchants	Small leather goods
	Specialty stores
Canterbury®	Specialty stores	Belts
	Golf pro shops	Small leather goods
Prince Gardner®	Mass merchants	Small leather goods
	Specialty stores
Princess Gardner®	Mass merchants	Small leather goods
	Specialty stores

Chambers Belt Company®	Specialty stores	Belts
Absolutely Fresh®	Specialty stores	Belts
Surplus®	National chain stores	Belts
		Small leather goods

Customers and Customer Relations

We maintain strong relationships with various major retailers throughout North America, including:

Department Stores	National Chains	Mass Merchants
Belk	Kohl’s	Walmart (U.S. and Canada)
Bon-Ton/Carson’s	Meijer	Kmart
Dillard’s	Fred Meyer
Stage Stores	JCPenney	Discounters
Lord & Taylor	Casual Male	Ross
Macy’s	Sears (U.S. and Canada)	TJ Maxx
Nordstrom		Steimart

Walmart accounted for 46% of our net sales in fiscal 2013 and 2012, respectively, and Kohl’s accounted for 15% and 13% in fiscal 2013 and 2012, respectively.  No other customer accounted for 10% or more of our total net sales in fiscal 2013 or fiscal 2012.  In fiscal 2013 and 2012 our top ten customers accounted for 78% and 77%, respectively, of net sales.

We believe our success with our customers is due in large part to our design expertise, long-term customer relationships, strong sales and merchandising organization, and superior customer service.  Factors that facilitate these strengths include our quick response distribution, vendor inventory management services, electronic data interchange capabilities, and expertise in the communication of lifestyle concepts through product lines and innovative point-of-sale presentations.  We develop and manage our accounts through the coordinated efforts of senior management, account executives, and an organization of salespeople and independent sales representatives.

We maintain customer service relationships with various specialty stores, national chain stores, and major department stores.  Our sales and merchandising organization are responsible for overseeing accounts, developing and maintaining business relationships with their respective customers, monitoring performance of our products at retail point-of-sale, preparing and conducting product line presentations, and assisting customers in the implementation of programs at the individual store level.

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Product Development and Merchandising

Our product development and merchandising team works closely with our licensors, suppliers, and customers to understand the needs of our core consumer, interpret market trends, develop new products, and create comprehensive merchandising programs consisting of packaging, point-of-sale, fixturing, and presentation materials.  Our product life-cycle management program leverages cross-functional business planning, merchandising, and design teams focusing on product development, strategic planning, fashion trends and seasonal sales plans.  Our senior managers maintain business relationships with customers’ buyers and merchandise managers enabling us to plan, develop, and implement specific merchandising programs for key accounts.  We believe our internal design ability represents a significant competitive advantage because, in our opinion, retail customers have become increasingly reliant on the design and merchandising expertise of their suppliers for developing compelling assortments.

Competition

Competition in the fashion accessories and gifts industries is highly fragmented and intense.  We believe we are a major competitor that is well positioned to compete in both industries.  Our accessories and gifts businesses compete with numerous manufacturers, importers and distributors, such as: Randa/Swank, Cipriani, Fossil, Buxton, Mundi, E&B, Merchsource, JLR, and Protocol.

We believe our ability to compete successfully is based on our long-term customer relationships, ability to respond to changing consumer preferences, superior customer service, national distribution capabilities, proprietary inventory management systems, flexible sourcing, and product design, innovation, and quality.

Growth Strategy

We seek to increase our earnings through a variety of means, including organic growth from increased sales of our current core products, as well as growth through new products and license agreements and the acquisition of assets and similar businesses.  Since our incorporation in 1990, we have acquired numerous businesses and licenses, including the Sperry Top-Sider®,Eddie Bauer®, Miss Me®, Samsonite®, American Tourister®, Wolverine®, Haggar® and Arnold Palmer® licenses, which were acquired in the last three fiscal years.  In the future, to the extent liquidity allows, we may make additional acquisitions that complement our business and are accretive to our earnings.

Product Sourcing and Production

We have strong relationships with a number of foreign manufacturers who provide products manufactured to our specifications.  Most of our products are manufactured by third-party suppliers in China, the Dominican Republic, India, Italy, and Taiwan, with only a small percentage manufactured in Canada and the U.S.  We own and operate belt manufacturing facilities in both Mexico and Canada.  In fiscal 2013 and 2012, our two largest suppliers were Best Development Company Limited and OneSource IML.  We do not believe we are exposed to any potentially significant disruption of product flow because a number of suppliers could manufacture our products.  However, any change in suppliers would require significant advance planning due to the two to five month lead times in our industry.

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Seasonality of Business

Our quarterly sales and operating results have a seasonal increase in the fall (our first and second fiscal quarters) due primarily to holiday sales.  Quarterly net sales and pretax (loss) income, as percentages of the totals for fiscal 2013 and 2012:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net sales
Fiscal 2013		22.7	%		42.0	%		17.2	%		18.1	%
Fiscal 2012		22.7	%		38.6	%		20.3	%		18.4	%
Pretax (loss) income
Fiscal 2013		(7.3	)%		(28.6	)%		(44.0	)%		(20.1	)%
Fiscal 2012		(29.9	)%		86.6	%		(91.9	)%		(64.8	)%

Governmental Regulations

Most of our products are manufactured outside of the United States.  Accordingly, foreign countries and the United States may from time to time modify existing quotas, duties, tariffs, or import restrictions, or otherwise regulate or restrict imports in a manner which could be material and adverse to us.  In addition, economic and political disruptions in Asia and other parts of the world from which we import goods could have an adverse effect on our ability to maintain an uninterrupted flow of products to our customers.  Laws and regulations such as the Consumer Product Safety Improvement Act of 2008 and California's Safe Drinking Water and Toxic Enforcement Act of 1986, which is commonly known as “Proposition 65," also may adversely affect our results of operations to the extent they require product modifications or increased product testing.

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

Employees

As of June 30, 2013, we employed 399 people, of which 362 employees were full time and 37 were part time.  The following table summarizes the number of full time employees, by location for the last three years:

	2013		2012		2011
United States		129		226		262
Canada		62		70		77
Mexico		171		183		177
Total		362		479		516

In connection with our March 2013 restructuring plan, we reduced our U.S. corporate headcount by 33% and our U.S. distribution headcount by 26%.

Intellectual Property

We believe our trademarks, licenses to use certain trademarks, and our other proprietary rights in and to intellectual property are important to our success and our competitive position.  We seek to protect our designs and intellectual property rights against infringement and devote resources to the establishment and protection of our intellectual property on a nationwide basis and in select foreign markets.  Our trademarks remain valid and enforceable as long as the marks are used in connection with our products and services and the required registration renewals are filed.

Working Capital

We do not enter into long-term agreements with any of our suppliers or customers for the purchase of our products.  Instead we enter into a number of purchase order commitments for each of our product lines every season.  Due to the time required by our foreign suppliers to produce and ship goods to our distribution centers, we attempt, based on internal estimates, to carry optimal on-hand inventory levels necessary for the timely shipment of initial and replenishment orders.  A decision by a customer’s buyer for any significant customer, whether motivated by competitive conditions, financial difficulties, or otherwise, to significantly change the amount of merchandise they purchase from us, the timing of delivery of merchandise they purchase from us, or to change the manner of doing business with us, could have a significant effect on our financial condition and results of operations.  We attempt to mitigate this exposure by proper inventory planning and by selling our products to a variety of retail customers throughout North America.

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Additional Information

Our website address is www.tandybrands.com.  Information about our corporate governance, including our Code of Business Conduct and Ethics, is available on our website at www.tandybrands.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed by our officers, directors, and stockholders holding 10% or more of our common stock, and all amendments to those reports are available free of charge through our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).  You also may read and copy any reports, proxy statements, or other information that we file with the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C.  20549, on official business days during the hours of 10 a.m. to 3 p.m.  Please call the SEC at 1-800-SEC-0330 for further information about the operation and location of the Public Reference Room.  Our SEC filings also are available to the public free of charge at the SEC’s website at www.sec.gov.

ITEM 1A - RISK FACTORS

In evaluating our business you should carefully consider the risk factors discussed below in addition to the other information in this Annual Report.  Any of these factors could materially and adversely affect our business, results of operations, and financial condition.  It is not possible to identify or predict all such factors and, therefore, you should not consider these risks to be a complete statement of all the uncertainties we face.

Risks Relating To Our Business

A significant portion of our sales is attributable to a few major customers and we cannot control the amount of products they purchase from us.

Ten customers accounted for 78% of our fiscal 2013 net sales, including Walmart, which accounted for 46% of our net sales.  A decision by Walmart or any other major customer, whether motivated by competitive conditions, financial difficulties or otherwise, to significantly change the amount of merchandise purchased from us, or to change the manner of doing business with us, could have a significant effect on our results of operations and financial position.  We attempt to mitigate this exposure by selling our products to a variety of retail customers throughout North America.

We do not maintain long-term contracts with our customers and are unable to control their purchasing decisions.

Like most companies in our industry, we do not enter into long-term contracts with our customers.  As a result, we have no contractual leverage over their purchasing decisions.  A determination by a major customer to decrease the amount of products it purchases or to discontinue carrying our products could have a material adverse effect on our operations.

Direct sales to customers by suppliers could negatively impact our sales.

Certain third-party manufacturers have increasingly marketed and sold products to retailers directly, instead of through companies such as ours, and certain retailers have shifted to direct sales programs.  We believe we provide significant value-added services through our design programs, warehousing and distribution flexibility, retail analytics and our ability to tailor products for specific customers and demographic groups.  However, if our customers decide to increase their level of purchases directly from third-party manufacturers, our sales and financial results could be negatively impacted.

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We extend unsecured credit to our customers and are subject to potential financial difficulties they may face.

We extend credit to our department and retail store customers based on an evaluation of their financial condition and generally do not require collateral from our customers.  If a customer experiences financial difficulties, we may need to curtail our sales to that customer or be subject to increased risk of nonpayment.  This risk increases if distressed customers are forced to file for bankruptcy.  If we are unable to collect our accounts receivable from a distressed customer, our operating results would be negatively impacted.

The loss of certain of our license agreements could result in the loss of significant sales.

Our fiscal 2013 net sales included $45.1 million of licensed brand name sales, including $29.7 million of totes® gifts.  If we fail to comply with the terms of our license agreements, or to protect against infringement, such failure could have a material adverse effect on our business.  In addition, certain of our license agreements require minimum royalty payments, regardless of the level of sales of the licensed products.  In the event royalty commitments under these agreements exceed the revenues generated by sales of the licensed products, our operating results would be negatively impacted.  We believe we have good relations with each of our significant licensors with whom we intend to continue to do business.

Distribution problems could delay product shipments.

Our inventory management and product distribution processes are highly dependent on the computer hardware and software which support these functions.  We believe we have strong disaster recovery plans in place, however, extended electric power, telecommunication, or internet outages, or a catastrophic loss of the hardware or software, could preclude timely delivery of products to our customers and result in a loss of sales.

The loss of, or problems with, third-party manufacturers could adversely impact our operations.

Most of our products are manufactured by independent, third-party suppliers in China, the Dominican Republic, India, Italy, and Taiwan.  We have no long-term contracts with these manufacturers and conduct business on a purchase-order basis.  We compete with other companies for the production capacity and facilities of these manufacturers.  Our future success depends on our ability to maintain relationships with our current suppliers and to identify other suppliers and develop relationships with those who can meet our quality standards.  If our quality standards are compromised, our customer relationships could be negatively affected.

Our business is dependent on our ability to maintain proper inventory levels.

In order to meet the demands of our customers, we must maintain certain levels of inventory of our products.  If our inventory levels exceed customer demand, we may be required to write-down unsold inventory or sell the excess at discounted or close-out prices.  Such actions could significantly impact our operating results and financial condition, and could result in the diminution of the value of our brands.  Our inventory lead times require us to maintain accurate inventory levels, sales of which are driven by consumer purchases at retail.  If we underestimate consumer demand for our products or if we are not able to obtain products in a timely manner, we may experience inventory shortages.  If we are unable to fill customer orders, our relationships with our customers could be damaged and our business could be adversely affected.  See “Our industry is highly subject to consumer preferences” below.

Price increases by our suppliers could negatively affect our operating results.

Most of our products are purchased from third-party suppliers.  If our suppliers increase their prices, or we experience increased freight costs to obtain our products, and we are not able to increase our selling prices, our gross margin and operating results would be materially impacted.

Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs.

Fluctuations in the price, availability and quality of the raw materials used in our products, including leather hides and certain metals, could have a material adverse effect on our cost of sales or ability to meet our customers’ demands.  The price and availability of such raw materials may fluctuate significantly, depending on many factors, including natural resources, increased freight costs, increased labor costs and weather conditions.  In the future, we may not be able to pass on all, or a portion of, such higher raw materials prices to our customers.

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Risks Relating To Our Industry

Our industry is highly subject to consumer preferences.

Our industry is driven largely by consumer preferences and our success is dependent on our ability to anticipate and respond to these factors.  While we devote considerable time and resources to gauging consumer and lifestyle trends which affect the accessories market, any failure on our part to identify and respond to relevant trends could adversely affect acceptance of our products and brands and adversely impact our sales.  If we fail to properly gauge consumer trends, we could be faced with a significant amount of inventory which might only be sold at distressed prices or we may be unable to fill customer orders due to our inventory lead times.  See “Our business is dependent on our ability to maintain proper inventory levels” above.

Our industry is highly competitive and subject to pricing pressures that could adversely affect our financial position.

The accessories industry is highly fragmented and very competitive.  We compete with numerous manufacturers, importers, and distributors who may have greater resources.  The majority of our net sales are attributable to our private brand programs and we could lose sales to competitors with stronger brands or lower private brand prices, which could adversely affect our market position and results of operations.  In addition, from time to time, we must adjust our prices to respond to industry-wide pricing pressures.  Our financial performance could be negatively impacted by these pricing pressures if we are forced to reduce prices and cannot also reduce procurement costs, or if our procurement costs increase and we cannot increase our prices.

Our industry is highly subject to economic cycles and retail industry conditions.

Our industry is highly subject to general economic cycles and retail industry conditions.  When general economic conditions are lower, consumers are often hesitant to use discretionary income to purchase fashion accessories.  Any significant declines in general economic conditions or uncertainties regarding future economic prospects that may affect consumer spending habits could adversely affect our business.

In the current economic environment, consumer confidence remains low resulting in a reduction in discretionary consumer spending.  Continued uncertainties regarding future economic prospects could have a material adverse effect on our results of operations and an economic slowdown could have a negative impact on our business and could result in:

• reduced consumer spending and demand for our products;

• increased price competition for our products;

• increased risk of unsaleable inventories; and

• increased risk in the collectability of accounts receivable from our customers.

These potential effects are difficult to forecast and, when they occur, mitigate.  As a consequence, our operating results for a particular period are difficult to predict and, therefore, prior results are not necessarily indicative of results to be expected in future periods. The occurrence of any of the foregoing circumstances could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect the market price of our common stock.

Consolidation in the retail industry may negatively impact our operations.

There has been a significant amount of consolidation in the retail industry in recent years, which has been accelerated by recent economic trends.  This consolidation may result in factors which could negatively impact our business, such as:

• store closures;

• increased customer leverage over suppliers, resulting in lower product prices or lower margins;

• tighter inventory management on the part of the customer, resulting in lower inventory levels and decreased orders; and

• a greater exposure to customer credit risk.

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Risks Relating To International Operations

We source most of our products from foreign countries.

Our transactions with our foreign manufacturers and suppliers are subject to the risks of doing business abroad, including up to five month inventory lead times and potential political and economic disruptions.  Imports into the United States could be affected by, among other things, the cost of transportation and the possible imposition of import duties and restrictions.  The United States, Mexico, Canada, China, the Dominican Republic, India, Italy, Taiwan and other countries in which our products are manufactured could impose new quotas, tariffs, or other restrictions, or adjust presently prevailing quotas, duty, or tariff levels, which could affect our operations and our ability to import products at current or increased levels.  In addition, our customers may impose standards that could impact our sourcing and product costs, such as environmental testing requirements or with respect to labor conditions in foreign factories, which could negatively impact our ability to import products at current or increased levels or deteriorate margins.

Fluctuations in foreign currencies could adversely impact our financial condition.

We generally purchase our products in transactions utilizing U.S. dollars.  Because we acquire most of our products from foreign countries, the cost of those products may be impacted by changes in the value of the currency of the source country.  Changes in the value of the Chinese Yuan, in particular, may have a material impact on our costs due to our reliance on Chinese manufacturing operations.  Changes in the currency exchange rates may also affect the relative prices at which we and our foreign competitors sell products in the same market.

Risks Relating To Our Company

Our Company depends on a limited number of key personnel.  The loss of any one of these individuals could disrupt our business.

Execution of operating plans is highly dependent upon the personal efforts and abilities of our senior executives.  Except for the severance agreements with certain of our executive officers, we do not have employment or similar contracts with, or maintain key-person insurance on the lives of, any of our senior executives, and the loss of any one of them could disrupt our business.

We are dependent on the creative talent of our designers and the effectiveness of our sales personnel.

Sales of our products are highly dependent on their marketplace acceptance, which is driven by current styles and our marketing abilities.  If we were unable to hire and retain employees having exceptional creative talent and marketing skills, our sales could be adversely affected.

Our stock price is volatile, and investors may not be able to recover their investment if our stock price declines.

The price of our common stock is volatile and can be expected to be significantly affected by factors such as quarterly variations in our results of operations and any failure to meet market expectations, quarterly variations in our competitors’ results of operations, and the stock price performance of comparable companies.  In addition, any failure to meet market expectations could cause lenders, creditors and investors to lose confidence in us, which could negatively impact our liquidity position and cause our stock price to fall.  Further, the stock market as a whole has experienced extreme price and volume fluctuations that have affected the market price of many public companies in ways that may have been unrelated to these companies’ operating performance.

Our independent auditors have issued a report which raises the question about our ability to continue as a going concern.  This report may impair our ability to raise additional financing and adversely affect the price of our common stock.

The report of our independent auditors contained in our financial statements for the year ended June 30, 2013 includes a paragraph that explains that we have experienced net losses which have negatively affected our current liquidity.  Per the report, these conditions raise substantial doubt about our ability to continue as a going concern.  Reports of independent auditors questioning a company’s ability to continue as a going concern are generally viewed unfavorably by analysts and investors.  This report, along with the fiscal 2013 and 2012 net losses from operations and our accumulated deficit, may make it difficult for us to raise additional debt or equity financing necessary to conduct our operations.

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If we are not able to comply with our debt covenants and subsequently cannot negotiate waivers or amendments to our credit facility with our senior lender, we may have insufficient liquidity to conduct our operations.

Under our credit facility with our prior senior lender, we were unable to comply with certain periodic debt covenants.  On July 24, 2013, we replaced our senior credit facility when we entered into a credit agreement with Salus Capital Partners, our new senior lender.  Immediately prior to the filing of this Annual Report, because we were not in compliance with certain covenants under our new credit facility, we entered into an amendment to the credit agreement with our senior lender, whereby our senior lender agreed to waive certain covenants and amend the credit agreement.  In the future, if we are unable to comply with covenants under our credit agreement with our senior lender, and our senior lender is unable or unwilling to waive or amend certain requirements under the credit agreement and chooses to exercise its remedies under the credit agreement, we may have insufficient liquidity to conduct our operations.  In such a case, we may either need to seek alternative sources of liquidity and/or seek other alternatives.

We are not currently in compliance with the Nasdaq Global Market $1.00 minimum bid price requirement or the minimum stockholders’ equity requirement, and failure to regain and maintain compliance with such standards could result in delisting and adversely affect the market price and liquidity of our common stock and our ability to raise additional capital.

Our common stock is currently listed on The Nasdaq Global Market (“Nasdaq”).  Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards.

On April 2, 2013, we received a letter from Nasdaq (the “Minimum Bid Price Notice”) notifying us that the closing bid price of our common stock was below the $1.00 minimum bid price requirement for 30 consecutive business days and, as a result, the Company no longer compiled with the minimum bid price requirement under Listing Rule 5450(a)(1) for continued listing on Nasdaq.  The Minimum Bid Price Notice also stated that we have been provided an initial compliance period of 180 calendar days, or until September 30, 2013, to regain compliance with the minimum bid price requirement.  To regain compliance, the closing bid price for our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to September 30, 2013.  If we do not regain compliance by September 30, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

On April 12, 2013, we received a letter from Nasdaq (the “Market Value Notice”) notifying us that we were no longer in compliance with the minimum market value of publically held shares (the “MVPHS”) requirement of at least $5 million for continued listing on Nasdaq.  The Market Value Notice does not result in the immediate delisting of our common stock from Nasdaq.  Rather, Market Value Notice stated that we have 180 calendar days, or until October 9, 2013, to regain compliance with the MVPHS requirement.  To regain compliance, the MVPHS must be at least $5 million for a minimum of 10 consecutive business days prior to October 9, 2013.  If we do not regain compliance by October 9, 2013, Nasdaq will provide notice to us that our securities will be subject to delisting.

However, before September 30, 2013, we (1) can request a hearing to remain on The Nasdaq Global Market or (2) transfer our securities to The Nasdaq Capital Market, which has an MVPHS requirement of $1 million.  Under either of these scenarios, if we provide Nasdaq written notice of our intention to cure the deficiency during a second compliance period, Nasdaq may grant an additional 180 days for us to bring the common stock bid price above $1.00 and to bring the MVPHS above $5 million (if we request to remain on The Nasdaq Global Market).  The Nasdaq staff will make a determination of whether it believes we will be able to cure the deficiency (or deficiencies, if applicable), and may consider such criteria as the likelihood that we will come into compliance with Nasdaq’s continued listing criteria, our past compliance history, the reasons for our current non-compliance, other corporate events that may occur within the review period, our overall financial condition and our public disclosures.

If we are delisted and cannot obtain listing on another major market or exchange, our stock’s liquidity would suffer, and we would likely experience reduced investor interest.  Such factors may result in a decrease in our stock’s trading price.  In addition, the failure to trade on a national securities exchange may hinder our efforts to obtain future financing.

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ITEM 1B - UNRESOLVED STAFF COMMENTS

None.

ITEM 2 - PROPERTIES

We own facilities in the United States and Mexico and lease facilities in the United States, Canada, and Hong Kong.  As of June 30, 2013 we owned and leased 158,546 and 274,017 square feet of warehouse and office space, respectively.  We believe our properties are adequate and suitable for the particular uses involved.  The following table summarizes our properties:

Facility Location	Use	Form of Ownership
Yoakum, Texas – 1 facility (1)	Office and warehouse	Own
Pitiquito, Sonora, Mexico	Manufacturing facilities	Own
Scarborough, Ontario, Canada	Manufacturing and distribution center	Lease
Dallas, Texas	Corporate office and distribution center	Lease
Bentonville, Arkansas	Office	Lease
Kowloon, Hong Kong	Office	Lease

(1) The Yoakum, Texas facility is no longer used in our operations and was classified as held for sale as of June 2013 and included in other current assets in the consolidated balance sheets at its appraised value of $910,000.

As part of our March 2013 restructuring, we closed three facilities, including our Dallas, Texas gifts distribution center, Los Angeles, California office, and our New York, New York office.  In August 2013, we entered into a lower cost office and showroom lease in New York, New York.

ITEM 3 - LEGAL PROCEEDINGS

We are periodically involved in legal proceedings and litigation arising in the ordinary course of business.  On February 14, 2011, The Belt Company (formerly known as Chambers Belt Company) filed suit against us in the Superior Court of the State of Delaware.  The suit alleges we underpaid Chambers approximately $524,000 in earn-out royalties under the terms of the asset purchase agreement between the parties dated July 9, 2009.  We dispute this allegation and, in fact, have asserted a counterclaim seeking a refund in the amount of $609,000 under the royalty provision of the asset purchase agreement.  At this time, we can make no estimate as to the outcome of the suit.

ITEM 4 – (Removed and Reserved)

PART II

ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Principal Market For Our Common Stock

The principal market for our common stock is The Nasdaq Global Market where it is listed under the symbol “TBAC.”  The high and low sales prices for our common stock for each quarterly period within the two most recent fiscal years as reported on Nasdaq were:

	Fiscal 2013				Fiscal 2012
Quarter Ended	High		Low		High		Low
September 30	$	1.61	$	1.21	$	2.33	$	1.08
December 31	$	2.01	$	1.26	$	1.29	$	0.90
March 31	$	1.59	$	0.43	$	2.14	$	0.92
June 30	$	1.20	$	0.38	$	1.96	$	1.23

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Stockholders of Record

As of September 25, 2013, we had approximately 397 stockholders of record.

Dividends

No dividends were declared in fiscal 2013 or fiscal 2012.

No dividends have been paid since October 2008 in order to preserve capital and enhance financial flexibility.  The payment of dividends in the future will be at the discretion of our board of directors and will depend on our profitability, financial condition, capital needs, future prospects, contractual restrictions, and other factors deemed relevant by our board of directors.  In addition, payment of any future dividends requires the approval of our lender, in its sole discretion, pursuant to the terms of our credit facility.

Stock Available Under Equity Compensation Plans

The following table provides information regarding the number of shares of our common stock that may be issued on exercise of outstanding stock options or vesting of performance units under our existing equity compensation plans as of June 30, 2013, which include:

· 2012 Omnibus Plan;

· 2002 Omnibus Plan; and

· 1995 Stock Deferral Plan for Non-Employee Directors.

	(A)	(B)	(C)
Plan Category	Number of Securities To Be Issued upon Exercise Of Outstanding Options, Warrants And Rights	Weighted-Average Exercise Price Of Outstanding Options, Warrants And Rights	Number Of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (A))
Equity Compensation Plans Approved by Stockholders	104,997 (1)	$8.20 (2)	694,706 (3)

________________

(1)   Includes options to purchase common stock under the following plan:

·   2002 Omnibus Plan – 104,997 shares.

(2)   Calculation of weighted-average exercise price does not include performance unit shares under the 2002 Omnibus Plan because they have no exercise price.

(3)   Includes 28,375 shares of common stock issuable under the 1995 Stock Deferral Plan for Non-Employee Directors and 666,331 shares of common stock issuable under the 2012 Omnibus Plan.  Upon adoption of the 2012 Omnibus Plan, 608,911 shares were authorized and reserved for issuance under the 2012 Omnibus Plan, plus an indeterminate number of shares attributed to forfeited or expired awards under the 2002 Omnibus Plan, up to a maximum aggregate number of 736,326 shares.  All shares of common stock authorized and reserved for issuance on the exercise of outstanding stock options under our previous stock option plans and the 2012 Omnibus Plan will, on the cancellation or expiration of any such stock options, automatically be authorized and reserved for issuance under the 2012 Omnibus Plan.

Stock Repurchases

We did not repurchase any shares of our common stock during the fourth quarter of fiscal 2013.

ITEM 6 - SELECTED FINANCIAL DATA

Not applicable.

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ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item 7 should be read in the context of the information included elsewhere in this Annual Report including our consolidated financial statements and accompanying notes in Item 8 of this Annual Report.

OVERVIEW

We are organized along product categories and have two reportable segments: (1) accessories, which include belts, small leather goods and other products, and (2) gifts.

During fiscal 2013 our financial results were severely impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012 in our gifts segment, which was markedly higher than both our expectations and historical levels.  These events were primarily driven by lack of consumer acceptance of two new products, unfavorable placement of our products in certain retailers, and lower than expected consumer purchases in our categories.  As a result, we announced and executed a restructuring plan which (1) eliminated unprofitable products; (2) reduced the amount of risk in our gifts business; (3) reduced corporate and distribution employee headcount; (4) closed or downsized four facilities; (5) outsourced and relocated our gifts distribution facility from Dallas to a third-party provider in California; and (6) exited development efforts and accelerated recognition of future expenses associated with non-core brands.  We expect these efforts will result in annual cost savings of $6.0 to $7.0 million in fiscal 2014.

Our operating results for fiscal 2013 were impacted by net sales growth in our gifts segment, lower net sales in our accessories segment primarily as a result of our decision to exit under-performing, non-core product categories in the prior year, higher returns of unsold products and higher freight and materials costs in our gifts segment, and significant improvements in our operating expenses as a result of the execution of our restructuring and cost-savings initiatives which reduced SG&A expenses by 31% over the past three fiscal years.

For the year, we had a net loss of $19.2 million, or $2.69 per share, a $15.5 million decline over the prior year.  This net loss includes $13.7 million in charges related to our execution of the restructuring plan.

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The following table presents sales and gross margin data for our business segments (in thousands of dollars).  Other financial information about our segments is incorporated herein by reference to Note 5 of the notes to consolidated financial statements included in Item 8 of this Annual Report.

	2013			2012
Net sales:
Accessories	$	77,073		$	86,188
Gifts		36,937			31,413
	$	114,010		$	117,601
Gross margin:
Accessories (1)	$	18,720		$	28,861
Gifts (2)		6,307			9,022
	$	25,027		$	37,883
Gross margin percent of sales:
Accessories		24.3	%		33.5	%
Gifts		17.1	%		28.7	%
		22.0	%		32.2	%
Operating expenses:
Accessories	$	9,364		$	11,151
Gifts		7,279			6,012
	$	16,643		$	17,163

(1)   Accessories gross margin for fiscal 2013 includes inventory write-downs of $5.4 million for exited products.  Excluding these write-downs, accessories gross margin would have been $24.1 million, or 31.3%, for fiscal 2013.

(2)  Gifts gross margin for fiscal 2013 includes inventory write-downs of $1.8 million.  Excluding these write-downs, gifts gross margin would have been $8.1 million, or 21.9%, for fiscal 2013.

The following presents selling, general and administrative expenses (“SG&A”), depreciation and amortization, and our interest expenses which are not directly allocated to one of our segments (in thousands of dollars):

	2013		2012
Selling, general and administrative expenses (unallocated)	$	18,115	$	20,579
Restructuring charges		3,072		-
Intangibles and held for sale impairment		3,011		-
Depreciation and amortization		1,818		2,205
Interest expense		1,741		1,159

Our sales are generally affected by changes in demand for our product categories (volume) as well as customer allowances and returns.  Sales volume also can impact our gross margins in terms of product channel mix between mass merchant retailers, which typically sell product at lower price points than department stores, and specialty retailers.  The components of our cost of goods sold and SG&A are described in Note 2 of the notes to consolidated financial statements included in Item 8 of this Annual Report and incorporated herein by reference.  We include the costs related to our distribution network in SG&A while others may include all or a portion of such costs in their cost of goods sold.  Consequently, our gross margins may not be comparable to others.

The following table presents net sales for each of our product categories (in thousands of dollars):

	2013				2012
	Net Sales		% of Total		Net Sales		% of Total
Belts	$	65,316	57.3	%	$	70,805		60.2	%
Gifts		36,937	32.4			31,413		26.7
Small Leather Goods		5,885	5.2			9,776		8.3
Other		5,872	5.1			5,607		4.8
	$	114,010			$	117,601

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Operationally, our most significant events in fiscal 2013 were:

· executed a restructuring plan pursuant to which we reduced the complexity of the business through paring down the customer base we serve, focusing on the most profitable belts, small leather goods, and gifts products, streamlining our operations and further reducing operating expenses. We expect the restructuring plan to reduce future operating expenses by $6.0 million to $7.0 million on an annualized basis, beginning in fiscal 2014;

· entered into a licensing agreement with national brands Samsonite® and American Tourister;

· organically grew our gifts product category 18%; and

· reduced SG&A expenses 8% as net sales declined 3% from the prior year;

2013 COMPARED TO 2012

Net Sales and Gross Margins

Our fiscal 2013 net sales were $114.0 million, which was $3.6 million, or 3% lower than the prior year.  Gross margin decreased from 32.2% in the prior year to 22.0% in fiscal 2013.

Net sales for the accessories segment were $77.1 million, which was $9.1 million, or 11%, lower than the prior year primarily due to lower sales of previously exited small leather goods and other products ($4.5 million), lower replenishment sales by our Canadian subsidiary, and higher customer deductions in order to procure additional retail space.  Gifts segment net sales of $36.9 million in fiscal 2013 were $5.5 million, or 18%, greater than in the prior year primarily due to increased holiday shipments resulting from organic growth of our totes® license and Eddie Bauer® licenses, offset partially by higher sales concessions and holiday season returns.

Accessories segment gross margins decreased from 33.5% from the prior year to 24.3% in the current fiscal year, primarily because of the $5.4 million inventory write-off associated with our restructuring plan, lower sales of previously written-down inventory, higher customer deductions, and cost increases in leather, metal and freight.  The gifts segment margin was 11.6 percentage points lower in fiscal 2013 compared to the prior year due to the $1.8 million inventory write-off associated with our restructuring plan, higher freight costs, higher sales to our higher volume, lower margin customers, and higher customer deductions.  Gross margins were also affected by more customer-direct shipments in fiscal 2013 compared to the prior year, since these shipments carry lower gross margins due to being shipped directly from our suppliers to our customers (and not handled in our distribution centers), reducing the associated selling, general and administrative costs.

Operating Expenses

Total segment operating expenses in fiscal 2013 of $16.6 million were $0.6 million lower than the prior year ($17.2 million) primarily due to decreases in variable distribution costs in our accessories segment, offset partially by higher variable distribution costs, facilities, selling costs and royalties in the gifts segment.

Total SG&A expenses of $34.8 million for fiscal 2013 were $2.9 million, or 8%, lower than fiscal 2012 ($37.7 million).  The decreases were primarily due to a lower bad debt provision and lower variable distribution costs, offset by higher selling and royalty costs.

Depreciation and amortization for fiscal 2013 was $387,000 lower than in 2012 as a result of assets being fully depreciated during the current year.

Interest and Taxes

Interest expense for fiscal 2013 was $582,000 higher than that incurred in 2012.  The increase was primarily due to a higher interest rate charged by our lender in the fourth quarter of fiscal 2013, a $267,000 write-off of costs previously capitalized, and additional interest incurred from a supply chain finance program entered into during the current fiscal year with our second largest customer.

We have a federal income tax net loss carryover of $64.8 million that will expire beginning in 2029.

Our effective income tax rates were (1.6%) and 11.8% in fiscal 2013 and fiscal 2012, respectively.  In both years, the benefits of the 34% federal statutory rate applied to our pretax losses were offset by deferred tax valuation allowances (fiscal 2013 – 32.6%; fiscal 2012 – 40.9%).  The valuation allowances are recorded on our federal and state deferred tax assets because we have experienced cumulative operating losses over the past few years.  Realization of the deferred tax assets and reversal of associated valuation allowances is dependent on the generation of future taxable income during the periods in which temporary differences become deductible.

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LIQUIDITY AND CAPITAL RESOURCES

We generally expect that cash needs over the next twelve months will be substantially the same as they have been as reflected in our historical financial statements, except for higher borrowing costs on our new credit facilities and expected use of cash to pay down subordinated notes payable entered into in July 2013 with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. 

We have incurred a net loss in each of our two most recent fiscal years and we have an accumulated deficit. Our financial results and liquidity forecasts were negatively impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012 in our gifts segment, which was markedly higher than both our expectations and historical levels.

Going Concern Uncertainties

Based on the above referenced factors, as of the date of this Annual Report, our independent auditors have issued a report which raises doubt about our ability to continue as a going concern.

In response to these negative factors we executed the following initiatives which we believe will allow us to effectively manage our liquidity over the near-term:

· Announced and executed a restructuring plan (“Restructuring”) which (1) eliminated unprofitable products; (2) reduced the amount of risk in our gifts business; (3) reduced corporate and distribution employee headcount; (4) closed or downsized four facilities; (5) outsourced and relocated our gifts distribution facility from Dallas to a third-party provider in California; and (6) exited development efforts and accelerated recognition of future expenses associated with non-core brands. We expect these efforts will result in annual cost savings of $6.0 to $7.0 million in fiscal 2014.

· On July 24, 2013, we replaced our previous credit facility with a new senior credit facility expiring in July 2015. We believe this new senior facility, along with a new purchase order financing arrangement with another lender, will provide us with sufficient credit availability to fund our operations in the foreseeable future. At September 23, 2013, we had $1.2 million in borrowing availability under our new senior credit facility after accounting for the $900,000 minimum excess availability requirement. Covenants set by our senior lender place additional restrictions on the use of the credit availability on a week-to-week basis.

· In July 2013, we entered into agreements with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. The arrangements with these parties consist of unsecured, subordinated promissory notes which are to be paid under varying payment terms and interest rates over a period of 12 to 24 months. These payments are subject to pre-established minimum availability levels as set by our new senior lender.

· On September 26, 2013 we, along with our subsidiaries, H.A. Sheldon Canada, Ltd. and TBAC Investment Trust, and our senior lender Salus Capital Partners LLC, entered into a First Amendment to Credit Agreement, dated July 24, 2013 (the “Amendment”). Pursuant to the Amendment, our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

In addition, we are continuing to evaluate and execute initiatives to improve liquidity such as selling unproductive assets (such as our held-for-sale facility in Yoakum, Texas) and raising additional capital.  We cannot make assurances as to whether any of these actions can be effected on a timely basis, on satisfactory terms or maintained once initiated.  Even if such actions are successfully implemented, our liquidity plan could result in limiting certain operational and strategic initiatives that were designed to grow our business over the long term.

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A summary of the effect of our operations on our cash flows is as follows:

Operating Activities

Fiscal 2013 net cash from operating activities was $833,000 lower than in the prior year, primarily driven by the following: (1) an increase in the operating loss; (2) $4.1 million less cash generated from accounts receivable due to $3.6 million lower net sales in the current year; (3) $9.5 million lower current year inventory and other assets primarily due to later timing and lower amounts of gift inventory deposits; and (4) $522,000 higher accounts payable and accrued expenses due to higher past due payables as part of our restructuring activities and the later timing of gift inventory purchases (first quarter of fiscal 2014 versus the fourth quarter of fiscal 2012) over the prior year, offset by the loss of trade terms with certain key suppliers during the current year.

Investing Activities

Investing activities for fiscal 2013 primarily consisted of purchases of new software to improve fill-rates with our largest customer and operating equipment to improve efficiency in our distribution facilities.  Investing activities for the prior year primarily related to the purchases of operating equipment for our distribution facilities.

Financing Activities

Financing activities included credit facility net repayments of $2.8 million and $6.1 million in fiscal 2013 and 2012, respectively.  The $3.3 million decline in repayments from the prior year was due to less cash being generated by our operating activities during the current year, which was primarily a result of lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012 in our gifts business, which was higher than both our expectations and historical levels.

Our primary sources of liquidity are cash flows from operating activities and borrowings under our credit facilities.

Information about our credit facilities and subordinated notes payable are incorporated herein by reference to Notes 4 and 14 of the notes to the consolidated financial statements included in Item 8 of this Annual Report.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

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

The accounting policies and estimates we consider most critical are presented below.

Revenues and Accounts Receivable Allowances

Sales are recognized when merchandise is shipped and title to the goods has passed to the customer.  We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances, and customer returns, as a reduction of sales based upon historical experience, current trends in the retail industry, and individual customer and product experience.  Actual returns and allowances may differ from our estimates and differences would affect the operating results of subsequent periods.

21

Sensitivity Analysis  The following table presents the estimated effect of the indicated increase (decrease) in our net sales, based on fiscal 2013 net sales of $114.0 million, on our customer allowance dollars (in thousands except per share amounts).  Changes in general economic conditions, trends and developments within our industry, or situations unique to specific customers could result in significant fluctuations in the actual effect of the estimate.

	Sales Change		Allowances/ Reserves			Expense			Earnings Per Share
Change in customer allowances and returns	+/-	0.5%	$570	/	$(570)	$570	/	$(570)	$(0.08)	/	$0.08

Inventories

Inventories are stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market.  Cost includes the direct cost of purchased products (product, duty and freight) and, for manufactured products, procurement costs, materials, direct and indirect labor, and factory overhead.  Market, with respect to raw materials, is replacement cost and, with respect to work-in-process and finished goods, is net realizable value.  In our assessment of the value of inventory, we monitor retailer sell-through rates, fashion trends, and the accumulation of excess inventory.  Our assessment is both a quantitative measurement (e.g., the use of metrics such as the number of months supply on hand) and qualitative measurement (e.g., the ability to utilize certain styles in current and future programs).  In general we have relationships with off-price store customers that will purchase excess inventory at discounted prices and we have been able to realize values at or above the lower of cost or market values at which we carry our inventories.  If circumstances arise in which the market value of items in inventory declines below cost, an inventory markdown is estimated and charged to cost of sales in the period identified.  If we incorrectly anticipate these trends or if unexpected events occur, our results of operations could be materially affected.

Sensitivity Analysis  The effect of a 1% write-down in the value of our inventory as of June 30, 2013 would be (dollars in thousands except per share amounts):

	Percentage Of Inventory			Inventory			Expense		Earnings Per Share
Change in inventory write-down		-1	%	$	(214	)	$	214	$	(0.03	)

Uncertain Tax Positions

Tax liabilities, together with interest and applicable penalties, are recognized for the benefits of uncertain tax positions in the financial statements which more likely than not may not be realized.  We review the appropriateness of items of revenue or expense excluded or included in our tax returns and the requirements for filing returns with jurisdictions which may have laws requiring us to file tax returns.  Failure to recognize a tax liability for the benefits of an uncertain tax position which ultimately is not realized could materially affect our financial position and results of operations.

Share-Based Compensation

The fair values of restricted stock and performance unit grants payable in stock are estimated to be the market price of our common stock on the grant dates.  The fair values of performance units measured in phantom stock units, which are payable in cash, are estimated to be the market price of our common stock as of each reporting date.  The assumptions we use to estimate the fair value of our stock options are based on historical information and current economic conditions.  Estimated fair values increase if the expected dividend yield decreases and the other assumptions increase.  Neither the grant-date market values of our stock nor the resulting output of the Black-Scholes option-pricing model using our assumptions may be the value ultimately realized by our directors and employees or accurately measure the tax benefits we may realize.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The information in Note 2 of the notes to the consolidated financial statements included in Item 8 of this Annual Report is incorporated herein by reference.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

22

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Tandy Brands Accessories, Inc. and subsidiaries (the “Company”) as of June 30, 2013 and 2012, and the related consolidated statements of operations, cash flows, and stockholders’ equity for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tandy Brands Accessories, Inc. and subsidiaries as of June 30, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has experienced net losses which have negatively affected the Company’s liquidity. These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GRANT THORNTON LLP

Dallas, Texas

September 27, 2013

23

Tandy Brands Accessories, Inc. And Subsidiaries

Consolidated Balance Sheets

(in thousands)

	June 30
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	518		$	217
Accounts receivable, net		4,605			7,042
Inventories, net		21,361			28,743
Inventory deposits		837			7,107
Other current assets		1,757			2,824
Total current assets		29,078			45,933
Property and equipment, net		4,373			5,474
Other assets:
Intangibles		1,100			4,115
Other assets		625			934
Total other assets		1,725			5,049
	$	35,176		$	56,456
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable	$	9,294		$	10,548
Accrued compensation		776			1,309
Accrued expenses		2,204			1,584
Accrued restructuring charges (see Note 3)		2,086			-
Credit facility		9,058			11,810
Total current liabilities		23,418			25,251
Other liabilities		4,150			4,290
Commitments and contingencies (see Note 6)
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, none issued		-			-
Common stock, $1.00 par value, 10,000 shares authorized, 7,130 shares and 7,102 shares issued and outstanding, respectively		7,130			7,102
Additional paid-in capital		34,141			34,129
Accumulated deficit		(35,147	)		(15,970	)
Other comprehensive income		1,484			1,654
Total stockholders' equity		7,608			26,915
	$	35,176		$	56,456

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

24

Tandy Brands Accessories, Inc. And Subsidiaries

Consolidated Statements Of Operations

(in thousands except per share amounts)

	Year Ended June 30
	2013			2012
Net sales	$	114,010		$	117,601
Cost of goods sold		81,825			79,718
Inventory write-down		7,158			-
		88,983			79,718
Gross margin		25,027			37,883
Selling, general and administrative expenses		34,758			37,742
Depreciation and amortization		1,818			2,205
Intangibles and held for sale impairment		3,011			-
Restructuring charges		3,072			-
Total operating expenses		42,659			39,947
Operating loss		(17,632	)		(2,064	)
Interest expense		(1,741	)		(1,159	)
Other expense		(107	)		(44	)
Loss before income taxes		(19,480	)		(3,267	)
Income tax (benefit) expense		(303	)		385
Net loss	$	(19,177	)	$	(3,652	)
Other comprehensive loss:
Currency translation adjustments		(170	)		(399	)
Total comprehensive loss	$	(19,347	)	$	(4,051	)
Loss per share:
Basic	$	(2.69	)	$	(0.52	)
Diluted	$	(2.69	)	$	(0.52	)
Weighted average common shares outstanding:
Basic		7,131			7,075
Diluted		7,131			7,075

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

25

Tandy Brands Accessories, Inc. And Subsidiaries

Consolidated Statements Of Cash Flows

(in thousands)

	Year Ended June 30
	2013			2012
Cash flows provided by operating activities:
Net loss	$	(19,177	)	$	(3,652	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Inventory write-down		7,158			-
Intangibles and held for sale impairments		3,011			-
Deferred income taxes		(215	)		127
Doubtful accounts receivable provision		174			802
Depreciation and amortization		2,068			2,455
Stock compensation expense		(130	)		152
Amortization of debt costs		389			196
Loss on sale of property and equipment		111			20
Changes in assets and liabilities:
Accounts receivable		2,251			6,375
Inventories		542			12
Other assets		154			380
Inventory deposits		6,270			(2,906	)
Accounts payable		(1,461	)		2,289
Accrued expenses and restructuring charges		2,935			(1,337	)
Net cash provided by operating activities		4,080			4,913
Cash flows used for investing activities:
Purchases of property and equipment		(592	)		(664	)
Sales of property and equipment		391			192
Net cash used for investing activities		(201	)		(472	)
Cash flows used for financing activities:
Change in cash overdrafts		(737	)		145
Change in restricted cash		-			1,405
Net repayments under credit facility		(2,752	)		(6,091	)
Net cash used for financing activities		(3,489	)		(4,541	)
Effect of exchange-rate changes on cash and cash equivalents		(89	)		(97	)
Net increase (decrease) in cash and cash equivalents		301			(197	)
Cash and cash equivalents beginning of year		217			414
Cash and cash equivalents end of period	$	518		$	217
Supplemental cash flow information:
Interest paid	$	1,080		$	1,146
Income taxes paid	$	33		$	144

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

26

Tandy Brands Accessories, Inc. And Subsidiaries

Consolidated Statements Of Stockholders' Equity

(in thousands except per share amounts)

	Common Stock				Additional Paid-In		Accumulated			Other Comprehensive			Total Stockholders'
	Shares		Amount		Capital		Deficit			Income			Equity
Balance June 30, 2011		7,075	$	7,075	$	34,119	$	(12,318	)	$	2,053		$	30,929
Comprehensive loss:
Net loss		-		-		-		(3,652	)		-			(3,652	)
Currency translation adjustments		-		-		-		-			(399	)		(399	)
														(4,051	)
Share-based compensation		27		27		10		-			-			37
Balance June 30, 2012		7,102	$	7,102	$	34,129	$	(15,970	)	$	1,654		$	26,915
Comprehensive loss:
Net loss		-		-		-		(19,177	)		-			(19,177	)
Currency translation adjustments		-		-		-		-			(170	)		(170	)
														(19,347	)
Share-based compensation		28		28		12		-			-			40
Balance June 30, 2013		7,130	$	7,130	$	34,141	$	(35,147	)	$	1,484		$	7,608

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Overview

The Company

We are a leading designer and marketer of branded men’s, women’s and children’s accessories, including belts, gifts and small leather goods.  Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, as well as private brands for major retail customers.  We sell our products through all major retail distribution channels throughout North America, including, without limitation, mass merchants, national chain stores, department stores, specialty stores, catalog retailers, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military.

Basis Of Presentation and Liquidity; Going Concern Uncertainties

The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and extinguishment of liabilities in the normal course of business.  We have incurred a net loss in each of our two most recent fiscal years and we have an accumulated deficit. Our financial results and liquidity forecasts were negatively impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012 in our gifts segment, which was markedly higher than both our expectations and historical levels.  These factors raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

In response to these negative factors we executed the following initiatives which we believe will allow us to effectively manage our liquidity over the near-term:

· Announced and executed a restructuring plan (“Restructuring”) which (1) eliminated unprofitable products; (2) reduced the amount of risk in our gifts business; (3) reduced corporate and distribution employee headcount; (4) closed or downsized four facilities; (5) outsourced and relocated our gifts distribution facility from Dallas to a third-party provider in California; and (6) exited development efforts and accelerated recognition of future expenses associated with non-core brands. We expect these efforts will result in annual cost savings of $6.0 to $7.0 million in fiscal 2014.

· On July 24, 2013, we replaced our previous credit facility with a new senior credit facility expiring in July 2015. We believe this new senior facility, along with a new purchase order financing arrangement with another lender, will provide us with sufficient credit availability to fund our operations in the foreseeable future. At September 23, 2013, we had $1.2 million in borrowing availability under our new senior credit facility after accounting for the $900,000 minimum excess availability requirement. Covenants set by our senior lender place additional restrictions on the use of the credit availability on a week-to-week basis.

· In July 2013, we entered into agreements with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. The arrangements with these parties consist of unsecured, subordinated promissory notes which are to be paid under varying payment terms and interest rates over a period of 12 to 24 months. These payments are subject to pre-established minimum availability levels as set by our new senior lender.

· On September 26, 2013 we, along with our subsidiaries, H.A. Sheldon Canada, Ltd. and TBAC Investment Trust, and our senior lender Salus Capital Partners LLC, entered into a First Amendment to Credit Agreement, dated July 24, 2013 (the “Amendment”). Pursuant to the Amendment, our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

In addition, we are continuing to evaluate and execute initiatives to improve liquidity such as selling unproductive assets (such as our held-for-sale facility in Yoakum, Texas) and raising additional capital.  We cannot make assurances as to whether any of these actions can be effected on a timely basis, on satisfactory terms or maintained once initiated.  Even if such actions are successfully implemented, our liquidity plan could result in limiting certain operational and strategic initiatives that were designed to grow our business over the long term. In addition, our current credit facility requires us to maintain minimum profitability and leverage ratios, as further described in Note 4, which we could have difficulty meeting to the extent that our plans are unsuccessfully implemented or for a number of additional reasons that are outside of our control, including but not limited to, the loss of key customers or suppliers.  Any potential covenant violation and our ability to successfully obtain waivers from our senior lender of such violations could negatively impact our ability to continue as a going concern.

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The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates that affect the reported value of assets, liabilities, revenues, and expenses. These estimates are based on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our conclusions.  We continually evaluate the information used to make these estimates as the business and economic environment changes, including evaluation of events subsequent to our fiscal year end through the financial statements issuance date.  Actual results may differ from these estimates under different assumptions or conditions.  Such differences could have a material impact on our future financial position, results of operations, and cash flows.

The consolidated financial statements include the accounts of the Company and our subsidiaries, all of which are wholly owned.  Intercompany accounts and transactions have been eliminated in consolidation.  Amounts related to costs for a third party provider to assemble and package gift products have been reclassified from cost of goods sold to the selling, general and administrative expense line item in the consolidated statements of operations and business segment information in the fiscal 2012 financial statements to conform to the fiscal 2013 presentation.

Foreign Currency Translation

For our Canadian operations, the functional currency is the Canadian dollar (“CAD”).  Its assets and liabilities are translated into U.S. dollars (“USD”) at the exchange rates in effect at each balance sheet date, and resulting translation gains or losses are accumulated in other comprehensive income as a separate component of stockholders’ equity.  Revenue and expenses are translated at monthly average exchange rates.  For our Mexican operations, the functional currency is the U.S. dollar.

Note 2 - Summary Of Significant Accounting Policies

Fair Values

We measure fair values using unadjusted quoted prices in active markets (Level 1 inputs), quoted prices for similar instruments in active or inactive markets, or other directly-observable factors (Level 2 inputs), or inputs that are unobservable and significant to the fair value measurement (Level 3 inputs).  Our financial instruments consist primarily of cash, trade receivables and payables, and our credit facility.  The carrying values of cash and trade receivables and payables are considered to be representative of their respective fair values.  Our credit facility, which was amended effective June 28, 2013, bears interest at floating market interest rates; therefore, we believe the fair value of amounts borrowed approximates the carrying value.  At June 30, 2013 and June 30, 2012, no other material financial assets or liabilities were measured at fair value.

Cash And Cash Equivalents

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

Accounts Receivable and Allowances

We perform periodic credit evaluations of our customers’ financial conditions and reserve against accounts deemed uncollectible based upon historical losses and customer specific events.  After all collection efforts are exhausted and an account is deemed uncollectible, it is written off against the allowance for doubtful accounts.  With the exception of a material customer account which ultimately resulted in an accounts receivable allowance of $900,000 in fiscal 2012, credit losses have historically been within our expectations and we generally do not require collateral.

Accounts receivable are net of an allowance for doubtful accounts, discounts and returns of $3.4 million and $3.9 million for fiscal 2013 and 2012, respectively.

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Inventories

Inventories are stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market.  Cost includes the direct cost of purchased products (product, duty and freight) and, for manufactured products, procurement costs, materials, direct and indirect labor, and factory overhead.  Market, with respect to raw materials, is replacement cost and, with respect to work-in-process and finished goods, is net realizable value.  Inventories consist of (in thousands):

	2013		2012
Raw materials	$	3,772	$	3,416
Work-in-process		148		412
Finished goods		17,441		24,915
	$	21,361	$	28,743

Inventory deposits of $800,000 and $7.1 million were paid against future gift product deliveries from suppliers at June 30, 2013 and 2012, respectively.

Property And Equipment

Property and equipment are carried at cost less accumulated depreciation calculated using the straight-line method (in thousands):

		2013		2012	Depreciation Rates
Buildings	$	278	$	278	3%
Leasehold improvements		2,567		3,490	Lesser of lease term or asset life
Machinery and equipment		27,698		27,766	10	%	to	50	%
		30,543		31,534
Accumulated depreciation		(26,170)		(26,060)
	$	4,373	$	5,474

Depreciation expense: 2013 - $1,388; 2012 - $1,634

The net book value of accessories segment property and equipment no longer used in our operations is included in other current assets (2013 - $0.9 million; 2012 - $1.5 million) and is held for sale without expectation of incurring a loss; however, amounts actually realized from the sale of such property and equipment may differ from our estimates.

Maintenance and repairs are charged to expense as incurred.  Renewals and betterments which materially prolong the useful lives of the assets are capitalized.  The cost and related accumulated depreciation of assets retired or sold are removed from the accounts and gains or losses are recognized in operations upon disposition.

Intangibles And Impairment Of Long-Lived Assets

Finite-lived intangibles are amortized either using the straight-line method over their estimated useful lives (e.g., trade names) or using an undiscounted cash flows model (e.g., Chambers customer list).

We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an asset might be impaired.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to undiscounted future net cash flows they are expected to generate.  If the undiscounted cash flows are less than the carrying amount, the impairment recognized is measured by the amount the carrying value of the assets exceeds their fair value.

Indefinite-lived intangibles are assessed annually or sooner if a triggering event occurs, for impairment using a fair value method such as discounted cash flows.

Derivative Instruments

We did not have any significant derivative activities as of June 30, 2013 and 2012 and we do not enter into derivative investments for the purpose of speculative investment.  Our overall risk management philosophy is re-evaluated as business conditions change.

30

Sales

Sales are recognized when merchandise is shipped and title to the goods has passed to the customer.  We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances, and customer returns, as a reduction of sales based upon historical experience, current trends in the retail industry, and individual customer and product experience.  Actual returns and allowances may differ from our estimates and differences would affect the operating results of subsequent periods.

Costs And Expenses

Cost of goods sold includes our costs associated with the procurement and manufacture of inventory, such as the cost of inventory and raw materials purchased from overseas, costs of shipping from our suppliers, ticketing and labeling of product and, where applicable, labor and overhead related to our product manufacturing facilities.  SG&A includes our costs related to activities incurred in the normal course of business which are not associated with the procurement or production of inventory.  They also include costs associated with our distribution centers (2013 - $8.1 million; 2012 - $7.8 million).  Those amounts include $1.2 million and $1.3 million of shipping and handling expenses in fiscal 2013 and 2012, respectively.

Advertising Costs

Advertising costs, consisting primarily of shows and conventions as well as display and print advertising, are expensed as they are incurred (2013 - $1.1 million; 2012 - $1.0 million).

Share-Based Compensation

Compensation expense for all share-based payments expected to vest is recognized on the straight-line basis over the requisite service period based on grant-date fair values.

Income Taxes

Deferred income taxes are recognized for the future income tax effects of differences in the carrying amounts of assets and liabilities for financial reporting and income tax return purposes using enacted tax laws and rates.  A valuation allowance is recognized if it is more likely than not that some or all of a deferred tax asset may not be realized.  Tax liabilities, together with interest and applicable penalties included in the income tax provision, are recognized for the benefits of uncertain tax positions in the financial statements which more likely than not may not be realized.

Note 3 - Significant Events

Fiscal 2013 Restructuring Plan Announced March 18, 2013

Our second quarter fiscal 2013 financial results for our gifts segment were severely impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012, which was higher than both our expectations and historical levels.  These events were primarily driven by lack of consumer acceptance of two new products, unfavorable placement of our products in certain retailers, and lower than expected consumer purchases in our categories.  As a result, our gifts segment net sales and gross margins were significantly lower than expectations and historical results.  This caused our December profits to fall, resulting in the previously-announced violation of our monthly minimum fixed charge coverage ratio within our prior credit agreement.  Additionally, the performance of the gifts segment products resulted in higher than expected sales concessions, such as allowing certain retailers to return certain unsold products, which also reduced net sales, gross margins and accounts receivable, while increasing inventories.  Each of these events unfavorably impacted our liquidity forecasts.  As a result of the covenant violation and liquidity restraints, we decided to implement a restructuring plan.

On March 18, 2013, the Board of Directors (the “Board”) approved the Restructuring plan pursuant to which we reduced the complexity of our business through paring down the customer base we serve, focusing on the most profitable belts, small leather goods, and gifts products, streamlining our operations and further reducing operating expenses.

The primary components of the Restructuring included:  (1) exiting under-performing product offerings which do not support our primary customer base and do not represent strategic components of our portfolio, (2) reducing corporate employee headcount by 33%, which occurred on March 18, 2013, (3) recognizing charges for certain intangible assets impaired as a result of our decision to immediately cease production and development of products under certain proprietary trade names and trade brands,  and (4) accelerating the recognition of future expenses under certain contractual obligations.  In connection with the foregoing, we incurred pre-tax charges of $13.7 million in fiscal 2013, which included (a) a non-cash inventory impairment charge of $7.2 million, (b) employee severance costs of $0.7 million, (c) non-cash intangible and held for sale impairment charges of $3.0 million, (d) charges related to the recognition of expenses under contractual liabilities of $1.6 million that we otherwise would have recorded over the life of the contract and related revenues attributable to those contracts, and (e) other charges of $1.2 million.  

31

Approximately $3.1 million of the charges will result in future cash expenditures.  The restructuring plan was substantially complete by June 30, 2013 and the remaining cash expenditures are expected to be recognized over the next 12 months.

The following table presents the movement in the severance liability and other restructuring costs (in thousands):

	Severance			Other			Total
Accrued restructuring charges, January 1, 2013	$	-		$	-		$	-
Charges		649			1,926			2,575
Cash spent		(49	)		(289	)		(338	)
Accrued restructuring charges, March 31, 2013	$	600		$	1,637		$	2,237
Charges		54			443			497
Cash spent		(355	)		(293	)		(648	)
Accrued restructuring charges, June 30, 2013	$	299		$	1,787		$	2,086

Fiscal 2013 - Inventory Write-down and Intangibles and Held for Sale Impairments

Due to (1) higher than expected holiday 2012 sales allowances and higher returns of unsold inventories in our gifts segment in December 2012; (2) the violation of the fixed charge covenant in our credit agreement with our senior lender; and (3) the Restructuring announced in March 2013 in which we made the decision to exit low-volume products and emphasize our focus on licensed products and high volume private label products, we concluded there was a need to generate immediate liquidity by selling returned, exited and slow moving inventories at prices discounted deeply below historical averages.  As a result of our determination to accelerate the liquidation of this inventory at deeply discounted prices, we recorded a $7.2 million noncash inventory write-down ($5.4 million and $1.8 million related to the accessories and gifts segments, respectively), which is included as an inventory write-down in our consolidated statement of operations.  The inventory was marked down to our best estimate of the market value we anticipated realizing based on actual close-out orders received for the inventory and our experiences selling through inventory liquidation channels in the past, including in certain cases, an incremental write-down compared to our historical experiences to reflect the need to immediately liquidate the effected inventory.  At June 30, 2013, the carrying value of impacted inventories was $1.1 million.  We expect to sell off all impacted inventory at approximately its current net book value by September 30, 2013.  Sales and gross margins of underperforming products were $8.0 million and $2.4 million, respectively, in fiscal 2013.  We do not expect any additional material write-offs related to the sell-off of this inventory.

Due to the Restructuring and our decision to cease production and development of products under certain proprietary trade names and trade brands, we tested our definite and indefinite-lived intangible assets for recoverability during the third quarter of fiscal 2013 using fair value methods, such as discounted cash flows (indefinite-lived intangible) and undiscounted cash flows (definite-lived intangibles).  As a result of the impairment tests, in connection with our restructuring plan, we recorded a $2.3 million impairment charge (accessories segment), which was included in the intangibles and held for sale impairments line in our consolidated statement of operations.

Due to our strategy to exit certain low-volume and unprofitable products and transition from proprietary to licensed brands, we determined that the life for our indefinite-lived trade brand intangible asset was no longer indefinite, and therefore the intangible asset will be amortized over the remaining period in which it is expected to contribute to cash flows, which is three years.

We recorded a $0.4 million impairment charge in the third quarter of fiscal 2013 on a held for sale property, which is included in the intangibles and held for sale impairments line in our consolidated statement of operations.  Due to the length of time our last held for sale property has been on the market and our current liquidity forecasts, we decided to market the property below its carrying value. 

32

Fiscal 2013 New License with Samsonite® and American Tourister®

During the second quarter of fiscal 2013, we announced the execution of a new licensing agreement with brands Samsonite® and American Tourister® (gifts segment).  Under the terms of the agreement (which expires December 31, 2016), we will distribute gifts among a wide array of channels, including but not limited to, national retail and department stores, specialty stores and wholesale clubs.  Revenues from this new license are expected to benefit results in the second half of fiscal 2014.

During fiscal year 2013, we made investments to procure and launch new licenses and incurred costs of $1.4 million without any significant associated sales or gross margins.  These costs include charges for personnel, travel, and samples, which are included in selling, general and administrative expenses.

Fiscal 2012 New Licenses

During the first quarter of fiscal 2012, we entered into licensing agreements with brands Elie Tahari® (accessories segment), Miss Me® (accessories segment), and The Sharper Image® (gifts segment).  The terms for each of the Elie Tahari®, Miss Me® and The Sharper Image® agreements are through December 31, 2014, December 31, 2014 and December 31, 2016, respectively.  Under the terms of the agreements, we distribute belts or gifts among a wide array of channels, including but not limited to, national retail and department stores, clubs and specialty and boutique stores.  In connection with our 2013 restructuring plan we ceased development and marketing of belts under the Elie Tahari® license and gifts under The Sharper Image license®.

During the third quarter of fiscal 2012, we entered into licensing agreements with brands Sperry Top-Sider® and Arnold Palmer®.  The terms for each of the Sperry Top-Sider® and Arnold Palmer® agreements are through January 31, 2016 and December 31, 2016, respectively.  Under the terms of the Sperry Top-Sider® agreement, we distribute belts and small leather goods for both men and women through department stores, specialty retail locations throughout the United States and Canada, Sperry Top-Sider’s own retail stores, and on sperrytopsider.com.  Under the terms of the Arnold Palmer® agreement, we distribute belts through green grass shops, off-course golf specialty stores, department stores as well as in corporate and e-commerce shops.

During the third quarter of fiscal 2012, we expanded our previously executed Eddie Bauer® license to also include the rights to license and market belts and small leather goods.

During the fiscal year 2012, we made investments to procure and launch our new licenses and incurred costs of $597,000 without any associated sales or gross margins.  These costs included charges for personnel, travel, and samples, which are included in selling, general and administrative expenses.

Fiscal 2012 Facilities Consolidation

During the third quarter of fiscal 2012, we consolidated certain facilities to simplify operations and reduce operating expenses.  In connection with this consolidation, we incurred lease termination ($39,000), severance ($73,000) and other costs ($110,000) which were included in selling, general and administrative expenses.

Fiscal 2012 Bad Debt Provision

During the third quarter of fiscal 2012, we recognized a $900,000 provision for doubtful accounts for one close-out customer due to the customer’s financial difficulties raising doubts about the customer’s ability to make payment in the foreseeable future.

Fiscal 2012 Credit Facility

Effective August 25, 2011, we replaced our prior $27.5 million credit facility with a $35 million credit facility.  The credit facility was guaranteed by substantially all of our and our subsidiaries assets, and required a specified profitability and fixed charge coverage and a minimum availability.  

Related Party Transactions

During fiscal 2013 and 2012, we purchased $3.4 million and $4.3 million, respectively of accessories inventory from an entity affiliated with Chiang Chih-Chiang, a passive shareholder of the Company.  At June 30, 2013 and 2012, the amount due to the passive shareholder for inventory purchases was $922,000 and $290,000, respectively.  These amounts were included in the accounts payable line on the consolidated balance sheets.  Although it is likely that we will continue our purchasing relationship with this existing shareholder, we believe there are numerous sources of products available at similar terms and conditions, and we do not believe the success of our operations is dependent on this or any one or more of our present suppliers.

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Note 4 - Credit Facility

Our previous $35 million credit facility for borrowings and letters of credit was set to expire in August 2015 and bore interest at either the daily three-month LIBOR rate plus 3.75% or a fixed LIBOR rate for three months plus 3.75%.  The facility was amended various times in fiscal 2013 to waive our failure to satisfy a fixed charge coverage ratio covenant for certain months, eliminate the ratio covenant going forward, adjust the minimum excess availability requirement, extend the time period required to deliver certain post-close deliverables and title matters related to real property, to modify certain definitions used in the credit agreement, and to extend the deadline to pay the indebtedness in full or raise additional cash equity.  At June 30, 2013, we had outstanding letters of credit totaling $230,000 and $9.1 million outstanding borrowings under the facility.  In order to provide higher borrowing capacity so that we could fund our inventory purchases for holiday 2013, the facility was terminated on July 24, 2013 and all borrowings were paid and obligations were fulfilled.

Effective July 24, 2013, we along with our subsidiaries, (1) H. A. Sheldon Canada, Ltd. (“HA Sheldon”) and (2) TBAC Investment Trust, a Pennsylvania business trust (“TBAC Trust”), each as guarantors, entered into a new credit agreement (the “Credit Agreement”) with Salus Capital Partners, LLC, as lender, administrative agent and collateral agent (“Salus”).  The Credit Agreement provides for senior financing in an aggregate principal amount of up to $29.0 million at any one time outstanding.  The facility is comprised of a revolving credit facility in the amount of $27.5 million and a first-in, last-out term loan facility in the amount of $1.5 million, and expires in July 2015 (the “Credit Facility”).  Under the Credit Facility, borrowings bear interest at either 0.75% per annum or the rate per annum for LIBOR as published for an interest period of thirty days, plus (i) 8.50% with respect to the revolver, and (ii) 11.25% with respect to the term loan.

The Credit Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by a first priority lien on substantially all of our assets, excluding certain goods and related accounts receivable financed pursuant to the King Trade Facility (see “King Trade Facility” below), for which Salus will have a second priority lien.  The Credit Facility contains covenants which establish minimum consolidated EBITDA requirements, account concentration limitations, budgeted expenses and accounts payable to inventory ratios.  The Credit Facility also permits Salus, as agent, to establish reserves with respect to inventory, availability, real estate and accounts receivable in determining the borrowing base under the Credit Agreement.  The borrowing base is generally determined by calculating (i) the cost of eligible finished goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible finished goods, plus (ii) the lesser of (a) the cost of eligible piece goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible piece goods inventory, or (b) the costs of eligible piece goods inventory, net of reserves, multiplied by the applicable advance rate , plus (iii) the applicable receivables advance rate multiplied by the face amount of eligible trade receivables, net of applicable reserves, plus (iv) the applicable real estate advance rate multiplied by the appraised value of eligible real estate.  The following amounts are then subtracted from that calculation: the reserve for the term loan, an availability block of $900,000, and the amount of any other availability reserves deemed applicable by the agent in certain circumstances.

The Credit Agreement contains customary representations and warranties and, pursuant to the Credit Agreement, we have agreed to certain customary affirmative covenants, including reporting requirements, insurance maintenance requirements, engagement of a financial advisor, compliance with laws and the maintenance of records.  The Credit Agreement provides for certain fees in connection with unused commitments and early termination of the agreement, as well as other fees.  The Credit Agreement also contains customary negative covenants which limit our ability to engage in certain actions without the lender’s consent, including creating additional liens on its properties, making certain investments, guaranteeing or incurring certain debt, repurchasing our common stock, entering into certain mergers or consolidations, paying dividends, making certain investments in other entities, prepaying debt, and making certain property transfers.  The Credit Agreement also provides for customary events of default.

Effective July 24, 2013, we also entered into a Master Agreement (“Master Agreement”) with EPK Financial Corporation, d/b/a King Trade Capital (“King Trade”) that provides for a purchase and sale facility (the “King Trade Facility”).  This facility provides us with additional financing to purchase certain inventory related to our holiday 2013 seasonal gifts business.

In order to receive financing under the King Trade Facility, we must present the transaction to King Trade for its consideration.  King Trade reserves the right to accept or reject proposed transactions.  The King Trade Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by (i) a first priority lien on the goods and related accounts receivable financed by the Company under the King Trade Facility, and (ii) a second priority lien on substantially all of our other assets.

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The Master Agreement contains representations and warranties and covenants that are customary for such financing arrangements.  The maximum aggregate amount permitted to be outstanding under the King Trade Facility is $11.5 million, unless King Trade otherwise agrees.  The amounts payable under the King Trade Facility bear interest at varying rates which depend primarily on the length of time such amounts are outstanding, the amount advanced for each transaction and the aggregate of all amounts advanced.

Interest expense includes interest incurred on our outstanding borrowings, amortization of costs incurred in connection with our credit facilities over the periods of the facilities (2013 - $389,000; 2012 - $196,000).  At June 30, 2013, the remaining debt costs to be amortized were $323,000.

In connection with our new facilities, we incurred $1.3 million in debt costs which will be amortized over the terms of each of the facilities.

Note 5 - Disclosures About Segments Of Our Business And Related Information

We are organized along product categories and have two reportable segments: (1) accessories, which include belts, small leather goods and other products, and (2) gifts.  Each segment is measured by management based on income consisting of net sales less cost of goods sold, product distribution expenses, and royalties utilizing accounting policies consistent in all material respects with those described in Note 2.  No inter-segment revenue is recorded. Assets, related depreciation and amortization, and certain SG&A expenses are not allocated to the segments.

The following table presents operating information by segment and a reconciliation of segment operating income to our consolidated operating loss (in thousands):

	2013			2012
Net sales:
Accessories	$	77,073		$	86,188
Gifts		36,937			31,413
	$	114,010		$	117,601
Segment operating income (loss):
Accessories (1)	$	9,356		$	17,710
Gifts (2)		(972	)		3,010
	$	8,384		$	20,720
Selling, general and administrative expenses		(18,115	)		(20,579	)
Restructuring charges		(3,072	)		-
Depreciation and amortization		(1,818	)		(2,205	)
Intangibles and held for sale impairment		(3,011	)		-
Operating loss	$	(17,632	)	$	(2,064	)

(1)   Accessories’ segment income for fiscal 2013 includes inventory write-downs of $5.4 million.

(2)   Gifts’ segment income for fiscal 2013 includes inventory write-downs of $1.8 million.

Significant customers which accounted for 10% or more of our total net sales were Walmart (2013 and 2012 - 46%) and Kohl’s (2013 – 15%; 2012 – 13%).

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Our net sales, property and equipment, and total assets by geographic location were (in thousands):

	2013		2012
Net sales:
United States	$	105,037	$	107,108
Canada		8,973		10,493
	$	114,010	$	117,601
Property and equipment:
United States	$	3,668	$	4,425
Canada		77		97
Mexico		628		952
	$	4,373	$	5,474
Total assets:
United States	$	28,148	$	47,880
Canada		3,637		5,157
Mexico		3,391		3,419
	$	35,176	$	56,456

Our Canadian subsidiary is part of our accessories segment.  Its sales and income are converted to U.S. dollars at monthly average exchange rates.  Property and equipment and total assets are converted at each fiscal year-end exchange rate.  Our Mexican subsidiary is part of our accessories segment.  Its functional currency is the U.S. dollar and all of the net sales are inter-company and are eliminated in consolidation.

Note 6 - Leases And Royalties

We lease office, warehouse, and manufacturing facilities under noncancellable operating leases expiring through 2020 with varying renewal and escalation clauses.  Our rental expense in fiscal 2013 and 2012 totaled $1.8 million and $1.9 million, respectively.

We have licensing agreements with third parties to use their trademarks on our products.  Royalty expense in fiscal 2013 and 2012 related to these agreements totaled $3.0 million and $2.2 million, respectively.

As of June 30, 2013, future payments under our leases, including additional rents under escalation clauses, and minimum royalty commitments were (in thousands):

Fiscal Year	Rent		Royalty
2014	$	1,228	$	2,399
2015		1,344		2,494
2016		1,304		1,364
2017		1,157		621
2018		1,084		-
Thereafter		3,179		-
	$	9,296	$	6,878

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Note 7 - Income Taxes

Significant components of our net deferred tax assets were (in thousands):

	2013			2012
Net operating loss carryover	$	24,532		$	19,643
Inventory valuation		2,533			1,688
Uncertain tax positions		1,174			1,147
Compensation plans		332			486
Depreciation		152			94
Accounts receivable valuation		554			932
Other, net		1,910			638
		31,187			24,628
Valuation allowance		(30,841	)		(24,486	)
Net	$	346		$	142

Significant components of our income tax expense were (in thousands):

	2013			2012
Current:
Federal	$	-		$	-
State		25			79
Foreign		(142	)		32
		(117	)		111
Deferred:
Federal		(5,719	)		(938	)
State		(531	)		(83	)
Foreign		(318	)		(188	)
Uncertain tax positions		27			147
Valuation allowance		6,355			1,336
		(186	)		274
	$	(303	)	$	385

The federal statutory income tax rate reconciles to our effective income tax rate as follows:

	2013			2012
Statutory rate		(34.0	)%		(34.0	)%
Deferred tax valuation allowance		32.6			40.9
State and foreign taxes net of federal tax benefit		(1.0	)		(5.1	)
Uncertain tax positions		0.1			4.5
Repatriation of foreign earnings		-			3.3
Other, net		0.7			2.2
		(1.6	)%		11.8	%

Our $64.8 million federal income tax net operating loss carryover will expire beginning in 2029. While it is reasonably possible a current examination of state income tax returns for fiscal 1999 through fiscal 2003 involving uncertain tax positions could be resolved within the next twelve months through settlement or administrative proceedings, the potential impact cannot be estimated at this time. Otherwise, the majority of our state income tax returns are no longer subject to examination for years before 2007. U.S. federal income tax returns are no longer subject to examination for years before fiscal 2009 and Canadian income tax returns are no longer subject to examination for years before 2006.

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The following presents information about our unrecognized tax benefits of uncertain tax positions (in thousands).

	2013			2012
Unrecognized tax benefits:
Beginning of year	$	1,477		$	1,530
Decreases in prior years' tax positions		(72	)		(53	)
End of year		1,405			1,477
Accrued interest and penalties		1,920			1,819
Uncertain tax positions liability	$	3,325		$	3,296
Unrecognized tax benefits affecting tax rate if recognized	$	927		$	975
Interest and penalty expense	$	101		$	200

During the first quarter of fiscal 2013, $161,000 of the liability previously recorded for uncertain state tax positions was released from the reserve as it no longer failed to meet the more likely than not threshold.

Note 8 - Intangibles

The following tables present information about the costs we have allocated to finite-lived intangible assets we acquired as part of business acquisitions (in thousands):

	2013			2012
Gross carrying amount	$	10,665		$	10,665
Accumulated amortization		(9,565	)		(6,550	)
	$	1,100		$	4,115

	Net Balance		Weighted-Average Life Remaining
Customer lists	$	841		2.9
Trade brand		259		2.8
Total	$	1,100		2.9

Amortization expense: 2013 - $680; 2012 - $821

Estimated annual amortization expense: 2014 - $423; 2015 - $368; 2016 - $309

As a result of the impairment tests, in connection with our restructuring plan, we recorded a $2.3 million impairment charge (accessories segment), which was included in the intangibles and held for sale impairments line in our consolidated statement of operations.  Due to our strategy to exit certain low-volume and unprofitable products and transition from proprietary to licensed brands, we determined that the life for our previously indefinite-lived trade brand intangible asset was no longer indefinite, and therefore the intangible asset will be amortized over the remaining period in which it is expected to contribute to cash flows, which is three years.

Note 9 - Share-Based Compensation

Omnibus Plan

The Tandy Brands Accessories, Inc. 2012 Omnibus Plan (“Omnibus Plan”), approved by our stockholders in 2012, is designed to attract and retain the services of key management employees and members of our board of directors through the granting of incentive stock options (other than to directors), nonqualified stock options, performance units, stock appreciation rights, or restricted stock.  Restricted stock and stock option awards under the Omnibus Plan and prior stock option plans have a maximum contractual life of ten years and specific vesting terms and performance goals are addressed in each equity award grant.  All shares which were available for grant under our prior plans have been transferred to the Omnibus Plan and are authorized and reserved for issuance under the Omnibus Plan.  All shares of common stock presently authorized and reserved for issuance on the exercise of stock options or vesting of restricted stock will automatically be authorized and reserved for issuance under the Omnibus Plan on their cancellation, forfeiture, or expiration up to a maximum of 736,326 shares.  At June 30, 2013, there were 694,706 shares of common stock available for future grants.

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A committee of non-employee members of our board of directors may grant awards to directors and employees.  Shares issued to satisfy awards may be from authorized but unissued common stock, treasury stock, or shares purchased on the open market.  Currently, we issue new shares under the Omnibus Plan.

Awards Granted

Restricted StockRestricted stock awards are not transferable, but bear rights of ownership including voting and dividend rights.  Awards to our non-employee directors vest annually at a rate of one-third per year, beginning one year after the grant date.  However, upon the death, disability, resignation, or termination of a non-employee director, that director’s shares generally become fully vested.  Consequently, there is no requisite service period and the fair value of the awards is expensed on the award date.  Restricted stock awarded to employees either cliff vests on the third anniversary of the award or vests at a rate of one-third per year.  The requisite service periods are either the vesting period or the total period over which multiple-tranche awards vest.  Although there are no performance requirements related to the vesting of restricted stock awarded to employees, participants must be continually employed through the vesting period.  We estimate the fair value of restricted stock awards to be the market price of our common stock on the award date.  As of June 30, 2013, no restricted stock awards granted to employees were outstanding.

	Number Of Shares			Weighted-Average Grant-Date Fair Value
Nonvested June 30, 2012		35,218		$	2.25
Granted		32,000			1.43
Vested		(15,588	)		2.45
Nonvested June 30, 2013		51,630			1.68

Restricted stock fair values on the vesting dates in fiscal 2013 and 2012 were $20,000 and $78,000, respectively.

Stock OptionsStock options granted to our non-employee directors are nonqualified and become fully vested six months after the grant date, the requisite service period.  Nonqualified options granted to employees vest annually at a rate of one-third per year, beginning one year after the grant date, and have a three-year requisite service period.

The exercise prices of our stock options are the grant-date market values of our common stock.  Their fair value is estimated using the Black-Scholes valuation model.  That model is used to estimate the fair value of traded options that have no vesting restrictions and are fully transferable.  Option valuation models require the input of highly subjective assumptions.  Because our stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect fair value estimates.

				Weighted-Average				Aggregate
	Number Of Shares			Exercise  Price		Remaining Contractual Term (Years)		Intrinsic Value ($000)
Outstanding June 30, 2012		269,316		$	10.22
Granted		35,000			1.40
Forfeited and cancelled		(199,319	)		9.74
Outstanding June 30, 2013		104,997			8.20
Vested and expected to vest		104,997			8.20		4.2	$	-
Exercisable		83,331			9.95		3.0		-

Performance Units  Performance units outstanding as of June 30, 2013 were awarded to certain employees in fiscal 2013.  For the award, the units earned during the applicable performance cycle vary from 0% to 200% of the units awarded based on our basic earnings per share for each year in the performance cycle, excluding the effects of accounting principles changes, extraordinary items, recognized capital gains and losses and, as determined by our board of directors, one-time, non-operating items.  Performance units generally cliff vest at the end of the applicable performance cycle.  Assuming continued employment, if, at the end of the performance cycle, at least the threshold performance level has been achieved, the performance units will cliff vest.  Notwithstanding the foregoing, employees vest in a portion of units earned based on the number of fiscal years employed during the cycle upon death, disability, or normal (age 65) or early (age 55 and 15 years service) retirement and, upon a change of control, employees vest in 100% of the units awarded under the fiscal 2013 awards.

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Each performance unit has a $1.00 assigned value.  To the extent earned, performance units awarded are comprised 50% of cash and 50% of phantom shares of our common stock and, to the extent earned following the end of the two-year performance period, will generally be settled in cash (if shares are available under our benefit plans, the Board may, in its discretion, settle the phantom shares attributable to an award in shares of our common stock).

As of June 30, 2013, we expect none of the 950,000 units granted in fiscal 2013 to vest and be paid because performance measures for the two year period were either not met or are not expected to be met.

Expense  Share-based compensation expense of ($110,000) and $169,000 was recognized in fiscal 2013 and 2012, respectively, together with income tax benefits of ($41,000) and $62,000, respectively.  Estimated unrecognized expense of $11,000 remained at June 30, 2013 to be recognized over a weighted-average period of 1.7 years.  The number of stock options and performance units expected to vest in determining compensation expense to be recognized were estimated based on employment termination, forfeiture patterns, and actual and estimated earnings per share.

Note 10 - Employee Benefit Plans

401(k) PlanOur 401(k) Plan, also known as the Employees Investment Plan, is open to substantially all of our full-time employees.  Participants may contribute up to 35% of their eligible annual compensation as elective pretax and Roth contributions to the 401(k) Plan, subject to IRS limits.  For each participant who elects to make elective deferrals under the 401(k) Plan during the plan year, we make safe-harbor contributions to the plan equal to 100% of the first 3% of the participant’s eligible annual compensation contributed for the plan year plus 50% of the next 2% of the participant’s eligible annual compensation contributed for the plan year, for a maximum safe harbor matching contribution equal to 4% of the participant’s eligible annual compensation.  The 401(k) Plan allows participants to direct the investment of both employee and matching employer contributions from a variety of investment alternatives, one of which is our common stock.  Our total contributions to our 401(k) Plan were $291,000 and $347,000 in fiscal 2013 and 2012, respectively.

Note 11 - Director Stock Deferral Plan

The 1995 Stock Deferral Plan for Non-Employee Directors (“Deferral Plan”) provides non-employee directors with an opportunity to defer receipt of their fees until a future date determined by each director.  We record compensation expense for the amount of the deferred fees which are credited, together with dividend equivalents, to an account we maintain in phantom stock units equivalent in value to our common stock.  The payment of deferred fees will be settled in shares of our common stock or, at our option, in cash based on the then current market price of our stock.  No director is currently deferring fees and changes in the market value of our common stock affected the value of previously deferred amounts by ($20,000) and ($15,000) in fiscal 2013 and 2012, respectively.  At June 30, 2013, there were 28,375 shares of common stock available for settlement of future deferrals.

Note 12 - Preferred Stock

Without any further action by the holders of our common stock, our board of directors is authorized to approve and determine the issuance of preferred stock, as well as the dividend rights, dividend rate, conversion or exchange rights, voting rights, rights and terms of redemption, liquidation preferences and sinking fund terms of any series of preferred stock, the number of shares constituting any series of preferred stock and the designation thereof.  No shares of preferred stock have been issued.  Should preferred stock be issued, the rights, preferences, and privileges of holders of our common stock would be made subject to the rights, preferences, and privileges of the preferred stock.

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Note 13 – Loss Per Share

Our basic and diluted losses per common share are computed as follows (in thousands except per share amounts):

	2013			2012
Numerator for basic and diluted earnings per share:
Net loss	$	(19,177	)	$	(3,652	)
Denominator for basic and diluted earnings per share		7,131			7,075
Loss per common share	$	(2.69	)	$	(0.52	)
Loss per common share assuming dilution	$	(2.69	)	$	(0.52	)

Potentially dilutive securities which could have had an antidilutive effect on our losses per share were (in thousands except per share amounts):

	2013		2012
Stock options (exercise prices per share: 2013 - $1.40 to $15.60; 2012 - $1.98 to $15.60)		132		277

Note 14 – Subsequent Events

Effective July 24, 2013, we entered into new credit facilities with two lenders, Salus and King Trade.

In connection with the entry into these credit arrangements, we also entered into agreements with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. Generally, the arrangements with these parties consist of the agreement (i) to pay a portion of the outstanding amount owed within specified time periods following the closing of the Credit Facility, and (ii) to pay the remainder of the outstanding amounts pursuant to unsecured, subordinated promissory notes. The aggregate amount financed through the use of the unsecured, subordinated promissory notes is $8.9 million and such notes bear interest at varying interest rates. Although the individual notes contain varying payment terms, the final principal and interest under such notes is due either July 15, 2014 or July 15, 2015.

On August 27, 2013 we announced the appointment of Roger R. Hemminghaus, a director since June 2000 and our lead independent director, as Chief Executive Officer and Chairman and a new plan of responsibilities for existing members of the management team, both of which were in response to the resignation of Rod McGeachy, our previous Chairman, Chief Executive Officer and President.

In connection with our March 2013 restructuring plan we ceased development and marketing of gifts under the Sharper Image® license and recognized all future obligations ($895,000) as set forth in the original license agreement.  In August 2013, we entered into a settlement agreement for the Sharper Image® license in which we would pay $350,000 to settle all remaining contractual obligations and terminate the license.  As a result of this settlement, we recognized a gain of $545,000 during first quarter fiscal 2014.

On September 26, 2013 we, along with our subsidiaries, H.A. Sheldon Canada, Ltd. and TBAC Investment Trust, and our senior lender Salus Capital Partners LLC, entered into a First Amendment to Credit Agreement, dated July 24, 2013 (the “Amendment”).  Pursuant to the Amendment, our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A - CONTROLS AND PROCEDURES

Disclosure Controls And Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2013.

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Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company.  Our internal control over financial reporting is a process designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  Our control environment is the foundation for our system of internal control over financial reporting and is an integral part of our Code of Business Conduct and Ethics which sets the tone for our directors, officers, and employees.  Our internal control over financial reporting includes policies and procedures: (1) pertaining to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) providing reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with U.S. generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our directors and management; and (3) providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

In order to assess the effectiveness of our internal control over financial reporting as of June 30, 2013 as required by Section 404 of the Sarbanes-Oxley Act of 2002, we conducted an evaluation of the effectiveness of our internal control over financial reporting under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, which included testing based on the criteria set forth in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”).  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.  Based on that assessment, we determined that our internal control over financial reporting was effective as of June 30, 2013.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, as amended by Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits us to provide only management’s report in this Annual Report.

Changes In Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the fourth quarter of fiscal 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B - OTHER INFORMATION

None.

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PART III

The information required by Items 10 through 14 of this Annual Report on Form 10-K, and not otherwise disclosed in this Annual Report, will be included in our definitive Proxy Statement relating to our 2013 Annual Meeting of Stockholders and will be  incorporated herein by reference.  Such information and its location in the Proxy Statement are as follows:

Item	Caption In The Tandy Brands Accessories, Inc. 2013 Proxy Statement
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	“Items of Business to be Acted on at the Meeting - Proposal One:  Election of Directors – Biographical and Other Information Regarding Our Nominees for Re-Election to Our Board of Directors” “Executive Officers” “Items of Business to be Acted on at the Meeting - Proposal One:  Election of Directors - Corporate Governance Information” “Section 16(a) Beneficial Ownership Reporting Compliance”
ITEM 11 - EXECUTIVE COMPENSATION	“Executive Compensation” “Items of Business to be Acted on at the Meeting - Proposal One:  Election of Directors - Director Compensation” “Items of Business to be Acted on at the Meeting – Proposal One:  Election of Directors – Corporate Governance Information – Compensation Committee”
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	“Security Ownership of Certain Beneficial Owners”
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	“Items of Business to be Acted on at the Meeting - Proposal One:  Election of Directors - Corporate Governance Information”
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES	“Items of Business to be Acted on at the Meeting - Proposal Two:  Ratification of Independent Auditor – Background"

43

PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

The following financial statements are included in Item 8 of this Annual Report:

· Consolidated Balance Sheets as of June 30, 2013 and 2012

· Consolidated Statements of Operations for the years ended June 30, 2013 and 2012

· Consolidated Statements of Cash Flows for the years ended June 30, 2013 and 2012

· Consolidated Statements of Stockholders' Equity for the years ended June 30, 2013 and 2012

Financial Statement Schedules

Financial statement schedules have been omitted because they either are not applicable or the required information is included in the consolidated financial statements or notes thereto.

Exhibits

The Exhibit Index immediately preceding the exhibits required to be filed with this report is incorporated herein by reference.

44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Roger R. Hemminghaus
Date: September 27, 2013	Roger R. Hemminghaus Chief Executive Officer

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

Name	Position	Date
/s/ Roger R. Hemminghaus	Director, Chairman of the Board,	September 27, 2013
Roger R. Hemminghaus	and Chief Executive Officer (principal executive officer)
/s/Lisbeth R. McNabb	Director	September 27, 2013
Lisbeth R. McNabb
/s/Colombe M. Nicholas	Director	September 27, 2013
Colombe M. Nicholas
/s/William D. Summitt	Director	September 27, 2013
William D. Summitt
/s/Joseph C. Talley	Chief Financial Officer	September 27, 2013
Joseph C. Talley	(principal financial and accounting officer )

45

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
	Exhibit Number and Description		Form	Date	File No.	Exhibit
(3)	Articles of Incorporation and Bylaws
	3.1	Certificate of Incorporation of Tandy Brands Accessories, Inc.	S-1	11/02/90	33-37588	3.1
	3.2	Certificate of Amendment of the Certificate of Incorporation of Tandy Brands Accessories, Inc.	8-K	11/02/07	0-18927	3.1
	3.3	Amended and Restated Bylaws of Tandy Brands Accessories, Inc., effective July 2007	8-K	7/13/07	0-18927	3.01
	3.4	Amendment No. 1 to Amended and Restated Bylaws of Tandy Brands Accessories, Inc.	8-K	11/02/07	0-18927	3.2
(4)	Instruments Defining the Rights of Security Holders, Including Indentures
	4.1	Form of Common Stock Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588	4.2
	4.2	Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock of Tandy Brands Accessories, Inc.	8-K	10/24/07	0-18927	3.1
	4.3	Credit Agreement by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 25, 2011	10-K/A	4/19/12	0-18927	4.8
	4.4	Amendment No. 1 to Credit Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of January 20, 2012	10-Q	2/10/12	0-18927	4.9
	4.5	Amendment No. 2 to Credit and Security Agreement dated as of August 25, 2011 and Waiver by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of May 11, 2012	10-Q	5/14/12	0-18927	4.5
	4.6	Amendment No. 3 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of June 5, 2012	10-K	9/4/12	0-18927	4.11
	4.7	Amendment No. 4 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 9, 2012	10-K	9/4/12	0-18927	4.12

46

4.8	Amendment No. 5 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 29, 2012	10-K	9/4/12	0-18927	4.13
4.9	Amendment No. 6 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of November 12, 2012	10-Q	11/14/12	0-18927	4.9
4.10	Amendment No. 7 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of April 11, 2013	10-Q	4/17/13	0-18927	4.10
4.11	Amendment No. 8 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of May 30, 2013**	N/A	N/A	N/A	N/A
4.12	Amendment No. 9 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of June 28, 2013**	N/A	N/A	N/A	N/A
4.13	Credit Agreement by and among Tandy Brands Accessories, Inc., H.A. Sheldon Canada, Ltd., TBAC Investment Trust, and Salus Capital Partners LLC dated as of July 24, 2013**	N/A	N/A	N/A	N/A
4.14	Master Agreement by and between Tandy Brands Accessories, Inc. and EPK Financial Corporation, d/b/a King Trade Capital, dated as of July 24, 2013**	N/A	N/A	N/A	N/A
4.15	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 23, 2013 to Eddie Bauer Licensing Services Inc.**	N/A	N/A	N/A	N/A
4.16	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 23, 2013 to totes ISOTONER Corporation**	N/A	N/A	N/A	N/A
4.17	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 17, 2013 to Ocean Ken International Limited**	N/A	N/A	N/A	N/A
4.18	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 18, 2013 Ample Sources Industries Limited**	N/A	N/A	N/A	N/A
4.19	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 22, 2013 Best Development Company (Hong Kong) Limited**	N/A	N/A	N/A	N/A

47

	4.20	Amendment No. 1 to Credit Agreement dated as of July 24, 2013 by and among Tandy Brands Accessories, Inc., H.A. Sheldon Canada, Ltd., TBAC Investment Trust, and Salus Capital Partners LLC dated as of September 26, 2013**	N/A	N/A	N/A	N/A
(10)	Material Contracts
	10.1	Form of Indemnification Agreement between Tandy Brands Accessories, Inc. and certain of its Directors	S-1	12/17/90	33-37588	10.16
	10.2	Tandy Brands Accessories, Inc. Nonqualified Formula Stock Option Plan for Non-Employee Directors*	S-8	2/10/94	33-75114	28.1
	10.3	Amendment No. 4 to the Tandy Brands Accessories, Inc. Nonqualified Formula Stock Option Plan For Non-Employee  Directors*	10-Q	5/10/02	0-18927	10.39
	10.4	Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors*	S-8	6/03/96	333-08579	99.1
	10.5	Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-Q	11/12/02	0-18927	10.24
	10.6	Form of Non-Employee Director Nonqualified Stock Option Agreement pursuant to the Tandy Brands   Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927	10.39
	10.7	Form of Employee Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927	10.40
	10.8	Form of Non-Employee Director Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927	10.41
	10.9	Form of Employee Restricted Stock  Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927	10.42
	10.10	Amendment No. 2 to the Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors*	10-K	9/22/06	0-18927	10.35
	10.11	Amendment No. 1 to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/21/07	0-18927	10.38
	10.12	Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan with N. Roderick McGeachy, III dated October 1, 2008*	10-Q	11/10/08	0-18927	10.2

48

10.13 Amendment No. 2 to the Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors dated December 31, 2008* 10-Q 2/4/09 0-18927 10.2

10.14	Form of Tandy Brands Accessories, Inc. Fiscal 2014 Performance Unit Award Agreement* **	N/A	N/A	N/A	N/A
10.15	Summary of Fiscal 2013 Management Incentive Plan for Tandy Brands Accessories, Inc.*	8-K	7/2/12	0-18927	10.1
10.16	Summary of 2013 Long-Term Incentive Program for Tandy Brands Accessories, Inc.*	8-K	7/2/12	0-18927	10.2
10.17	Agreement to Provide Severance Pay by and between Tandy Brands Accessories, Inc. and N. Roderick McGeachy, III dated as of April 22, 2010*	10-Q	5/13/10	0-18927	10.1
10.18	Change of Control Agreement by and between Tandy Brands Accessories, Inc. and N. Roderick McGeachy, III dated as of April 22, 2010*	10-Q	5/13/10	0-18927	10.2
10.19	Industrial Lease Agreement between Pinnacle Industrial Center Limited Partnership, as Landlord, and Tandy Brands Accessories, Inc., as Tenant, dated September 24, 1999; First Amendment to Industrial Lease Agreement dated January 5, 2000; Second Amendment to Industrial Lease Agreement with Pinnacle Industrial Dallas, Inc. dated September 4, 2003; Third Amendment to Industrial Lease Agreement dated August 24, 2009 with The Realty Associates Fund VII, L.P.; Fourth Amendment to Industrial Lease Agreement dated October 6, 2009	10-K	8/26/10	0-18927	10.32
10.20	Form of Tandy Brands Accessories, Inc. Fiscal 2011 Performance Unit Award Agreement*	10-K	8/26/10	0-18927	10.33
10.21	Form of Tandy Brands Accessories, Inc. Fiscal 2012 Performance Unit Award Agreement*	10-K	9/1/11	0-18927	10.34
10.22	Credit Agreement by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 25, 2011	10-K/A	4/19/12	0-18927	4.8
10.23	Amendment No. 1 to Credit Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of January 20, 2012	10-Q	2/10/12	0-18927	4.9
10.24	Amendment No. 2 to Credit and Security Agreement dated as of August 25, 2011 and Waiver by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of May 11, 2012	10-Q	5/14/12	0-18927	4.5

49

10.25	Amendment No. 3 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of June 5, 2012	10-K	9/4/12	0-18927	4.11
10.26	Amendment No. 4 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 9, 2012	10-K	9/4/12	0-18927	4.12
10.27	Amendment No. 5 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of August 29, 2012	10-K	9/4/12	0-18927	4.13
10.28	Amendment No. 6 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of November 12, 2012	10-Q	11/14/12	0-18927	4.9
10.29	Amendment No. 7 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of April 11, 2013	10-Q	4/17/13	0-18927	4.10
10.30	Amendment No. 8 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of May 30, 2013**	N/A	N/A	N/A	N/A
10.31	Amendment No. 9 to Credit and Security Agreement dated as of August 25, 2011 by and between Tandy Brands Accessories, Inc. and Wells Fargo Bank dated as of June 28, 2013**	N/A	N/A	N/A	N/A
10.32	Form of Non-Employee Director Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (2011)*	10-K	9/1/11	0-18927	10.39
10.33	Form of Non-Employee Director Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2012 Omnibus Plan* **	N/A	N/A	N/A	N/A

50

10.34	Severance Pay Agreement between Robert J. McCarten and Tandy Brands Accessories, Inc., effective February 20, 2012*	10/K	9/4/12	0-18927	10.39
10.35	Severance Pay Agreement between Joseph C. Talley and Tandy Brands Accessories, Inc., effective February 20, 2012*	10-K	9/4/12	0-18927	10.41
10.36	Credit Agreement by and among Tandy Brands Accessories, Inc., H.A. Sheldon Canada, Ltd., TBAC Investment Trust, and Salus Capital Partners LLC dated as of July 24, 2013**	N/A	N/A	N/A	N/A
10.37	Master Agreement by and between Tandy Brands Accessories, Inc. and EPK Financial Corporation, d/b/a King Trade Capital, dated as of July 24, 2013**	N/A	N/A	N/A	N/A
10.38	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 23, 2013 to Eddie Bauer Licensing Services Inc.**	N/A	N/A	N/A	N/A
10.39	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 23, 2013 to totes ISOTONER Corporation**	N/A	N/A	N/A	N/A
10.40	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 17, 2013 to Ocean Ken International Limited**	N/A	N/A	N/A	N/A
10.41	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 18, 2013 Ample Sources Industries Limited**	N/A	N/A	N/A	N/A
10.42	Subordinated Promissory Note, made by Tandy Brands Accessories, Inc. and issued as of July 22, 2013 Best Development Company (Hong Kong) Limited**	N/A	N/A	N/A	N/A
10.43	Amendment No. 1 to Credit Agreement dated as of July 24, 2013 by and among Tandy Brands Accessories, Inc., H.A. Sheldon Canada, Ltd., TBAC Investment Trust, and Salus Capital Partners LLC dated as of September 26, 2013**	N/A	N/A	N/A	N/A

51

(21)	Subsidiaries of the Registrant
	21.1	List of Subsidiaries**	N/A	N/A	N/A	N/A
(23)	Consents of Experts and Counsel
	23.1	Consent of Grant Thornton LLP**	N/A	N/A	N/A	N/A
(31)	Rule 13a-14(a)/15d-14(a) Certifications
	31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Principal Executive Officer)**	N/A	N/A	N/A	N/A
	31.2	Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Principal Financial Officer)**	N/A	N/A	N/A	N/A
(32)	Section 1350 Certifications
	32.1	Section 1350 Certifications (Principal Executive Officer and Principal Financial Officer)**	N/A	N/A	N/A	N/A
(101)	Interactive Data Files***
		101.INS  XBRL Instance**
		101.SCH XBRL Taxonomy Extension Schema**
		101.CAL XBRL Taxonomy Extension Calculation**
		101.LAB XBRL Taxonomy Extension Labels**
		101.PRE XBRL Taxonomy Extension Presentation**
		101.DEF XBRL Taxonomy Extension Definition**

____________________

*	Management contract or compensatory plan
**	Filed herewith
***	In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing

52

EX-4.11

Exhibit 4.11 and 10.30

EIGHTH AMENDMENT TO CREDIT AND

SECURITY AGREEMENT

THIS EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) executed as of May 30, 2013, is by and among Tandy Brands Accessories, Inc., a Delaware corporation (“Parent”), H.A. Sheldon Canada Ltd., an Ontario corporation (“HA Sheldon”; Parent and HA Sheldon are herein collectively called “Company”), Wells Fargo Bank, National Association (“Wells Fargo”), acting through its Wells Fargo Business Credit operating division, and TBAC Investment Trust, a Pennsylvania business trust, and TBAC-TOREL, Inc., a Delaware corporation, consenting to this Amendment and ratifying their respective Guaranties (as defined in the Credit Agreement) each dated of even date with the Credit Agreement (defined below).

W I T N E S S E T H:

WHEREAS, Company and Wells Fargo entered into that certain Credit and Security Agreement dated as of August 25, 2011 (as heretofore amended, supplemented or otherwise modified, the “Original Credit Agreement”, and as amended hereby, the “Credit Agreement”), for  the purposes and consideration therein expressed, pursuant to which Wells Fargo became obligated to make loans to the Company as therein provided;

WHEREAS, the Company and Wells Fargo desire to amend the Original Credit Agreement as provided herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Credit Agreement, in consideration of the loans made and which may hereafter be made by Wells Fargo to Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1Terms Defined in the Original Credit Agreement.  Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Credit Agreement shall have the same meanings whenever used in this Amendment.

ARTICLE II

AMENDMENTS TO ORIGINAL CREDIT AGREEMENT

Section 2.1Amendment to Maximum Capital Expenditures Covenant.  Section 5.2(c) of the Original Credit Agreement is hereby amended in its entirety to read as follows:

“(c) Maximum Capital Expenditures.  Company shall not incur or contract to incur Capital Expenditures of more than $25,000 in the aggregate from May 30, 2013 through the Maturity Date.”

Section 2.2Amendment to Proof of Ownership of Real Property.  Section 5.9 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Page 1

“5.9 Title.  Parent shall, not later than June 28, 2013, provide (i) evidence satisfactory to Wells Fargo as to its ownership, subject to no Liens other than Permitted Liens, of the real property located at 500 Airport Road and 502 Airport Road, Yoakum, Texas in Lavaca County or (ii) a fully paid Loan Policy of Title Insurance (Form T-2) on the standard form in use in the State of Texas in an amount  reasonably acceptable to the Lender insuring that the Deed of Trust covering the property located at 500 Airport Road and 502 Airport Road, Yoakum, Texas in Lavaca County constitutes a valid lien against the land and all improvements thereon, with endorsements reasonably acceptable to the Lender.”

Section 2.3Additional Covenants.  Section 5.33 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

“5.33 Capital Contribution; Refinance.  On or before 5:00 p.m. (Dallas, Texas time) on June 28, 2013, Company shall either (a) provide evidence satisfactory to Wells Fargo that Parent shall have received additional cash equity in the amount of $10,000,000 or more, which such amounts may be through contributions made by one or more current or new equity holders of Parent so long as any such contributions shall be made in compliance with the other terms, conditions and covenants contained in this Agreement; or (b) pay the Indebtedness in full and terminate this Agreement, in which event Company shall not be required to provide advance notice of such termination as required in Section 1.10, nor shall it be required to pay the termination fee set forth in Section 1.8(d) (which such fee is hereby waived by Wells Fargo if such prepayment is made pursuant to this Section 5.33(b)) (the date on which either Subsection (a) or (b) of this Section 5.33 is satisfied is referred to herein as the “Refinance/Contribution Date”).  Failure to comply with this Section 5.33 shall constitute an immediate Event of Default under Section 6.1(b)(ii) with no cure period.”

ARTICLE III

AMENDMENT FEE

Section 3.1Amendment Fee.  Wells Fargo acknowledges receipt of $100,000 of the amendment fee payable pursuant to Section 4.1 of the Seventh Amendment to Credit and Security Agreement dated as of April 11, 2013.  The due date for the remaining $100,000 payable to Wells Fargo pursuant to such section is hereby extended from May 31, 2013 to the earlier of (i) June 28, 2013 or (ii) the Refinance/Contribution Date.

ARTICLE IV

CONDITIONS OF EFFECTIVENESS

Section 4.1Effective Date.  This Amendment shall become effective as of the date first written above (the “Effective Date”) when and only when each of the following conditions precedent shall have been satisfied in full:

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Page 2

(a)Wells Fargo shall have received, at Wells Fargo’s office a duly executed counterpart by each of Parent and HA Sheldon of this Amendment and a duly executed counterpart of the attached acknowledgement and consent by TBAC Investment Trust and TBAC-TOREL, Inc.;

(b)Company shall have paid to Wells Fargo all outstanding fees and expenses owing to Wells Fargo under the Loan Documents as of such date;

(c)The representations and warranties contained herein and in the Credit Agreement and other Loan Documents are true and correct with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect to the amendments and waiver contemplated hereby, except to the extent such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) or changes resulting from transactions expressly permitted under the Credit Agreement or other Loan Documents; and

(d)No Event of Default or other event which with the giving of notice or passing of time, or both, would constitute an Event of Default, shall have occurred and be continuing, other than the Specified Events of Default prior to their waiver hereof.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.1Representations and Warranties of Company.  In order to induce Wells Fargo to enter into this Amendment, each of Parent and HA Sheldon hereby represents and warrants to Wells Fargo that:

(a)After giving effect to this Amendment, the representations and warranties contained in the Original Credit Agreement are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate in all material respects on and as of such earlier date) or changes resulting from transactions expressly permitted under the Credit Agreement or other Loan Documents.

(b)Each such Person is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to perform its obligations under the Credit Agreement and the other Loan Documents to which it is a party and such Person is and will continue to be duly authorized to borrow under the Credit Agreement.  Each such Person has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of their respective obligations hereunder.

(c)The execution and delivery by such Person of this Amendment, the performance by it of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of its articles of incorporation or bylaws, or of any agreement, judgment, license, order or permit applicable to or binding upon it.  Except for those which have been duly obtained and are in full

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Page 3

force and effect, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by such Person of this Amendment or to consummate the transactions contemplated hereby.

(d)When duly executed and delivered, this Amendment will be a legal and binding instrument and agreement of Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency and similar laws applying to creditors’ rights generally and by principles of equity applying to creditors’ rights generally.

ARTICLE VI

MISCELLANEOUS

Section 6.1Ratification of Agreement.  The Original Credit Agreement as hereby amended is hereby ratified and confirmed in all respects.  This Amendment shall constitute a “Loan Document” under and as defined in the Credit Agreement in all respects and for all purposes.  Any reference to the Credit Agreement in any Loan Document shall be deemed to refer to the Original Credit Agreement as amended by this Amendment also.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Wells Fargo under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document.

Section 6.2Survival of Agreements.  All representations, warranties, covenants and agreements of Company herein shall survive the execution and delivery of this Amendment and the performance hereof, and shall further survive until all of the Indebtedness is paid in full.  All statements and agreements contained in any certificate or instrument delivered by Company and any Guarantors hereunder or under the Credit Agreement to Wells Fargo shall be deemed to constitute representations and warranties by, or agreements and covenants of, such Person or any such Guarantor, as applicable, under this Amendment and under the Credit Agreement.

Section 6.3Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable; provided that the parties hereto shall endeavor in good faith to promptly replace any such invalid or unenforceable provisions with substantially similar provisions that are enforceable.

Section 6.4Further Assurances.  Each of Parent and HA Sheldon hereby agrees to establish, make, prepare, execute, deliver, file, amend, authorize, ratify, affirm and/or approve any and all agreements, instruments, notes, waivers, consents, licenses, accounts and other documents, and take any and all other actions and do all other things necessary or desirable to consummate or otherwise give effect to the transactions and grant of security contemplated by this Amendment and the Credit Agreement.

Section 6.5GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (OTHER THAN CONFLICT LAWS) OF THE STATE OF TEXAS.  THE PARTIES TO THIS AMENDMENT (A) CONSENT TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Page 4

STATE OF TEXAS IN CONNECTION WITH ANY CONTROVERSY RELATED TO THIS AMENDMENT; (B) WAIVE ANY ARGUMENT THAT VENUE IN ANY SUCH FORUM IS NOT CONVENIENT; (C) AGREE THAT ANY LITIGATION INITIATED BY WELLS FARGO OR COMPANY IN CONNECTION WITH THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS MAY BE VENUED IN EITHER THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF DALLAS, STATE OF TEXAS; AND (D) AGREE THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AMENDMENT.

Section 6.6Counterparts; Fax.  This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment.  This Amendment may be duly executed and delivered by facsimile transmission, electronic mail or other electronic means.

Section 6.7FINAL AGREEMENT.  THIS AMENDMENT TOGETHER WITH THE OTHER LOAN DOCUMENTS COMPRISES THE COMPLETE AND INTEGRATED AGREEMENT OF THE PARTIES ON THE SUBJECT MATTER OF THIS AMENDMENT AND SUPERSEDES ALL PRIOR AGREEMENTS, WHETHER ORAL OR EVIDENCED IN A RECORD.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[The remainder of this page is intentionally left blank.]

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Page 5

IN WITNESS WHEREOF, the undersigned by their respective duly authorized officers thereunto have executed and delivered this Amendment as of the date first above written.

TANDY BRANDS ACCESSORIES, INC.
By:
	Name:
	Title:
H.A. SHELDON CANADA, LTD.
By:
	Name:
	Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
	Name:
	Title:

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Signature Page to Consent and Ratification

Each of the undersigned by their respective signatures hereunto acknowledges its receipt and review of this Amendment and hereby consents to the execution and delivery of, and the terms of, this Amendment and hereby ratifies and confirms their respective Guaranty and the obligations guarantied thereunder in all respects and for all purposes.

TBAC INVESTMENT TRUST
By:
	not in his/her individual capacity, but solely as Trustee
TBAC-TOREL, INC.
By:
	Name:	N. Roderick McGeachy, III
	Title:	President and Chief Executive Officer

EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT - Signature Page to Consent and Ratification

EX-4.12

Exhibit 4.12 and 10.31

NINTH AMENDMENT TO CREDIT AND

SECURITY AGREEMENT

THIS NINTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) executed as of June 28, 2013, is by and among Tandy Brands Accessories, Inc., a Delaware corporation (“Parent”), H.A. Sheldon Canada Ltd., an Ontario corporation (“HA Sheldon”; Parent and HA Sheldon are herein collectively called “Company”), Wells Fargo Bank, National Association (“Wells Fargo”), acting through its Wells Fargo Business Credit operating division, and TBAC Investment Trust, a Pennsylvania business trust, and TBAC-TOREL, Inc., a Delaware corporation, consenting to this Amendment and ratifying their respective Guaranties (as defined in the Credit Agreement) each dated of even date with the Credit Agreement (defined below).

W I T N E S S E T H:

WHEREAS, Company and Wells Fargo entered into that certain Credit and Security Agreement dated as of August 25, 2011 (as heretofore amended, supplemented or otherwise modified, the “Original Credit Agreement”, and as amended hereby, the “Credit Agreement”), for  the purposes and consideration therein expressed, pursuant to which Wells Fargo became obligated to make loans to the Company as therein provided;

WHEREAS, the Company and Wells Fargo desire to amend the Original Credit Agreement as provided herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Credit Agreement, in consideration of the loans made and which may hereafter be made by Wells Fargo to Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1Terms Defined in the Original Credit Agreement.  Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Credit Agreement shall have the same meanings whenever used in this Amendment.

ARTICLE II

AMENDMENTS TO ORIGINAL CREDIT AGREEMENT

Section 2.1Amendment to Advance Rate on Inventory.  Subclause (1)(A) of clause (iii) of Section 1.2(a) of the Original Credit Agreement is hereby amended to read as follows:

“(1) (A) during the months of January through May and December of calendar year 2012 and the months of January through August and December of any other calendar year, 39.0% (or such lesser percentage as Wells Fargo in its Permitted Discretion may deem appropriate) of Eligible Inventory”

Page 1

Section 2.2Amendment to Proof of Ownership of Real Property.  The phrase “June 28, 2013” in the first line of Section 5.9 of the Original Credit Agreement is hereby amended to read “July 31, 2013”.

Section 2.3Capital Contribution.  The phrase “June 28, 2013” in the second line of Section 5.33 of the Original Credit Agreement is hereby amended to read “July 31, 2013”.

ARTICLE III

AMENDMENT FEE

Section 3.1Amendment Fee.  In consideration of Wells Fargo’s agreement to enter into this Amendment, Company shall pay to Wells Fargo an amendment fee equal to $25,000 (the “Ninth Amendment Fee”), which amount is fully earned as of the Effective Date and is payable in immediately available funds on or prior to July 31, 2013; provided that, Wells Fargo hereby agrees to waive payment of the Ninth Amendment Fee if the Refinance/Contribution Date occurs on or prior to July 31, 2013.

ARTICLE IV

CONDITIONS OF EFFECTIVENESS

Section 4.1Effective Date.  This Amendment shall become effective as of the date first written above (the “Effective Date”) when and only when each of the following conditions precedent shall have been satisfied in full:

(a)Wells Fargo shall have received, at Wells Fargo’s office a duly executed counterpart by each of Parent and HA Sheldon of this Amendment and a duly executed counterpart of the attached acknowledgement and consent by TBAC Investment Trust and TBAC-TOREL, Inc.;

(b)Company shall have paid to Wells Fargo all outstanding fees and expenses owing to Wells Fargo under the Loan Documents as of such date, in immediately available funds, including without limitation the remaining $100,000, amendment fee payable to Wells Fargo pursuant to Section 4.1 of the Seventh Amendment to Credit and Security Agreement dated as of April 11, 2013, as amended by the Eighth Amendment to Credit and Security Agreement dated as of May 30, 2013;

(c)The representations and warranties contained herein and in the Credit Agreement and other Loan Documents are true and correct with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect to the amendments and waiver contemplated hereby, except to the extent such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) or changes resulting from transactions expressly permitted under the Credit Agreement or other Loan Documents; and

(d)No Event of Default or other event which with the giving of notice or passing of time, or both, would constitute an Event of Default, shall have occurred and be continuing, prior to their waiver hereof.

Page 2

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.1Representations and Warranties of Company.  In order to induce Wells Fargo to enter into this Amendment, each of Parent and HA Sheldon hereby represents and warrants to Wells Fargo that:

(a)After giving effect to this Amendment, the representations and warranties contained in the Original Credit Agreement are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate in all material respects on and as of such earlier date) or changes resulting from transactions expressly permitted under the Credit Agreement or other Loan Documents.

(b)Each such Person is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to perform its obligations under the Credit Agreement and the other Loan Documents to which it is a party and such Person is and will continue to be duly authorized to borrow under the Credit Agreement.  Each such Person has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of their respective obligations hereunder.

(c)The execution and delivery by such Person of this Amendment, the performance by it of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of its articles of incorporation or bylaws, or of any agreement, judgment, license, order or permit applicable to or binding upon it.  Except for those which have been duly obtained and are in full force and effect, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by such Person of this Amendment or to consummate the transactions contemplated hereby.

(d)When duly executed and delivered, this Amendment will be a legal and binding instrument and agreement of Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency and similar laws applying to creditors’ rights generally and by principles of equity applying to creditors’ rights generally.

Page 3

ARTICLE VI

MISCELLANEOUS

Section 6.1Ratification of Agreement.  The Original Credit Agreement as hereby amended is hereby ratified and confirmed in all respects.  This Amendment shall constitute a “Loan Document” under and as defined in the Credit Agreement in all respects and for all purposes.  Any reference to the Credit Agreement in any Loan Document shall be deemed to refer to the Original Credit Agreement as amended by this Amendment also.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Wells Fargo under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document.

Section 6.2Survival of Agreements.  All representations, warranties, covenants and agreements of Company herein shall survive the execution and delivery of this Amendment and the performance hereof, and shall further survive until all of the Indebtedness is paid in full.  All statements and agreements contained in any certificate or instrument delivered by Company and any Guarantors hereunder or under the Credit Agreement to Wells Fargo shall be deemed to constitute representations and warranties by, or agreements and covenants of, such Person or any such Guarantor, as applicable, under this Amendment and under the Credit Agreement.

Section 6.3Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable; provided that the parties hereto shall endeavor in good faith to promptly replace any such invalid or unenforceable provisions with substantially similar provisions that are enforceable.

Section 6.4Further Assurances.  Each of Parent and HA Sheldon hereby agrees to establish, make, prepare, execute, deliver, file, amend, authorize, ratify, affirm and/or approve any and all agreements, instruments, notes, waivers, consents, licenses, accounts and other documents, and take any and all other actions and do all other things necessary or desirable to consummate or otherwise give effect to the transactions and grant of security contemplated by this Amendment and the Credit Agreement.

Section 6.5GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (OTHER THAN CONFLICT LAWS) OF THE STATE OF TEXAS.  THE PARTIES TO THIS AMENDMENT (A) CONSENT TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF TEXAS IN CONNECTION WITH ANY CONTROVERSY RELATED TO THIS AMENDMENT; (B) WAIVE ANY ARGUMENT THAT VENUE IN ANY SUCH FORUM IS NOT CONVENIENT; (C) AGREE THAT ANY LITIGATION INITIATED BY WELLS FARGO OR COMPANY IN CONNECTION WITH THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS MAY BE VENUED IN EITHER THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF DALLAS, STATE OF TEXAS; AND (D) AGREE THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AMENDMENT.

Page 4

Section 6.6Counterparts; Fax.  This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment.  This Amendment may be duly executed and delivered by facsimile transmission, electronic mail or other electronic means.

Section 6.7FINAL AGREEMENT.  THIS AMENDMENT TOGETHER WITH THE OTHER LOAN DOCUMENTS COMPRISES THE COMPLETE AND INTEGRATED AGREEMENT OF THE PARTIES ON THE SUBJECT MATTER OF THIS AMENDMENT AND SUPERSEDES ALL PRIOR AGREEMENTS, WHETHER ORAL OR EVIDENCED IN A RECORD.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[The remainder of this page is intentionally left blank.]

Page 5

IN WITNESS WHEREOF, the undersigned by their respective duly authorized officers thereunto have executed and delivered this Amendment as of the date first above written.

TANDY BRANDS ACCESSORIES, INC.

By: _____________________________

Name:

Title:

H.A. SHELDON CANADA, LTD.

By: _____________________________

Name:

Title:

WELLS FARGO BANK, NATIONAL ASSOCIATION

By: _____________________________

Name:

Title:

Signature Page to Consent and Ratification

Each of the undersigned by their respective signatures hereunto acknowledges its receipt and review of this Amendment and hereby consents to the execution and delivery of, and the terms of, this Amendment and hereby ratifies and confirms their respective Guaranty and the obligations guarantied thereunder in all respects and for all purposes.

TBAC INVESTMENT TRUST

By: _____________________________

not in his/her individual capacity, but solely  as Trustee

TBAC-TOREL, INC.

By: _____________________________

Name:  N. Roderick McGeachy, III

Title:    President and Chief Executive Officer

Signature Page to Consent and Ratification

EX-4.13

Exhibit 4.13 and 10.36

CREDIT AGREEMENT

Dated as of July 24, 2013

among

TANDY BRANDS ACCESSORIES, INC., as Borrower

The Guarantors Named Herein

SALUS CAPITAL PARTNERS, LLC

as Administrative Agent and Collateral Agent,

and

The Other Lenders Party Hereto

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS		1
1.01	Defined Terms	1
1.02	Other Interpretive Provisions	49
1.03	Accounting Terms Generally.	50
1.04	Rounding	50
1.05	Times of Day	51
1.06	Letter of Credit Amounts	51
1.07	Currency Equivalents Generally	51
1.08	Judgment Currency.	51
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS		52
2.01	Committed Loans; Reserves.	52
2.02	Borrowings and Conversions of Committed Loans.	53
2.03	Letters of Credit.	54
2.04	Prepayments.	61
2.05	Termination or Reduction of Commitments.	62
2.06	Repayment of Loans.	63
2.07	Interest.	63
2.08	Fees	64
2.09	Computation of Interest and Fees	65
2.10	Evidence of Debt.	65
2.11	Payments Generally; Agent’s Clawback.	66
2.12	Sharing of Payments by Lenders	68
2.13	Settlement Amongst Lenders.	68
2.14	Defaulting Lenders.	69
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY		70

3.01	Taxes.	70
3.02	Illegality	73
3.03	Inability to Determine Rates	74
3.04	Increased Costs; Reserves on LIBO Rate Loans.	74
3.05	Mitigation Obligations; Replacement of Lenders.	76
3.06	Survival	76
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS		76
4.01	Conditions of Initial Credit Extension	76
4.02	Conditions to all Credit Extensions	80
ARTICLE V REPRESENTATIONS AND WARRANTIES		81
5.01	Existence, Qualification and Power	81
5.02	Authorization; No Contravention	82
5.03	Governmental Authorization; Other Consents	82
5.04	Binding Effect	82
5.05	Financial Statements; No Material Adverse Effect.	82
5.06	Litigation	83
5.07	No Default	83
5.08	Ownership of Property; Liens	84
5.09	Environmental Compliance.	84
5.10	Insurance	85
5.11	Taxes	85
5.12	ERISA Compliance; Canadian Plans.	86
5.13	Subsidiaries; Equity Interests	87
5.14	Margin Regulations; Investment Company Act	87
5.15	Disclosure	88

5.16	Compliance with Laws	88
5.17	Intellectual Property; Licenses, Etc.	88
5.18	Labor Matters	88
5.19	Security Documents.	89
5.20	Solvency	90
5.21	Deposit Accounts.	90
5.22	Brokers	90
5.23	Customer and Trade Relations	90
5.24	Material Contracts	90
5.25	Casualty	91
5.26	Business Plan	91
5.27	Personally Identifiable Information	91
5.28	Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada)	91
5.29		91
ARTICLE VI AFFIRMATIVE COVENANTS		91
6.01	Financial Statements	92
6.02	Certificates; Other Information	92
6.03	Notices	95
6.04	Payment of Obligations	96
6.05	Preservation of Existence, Etc	96
6.06	Maintenance of Properties	97
6.07	Maintenance of Insurance.	97
6.08	Compliance with Laws	98
6.09	Books and Records; Accountants.	99
6.10	Inspection Rights.	99

6.11	Use of Proceeds	101
6.12	Additional Loan Parties	101
6.13	Cash Management.	101
6.14	Information Regarding the Collateral.	103
6.15	Physical Inventories.	104
6.16	Environmental Laws	104
6.17	Further Assurances.	105
6.18	Compliance with Terms of Leaseholds	105
6.19	Material Contracts	106
6.20	Business Plan; Financial Advisor.	106
6.21	Employee Benefit Plans.	106
ARTICLE VII NEGATIVE COVENANTS		107
7.01	Liens	107
7.02	Investments	107
7.03	Indebtedness; Disqualified Stock	107
7.04	Fundamental Changes	107
7.05	Dispositions	108
7.06	Restricted Payments	108
7.07	Prepayments of Indebtedness	108
7.08	Change in Nature of Business.	109
7.09	Transactions with Affiliates	109
7.10	Burdensome Agreements	109
7.11	Use of Proceeds	110
7.12	Amendment of Material Documents	110
7.13	Fiscal Year	110

7.14	Deposit Accounts	110
7.15	Minimum Consolidated EBITDA.	110
7.16	Account Concentration	112
7.17	Budgeted Expenses.	112
7.18	Accounts Payable to Inventory Ratio.	112
7.19	Excluded Subsidiaries.	112
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		112
8.01	Events of Default	112
8.02	Remedies Upon Event of Default	116
8.03	Application of Funds	117
ARTICLE IX THE AGENT		118
9.01	Appointment and Authority	118
9.02	Rights as a Lender	118
9.03	Exculpatory Provisions	119
9.04	Reliance by Agent	120
9.05	Delegation of Duties	120
9.06	Resignation of Agent	120
9.07	Non-Reliance on Agent and Other Lenders	121
9.08	No Other Duties, Etc.	121
9.09	Agent May File Proofs of Claim	122
9.10	Collateral and Guaranty Matters	122
9.11	Notice of Transfer	123
9.12	Reports and Financial Statements	123
9.13	Agency for Perfection	124
9.14	Indemnification of Agent	124

9.15	Relation among Lenders	124
ARTICLE X MISCELLANEOUS		125
10.01	Amendments, Etc.	125
10.02	Notices; Effectiveness; Electronic Communications.	127
10.03	No Waiver; Cumulative Remedies	128
10.04	Expenses; Indemnity; Damage Waiver.	129
10.05	Payments Set Aside	131
10.06	Successors and Assigns.	131
10.07	Treatment of Certain Information; Confidentiality	135
10.08	Right of Setoff	136
10.09	Interest Rate Limitation	137
10.10	Counterparts; Integration; Effectiveness	137
10.11	Survival	138
10.12	Severability	138
10.13	Replacement of Lenders	138
10.14	Governing Law; Jurisdiction; Etc.	139
10.15	Waiver of Jury Trial	140
10.16	No Advisory or Fiduciary Responsibility	140
10.17	USA PATRIOT Act Notice	141
10.18	Foreign Asset Control Regulations	141
10.19	Time of the Essence	142
10.20	Press Releases.	142
10.21	Additional Waivers.	142
10.22	No Strict Construction	144
10.23	Attachments	144

SCHEDULES

1.01	Guarantors
1.02	Approved Foreign Vendors
2.01	Commitments and Applicable Percentages
4.01	License Agreements
5.01	Loan Parties Organizational Information
5.06	Litigation
5.08(b)(1)	Owned Real Estate
5.08(b)(2)	Leased Real Estate
5.09	Environmental Matters
5.1	Insurance
5.12	Canadian Pension Plans
5.13	Subsidiaries; Other Equity Investments
5.21	DDAs
5.24	Material Contracts
6.02	Financial and Collateral Reporting
7.01	Existing Liens
7.02	Existing Investments
7.03	Existing Indebtedness
10.02	Agent’s Office; Certain Addresses for Notices

EXHIBITS

	Form of
A	Committed Loan Notice
B-1	Revolving Note

B-2	Term Note
C	Compliance Certificate
D	Assignment and Assumption
E	Borrowing Base Certificate
F	DDA Notification

CREDIT AGREEMENT

This CREDIT AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of July 24, 2013, among TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the “Borrower”), the Persons named on Schedule 1.01 hereto (collectively, the “Guarantors”), each Lender from time to time party hereto, and SALUS CAPITAL PARTNERS, LLC, as Administrative Agent and Collateral Agent.

The Borrower has requested that the Lenders provide a revolving credit facility, a first-in, last-out term loan facility and certain other financial accommodations, and the Lenders have indicated their willingness to lend and the L/C Issuers have indicated their willingness to issue Letters of Credit, in each case on the terms and conditions set forth herein.

All Obligations of the Loan Parties to the Agent and Lenders hereunder and under the Loan Documents shall be full recourse to each of the Loan Parties and secured by the Agent’s security interest in and liens on all or substantially all of the assets of the Loan Parties included in the Collateral.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.01Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:

“Acceptable Document of Title” means, with respect to any Inventory, a tangible, negotiable bill of lading or other Document (as defined in the UCC) or Document of Title (as defined in the PPSA) that (a) is issued by a common carrier which is not (i) to the Borrower’s knowledge, an Affiliate of the Approved Foreign Vendor or (ii) an Affiliate of any Loan Party which is in actual possession of such Inventory, (b) is issued to the order of a Loan Party or, if so requested by the Agent, to the order of the Agent, (c) names the Agent as a notify party and bears a conspicuous notation on its face of the Agent’s security interest therein, (d) is not subject to any Lien (other than in favor of the Agent and other Permitted Encumbrances), and (e) is on terms otherwise reasonably acceptable to the Agent.

“ACH” means automated clearing house transfers.

“Accommodation Payment” as defined in Section 10.21(d).

“Account” means “accounts” as defined in the UCC or PPSA (as applicable), and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for a secondary obligation incurred or to be incurred, (e) for energy provided or to be provided, (f) for the use or hire of a vessel under a charter or other contract, (g) arising out of the use of a

credit or charge card or information contained on or for use with the card, or (h) as winnings in a lottery or other game of chance operated or sponsored by a state, province or territory, governmental unit of a state, province or territory, or person licensed or authorized to operate the game by a state, province or territory or governmental unit of a state, province or territory. The term “Account” includes health-care-insurance receivables.

“Acquisition” means, with respect to any Person (a) an investment in, or a purchase of, a Controlling interest in the Equity Interests of any other Person, (b) a purchase or other acquisition of all or substantially all of the assets or properties of, another Person or of any business unit of another Person, or (c) any amalgamation, merger or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a Controlling interest in the Equity Interests, of any Person, in each case in any transaction or group of transactions which are part of a common plan.

“Act” shall have the meaning provided in Section 10.17.

“Administrative Agent” means Salus in its capacity as administrative agent under any of the Loan Documents, or any successor thereto in such capacities.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Agent.

“Affiliate” means, with respect to any Person, (i) another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (ii) any director, officer, managing member, partner, trustee, or beneficiary of that Person, (iii) any other Person directly or indirectly holding twenty percent (20%) or more of any class of the Equity Interests of that Person, and (iv) any other Person twenty percent (20%) or more of any class of whose Equity Interests is held directly or indirectly by that Person.

“Agent” means Salus in its capacity as Administrative Agent and Collateral Agent under any of the Loan Documents, or any successor thereto in such capacities.

“Agent’s Office” means the Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Agent may from time to time notify the Borrower and the Lenders.

“Aggregate Revolving Commitments” means the Revolving Commitments of all the Revolving Lenders.  As of the Closing Date, the Aggregate Revolving Commitments are $27,500,000.

“Agreement” means this Credit Agreement.

“Allocable Amount” has the meaning specified in Section 10.21(d).

“AML Program” has the meaning specified in Section 5.28.

-2-

“Applicable Lenders” means the Required Lenders, all affected Lenders, or all Lenders, as the context may require.

“Applicable Margin” means (a) with respect to any Committed Revolving Loan, eight and one-half percent (8.50%), and (b) with respect to any outstanding portion of the Term Loan, eleven and one-quarter percent (11.25%).

“Applicable Percentage” means, in each case as the context requires, (a) with respect to any Revolving Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Revolving Commitments represented by such Lender’s Revolving Commitment at such time, (b) with respect to any Term Lender at any time, the portion of the Term Loan represented by the outstanding principal balance of such Term Lender’s Term Loan at such time, or (c) with respect to all Lenders at any time, the percentage of the sum of the Aggregate Revolving Commitments represented by the sum of such Lender’s Revolving Commitment and the outstanding principal balance of such Lender’s Term Loan at such time, in each case as the context provides.  If the commitment of each Lender to make Loans and the obligation of each L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 2.05 or Section  8.02 or if the Aggregate Revolving Commitments have expired, then the Applicable Percentage of each Revolving Lender shall be determined based on the Applicable Percentage of such Revolving Lender most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“Appraisal Percentage” means (i) with respect to Eligible Finished Goods Inventory (including, without duplication but subject to the proviso set forth below, Eligible In-Transit Inventory), ninety percent (90)%, and (ii) with respect to Eligible Piece Goods Inventory, seventy percent (70)%; provided that, the Agent shall have the right, at any time and from time to time after the Closing Date in its Permitted Discretion to modify the Appraisal Percentage with respect to Eligible In-Transit Inventory.

“Appraised Value” means (a) with respect to Eligible Inventory, the appraised orderly liquidation value, net of costs and expenses to be incurred in connection with any such liquidation, which value (x) is expressed as a percentage of Cost of Eligible Inventory as set forth in the inventory stock ledger of the Loan Parties and (y) shall be determined from time to time by the most recent appraisal undertaken by an independent appraiser engaged by the Agent, and (b) with respect to Eligible Real Estate, the appraised orderly liquidation value of Eligible Real Estate as set forth in the most recent appraisal of Eligible Real Estate as determined from time to time by an independent appraiser engaged by the Agent, which appraisal shall assume, among other things, a marketing time of not greater than twelve (12) months or less than three (3) months; provided that the Appraised Value of Eligible Real Estate shall in no event exceed the maximum amount of the Obligations at any time specified to be secured by a Mortgage thereon.

“Approved Budget” has the meaning specified in Section 7.17.

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“Approved Foreign Vendor” means each of the Foreign Vendors listed on Schedule 1.02 hereto, and any other Foreign Vendor which (a) is located in any country acceptable to the Agent in its Permitted Discretion, (b) has received timely payment or performance of all obligations owed to it by the Loan Parties, (c) has not asserted any reclamation, repossession, diversion, stoppage in transit, Lien or title retention rights in respect of such Inventory, and (d), if so reasonably requested by the Agent, has entered into and is in full compliance with the terms of a Foreign Vendor Agreement.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender, (c) an entity or an Affiliate of an entity that administers or manages a Lender or (d) the same investment advisor or an advisor under common control with such Lender, Affiliate or advisor, as applicable.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of each Person whose consent is required by Section 10.06(b)), and accepted by the Agent, in substantially the form of Exhibit D or any other form approved by the Agent.

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease, agreement or instrument were accounted for as a capital lease.

“Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Year ended June 30, 2012, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year of the Borrower and its Subsidiaries, including the notes thereto.

“Auto-Extension Letter of Credit” shall have the meaning specified in Section 2.03(b)(ii).

“Availability” means, as of any date of determination thereof by the Agent, the result, if a positive number, of:

(a)           the Maximum Revolving Loan Amount

minus

(b)           the Total Revolver Outstandings.

In calculating Availability at any time and for any purpose under this Agreement, the Borrower shall certify to the Agent that all accounts payable (including, without limitation, all rents) and Taxes are being paid on a timely basis or are being contested in compliance with Section 6.04.

“Availability Block” means $900,000.

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“Availability Period” means the period from and including the Closing Date to the Termination Date.

“Availability Reserves” means, without duplication of any other Reserves or items to the extent such items are otherwise addressed or excluded through eligibility criteria, such reserves as the Agent from time to time determines in its Permitted Discretion as being appropriate (a) to reflect the impediments to the Agent’s ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Agent determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, or the assets, business, financial performance or financial condition of any Loan Party, or (d) to reflect that a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include, in the Agent’s Permitted Discretion, (but are not limited to) reserves based on: (i) rent; (ii) customs duties, and other costs to release Inventory which is being imported into the United States or Canada; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, goods and services, harmonized sales, municipal, claims of the PBGC and other Taxes which may have priority over the interests of the Agent in the Collateral; (iv) salaries, wages and benefits due to employees of any Loan Party and any employee service deductions, workers’ compensation, pension fund or Wage Earner Protection Act (Canada) obligations of any Loan Party, (v) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory or Eligible Real Estate between appraisals; (vi) warehousemen’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Agent in the Collateral (unless such charges or Permitted Encumbrances have been subordinated to the Lien of the Agent); (vii) Cash Management Reserves; (viii) Realty Reserves; (ix) royalties payable in respect of licensed merchandise; (xii) Inventory that is subject to the rights of suppliers under section 81.1 of the Bankruptcy and Insolvency Act (Canada); and (xiii) potential currency rate exchange fluctuations which may from time to time occur in respect of any Eligible Trade Receivables payable in a currency other than Dollars.

“Bankruptcy Code” means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

“Blocked Account” has the meaning provided in Section 6.13(a)(i).

“Blocked Account Agreement” means with respect to a deposit account established by a Loan Party, an agreement, in form and substance reasonably satisfactory to the Agent, establishing control (as defined in the UCC) of such account by the Agent and whereby the bank maintaining such account agrees to comply only with the instructions originated by the Agent without the further consent of any Loan Party.

“Blocked Account Bank” means each bank with whom deposit accounts are maintained in which any funds of any of the Loan Parties from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

“Borrower” has the meaning specified in the introductory paragraph hereto.

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“Borrower Materials” means any Borrowing Base information, reports, financial statements and other materials delivered by the Borrower or any Loan Party hereunder, as well as other Reports and information provided by the Agent to the Lenders.

“Borrowing” means a Revolving Credit Borrowing or the Term Borrowing, as the context may require.

“Borrowing Base” means, at any time of calculation, an amount equal to:

(a)the Cost of Eligible Finished Goods Inventory, net of Inventory Reserves, multiplied by the product of the Appraisal Percentage multiplied by the Appraised Value of Eligible Finished Goods Inventory; provided that, Eligible In-Transit Inventory shall be included in such calculation in the sole discretion of the Agent, and provided further that the amount of Eligible In-Transit Inventory included in Eligible Finished Goods Inventory shall in no event exceed the lesser of (i) (x) for the period from July 1 through October 31 of any year, thirty percent (30%) of the Maximum Revolving Loan Amount, and (y) at all other times, twenty-five percent (25%) of the Maximum Revolving Loan Amount or (ii) $6,500,000;

plus

(b)the lesser of (i) the Cost of Eligible Piece Goods Inventory, net of Inventory Reserves, multiplied by the product of the Appraisal Percentage multiplied by the Appraised Value of Eligible Piece Goods Inventory, or (ii) the Cost of Eligible Piece Goods Inventory, net of Inventory Reserves, multiplied by thirty-five percent (35%);

plus

(c)the Receivables Advance Rate multiplied by the face amount of Eligible Trade Receivables (net of Receivables Reserves applicable thereto);

plus

(d)the Real Estate Advance Rate multiplied by the Appraised Value of Eligible Real Estate;

minus

(e)the Term Loan Reserve;

minus

(f)the Availability Block;

minus

(g)the then amount of all Availability Reserves.

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For the purpose of valuating any of the foregoing denominated in Canadian Dollars, the amount in Canadian Dollars shall be converted into the Equivalent Amount thereof in Dollars; provided that Agent reserves the right to adjust such conversion rate to take into account currency rate exchange fluctuations since the last valuation thereof.

“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit E hereto (with such changes therein as may be required by the Agent to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Responsible Officer of the Borrower which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as reasonably requested by the Agent.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Agent’s Office is located.

“Business Plan” means, with respect to any Fiscal Year, (i) a detailed forecast prepared by management of the Borrower for such Fiscal Year, which shall include (without limitation) an Availability model, Consolidated income statement, balance sheet, and statement of cash flow, by month, each prepared in conformity with GAAP and consistent with the Borrower’s then current practices, the amount of any proposed distributions to be made pursuant to Section 7.06 and such other information (financial or otherwise) as is reasonably requested by the Agent, and (ii) any revisions to such forecast, in each case in form and substance satisfactory to the Agent in its Permitted Discretion.  For the avoidance of doubt, a draft or preliminary plan submitted by the Borrower to the Agent shall not be deemed the “Business Plan” hereunder until it has been finalized and accepted by the Borrower and the Agent.  A true and complete copy of the initial Business Plan has been delivered to the Agent prior to the Closing Date.

“Canadian Benefit Plan” means any plan, fund, program, or policy, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, providing employee benefits, including medical, hospital care, dental, sickness, accident, disability, life insurance, pension, retirement or savings benefits, under which any Loan Party has any liability with respect to any employee or former employee, but excluding any Canadian Pension Plan.

“Canadian Dollars” or “C$” shall mean the lawful currency of Canada.

“Canadian Pension Plan” means each pension plan required to be registered under Canadian federal or provincial law that is maintained or contributed to by a Loan Party for its employees or former employees, but does not include the Canada Pension Plan as maintained by the Government of Canada.

“Capital Lease Obligations” means, with respect to any Person for any period, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of such Person under GAAP and the amount of which obligations shall be the capitalized amount thereof determined in accordance with GAAP.

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“Cash Collateral Account” means a non-interest bearing account established by one or more of the Loan Parties with an L/C Issuer, in which deposits are required to be made in accordance with Sections 2.03(f) or 8.02(c).

“Cash Collateralize” means to pledge and deposit with or deliver to the applicable L/C Issuer, for its benefit, as collateral for the applicable L/C Obligations, cash or deposit account balances or, if the Agent and the applicable L/C Issuer shall otherwise agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Agent and the applicable L/C Issuer (which documentation is hereby Consented to by the Lenders).  “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

“Cash Management Bank” means any Lender, Affiliate of a Lender or another institution approved by Agent in its sole discretion.

“Cash Management Reserves” means such reserves as the Agent, from time to time, determines in its Permitted Discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.

“Cash Management Services” means any cash management services or facilities provided to any Loan Party by the Cash Management Bank or any of its Affiliates, including, without limitation: (a) ACH transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) credit or debit cards, (d) credit card processing services, and (e) purchase cards.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the United States Environmental Protection Agency.

“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided, however, for the purposes of this Agreement: (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority), the United States, any central bank or other Governmental Authority, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

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“Change of Control” means an event or series of events by which:

(a)any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of thirty percent (30%) or more of the Equity Interests of the Borrower  entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such “person” or “group” has the right to acquire pursuant to any option right); or

(b)during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

(c)any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, control over the Equity Interests of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such Person or Persons have the right to acquire pursuant to any option right) representing thirty percent (30%) or more of the combined voting power of such securities; or

(d)any “change in control” or similar event as defined in any Organizational Document of any Loan Party or in any Material Contract, or any document governing Material Indebtedness of any Loan Party;

(e)the Borrower fails at any time to own, directly or indirectly, one-hundred percent (100%) of the Equity Interests of each other Loan Party free and clear of all Liens

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(other than the Liens in favor of the Agent), except where such failure is as a result of a transaction permitted by the Loan Documents; or

(f)either N. Roderick McGeachy, III, Robert J. McCarten or Chuck Talley shall cease, for any reason, to be actively engaged in the day-to-day management of the Borrower, unless (i) a successor with similar industry experience, reputation and expertise is appointed within six (6) months of such cessation and such successor is appointed following good faith consultation with the Agent or (ii) if such successor does not have (or Agent shall reasonably determine such successor does not have) similar industry experience, reputation or expertise, such successor is appointed with the consent of the Agent (such consent not to be unreasonably withheld, conditioned or delayed) within six (6) months of such cessation.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.

“Collateral” means any and all “Collateral” or “Mortgaged Property” as defined in any applicable Security Document and all other property that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Agent.

“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Agent executed by (a) a bailee or other Person in possession of Collateral, or (b) any landlord of Real Estate leased by any Loan Party, as applicable, pursuant to which such Person (i) acknowledges the Agent’s Lien on the Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral held by such Person or located on such Real Estate, (iii) provides the Agent with access to the Collateral held by such bailee or other Person or located in or on such Real Estate, (iv) as to any landlord, provides the Agent with a reasonable time to sell and dispose of the Collateral from such Real Estate, and (v) makes such other agreements with the Agent as the Agent may reasonably require.

“Collateral Agent” means Salus in its capacity as collateral agent under any of the Loan Documents, or any successor thereto in such capacities.

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by a Loan Party in the ordinary course of business of such Loan Party.

“Commercial Letter of Credit Agreement” means the Commercial Letter of Credit Agreement relating to the issuance of a Commercial Letter of Credit in the form from time to time in use by the applicable L/C Issuer.

“Commitment” means, as to each Lender, such Lender’s Revolving Commitment and Term Commitment, as applicable.

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“Committed Loan Notice” means a notice of a Revolving Credit Borrowing, pursuant to Section 2.02, which, if in writing, shall be substantially in the form of Exhibit A.

“Committed Revolving Loan” has the meaning specified in Section 2.01(b).

“Compliance Certificate” means a certificate substantially in the form of Exhibit C.

“Concentration Account” has the meaning provided in Section 6.13(c).

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consent” means actual consent given by a Lender from whom such consent is sought; or the passage of five (5) Business Days from receipt of written notice to a Lender from the Agent of a proposed course of action to be followed by the Agent without such Lender giving the Agent written notice of that Lender’s objection to such course of action.

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated basis for the most recently completed Measurement Period, plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, provincial, territorial, local and foreign income Taxes, (iii) depreciation and amortization expense (iv) other non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period (in each case of or by Borrower and its Subsidiaries for such Measurement Period), (v) fees and expenses incurred in connection with the Existing Credit Agreement, this Agreement and any amendment or modification of this Agreement, including fees and expenses of advisors and legal counsel and (vi) the amount of any restructuring charges and costs related to the closure and/or consolidation of facilities or lines of business, not to exceed an amount approved by the Agent, minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, provincial, territorial, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries for such Measurement Period), all as determined on a Consolidated basis in accordance with GAAP.

“Consolidated Interest Charges” means, for any Measurement Period, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, but excluding any non-cash or deferred interest financing costs, (b) all interest paid or payable with respect to discontinued operations and (c) the portion of rent expense with respect to such period under Capital Lease Obligations

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that is treated as interest in accordance with GAAP minus (d) interest income during such period (excluding any portion of interest income representing accruals of amounts received in a previous period), in each case of or by the Borrower and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, as of any date of determination, the net income of the Borrower and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP; provided, however, that there shall be excluded therefrom (a) extraordinary gains and extraordinary losses for such Measurement Period, (b) the income (or loss) of such Person during such Measurement Period in which any other Person has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to such Person during such period, (c) the income (or loss) of such Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of a Person or any of such Person’s Subsidiaries or is merged into or consolidated with a Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of a Person to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its Organization Documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, except that the Borrower’s equity in any net loss of any such Subsidiary for such Measurement Period shall be included in determining Consolidated Net Income.

“Contractual Obligation” means, as to any Person, any provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Cost” means the lower of cost or market value of Inventory, based upon the Loan Parties’ accounting practices, known to the Agent, which practices are in effect on the Closing Date as such calculated cost is determined from invoices received by the Loan Parties, the Loan Parties’ purchase journals or the Loan Parties’ stock ledger.  “Cost” does not include inventory capitalization costs or other non-purchase price charges (such as freight) used in the Loan Parties’ calculation of cost of goods sold.

“Credit Extensions” mean each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and its Affiliates, (ii) the Agent, (iii) each L/C Issuer, (iv) each Cash Management Bank, (v) each beneficiary of each indemnification obligation undertaken by any Loan Party under any Loan Document, (vi) any other Person to whom Obligations under this Agreement and other Loan

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Documents are owing, and (vii) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

“Credit Party Expenses” means, without limitation, (a) all reasonable and documented out-of-pocket expenses incurred by the Agent and its Affiliates in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Agent, (B) outside consultants for the Agent, (C) appraisers, (D) commercial finance examinations, and (E) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, (ii) in connection with (A) the syndication of the credit facilities provided for herein, including any fees or expenses incurred in connection with obtaining a rating for such credit facilities, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including in connection with any increase in the amount of Aggregate Revolving Commitments after the Closing Date, or (C) the enforcement or protection of the rights of the Credit Parties in connection with this Agreement or the Loan Documents or efforts to monitor, preserve, protect, collect, or enforce the Collateral (it being understood that the reimbursement obligations of the Loan Parties for any appraisals, inspections or exams shall be subject to the limitations set forth herein); (b) with respect to any L/C Issuer and its Affiliates, all reasonable out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder; (c) all customary and reasonable fees and charges (as adjusted from time to time) of the Agent with respect to access to online Loan information, the disbursement of funds (or the receipt of funds) to or for the account of Loan Parties (whether by wire transfer or otherwise), together with any reasonable out-of-pocket costs and expenses incurred in connection therewith; and (d) upon the occurrence and during the continuance of an Event of Default, all reasonable and documented  out-of-pocket expenses incurred by the Credit Parties who are not the Agent, a L/C Issuer or any Affiliate of any of them, provided that such Credit Parties shall be entitled to reimbursement for no more than one counsel in each relevant jurisdiction representing all such Credit Parties (absent a conflict of interest in which case the Credit Parties may engage and be reimbursed for additional counsel as reasonably required to eliminate such conflict).

“Customs Broker/Carrier Agreement” means an agreement in form and substance satisfactory to the Agent among the Borrower, a customs broker, freight forwarder, consolidator or carrier, and the Agent, in which the customs broker, freight forwarder, consolidator or carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Agent and agrees, upon notice from the Agent, to hold and dispose of the subject Inventory solely as directed by the Agent.

“DDA” means each checking, savings or other demand deposit account maintained by any of the Loan Parties (other than Excluded Accounts).  All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agent and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in any DDA.

“DDA Notification” has the meaning provided therefor in Section 6.13(a)(ii).

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“Debtor Relief Laws” means the Bankruptcy Code of the United States, the Companies Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada), the Winding Up and Restructuring Act (Canada), and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States and Canada (or any provincial or territorial subdivision thereof) or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to any such Loan plus three and one-half percent (3.5%) per annum.

“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) has failed to (i) fund all or any portion of its Committed Revolving Loans within two Business Days of the date such Committed Revolving Loans or such drawing were required to be funded hereunder, or (ii) pay to the Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the Borrower or the Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect, (c) has failed, within three Business Days after written request by the Agent or the Borrower, to confirm in writing to the Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership of acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.  Any determination by the Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.14(b)) as of the date established therefor by the Agent in a written notice of such determination, which shall be delivered by the Agent to the Borrower and each other Lender promptly following such determination.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (whether in one transaction or in a series of related transactions, and including any sale and leaseback transaction and any sale, transfer, license or other disposition) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option

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or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the date on which the Loans mature; provided, however, that (i) only the portion of such Equity Interests which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock and (ii) with respect to any Equity Interests issued to any employee or to any plan for the benefit of employees of the Loan Parties or by any such plan to such employees, such Equity Interest shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Loan Parties in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, resignation, death or disability and if any class of Equity Interest of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of an Equity Interest that is not Disqualified Stock, such Equity Interests shall not be deemed to be Disqualified Stock. Notwithstanding the preceding sentence, any Equity Interest that would constitute Disqualified Stock solely because the holders thereof have the right to require a Loan Party to repurchase such Equity Interest upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock.  The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that the Loan Parties may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.

“Dollars” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America, any State thereof or the District of Columbia (excluding, for the avoidance of doubt, any Subsidiary organized under the laws of Puerto Rico or any other territory).

“Early Termination Fee” shall have the meaning given to such term in Section 2.08(b) hereof.

“Eligible Finished Goods Inventory” means, as of the date of determination thereof, without duplication, (i) Eligible In-Transit Inventory, and (ii) items of Inventory of the Loan Parties that are finished goods, merchantable and readily saleable to the public in the ordinary course of the Loan Parties’ business and deemed by the Agent in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base, in each case that, except as otherwise agreed by the Agent, (A) complies with each of the representations and warranties respecting Inventory made by the Loan Parties in the Loan Documents, and (B) is not excluded as ineligible by virtue of one or more of the criteria set forth below.  Except as otherwise agreed

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by the Agent, in its Permitted Discretion, the following items of Inventory shall not be included in Eligible Finished Goods Inventory:

(a)Inventory that is not solely owned by a Loan Party or a Loan Party does not have good and valid title thereto;

(b)Inventory that is leased by or is on consignment to a Loan Party or which is consigned by a Loan Party to a Person which is not a Loan Party;

(c)Inventory (other than Eligible In-Transit Inventory) that is not located in the United States of America (excluding territories or possessions of the United States) or the Province of Ontario;

(d)Inventory that is not located at a location that is owned or leased by a Loan Party, except (i) Inventory in transit between such owned or leased locations or locations which meet the criteria set forth in clause (ii) below, or (ii) to the extent that a Loan Party has furnished the Agent with (A) any UCC or PPSA financing statements or other documents that the Agent may reasonably determine to be necessary to perfect its security interest in such Inventory at such location, and (B) a Collateral Access Agreement executed by the Person owning any such location on terms reasonably acceptable to the Agent;

(e)Inventory that is located: (i) in a distribution center leased by a Loan Party unless the applicable lessor has delivered to the Agent a Collateral Access Agreement, or (ii) at any leased location in a Landlord Lien State unless the applicable lessor has delivered to the Agent a Collateral Access Agreement or the Agent has implemented Reserves for such location;

(f)Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or custom items, work in process, raw materials, or that constitute samples, spare parts, promotional, marketing, labels, bags and other packaging and shipping materials or supplies used or consumed in the Loan Parties’ business, (iv) are seasonal in nature and which have been packed away for sale in the subsequent season, (v) are not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, or (vi) are bill and hold goods;

(g)Inventory that is not subject to a perfected first priority security interest in favor of the Agent;

(h)Inventory that is not insured in compliance with the provisions of Section 5.10 hereof;

(i)Inventory that has been sold but not yet delivered or as to which the Borrower has accepted a deposit; or

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(j)Inventory that is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third party from which the Borrower or any of its Subsidiaries has received written notice of a dispute in respect of any such agreement (other than disputes with respect to past-due royalties incurred prior to the Closing Date for which the Agent has established an Availability Reserve).

“Eligible In-Transit Inventory” means, as of any date of determination thereof, without duplication of other Eligible Finished Goods Inventory, In-Transit Inventory:

(a)Which has been shipped from a foreign location for receipt by a Loan Party, but which has not yet been delivered to such Loan Party, which In-Transit Inventory has been in transit for forty-five (45) days or less from the date of shipment of such Inventory;

(b)For which the purchase order is in the name of a Loan Party and title and risk of loss has passed to such Loan Party;

(c)For which an Acceptable Document of Title has been issued, and in each case as to which the Agent has control (as defined in the UCC) over the documents of title which evidence ownership of the subject Inventory pursuant to a Customs Broker/Carrier Agreement;

(d)Which is insured to the reasonable satisfaction of the Agent (including, without limitation, marine cargo insurance);

(e)the Foreign Vendor with respect to such In-Transit Inventory is an Approved Foreign Vendor;

(f)For which payment of the purchase price has been made by a Loan Party or the purchase price is supported by a Commercial Letter of Credit; and

(g)Which otherwise would constitute Eligible Finished Goods Inventory;

provided that the Agent may, in its Permitted Discretion, exclude any particular Inventory from the definition of “Eligible In-Transit Inventory” in the event the Agent determines that such Inventory is subject to any Person’s right of reclamation, repudiation, stoppage in transit or any event has occurred or is reasonably anticipated by the Agent to arise which may otherwise adversely impact the ability of the Agent to realize upon such Inventory.

“Eligible Inventory” means, collectively, Eligible Finished Goods Inventory and Eligible Piece Goods Inventory.

“Eligible Piece Goods Inventory” means, as of the date of determination thereof, items of Inventory of the Loan Parties that are piece goods and deemed by the Agent in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base, in each case that, except as otherwise agreed by the Agent, (A) complies with each of the representations and warranties respecting Inventory made by the Loan Parties in the Loan Documents, and (B) would  

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not be excluded as ineligible by virtue of one or more of the criteria set forth in clauses (a) through (j) of the definition of Eligible Finished Goods Inventory.

“Eligible Real Estate” means Real Estate deemed by the Agent in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base and which, except as otherwise agreed by the Agent, in its Permitted Discretion, satisfies all of the following conditions:

(a)The Borrower owns such Real Estate in fee simple absolute;

(b)The Agent shall have received evidence that all actions that the Agent may reasonably deem necessary or appropriate in order to create valid first and subsisting Liens (subject only to Permitted Encumbrances (other than Encumbrances securing Indebtedness) which have priority over the Lien of the Agent by operation of Law) on the such Real Estate has been taken.

(c)The Agent shall have received an appraisal (based upon Appraised Value) of such Real Estate by a third party appraiser reasonably acceptable to the Agent and otherwise in form and substance reasonably satisfactory to the Agent; and

(d)The Real Estate Eligibility Requirements have been satisfied.

“Eligible Trade Receivables” means each Account deemed by the Agent in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base arising from the sale of the Loan Parties’ Inventory that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Account (i) has been earned by performance and represents the bona fide amounts due to a Loan Party from an account debtor, and in each case originated in the ordinary course of business of a Loan Party, and (ii) in each case is acceptable to the Agent in its Permitted Discretion, and is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (v) below.  Without limiting the foregoing, to qualify as an Eligible Trade Receivable, an Account shall indicate no Person other than a Loan Party as payee or remittance party.  In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Loan Party may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by a Loan Party to reduce the amount of such Eligible Trade Receivable.  Except as otherwise agreed by the Agent, any Account included within any of the following categories shall not constitute an Eligible Trade Receivable:

(a)Accounts that are not evidenced by an invoice;

(b)Accounts for which invoices have been outstanding for more than 120 days past the due date;

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(c)Accounts due from any account debtor of which more than fifty percent (50%) of Accounts due from such account debtor are ineligible under clause (b) above.

(d)All Accounts owed by an account debtor and/or its Affiliates which together exceed (i) with respect to Accounts owned by Wal-Mart, Kohl's or JC Penney, forty percent (40%) (or any higher percentage hereafter established by the Agent for any particular account debtor) of the amount of all Accounts at any one time (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Trade Receivables, in the Agent’s Permitted Discretion) and (ii) with respect to all other Accounts, fifteen percent (15%) (or any higher percentage hereafter established by the Agent for any particular account debtor) of the amount of all Accounts at any one time (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Trade Receivables, in the Agent’s Permitted Discretion);

(e)Accounts (i) that are not subject to a perfected first priority security interest in favor of the Agent, or (ii) with respect to which the Loan Parties do not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Agent pursuant to the Security Documents);

(f)Accounts which are disputed or with respect to which a claim, counterclaim, offset or chargeback has been asserted, but only to the extent of such dispute, counterclaim, offset or chargeback;

(g)Accounts which arise out of any sale made not in the ordinary course of business, made on a basis other than upon credit terms usual to the business of the Loan Parties or are not payable in Dollars or Canadian Dollars;

(h)Accounts which are owed by any account debtor whose principal place of business is not within the continental United States or Canada;

(i)Accounts which are owed by any Affiliate or any employee of a Loan Party;

(j)Accounts for which all consents, approvals or authorizations of, or registrations or declarations with any Governmental Authority required to be obtained, effected or given in connection with the performance of such Account by the account debtor or in connection with the enforcement of such Account by the Agent have been duly obtained, effected or given and are in full force and effect;

(k)Accounts due from an account debtor which is the subject of any proceeding under Debtor Relief Laws, has had a trustee, custodian, receiver and manager trustee, conservator, liquidator, sequestrator or receiver appointed for all or a substantial part of its property, has made an assignment for the benefit of creditors or has suspended its business;

(l)Accounts due from any Governmental Authority except to the extent that the subject account debtor is the federal government of the United States of America and has complied with the Federal Assignment of Claims Act of 1940 and any similar state

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legislation, or the federal government of Canada and has complied with the Financial Administration Act (Canada) and any applicable provincial or territorial legislation;

(m)Accounts (i) owing from any Person that is also a supplier to or creditor of a Loan Party or any of its Subsidiaries unless such Person has waived any right of setoff in a manner acceptable to the Agent or (ii) representing any manufacturer’s or supplier’s credits, discounts, incentive plans or similar arrangements entitling a Loan Party or any of its Subsidiaries to discounts on future purchase therefrom;

(n)Accounts arising out of sales on a bill-and-hold, guaranteed sale, sale on approval or consignment basis or subject to any right of return, set off or charge back;

(o)Accounts arising out of sales to account debtors outside the United States and Canada;

(p)Accounts that are otherwise on terms other than those normal and customary in the Loan Parties’ business;

(q)Accounts evidenced by a promissory note or other instrument;

(r)Accounts consisting of amounts due from vendors as rebates or allowances;

(s)Accounts which are in excess of the credit limit for such account debtor established by the Loan Parties in the ordinary course of business and consistent with past practices;

(t)Accounts which include extended payment terms (datings) beyond those generally furnished to other account debtors in the ordinary course of business;

(u)Accounts which constitute credit card receivables;

(v)Accounts arising out of the sale of Inventory financed by EPK pursuant to the KTC Financing Documents, until such time as a Purchase Order Certificate (as defined in the Intercreditor Agreement) has been delivered to and been accepted by the Agent and the Agent is satisfied that EPK has released or subordinated its Lien on such Accounts to the Agent; or

(w)Accounts which the Agent determines in its Permitted Discretion to be unacceptable for inclusion in the Borrowing Base.

“Environmental Compliance Reserve” means, with respect to Eligible Real Estate, any reserve which the Agent, from time to time in its Permitted Discretion establishes for estimable amounts that are reasonably likely to be expended by any of the Loan Parties in order for such Loan Party and its operations and property (a) to comply with any notice from a Governmental Authority asserting non-compliance with Environmental Laws, or (b) to correct any such non-compliance with Environmental Laws or to provide for any Environmental Liability.

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“Environmental Laws” means any and all Federal, state, provincial, territorial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“EPK” means EPK Financial Corporation d/b/a/ King Trade Capital.

“Equipment” has the meaning set forth in the UCC or the PPSA (as applicable).

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“Equivalent Amount” means, on any date of determination, with respect to obligations or valuations denominated in one currency (the “first currency”), the amount of another currency (the “second currency”) which would result from the Agent converting the first currency into the second currency at approximately 12:00 p.m. on such day in accordance with Agent’s customary practice for commercial loans being administered by it or at such other rate as may have been agreed in writing between Borrower and Agent.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Loan Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 and 4971 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to

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Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination of a Pension Plan or a Multiemployer Plan under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate; or (g) the determination that any Pension Plan is considered to be an “at-risk” plan or that any Multiemployer Plan is considered to be in “endangered” or “critical” status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA.

“Event of Default” has the meaning specified in Section 8.01.  An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 10.01 hereof.

“Excluded Accounts” means deposit accounts used exclusively and in the ordinary course of business for payroll, payroll taxes or employee benefits.

“Excluded Subsidiary” means (a) TBAC-Torel, Inc., a Delaware corporation and (b) Tandy Brands Accessories Handbags, Inc., a Delaware corporation.

“Excluded Taxes” means, with respect to the Agent, any Lender, any L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Loan Parties hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) pursuant to  the laws of the jurisdiction under which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Loan Party is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to Section 3.01(a), (d) any U.S. federal, state or local backup withholding tax attributable to such Agent’s, Lender’s, any L/C Issuer’s or any other recipient’s failure to comply with Section 3.01(e), and (e) any U.S. federal withholding tax imposed under FATCA.

“Executive Order” has the meaning set forth in Section 10.18.

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“Existing Credit Agreement” means that certain Credit and Security Agreement dated as of August 25, 2011 among the Borrower and certain of the other Loan Parties, and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, as lender.

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments.

“Facility Guaranty” means any Guarantee made by a Guarantor in favor of the Agent and the other Credit Parties, in form and substance reasonably satisfactory to the Agent, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced.

“FATCA” means current Section 1471 through 1474 of the Code, as of the date of this Agreement (or any amended version or successor provision that is substantively similar and not materially more onerous to comply with) and, in each case, any regulations promulgated thereunder and any interpretation thereof and other guidance issued in connection therewith and any agreements entered into with respect to Section 1471(b)(1) of the Code.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to money center banks on such day on such transactions as determined by the Agent.

“Fee Letter” means the letter agreement, dated as of the Closing Date, among the Borrower and the Agent.

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Loan Parties.

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each September, December, March and June of such Fiscal Year in accordance with the fiscal accounting calendar of the Loan Parties.

“Fiscal Year” means any period of twelve (12) consecutive months ending on June 30 of any calendar year.

“Foreign Asset Control Regulations” has the meaning set forth in Section 10.18.

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“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Vendor” means a Person that sells In-Transit Inventory to the Borrower.

“Foreign Vendor Agreement” means an agreement between a Foreign Vendor and the Agent in form and substance reasonably satisfactory to the Agent and pursuant to which, among other things, the parties shall agree upon their relative rights with respect to In-Transit Inventory of the Borrower purchased from such Foreign Vendor.

“Fronting Fee” has the meaning assigned to such term in Section 2.03(h).

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether provincial, territorial, state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any

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assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

“Guarantor” means (a) HA Sheldon, (b) TBAC Trust and (c) and each other Domestic Subsidiary of the Borrower (other than Excluded Subsidiaries) that shall be required to execute and deliver a Facility Guaranty pursuant to Section 6.12.

“HA Sheldon” means H.A. Sheldon Canada Ltd., an Ontario corporation.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Honor Date” means the date of any payment by the applicable L/C Issuer under a Letter of Credit.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a)all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b)the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments issued or created by or for the account of such Person;

(c)all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than sixty (60) days after the date on which such trade account payable was created);

(d)indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(e)All Attributable Indebtedness of such Person;

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(f)all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (including, without limitation, Disqualified Stock), or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

(g)all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company or similar organization under the laws of jurisdiction of such joint venture) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitees” has the meaning specified in Section 10.04(b).

“Information” has the meaning specified in Section 10.07.

“Intellectual Property” means all present and future:  trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents and patent applications; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Closing Date among the Borrower, EPK, and the Agent.

“Interest Payment Date” means the first day after the end of each month and the Maturity Date.

“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s and/or its Subsidiaries’ internal controls over financial reporting, in each case as described in the Securities Laws.

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“In-Transit Inventory” means Inventory of a Loan Party which is in the possession of a common carrier and is in transit from a Foreign Vendor of such Loan Party from a location (a) outside of the continental United States in respect or Inventory of the Borrower or a Guarantor that is a Domestic Subsidiary to a location of the Borrower or such Domestic Subsidiary that is within the continental United States or (b) outside of the Province of Ontario with respect to Inventory of HA Sheldon or any other Guarantor organized in the Province of Ontario to a location of HA Sheldon or such other Guarantor that is within the Province of Ontario.

“Inventory” has the meaning given that term in the UCC or the PPSA (as applicable), and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, piece goods or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.

“Inventory Reserves” means such reserves as may be established from time to time by the Agent in its Permitted Discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory, which reflect such other factors as affect the market value of the Eligible Inventory or which reflect claims and liabilities that the Agent determines will need to be satisfied in connection with the realization upon the Inventory. Without limiting the generality of the foregoing, Inventory Reserves may, in the Agent’s Permitted Discretion, include (but are not limited to) reserves based on:

(a)Obsolescence;

(b)Seasonality;

(c)Shrink;

(d)Imbalance;

(e)Change in Inventory character;

(f)Change in Inventory composition;

(g)Change in Inventory mix;

(h)Markdowns (both permanent and point of sale);

(i)Retail markons and markups inconsistent with prior period practice and performance, industry standards, current business plans or advertising calendar and planned advertising events; and

(j)Out-of-date and/or expired Inventory.

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of

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another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) any Acquisition, or (d) any other investment of money or capital in order to obtain a profitable return. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“IRS” means the United States Internal Revenue Service.

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, the Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable, and any other document, agreement and instrument entered into by the applicable L/C Issuer and the Borrower (or any Subsidiary thereof) or in favor of the applicable L/C Issuer and relating to any such Letter of Credit.

“Joinder” means an agreement, in form and substance reasonably satisfactory to the Agent pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as a Guarantor.

“KTC Financing Documents” means any and all documentation governing the KTC Indebtedness.

“KTC Indebtedness” means the Indebtedness consisting of purchase order financing provided to the Borrower and the other Loan Parties by EPK pursuant to the KTC Financing Documents.

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent may have priority over the Lien of the Agent in any of the Collateral.

“Laws” means each international, foreign, Federal, state, provincial, territorial and local law, statute, treaty, rule, guideline, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directed duty, request, license, authorization and permit of, and agreement with, any Governmental Authority, in each case whether or not having the force of law.

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

“L/C Issuer” means (a) Salus, (b) any other financial institution that, with the consent of the Agent (and subject to such financial institution’s entry into agreements reasonably satisfactory to the Agent), agrees to become an L/C Issuer for the purpose of issuing Letters of

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Credit hereunder, and (c) any successor issuer of Letters of Credit hereunder (which successor may only be a Revolving Lender selected by the Agent in its Permitted Discretion). Any L/C Issuer may, in its Permitted Discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such L/C Issuer and/or for such Affiliate to act as an advising, transferring, confirming and/or nominated bank in connection with the issuance or administration of any such Letter of Credit, in which case the term “L/C Issuer” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“L/C Obligations” means, as at any date of determination, the aggregate undrawn amount available to be drawn under all outstanding Letters of Credit.  For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of any “rule” under the ISP or any article of UCP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

“Lease” means any written agreement, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any space in a structure, land, improvements or premises for any period of time.

“Lender” means, individually, a Revolving Lender or a Term Lender, and collectively, all such persons.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.

“Letter of Credit” means each Standby Letter of Credit and each Commercial Letter of Credit issued hereunder.

“Letter of Credit Application” means an application for the issuance or amendment of a Letter of Credit in the form from time to time in use by the applicable L/C Issuer.

“Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

“Letter of Credit Fee” shall have the meaning given to such term in Section 2.03(i) hereof.

“Letter of Credit Sublimit” means an amount equal to $5,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.  A permanent reduction of the Aggregate Revolving Commitments shall not require a corresponding pro rata reduction in the Letter of Credit Sublimit; provided, however, that if the Aggregate Revolving Commitments are reduced to an amount less than the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Borrower’s option, less than) the Aggregate Revolving Commitments.

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“LIBO Rate” means, as of any date of determination, the greater of (a) 0.75% per annum, and (b) the rate per annum for LIBOR  as published by www.bankrate.com (or other commercially available source providing quotations of LIBOR as designated by the Agent from time to time) for an interest period of thirty (30) days.  If such rate is not available at such time for any reason, then the “LIBO Rate” shall be the rate per annum determined by the Agent to be the rate at which deposits in Dollars in the approximate outstanding amount of the applicable Loans would be offered to major banks in the London interbank eurodollar market in which Salus participates for an interest period of thirty (30) days.

“LIBO Rate Loan” means a Loan that bears interest at a rate based on the LIBO Rate.

“Licensor/Vendor Subordinated Notes” means, collectively, those certain Subordinated Promissory Notes dated as of the Closing Date in an aggregate principal amount of $9,766,458 from the Borrower to certain licensors and vendors of the Borrower, which shall be on terms and conditions acceptable to the Agent in its Permitted Discretion.

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and (b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Loan” means any extension of credit by a Lender to the Borrower under ARTICLE II in the form of a Committed Revolving Loan, the Term Loan or otherwise.

“Loan Account” has the meaning assigned to such term in Section 2.10(a).

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA Notifications, the Security Documents, each Facility Guaranty, the Intercreditor Agreement, and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services provided by the Agent or any of its Affiliates, each as amended and in effect from time to time.

“Loan Parties” means, collectively, the Borrower and each Guarantor.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material impairment of the rights and remedies, taken as a whole, of the Agent or any Lender under any Loan Document or a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.  In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event in and of itself does not have such effect, a

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Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect.

“Material Contract” means with respect to any Person, each contract to which such Person is a party involving aggregate consideration payable to or by such Person of $500,000 or more in any fiscal year or otherwise material to the business, condition (financial or otherwise), operations, performance or properties of such Person; provided that the KTC Financing Documents and the Licensor/Vendor Subordinated Notes shall at all times be considered Material Contracts, regardless of the amount thereof.

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $1,000,000; provided that the KTC Indebtedness shall at all times be considered Material Indebtedness, regardless of the amount thereof.  For purposes of determining the amount of Material Indebtedness at any time, (a) the undrawn committed or available amounts shall be included, and (b) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included.

“Maturity Date” means July 24, 2015.

“Maximum Rate” has the meaning provided therefor in Section 10.09.

“Maximum Revolving Loan Amount” means, at any time of determination, the lesser of (a) the Aggregate Revolving Commitments or (b) the Borrowing Base.

“Measurement Period” means, at any date of determination, the most recently completed four Fiscal Quarters of the Borrower.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage Policy” has the meaning specified in the definition of Real Estate Eligibility Requirements.

“Mortgages” means each and every fee mortgage or deed of trust, security agreement and assignment by and between the Loan Party owning the Real Estate encumbered thereby in favor of the Agent.

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or any of its Subsidiaries, or any Extraordinary Receipt received or paid to the account of any Loan Party or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such transaction (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset by a Lien permitted hereunder which is senior to the Agent’s Lien

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on such asset and that is required to be repaid (or to establish an escrow for the future repayment thereof) in connection with such transaction (other than Indebtedness under the Loan Documents), and (B) the reasonable and customary out-of-pocket fees and expenses incurred by such Loan Party or such Subsidiary in connection with such transaction (including, without limitation, attorneys' fees, investment banking fees, appraisals, and brokerage, legal, title and recording or transfer tax expenses and commissions and other customary expenses and fees) paid by any Loan Party to third parties (other than Affiliates)); and

(b)           with respect to the sale or issuance of any Equity Interest by any Loan Party or any of its Subsidiaries, or the incurrence or issuance of any Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the sum of the cash and cash equivalents received in connection with such transaction over (ii) the investment banking fees, underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by such Loan Party or such Subsidiary in connection therewith.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(ii).

“Note” means (a) a Revolving Note or (b) a Term Note, as each may be amended, restated, supplemented or modified from time to time.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees, costs, expenses and indemnities are allowed claims in such proceeding, and (b) any Other Liabilities.

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity, and (d) in each case, all shareholder or other equity holder agreements, voting trusts and similar arrangements to

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which such Person is a party or which is applicable to its Equity Interests and all other arrangements relating to the Control or management of such Person.

“Other Connection Taxes” means, with respect to any recipient, Taxes imposed as a result of a present or former connection between such recipient and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Liabilities” means any obligation on account of any Cash Management Services furnished to any of the Loan Parties or any of their Subsidiaries.

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 10.13).

“Outstanding Amount” means (i) with respect to Committed Revolving Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Revolving Loans occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date.

“Overadvance” means a Credit Extension to the extent that, immediately after its having been made, Availability is less than zero.

“Participant” has the meaning specified in Section 10.06(d).

“Participation Register” has the meaning provided therefor in Section 10.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation.

“PCAOB” means the Public Company Accounting Oversight Board.

“PCMLTFA” has the meaning provided therefor in Section 5.30.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

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“Perfection Certificate” means that certain perfection certificate dated as of the date hereof, executed and delivered by the Loan Parties in favor of the Agent, for the benefit of the Credit Parties, and each other Perfection Certificate (which shall be in form and substance reasonably acceptable to the Agent) executed and delivered by the applicable Guarantor in favor of the Agent for the benefit of the Credit Parties contemporaneously with the execution and delivery of Joinder executed in accordance with Section 6.12, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance herewith.

“Permitted Discretion” means, as to Agent or any Lender, a determination made in good faith and in the exercise of reasonable business judgment from the perspective of a secured, asset-based commercial lender exercised in accordance with generally applicable practices of Agent or such Lender.

“Permitted Disposition” means any of the following:

(a)           Dispositions of inventory in the ordinary course of business;

(b)           non-exclusive licenses of Intellectual Property of a Loan Party or any of its Subsidiaries in the ordinary course of business;

(c)           Dispositions of Equipment in the ordinary course of business that is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no longer useful or necessary in its business or that of any Subsidiary;

(d)           sales, transfers and Dispositions among the Loan Parties or by any Subsidiary to a Loan Party;

(e)           sales, transfers and Dispositions by any Subsidiary which is not a Loan Party to another Subsidiary that is not a Loan Party;

(f)           sales, transfers and Dispositions related to accounts receivable of Wal-Mart Stores, Inc. and its Affiliates to Wells Fargo Bank, National Association pursuant to a factoring arrangement on terms, conditions and documentation reasonably satisfactory to the Agent;

(g)           sales, transfers and Dispositions related to accounts receivable of Kohl’s Corporation, Kohl’s Department Stores, Inc. and their respective Affiliates to Bank of America, N.A. pursuant to a factoring arrangement on terms, conditions and documentation reasonably satisfactory to the Agent;

(h)           as long as no Default or Event of Default then exists or would arise therefrom, sales of Real Estate of any Loan Party (or sales of any Person or Persons created to hold such Real Estate or the Equity Interests in such Person or Persons), including sale-leaseback transactions involving any such Real Estate pursuant to leases on market terms, as long as, (A) such sale is made for fair market value, (B) with respect to any Eligible Real Estate, the Net Proceeds paid in cash are in an amount at least equal to the greater of the amounts advanced or available to be advanced against such Eligible

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Real Estate under the Borrowing Base, (C) the proceeds of such sale are utilized to repay the Obligations, and (D) in the case of any sale-leaseback transaction permitted hereunder, the Agent shall have received from each such purchaser or transferee a Collateral Access Agreement on terms and conditions reasonably satisfactory to the Agent

(i)           the sale, discount or transfer of delinquent accounts receivable in the ordinary course of business for purposes of collection and consistent with historical practices;

(j)           dispositions of property (other than assets included in the Borrowing Base) at fair market value to the extent that such property is exchanged for credit against the purchase price of similar property or the proceeds of such disposition are promptly applied to the purchase price of replacement property;

(k)           the dissolution or liquidation of any Excluded Subsidiary if the Borrower determines in good faith that any such dissolution or liquidation is in the best interest of the Loan Parties; and

(l)           dispositions of other assets of the Borrower provided that at the time of such disposition no Event of Default exists or would result therefrom and the aggregate book value of all property disposed of in reliance on this clause (l) shall not exceed $250,000 in any fiscal year.

“Permitted Encumbrances” means:

(a)           Liens imposed by law for Taxes or other governmental charges that are not yet due or are being contested in compliance with Section 6.04;

(b)           Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by applicable Law, arising in the ordinary course of business and securing obligations that are not overdue or are being contested in compliance with Section 6.04;

(c)           Pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, other than any Lien imposed by ERISA;

(d)           Deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e)           Liens in respect of judgments that would not constitute an Event of Default hereunder;

(f)           Easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and

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do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of a Loan Party and such other minor title defects or survey matters that are disclosed by current surveys that, in each case, do not materially interfere with the current use of the real property;

(g)           Liens existing on the Closing Date and listed on Schedule 7.01 and any Permitted Refinancings thereof;

(h)           Liens on fixed or capital assets acquired by any Loan Party which secure Indebtedness permitted under clause (c) of the definition of Permitted Indebtedness so long as (i) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety (90) days after such acquisition, (ii) the Indebtedness secured thereby does not exceed the cost of acquisition of such fixed or capital assets and (iii) such Liens shall not extend to any other property or assets of the Loan Parties;

(i)           Liens in favor of the Agent;

(j)           Liens in favor of EPK under the KTC Financing Documents, provided that such Liens shall at all times be subject to the provisions of the Intercreditor Agreement;

(k)           Statutory Liens of landlords and lessors in respect of rent not in default;

(l)           Possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments owned as of the Closing Date and Permitted Investments, provided that such liens (a) attach only to such Investments and (b) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing;

(m)           Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

(n)           Liens arising from precautionary UCC or PPSA filings regarding “true” operating leases or, to the extent permitted under the Loan Documents, the consignment of goods to a Loan Party;

(o)           Liens in favor of customs and revenues authorities imposed by applicable Law arising in the ordinary course of business in connection with the importation of goods and securing obligations that are (A) being contested in good faith by appropriate proceedings, (B) the applicable Loan Party or Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation; and

(p)           encumbrances referred to in Schedule B of the Mortgage Policies insuring the Mortgages.

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“Permitted Indebtedness” means each of the following:

(a)           Indebtedness outstanding on the Closing Date and listed on Schedule 7.03 and any Permitted Refinancing thereof;

(b)           Indebtedness of any Loan Party to any other Loan Party;

(c)           Purchase money Indebtedness of any Loan Party to finance the acquisition of any personal property consisting solely of fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and Permitted Refinancings thereof; provided, however, that the aggregate principal amount of Indebtedness permitted by this clause (c) shall not exceed $500,000 at any time outstanding; provided further that, if requested by the Agent, the Loan Parties shall use commercially reasonable efforts to cause the holders of such Indebtedness to enter into an intercreditor agreement on terms reasonably satisfactory to the Agent;

(d)           Indebtedness incurred for the construction or acquisition or improvement of, or to finance or to refinance, any Real Estate owned by any Loan Party (including therein any Indebtedness incurred in connection with sale-leaseback transactions permitted hereunder and any Synthetic Lease Obligations), provided that, (A) with respect to any Eligible Real Estate, the Net Proceeds paid in cash are in an amount at least equal to the greater of the amounts advanced or available to be advanced against such Eligible Real Estate under the Borrowing Base, (B) all Net Proceeds received in connection with any such Indebtedness are applied to the Obligations, and (C) the Loan Parties shall cause the holders of such Indebtedness and the lessors under any sale-leaseback transaction to enter into a Collateral Access Agreement on terms reasonably satisfactory to the Agent;

(e)           the Obligations;

(f)           the KTC Indebtedness;

(g)           Indebtedness owing to certain vendors of the Borrower pursuant to the Licensor/Vendor Subordinated Notes;

(h)           Reserved;

(i)           (i) unsecured Indebtedness owing among Subsidiaries that are not Loan Parties, and (ii) unsecured Indebtedness owing by Subsidiaries that are not Loan Parties to the Loan Parties (A) outstanding as of the Closing Date and (B) for rent and payroll operations in Mexico and Hong Kong in an amount not to exceed, together with (but without duplication of, or in addition to) the amount of any Investments permitted pursuant to clause (g)(iv)(B) of the definition of Permitted Investment, $500,000 in the aggregate at any time outstanding;

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(j)           Indebtedness arising from the honoring of bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five (5) Business Days of the incurrence thereof;

(k)           Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

(l)           unsecured contingent liabilities arising with respect to customary indemnification obligations in favor of purchasers in connection with Permitted Dispositions;

(m)           deferred payments on account insurance premiums; and

(n)           unsecured Indebtedness not otherwise specifically described herein in an aggregate principal amount not to exceed $1,000,000 at any time outstanding.

“Permitted Investments” means each of the following as long as, in the cases of clauses (a) – (e), (g)(iv), (k) and (l), no Event of Default exists or would arise from the making of such Investment at the time such Investment is made:

(a)           readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;

(b)           commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof;

(c)           time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 180 days from the date of acquisition thereof;

(d)           Fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above or with any primary dealer and having a market value at the time that such repurchase agreement is entered into of not less than one hundred percent (100%) of the repurchase obligation of such counterparty entity with whom such repurchase agreement has been entered into;

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(e)           Investments, classified in accordance with GAAP as current assets of the Loan Parties, in any money market fund, mutual fund, or other investment companies that are registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and which invest solely in one or more of the types of securities described in clauses (a) through (d) above;

(f)           Investments existing on the Closing Date, and set forth on Schedule 7.02, but not any increase in the amount thereof or any other modification of the terms thereof;

(g)           (i) Investments by any Loan Party and its Subsidiaries in their respective Subsidiaries outstanding on the Closing Date, (ii) additional Investments by any Loan Party and its Subsidiaries in Loan Parties, (iii) Investments by any Subsidiary that is not a Loan Party in any other Subsidiary that is not a Loan Party; and (iv) loans and advances by any Loan Party to a Subsidiary that is not a Loan Party (A) outstanding on the Closing Date and (B) to fund rent and payroll operations in Mexico on a weekly basis and in Hong Kong on a monthly basis in an amount not to exceed, together with (but without duplication of, or in addition to) the amount of any Indebtedness permitted pursuant to clause (i)(ii)(B) of the definition of Permitted Indebtedness, $500,000 in the aggregate at any time outstanding;

(h)           Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(i)           Guarantees constituting Permitted Indebtedness;

(j)           Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(k)           advances to officers, directors and employees of the Loan Parties and Subsidiaries in the ordinary course of business in an amount not to exceed $50,000 to any individual at any time or in an aggregate amount not to exceed $150,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

(l)           Prepaid rent not exceeding one month and security deposits for leased locations; and

(m)           Capital contributions made by any Loan Party to another Loan Party;

provided, however, that notwithstanding the foregoing, no such Investments specified in clauses (a) through (e) shall be permitted unless (i) no Committed Revolving Loans, or, if then required to be Cash Collateralized, Letters of Credit are then outstanding, and (ii) such Investments shall

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be pledged to the Agent as additional collateral for the Obligations pursuant to such agreements as may be reasonably required by the Agent.

“Permitted Overadvance” means an Overadvance made by the Agent, in its Permitted Discretion, which:

(a)Is made to maintain, protect or preserve the Collateral and/or the Credit Parties’ rights under the Loan Documents or which is otherwise for the benefit of the Credit Parties;

(b)Is made to enhance the likelihood of, or to maximize the amount of, repayment of any Obligation; or

(c)Is made to pay any other amount chargeable to any Loan Party hereunder;

provided however, that the foregoing shall not result in any claim or liability against the Agent (regardless of the amount of any Overadvance) for Unintentional Overadvances and such Unintentional Overadvances shall not reduce the amount of Permitted Overadvances allowed hereunder; provided further that in no event shall the Agent make an Overadvance, if after giving effect thereto, the principal amount of the Credit Extensions would exceed the Aggregate Revolving Commitments (as in effect prior to any termination of the Revolving Commitments pursuant to Section 2.05 hereof).

“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premiums thereon and underwriting discounts, defeasance costs, fees, commissions and expenses), (b) the weighted average life to maturity of such Permitted Refinancing is greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced (c) such Permitted Refinancing shall not require any scheduled principal payments due prior to the Maturity Date in excess of, or prior to, the scheduled principal payments due prior to such Maturity Date for the Indebtedness being Refinanced, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Credit Parties as those contained in the documentation governing the Indebtedness being Refinanced, (e) no Permitted Refinancing shall have direct or indirect obligors who were not also obligors of the Indebtedness being Refinanced, or greater guarantees or security, than the Indebtedness being Refinanced, (f) such Permitted Refinancing shall be otherwise on terms not materially less favorable to the Credit Parties than those contained in the documentation governing the Indebtedness being Refinanced, including, without limitation, with respect to financial and other covenants and events of default, (g) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate, and (h) at the time thereof, no Default or Event of Default shall have occurred and be continuing.

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“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.

“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

“PPSA” means the Personal Property Security Act (Ontario) and the regulations thereunder, as from time to time in effect, provided, however, if attachment, perfection or priority of Agent’s security interests in any Collateral are governed by the personal property security laws of any jurisdiction other than Ontario, PPSA shall mean those personal property security laws in such other jurisdiction for the purposes of the provisions hereof relating to such attachment, perfection or priority and for the definitions related to such provisions.

“Prepayment Event” means:

(a)Any Disposition (including pursuant to a sale and leaseback transaction) of any property or asset of a Loan Party to a Person that is not a Loan Party (other than Dispositions described in clauses (a), (c), (d), (e) and (j) of the definition of Permitted Disposition) in an amount in excess of $100,000;

(b)Any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of (and payments in lieu thereof), any property or asset of a Loan Party in an amount in excess of $100,000, unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Agent;

(c)The issuance by a Loan Party of any Equity Interests, other than any such issuance of Equity Interests (i) to a Loan Party or (ii) as a compensatory issuance to any employee, director, or consultant (including under any option plan);

(d)The incurrence by a Loan Party of any Indebtedness for borrowed money other than Permitted Indebtedness; or

(e)The receipt by any Loan Party of any Extraordinary Receipts.

“Real Estate” means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.

“Real Estate Advance Rate” means the applicable percentage during each time period as set forth below:

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Period	Real Estate Advance Rate
Closing Date through July 31, 2013	80%
August 1, 2013 through August 31, 2013	77.5%
September 1, 2013 through September 30, 2013	75%
October 1, 2013 through October 31, 2013	72.5%
November 1, 2013 through November 30, 2013	70%
December 1, 2013 through December 31, 2013	67.5%
January 1, 2014 through January 31, 2014	65%
February 1, 2014 through February 28, 2014	62.5%
March 1, 2014 through March 31, 2014	60%
April 1, 2014 through April 30, 2014	57.5%
May 1, 2014 and thereafter	55%

“Real Estate Eligibility Requirements: means collectively, each of the following:

(a)The applicable Loan Party has executed and delivered to the Agent a Mortgage with respect to any Real Estate to be included in Eligible Real Estate;

(b)As to any particular property, the Loan Party is in compliance in all material respects with the representations, warranties and covenants set forth in the Mortgage relating to such Real Estate;

(c)The Agent shall have received fully paid American Land Title Association Lender’s Extended Coverage title insurance policies or marked-up title insurance commitments having the effect of a policy of title insurance) (the “Mortgage Policies”) in form and substance, with the endorsements reasonably required by the Agent (to the extent available at commercially reasonable rates) and in amounts reasonably acceptable to the Agent, issued, coinsured and reinsured (to the extent required by the Agent) by title insurers reasonably acceptable to the Agent, insuring the Mortgages to be valid first and subsisting Liens on the property or leasehold interests described therein, free and clear of all defects (including, but not limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only Permitted Encumbrances having priority over the Lien of the Agent under applicable Law or otherwise reasonably acceptable to the Agent;

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(d)The Agent shall have received, within thirty (30) days following the Closing Date, American Land Title Association/American Congress on Surveying and Mapping form surveys, for which all necessary fees (where applicable) have been paid,  certified to the Agent and the issuer of the Mortgage Policies in a manner reasonably satisfactory to the Agent by a land surveyor duly registered and licensed in the states in which the property described in such surveys is located and reasonably acceptable to the Agent, showing all buildings and other improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects reasonably acceptable to the Agent;

(e)The Agent shall have received a Phase I Environmental Site Assessment (and, with respect to the Real Estate included in the Borrowing Base on the Closing Date, within thirty (30) days following the Closing Date, a Phase II Environmental Site Assessment), in each case in accordance with ASTM Standard E1527-05, in form and substance reasonably satisfactory to the Agent, from an environmental consulting firm reasonably acceptable to the Agent, which reports shall identify recognized environmental conditions and shall to the extent possible quantify any related costs and liabilities, associated with such conditions and the Agent shall be satisfied with the nature and amount of any such matters. The Agent may, upon the receipt of a Phase I Environmental Site Assessment for any other Eligible Real Estate require the delivery of further environmental assessments or reports to the extent such further assessments or reports are recommended in the Phase I Environmental Site Assessment;

(f)If such Real Estate is located is designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), the applicable Loan Party shall have delivered to the Agent evidence of flood insurance naming the Agent as mortgagee as required by the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended and in effect, which shall be reasonably satisfactory in form and substance to the Agent; and

(g)The applicable Loan Party shall have delivered such other information and documents as may be reasonably requested by the Agent.

“Realty Reserves” means such reserves as the Agent from time to time determines in the Agent’s Permitted Discretion as being appropriate to reflect the impediments to the Agent’s ability to realize upon any Eligible Real Estate or to reflect claims and liabilities that the Agent determines will need to be satisfied in connection with the realization upon any Eligible Real Estate. Without limiting the generality of the foregoing, Realty Reserves may include (but are not limited to) (i) Environmental Compliance Reserves, (ii) reserves for (A) municipal taxes and assessments, (B) repairs and (C) remediation of title defects, and (iii) reserves for Indebtedness secured by Liens having priority over the Lien of the Agent.

“Receipts and Collections” has the meaning specified in Section 6.13(c).

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“Receivables Advance Rate” means (i) from the Closing Date until the first anniversary of the Closing Date, 95%, and (ii) thereafter, 90%.

“Receivables Reserves” means such reserves as may be established from time to time by the Agent in the Agent’s Permitted Discretion with respect to the determination of the collectability in the ordinary course of Eligible Trade Receivables, including, without limitation, dilution reserves.

“Register” has the meaning specified in Section 10.06(c).

“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Borrower and its Subsidiaries as prescribed by the Securities Laws.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

“Reports” has the meaning provided in Section 9.12(b).

“Request for Credit Extension” means (a) with respect to a Borrowing of Committed Revolving Loans or the Term Loan, a Committed Loan Notice, and (b) with respect to an L/C Credit Extension, a Letter of Credit Application and, if required by the applicable L/C Issuer, a Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable.

“Required Lenders” means, as of any date of determination, Lenders holding more than fifty percent (50%) of the sum of the Aggregate Revolving Commitments and the then aggregate outstanding principal balance of the Term Loan or, if the Aggregate Revolving Commitments and the obligation of each L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than fifty percent (50%) of the Total Outstandings; provided that the Revolving Commitment of, and the portion in the aggregate of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

“Reserves” means all Inventory Reserves, Availability Reserves, Realty Reserves, and Receivables Reserves.

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Loan Party or any of the other individuals designated in writing to the Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder and for whom the Agent has received satisfactory background checks.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and

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such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.  Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.

“Revolving Commitment” means, as to each Revolving Lender, its obligation to make Committed Revolving Loans to the Borrower pursuant to Section 2.01 in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which the Revolving Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Committed Revolving Loans made by each of the Revolving Lenders pursuant to Section 2.01.

“Revolving Lender” means each Lender having a Revolving Commitment as set forth on Schedule 2.01 hereto or in the Assignment and Assumption by which such Person becomes a Revolving Lender.

“Revolving Note” means a promissory note made by the Borrower in favor of a Revolving Lender evidencing the Committed Revolving Loans made by such Revolving Lender, substantially in the form of Exhibit B-1.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

“Salus” means Salus Capital Partners, LLC and its successors.

“Salus Entity” has the meaning provided in Section 10.06(i).

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

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“Security Agreement” means the Security Agreement dated as of the Closing Date among the Loan Parties and the Agent, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced.

“Security Documents” means the Security Agreement, the Blocked Account Agreements, the Mortgages, the DDA Notifications, and each other security agreement or other instrument or document executed and delivered to the Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations.

“Settlement Date” has the meaning provided in Section 2.13(a).

“Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP.

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.

“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged, and (f) such Person is not an “insolvent person” within the meaning of the Bankruptcy and Insolvency Act (Canada).  The amount of all guarantees at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.

“Spot Rate” has the meaning given to such term in Section 1.07 hereof.

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds (excluding appeal bonds) arising in the ordinary course of business, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by any of the Loan Parties, or (d) supports payment or performance for identified purchases or exchanges of products or services in the ordinary course of business.

“Standby Letter of Credit Agreement” means the Standby Letter of Credit Agreement relating to the issuance of a Standby Letter of Credit in the form from time to time in use by the applicable L/C Issuer.

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“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Loan Party.

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“TBAC Trust” means TBAC Investment Trust, a Pennsylvania business trust.

“Term Borrowing” means the borrowing of the Term Loan made by each of the Term Lenders on the Closing Date pursuant to Section 2.01(a).

“Term Commitment” means, as to each Term Lender, its obligation to make a portion of the Term Loan pursuant to Section 2.01(a) in an aggregate principal amount not to exceed the amount set forth opposite such Term Lender’s name on Schedule 2.01.  As of the Closing Date, the aggregate amount of Term Commitments is $1,500,000.

“Term Lender” means each Lender having a Term Commitment as set forth on Schedule 2.01 hereto or in the Assignment and Assumption by which such Person becomes a Term Lender, or after the making of the Term Loan, each Lender holding any portion of the Term Loan.

“Term Loan” means the term loan made by the Term Lenders on the Closing Date pursuant to Section 2.01(a).

“Term Loan Reserve” means the amount by which the outstanding amount of the Term Loan exceeds ten percent (10%) of the Appraised Value of Eligible Inventory.

 “Term Note” means a promissory note made by the Borrower in favor of a Term Lender evidencing the Term Loan made by such Term Lender, substantially in the form of Exhibit B-2.

“Termination Date” means the earliest to occur of (i) the Maturity Date,  (ii) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Revolving Commitments are irrevocably terminated (or deemed terminated) in accordance with ARTICLE VIII, or (iii) the termination of the Revolving

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Commitments in accordance with the provisions of Section 2.05(a) hereof.

“Total Outstandings” means the outstanding principal balance of the Term Loan plus the Total Revolver Outstandings.

“Total Revolver Outstandings” means the aggregate Outstanding Amount of all Committed Revolving Loans and all L/C Obligations.

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9 of the Uniform Commercial Code; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits 2007 Revision, International Chamber of Commerce Publication No. 600 and any subsequent revision thereof adopted by the International Chamber of Commerce on the date such Letter of Credit is issued.

“UFCA” has the meaning specified in Section 10.21(d).

“UFTA” has the meaning specified in Section 10.21(d).

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

“Unintentional Overadvance” means an Overadvance which, to the Agent’s knowledge, did not constitute an Overadvance when made but which has become an Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Borrowing Base or misrepresentation by the Loan Parties.

“United States” and “U.S.” mean the United States of America.

“Unused Line Fee” shall have the meaning given to such term in Section 2.08(a) hereof.

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1.02Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

(d)Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Letters of Credit) and any other contingent Obligations, providing cash collateralization or other collateral as may be requested by the Agent) of all of the Obligations other than unasserted contingent indemnification Obligations.

1.03Accounting Terms Generally.

(a)Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this

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Agreement shall be prepared in conformity with GAAP, applied on a consistent basis, as in effect from time to time, except as otherwise specifically prescribed herein.

(b)           Changes in GAAP.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

1.04Rounding.  Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

1.05Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

1.06Letter of Credit Amounts.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the Stated Amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Documents related thereto, provides for one or more automatic increases in the Stated Amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum Stated Amount is in effect at such time.

1.07Currency Equivalents Generally.  Any amount specified in this Agreement (other than in ARTICLE II,ARTICLE IX and ARTICLE X) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount thereof in the applicable currency to be determined by the Agent at such time on the basis of the Spot Rate (as defined below) for the purchase of such currency with Dollars.  For purposes of this Section 1.07, the “Spot Rate” for a currency means the rate determined by the Agent to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two Business Days prior to the date of such determination; provided that the Agent may obtain such spot rate from another financial institution designated by the Agent if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency.

1.08Judgment Currency.

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(a)If, for the purpose of obtaining or enforcing judgment against any Loan Party in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 1.08 referred to as the “Judgment Currency”) an amount due under any Loan Document in any currency (the “Obligation Currency”) other than the Judgment Currency, the conversion shall be made at the rate of exchange prevailing on the Business Day immediately preceding the date of actual payment of the amount due, in the case of any proceeding in the courts of the Province of Ontario or in the courts of any other jurisdiction that will give effect to such conversion being made on such date, or  the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the applicable date as of which such conversion is made pursuant to this Section 1.08 being hereinafter in this Section 1.08 referred to as the “Judgment Conversion Date”).

(b)If, in the case of any proceeding in the court of any jurisdiction referred to in Section 1.08(a), there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual receipt for value of the amount due, the applicable Loan Party shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount actually received in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of the Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date.  Any amount due from any Loan Party under this Section 1.08(b) shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of any of the Loan Documents.

(c)The term “rate of exchange” in this Section 1.08 means the rate of exchange at which Agent, on the relevant date at or about 12:00 p.m. on the relevant date, would be prepared to sell, in accordance with Agent’s normal course foreign currency exchange practices, the Obligation Currency against the Judgment Currency.

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

2.01Committed Loans; Reserves.

(a)Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make a loan to the Borrower on the Closing Date in a principal amount not to exceed the Term Commitment of such Term Lender.  Amounts repaid in respect of the Term Loan may not be reborrowed, and upon each Term Lender’s making of such Term Loan, the Term Commitment of such Term Lender shall be terminated.

(b)Subject to the terms and conditions set forth herein, each Revolving Lender severally agrees to make loans (each such loan, a “Committed Revolving Loan”) to the Borrower from time to time, on any Business Day during the Availability Period on which the Agent’s offices are open to conduct business, in an aggregate amount not to exceed at any time outstanding the lesser of (x) the amount of such Lender’s Revolving

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Commitment, or (y) such Lender’s Applicable Percentage of the Borrowing Base; subject in each case to the following limitations:

(i)after giving effect to any Revolving Credit Borrowing, the Total Revolver Outstandings shall not exceed the Maximum Revolving Loan Amount;

(ii)after giving effect to any Revolving Credit Borrowing, the aggregate Outstanding Amount of the Committed Revolving Loans of any Revolving Lender shall not exceed the lesser of (A) such Lender’s Revolving Commitment and (B) such Revolving Lender’s Applicable Percentage of the Borrowing Base; and

(iii)the Outstanding Amount of all L/C Obligations shall not at any time exceed the Letter of Credit Sublimit.

Within the limits of each Lender’s Revolving Commitment, and subject to the other terms and conditions hereof, the Borrower may make Revolving Credit Borrowings under this Section 2.01, prepay under Section 2.04, and reborrow Committed Revolving Loans under this Section 2.01.

(c)The Reserves as of the Closing Date are set forth in the Borrowing Base Certificate delivered pursuant to Section 4.01(c) hereof.

(d)The Agent shall have the right, at any time and from time to time after the Closing Date in its Permitted Discretion to establish, modify or eliminate Reserves.

2.02Borrowings and Conversions of Committed Loans.

(a)Subject to the provisions of Section 3.02 and Section 3.03, all Loans shall be LIBO Rate Loans.

(b)Each Revolving Credit Borrowing shall be made upon the Borrower’s irrevocable notice to the Agent in writing in the form of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Each such notice must be received by the Agent not later than 12:00 p.m. on the requested date of any Borrowing.  Each Borrowing of any Committed Revolving Loan shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Committed Loan Notice shall specify (i) the requested date of the Borrowing (which shall be a Business Day) and (ii) the principal amount of Committed Revolving Loans to be borrowed.

(c)Following receipt of a Request for Credit Extension, the Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Revolving Loans.  Each Revolving Lender shall make the amount of its Committed Revolving Loan available to the Agent in immediately available funds at the Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Agent shall make all funds so received available to the Borrower in like funds by no later

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than 4:00 p.m. on the day of receipt by the Agent by wire transfer of such funds in accordance with instructions provided to (and reasonably acceptable to) the Agent by the Borrower.

(d)The Agent, without the request of the Borrower, may advance as a Committed Revolving Loan any interest, fee, service charge (including direct wire fees), Credit Party Expenses, or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto or any other Loan Document and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby.  The Agent shall advise the Borrower of any such advance or charge promptly after the making thereof.  Such action on the part of the Agent shall not constitute a waiver of the Agent’s rights and the Borrower’s obligations under Section 2.04(b).

(e)Each Borrowing of Committed Revolving Loans shall be made by the Revolving Lenders pro rata in accordance with their respective Applicable Percentage.  The failure of any Revolving Lender to make any Loan shall neither relieve any other Lender of its obligation to fund its Loan in accordance with the provisions of this Agreement nor increase the obligation of any such other Lender.

(f)At any time that LIBO Rate Loans are outstanding, the Agent shall notify the Borrower and the Lenders of any change in the LIBO Rate used in determining the applicable interest rate.

(g)The Agent, the Revolving Lenders and the L/C Issuers shall have no obligation to make any Loan or to provide any Letter of Credit if an Overadvance would result.  The Agent may, in its Permitted Discretion, make Permitted Overadvances without the consent of the Borrower, the Lenders and the L/C Issuers and the Borrower and each Lender and L/C Issuer shall be bound thereby.  A Permitted Overadvance is for the account of the Borrower and shall constitute an Obligation and shall be repaid by the Borrower in accordance with the provisions of Section 2.04(b).  The making of any such Permitted Overadvance on any one occasion shall not obligate the Agent or any Revolving Lender to make or permit any Permitted Overadvance on any other occasion or to permit such Permitted Overadvances to remain outstanding. The Agent shall have no liability for, and no Loan Party or Credit Party shall have the right to, or shall, bring any claim of any kind whatsoever against the Agent with respect to Unintentional Overadvances regardless of the amount of any such Overadvance(s).

2.03Letters of Credit.

(a)The Letter of Credit Commitment.

(i)Subject to the terms and conditions set forth herein, each L/C Issuer shall (A) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, issue Letters of Credit for the account of the Loan Parties, and amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (B) honor drawings under the Letters of Credit; provided, that after giving effect to any L/C Credit Extension with respect to any

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Letter of Credit, (x) the Total Revolver Outstandings shall not exceed Maximum Revolving Loan Amount, (y) the aggregate Outstanding Amount of the Committed Revolving Loans of any Revolving Lender shall not exceed such Lender’s Revolving Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.

(ii)No Letter of Credit shall be issued if:

(A)subject to Section 2.03(b)(ii), the expiry date of such requested Standby Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Revolving Lenders have approved such expiry date; or

(B)subject to Section 2.03(b)(ii), the expiry date of such requested Commercial Letter of Credit would occur more than 120 days after the date of issuance or last extension, unless the Required Revolving Lenders have approved such expiry date; or

(C)the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.

(iii)No Letter of Credit shall be issued without the prior consent of the Agent if:

(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the applicable L/C Issuer from issuing such Letter of Credit, or any Law applicable to the applicable L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the applicable L/C Issuer shall prohibit, or request that the applicable L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the applicable L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the applicable L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the applicable L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the applicable L/C Issuer in good faith deems material to it;

(B)the issuance of such Letter of Credit would violate one or more policies of the applicable L/C Issuer applicable to letters of credit generally;

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(C)except as otherwise agreed by the Agent and the applicable L/C Issuer, such Letter of Credit is in an initial Stated Amount less than $100,000, in the case of a Commercial Letter of Credit, or $500,000, in the case of a Standby Letter of Credit; or

(D)such Letter of Credit is to be denominated in a currency other than Dollars; provided that if the applicable L/C Issuer, in its Permitted Discretion, issues a Letter of Credit denominated in a currency other than Dollars, all reimbursements by the Borrower of the honoring of any drawing under such Letter of Credit shall be paid in Dollars based on the Spot Rate.

(iv)The applicable L/C Issuer shall not amend any Letter of Credit if (A) such L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(v)Each L/C Issuer shall have all of the benefits and immunities (A) provided to the Agent in ARTICLE IX with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Agent” as used in ARTICLE IX included such L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to such L/C Issuer.

(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable L/C Issuer (with a copy to the Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower.  Such Letter of Credit Application must be received by such L/C Issuer and the Agent not later than 11:00 a.m. at least two Business Days (or such other date and time as the Agent and such L/C Issuer may agree in a particular instance in their Permitted Discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Agent and such L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Agent or such L/C Issuer may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Agent and the applicable L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the Agent or such L/C Issuer may reasonably require.  Additionally, the Borrower shall furnish to the applicable L/C Issuer

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and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, and any Issuer Documents (including, if requested by the applicable L/C Issuer, a Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable), as the applicable L/C Issuer or the Agent may require.

(ii)Promptly after receipt of any Letter of Credit Application, the applicable L/C Issuer will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such L/C Issuer will provide the Agent with a copy thereof.  Unless the applicable L/C Issuer has received written notice from any Lender, the Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in ARTICLE IV shall not then be satisfied or unless the applicable L/C Issuer would not be permitted, or would have no obligation, at such time to issue such Letter of Credit under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), then, subject to the terms and conditions hereof, the applicable L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the applicable Loan Party or enter into the applicable amendment, as the case may be, in each case in accordance with such L/C Issuer’s usual and customary business practices.

(iii)If the Borrower so requests in any applicable Letter of Credit Application, the applicable L/C Issuer may, in its sole and absolute discretion, agree to issue a Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the applicable L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Standby Letter of Credit is issued.  Unless otherwise directed by the Agent or the applicable L/C Issuer, the Borrower shall not be required to make a specific request to the Agent or the applicable L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable L/C Issuer to permit the extension of such Standby Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the Agent shall instruct the applicable L/C Issuer not to permit any such extension if (A) the applicable L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Standby Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) the applicable L/C Issuer has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Agent that the Required Lenders have elected not to permit such extension or (2) from the Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the applicable L/C Issuer not to permit such extension.

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(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable L/C Issuer will also deliver to the Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.

(c)Drawings.  Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the applicable L/C Issuer shall notify the Borrower and the Agent thereof not less than two (2) Business Days prior to the Honor Date (as defined below); provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the applicable L/C Issuer with respect to any such payment.  Any notice given by the applicable L/C Issuer or the Agent pursuant to this Section 2.03(c)may be given by telephone if immediately confirmed in writing; provided, that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(d)Obligations Absolute.  The obligation of the Borrower to reimburse the applicable L/C Issuer for each drawing under each Letter of Credit shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

(ii)the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the applicable L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv)any payment by the applicable L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the applicable L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

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(v)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any of its Subsidiaries; or

(vi)the fact that any Default or Event of Default shall have occurred and be continuing.

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the Agent and the applicable L/C Issuer.  The Borrower shall be conclusively deemed to have waived any such claim against the applicable L/C Issuer and its correspondents unless such notice is given as aforesaid.

(e)Role of L/C Issuer.  Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the applicable L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the applicable L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the applicable L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the applicable L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the applicable L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(d)) or for any action, neglect or omission under or in connection with any Letter of Credit or Issuer Documents, including, without limitation, the issuance or any amendment of any Letter of Credit, the failure to issue or amend any Letter of Credit, or the honoring or dishonoring of any demand under any Letter of Credit, and such action or neglect or omission will bind the Borrower; provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the applicable L/C Issuer, and the applicable L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, exemplary or punitive damages suffered by the Borrower which the Borrower proves were caused by the applicable L/C Issuer’s willful misconduct or gross negligence or the applicable L/C Issuer’s willful

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failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit; provided, further that any claim against the applicable L/C Issuer by the Borrower for any loss suffered or incurred by the Borrower shall be reduced by an amount equal to the sum of (i) the amount (if any) saved by the Borrower as a result of the breach or other wrongful conduct that allegedly caused such loss, and (ii) the amount (if any) of the loss that would have been avoided had the Borrower taken all reasonable steps to mitigate such loss, including, without limitation, by enforcing its rights against any beneficiary and, in case of a claim of wrongful dishonor, by specifically and timely authorizing the applicable L/C Issuer to cure such dishonor. In furtherance and not in limitation of the foregoing, the applicable L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or the applicable L/C Issuer may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit and may disregard any requirement in a Letter of Credit that notice of dishonor be given in a particular manner and any requirement that presentation be made at a particular place or by a particular time of day), and the applicable L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. The applicable L/C Issuer shall not be responsible for the wording of any Letter of Credit (including, without limitation, any drawing conditions or any terms or conditions that are ineffective, ambiguous, inconsistent, unduly complicated or reasonably impossible to satisfy), notwithstanding any assistance the applicable L/C Issuer may provide to the Borrower with drafting or recommending text for any Letter of Credit Application or with the structuring of any transaction related to any Letter of Credit, and the Borrower hereby acknowledges and agrees that any such assistance will not constitute legal or other advice by the applicable L/C Issuer or any representation or warranty by the applicable L/C Issuer that any such wording or such Letter of Credit will be effective. Without limiting the foregoing, the applicable L/C Issuer may, as it deems appropriate, modify or alter and use in any Letter of Credit the terminology contained on the Letter of Credit Application for such Letter of Credit.

(f)Cash Collateral.  The Borrower shall immediately Cash Collateralize, with the proceeds of Committed Revolving Loans, the Outstanding Amount of all L/C Obligations with respect to all Letters of Credit upon the issuance thereof in an amount equal to one hundred percent (100%) of the Outstanding Amount of such L/C Obligations (other than L/C Obligations with respect to Letters of Credit denominated in a currency other than Dollars, which L/C Obligations shall be Cash Collateralized in an amount equal to one hundred five percent (105%) of the Outstanding Amount of such L/C Obligations).  In furtherance thereof, on the date of issuance of each Letter of Credit hereunder, the Borrower shall request a Revolving Credit Borrowing to be disbursed on such date in order to Cash Collateralize the Outstanding Amount of all L/C Obligations with respect to such Letter of Credit in accordance with this Section 2.03(f).  Cash Collateral shall be maintained in a Cash Collateral Account with the applicable L/C Issuer.  If at any time the Agent or the applicable L/C Issuer determines that any funds

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held as Cash Collateral are subject to any right or claim of any Person other than the Agent or the applicable L/C Issuer or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the applicable L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations.

(g)Applicability of ISP and UCP.  Unless otherwise expressly agreed by the applicable L/C Issuer and the Borrower when a Letter of Credit is issued, (i) the rules of the ISP and the UCP shall apply to each Standby Letter of Credit, and (ii) the rules of the UCP shall apply to each Commercial Letter of Credit.

(h)Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Borrower shall pay directly to the applicable L/C Issuer, for its own account, a customary fronting fee (the “Fronting Fee”) computed on the daily amount available to be drawn under each Letter of Credit issued by such L/C Issuer and payable on a monthly basis in arrears.  Such Fronting Fees shall be due and payable on the first day after the end of each month, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.   For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.06.  In addition, the Borrower shall pay directly to the applicable L/C Issuer, for its own account, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

(i)Letter of Credit Fee.  The Borrower shall pay to the Agent, for the account of each Lender in accordance with its Applicable Percentage, a Letter of Credit Fee (the “Letter of Credit Fee”) for each Letter of Credit at the rate per annum equal to the LIBO Rate plus the Applicable Margin set forth in clause (a) of the definition thereof, multiplied by the daily Stated Amount of such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit).  Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each month, commencing with the first such date to occur after the issuance of such Letter of Credit, on the expiration date of such Letter of Credit and on the Termination Date, and (ii) computed on a monthly basis in arrears.  Notwithstanding anything to the contrary contained herein, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

(j)Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

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2.04Prepayments.

(a)Subject to the payment of any Early Termination Fee required under Section 2.08(b) hereof, the Borrower may, upon notice from the Borrower to the Agent (which notice may be revocable if such notices states that the such prepayment is contingent upon the refinancing in full of the credit facility provided hereunder, or the occurrence of any similar transaction, and such refinancing or other transaction does not occur), at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Agent not later than 11:00 a.m. three Business Days prior to any date of prepayment; and (ii) any prepayment of (x) Committed Revolving Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof, and (y) the Term Loan shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment.  The Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Loan shall be accompanied by all accrued interest on the amount prepaid.  Each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages.

(b)If for any reason the Total Revolver Outstandings at any time exceed the Maximum Revolving Loan Amount as then in effect, the Borrower shall immediately prepay the Committed Revolving Loans in an amount equal to such excess.

(c)The Borrower shall prepay the Loans and Cash Collateralize the L/C Obligations (to the extent that any such L/C Obligations are not already Cash Collateralized) with proceeds and collections received by the Loan Parties to the extent so required under the provisions of Section 6.13 hereof.

(d)The Borrower shall prepay the Loans and Cash Collateralize the L/C Obligations (to the extent that any such L/C Obligations are not already Cash Collateralized) in an amount equal to the Net Proceeds received by a Loan Party on account of a Prepayment Event.

(e)Upon the expiration of any Letter of Credit, or any reduction in the amount of any Letter of Credit, the Borrower shall immediately prepay the Loans then outstanding with the cash collateral held by the applicable L/C Issuer on account of such Letter of Credit in an amount equal to (i) in the case of the expiration of such Letter of, the aggregate amount of Cash Collateral held by the applicable L/C Issuer on account of such Letter of Credit prior to giving effect to such prepayment, and (ii) in the case of any reduction in the amount of such Letter of Credit, (A) the aggregate amount of Cash Collateral held by the applicable L/C Issuer on account of such Letter of Credit prior to giving effect to such prepayment minus (ii) the amount of cash collateral required to Cash

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Collateralize the aggregate undrawn amount available to be drawn on such Letter of Credit after giving effect to the reduction thereof, in accordance with Section 2.03(f).

(f)Prepayments made pursuant to Section 2.04(c), (d) and (e) above, first, shall be applied to the outstanding Committed Revolving Loans; second, shall be used to Cash Collateralize the remaining L/C Obligations (to the extent that any such L/C Obligations are not already Cash Collateralized); third, shall be applied ratably to the outstanding Term Loan; and, fourth, the amount remaining, if any, after the prepayment in full of all Loans outstanding at such time and the Cash Collateralization of the remaining L/C Obligations in full may be retained by the Borrower for use in the ordinary course of its business.  Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the applicable L/C Issuer.

2.05Termination or Reduction of Commitments.

(a)The Borrower may, upon notice from the Borrower to the Agent (which notice may be revocable if such notice states that the termination is contingent upon the refinancing in full of the credit facility provided hereunder, or the occurrence of any other similar transaction, and such refinancing or other transaction does not occur), terminate the Aggregate Revolving Commitments or the Letter of Credit Sublimit or from time to time permanently reduce the Aggregate Revolving Commitments or the Letter of Credit Sublimit; provided that (i) any such notice shall be received by the Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $500,000 in excess thereof, (iii) the Borrower shall not terminate or reduce (A) the Aggregate Revolving Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolver Outstandings would exceed the Aggregate Revolving Commitments, or (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit.

(b)If, after giving effect to any reduction of the Aggregate Revolving Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate Revolving Commitments, such Letter of Credit Sublimit shall be automatically reduced by the amount of such excess.

(c)The Agent will promptly notify the Lenders of any termination or reduction of the Letter of Credit Sublimit or the Aggregate Revolving Commitments under this Section 2.05.  Upon any reduction of the Aggregate Revolving Commitments, the Revolving Commitment of each Revolving Lender shall be reduced by such Revolving Lender’s Applicable Percentage of such reduction amount.  All fees and interest in respect of the Aggregate Revolving Commitments accrued until the effective date of any termination of the Aggregate Revolving Commitments shall be paid on the effective date of such termination.

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(d)The Term Commitment of each Term Lender shall automatically terminate upon such Term Lender’s funding of its portion of the Term Loan, which shall occur no later than the Closing Date.

2.06Repayment of Loans.

(a)The Borrower shall repay to the Revolving Lenders on the Termination Date the aggregate principal amount of Committed Revolving Loans outstanding on such date.

(b)The Borrower shall repay to the Term Lenders on the Termination Date the aggregate principal amount of the Term Loan outstanding on such date, along with accrued but unpaid interest and all other Obligations outstanding with respect to the Term Loan.

2.07Interest.

(a)Subject to the provisions of Section 2.07(b) below, each Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the LIBO Rate plus the Applicable Margin.

(b)(i)           If any amount payable under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws until so paid.

(i)If any other Event of Default exists, then the Agent may, and upon the request of the Required Lenders shall, notify the Borrower that all outstanding Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times during the continuance of such Event of Default equal to the Default Rate and thereafter such Obligations shall bear interest at the Default Rate to the fullest extent permitted by applicable Laws.

(ii)Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c)Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

2.08Fees.  In addition to certain fees described in Section 2.03(h) and (i):

(a)Unused Line Fee.  The Borrower shall pay to the Agent for the account of each Lender in accordance with its Applicable Percentage, an unused line fee, calculated on a per annum basis, equal to 0.50% times the average daily amount by which the

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Aggregate Revolving Commitments exceed the Total Revolver Outstandings (the “Unused Line Fee”). The Unused Line Fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV of the Credit Agreement is not met, and shall be due and payable monthly in arrears on the first Business Day after the end of each month, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period. The Unused Line Fee shall be computed on a monthly basis in arrears.

(b)Early Termination Fee.  In the event that the Termination Date occurs, for any reason, prior to the Maturity Date, or in the event that the Borrower reduces (but does not terminate) the Aggregate Revolving Commitments prior to the Maturity Date, the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a fee (the “Early Termination Fee”) equal to the following:  (i) three percent (3.00%) of (x) the Aggregate Revolving Commitments then in effect (without regard to any termination thereof) plus the outstanding amount of the Term Loan or (y) the amount of any reduction in the Aggregate Revolving Commitments, as applicable, if the Termination Date or reduction shall occur at any time on or before the first anniversary of the Closing Date; and (ii) one and one-half percent (1.50%) of (x) the Aggregate Revolving Commitments then in effect (without regard to any termination thereof) plus the outstanding amount of the Term Loan or (y) the amount of any reduction in the Aggregate Revolving Commitments, as applicable, if the Termination Date or reduction shall occur at any time after the first anniversary of the Closing Date.  The parties hereto agree and acknowledge that the Lenders will have suffered damages on account of the early termination of this Agreement or any portion of the Aggregate Revolving Commitments and that, in view of the difficulty in ascertaining the amount of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Lenders on account thereof.

(c)Other Fees.  The Borrower shall pay to the Agent for its own account and the account of the Lenders fees in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

2.09Computation of Interest and Fees.  All computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed.  Interest shall accrue on each Loan for the day on which the Loan is made.  For purposes of the calculation of interest on the Loans and the Outstanding Amount, all payments made by or on account of the Borrower shall be deemed to have been applied to the Loans two (2) Business Days after receipt of such payments by the Agent (as such receipt is determined pursuant to Section 2.11).  Each determination by the Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

2.10Evidence of Debt.

(a)The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by the Agent (the “Loan Account”) in the ordinary course of business.  In addition, each Lender may record in such Lender’s internal

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records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to such Lender. The accounts or records maintained by the Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Agent, the Borrower shall execute and deliver to such Lender (through the Agent) a Note, which shall evidence such Lender’s Committed Revolving Loans or portion of the Term Loan, as applicable, in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.

(b)The Agent shall render monthly statements regarding the Loan Account to the Borrower including principal, interest, fees, and including an itemization of all charges and expenses constituting Credit Party Expenses owing, and such statements, absent manifest error, shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and the Credit Parties unless, within thirty (30) days after receipt thereof by the Borrower, the Borrower shall deliver to Agent written objection thereto describing the error or errors contained in any such statements.

2.11Payments Generally; Agent’s Clawback.

(a)General.  All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Agent, for the account of the respective Lenders to which such payment is owed, at the Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Agent shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue and shall be calculated pursuant to Section 2.09.  If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

(b)(ii)           Funding by Revolving Lenders; Presumption by Agent.  Unless the Agent shall have received notice from a Revolving Lender prior to 12:00 noon on the date of such Revolving Credit Borrowing that such Revolving Lender will not make

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available to the Agent such Revolving Lender’s share of such Revolving Credit Borrowing, the Agent may assume that such Revolving Lender has made such share available on such date in accordance with Section 2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Revolving Lender has not in fact made its share of the applicable Revolving Credit Borrowing available to the Agent, then the applicable Revolving Lender and the Borrower severally agree to pay to the Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Agent, at (A) in the case of a payment to be made by such Revolving Lender, the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Committed Revolving Loans. If the Borrower and such Revolving Lender shall pay such interest to the Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Revolving Lender pays its share of the applicable Revolving Credit Borrowing to the Agent, then the amount so paid shall constitute such Revolving Lender’s Committed Revolving Loan included in such Revolving Credit Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Revolving Lender that shall have failed to make such payment to the Agent.

(i)Payments by Borrower; Presumptions by Agent.  Unless the Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Agent for the account of the Lenders or the applicable L/C Issuer hereunder that the Borrower will not make such payment, the Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable L/C Issuer, as the case may be, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable L/C Issuer, as the case may be, severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender or the applicable L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation.

A notice of the Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

(c)Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this ARTICLE II, and such funds are not made available to the Borrower by the Agent because the conditions to the applicable Credit Extension set forth in ARTICLE IV are not satisfied or waived in accordance with the terms hereof (subject to

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the provisions of the last paragraph of Section 4.02 hereof), the Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(d)Obligations of Lenders Several.  The obligations of the Term Lenders hereunder to make the Term Loan and of the Revolving Lenders hereunder to make Committed Revolving Loans, to fund participations in Letters of Credit and to make payments hereunder are several and not joint.  The failure of any Term Lender to make its portion of the Term Loan, or of any Revolving Lender to make any Committed Revolving Loan, to fund any such participation or to make any payment hereunder on any date required hereunder shall not relieve any other Term Lender or Revolving Lender (as applicable) of its corresponding obligation to do so on such date, and no Term Lender or Revolving Lender (as applicable) shall be responsible for the failure of any other Term Lender or Revolving Lender (as applicable) to so make its portion of the Term Loan or its Committed Revolving Loan (as applicable), to purchase its participation or to make its payment hereunder.

(e)Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

2.12Sharing of Payments by Lenders.  If any Credit Party shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of, interest on, or other amounts with respect to, any of the Obligations resulting in (a) any Revolving Lender’s receiving payment of a proportion of the aggregate amount of Obligations in respect of Committed Revolving Loans greater than its pro rata share thereof as provided herein, or (b) a Term Lender receiving payment of a portion of the aggregate amount of Obligations in respect of the Term Loan greater than its pro rata share thereof as provided herein (including, in each case, as in contravention of the priorities of payment set forth in Section 8.03), then the Credit Party receiving such greater proportion shall (a) notify the Agent of such fact, and (b) purchase (for cash at face value) participations in the Obligations of the other Revolving Lenders or Term Lenders, as applicable, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Credit Parties ratably and in the priorities set forth in Section 8.03, provided that:

(i)if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii)the provisions of this Section shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its portion of the Term Loan or its Committed Revolving Loans or subparticipations in L/C Obligations to any assignee or

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participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

2.13Settlement Amongst Lenders.

(a)The amount of each Revolving Lender’s Applicable Percentage of outstanding Committed Revolving Loans shall be computed weekly (or more frequently in the Agent’s Permitted Discretion) and shall be adjusted upward or downward based on all Committed Revolving Loans and repayments of Committed Revolving Loans received by the Agent as of 3:00 p.m. on the first Business Day (such date, the “Settlement Date”) following the end of the period specified by the Agent.

(b)The Agent shall deliver to each of the Revolving Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Committed Revolving Loans for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the Agent shall transfer to each Revolving Lender its Applicable Percentage of repayments, and (ii) each Revolving Lender shall transfer to the Agent (as provided below) or the Agent shall transfer to each Revolving Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Committed Revolving Loans made by each Revolving Lender shall be equal to such Revolving Lender’s Applicable Percentage of all Committed Revolving Loans outstanding as of such Settlement Date.  If the summary statement requires transfers to be made to the Agent by the Revolving Lenders and is received prior to 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day. The obligation of each Revolving Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Agent.  If and to the extent any Revolving Lender shall not have so made its transfer to the Agent, such Revolving Lender agrees to pay to the Agent, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent, equal to the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Agent in connection with the foregoing.

2.14Defaulting Lenders.

(a)Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

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(i)Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01.

(ii)Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Agent as follows:  first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder; second, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Committed Revolving Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; third, if so determined by the Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Committed Revolving Loans under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Committed Revolving Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Committed Revolving Loans were made at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Committed Revolving Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Committed Revolving Loans of such Defaulting Lender until such time as all Committed Revolving Loans are held by the Lenders pro rata in accordance with the Revolving Commitments hereunder.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii)Certain Fees.

(A)No Defaulting Lender shall be entitled to receive any fee payable under Section 2.08 for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B)With respect to any fee payable under Section 2.08 not required to be paid to any Defaulting Lender pursuant to clause (A) above, the Borrower shall not be required to pay the remaining amount of any such fee.

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(b)Defaulting Lender Cure.  If the Borrower and the Agent agree in writing that a Lender is no longer a Defaulting Lender, the Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Committed Revolving Loans of the other Lenders or take such other actions as the Agent may determine to be necessary to cause the Committed Revolving Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

3.01Taxes.

(a)Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, the Lender or the applicable L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b)Payment of Other Taxes by the Borrower.  Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Agent, each Lender and each L/C Issuer, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Agent, such Lender or such L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or a L/C Issuer (with a

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copy to the Agent), or by the Agent on its own behalf or on behalf of the Agent, a Lender or a L/C Issuer, shall be conclusive absent manifest error.

(d)Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.

(e)Status of Lenders.  Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. Such delivery shall be provided on the Closing Date and on or before such documentation expires or becomes obsolete or after the occurrence of an event requiring a change in the documentation most recently delivered.  In addition, any Lender, if requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(i)duly executed originals of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

(ii)duly executed originals of Internal Revenue Service Form W-8ECI,

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(iii)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) duly executed originals of  Internal Revenue Service Form W-8BEN, or

(iv)to the extent a Foreign Lender is not the beneficial owner, duly executed originals of Internal Revenue Service Form W-8IMY, accompanied by Internal Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN, a U.S. Tax Compliance Certificate, Internal Revenue Service Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially on behalf of each such direct and indirect partner;

(C)           any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and

(D)           if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.

(f)Treatment of Certain Refunds.  If the Agent, any Lender or any L/C Issuer determines, in its Permitted Discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to

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the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Agent, such Lender or such L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Agent, such Lender or such L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, such Lender or such L/C Issuer in the event the Agent, such Lender or such L/C Issuer is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Agent, any Lender or any L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

3.02Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBO Rate Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to make or continue LIBO Rate Loans shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, all Loans of such Lender shall thereafter bear interest a per annum rate equal to the prime rate of interest from time to time published by www.bankrate.com.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

3.03Inability to Determine Rates.  If the Required Lenders determine that for any reason in connection with any request for a LIBO Rate Loan or a conversion to a LIBO Rate Loan that (a) adequate and reasonable means do not exist for determining the LIBO Rate for with respect to a proposed LIBO Rate Loan, or (b) the LIBO Rate with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agent will promptly so notify the Borrower and each Lender.  Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended until the Agent (upon the instruction of the Required Lenders) revokes such notice and all Loans shall bear interest at a per annum rate equal to the prime rate of interest from time to time published by www.bankrate.com.

3.04Increased Costs; Reserves on LIBO Rate Loans.

(a)Increased Costs Generally.  If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBO Rate) or any L/C Issuer;

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(ii)subject any Lender or any L/C Issuer to any Taxes, any Letter of Credit or any LIBO Rate Loan made by it, or change the basis of taxation of payments to such Lender or such L/C Issuer in respect thereof (except for (A) Indemnified Taxes, (B) Other Taxes covered by Section 3.01, (C) Taxes described in clauses (c) through (e) of the definition of Excluded Taxes and (D) Connection Income Taxes) payable by such Lender or such L/C Issuer); or

(iii)impose on any Lender or any L/C Issuer any other condition, cost or expense (other than Taxes) affecting this Agreement or LIBO Rate Loans made by such Lender or any Letter of Credit;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBO Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such L/C Issuer of issuing or maintaining any Letter of Credit (or of maintaining its obligation to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or such L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or such L/C Issuer, the Borrower will pay to such Lender or such L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or such L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.  In such event, such Lender or such L/C Issuer, as the case may be, will provide the Borrower with reasonably detailed evidence of such additional costs or reductions and the Change in Law giving rise thereto.

(b)Capital Requirements.  If any Lender or any L/C Issuer determines that any Change in Law affecting such Lender or such L/C Issuer or any Lending Office of such Lender or such Lender’s or such L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or such L/C Issuer’s capital or on the capital of such Lender’s or such L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by such Lender, or the Letters of Credit issued by such L/C Issuer, to a level below that which such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such L/C Issuer’s policies and the policies of such Lender’s or such L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or such L/C Issuer or such Lender’s or such L/C Issuer’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender or a L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or such L/C Issuer or its holding company, as the case may be, together with delivery to the Borrower of reasonably detailed evidence of such Change in Law, amount of increased capital, additional costs, or reductions, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender or such L/C Issuer, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

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(d)Delay in Requests.  Failure or delay on the part of any Lender or any L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or such L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or a L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or such L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

(e)Reserves on LIBO Rate Loans.  The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each LIBO Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

3.05Mitigation Obligations; Replacement of Lenders.

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 3.04, or requires the Borrower to pay any Indemnified Taxes or to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.  Each Lender agrees to use commercially reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to designate a different Lending Office if the making of such designation would avoid the effect of this paragraph and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

(b)Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13.

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3.06Survival.  All of the Borrower’s obligations under this ARTICLE III shall survive termination of the Aggregate Revolving Commitments and repayment of the Term Loan, the Committed Revolving Loans and all other Obligations hereunder.

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01Conditions of Initial Credit Extension.  The obligation of each L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

(a)The Agent’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif ” via e-mail) (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party or the Lenders, as applicable, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance reasonably satisfactory to the Agent:

(i)executed counterparts of this Agreement sufficient in number for distribution to the Agent, each Lender and the Borrower;

(ii)a Note executed by the Borrower in favor of each Lender requesting a Note;

(iii)such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Agent may reasonably require evidencing (A) the authority of each Loan Party to enter into this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party;

(iv)copies of each Loan Party’s Organization Documents and such other documents and certifications as the Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to so qualify in such jurisdiction could not reasonably be expected to have a Material Adverse Effect;

(v)a favorable opinion of (a) Winstead PC, counsel to certain of the Loan Parties, addressed to the Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Agent may reasonably request, (b) Saul Ewing LLP, Pennsylvania counsel to TBAC Trust, addressed to the Agent and each Lender, as to such matters concerning TBAC Trust and the Loan Documents as the Agent may reasonably request, and (c) Aird & Berlis LLP, Canadian counsel to HA Sheldon, addressed to the Agent and each Lender, as to such matters concerning HA Sheldon and the Loan Documents as the Agent may reasonably request;

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(vi)a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and 4.02(b) have been satisfied, (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect (except as disclosed in the Borrower’s reports filed with the SEC prior to the Closing Date), (C) to the Solvency of the Loan Parties as of the Closing Date after giving effect to the transactions contemplated hereby, and (D) either that (1) no consents, licenses or approvals are required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, or (2) that all such consents, licenses and approvals have been obtained and are in full force and effect except those which, if not obtained, would not cause a Default hereunder, and could not reasonably be expected to have a Material Adverse Effect or do not have an adverse effect on the enforceability of the Loan Documents;

(vii)evidence that all insurance required to be maintained pursuant to the Loan Documents and all endorsements in favor of the Agent required under the Loan Documents have been obtained and are in effect;

(viii)a payoff letter from the lender under the Existing Credit Agreement reasonably satisfactory in form and substance to the Agent evidencing that the Existing Credit Agreement has been or concurrently with the Closing Date is being terminated, all obligations thereunder are being paid in full, and all Liens securing obligations under the Existing Credit Agreement have been or concurrently with the Closing Date are being released;

(ix)the Security Documents (including, without limitation, the Mortgages and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties;

(x)all other Loan Documents, each duly executed by the applicable Loan Parties;

(xi)(A)           appraisals (based on net liquidation value) by a third party appraiser acceptable to the Agent of all Inventory of the Borrower, the results of which are satisfactory to the Agent (it being agreed that the appraisal of Gordon Brothers delivered to Agent prior to the Closing Date shall be deemed satisfactory) and (B) a written report regarding the results of a commercial finance examination of the Loan Parties, which shall be satisfactory to the Agent;

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(xii)results of searches or other evidence reasonably satisfactory to the Agent (in each case dated as of a date reasonably satisfactory to the Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements and releases, satisfactions and discharges of any mortgages, and releases  or subordination agreements satisfactory to the Agent are being tendered concurrently with such extension of credit or other arrangements satisfactory to the Agent for the delivery of such termination statements and releases, satisfactions and discharges have been made;

(xiii)(A)           all documents and instruments, including UCC and PPSA financing statements, required by law or reasonably requested by the Agent to be filed, registered or recorded to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Agent, (B) the DDA Notifications and Blocked Account Agreements required pursuant to Section 6.13 hereof, (C) control agreements with respect to the Loan Parties’ securities and investment accounts (if any), and (D) Collateral Access Agreements as required by the Agent;

(xiv)evidence that all other actions that the Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken;

(xv)an appraisal of each of the properties described in the Mortgages by a third party appraiser acceptable to the Agent and otherwise in form and substance satisfactory to the Agent (it being agreed that the appraisal of CBIZ Valuation Group, LLC delivered to Agent prior to the Closing Date shall be deemed satisfactory);

(xvi)flood certificates with respect to each of the properties described in the Mortgages certifying that such properties are not in a flood zone otherwise the Agent shall be named as loss payee and additional insured on flood insurance reasonably acceptable to the Agent with respect to such properties; and

(xvii)such other assurances, certificates, documents, consents or opinions as the Agent or its counsel reasonably may require.

(b)After giving effect to (i) the Loans made, and the Letters of Credit issued, on the Closing Date and (ii) any charges to the Loan Account made in connection with the establishment of the credit facility contemplated hereby, Availability shall be not less than $2,500,000.

(c)The Agent shall have received a Borrowing Base Certificate dated the Closing Date, relating to the week ended on July 20, 2013, with a roll-forward with respect to Inventory and Accounts through July 22, 2013, and executed by a Responsible Officer of the Borrower.

(d)The Agent shall be reasonably satisfied that any financial statements delivered to it fairly present the business and financial condition of the Loan Parties and that there has been no Material Adverse Effect since the date of the Audited Financial Statements (except as disclosed in the Borrower’s reports filed with the SEC prior to the Closing Date).

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(e)The Agent shall have received executed copies of the Licensor/Vendor Subordinated Notes.

(f)The Agent shall have received licensor consent agreements with respect to each of the license agreements set forth on Schedule 4.01 hereto, which consents shall provide that the applicable licensor under each such license agreement shall provide the Agent notice of any default under, or termination of, such license agreement contemporaneously with any delivery of such notice to the applicable Loan Party thereof.

(g)The Agent shall be reasonably satisfied that the Real Estate Eligibility Conditions have been satisfied.

(h)The Agent shall have received and be satisfied with the Borrower’s Business Plan and such other information (financial or otherwise) reasonably requested by the Agent. The Agent shall have received and reviewed the Approved Budget, which shall be in form and substance reasonably satisfactory to the Agent.

(i)There shall not be pending any litigation or other proceeding (except as disclosed on Schedule 5.06), the result of which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(j)The consummation of the transactions contemplated hereby shall not violate any applicable Law or any Organization Document.

(k)All fees and expenses required to be paid to the Agent on or before the Closing Date shall have been paid in full, and all fees and expenses required to be paid to the Lenders on or before the Closing Date shall have been paid in full.

(l)The Borrower shall have paid all fees, charges and disbursements of counsel to the Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the Closing Date (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Agent).

(m)The Agent and the Lenders shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).

(n)No material changes in governmental regulations or policies affecting any Loan Party or any Credit Party shall have occurred prior to the Closing Date.

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(o)There shall not have occurred any disruption or material adverse change in the United States financial or capital markets in general that has had, in the reasonable opinion of the Agent, a material adverse effect on the market for loan syndications or adversely affecting the syndication of the Loans.

(p)The Agent and the Lenders shall have received a pro forma consolidated and consolidating opening balance sheet of the Borrower and its Subsidiaries.

Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have Consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be Consented to or approved by or acceptable or satisfactory to a Lender unless the Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

4.02Conditions to all Credit Extensions.  The obligation of each Lender to honor any Request for Credit Extension and each L/C Issuer to issue each Letter of Credit is subject to the following conditions precedent:

(a)The representations and warranties of each other Loan Party contained in ARTICLE V or in any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (other than any representations and warranty which is qualified by materiality which shall be true and correct in all respects) on and as of the date of such Credit Extension, except (i) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (other than any representations and warranty which is qualified by materiality which shall be true and correct in all respects) as of such earlier date, and (ii) for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01;

(b)No Default or Event of Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof;

(c)The Agent and, if applicable, the applicable L/C Issuer shall have received a Request for Credit Extension in accordance with the requirements hereof;

(d)No event or circumstance which could reasonably be expected to result in a Material Adverse Effect shall have occurred; and

(e)No Overadvance shall result from such Credit Extension unless such Overadvance is a Permitted Overadvance.

Each Request for Credit Extension submitted by the Borrower shall be deemed to be a representation and warranty by the Borrower that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this Section 4.02 are for the sole benefit of the Credit Parties but until the Required

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Revolving  Lenders otherwise direct the Agent to cease making Committed Revolving Loans and direct each L/C Issuer to cease issuing Letters of Credit, the Revolving Lenders will fund their Applicable Percentage of all Committed Revolving Loans whenever made, which are requested by the Borrower and which, notwithstanding the failure of the Loan Parties  to comply with the provisions of this ARTICLE IV, agreed to by the Agent; provided, however, the making of any such Loans or the issuance of any Letters of Credit shall not be deemed a modification or waiver by any Credit Party of the provisions of this ARTICLE IV on any future occasion or a waiver of any rights or the Credit Parties as a result of any such failure to comply.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, each Loan Party represents and warrants to the Agent and the other Credit Parties that:

5.01Existence, Qualification and Power.  Each Loan Party (a) is a corporation, limited liability company, business trust, partnership or limited partnership, duly incorporated, organized or formed, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, organization, or formation, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears in official filings in its jurisdiction of incorporation or organization, its jurisdiction of incorporation or organization, organization type, organization number, if any, issued by its jurisdiction of incorporation or organization, and its federal employer identification number.

5.02Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any Material Contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Agent under the Security Documents); or (d) violate any Law.

5.03Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery

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or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the first priority nature thereof), (b) such as have been obtained or made and are in full force and effect and (c) those which if not obtained would not cause a Default hereunder and could not reasonably be expected to result in a Material Adverse Effect.

5.04Binding Effect.  This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

5.05Financial Statements; No Material Adverse Effect.

(a)The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

(b)The unaudited Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries dated May 31, 2013, and the related Consolidated and consolidating statements of income or operations, Shareholders’ Equity and cash flows for the Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

(c)Since the date of the Audited Financial Statements, except as disclosed on Schedule 5.06 or in the Borrower’s reports filed with the SEC prior to the Closing Date, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(d)To the best knowledge of the Borrower, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or could reasonably be expected to result in a misstatement in any material respect, (i) in any financial information delivered or to be delivered to the Agent or the Lenders, (ii) of the Borrowing Base, (iii) of covenant compliance calculations provided hereunder or (iv)

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of the assets, liabilities, financial condition or results of operations of the Borrower and its Subsidiaries on a Consolidated basis.

(e)The Consolidated and consolidating forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 6.01(c) and the Business Plan were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of its future financial performance (it being recognized by the Agent and the Lenders that any projections and forecasts provided by any Loan Party are subject to uncertainties and contingencies, are based on good faith estimates and assumptions believed by the Loan Parties to be reasonable as of the date of the applicable projections or forecasts and that actual results during the period or periods covered by any such projections and forecasts may differ materially from projected or forecasted results).

5.06Litigation.  Except as set forth in Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

5.07No Default.  No Loan Party is in default under or with respect to any Material Indebtedness.  No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

5.08Ownership of Property; Liens.

(a)Each of the Loan Parties and each Subsidiary thereof has good record and marketable title in fee simple (or is successor in interest to the record title owner) to or valid leasehold interests in, all Real Estate necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each of the Loan Parties and each Subsidiary has good and marketable title to, valid leasehold interests in, or valid licenses to use all personal property and assets material to the ordinary conduct of its business.

(b)Schedule 5.08(b)(1) sets forth the address (including street address, county and state) of all Real Estate that is owned by the Loan Parties, together with a list of the holders of any mortgage or other Lien thereon as of the Closing Date.  Each Loan Party and each of its Subsidiaries has good, marketable and insurable fee simple title to the Real Estate owned by such Loan Party or such Subsidiary, free and clear of all Liens, other than Permitted Encumbrances.  Schedule 5.08(b)(2) sets forth the address

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(including street address, county and state) of all Leases of the Loan Parties, together with a list of the lessor and its contact information with respect to each such Lease as of the Closing Date.  Each of such Leases is in full force and effect and the Loan Parties are not in default of the terms thereof.

(c)Schedule 7.01 sets forth a complete and accurate list of all Liens reflected in filed financing statements on the property or assets of each Loan Party, showing as of the Closing Date the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party subject thereto.  The property of each Loan Party is subject to no Liens, other than Permitted Encumbrances.

(d)Schedule 7.02 sets forth a complete and accurate list of all Investments held by any Loan Party (other than intercompany Indebtedness owed by a Loan Party to any Loan Party) of a Loan Party on the Closing Date, showing as of the Closing Date the amount, obligor or issuer and maturity, if any, thereof.

(e)Schedule 7.03 sets forth a complete and accurate list of all Indebtedness of each Loan Party or any Subsidiary of a Loan Party on the Closing Date, showing as of the Closing Date the amount, obligor or issuer and maturity thereof.

5.09Environmental Compliance.

(a)No Loan Party or any Subsidiary thereof (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)Except as otherwise set forth in Schedule 5.09, with respect to properties currently owned or operated by any Loan Party or any Subsidiary thereof, or to the knowledge of the Borrower and any other Loan Party, any property formerly owned or operated by any Loan Party to any Subsidiary thereof, none of the properties currently or formerly owned or operated by any Loan Party or any Subsidiary thereof is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state, provincial, territorial or local list or is adjacent to any such property; there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any Subsidiary thereof or, to the best of the knowledge of the Loan Parties, on any property formerly owned or operated by any Loan Party or Subsidiary thereof; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or Subsidiary thereof; and Hazardous Materials have not been released, discharged or disposed of in violation of Environmental Laws on any property currently or, to the knowledge of the Loan Parties, formerly owned or operated by any Loan Party or any Subsidiary thereof.

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(c)Except as otherwise set forth on Schedule 5,09, no Loan Party or any Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary thereof has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any Subsidiary thereof have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any Subsidiary thereof.

5.10Insurance.  The properties of the Loan Parties and their Subsidiaries are insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties, in such amounts, with such deductibles and covering such risks (including, without limitation, workmen’s compensation, public liability, business interruption and property damage insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Loan Parties or the applicable Subsidiary operates.  Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties and their Subsidiaries as of the Closing Date. Each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

5.11Taxes.  The Loan Parties and their Subsidiaries have filed all Federal, state, provincial, territorial and other material tax returns and reports required to be filed, and have paid all Federal, state, provincial, territorial and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP, and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation.  There is no proposed tax assessment against any Loan Party or any Subsidiary that would, if made, have a Material Adverse Effect.  No Loan Party or any Subsidiary thereof is a party to any tax sharing agreement.

5.12ERISA Compliance; Canadian Plans.

(a)The Borrower, each of its ERISA Affiliates and each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification.  The Loan Parties and each ERISA Affiliate have made all required contributions to each Plan subject to Sections 412 or 430 of the Code and to each Multiemployer Plan, and no application for a funding waiver or an extension of any amortization period pursuant to Sections 412 or 430 of the Code has been made with respect to any Plan.  No Lien imposed under the Code or ERISA exists or is likely to arise on account of any Plan or Multiemployer Plan.

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(b)There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)(i)           No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

(d)Schedule 5.12 lists all Canadian Benefit Plans and Canadian Pension Plans maintained or contributed to by each Loan Party, and indicates, for each Canadian Pension Plan, whether such Canadian Pension Plan is a defined benefits plan or a defined contribution plan.  The Canadian Pension Plans are duly registered under the Income Tax Act (Canada) and all other applicable laws which require registration.  Each Loan Party has complied with and performed all of its obligations under and in respect of the Canadian Pension Plans and Canadian Benefit Plans under the terms thereof, any funding agreements and all applicable laws (including any fiduciary, funding, investment and administration obligations).  All employer and employee payments, contributions or premiums to be remitted, paid to or in respect of each Canadian Pension Plan or Canadian Benefit Plan have been paid in a timely fashion in accordance with the terms thereof, any funding agreement and all applicable laws.  There have been no improper withdrawals or applications of the assets of the Canadian Pension Plans or the Canadian Benefit Plans.  There are no outstanding disputes concerning the assets of the Canadian Pension Plans or the Canadian Benefit Plans.  Each of the Canadian Pension Plans is fully funded on a solvency basis (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities and which are consistent with generally accepted actuarial principles).

5.13Subsidiaries; Equity Interests.  The Loan Parties have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary.  All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party (or a Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except for those created under the Security Documents and other Permitted Encumbrances.  Except as set

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forth in Schedule 5.13, there are no outstanding rights to purchase any Equity Interests in any Subsidiary.  The Loan Parties have no equity investments in any other corporation or entity other than those specifically disclosed in Part(b) of Schedule 5.13.  All of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and are owned in the amounts specified on Part (c) of Schedule 5.13 free and clear of all Liens except for those created under the Security Documents and other Permitted Encumbrances.  The copies of the Organization Documents of each Loan Party and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

5.14Margin Regulations; Investment Company Act.

(a)No Loan Party is engaged or will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  None of the proceeds of the Credit Extensions shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Credit Extensions to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

(b)None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.15Disclosure.  Each Loan Party has disclosed to the Agent and the Lenders all material agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate or other information furnished in writing by or on behalf of any Loan Party to the Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading as of the time when made or delivered (it being recognized by the Agent and the Lenders that any projections and forecasts provided by any Loan Party are subject to uncertainties and contingencies, are based on good faith estimates and assumptions believed by the Loan Parties to be reasonable as of the date of the applicable projections or forecasts and that actual results during the period or periods covered by any such projections and forecasts may differ materially from projected or forecasted results).

5.16Compliance with Laws.  Each of the Loan Parties and each Subsidiary is in compliance (a) in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (i) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (ii) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (b) with Sections 10.17 and 10.18 hereof.

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5.17Intellectual Property; Licenses, Etc.  The Loan Parties and their Subsidiaries own, or possess the right to use, all of the Intellectual Property, licenses, permits and other authorizations that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person.  To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party or any Subsidiary infringes upon any rights held by any other Person.  No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.18Labor Matters.  There are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party or any Subsidiary thereof pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties comply with the Fair Labor Standards Act and any other applicable federal, state, provincial, territorial, local or foreign Law dealing with such matters except to the extent that any such violation could not reasonably be expected to have a Material Adverse Effect. No Loan Party or any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Act or similar state Law.  All payments due from any Loan Party and its Subsidiaries, or for which any claim may be made against any Loan Party or any of its Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in accordance with GAAP as a liability on the books of such Loan Party. Except as set forth in the Borrower’s SEC filings or otherwise disclosed to Agent in writing, no Loan Party or any Subsidiary is a party to or bound by any collective bargaining agreement, management agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement. There are no representation proceedings pending or, to any Loan Party’s knowledge, threatened to be filed with the National Labor Relations Board or any other applicable labor relations board, organization or similar Governmental Authority, and no labor organization or group of employees of any Loan Party or any Subsidiary has made a pending demand for recognition. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party or any of its Subsidiaries, except as would not be reasonably expected to have a Material Adverse Effect. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party or any of its Subsidiaries is bound.

5.19Security Documents.

(a)The Security Agreement is effective to create in favor of the Agent, for the benefit of the Secured Parties referred to therein, a legal, valid and enforceable security

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interest in the Collateral (as defined in the Security Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.  The financing statements, releases and other filings are in appropriate form and have been or will be filed in the offices specified in Schedule II of the Security Agreement.  Upon such filings, and/or the obtaining of “control” (as defined in the UCC), the Agent will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the UCC or PPSA, as applicable) or by obtaining control, under the UCC, or PPSA, as applicable (in effect on the date this representation is made) in each case prior and superior in right to any other Person.

(b)When the Security Agreement (or a short form thereof) is filed in the United States Patent and Trademark Office, the United States Copyright Office and the Canadian Intellectual Property office and when financing statements, releases and other filings in appropriate form are filed in the offices specified in Schedule II of the Security Agreement, the Agent shall have a fully perfected Lien on, and security interest in, all right, title and interest of the applicable Loan Parties in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office, the United States Copyright Office and the Canadian Intellectual Property Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Closing Date).

(c)The Mortgages create in favor of the Agent, for the benefit of the Secured Parties referred to therein, a legal, valid, continuing and enforceable Lien in the Mortgaged Property (as defined in the Mortgages), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.  Upon the filing or recording of the Mortgages with the appropriate Governmental Authorities, the Agent will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Mortgaged Property that may be perfected by such filing (including without limitation the proceeds of such Mortgaged Property), in each case prior and superior in right to any other Person.

5.20Solvency.  After giving effect to the transactions contemplated by this Agreement, and before and after giving effect to each Credit Extension, the Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party.

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5.21Deposit Accounts.Annexed hereto as Schedule 5.21 is a list of all DDAs maintained by the Loan Parties as of the Closing Date, which Schedule includes, with respect to each DDA (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

5.22Brokers.  Except for Deloitte Corporate Finance LLP, no broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents, and no Loan  Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

5.23Customer and Trade Relations.  There exists no actual or, to the knowledge of any Loan Party, threatened, termination or cancellation of, or any material adverse modification or change in the business relationship of any Loan Party with any supplier material to its operations, except as could not reasonably be expected to have a Material Adverse Effect.

5.24Material Contracts.  Schedule 5.24 sets forth all Material Contracts to which any Loan Party is a party or is bound as of the Closing Date.  The Loan Parties have delivered true, correct and complete copies of such Material Contracts to the Agent on or before the Closing Date.  Except as disclosed to the Agent prior to the Closing Date and except as would not reasonably be expected to have a Material Adverse Effect, the Loan Parties are not in breach of or in default under, in any material respect, any Material Contract (which breach or default is continuing beyond any applicable cure periods or which has not been waived) and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

5.25Casualty.  Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.26Business Plan.  The Loan Parties are operating their business in all material respects in a manner consistent with the Business Plan most recently delivered pursuant to Section 6.01(c) and accepted by the Agent in its Permitted Discretion.

5.27Personally Identifiable Information.  The Loan Parties maintain a policy for the treatment, handling and storage of consumer information and personally identifiable information in accordance with applicable Laws and a true, accurate and complete copy of the current version thereof has been provided to the Agent.

5.28Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada)

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HA Sheldon is in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and all applicable regulations thereunder.

ARTICLE VI

AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which a claim has not been asserted) , or any Letter of Credit shall remain outstanding, the Loan Parties shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

6.01Financial Statements.  Deliver to the Agent, in form and detail satisfactory to the Agent:

(a)as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Borrower, a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

(b)as soon as available, but in any event within 30 days after the end of each of the Fiscal Months of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Month, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Month, and for the portion of the Borrower’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(c) hereof, (B) the corresponding Fiscal Month of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail, such consolidated statements to be certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

(c)as soon as available, but in any event by June 30 of each Fiscal Year of the Borrower, the Business Plan of the Borrower and its Subsidiaries on a monthly basis for the immediately following Fiscal Year (for the avoidance of doubt, the Business Plan for the Fiscal Year in which the Maturity Date occurs shall cover such Fiscal Year in its entirety), and as soon as available, any significant revisions to the Business Plan with respect to such Fiscal Year; provided that (i) the Borrower shall submit a preliminary

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Business Plan no later than May 31 of each Fiscal Year and (ii) any revisions by the Loan Parties to the Business Plan pursuant to a contemplated restructuring of the Indebtedness evidenced by the Licensor/Vendor Subordinated Notes or pursuant to any Event of Default occurring pursuant to Section 8.01(n) hereof shall be subject to the prior written consent of the Agent (such consent not to be unreasonably withheld or delayed).

6.02Certificates; Other Information.  Deliver to the Agent and each Lender, in form and detail satisfactory to the Agent:

(a)concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary for their certification of such financial statements, such Registered Public Accounting Firm has not obtained any knowledge of the existence of any Default or Event of Default under the financial covenants set forth herein or, if any such Default or Event of Default shall exist, stating the nature and status of such event;

(b)concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), (i) a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to GAAP and (ii) a copy of management’s discussion and analysis with respect to such financial statements;

(c)on the Tuesday of each week (or, if such day is not a Business Day, on the next succeeding Business Day), a Borrowing Base Certificate showing the Borrowing Base as of the close of business as of the last day of the immediately preceding week (provided that the Appraised Value percentage applied to the Eligible Inventory set forth in each Borrowing Base Certificate shall be the percentage set forth in the most recent appraisal obtained by the Agent pursuant to Section 6.10 hereof for the applicable month in which such Borrowing Base Certificate is delivered), each Borrowing Base Certificate to be certified as complete and correct by a Responsible Officer of the Borrower and accompanied by all applicable system generated documentation supporting the information contained within the Borrowing Base Certificate, including but not limited to inventory reporting inclusive of inventory mix by category and/or department and, where applicable, accounts receivable detail documentation and any additional documentation reasonably requested by the Agent.

(d)promptly upon receipt or delivery thereof, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Loan Party by its Registered Public Accounting Firm in connection with the accounts or books of the Loan Parties or any Subsidiary, or any audit of any of them, including, without limitation, specifying any Internal Control Event;

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(e)promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Loan Parties, and copies of all annual, regular, periodic and special reports and registration statements which any Loan Party may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national securities commission or stock exchange, and in any case not otherwise required to be delivered to the Agent pursuant hereto;

(f)The financial and collateral reports described on Schedule 6.02 hereto, at the times set forth in such Schedule;

(g)on or before the date that is five (5) days prior to the making of any payment or prepayment on account of the Indebtedness evidenced by the Licensor/Vendor Subordinated Notes, notice of the making of such payment or prepayment and a certificate setting forth the calculation of and certifying as to the satisfaction of the Payment Conditions (as defined in the Licensor/Vendor Subordinated Notes) in connection therewith;

(h)copies of any periodic sale or other reports sent to any licensors of the Loan Parties as and when delivered to such licensors, and a report of all royalty payments made to any licensors of the Loan Parties as and when made;

(i)as soon as available, but in any event within 30 days after the end of each Fiscal Year of the Loan Parties, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and its Subsidiaries and containing such additional information as the Agent, or any Lender through the Agent, may reasonably specify;

(j)promptly after the Agent’s reasonable request therefor, copies of all Material Contracts and documents evidencing Material Indebtedness;

(k)promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or a securities commission in Canada or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of any Loan Party or any Subsidiary thereof or any other matter which, if adversely determined, could reasonably expected to have a Material Adverse Effect;

(l)on Tuesday of each week commencing with the first week after the Closing Date, a variance report showing the Loan Parties’ actual performance compared to the Approved Budget for the immediately preceding week and on a cumulative basis on and after the Closing Date, and projected results for the subsequent 13 week period, in form and substance reasonably acceptable to the Agent; and

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(m)promptly, such additional information regarding the business affairs, financial condition or operations of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Agent or any Lender may from time to time reasonably request.

Documents required to be delivered pursuant to Sections 6.01(a), or Section 6.02(d) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC or a securities commission in Canada) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Agent or such Lender and (ii) the Borrower shall notify the Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Agent by electronic mail upon request electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Agent.  The Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

6.03Notices.  Promptly notify the Agent:

(a)of the occurrence of any Default or Event of Default;

(b)of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect;

(c)of any material breach or non-performance of, or any written notice of default under, a Material Contract or with respect to Material Indebtedness of any Loan Party or any Subsidiary thereof;

(d)of any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority or the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary thereof, including pursuant to any applicable Environmental Laws;

(e)of the occurrence of any ERISA Event or termination of winding-up of any Canadian Pension Plan;

(f)of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof;

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(g)of any change in any Loan Party’s senior executive officers;

(h)of the discharge by any Loan Party of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

(i)of any collective bargaining agreement or other labor contract to which a Loan Party becomes a party, or the application for the certification of a collective bargaining agent;

(j)of the filing of any Lien for unpaid Taxes against any Loan Party;

(k)of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any interest in a material portion of the Collateral under power of eminent domain or by condemnation or similar proceeding or if any material portion of the Collateral is damaged or destroyed; and

(l)of the entering into of any transaction permitted pursuant to clauses (h) or (l) of the definition of Permitted Disposition, clauses (c), (d) or (n) of the definition of Permitted Indebtedness, or clauses (a) through (e) or clause (n) of the definition of Permitted Investment.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

6.04Payment of Obligations.  Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims of landlords, warehousemen, customs brokers, freight forwarders, consolidators and carriers) which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, (ii) such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (iii) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, (iv) no Lien has been filed with respect thereto and (v) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. Nothing contained herein shall be deemed to limit the rights of the Agent with respect to determining Reserves pursuant to this Agreement.

6.05Preservation of Existence, Etc.  Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or Section 7.05; (b) take all

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reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its Intellectual Property, except to the extent such Intellectual Property is no longer used or useful in the conduct of the business of the Loan Parties or if the failure to do so could not reasonably be expected to have a Material Adverse Effect.

6.06Maintenance of Properties.  (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

6.07Maintenance of Insurance.

(a)Maintain with financially sound and reputable insurance companies reasonably acceptable to the Agent and not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by applicable Law, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the Agent.

(b)Cause fire and extended coverage policies maintained with respect to any Collateral to be endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding improvements to Real Estate) and lenders’ loss payable clause (regarding personal property), in form and substance satisfactory to the Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Agent, (ii) a provision to the effect that none of the Loan Parties, Credit Parties or any other Person shall be a co-insurer and (iii) such other provisions as the Agent may reasonably require from time to time to protect the interests of the Credit Parties.

(c)Cause commercial general liability policies to be endorsed to name the Agent as an additional insured.

(d)Cause business interruption policies to name the Agent as a loss payee and to be endorsed or amended to include (i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Agent, (ii) a provision to the effect that none of the Loan Parties, the Agent, any Lender or any other Credit Party shall be a co-insurer and (iii) such other provisions as the Agent may reasonably require from time to time to protect the interests of the Credit Parties.

(e)Cause each such policy referred to in this Section 6.07 to also provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the

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insurer to the Agent (giving the Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Agent.

(f)Deliver to the Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Agent, including an insurance binder) together with evidence satisfactory to the Agent of payment of the premium therefor.

(g)If at any time the area in which any Eligible Real Estate is located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as is reasonable and customary for companies engaged in the business of operating supermarkets, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as is reasonable and customary for companies engaged in the in the same or similar business.

(h)Maintain for themselves and their Subsidiaries, a Directors and Officers insurance policy, and a “Blanket Crime” policy including employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, property, and computer fraud coverage with responsible companies in such amounts as are customarily carried by business entities engaged in similar businesses similarly situated, and will upon request by the Agent furnish the Agent certificates evidencing renewal of each such policy.

(i)Permit any representatives that are designated by the Agent to inspect the insurance policies maintained by or on behalf of the Loan Parties and to inspect books and records related thereto and any properties covered thereby during regular business hours upon reasonable prior notice; provided, that no such notice shall be required during the continuance of a Default or Event of Default.

(j)None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07.  Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees.  The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.

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6.08Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws, and (c) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

6.09Books and Records; Accountants.

(a)(i)  Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties or such Subsidiary, as the case may be; and (ii) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Loan Parties or such Subsidiary, as the case may be.

(b)At all times retain a Registered Public Accounting Firm which is reasonably satisfactory to the Agent and shall instruct such Registered Public Accounting Firm to cooperate with, and be available to upon reasonable prior notice and during regular business hours, the Agent or its representatives to discuss the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the Agent.

6.10Inspection Rights.

(a)No more than two times within a Fiscal Year, permit representatives and independent contractors of the Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and Registered Public Accounting Firm, and permit the Agent or professionals (including investment bankers, consultants, accountants, and lawyers) retained by the Agent to conduct evaluations of the Business Plan, forecasts and cash flows, all at the expense of the Loan Parties and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when a Default or Event of Default exists the Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties at any time during normal business hours and without advance notice and the limitation of two inspections within a Fiscal Year above shall not apply.

(b)Upon the request of the Agent after reasonable prior notice and during reasonable business hours; provided that no such notice shall be required during the continuance of a Default or Event of Default, permit the Agent or professionals (including investment bankers, consultants, accountants, and lawyers) retained by the

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Agent to conduct commercial finance examinations and other evaluations, including, without limitation, of (i) the Borrower’s practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves, and (iii) the Business Plan.  The Loan Parties shall pay the reasonable out-of-pocket fees and expenses of the Agent and such professionals with respect to such examinations and evaluations.  Without limiting the foregoing, the Loan Parties acknowledge that the Agent may, in its Permitted Discretion, undertake up to three (3) commercial finance examinations each Fiscal Year at the Loan Parties’ expense.  Notwithstanding the foregoing, the Agent may cause additional commercial finance examinations to be undertaken (i) as it deems necessary or appropriate, at its own expense or, (ii) if required by Law or if a Default or Event of Default shall have occurred and be continuing, at the expense of the Loan Parties.

(c)Upon the request of the Agent after reasonable prior notice, permit the Agent or professionals (including appraisers) retained by the Agent to conduct appraisals of the Collateral, including, without limitation, the assets included in the Borrowing Base.  The Loan Parties shall pay the fees and expenses of the Agent and such professionals with respect to such appraisals.  Without limiting the foregoing, the Loan Parties acknowledge that the Agent may, in its Permitted Discretion, undertake up to three (3) inventory appraisals and one (1) real estate appraisal each Fiscal Year at the Loan Parties’ expense.  Notwithstanding the foregoing, the Agent may cause additional appraisals to be undertaken (i) as it deems necessary or appropriate, at its own expense or, (ii) if required by Law or if a Default or Event of Default shall have occurred and be continuing, at the expense of the Loan Parties.

(d)Permit the Agent, from time to time in its Permitted Discretion, to engage a geohydrologist, an independent engineer or other qualified consultant or expert, reasonably acceptable to the Agent, at the expense of the Loan Parties, to undertake Phase I environmental site assessments during the term of this Agreement of the Eligible Real Estate, provided that such assessments may only be undertaken (i) during the continuance of a Default or Event of Default, or (ii) if a Loan Party receives any notice or obtains knowledge of (A) any potential or known release of any Hazardous Materials in violation of Environmental Laws at or from any Eligible Real Estate, notification of which must be given to any Governmental Authority under any Environmental Law, or notification of which has, in fact, been given to any Governmental Authority, or (B) any material complaint, order, citation or notice with regard to air emissions, water discharges, or any other environmental health or safety matter affecting any Loan Party or any Eligible Real Estate from any Person (including, without limitation, the Environmental Protection Agency). Environmental assessments may include detailed visual inspections of the Real Estate, including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as are reasonably necessary for a determination of the compliance of the Real Estate and the use and operation thereof with all applicable Environmental Laws.  The Borrower will, and will cause each of their Subsidiaries to, cooperate in all respects with the Agent and such third parties to enable such assessment and evaluation to be timely completed in a manner reasonably satisfactory to the Agent.

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(e)Upon the request of Salus after reasonable prior notice, use commercially reasonable efforts to assist Salus and any other Salus Entity (and any of their lending or funding sources) in obtaining ratings for the credit facilities provided for herein from one or more national rating agencies.  Without limiting the foregoing, senior management members of the Loan Parties shall attend or host one or more meetings with such rating agencies and Salus upon reasonable prior notice.

6.11Use of Proceeds.  Use the proceeds of the Credit Extensions (a) to finance the acquisition of working capital assets of the Borrower, including the purchase of inventory and equipment, in each case in the ordinary course of business, (b) to  refinance all Indebtedness of the Loan Parties under the Existing Credit Agreement in full and (c) for general corporate purposes of the Loan Parties, including the repayment of certain Indebtedness owing to key vendors and licensors of the Loan Parties, as set forth in and subject to Section 7.07 hereof, in each case to the extent expressly permitted under applicable Law and the Loan Documents.

6.12Additional Loan Parties.  Notify the Agent at the time that any Person becomes a Domestic Subsidiary (or if at any time an administratively dissolved Subsidiary ceases to be so administratively dissolved), and promptly thereafter (and in any event within fifteen (15) days), cause any such Person (a) which is not a CFC or Excluded Subsidiary, to (i) become a Loan Party by executing and delivering to the Agent a Joinder to this Agreement or a Joinder to the Facility Guaranty or such other documents as the Agent shall reasonably deem appropriate for such purpose, (ii) grant a Lien to the Agent on such Person’s assets of the same type that constitute Collateral to secure the Obligations, and (iii) deliver to the Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), and (b) if any Equity Interests or Indebtedness of such Person are owned by or on behalf of any Loan Party, to pledge such Equity Interests and promissory notes evidencing such Indebtedness (except that, if such Subsidiary is a CFC, the Equity Interests of such Subsidiary to be pledged may be limited to sixty-five percent (65%) of the outstanding voting Equity Interests of such Subsidiary and one hundred percent (100%) of the non-voting Equity Interests of such Subsidiary), in each case in form, content and scope reasonably satisfactory to the Agent.  In no event shall compliance with this Section 6.12 waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.12 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute, with respect to any Subsidiary, an approval to permit the inclusion of any acquired assets in the computation of the Borrowing Base.

6.13Cash Management.

(a)On or prior to the Closing Date:

(i)enter into a Blocked Account Agreement reasonably satisfactory in form and substance to the Agent with each Blocked Account Bank (collectively, together with the Concentration Account, the “Blocked Accounts”); and

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(ii)at the reasonable request of the Agent, deliver to the Agent copies of notifications (each, a “DDA Notification”) substantially in the form attached hereto as Exhibit F which have been executed on behalf of such Loan Party and delivered to each depository institution listed on Schedule 5.21.

(b)From and after the Closing Date, the Loan Parties shall cause to be sent via ACH or wire transfer no less frequently than daily (with respect to cash maintained in the United States) or weekly (with respect to cash maintained in Canada) (and, in each case, whether or not there are then any outstanding Obligations) to a Blocked Account all of the following:

(i)all amounts on deposit in each DDA (net of any minimum balance, not to exceed $2,500.00, as may be required to be kept in the subject DDA by the depository institution at which such DDA is maintained);

(ii)all cash receipts from the Disposition of Inventory and other assets (whether or not constituting Collateral);

(iii)all proceeds of Accounts; and

(iv)all Net Proceeds, and all other cash payments received by a Loan Party from any Person or from any source or on account of any Disposition or other transaction or event, including, without limitation, any Prepayment Event.

(c)Each Blocked Account Agreement shall require the ACH or wire transfer no less frequently than daily (with respect to cash maintained in the United States) or weekly (with respect to cash maintained in Canada) (and whether or not there are then any outstanding Obligations) to the concentration account controlled by the Agent at Wells Fargo Bank, National Association (the “Concentration Account”), of all cash receipts and collections received by each Loan Party from all sources (the “Receipts and Collections”), including, without limitation, the following:

(i)the then entire ledger balance of each Blocked Account (net of any minimum balance, not to exceed $2,500.00, as may be required to be kept in the subject Blocked Account by the Blocked Account Bank);

(ii)all amounts required to be deposited into the Blocked Accounts pursuant to clause (b) above; and

(iii)any other cash amounts received by any Loan Party from any other source, on account of any type of transaction or event;

(iv)provided, however, the Agent may, in its sole discretion, permit the Loan Parties to have one or more “intermediate” Blocked Account Agreements, whereby such agreements would provide, upon notice from the Agent, the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) all Receipts and Collections to another Blocked Account, as opposed to the Concentration Account.

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(d)The Concentration Account shall at all times be under the sole dominion and control of the Agent and all funds therein shall be wired to an account specified by Agent no less frequently than daily.  The Agent shall cause all funds on deposit in the Concentration Account to be applied to the Obligations, which amounts shall be applied to the Obligations in the order proscribed in either Section 2.04(f) or Section 8.03 of this Agreement, as applicable.  The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Account, and (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations.  In the event that, notwithstanding the provisions of this Section 6.13, any Loan Party receives or otherwise has dominion and control of any such cash receipts or collections, such receipts and collections shall be held in trust by such Loan Party for the Agent, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into a Blocked Account or the Concentration Account or dealt with in such other fashion as such Loan Party may be reasonably instructed by the Agent.

(e)The Loan Parties shall cause screen shots of the bank accounts located in Hong Kong and Mexico of the Loan Parties and their Subsidiaries to be delivered to the Agent not less often than weekly, and upon the reasonable request of the Agent, the Loan Parties shall cause bank statements and/or other reports to be delivered to the Agent not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

(f)If the Agent does not require DDA Notifications to be delivered on the Closing Date in accordance with Section 6.13(a) above, then the Loan Parties shall, upon the request of the Agent at any time after the Closing Date, deliver to the Agent copies of DDA Notifications, which have been executed on behalf of the applicable Loan Party and delivered to each depository institution listed on Schedule 5.21.

6.14Information Regarding the Collateral.

(a)Furnish to the Agent at least thirty (30) days prior written notice of any change in: (i) any Loan Party’s name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties; (ii) the location of any Loan Party’s chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility); (iii) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization. The Loan Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the UCC and the PPSA or otherwise that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest (subject to Permitted Encumbrances having priority by operation of applicable Law and the Intercreditor Agreement) in all the Collateral for its own benefit and the benefit of the other Credit Parties.

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(b)Should any of the information on any of the Schedules hereto become inaccurate or misleading in any material respect as a result of changes after the Closing Date, the Borrower shall advise the Agent in writing of such revisions or updates as may be necessary or appropriate to update or correct the same.  From time to time as may be reasonably requested by the Agent, the Borrower shall supplement each Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter arising after the Closing Date that, if existing or occurring on the Closing Date, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate in any material respect thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein).  Notwithstanding the foregoing, no supplement or revision to any Schedule or representation shall be deemed the Credit Parties’ consent to the matters reflected in such updated Schedules or revised representations nor permit the Loan Parties to undertake any actions otherwise prohibited hereunder or fail to undertake any action required hereunder from the restrictions and requirements in existence prior to the delivery of such updated Schedules or such revision of a representation; nor shall any such supplement or revision to any Schedule or representation be deemed the Credit Parties’ waiver of any Default or Event of Default resulting from the matters disclosed therein.

6.15Physical Inventories.

(a)Cause not less than one (1) physical inventory to be undertaken, at the expense of the Loan Parties, in each twelve (12) month period, consistent with past practices as applicable, conducted by such inventory takers as are reasonably satisfactory to the Agent and following such methodology as is consistent with the methodology used in the immediately preceding inventory or as otherwise may be reasonably satisfactory to the Agent. The Agent, at the expense of the Loan Parties, may participate in and/or observe each scheduled physical count of Inventory which is undertaken on behalf of any Loan Party.  The Borrower, within ten (10) days following the completion of such inventory, shall provide the Agent with a reconciliation of the results of such inventory and shall post such results to the Loan Parties’ stock ledgers and general ledgers, as applicable.

(b)Permit the Agent, in its Permitted Discretion, if any Default or Event of Default exists, to cause additional such inventories to be taken as the Agent determines (each, at the expense of the Loan Parties).

6.16Environmental Laws.  Except where failure to do so would not reasonably be expected to have a Material Adverse Effect, (a) conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all environmental permits necessary for its operations and properties; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to

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maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, provided, however, that neither a Loan Party nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Loan Parties with respect to such circumstances in accordance with GAAP.

6.17Further Assurances.

(a)Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any applicable Law, or which the Agent may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. The Loan Parties also agree to provide to the Agent, from time to time upon request, evidence reasonably satisfactory to the Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

(b)If any material assets are acquired by any Loan Party after the Closing Date (other than assets constituting Collateral under the Security Documents that become subject to the perfected first-priority Lien (subject to Permitted Encumbrances having priority by operation of applicable Law and the Intercreditor Agreement) under the Security Documents upon acquisition thereof), notify the Agent thereof, and the Loan Parties will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or shall be reasonably requested by the Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section 6.17, all at the expense of the Loan Parties. In no event shall compliance with this Section 6.17 waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.17 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute Consent to the inclusion of any acquired assets in the computation of the Borrowing Base.

(c)Upon the request of the Agent, use commercially reasonable efforts to cause each of its customs brokers, freight forwarders, consolidators and/or carriers to deliver an agreement (including, without limitation, a Customs Broker/Carrier Agreement) to the Agent covering such matters and in such form as the Agent may reasonably require.

(d)Upon the request of the Agent, use commercially reasonable efforts to cause any of its landlords to deliver a Collateral Access Agreement to the Agent in such form as the Agent may reasonably require.

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(e)If required by the Agent, within thirty (30) days after the Closing Date, cause Tandy Brands Accessories Handbags, Inc. and/or Maquiladora Chambers de Mexico S.A. de C.V. to become a Guarantor hereunder in accordance with the provisions of Section 6.12 hereof.

6.18Compliance with Terms of Leaseholds.  Except as otherwise expressly permitted hereunder or to the extent failure to do so would not reasonably be expected to have a Material Adverse Effect, (a) make all payments and otherwise perform all obligations in respect of all Leases to which any Loan Party or any of its Subsidiaries is a party and keep such Leases in full force and effect, (b) not allow such Leases to lapse or be terminated or any rights to renew such Leases to be forfeited or cancelled, (c) notify the Agent of any default by any party with respect to such Leases and cooperate with the Agent in all respects to cure any such default, and (d) cause each of its Subsidiaries to do the foregoing.

6.19Material Contracts.  Except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect, (a) perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, (b) maintain each such Material Contract in full force and effect, (c) enforce each such Material Contract in accordance with its terms, (d) take all such action to such end as may be from time to time reasonably requested by the Agent, (e) upon reasonable request of the Agent, make to each other party to each such Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract, and (f) cause each of its Subsidiaries to do the foregoing.

6.20Business Plan; Financial Advisor.

(a)Generally operate the business of the Loan Parties in all material respects in a manner consistent with the Business Plan most recently delivered pursuant to Section 6.01(c) hereof and accepted by the Agent in its Permitted Discretion, provided that such operation does not guarantee that actual results will match the estimates contained in the Business Plan.

(b)Maintain until January 31, 2014, or for such longer time period as may be required by the Agent in its sole discretion, the engagement by the Loan Parties (or, if required by the Agent, the engagement by the Agent) of a financial advisor acceptable to the Agent in its Permitted Discretion, and permit the Agent to appoint such financial advisor as a chief restructuring officer if required by the Agent in its Permitted Discretion.

6.21Employee Benefit Plans.

(a)Maintain, and cause each ERISA Affiliate and Loan Party to maintain, each Pension Plan, Canadian Pension Plan and Canadian Benefit Plan in substantial compliance with all applicable Laws.

(b)Make, and cause each ERISA Affiliate and Loan Party to make, on a timely basis, all required contributions to any Multiemployer Plan, Canadian Pension Plan and Canadian Benefit Plan.

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(c)Not, and not permit any ERISA Affiliate to (i) seek a waiver of the minimum funding standards of ERISA, (ii) terminate or withdraw from any Pension Plan or Multiemployer Plan or (iii) take any other action with respect to any Pension Plan that would, or could reasonably be expected to, entitle the PBGC to terminate, impose liability in respect of, or cause a trustee to be appointed to administer, any Pension Plan, unless the actions or events described in clauses (i), (ii) and (iii) above individually or in the aggregate would not have or could not reasonably be expected to have a Material Adverse Effect.

(d)Deliver to Agent (i) if requested by Agent, copies of each annual and other return, report or valuation with respect to each Canadian Pension Plan as filed with any applicable Governmental Authority; (ii) promptly after receipt thereof, a copy of any direction, order, notice, ruling or opinion that any Loan Party may receive from any applicable Governmental Authority with respect to any Canadian Pension Plan; and (iii) notification within 30 days of any increases having a cost to one or more of the Loan Parties in excess of C$500,000 per annum in the aggregate, in the benefits of any existing Canadian Pension Plan or Canadian Benefit Plan, or the establishment of any new Canadian Pension Plan or Canadian Benefit Plan, or the commencement of contributions to any such plan to which any Loan Party was not previously contributing.

ARTICLE VII

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (other than contingent indemnification obligations for which a claim has not been asserted), no Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:

7.01Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or sign or file or suffer to exist under the UCC, the PPSA or any similar Law or statute of any jurisdiction a financing statement that names any Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any security agreement authorizing any Person thereunder to file such financing statement; sell any of its property or assets subject to an understanding or agreement (contingent or otherwise) to repurchase such property or assets with recourse to it or any of its Subsidiaries; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

7.02Investments.  Make any Investments, except Permitted Investments.

7.03Indebtedness; Disqualified Stock.  (a) Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Indebtedness, except Permitted Indebtedness; (b) issue Disqualified Stock, or (c) issue and sell any other Equity Interests unless (i) such Equity Interests shall be issued solely by the Borrower and not by a Subsidiary of a Loan Party or shall be permitted by Section 7.06 or Sections 7.09(d) or (f), (ii) such Equity Interests provide that all dividends and other Restricted Payments in respect thereof shall be made solely in additional shares of such Equity Interests, in lieu of cash, (iii) such Equity Interests shall not

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be subject to redemption other than redemption at the option of the Loan Party issuing such Equity Interests and in accordance with the limitations contained in this Agreement, and (iv) all Restricted Payments in respect of such Equity Interests are expressly subordinated to the Obligations.

7.04Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into another Person, (or agree to do any of the foregoing), except that, so long as no Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

(a)any Subsidiary which is not a Loan Party may merge with (i) a Loan Party, provided that the Loan Party shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries which are not Loan Parties, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person;

(b)any Subsidiary which is a Loan Party may merge into any Subsidiary which is a Loan Party or into the Borrower, provided that in any merger involving the Borrower, the Borrower shall be the continuing or surviving Person;

(c)any Excluded Subsidiary may be dissolved or liquidated if the Borrower determines in good faith that any such dissolution or liquidation is in the best interest of the Loan Parties; and

(d)any CFC that is not a Loan Party may merge into any CFC that is not a Loan Party.

7.05Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except Permitted Dispositions.

7.06Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect  to any action described below or would result therefrom:

(a)each Subsidiary of a Loan Party may make Restricted Payments to any Loan Party; and

(b)the Loan Parties and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person.

7.07Prepayments of Indebtedness.  Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness except the following:

(a)as long as no Default or Event of Default then exists, the Loan Parties may make regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness (other than the KTC Indebtedness and Indebtedness under the Licensor/Vendor Subordinated Notes);

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(b)so long as no Event of Default has occurred and is continuing, the Loan Parties may make regularly scheduled or mandatory or voluntary repayments, repurchases, redemptions or defeasances of the Indebtedness evidenced by the Licensor/Vendor Subordinated Notes if the Payment Conditions (as defined in the Licensor/Vendor Subordinated Notes) are satisfied;

(c)the Loan Parties may make regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of the KTC Indebtedness (i) from proceeds of EPK Collateral (as defined in the Intercreditor Agreement) and (ii) otherwise in an amount equal to the difference between (x) the EPK Purchase Price (as defined in the KTC Financing Documents) and (y) the amount realized upon either (a) the sale of the relevant Inventory or (b) the recovery on any amount for which the Agent has not paid EPK the Designated Amount (as defined in the Intercreditor Agreement), so long as (A) no Event of Default has occurred and is continuing hereunder, (B) no Event of Default has occurred and is continuing under the KTC Financing Documents, (C) any such payment shall not result in any default in any other Contractual Obligation of the Loan Parties, (D) the amount of all such payments permitted under this clause (c)(ii) shall not exceed $250,000 in the aggregate without the written consent of the Agent, and (E) prior to making any such payment under this clause (c)(ii), the Loan Parties shall deliver to the Agent a certificate or other evidence of satisfaction of the conditions contained in clauses (A) through (D) above reasonably satisfactory to the Agent; and

(d)the Loan Parties may consummate Permitted Refinancings of any such Indebtedness.

7.08Change in Nature of Business.

Engage in any line of business substantially different from the business conducted by the Loan Parties and their Subsidiaries on the Closing Date or any business substantially related or incidental thereto.

7.09Transactions with Affiliates.  Enter into, renew, extend or be a party to any transaction of any kind with any Affiliate of any Loan Party, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Parties or such Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (a) a transaction between or among the Loan Parties and to the extent otherwise expressly permitted hereunder, intercompany transactions between the Loan Parties and their Subsidiaries, (b) advances for commissions, travel and other similar purposes in the ordinary course of business to directors, officers and employees, (d) the issuance of Equity Interests in the Borrower to any officer, director, employee or consultant of the Borrower or any of its Subsidiaries, (e) the payment of reasonable fees and out-of-pocket costs to directors, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, and insurance arrangements entered into for the benefit of, directors,

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officers or employees of the Borrower or any of its Subsidiaries, and (f) any issuances of securities of the Borrower (other than Disqualified Stock and other Equity Interests not permitted hereunder) or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans (in each case in respect of Equity Interests in the Borrower) of the Borrower or any of its Subsidiaries.

7.10Burdensome Agreements.  Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments or other distributions to any Loan Party or to otherwise transfer property to or invest in a Loan Party, (ii) of any Subsidiary to Guarantee the Obligations, (iii) of any Subsidiary to make or repay loans to a Loan Party, or (iv) of the Loan Parties or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person in favor of the Agent; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under clauses (c) or (f) of the definition of Permitted Indebtedness solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person; provided, however, that this Section 7.10  shall not apply to any (i) customary provisions in leases and other contracts restricting the assignment or other transfer thereof, (ii) restrictions resulting from any applicable law, rule or regulation (including, without limitation, applicable currency control laws and applicable state corporate statutes restricting the payment of dividends in certain circumstances), (iii) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary of the Borrower (or the assets of a Subsidiary of the Borrower) pending such sale, provided such restrictions and conditions apply only to the Subsidiary of the Borrower that is to be sold (or whose assets are to be sold) and such sale is permitted hereunder, (iv) customary provisions in license agreements entered into by the Loan Parties with the approval of the Agent in its commercially reasonable discretion, and (v) customary provisions with respect to the disposition or distribution of assets or property in joint venture agreements, limited liability company operating agreements, partnership agreements, stockholders agreements, asset sale agreements, agreements in respect of sales of Equity Interests and other similar agreements entered into in connection with transactions permitted by this Agreement,  provided  that such encumbrance or restriction shall only be effective against the assets or property that are the subject of such agreements.

7.11Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose; or (b) for purposes other than those permitted under this Agreement.

7.12Amendment of Material Documents.  Amend, modify or waive any of a Loan Party’s rights under (a) its Organization Documents in a manner materially adverse to the Credit Parties, or (b) any Material Contract or Material Indebtedness (other than on account of any refinancing thereof otherwise permitted hereunder), in each case to the extent that such amendment, modification or waiver would result in a Default or Event of Default under any of the Loan Documents, would be materially adverse to the Credit Parties or otherwise would be reasonably likely to have a Material Adverse Effect.

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7.13Fiscal Year.  Change the Fiscal Year of any Loan Party, or the accounting policies or reporting practices of the Loan Parties, except as required by GAAP.

7.14Deposit Accounts.  Open new DDAs or Blocked Accounts unless the Loan Parties shall have delivered to the Agent within fifteen (15) days of the creation thereof appropriate DDA Notifications (to the extent requested by Agent pursuant to the provisions of Section 6.13(a)(ii) hereof) or Blocked Account Agreements consistent with the provisions of Section 6.13 and otherwise satisfactory to the Agent.  No Loan Party shall maintain any bank accounts other than the ones expressly contemplated herein or in Section 6.13 hereof.

7.15Minimum Consolidated EBITDA.

Minimum Consolidated EBITDA.  Permit Consolidated EBITDA for the twelve-month period ending on each date set forth below to be less than the corresponding amount set forth below:

Twelve-Month Period Ending	Minimum Consolidated EBITDA
November 1, 2013	($15,972,000)
December 1, 2013	($5,897,000)
January 1, 2014	($4,845,000)
February 1, 2014	($4,323,000)
March 1, 2014	$1,921,000
April 1, 2014	$2,369,000
May 1, 2014	$2,203,000
June 1, 2014	$1,928,000
July 1, 2014	$1,987,000
August 1, 2014	$1,987,000
September 1, 2014	$2,116,000
October 1, 2014	$2,245,000
November 1, 2014	$2,398,000
December 1, 2014	$2,438,000
January 1, 2015	$2,486,000
February 1, 2015	$2,488,000
March 1, 2015	$2,488,000
April 1, 2015	$2,527,000
May 1, 2015	$2,536,000
June 1, 2015	$2,574,000

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provided that the levels set forth above shall be revised as agreed between the Agent and the Borrower in connection with any payments made on the Indebtedness evidenced by the Licensor/Vendor Subordinated Notes.

7.16Account Concentration

.  Permit the aggregate amount of all cancellations, charge backs, credit memos, discounts, returns, write-offs or other dilution of the Loan Parties’ Accounts as determined by the Agent in its sole discretion as of the end of each month on a trailing twelve month basis, and as tested at the time that any commercial finance examination is conducted under Section 6.10(c) hereof, to exceed twenty (20%) percent of the aggregate sales of Inventory of the Loan Parties for such period.

7.17Budgeted Expenses.

Pay any expenses other than those set forth in the thirteen week budget approved by the Agent prior to the Closing Date, which budget shall be updated weekly on a rolling thirteen week basis following the Closing Date (such initial budget, together with any subsequent budget which the Agent may, in its reasonable discretion, approve, the “Approved Budget”).  From the Closing Date until January 31, 2014, (x) the Loan Parties’ sales and inventory receipts shall each not be less than 20.0% of the projected amounts set forth in the Approved Budget, and (y) the Loan Parties’ actual expenses and cash expenditures each shall not be greater than 20.0% of the projected amounts set forth in the Approved Budget, by line item or in the aggregate, and Availability hereunder shall not be less than 20.0% of projected Availability set forth in the Approved Budget; provided, however, that the Borrower shall not use funds allocated to a particular line item in the Approved Budget (including line items denominated “Miscellaneous” or “Other”, or words of similar import) to pay any expenses under any other line item(s) in the Approved Budget without the prior express written consent of the Agent, which consent may be conditioned, withheld, or delayed in the Agent’s sole and exclusive discretion.  The foregoing shall be tested on Tuesday of each week as of the end of the prior week pursuant to the variance report delivered by the Borrower to the Lender, in each case on a weekly and cumulative basis commencing with the fourth (4th) week after the Closing Date.

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7.18Accounts Payable to Inventory Ratio.

From the Closing Date until January 1, 2014, permit the Loan Parties’ ratio of accounts payable from Inventory purchases for any applicable period to Inventory at the end of such period, to be less than 0.18:1.00, as calculated on a monthly basis on the last day of each month.

7.19Excluded Subsidiaries.

Permit any Excluded Subsidiary to have assets other than those existing on the Closing Date; provided that the Borrower may fund payroll and rent amounts to fund Hong Kong operations into accounts held by Tandy Brands Accessories Handbags, Inc. on a monthly basis and to fund Mexico operations into accounts held by Maquiladora Chambers de Mexico S.A. de C.V. on a weekly basis, in each case to the extent set forth in clause (i)(ii)(B) of the definition of Permitted Indebtedness and clause (g)(iv)(B) of the definition of Permitted Investments.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

8.01Events of Default.  Any of the following shall constitute an Event of Default:

(a)Non-Payment.  The Borrower or any other Loan Party fails to pay when and as required to be paid herein, (i) any amount of principal of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C Obligations, or (ii) any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) any other amount payable hereunder or under any other Loan Document; or

(b)Specific Covenants.  Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.07, 6.10, 6.11, 6.12, 6.13 or 6.14 or ARTICLE VII; or

(c)Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for twenty (20) days; or

(d)Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith (including, without limitation, any Borrowing Base Certificate) shall be incorrect or misleading in any material respect when made or deemed made; or

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(e)Cross-Default.  Any Loan Party or any Subsidiary thereof (A) fails to make any payment when due beyond any applicable cure periods (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement), or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or

(f)Insolvency Proceedings, Etc.  Any Loan Party or any of its Subsidiaries (other than (i) a CFC that is not a Loan Party or (ii) an Excluded Subsidiary) institutes, consents to the institution of or declares its intention to institute any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, receiver and manager, mortgagee in possession, sequestrator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, receiver and manager, mortgagee in possession, sequestrator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for forty-five (45) calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for forty-five (45) calendar days, or an order for relief is entered in any such proceeding; or

(g)Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Subsidiary thereof (other than (i) a CFC that is not a Loan Party or (ii) an Excluded Subsidiary) becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within thirty (30) days after its issuance or levy; or

(h)Judgments.  There is entered against any Loan Party or any Subsidiary thereof (other than (i) a CFC that is not a Loan Party or (ii) an Excluded Subsidiary) (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $500,000 (or the equivalent thereof in any other currency) (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments

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that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

(i)ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party or any ERISA Affiliate under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $500,000 or which would reasonably likely result in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $500,000 or which would reasonably likely result in a Material Adverse Effect; or

(j)Invalidity of Loan Documents.  (i)  Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document; or

(k)Change of Control.  There occurs any Change of Control; or

(l)Cessation of Business.  Except as otherwise expressly permitted hereunder, any Loan Party shall take any action to suspend the operation of its business in the ordinary course, liquidate all or a material portion of its assets, or employ an agent or other third party to conduct a program of closings, liquidations or “Going-Out-Of-Business” sales of any material portion of its business; or

(m)Loss of Collateral.  There occurs any uninsured loss to any material portion of the Collateral; or

(n)Breach of Contractual Obligation.  Either (x) any Loan Party or any Subsidiary thereof (other than (i) a CFC that is not a Loan Party or (ii) an Excluded Subsidiary) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Contract or fails to observe or perform any other agreement or condition relating to any such Material Contract or contained in any instrument or agreement evidencing, securing

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or relating thereto, or any other event occurs, the effect of which failure, default or other event is to cause, or to permit the counterparty to such Material Contract to terminate such Material Contract (other than the failure to make any payment under the Licensor/Vendor Subordinated Notes due to a failure to meet the requirements set forth in Section 7.07 hereof), or (y) any purchase order under the KTC Financing Documents in an amount in excess of $250,000 is canceled; or

(o)Indictment.  The indictment of any Loan Party or any Subsidiary (other than (i) a CFC that is not a Loan Party and (ii) an Excluded Subsidiary) thereof, under any federal, state, provincial, territorial, municipal, and other criminal statute, rule, regulation, order, or other requirement having the force of law for a felony;

(p)Guaranty.  The termination or attempted termination of any Facility Guaranty except as expressly permitted hereunder or under any other Loan Document;

(q)Subordination.  (i)  The subordination provisions of the Licensor/Vendor Subordinated Notes (the “Subordinated Provisions”) or the Intercreditor Agreement shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the Licensor/Vendor Subordinated Notes or against EPK, as applicable; or (ii) the Borrower or any other Loan Party shall, directly or indirectly, disavow or contest in any manner (A) the effectiveness, validity or enforceability of any of the Subordinated Provisions or the Intercreditor Agreement, (B) that the Subordinated Provisions and the Intercreditor Agreement exist for the benefit of the Credit Parties, or (C) that all payments of principal of or premium and interest on the applicable Indebtedness, or realized from the liquidation of any property of any Loan Party, shall be subject to any of the Subordinated Provisions or the Intercreditor Agreement, as applicable; or

(r)Material Adverse Effect.  A Material Adverse Effect shall occur.

8.02Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Agent may, or, at the request of the Required Lenders shall, take any or all of the following actions:

(a)declare the Revolving Commitments of each Revolving Lender to make Committed Revolving Loans and any obligation of any L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such Revolving Commitments and obligation shall be terminated;

(b)declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other Obligations to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties;

(c)require that the Loan Parties Cash Collateralize the L/C Obligations (to the extent not already Cash Collateralized);

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(d)capitalize any accrued and unpaid interest by adding such amount to the outstanding principal balance of the Loans, at which time such capitalized amount shall bear interest at the Default Rate;

(e)whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or applicable Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties; and

(f)Credit Bidding.  The Agent or any Lender may purchase, in any public or private sale conducted under the provision of the UCC (including pursuant section 9-610 and 9-620 of the UCC), the provisions of the Bankruptcy Code (including pursuant to section 363 of the Bankruptcy Code) or at any sale or foreclosure conducted by the Agent (whether by judicial action or otherwise) in accordance with Applicable Law, all or any portion of the Collateral.  The Lenders hereby irrevocably authorize the Agent, upon written consent of the Required Lenders, to credit bid (in an amount and on such terms as may be directed by the Required Lenders) and purchase at any such sale (either directly or through one or more acquisition vehicles) all or any portion of the Collateral on behalf of and for the benefit of the Lenders;

provided, however, that upon the occurrence of any Event of Default with respect to any Loan Party or any Subsidiary thereof under Section 8.01(f), the obligation of each Lender to make Loans and any obligation of each L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Agent or any Lender.

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

8.03Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Agent in the following order, in each case whether or not such Obligations are allowed or allowable in any bankruptcy or insolvency proceeding or under any Debtor Relief Law:

First, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Agent and amounts payable under ARTICLE III) payable to the Agent;

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Second, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Lenders and the L/C Issuers (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuers and amounts payable under ARTICLE III), ratably among them in proportion to the amounts described in this clause Second payable to them;

Third, to the extent not previously reimbursed by the Lenders, to payment to the Agent of that portion of the Obligations constituting principal and accrued and unpaid interest on any Permitted Overadvances;

Fourth, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, and fees, ratably among the Lenders and the L/C Issuers in proportion to the respective amounts described in this clause Fourth payable to them;

Fifth, to payment of that portion of the Obligations constituting unpaid principal of the Committed Revolving Loans, ratably among the Revolving Lenders in proportion to the respective amounts described in this clause Fifth held by them;

Sixth, to the Agent for the account of the L/C Issuers, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit (to the extent not already Cash Collateralized);

Seventh, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations, but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventh held by them;

Eighth, to payment of that portion of the Obligations arising from Cash Management Services to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them;

Ninth, to payment of that portion of the Obligations constituting unpaid principal of the Term Loan and all other Obligations related to the Term Loan, ratably among the Term Lenders in proportion to the respective amounts described in this clause Ninth held by them; and

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Loan Parties or as otherwise required by Law.

Amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Sixth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  In accordance with Section 2.04(b) if any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

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ARTICLE IX

THE AGENT

9.01Appointment and Authority.  Each of the Lenders hereby irrevocably appoints Salus to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof (including, without limitation, acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations), together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the Agent, the Lenders and the L/C Issuers, and no Loan Party or any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions.  It is understood and agreed that the use of the terms “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law.  Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

9.02Rights as a Lender.  The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though they were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were not the hereunder and without any duty to account therefor to the Lenders.

9.03Exculpatory Provisions.  The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Agent:

(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;

(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may affect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

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(c)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.

The Agent shall not be liable for any action taken or not taken by it (i) with the Consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.

The Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Agent by the Loan Parties, a Lender or a L/C Issuer. Upon the occurrence of a Default or Event of Default, the Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Applicable Lenders.  Unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as it shall deem advisable in the best interest of the Credit Parties.  In no event shall the Agent be required to comply with any such directions to the extent that the Agent believes that its compliance with such directions would be unlawful.

The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in ARTICLE IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.

9.04Reliance by Agent.  The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or a L/C Issuer, the Agent may presume that such condition is satisfactory to such Lender or such L/C Issuer unless the Agent shall have received written notice to the contrary from such Lender or such L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  The Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

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9.05Delegation of Duties.  The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub agents appointed by the Agent.  The Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub agent and to the Related Parties of the Agent and any such sub agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Agent.  The Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

9.06Resignation of Agent.  The Agent may at any time give written notice of its resignation to the Lenders and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders and the L/C Issuers, appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Agent on behalf of the Lenders or the L/C Issuers under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender and each L/C Issuer directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section.  Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section).  The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent hereunder.

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Any resignation by Salus as Agent pursuant to this Section shall also constitute the resignation of Salus as an L/C Issuer.  Upon the acceptance of a successor’s appointment as Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of such retiring L/C Issuer, (b) such retiring L/C Issuer shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, issued by such retiring L/C Issuer and outstanding at the time of such succession or make other arrangements satisfactory to such retiring L/C Issuer to effectively assume the obligations of such retiring L/C Issuer with respect to such Letters of Credit.

9.07Non-Reliance on Agent and Other Lenders.  Each Lender and each L/C Issuer acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and each L/C Issuer also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.  Except as provided in Section 9.12, the Agent shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agent.

9.08No Other Duties, Etc.  Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers, Syndication Agent or Documentation Agent listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity as the Agent, a Lender or a L/C Issuer hereunder.

9.09Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuers, the Agent and the other Credit Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuers, the Agent, such Credit Parties and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuers, the Agent and such Credit Parties under Sections 2.03, 2.08 and 10.04) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each L/C Issuer to make such payments to the Agent and, if the Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuers, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 2.08 and 10.04.

Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Lender or any L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or any L/C Issuer or to authorize the Agent to vote in respect of the claim of any Lender or any L/C Issuer in any such proceeding.

9.10Collateral and Guaranty Matters.  The Credit Parties irrevocably authorize the Agent, at its option and in its Permitted Discretion,

(a)to release any Lien on any property granted to or held by the Agent under any Loan Document (i) upon termination of the Aggregate Revolving Commitments and payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been asserted), and the expiration, termination or Cash Collateralization of all Letters of Credit, (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing by the Applicable Lenders in accordance with Section 10.01;

(b)to subordinate any Lien on any property granted to or held by the Agent under any Loan Document to the holder of any Lien on such property that is permitted by clause (h) of the definition of Permitted Encumbrances; and

(c)to release any Guarantor from its obligations under the Facility Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

Upon request by the Agent at any time, the Applicable Lenders will confirm in writing the Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Facility Guaranty pursuant to this Section 9.10.  In each case as specified in this Section 9.10, the Agent will, at the Loan Parties’ expense, execute and deliver promptly to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

9.11Notice of Transfer.  The Agent may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Assumption shall have become effective as set forth in Section 10.06.

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9.12Reports and Financial Statements.  By signing this Agreement, each Lender:

(a)agrees to furnish the Agent at such frequency as the Agent may reasonably request with a summary of all Other Liabilities due or to become due to such Lender. In connection with any distributions to be made hereunder, the Agent shall be entitled to assume that no amounts are due to any Lender on account of Other Liabilities unless the Agent has received written notice thereof from such Lender and, if such notice is received, the Agent shall be entitled to assume that the only amounts due to such Lender on account of Other Liabilities is the amount set forth in such notice;

(b)is deemed to have requested that the Agent furnish such Lender, promptly after they become available, copies of all Borrowing Base Certificates, financial statements and other Borrower Materials required to be delivered by the Borrower hereunder and all commercial finance examinations and appraisals of the Collateral received by the Agent (collectively, the “Reports”);

(c)expressly agrees and acknowledges that the Agent makes no representation or warranty as to the accuracy or completeness of any Borrower Materials, and shall not be liable for any information contained in any Borrower Materials (including any Report);

(d)expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agent or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties' personnel;

(e)agrees to keep all Reports and other Borrower Materials confidential in accordance with the provisions of Section 10.07 hereof; and

(f)without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report and other Borrower Materials in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend, and hold the Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

9.13Agency for Perfection.  Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Agent and the Lenders in assets which, in accordance with Article 9 of the UCC, the PPSA or any other applicable Law, can be perfected only by possession.  Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agent’s request therefor shall deliver such Collateral to the Agent or otherwise deal with such Collateral in accordance with the Agent's instructions.

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9.14Indemnification of Agent.  Without limiting the obligations of the Loan Parties hereunder, the Lenders hereby agree to indemnify the Agent, each L/C Issuer and any Related Party, as the case may be, ratably according to their Applicable Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent, such L/C Issuer and their Related Parties in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by the Agent, such L/C Issuer and their Related Parties in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s, such L/C Issuer’s and their Related Parties’ gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.

9.15Relation among Lenders.  The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Lender.

ARTICLE X

MISCELLANEOUS

10.01Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no Consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Agent, with the Consent of the Required Lenders, and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or Consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

(a)increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written Consent of such Lender;

(b)as to any Lender, postpone any date fixed by this Agreement or any other Loan Document for (i) any scheduled payment (including the Maturity Date) or mandatory prepayment of principal, interest, fees or other amounts due hereunder or under any of the other Loan Documents without the written Consent of such Lender entitled to such payment, or (ii) any scheduled or mandatory reduction or termination of the Aggregate Revolving Commitments hereunder or under any other Loan Document without the written Consent of each Revolving Lender;

(c)as to any Lender, reduce the principal of, or the rate of interest specified herein on, any Loan held by such Lender, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document to or for the account of such Lender, without the written Consent of each Lender entitled to such amount; provided, however, that only the Consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or fees at the Default Rate;

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(d)as to any Lender, change Section 2.12 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written Consent of such Lender;

(e)change any provision of this Section or the definition of “Applicable Lenders”, “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written Consent of each Lender;

(f)except as expressly permitted hereunder or under any other Loan Document, release, or limit the liability of, any Loan Party without the written Consent of each Lender;

(g)except for Permitted Dispositions, release all or substantially all of the Collateral from the Liens of the Security Documents without the written Consent of each Lender;

(h)increase the Aggregate Revolving Commitments without the written Consent of each Revolving Lender;

(i)change the definition of the term “Borrowing Base” or any component definition thereof if as a result thereof the amounts available to be borrowed by the Borrower would be increased without the written Consent of each Lender, provided that the foregoing shall not limit the Permitted Discretion of the Agent to change, establish or eliminate any Reserves;

(j)modify the definition of Permitted Overadvance so as to increase the amount thereof or, except as provided in such definition, the time period for which a Permitted Overadvance may remain outstanding without the written Consent of each Lender; and

(k)except as expressly permitted herein or in any other Loan Document, subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be without the written Consent of each Lender;

and, provided further, that (i) no amendment, waiver or Consent shall, unless in writing and signed by the applicable L/C Issuer in addition to the Lenders required above, affect the rights or duties of such L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or Consent shall, unless in writing and signed by the Agent in addition to the Lenders required above, affect the rights or duties of the Agent under this Agreement or any other Loan Document; and (iii) the Fee Letter and any agreement with any Cash Management Bank relating to Cash Management Services may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties

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thereto.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

Notwithstanding anything to the contrary in this Agreement or any other Loan Document, (x) no provider of any Cash Management Services (or holder of any Obligations relating thereto) shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or any Loan Party and (y) any Loan Document may be amended and waived with the written consent of the Agent at the request of and with the written consent of the Borrower without the need to obtain the consent of any Lender if such amendment or waiver is delivered in order (i) to comply with local law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause any Loan Document to be consistent with this Agreement and the other Loan Documents.

10.02Notices; Effectiveness; Electronic Communications.

(a)Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i)if to the Loan Parties or the Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

(ii)if to any Lender or any L/C Issuer, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

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(b)Electronic Communications.  Notices and other communications to the Loan Parties, the Lenders and the L/C Issuers hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent, provided that the foregoing shall not apply to notices to any Lender or any L/C Issuer pursuant to ARTICLE II if such Lender or such L/C Issuer, as applicable, has notified the Agent that it is incapable of receiving notices under such Article by electronic communication.  The Agent may, in its Permitted Discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c)The Internet.  In no event shall the Agent or any of its Related Parties (each, an “Agent Party”) have any liability to any Loan Party, any Lender, any L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Loan Parties’ or the Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of such Agent Party.

(d)Change of Address, Etc.  Each of the Loan Parties and the Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each Lender and each L/C Issuer may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the Agent.  In addition, each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

(e)Reliance by Agent, L/C Issuers and Lenders.  The Agent, the L/C Issuers and the Lenders shall be entitled to rely and act upon any notices (including Committed Loan Notices) purportedly given by or on behalf of the Loan Parties even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Loan

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Parties shall indemnify the Agent, each L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Loan Parties, except to the extent that such losses, costs, expenses or liabilities are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of the Agent, such L/C Issuer, such Lender or any such Related Party.  All telephonic communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording.

10.03No Waiver; Cumulative Remedies.  No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

10.04Expenses; Indemnity; Damage Waiver.

(a)Costs and Expenses.  The Borrower shall pay all Credit Party Expenses.

(b)Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Agent (and any sub-agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee; provided that, in the case of legal fees and expenses, such fees and expenses shall be limited to the fees and expenses of one counsel to all such Indemnitees, taken as a whole, one firm of regulatory counsel for all such Indemnitees, taken as a whole, and, if necessary, of a single local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all such Indemnitees, taken as a whole (and, in the case of an actual or perceived conflict of interest where the Indemnitee affected by such conflict informs you of such conflict and thereafter retains its own counsel, of another firm of counsel for such affected Indemnitee)), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Agent (and any sub-agents thereof) and their Related Parties only, the

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administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by any L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit, any bank advising or confirming a Letter of Credit or any other nominated person with respect to a Letter of Credit seeking to be reimbursed or indemnified or compensated, and any third party seeking to enforce the rights of the Borrower, beneficiary, nominated person, transferee, assignee of Letter of Credit proceeds, or holder of an instrument or document related to any Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Loan Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee, (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (z) results from any claim, litigation, investigation or proceeding that does not involve an act or omission of any Loan Party or their respective Subsidiaries or Affiliates and that is brought by an Indemnitee against any other Indemnitee (other than any action brought by an Indemnitee against the Agent in its capacity as such).

(c)Reimbursement by Lenders.  Without limiting their obligations under Section 9.14 hereof, to the extent that the Loan Parties for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it, each Lender severally agrees to pay to the Agent (or any such sub-agent), the applicable L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent) or such L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) or such L/C Issuer in connection with such capacity.  The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.11(d).

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(d)Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable Law, no party hereto shall assert, and each party hereto hereby waives, any claim against any other party hereto or any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e)Payments.  All amounts due under this Section shall be payable on demand therefor.

(f)Survival.  The agreements in this Section shall survive the resignation of any Agent and any L/C Issuer, the assignment of any Commitment or Loan by any Lender, the replacement of any Lender, the termination of the Aggregate Revolving Commitments and the repayment, satisfaction or discharge of all the other Obligations.

10.05Payments Set Aside.  To the extent that any payment by or on behalf of the Loan Parties is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its Permitted Discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each L/C Issuer severally agrees to pay to the Agent upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders and the L/C Issuers under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

10.06Successors and Assigns.

(a)Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written Consent of the Agent and each Lender and no Lender

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may assign or otherwise transfer any of its rights or obligations hereunder except (i) in accordance with the provisions of Section (b), (ii) by way of participation in accordance with the provisions of subsection Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)Assignments by Lenders.  Any Lender may at any time assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i)Minimum Amounts

(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount need be assigned; and

(B)in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless the Agent otherwise consents;

(ii)Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned;

(iii)Required Consent.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition, the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of any Commitment if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender.

(iv)Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, provided, however, that the Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Agent an Administrative Questionnaire.

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(v)No Assignment to Certain Persons.  No such assignment shall be made to any Defaulting Lender or any of its Subsidiaries or to any natural Person.

(vi)Certain Additional Payments.  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Agent, the applicable pro rata share of Committed Revolving Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Committed Revolving Loans in accordance with its Applicable Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04 and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from the Lenders having been a Defaulting Lender.  Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

(c)Register.  The Agent, acting solely for this purpose as an agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses

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 of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Loan Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(d)Participations.  Any Lender may at any time, without the consent of, or notice to, the Loan Parties or the Agent, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Agent, the Lenders and the L/C Issuers shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 10.07 as if such Participant was a Lender hereunder.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant.  Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01 and 3.04 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section (b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.12 as though it were a Lender.  Each Lender, acting for this purpose as an agent of the Loan Parties, shall maintain at its offices a record of each agreement or instrument effecting any participation and a register for the recordation of the names and addresses of its Participants and their rights with respect to principal amounts and other Obligations from time to time (each a “Participation Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participation Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in each Participation Register shall be conclusive absent manifest error and the Loan Parties, the Agent, the L/C Issuers and the Lenders may treat each Person whose name is recorded in a Participant Register as a Participant for all purposes of this Agreement (including, for the avoidance of doubt, for purposes of entitlement to benefits under Section 3.01, Section 3.04 and Section 10.08).  The Participation Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

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(e)Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a Lender.

(f)Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g)Electronic Execution of Assignments.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

(h)Resignation as L/C Issuer after Assignment.  Notwithstanding anything to the contrary contained herein, if at any time Salus assigns all of its Revolving Commitment and Committed Revolving Loans pursuant to subsection (b) above, Salus may, upon thirty (30) days’ notice to the Borrower and the Revolving Lenders, resign as a L/C Issuer.  In the event of any such resignation as a L/C Issuer, the Borrower shall be entitled to appoint from among the Revolving Lenders a successor L/C Issuer hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Salus as a L/C Issuer.  If Salus resigns as a L/C Issuer, it shall retain all the rights, powers, privileges and duties of a L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as a L/C Issuer and all L/C Obligations with respect thereto.  Upon the appointment of a successor L/C Issuer, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of such retiring L/C Issuer, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, issued by such retiring L/C Issuer and outstanding at the time of such succession or make other arrangements satisfactory to Salus to effectively assume the obligations of Salus with respect to such Letters of Credit.

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(i)Transactions by Salus Entity.  Notwithstanding anything in this Agreement or any other Loan Document to the contrary, (A) neither Salus nor any Affiliate thereof (each, a “Salus Entity”) shall be required to comply with this Section 10.06 in connection with any transaction involving any other Salus Entity or any of its or their lenders or funding or financing sources, and no Salus Entity shall have any obligation to disclose any such transaction to any Person, and (B) there shall be no limitation or restriction on (i) the ability of any Salus Entity to assign or otherwise transfer its rights and/or obligations under this Agreement or any other Loan Document, any Commitment, any Loan, or any other Obligation to any other Salus Entity or any lender or financing or funding source of a Salus Entity or (ii) any such lender’s or funding or financing source’s ability to assign or otherwise transfer its rights and/or obligations under this Agreement or any other Loan Document, any Commitment, any Loan, or any other Obligation; provided, however, that Salus shall continue to be liable as a “Lender” under this Agreement and the other Loan Documents unless such other Person complies with the provisions of this Agreement to become a “Lender”.

10.07Treatment of Certain Information; Confidentiality.  Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential and such Person agrees to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners) (in which case such Person agrees (except with respect to any audit or examination conducted by bank accountants or regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, to inform you promptly thereof prior to disclosure), (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Loan Party and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Loan Parties.

For purposes of this Section, “Information” means all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

10.08Right of Setoff.  If an Event of Default shall have occurred and be continuing or if any Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, each Lender, each L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Agent or the Required Lenders, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, such L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to such Lender or such L/C Issuer, regardless of the adequacy of the Collateral, and irrespective of whether or not such Lender or such L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or such L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Agent for further application in accordance with the provisions of Section 2.14 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  The rights of each Lender, each L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, such L/C Issuer or their respective Affiliates may have.  Each Lender and each L/C Issuer agrees to notify the Borrower and the Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

10.09Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law and shall not result in a receipt by such Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada) (in each case, the “Maximum Rate”).  If the Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather

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than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder. For purposes of disclosure pursuant to the Interest Act (Canada), the annual rates of interest or fees to which the rates of interest or fees provided in this Agreement and the other Loan Documents (and stated herein or therein, as applicable, to be computed on the basis of a 360 year or any other period of time less than a calendar year) are equivalent are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by 360 or such other period of time, respectively.

10.10Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf., or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

10.11Survival.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.  Further, the provisions of Sections 3.01, 3.04 and 10.04 and ARTICLE IXshall survive and remain in full force and effect regardless of the repayment of the Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.  In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Agent may require in its Permitted Discretion such indemnities and collateral security in such reasonable amounts and as it shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities and (z) any Obligations that may thereafter arise under Section 10.04.

10.12Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable

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such provision in any other jurisdiction.  Without limiting the foregoing provisions of this Section10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Agent, then such provisions shall be deemed to be in effect only to the extent not so limited.

10.13Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(a)the Borrower shall have paid to the Agent the assignment fee specified in Section 10.06(b);

(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(c)in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

(d)such assignment does not conflict with applicable Laws.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

10.14Governing Law; Jurisdiction; Etc.

(a)GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(b)SUBMISSION TO JURISDICTION.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED

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STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

(e)ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE AGENT MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

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10.15Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

10.16No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

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10.17USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as hereinafter defined) and the Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Agent, as applicable, to identify each Loan Party in accordance with the Act. Each Loan Party is in compliance, in all material respects, with the Act.  No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.  The Loan Parties shall, promptly following a request by the Agent or any Lender, provide all documentation and other information that the Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

10.18Foreign Asset Control Regulations.  Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate any applicable foreign asset control or economic sanctions regulation, including the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended)  (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), the United Nations Act (Canada), the Special Economic Measures Act (Canada), the Criminal Code (Canada) or any other economic sanctions laws administered by Foreign Affairs and International Trade Canada or the Department of Public Safety Canada (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, neither the Borrower nor any of its Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person" or in any manner violative of any such order, (c) is a Person designated by the Canadian government on any list set out in any Economic Sanction Law including the United Nations Al-Qaida and Taliban Regulations, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the Criminal Code (Canada) with which a Canadian Person cannot deal with or otherwise engage in business transactions (or is controlled by or acts, directly or indirectly, for or on behalf of any such Person), or (d) is a Person who is otherwise the target of Canadian economic sanctions laws such that a Canadian Person cannot deal or otherwise engage in business transactions with such Person.

10.19Time of the Essence.  Time is of the essence of the Loan Documents.

10.20Press Releases.

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(a)Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of the Agent or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Agent and without the prior written consent of the Agent unless (and only to the extent that) such Credit Party or Affiliate is required to do so under applicable Law and then, in any event, such Credit Party or Affiliate will consult with the Agent before issuing such press release or other public disclosure.

(b)Each Loan Party consents to the publication by the Agent or any Lender of advertising material, including any “tombstone” or comparable advertising, on its website or in other marketing materials of Agent, relating to the financing transactions contemplated by this Agreement using any Loan Party’s name, product photographs, logo, trademark or other insignia.  The Agent or such Lender shall provide a draft reasonably in advance of any advertising material to the Borrower for review and comment prior to the publication thereof.  The Agent reserves the right to provide to industry trade organizations and loan syndication and pricing reporting services information necessary and customary for inclusion in league table measurements.

10.21Additional Waivers.

(a)The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by Applicable Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Agent or any other Credit Party.

(b)The obligations of each Loan Party  shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations after the termination of the Commitments), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise.  Without limiting the generality of the foregoing, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations after the termination of the Commitments).

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(c)To the fullest extent permitted by applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations and the termination of the Commitments. The Agent and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and the Commitments have been terminated.  Each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

(d)Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations and the termination of the Commitments. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Loan Party will demand, sue for or otherwise attempt to collect any such indebtedness during the continuation of an Event of Default.  If any amount shall erroneously be paid to any Loan Party during the continuation of an Event of Default on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents.  Subject to the foregoing, to the extent that any Loan Party shall repay any of the Obligations constituting Loans made to the Borrower hereunder or other Obligations incurred directly and primarily by any other Loan Party (an “Accommodation Payment”), then the Loan Party making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount, for each of such other Loan Parties, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Loan Party's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Loan Parties.  As of any date of determination, the “Allocable Amount” of each Loan Party shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Loan Party hereunder without (a) rendering such Loan Party "insolvent" within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Loan Party with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, (c) leaving such Loan Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA or (d) rendering such Loan Party an “insolvent person” within the meaning of the Bankruptcy and Insolvency Act (Canada).

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10.22No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

10.23Attachments.  The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

TANDY BRANDS ACCESSORIES, INC., as Borrower

By: ___________________

Name: _________________

Title: __________________

H.A. SHELDON CANADA LTD., as a Guarantor

By: ___________________

Name: _________________

Title: __________________

TBAC INVESTMENT TRUST, as a Guarantor

By: ___________________

Name: _________________

Title: __________________

Signature Page to Credit Agreement

SALUS CAPITAL PARTNERS, LLC, as Administrative Agent and as Collateral Agent

By: ________________________

Name:

Its Authorized Signatory

Signature Page to Credit Agreement

SALUS CAPITAL PARTNERS, LLC, as a Lender

By: ________________________

Name:

Its Authorized Signatory

Signature Page to Credit Agreement

SCHEDULE 6.02

Tandy Brands Accessories, Inc.

REQUIRED REPORTING CHECKLIST

(For the Fiscal Month of ___________________)

DUE                                        NAME OF REPORT	(     X     )
Weekly (by 12:00 pm EST on Tuesday of each week or, if such day is not a Business Day, on the next succeeding Business Day), on the requested date of each Borrowing per Section 6.02(c):
Borrowing Base Certificate with summary backup information (SCP Form)
Concurrently with each Borrowing Base Certificate;
A detailed Inventory system/perpetual report specifying the cost value of Borrower’s Inventory (inclusive of inventory mix by category and/or department),
A detailed calculation of Inventory categories of Borrower that are not eligible for borrowing base with additional detail showing additions to and deletions there from,
A detailed calculation of outstanding Accounts Receivable by aging A detailed calculation of Accounts Receivable categories of Borrower that are not eligible for borrowing base with additional detail showing additions to and deletions there from,
Weekly Flash Sales Report A General ledger report as of the close of business on the immediately preceding Friday
Monthly (30 days after month end), per Section 6.01:
Monthly Financial Statements inclusive of Income Statement, Balance Sheet, Cash Flow in comparative form the figures for such period set forth in the projections, the corresponding fiscal month of the previous fiscal year and the corresponding portion of the previous fiscal year
Detailed inventory report and inventory aging report
Calculation of Borrower’s Inventory and Eligible Inventory as of the end of that month
Detailed aging of accounts payable
Officer’s Compliance Certificate (SCP Form)
Sales Report with comparative figures for such period set forth in projections
Vendor/Licensor Subordinated Note Payment Notice, per Section 6.02 (g):
Notice of the making of any payment or prepayment on either Vendor or Licensor Subordinated Notes required at least 5 days prior to anticipated payment.  Notice must be accompanied by certificate demonstrating compliance with Payment Conditions.
Covenant Compliance Event, per Section 7.15, 7.16, 7.17 and 7.18:
Minimum TTM EBITDA (7.15) covenant calculation (20% cushion to 2014 plan, test begins November 1, 2013) Account Concentration (tested monthly on a TTM basis, 7.16)
13-Week Budgeted Expenses (7.17), which sales, inventory, availability, actual expenses, and cash expenditures tested weekly on Tuesday on a rolling build-up 4-week basis with a 20% cushion from close through January 1, 2014.
Accounts Payable to Inventory Ratio (7.18) will be tested monthly and shall not be greater than 0.18x.
Annually (120 days after fiscal year end unless otherwise specified), per Section 6.01:
Audited Annual Financial Statements (120 days) Section 6.01(a)
Insurance coverage summary report Section 6.02 (h) specifying type, amount and carrier, (within 30 days) after each fiscal year end
Annual Business Plan that shall go out through the end of the next fiscal year on a monthly basis (due no later than June 30 of each year) Section 6.01(c)

(1)   X = The required report is included in this reporting package, with the following exception(s): ____________________________________________________________________________________

The purpose of the above reporting is to provide Salus Capital Partners with the same financial information prepared in the normal course of business to monitor, evaluate and report the Company’s financial results.  If the above information is provided in an existing Company report in a different format please call to discuss substituting the Company’s report for the one above. Please note that per Section 6.02(m) of the Credit Agreement, Salus Capital Partners may require, from time to time, additional information or reporting from the Company.

EX-4.14

Exhibit 4.14 and 10.37

MASTER AGREEMENT

This Master Agreement dated as of  July 24, 2013, is by and between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (the "Manager"), and EPK Financial Corporation, a Texas corporation ("EPK").

PRELIMINARY MATTERS

A.           The Manager may, from time to time, identify trading opportunities involving the purchase and resale of goods.

B.           The Parties wish to set forth their agreement regarding the terms upon which EPK may agree to purchase and resell such goods and the provision of management services by, and compensation of, the Manager in connection therewith.

AGREEMENT

In consideration of the premises, and of the representations, warranties, covenants, agreements, and conditions contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Manager and EPK hereby agree as follows:

ARTICLE I

INTERPRETATION

1.1           Certain Definitions. As used in this Agreement, the following terms have the meanings specified:

"Affiliate" when used with respect to a Person, means any other Person whom directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person. The term "control" (including the correlative term "controlled") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock, by contract or otherwise.

"Agreement" has the meaning specified in Section 1.4.

"Business Day" means any day which is not a Saturday, a Sunday or a day on which national banks in the State of Texas are authorized or required by law to be closed.

"Confirmation" means a confirmation in the form of Exhibit A or such other form of written instrument as to which the Parties may agree.

"Credit Enhancement," with respect to a Transaction and if applicable, means the letter of credit, guaranty, bond or other form of credit support with respect to the obligations of the Purchaser under such Transaction, provided by the Credit Enhancer for such Transaction.

"Credit Enhancer," with respect to a Transaction, means the Person, if any, identified as such in the Confirmation with respect to such Transaction.

"EPK" has the meaning specified in the preamble to this Agreement.

"EPK Minimum Proceeds," with respect to a Transaction, has the meaning specified in the Confirmation for such Transaction.

"EPK Purchase Price," with respect to a Transaction, means the aggregate purchase price payable and/or paid to the Vendor for the Goods under such Transaction as set forth in the Vendor Pro Forma Invoice for such Transaction and the Confirmation with respect to such Transaction.

"Event of Default" has the meaning specified in Section 4.1.

"Factor" means Salus Capital Partners, LLC and its successors and assigns.

"Factoring Agreement" means that certain credit agreement between Manager and Factor dated as of the date hereof,as amended, restated, supplemented or otherwise modified from time to time.

"FCPA" means the U.S. Foreign Corrupt Practices Act, 15 U.S.C. 78a, et seq., as amended, supplemented and replaced from time to time.

"Governmental Authority" means any government or any political subdivision or agency, department or instrumentality thereof, including, without limitation any court or administrative body.

"Goods," with respect to a Transaction, means the goods identified as such in the Confirmation with respect to such Transaction.

"Guarantor" means each of H.A. SHELDON CANADA LTD. and TBAC INVESTMENT TRUST.  Each Guarantor constitutes a Credit Enhancer with respect to all Transactions hereunder.

"Guaranty" means each guaranty made by the Guarantors, in form acceptable to EPK, delivered pursuant to Section 5.15. Each Guaranty shall constitute Credit Enhancement with respect to all Transactions hereunder.

"Intercreditor Agreement" means that certain Intercreditor Agreement between Manager, Factor and EPK dated as of the date hereof, as amended, restated, supplemented or otherwise modified from time to time.

"Manager's Compensation," with respect to a Transaction and subject to Section 2.5, the compensation of the Manager for performing his obligations in respect of such Transaction under the Agreement, as specified in the Confirmation with respect to such Transaction.

"Material Adverse Effect," means (i) a material adverse effect upon the validity or enforceability of this Master Agreement, all Confirmations, and Guaranties, (ii) a material adverse change in, or a material adverse effect upon, the condition (financial or otherwise), business, assets, or operations of the Manager, (iii) a material impairment of the ability of the Manager to fulfill its obligations under this Master Agreement and all Confirmations and Guaranties, or (iv) a material impairment of any underlying Transaction.

"Party" means EPK or the Manager.

"Person" means collectively, any individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated organization, joint venture, firm or other entity, or Governmental Authority.

"Purchase Order," with respect to a Transaction, means the agreement referring to purchase orders from the Purchaser for the Goods with respect to such Transaction, including any and all additions, substitutions, replacements, and/or changes thereto.

"Purchaser," with respect to a Transaction, means the Person identified as such in the Confirmation with respect to such Transaction, including any and all additions, substitutions, replacements, and/or changes thereto.

"Purchaser Purchase Price," with respect to a Transaction, means the aggregate purchase price payable by the Purchaser for the Goods under such transaction as set forth in the Purchase Order for such Transaction and the Confirmation with respect to such Transaction, including any and all additions, substitutions, replacements, and/or changes thereto.

"Solvent," as to any Person, means such Person (a) owns property whose fair salable value is greater than the amount required to pay all of such Person's indebtedness (including contingent debts), (b) is able to pay all of the indebtedness as such indebtedness matures and (c) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage.

"Taxes" means all sales, use, excise, stamp or other taxes, tariffs, duties, or fees of any description due to, or imposed or levied by, any Governmental Authority, whether at the federal, state or local level, arising out of or in connection with any payments made or services performed under this Agreement or the ownership, sale, use or possession of the Goods.  Notwithstanding the foregoing, "Taxes" shall not include any tax imposed upon EPK based upon EPK's income or for the privilege of doing business, whether at the federal, state or local level.

"Transaction" means a particular transaction governed by the terms of this Agreement, including the terms set forth in the Confirmation with respect to such transaction.

"Vendor," with respect to a Transaction, means the Person identified as such in the Confirmation with respect to such Transaction, including any and all additions, substitutions, replacements, and/or changes thereto.

"Vendor Pro Forma Invoice" with respect to a Transaction, means the contract from the Vendor for the Goods with respect to such Transaction, including any and all additions, substitutions, replacements, and/or changes thereto.

1.2           Other Definitional Provisions.

a.           Unless otherwise specified therein, all terms defined in this Agreement have the above-defined meanings when used in any Confirmation, certificate, amendment, report or other document made or delivered pursuant hereto.

b.           Each term defined in the singular form in Section 1.1 shall mean the plural thereof when the plural form of such term is used in this Agreement or any Confirmation, certificate, amendment, report or other document made or delivered pursuant hereto, and each term defined in the plural form in Section 1.1 shall mean the singular thereof when the singular form of such term is used herein or therein.

c.           The words "hereof," "herein," "hereunder" and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, schedule and exhibit references herein are references to sections, schedules and exhibits to this Agreement unless otherwise specified.

d.           The word "including" when used herein shall mean "including without limitation"

e.           Unless otherwise specified herein, all times set forth herein are Dallas, Texas time.

1.3           Inconsistency. In the event of any inconsistency between the provisions of any Confirmation and this Agreement, such Confirmation will prevail for the purpose of (but only for the purpose of) the relevant Transaction.

1.4           Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the Parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions.

ARTICLE II

TRANSACTIONS

2.1           Offer. The Manager may, from time to time propose a Transaction by submitting to EPK a proposed Confirmation setting forth for such Transaction the Goods, the EPK Minimum Proceeds, the Manager's Compensation, the EPK Purchase Price, the Vendor, the Purchaser Purchase Price, the Purchaser, information sufficient to enable to EPK to determine the relative credit worthiness of the Purchaser, the Purchaser's terms and method of payment in the transaction, and, if applicable, the Credit Enhancer, and attaching copies of the Vendor Pro Forma Invoice, the Purchase Order and, if applicable, the Credit Enhancement (other than the Guaranty) with respect to the proposed Transaction, and any other items which EPK may request from time to time to properly review the Transaction.

2.2           Acceptance.  EPK shall have no obligation to enter into any proposed Transaction. In the event that EPK and the Manager agree upon a proposed Transaction, such agreement shall be evidenced by the execution and delivery (which may be by telecopy) of a Confirmation setting forth the terms of such Transaction. The Confirmation with respect to a Transaction shall become effective upon all of the following having occurred (i) execution and delivery thereof by both of the Parties; (ii) assignment (or other means of transfer) to EPK acceptable to EPK of any Credit Enhancement (other than the Guaranty which has been executed and delivered to EPK) with respect to the Transaction; (iii) if requested by EPK, deliver to EPK a letter from each and every creditor of Manager (other than Factor)  that now or hereafter holds a security interest in or lien on any of Manager's Inventory and Accounts and all personal property which secure the Manager’s obligations under this Agreement whereunder each of them shall have consented to the Transactions contemplated by this Agreement and shall have acknowledged EPK's sole and exclusive ownership in the Goods and all proceeds thereof; and (iv) if requested by EPK, subject to the terms of the Intercreditor Agreement, the establishment of a lock box account over which EPK shall have sole access, dominion and control at a state or national bank acceptable to EPK (the “Lock Box") at the sole cost and expense of Manager.

2.3           Services of the Manager.  Unless otherwise specified in the Confirmation  relevant to a Transaction, the Manager and/or it agents and representatives shall:  (a) cause the Goods to be shipped to the Purchaser in accordance with the Purchase Order relevant to such Transaction and bear all costs, including any shipping costs and messenger expenses and legal costs, incidental to such Transaction as may be required by the terms of the relevant Purchase Order; (b) indemnify and hold EPK and its assigns harmless from and against (i) any loss caused by the failure of (A) the Vendor or any shipper to timely deliver Goods which conform to the requirements of the Vendor Pro Forma Invoice, the Purchase Order and applicable law, or (B) the Manager to truthfully represent the Purchaser's credit information or the terms and method of payments in the transaction as contemplated in Section  3.1, ( ii) any claim of or liability to any Person arising out of the Transaction, including without limitation any claim of or liability to the Purchaser or any other Person in respect of the Goods , and (iii) any Taxes due in connection with such Transaction; provided, however, that notwithstanding anything to the contrary in this Agreement, the Manager shall not have any obligation to indemnify or hold EPK or any of its assigns harmless from any losses, claims, damages, liabilities or related expenses to the extent they are found by a court of competent jurisdiction to have resulted from the bad faith, willful misconduct or gross negligence of such indemnified person; (c) be responsible for performing all customary administrative and ministerial tasks relating to the collection of such invoices to the Purchaser; provided, however, that the foregoing shall in no way limit EPK's right at any time and from time to time (if the accounts receivable generated from such invoices are not factored pursuant to the Factoring Agreement and EPK reasonably believes itself to be insecure) to collect amounts owing under such invoices directly; and provided, further, that the foregoing shall not constitute a guaranty by Manager of the payment or collection of such invoices; (d) to pay for and do all things reasonably necessary to maintain (in all material respects) all warranty, service and/or other post delivery obligations with Purchaser as required by the terms of the relevant Purchase Order; and (e) not perform any action which could result in reduced or non-payment by Purchaser.

2.4           Maximum EPK Purchase Price. Unless otherwise specified in the Confirmation relevant to a Transaction, the aggregate EPK Purchase Price for all Transactions at any time outstanding shall not be greater than $11,500,000.00.

2.5           Compensation of the Manager. The compensation of the Manager in respect of its services in connection with a particular Transaction shall be the Manager's Compensation set forth in the Confirmation with respect to such Transaction; provided, that unless otherwise specified in the Confirmation with respect to such Transaction, the compensation of the Manager in respect of a particular Transaction shall be payable solely from the proceeds received by EPK from the Purchaser and, if applicable, the Credit Enhancer with respect to such Transaction and only to the extent that such proceeds exceed the EPK Minimum Proceeds for such Transaction. Prior to the payment of Manager’s Compensation, EPK has the right, in its sole discretion, to require the Manager to execute a general release duly notarized in form acceptable to EPK. In the event EPK receives communication of any kind as to any conflicting claims or legal proceedings made by any Party in connection with a particular Transaction including, but not limited to, the Manager, Vendor and/or Purchaser, EPK maintains the right, and is authorized by the Manager, and at Manager’s sole risk to (1) retain an amount acceptable to EPK in trust to reserve against such claims and legal proceedings, (2) file suit in interpleader or for declaratory relief and deposit such funds into court and/or (3) deposit same with an attorney acceptable to EPK in trust for EPK, Manager and/or such claimants.

2.6           Further Assurances.  The Manager hereby agrees that at any time and from time to time after the execution of this Agreement, Manager shall, upon the  request of EPK, execute and deliver such further acts and things as EPK may request in order to fully effect the purposes of this Agreement and to protect EPK's interests in the Goods and/or Credit Enhancements, including, but not limited to, furnishing any and all documents necessary to enable EPK or its insurer to defend itself in any litigation arising in connection herewith.  Manager shall give EPK written notice of any action known by Manager to have been taken by a third party which may jeopardize EPK's rights in the Goods and/or Credit Enhancement promptly after Manager becomes aware of the same.  Manager hereby agrees to reimburse EPK for all documented out-of-pocket costs and expenses (including but not limited to reasonable attorney’s fees) incurred by EPK in connection with (a) any litigation, contest, dispute, suit, proceeding or action (whether instituted by EPK, the Vendor, the Purchaser, Manager or any other person) in any way relating to the Goods, the transactions or this Agreement (except any litigation, contest, dispute, suit, proceeding or action involving EPK which has been determined by a court of competent jurisdiction adverse to EPK due to its bad faith, willful misconduct or gross negligence), and (b) any attempt during the continuance of an Event of Default to (i) enforce any of EPK's rights in the Goods or Credit Enhancements in the transactions or under this Agreement against Manager, the Vendor, the Purchaser or any other person, and/or ( ii) verify, protect, sell, liquidate or otherwise dispose of the Goods and/or Credit Enhancements.  With respect to a Transaction, the Manager agrees not to accept or arrange for Goods to be returned by the Purchaser without the express written authorization of EPK (such authorization not to be unreasonably withheld or delayed).  In the event Goods are returned by the Purchaser with respect to a Transaction, and agreed to in writing by EPK, all Goods shall be sent to third party warehouse acceptable to EPK.  All costs associated with such returned Goods, including but not limited to freight, storage and insurance shall be for the account of the Manager.

2.7           Title.  All Goods shall at all times be and remain the sole and exclusive property of EPK and titled in the name of EPK or such tradestyle as may be acceptable to EPK.

2.8           Insurance on Goods.  Manager shall obtain insurance which insures the Goods against all risks or physical loss or damage with warehouse to warehouse coverage.  All such policies of insurance shall name EPK as the additional insured party and as loss-payee thereunder.  EPK shall have the right to file all insurance claims in EPK’s or Manager’s name, as well as the right to acquire insurance, at the sole cost of Manager, if Manager’s insurance is terminated or(and no replacement insurance has been obtained) deemed insufficient by EPK.

2.9           Security Agreement.   If this Agreement and any Confirmation hereunder are deemed to be a Security Agreement, Manager grants EPK a security interest in all assets of Manager including all real estate, Goods, Purchase Orders, accounts, proceeds and any other personal property now owned or hereafter assigned, and all products and proceeds thereof, wherever located.

2.10         Collection of Purchaser Purchase Price.  All invoices shall instruct the Purchaser to remit their payments directly to a Lock Box or as instructed by the Form of Confirmation.  Without limiting the foregoing, in the event that Manager shall receive any remittances from any Purchaser from time-to-time on account of Transactions, such remittances shall be and remain EPK's property and Manager shall hold such remittances as trustee of an express trust for EPK's benefit and immediately deliver over to EPK for deposit or cause to be deposited the same in the Lock Box or to EPK or to such other account designated by EPK.  Manager acknowledges that such remittances are the sole and exclusive property of EPK (subject to EPK’s payment obligations to the Manager under this Agreement and subject to the terms of the Intercreditor Agreement).  All payments of the Purchaser's Purchase Price which are made through presentment of a letter of credit shall instruct the collecting or paying bank of said letter of credit to make payment by wire transfer of immediately available funds to the Lock Box, to EPK or to such other account designated by EPK.  All funds deposited in such designated account received on account of a Transaction are the sole and exclusive property of EPK (subject to EPK’s payment obligations to the Manager under this Agreementand subject to the terms of the Intercreditor Agreement). EPK and its directors, officers and agents shall have the right to sign and endorse on behalf of Manager all checks, drafts and other forms of payment received by EPK in connection with the payment of any account arising from a Transaction or the sale of Goods Manager appoints EPK or any other person EPK may from time to time designate, as Manager’s attorney-in-fact with power to:

(a) endorse Manager’s name on any checks, drafts or other forms of payment or security received in payment of any account arising from a Transaction or the sale of Goodsthat may come into EPK’s possession;

(b) sign Manager’s name on notices of assignment, verifications of accounts, verifications of Purchase Orders and notices to current and/or potential future Purchasers;

(c) receive and open all mail addressed to Manager and received by EPK (provided that EPK shall promptly forward the same to Manager);

(d) send notices of assignment, requests for verification of Purchase Orders or requests for verification of accounts to current and/or potential future Purchasers;

(e) to sign Manager’s name and file any federal and state Financing Statement(s) / recordations / registrations / continuation statements / assignments / subordinations / terminations, etc. and/or amendments (UCC-1, UCC-2, UCC-3, etc.) in connection with any security interests granted by the Manager in connection with this Agreement;

(f) to use the name of Manager and, in EPK’s sole discretion, to litigate, file in court and/or serve documents in respect to, and, for an amount less than face value or cost; etc. in prosecuting and/or defending any action/claim brought by/against/involving Manager / EPK / Purchaser and/or any third parties;

(g) to settle, compromise, surrender Goods and/or security or modify any such Purchase Order and otherwise deal with Purchaser, those with whom Manager and/or Purchaser has contracted, for the account and risk of Manager, notwithstanding any effect on any Purchase Order; and

(h) do all things necessary to carry out the terms of this Agreement.

2.11           Access to Information and Control Over Goods.  Manager shall provide EPK with any and all information which EPK may reasonably request concerning the Goods, the Purchaser, the Vendors, Manager, and/or any other parties involved with the Goods, including, but not limited to, permitting the inspection of the books and records of Manager by EPK and its representatives. Manager shall provide EPK with immediate access to any and all Goods in Manager's possession, actual or constructive, upon request by EPK.  In the event that EPK determines in good faith that it is necessary for EPK to assert or enforce its rights as owner of the Goods in order to adequately protect its interests, EPK shall be permitted to take, and Manager shall assist EPK in taking any and all action as EPK deems necessary, including, but not limited to, (i) notifying freight forwarders, the Purchasers, the Vendors and other third parties of EPK's interest in the Goods, and (ii) taking immediate and complete physical control over the Goods and the proceeds and products thereof.

2.12           NO WARRANTIES ON GOODS.  ALL GOODS COVERED BY THE AGREEMENT ARE RESOLD BY EPK "AS IS" AND "WITH ALL FAULTS," AND MANAGER ACKNOWLEDGES THAT NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE ARE TO BE IMPLIED IN THE AGREEMENT.  EPK GIVES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE DESCRIPTION, QUALITY, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, PRODUCTIVENESS, OR ANY OTHER MATTER OF ANY OF THE GOODS.  EPK SHALL BE IN NO WAY RESPONSIBLE FOR THE PROPER USE OR SERVICE OF THE GOODS.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1           The Manager. The Manager hereby represents and warrants, and the delivery by the Manager of each Confirmation shall constitute the further representation and warranty of the Manager, that:

(a) The Manager is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware.

(b) the Manager has all requisite authority to enter into this Agreement and to perform all the obligations required to be performed by it hereunder;

(c) neither the execution and delivery by the Manager of this Agreement, nor the consummation of any of the Transactions herein contemplated, nor compliance with the terms and provisions hereof, will (i) materially contravene or conflict with the articles of incorporation or bylaws of the Manager, any requirement of law to which the Manager is subject, or any indenture, mortgage, deed of trust, or other agreement or instrument to which the Manager is a party or by which the Manager may be bound, or to which the property of the Manager may be subject, except as would not reasonably be expected to result in a Material Adverse Effect, or (ii) result in the creation or imposition of any lien on the property of the Manager by any party other than EPK;

(d) this Agreement is the legal, valid and binding obligation of the Manager, enforceable against the Manager in accordance with its terms,subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law;

(e) there is no material fact relevant to the transactions contemplated by this Agreement (and in the case of each Confirmation, there is no material fact relevant to the Transaction set forth in such Confirmation) known to the Manager that the Manager has not disclosed to EPK including pending or current offsets, charge backs or allowances of any kind by the Purchaser;

(f) the Manager is not (and in the case of each Confirmation, to the knowledge of the Manager, neither the Purchaser nor the Vendor thereunder is) in default under any loan agreement, mortgage, security agreement or other material agreement or obligation to which it is a party or by which any of its property is bound , except as would not reasonably be expected to result in a Material Adverse Effect;

(g) there are no material actions, suits or legal, equitable, arbitration or administrative proceedings pending, or to the knowledge of the Manager threatened, against the Manager (and in the case of each Confirmation, to the knowledge of the Manager, there are no material actions, suits or legal, equitable, arbitration or administrative proceedings pending, or threatened, against the Purchaser or the Vendor thereunder) , except as would not reasonably be expected to result in a Material Adverse Effect;

(h) all tax returns required to be filed by the Manager in any jurisdiction have been filed and all material taxes, assessments, fees and other governmental charges upon the Manager or upon any of its properties, income or franchises have been paid prior to the time that such taxes could give rise to a lien thereon,except those which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP;

(i) neither the execution and delivery of this Agreement nor the consummation of any of the transactions contemplated hereby requires the consent or approval of, the giving of notice to, or the registration, recording or filing by the Manager or any other Person of any document with, or the taking of any other action in respect of, any Governmental Authority which has jurisdiction over the Manager (or, in the case of each Confirmation, the Purchaser or the Vendor thereunder) or any of its property, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the first priority nature thereof), (b) such as have been obtained or made and are in full force and effect and (c) those which if not made or obtained could not reasonably be expected to have a Material Adverse Effect;

(j) the Manager has delivered to EPK a list of creditors of the Manager, and Income Statements and Balance Sheets for the periods ending June 30, 2011, June 30, 2012 and March 31, 2013; such lists, Income Statements and Balance Sheets are accurate in all material respects;

(k) the Manager and the Guarantors, on a consolidated basis(and, in the case of each Confirmation, to the knowledge of the Manager, the Purchaser and the Vendor thereunder), are Solvent;

(l) none of the Purchaser, the Vendor or the Credit Enhancer (other than the Guarantors) with respect to any Transaction is an Affiliate of the Manager;

(m) all information furnished by the Manager in each Confirmation is true, correct, and complete in all material respects; and

(n) the Manager has paid and will continue to pay and maintain in current standing all material taxes, insurances, licenses, etc. as Manager determines in its reasonable discretion required for conduct of its business or profession.

(o) The Manager shall perform all actions for the benefit of EPK and authorized by EPK in a good workmanlike manner and as a reasonably prudent person engaged in a similar business would in similar circumstances.

(p) The Manager shall not permit the change of control of the Manager. "Change of control" as used in the preceding sentence means (a) the acquisition of more than fifty percent (50%) of the outstanding voting stock and/or membership interests of the Manager by any person or group of persons acting in concert, or (b) the acquisition of more than ten percent (10%) of the outstanding voting stock and/or membership interests of the Manager by any person or group of persons acting in concert if at any time following such acquisition of ten percent (10%) or more of the Manager's outstanding voting stock and/or membership interests more than fifty percent (50%) of the persons serving on the board of directors of the Manager are persons proposed directly or indirectly by the persons or group of persons acting in concert who have acquired such the percent (10%) or more of the Manager's outstanding voting stock and/or membership interests.

All representations and warranties by the Manager herein shall survive until all obligations of the Manager under this Agreement have been irrevocably paid in full, and any investigation at any time made by or on behalf of EPK shall not diminish the right of EPK to rely thereon.

ARTICLE IV

DEFAULT; REMEDIES

4.1           Event of Default. An Event of Default shall exist if any one or more of the following occurs:

(a) The Manager fails to make any payment due hereunder on the date that such payment is due;

(b) the Manager fails to observe or perform any other term, covenant or agreement set forth in this Agreement on its part to be performed or observed and such failure continues unremedied for five (5) Business Days past the date when such observance or performance is due;

(c) any material statement, warranty or representation by or on behalf of the Manager contained in this Agreement, (including any Confirmation or other writing furnished in connection with this Agreement) proves to have been incorrect or misleading in any material respect when made or deemed made;

(d) any provision of this Agreement shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part, or the validity or enforceability of any such document shall be challenged or denied; or

(e) the Manager enters into any arrangement that provides for a security interest in any of its assets without the express written consent or agreement of EPK. This does not apply to previously reported security interests that are addressed by a subordination or intercreditor agreement (including, for the avoidance of doubt, the liens securing the Factoring Agreement subject to the Intercreditor Agreement), or liens in the nature of those described on Schedule II hereto.

(f) the commencement by the Manager or any Credit Enhancer as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or the seeking by the Manager or any Credit Enhancer of the appointment of a receiver, trustee, custodian or similar official for such Person or any substantial part of its property, (ii) the commencement of any such case or proceeding against the Manager, (iii) the making by the Manager or any Credit Enhancer of a general assignment for the benefit of its creditors, or (iv) the admission by the Manager or any Credit Enhancer that it is unable to pay its debts as they become due.

(g) any event or circumstance relating to the Manager's business or affairs or to any Transaction has had or could reasonably be expected by EPK to have a Material Adverse Effect.

4.2           Remedies. Upon the occurrence of an Event of Default, all obligations of EPK hereunder shall be suspended and EPK may exercise all rights and remedies granted in this Agreement, in any Credit Enhancement and/or under applicable law, and may offset all Manager's compensation then due against any sums due EPK.

ARTICLE V

MISCELLANEOUS

5.1           Term. This Agreement may be terminated by EPK immediately upon written notice to the Manager or by the Manager upon 30 days after Manager delivers written notice to EPK and shall terminate without notice by either Party on [June 30, 2015]; provided, that notwithstanding the termination of this Agreement, this Agreement shall continue in full force and effect with respect to any Transactions with respect to which Manager has not fully performed its obligations hereunder until such time as such performance is completed.

5.2            Amendments, Etc.   No amendment or waiver of any provision of this Agreement nor any consent to any departure by either Party herefrom shall in any event be effective unless the same shall be in writing and signed by the Party against whom enforcement of such amendment, waiver or consent is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

5.3           No Waiver, Remedies. No failure on the part of EPK to exercise, and no delay on the part of EPK in exercising, any right hereunder shall operate as a waiver of such right; nor shall any single or partial exercise of any right by EPK preclude any further or subsequent exercise of the same or any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

5.4           Notices. etc. Any notice or other communication in respect of this Agreement may be given in any form set forth below to the address or number or in accordance with the electronic messaging system details provided on Schedule I and will be deemed effective as indicated:

(i) If in writing and delivered in person or by courier, on the date it is delivered;

(ii) if sent by facsimile transmission, on the date (if sent during regular business hours of the recipient, or if not, on the next succeeding business day) that transmission is sent in legible form (it being agreed that the burden of proving it was sent will be on the sender and will be met by a transmission report generated by the sender's facsimile machine);

(iii) if sent by regular, certified or registered mail or the equivalent (return receipt requested) on the date it is  delivered; or

(iv) if sent by electronic mail, on the date that the electronic message is received (if sent during regular business hours of the recipient, or if not, on the next succeeding business day) (it being agreed that the burden of proving it was sent will be on the sender and will be met by a return receipt sent by the recipient).

Either Party may by written notice to the other change the address or facsimile number or electronic messaging system details at which notices are to be given to it.

5.5           Captions. The captions in this Agreement are for convenience of reference only and are not to be given any substantive meaning or significance whatever in construing the terms and provisions of this Agreement.

5.6           Transfer. Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by the Manager without the prior written consent of EPK.  EPK may, with written notice to the Manager assign or transfer all or any part of its interests and obligations herein to any other Person, and such other Person shall thereupon become vested with all rights and obligations in respect thereof granted to and assumed by EPK herein or otherwise.

5.7           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF TEXAS.

5.8           CONSENT TO FORUM.  THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN DALLAS COUNTY, TEXAS.  AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR OTHER PRINCIPAL PLACE OF BUSINESS OF MANAGER OR EPK, MANAGER HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS COUNTY, TEXAS, OR, AT EPK'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN MANAGER AND EPK PERTAINING TO THIS AGREEMENT OR TO ANY OTHER MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.  MANAGER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND MANAGER HEREBY WAIVES ANY OBJECTION WHICH MANAGER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNONCONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  MANAGER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO MANAGER AT THE ADDRESS LAST KNOWN TO EPK AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF MANAGER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.  NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF EPK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY MANAGER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

5.9           JURY TRIAL; DAMAGES.  THE MANAGER HEREBY (a) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN; (b) IRREVOCABLY WAIVES, TO THE EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (d) ACKNOWLEDGES THAT THEY ENTERED INTO THE AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED HEREBY, BASED UPON, AMONG OTHER THINGS, THE  WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

5.10           Attorneys' Fees. Manager shall pay all EPK's documented legal fees and expenses incurred by EPK in connection to this Agreement and enforcement of this Agreement (except in connection with any litigation, contest, dispute, suit, proceeding or action involving EPK which has been determined by a court of competent jurisdiction adverse to EPK due to its bad faith, willful misconduct or gross negligence).

5.11           No Rights Conferred Upon Third Parties. This Agreement is for the benefit of the Parties hereto and nothing contained herein shall be construed to give any third party any benefits or rights hereunder.

5.12Counterparts. This Agreement may be executed in counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile or electronic (i.e. PDF) transmission shall be effective as delivery of manually executed counterpart hereof.

5.13           Maximum Rate.   Nothing in this Master Agreement or related documents should be construed as interest. Notwithstanding any provision of this Master Agreement, Form of Confirmation or other document to the contrary, it is the intent of EPK and the Manager that EPK or any subsequent holder or assignee of this Master Agreement shall never be entitled to receive, collect, reserve or apply as interest, any amount in excess of the maximum rate of interest as permitted by applicable law, as amended or enacted, from time to time.  In the event that EPK or any subsequent holder or assignee of this Master Agreement ever receives, collects, reserves or applies, as interest, any such excess, such amount which would be excessive interest shall be deemed a partial prepayment of principal and treated as such, or, if the principal indebtedness and all other amounts due are paid in full, any remaining excess interest shall be paid to the Manager.  In determining whether fees paid or payable under the Master Agreement, under any specific contingency, constitute interest and exceeds the highest lawful rate, the Manager and EPK shall, to the maximum extent permitted under applicable law, (a) exclude voluntary prepayments and the effects thereof as it may relate to fees charges by EPK, and (b) amortize, prorate, allocate, and spread, in equal parts, the total amount of fees charged throughout the entire term of the Master Agreement.  Upon refund of any excess interest as determined hereunder, EPK shall not be subjected to any damages or penalties under any laws for contracting for, charging, reserving or receiving interest in excess of the maximum lawful rate. EPK and the Manager specifically agree and stipulate that any fees charged under the Master Agreement, not specifically denominated as interest, are not compensation for the use or forbearance or detention of money. Manager specifically waive any damages, whether imposed by precedent or statute, for the contract, charge, reserve or receipt by EPK of interest in excess of that allowed by law except the refund of the excess interest and the Manager specifically acknowledge that EPK relies on such waiver in entering into the Master Agreement and that EPK has changed its position in reliance on such waiver.

5.14           COMPLIANCE WITH LAWS.  MANAGER SHALL OBSERVE AND COMPLY IN ALL MATERIAL RESPECTS WITH ALL FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS WHICH GOVERN THE MANUFACTURE, SALE, HANDLING AND DISPOSAL OF ANY PRODUCTS HEREIN SPECIFIED.  MANAGER ALSO AGREES TO COMPLY WITH THE PROVISIONS RELATING TO THE FCPA SET FORTH IN EXHIBIT B.  IF MANAGER VIOLATES ANY OF SUCH LAWS OR REGULATIONS OR IS OFFICIALLY CHARGED WITH SUCH VIOLATIONS, EPK IN ITS SOLE DISCRETION MAY TREAT THIS CONDUCT AS A BREACH OF THIS WHOLE AGREEMENT AND IN ADDITION TO ANY OTHER REMEDIES, MAY IMMEDIATELY TERMINATE THIS AGREEMENT.

5.15           Guaranty. The Manager shall cause each Guarantor to execute and deliver a Guaranty and take all actions reasonably requested by EPK to cause each Guarantor to perform its obligations under its Guaranty.

5.16           UCC Filing. To secure performance and payment of Manager’s obligation hereunder, Manager grants EPK a security interest in all personal property.

5.17           THE MANAGER AND EPK AGREE THAT THE TERMS HEREIN SHALLBE AND AT ALL TIMES WILL REMAIN CONFIDENTIAL AND, EXCEPT AS REQUIRED BY LAW, WILL NOT BE COMMUNICATED BY EITHER THE MANAGER OR EPK TO ANY THIRD PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER. EXCEPT (a) AS REQUIRED BY LAW AND (b) TO SUCH PARTY’S AFFILIATES AND ITS AFFILIATE’S RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ADVISORS AND AGENTS, PROVIDED THAT SUCH PERSONS ARE SUBJECT TO CONFIDENTIALITY PROVISIONS THE AS SET FORTH HEREIN.

5.18           Commitment Fee. Manager shall pay to EPK a fee in consideration of EPK’s commitment to reserve and have available sufficient funds to enter in to a proposed Transaction (“Commitment Fee”). The Commitment Fee shall be in the sum of $230,000.00. The Commitment Fee is deemed by the Manager to have been earned by EPK upon the signing of this agreementand shall be payable from the payments received by EPK from Purchaser and/or Factor in an amount equal to an additional 5% of the EPK Purchase Price of each Transaction in addition to the fees detailed in the EPK Minimum Proceeds, until the Commitment Fee has been paid in full. Manager hereby agrees the Commitment Fee shall be paid in full by no later than November 1, 2013. EPK reserves the right to change or amend the percentage of the EPK Purchase Price to collect the Commitment Fee at anytime.

5.19           Notwithstanding anything to the contrary in this Agreement, the lien and security interest granted herein, and the exercise of rights and remedies by EPK hereunder, are subject to the provisions of the Intercreditor Agreement.  In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern and control for so long as the Intercreditor Agreement shall be in effect.  For the avoidance of doubt, in the event of a shortfall related to a Transaction, Manager shall repay EPK from all available proceeds with Factor including proceeds not related to a Transaction subject to the terms of the Factoring Agreement.

5.20           ENTIRE AGREEMENT.  THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO REGARDING THE SUBJECT MATTER HEREOF 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 undersigned have executed this Agreement as of the date set forth above.

MANAGER:

TANDY BRANDS ACCESSORIES, INC.

By:

Title:

Date:

EPK:

EPK FINANCIAL CORPORATION

By:

Edward P. King

Title: President

Date:

Signature Page to Master Agreement

SCHEDULE I

TO

MASTER AGREEMENT

EXECUTED AND DELIVERED AS OF  JULY __, 2013 BETWEEN

TANDY BRANDS ACCESSORIES, INC. (the "Manager")

AND

EPK FINANCIAL CORPORATION ("EPK")

ADDRESSES FOR NOTICES

Address for notices to the Manager:

Address:  3631 W. Davis Street, Suite A, Dallas, TX 75211

Attention: Neill Roderick McGeachy

Facsimile: transmit via email         Phone: 214-519-5120

Address for notices to the EPK:

Address: 5944 Luther Lane, Ste 300 Dallas, TX 75225

Attention:  Edward P. King

Facsimile:  214-368-5105         Phone: 214-368-5100

SCHEDULE I

TO

MASTER AGREEMENT

EXECUTED AND DELIVERED AS OF JULY __, 2013 BETWEEN

TANDY BRANDS ACCESSORIES, INC. (the "Manager")

AND

EPK FINANCIAL CORPORATION ("EPK")

PERMITTED LIENS

(a)           Liens imposed by law for taxes or other governmental charges (A) that are not yet due or that are being contested in good faith by appropriate proceedings, (B) for which the Manager has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) for which the collection and enforcement thereof has been effectively suspended;

(b)           Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by applicable law, arising in the ordinary course of business and securing obligations that are not overdue or are being contested and do not encumber any Goods;

(c)           Pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, other than any Lien imposed by ERISA;

(d)           Deposits to secure the performance of bids, trade contracts and leases (other than indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e)

(f)           Easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of Manager and such other minor title defects or survey matters that are disclosed by current surveys that, in each case, do not materially interfere with the current use of the real property;

(g)           cash collateral maintained at Wells Fargo Bank, N.A. securing the Manager’s reimbursement obligations for draws under a letter of credit issued by Wells Fargo Bank, N.A., and refinancings thereof;

(h)           Purchase money liens;

(i)           Statutory liens of landlords and lessors in respect of rent not in default;

(j)           Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

(k)           Liens in favor of customs and revenues authorities imposed by applicable Law arising in the ordinary course of business in connection with the importation of goods (other than Goods) and securing obligations (A) that are being contested in good faith by appropriate proceedings, (B) for which the Manager has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) for which the collection and enforcement thereof has been effectively suspended; and

(l)           encumbrances referred to in Schedule B of the mortgage policies insuring the Mortgages delivered to Factor.

EX-4.15

Exhibit 4.15 and 10.38

SUBORDINATED PROMISSORY NOTE

$502,946.63 dated as of July 23, 2013

For value received, Tandy Brands Accessories, Inc., a Delaware corporation ("Maker") does hereby promise to pay to the order of Eddie Bauer Licensing Services LLC ("Payee"), at 10401 NE 8th Street, Suite 500, Bellevue, WA 98004, or such address as Eddie Bauer may notify Maker from time to time, in legal and lawful money of the United States of America, on or before July 15, 2015 (the “Maturity Date”), the sum of $502,946.63, together with interest accruing at the rate of 6% per annum from the date hereof on the principal balance outstanding until paid in full.  Interest shall be computed on a per annum basis of a year of 365 days or 366 days in a leap year, as the case may be.

1.Payment Terms.  Subject to Paragraph 10 hereof, principal remaining due hereunder (subject to reduction under Paragraph 2 below)shall be due and payable as follows:

(a)           one installment of $50,294.66, constituting 10% of the total principal amount of this Note, together with interest accrued thereon, shall be due and payable 30 days following the date of this Subordinated Promissory Note (“Note”).  No Payment Conditions shall be required to be met for Maker to make this installment, nor shall this payment be deferred or delayed;

(b)           one installment of $201,178.65, constituting 40% of the total principal amount of this Note, together with interest accrued thereon, on or before December 31, 2013;

(c)           the remainder of the principal balance in three equal installments, together with interest accrued thereon, on each of January 15 and July 15 of each year, beginning on July 15, 2014 (each such payment date specified in subsections (b) and (c), a "Payment Date" hereunder) and continuing thereafter until the Maturity Date, at which time all principal amounts remaining unpaid under this Subordinated Promissory Note (this "Note"), together with all interest accrued thereon, shall become immediately due and payable without notice or presentment.

Notwithstanding the foregoing,  if on a Payment Date the Payment Conditions (as defined in Paragraph 3 below) are not then satisfied, then the principal payment, together with accrued interest thereon, then due shall be deferred to the next Payment Date; provided, however, that (i) the Payment Conditions shall not be required to be met for the payment under (a) above and (ii) subject to the provisions of Paragraph 10 hereof, neither a deferral of a Payment Date nor a failure of a Payment Condition shall defer or delay the payment of all remaining amounts outstanding, together with interest accrued thereon, on the Maturity Date.

2.           Additional Offsets to Principal Amount.In the event that Eddie Bauer LLC, an affiliate of Payee, elects to purchase goods from Maker for resale in its retail stores or website, and Maker sells such goods to Eddie Bauer LLC at a discount greater than 7% off of Maker’s “best customer pricing” [as required under Section 12.12 of the License Agreement dated effective February 1, 2011 between Maker and Payee (the “License Agreement”)], then Payee may, at its election, apply the difference between the amount of the discount required to be extended by the License Agreement and the amount of discount actually extended by Maker to Eddie Bauer LLC for all purchases made during 2013 and 2014, up to a maximum of $50,000, as a credit against the outstanding principal amount of and accrued interest on this Note, with each credit being effective as of the date the invoice for goods is due from Eddie Bauer LLC, and with such credit applied first against accrued interest and then against outstanding principal under the Note.

3.           Payment Conditions.  (a)  As used herein, “Payment Conditions” shall mean the following:   (i)  sales of Inventory of Maker, as tested on a rolling three month basis as of the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan (as defined in the Senior Credit Agreement (as defined below)); (ii) accounts payable of the Maker, as tested for the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan; (iii) Availability (as defined in the Senior Credit Agreement), as tested for the immediately preceding month prior to the applicable Payment Date, is within ten percent (10%) of projected Availability as set forth in the Business Plan; (iv) for the thirty (30) day period immediately preceding any such Payment Date, and on a projected basis for the thirty (30) day period immediately succeeding any such Payment Date after giving effect to the applicable payment made on such Payment Date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount (as defined in the Senior Credit Agreement); and (v) Maker is not in default under the terms of the Senior Credit Agreement.  Maker shall provide Payee with written notice, certified as true and correct by an executive officer of Maker, together with details regarding which components of the Payment Condition were not met, in the event that a Payment Condition has not been met for any Payment Date, not more than two business days following the Payment Date.  In the event a Payment Condition is not met for any Payment Date, the Payment Date shall be deferred to the earlier to occur of the satisfaction of the Payment Condition or the next succeeding Payment Date.  Notwithstanding the foregoing, subject the provisions of Paragraph 10, hereof, all remaining outstanding amounts under this Note shall be due and payable in full on the Maturity Date.

4.           Prepayment.  Subject to Paragraphs 3 and 10, Maker reserves the right to prepay, prior to the Maturity Date, all or any part of the principal and interest of this Note without penalty.  Any prepayments shall be applied first to accrued interest and then to principal.  Maker will provide written notice to Eddie Bauerof any such prepayment at the time thereof.  All payments and prepayments of principal or interest on this Note shall be made in lawful money of the United States of America in immediately available funds at such place as Eddie Bauer shall designate from time to time.  All partial prepayments of principal shall be applied to the next due principal repayment .  Upon any such prepayment, the Amortization Schedule shall be revised to reflect such prepayment and the current outstanding amount of the Note.

5.           Default.  (a)  Payee and Maker expressly agree that any default under the terms of the License Agreement or under the terms of the Settlement Agreement between the parties dated as of even date herewith, shall constitute a default under this Note.

(b)           Upon the failure of Maker to pay any amount due under this Note within 5 days after the same becomes due and payable, without further right to notice or an opportunity to cure, unless Maker has provided Payee with notice, confirmed by Maker’s Senior Lender, that such payment is prohibited by the Payment Conditions, Payee may, at its option, accelerate all amounts due hereunder, or pursue any rights, remedies and recourses available to Payee at law or in equity, including any rights granted to Maker under the License Agreement or Settlement Agreement; provided, however, that any right of Payee to payment of the amounts due hereunder shall be subject to Paragraph 10 hereof.  All overdue amounts shall accrue interest at a default rate of 12% per annum from due date until paid.  In addition, Payee shall be entitled to seek all costs of collection, including attorneys fees and costs, incurred by Payee to collect amounts in default hereunder.

6.           No Usury Intended.  In no event shall interest contracted for, charged or received hereunder, plus any other charges in connection herewith which constitute interest, exceed the maximum interest permitted by applicable law.

7.           Unsecured.  This Note is not, and shall not at any time be secured.

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8.           Governing Law, Venue.  This Note is being executed and delivered, and is intended to be performed in the State of Washington.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Washington shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in King County, Washington.

9.           Subordination Definitions.  As used herein, the following terms shall have the following meanings:

a."Bankruptcy Law" means any bankruptcy, insolvency, reorganization, moratorium, receivership or similar law generally affecting creditors' rights, including, without limitation, the U.S. Bankruptcy Code, as amended.

b."Senior Credit Agreement" means that certain Credit Agreement, dated as of July 24, 2103, by and between Maker, Salus Capital Partners, LLC, in its capacity as Administrative Agent and Lender, and the other Lenders party thereto (as such terms are defined therein), as amended, restated, extended, increased, consented to, waived or modified from time to time.

c."Senior Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under (i) the Senior Credit Agreement or any of the Loan Documents (as such term is defined in the Senior Credit Agreement) with, to or in favor of Administrative Agent and the other Lenders party thereto, or any of their permitted successors and assigns (collectively, "Senior Lender"), including, without limitation, all amendments, restatements, refinancings and extensions thereof and (ii) the Master Agreement between Maker and EPK Financial Corporation, dated as of July 24, 2013 (the "KTC Master Agreement") or any Confirmation (as defined in such KTC Master Agreement) or other agreement furnished in connection with the KTC Master Agreement.

d."Subordinated Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under this Note or any related agreement, document or instrument with, to or in favor of Payee.

10.           Subordination.  (a)  Notwithstanding anything in this Note or any other agreement referred to herein to the contrary, all obligations and liabilities of Maker to Payee under this Note are subordinated in right of payment to the prior and complete payment in full of all Senior Indebtedness and the termination of all commitments of Senior Lender thereunder as provided herein; provided, however, that subject to the Payment Conditions requirements set forth in Paragraph 3 hereof, Maker may make all payments and prepayments of principal and accrued interest under this Note.

(b)           Payee acknowledges to Senior Lender that it holds no perfected security interest in any of the goods or assets of Maker, and that to the extent Payee acquires any security interest in collateral of Maker on or before the Maturity Date of this Note, whether in violation of Paragraph 7 or otherwise, that such security interest shall be subordinated to the rights of Senior Lender in such collateral.  The parties hereto agree that Payee’s rights in and under the License Agreement do not constitute an interest in collateral of Maker, and nothing set forth in this Note or any other agreement between Payee and Maker or Maker and Senior Lender shall prohibit Maker from exercising any termination right it may have under the License Agreement, nor shall Senior Lender be granted any right in such License Agreement.

11.Waivers.  Maker waives any right to notice of acceptance of this Note and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration.

3

12.Restricted Modification.  Maker and Eddie Bauer hereby acknowledge and agree that Senior Lender is a third party beneficiary of Paragraphs 9, 10, 11 and 12 of this Note.  Furthermore, Maker and Eddie Bauer agree that, so long as any Senior Indebtedness is outstanding, the amount, interest rate, payment and subordination terms of this Note, the unsecured nature of this Note, and the Maturity Date hereof may not be modified or otherwise amended without the prior written approval of Senior Lender.

13.Termination of Senior Indebtedness.  Upon payment and performance in full of the Senior Indebtedness and termination of all commitments of Senior Lender thereunder, all provisions of this Note relating to and/or running in favor of or agreed to for the benefit of Senior Lender and/or the Senior Indebtedness shall immediately terminate and be of no further force and effect.

MAKER:

TANDY BRANDS ACCESSORIES, INC., a Delaware corporation

By:

Name:

Title:

4

EX-4.16

Exhibit 4.16 and 10.39

SUBORDINATED PROMISSORY NOTE

$955,739.90 dated as of July 23, 2013

For value received, Tandy Brands Accessories, Inc., a Delaware corporation ("Maker") does hereby promise to pay to the order of totes ISOTONER Corporation, an Ohio corporation (together with its successors and assigns, "Licensor"), at such address as Licensor may notify Maker from time to time, in legal and lawful money of the United States of America, the sum of $955,739.90, together with interest from the date hereof on the principal balance outstanding from time to time as hereinafter provided.  Interest shall be computed on a per annum basis of a year of 365 days or 366 days in a leap year, as the case may be.

1.Payment Terms.  Subject to Paragraph 9 hereof, principal and accrued interest shall be due and payable on November 30, 2013 and July 31, 2014 (each such payment date, a "Payment Date"); provided that if on November 30, 2013 the applicable Payment Conditions (as defined below) are not then satisfied (or waived) then the principal payment then due shall be deferred to July 31, 2014.  Subject to Paragraph 3, all principal and interest shall be paid in equal installments so as to amortize all outstanding amounts existing at such time over a twelve (12) month period (the "Amortization Schedule"); provided that, the entire amount hereof, principal and interest then remaining unpaid, shall be then due and payable in full on July 31, 2014 (the “Maturity Date”).  Notwithstanding anything to the contrary contained herein, if such payment is not made on the Payment Date occurring on July 31, 2014 (whether or not the Payment Conditions are satisfied or a Stop Notice has been given), a default shall exist hereunder and under the License.

As used herein, “Payment Conditions” shall mean the following: (x) Maker shall be in compliance with the covenant set forth in Section 7.17 of the Senior Credit Agreement (as in effect on the date hereof), and (y)

(I) for any payments to be made hereunder on any date during the period commencing July 24, 2013 and ending August 24, 2013, (a) for the twenty (20) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability (as defined in the Senior Credit Agreement (as in effect on the date hereof)) shall be not less than $4,000,000, and (b) for the five (5) day period immediately preceding any such date, average Availability shall be not less than fifteen percent (15%) of Maximum Revolving Loan Amount (as defined in the Senior Credit Agreement (as in effect on the date hereof)).

(II) for any payments to be made hereunder on any date during the period commencing August 25, 2013 and ending September 25, 2013, (a) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability shall be not less than $4,000,000, (b) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan (as defined in the Senior Credit Agreement (as in effect on the date hereof)), (c) Availability, as tested from the Closing Date (as defined in the Senior Credit Agreement (as in effect on the date hereof)) shall not be less than thirteen percent (13%) of the Maximum Revolving Loan Amount, (d) sales of Inventory of Maker and its subsidiaries, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan, and (e) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within fifteen percent (15%) of the projected amount of such accounts payable as set forth in the Business Plan,

(III) for any payments to be made hereunder on any date during the period commencing September 26, 2013 and ending October 26, 2013, (a) sales of Inventory (as defined in the Uniform Commercial Code) of Maker and its subsidiaries, as tested for the immediately preceding two months prior to such date, are within twelve percent (12%) of the projected amount of such sales as set forth in the Business Plan, (b) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan, (c) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan, and (d) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount, and

(IV) for any payments to be made on any date (including any Payment Date) thereafter (a) sales of Inventory of Maker and its subsidiaries, as tested on a rolling three month basis as of the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan; (b) accounts payable of the Maker, as tested for the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan; (c) Availability, as tested for the immediately preceding month prior to the applicable Payment Date, is within ten percent (10%) of projected Availability as set forth in the Business Plan; and (d) for the thirty (30) day period immediately preceding any such Payment Date, and on a projected basis for the thirty (30) day period immediately succeeding any such Payment Date after giving effect to the applicable payment made on such Payment Date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount.

2.Interest Rate.  Interest shall be calculated on the unpaid principal each day principal is outstanding and all payments made credited to the discharge of the interest accrued and to the reduction of the principal, in such order as Licensor shall determine.  As of the date of this Subordinated Promissory Note (this "Note"), interest on the outstanding and unpaid principal balance hereof shall be computed at a per annum rate equal to the lesser of (a) eleven percent (11.00%) per annum or (b) the highest rate permitted by applicable law, but in no event shall interest contracted for, charged or received hereunder plus any other charges in connection herewith which constitute interest exceed the maximum interest permitted by applicable law, said rate to be effective prior to maturity.  Notwithstanding anything to the contrary contained herein, while any incipient default or default (as such terms are defined in Paragraph 4) exists, the interest rate set forth in clause (a) of this Paragraph shall be increased by 2% to the fullest extent permitted by applicable Laws until so paid.

3.Prepayment.  Subject to Paragraph 9, Maker reserves the right to prepay, prior to maturity, all or any part of the principal and interest of this Note without penalty; provided that Maker shall be permitted to make any such payment only if the applicable Payment Conditions are satisfied at the time of such prepayment.  Any prepayments shall be applied first to accrued interest and then to scheduled payments of principal in inverse order of maturity.  Maker will provide written notice to Licensorof any such prepayment at least one business day prior thereto.  All payments and prepayments of principal or interest on this Note shall be made in lawful money of the United States of America in immediately available funds at such place as Licensor shall designate from time to time.  Upon any such prepayment, the Amortization Schedule shall be revised to reflect such prepayment and the current outstanding amount of the Note.

4.Default.  Upon (i) the failure of Maker to pay any amount due under this Note within ten (10) days after the same becomes due and payable (regardless of whether the applicable Payment Conditions are then met or a Stop Notice has been issued), or (ii) any other failure to comply with the terms of this Note, in each case after written notice is given to Maker by Licensor demanding payment or performance thereof, an “incipient default” shall exist hereunder.  If an incipient default shall exist and be continuing after the Maturity Date, a “default” shall have automatically occurred hereunder for all purposes (including without limitation any other contractual arrangements between and among the Licensor and the Maker) and Licensor may, at its option, pursue any rights, remedies and recourses available to Licensor at law or in equity, including termination of other contractual arrangements.

2

5.No Usury Intended.  In no event shall interest contracted for, charged or received hereunder, plus any other charges in connection herewith which constitute interest, exceed the maximum interest permitted by applicable law.

6.Unsecured.  This Note is not, and shall not at any time be, secured.

7.Governing Law, Venue.  This Note is being executed and delivered, and is intended to be performed in the State of Texas.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

8.Subordination Definitions.  As used herein, the following terms shall have the following meanings:

a."Bankruptcy Law" means any bankruptcy, insolvency, reorganization, moratorium, receivership or similar law generally affecting creditors' rights, including, without limitation, the U.S. Bankruptcy Code, as amended.

b."Senior Credit Agreement" means that certain Credit Agreement, dated as of July 24, 2013, by and between Maker, Salus Capital Partners, LLC, in its capacity as Administrative Agent and Lender, and the other Lenders party thereto (as such terms are defined therein), as amended, restated, extended, increased, consented to, waived or modified from time to time provided that no such amendment, restatement, extension, increase, consent, waiver or modification, directly or indirectly, imposes any additional limitation, prohibition or restriction (which was not in existence as of the date hereof) on Maker to pay amounts outstanding under this Note or otherwise comply herewith.

c."Senior Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under (i) the Senior Credit Agreement or any of the Loan Documents (as such term is defined in the Senior Credit Agreement as in effect on the date hereof) with, to or in favor of Administrative Agent and the other Lenders party thereto, or any of their permitted successors and assigns (collectively, "Senior Lender"), including, without limitation, all amendments, restatements, refinancings and extensions thereof and (ii) the Master Agreement between Maker and EPK Financial Corporation, dated as of July 24, 2013 (the "KTC Master Agreement") or any Confirmation (as defined in such KTC Master Agreement) or other agreement furnished in connection with the KTC Master Agreement.

d."Subordinated Indebtedness" means any and all principal and interest of Maker, at any time outstanding under this Note.

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9.Subordination.  Notwithstanding anything in this Note or any other agreement referred to herein to the contrary, all obligations and liabilities of Maker to Licensor under this Note are subordinated in right of payment to the prior and complete payment in full of all Senior Indebtedness (other than contingent obligations not due and owing and letters of credit cash collateralized or otherwise backstopped in accordance with the terms of the Senior Credit Agreement) and the termination of all commitments of Senior Lender thereunder as provided herein; provided, however, that until such time as a Stop Notice is issued and existing, subject to the Payment Conditions requirements set forth in Paragraphs 1 and 3 hereof, Maker may make and Licensor may accept all payments and prepayments of principal and accrued interest under this Note.  Notwithstanding anything to the contrary contained in this Note, (a) Maker shall not make any payment (whether of principal or accrued interest) of, on, with respect to the Subordinated Indebtedness, after receiving written notice (a "Stop Notice") from Senior Lender that an Event of Default (as defined in the Senior Credit Agreement (as in effect on the date hereof)) in the Senior Indebtedness has occurred and is continuing, and Licensor shall not accept any such payment until the earlier of (i) the Senior Indebtedness (other than contingent obligations not due and owing and letters of credit cash collateralized or otherwise backstopped in accordance with the terms of the Senior Credit Agreement) has been paid in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated and (ii) the cure of such Event of Default or the waiver thereof by Senior Lender, and (b) no collateral security or guarantee of any nature to secure, guarantee or pay the Subordinated Indebtedness shall be made or given, directly or indirectly, by Maker or any affiliate of Maker or received, accepted, retained or applied by Licensor (and no right or remedy of Licensorwith respect to any of the foregoing may be exercised) unless and until all Senior Indebtedness (other than contingent obligations and letters of credit cash collateralized or otherwise backstopped in accordance with the terms of the Senior Credit Agreement) has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  A Stop Notice shall remain in effect so long as an Event of Default (as defined in the Senior Credit Agreement) in the Senior Indebtedness continues.  Upon the issuance and continuation of a Stop Notice (and delivery of a copy by Senior Lender of such Stop Notice to Licensor), Licensorwaives, and agrees not to exercise, any and all rights of setoff that it may now or hereafter have against the property or assets of Maker solely in respect of the Subordinated Indebtedness, unless and until all of the Senior Indebtedness (other than contingent obligations not due and owing and letters of credit cash collateralized or otherwise backstopped in accordance with the terms of the Senior Credit Agreement) has been paid in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated or suchunderlying Event of Default no longer exists.  Furthermore, any payments received by Licensor in violation of this Note shall be held for the benefit of the Senior Lender, andLicensor hereby agrees that it shall promptly (as and when received) turn over any and all such payments to the Senior Lender.  All subordination provisions of this Note shall be automatically reinstated if at any time payment of any of the Senior Indebtedness, in whole or in part, is rescinded or must otherwise be restored or refunded by Senior Lender as a preference, fraudulentconveyance or otherwise under any Bankruptcy Law or otherwise, all as though such payment had not been made.  Maker and Licensor agree that any other promissory note, document or agreement evidencing the Subordinated Indebtedness shall expressly incorporate by reference all subordination provisions of this Note.

10.Reserved.

11.Reserved.

12.Waivers by Licensor.  Licensor waives any right to require Senior Lender to:  (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Maker or any other person, or otherwise comply with the provisions of Section 9.504 of the Texas or other applicable Uniform Commercial Code; or (c) pursue any other remedy in Senior Lender's power.  Licensor waives notice of acceptance of this Note and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration of any Senior Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Senior Indebtedness, and agrees that Senior Lender may, once or any number of times, modify the terms of any Senior Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Senior Indebtedness, or permit Maker to incur additional Senior Indebtedness, all without notice to Licensor and without affecting in any manner the unconditional obligations of Licensor to Senior Lender under this Note.

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13.Restricted Modification.  Maker and Licensor hereby acknowledge and agree that Senior Lender is a third party beneficiary of Paragraphs 8, 9, 12 and 13 of this Note.  Furthermore, Maker andLicensor agree that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder: (i) the principal amount of this Note may not be increased (other than by accrued interest); (ii) the interest rate set forth in this Note may not be increased except as set forth in Paragraph 2; (iii) the subordination terms of this Note may not be amended in a manner adverse to the Senior Lender; (iv) the Note may not be secured by a lien or grant of a security interest of any kind or nature; and (v) the maturity date hereof may not be shortened, in each case described in the foregoing clauses (i) through (v), without the prior written approval of Senior Lender.

14.Termination of Senior Indebtedness.  Upon payment and performance in full of the Senior Indebtedness and termination of all commitments of Senior Lender thereunder, all provisions of this Note relating to and/or running in favor of or agreed to for the benefit of Senior Lender and/or the Senior Indebtedness shall immediately terminate and be of no further force and effect.

15.Credit Agreement and Business Plan.  True, correct and complete copies of each of the Business Plan and the Credit Agreement as in effect on the date hereof (including all attachments, exhibits and schedules thereto) have been delivered by Maker to Licensor.

16.Financial Reporting.  Maker shall provide to Licensor copies of the following contemporaneously upon receipt from or delivery to, as applicable, Senior Lender: (a) the annual and monthly financial statements provided to Senior Lender pursuant to Section 6.01 of the Senior Credit Agreement and Compliance Certificates (as defined in the Senior Credit Agreement) provided in connection therewith, (ii) notices of default and events of default under the Senior Credit Agreement, (iii) in connection with any payment or prepayment hereunder, calculations set forth in reasonable detail demonstrating the satisfaction of the Payment Conditions given to Senior Lender, and (iv) any updates to the Business Plan given to Senior Lender.

[Signature Page Follows]

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MAKER:

TANDY BRANDS ACCESSORIES, INC., a Delaware corporation

By:

Name:

Title:

Signature Page to Subordinated Promissory Note

(ISOTONER Corporation)

EX-4.17

Exhibit 4.17 and 10.40

SUBORDINATED PROMISSORY NOTE

$856,254.30 dated as of July __, 2013

For value received, Tandy Brands Accessories, Inc., a Delaware corporation ("Maker") does hereby promise to pay to the order of Ocean Ken International Limited ('"Vendor"), at such address as Vendor may notify Maker from time to time, in legal and lawful money of the United States of America, the sum of $856,254.30, together with interest from the date hereof on the principal balance outstanding from time to time as hereinafter provided.  Interest shall be computed on a per annum basis of a year of 365 days or 366 days in a leap year, as the case may be.

1.Payment Terms.  Subject to Paragraph 9 hereof, principal and accrued interest shall be due and payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2014 and continuing regularly and semi-annually thereafter until paid in full (each such payment date, a "Payment Date"); provided that if on any Payment Date the applicable Payment Conditions (as defined below) set forth in clause (IV) are not then satisfied then the principal payment then due shall be deferred to the next Payment Date.  Subject to Paragraph 3, all principal and interest shall be paid in equal installments so as to amortize all outstanding amounts existing at such time over a twenty-four (24) month period (the "Amortization Schedule"); provided that subject to the proviso set forth above and the subordination provisions set forth in Paragraph 9 hereof, the entire amount hereof, principal and interest then remaining unpaid, shall be then due and payable in full on the two (2) year anniversary date of this Subordinated Promissory Note (this "Note").

As used herein, "Payment Conditions" shall mean the following:  (x) Maker shall be in compliance with the covenant set forth in Section 7.17 of the Senior Credit Agreement, and (y)

(I)   for any payments to be made hereunder on any date during the period commencing July 12, 2013 and ending August 16, 2013, (a) for the twenty (20) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability (as defined in the Senior Credit Agreement) shall be not less than $4,000,000, and (b) for the five (5) day period immediately preceding any such date, average Availability shall be not less than fifteen percent (15%) of Maximum Revolving Loan Amount (as defined in the Senior Credit Agreement);

(II)   for any payments to be made hereunder on any date during the period commencing August 17, 2013 and ending September 20, 2013, (a) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability shall be not less than $4,000,000, (b) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan (as defined in the Senior Credit Agreement), (c) Availability, as tested from the Closing Date (as defined in the Senior Credit

Agreement) shall not be less than fifteen percent (15%) of the Maximum Revolving Loan Amount, (d) sales of Inventory of Maker, as tested for the immediately preceding month prior to such date, are within thirteen percent (13%) of the projected amount of such sales as set forth in the Business Plan, and (e) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan;

(III)   for any payments to be made hereunder on any date during the period commencing September 21, 2013 and ending October 25, 2013, (a) sales of Inventory of Maker, as tested for the immediately preceding two months prior to such date, are within twelve percent (12%) of the projected amount of such sales as set forth in the Business Plan, (b) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan, (c) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan, and (d) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount; and

(IV)   for any payments to be made on any date (including any Payment Date) thereafter (a) sales of Inventory of Maker, as tested on a rolling three month basis as of the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan; (b) accounts payable of the Maker, as tested for the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan; (c) Availability, as tested for the immediately preceding month prior to the applicable Payment Date, is within ten percent (10%) of projected Availability as set forth in the Business Plan; and (d) for the thirty (30) day period immediately preceding any such Payment Date, and on a projected basis for the thirty (30) day period immediately succeeding any such Payment Date after giving effect to the applicable payment made on such Payment Date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount.

2.Interest Rate.  Interest shall be calculated on the unpaid principal each day principal is outstanding and all payments made credited to the discharge of the interest accrued and to the reduction of the principal, in such order as Vendor shall determine.  As of the date of this Note, interest on the outstanding and unpaid principal balance hereof shall be computed at a per annum rate equal to the lesser of (a) six percent (6.00%) per annum or (b) the highest rate permitted by applicable law, but in no event shall interest contracted for, charged or received hereunder plus any other charges in connection herewith which constitute interest exceed the maximum interest permitted by applicable law, said rate to be effective prior to maturity.

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3.Prepayment.  Subject to Paragraph 9, Maker reserves the right to prepay, prior to maturity, all or any part of the principal and interest of this Note without penalty; provided that Maker shall be permitted to make any such payment only if the Payment Conditions are satisfied at the time of such prepayment.  Any prepayments shall be applied first to accrued interest and then to principal.  Maker will provide written notice to Vendor of any such prepayment at the time thereof.  All payments and prepayments of principal or interest on this Note shall be made in lawful money of the United States of America in immediately available funds at such place as Vendor shall designate from time to time.  All partial prepayments of principal shall be applied to the principal repayment installments thereof on a pro rata basis.  Upon any such prepayment, the Amortization Schedule shall be revised to reflect such prepayment and the current outstanding amount of the Note.

4.Default.  It is expressly provided that upon the failure of Maker to pay any amount due under this Note within ten (10) days after the same becomes due and payable and after written notice is given to Maker by Vendor demanding payment thereof, unless such payment is prohibited by the terms of the Senior Indebtedness or otherwise hereunder, Vendor may, at its option, pursue any rights, remedies and recourses available to Vendor at law or in equity, subject to Paragraph 9 hereof.

5.No Usury Intended.  In no event shall interest contracted for, charged or received hereunder, plus any other charges in connection herewith which constitute interest, exceed the maximum interest permitted by applicable law.

6.Unsecured.  This Note is not, and shall not at any time be secured.

7.Governing Law, Venue.  This Note is being executed and delivered, and is intended to be performed in the State of Texas.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

8.Subordination Definitions.  As used herein, the following terms shall have the following meanings:

a."Bankruptcy Law" means any bankruptcy, insolvency, reorganization, moratorium, receivership or similar law generally affecting creditors' rights, including, without limitation, the U.S. Bankruptcy Code, as amended.

b."Senior Credit Agreement" means that certain Credit Agreement, of even date herewith, by and between Maker, Salus Capital Partners, LLC, in its capacity as Administrative Agent and Lender, and the other Lenders party thereto (as such terms are defined therein), as amended, restated, extended, increased, consented to, waived or modified from time to time.

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c."Senior Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under (i) the Senior Credit Agreement or any of the Loan Documents (as such term is defined in the Senior Credit Agreement) with, to or in favor of Administrative Agent and the other Lenders party thereto, or any of their permitted successors and assigns (collectively, "Senior Lender"), including, without limitation, all amendments, restatements, refinancings and extensions thereof and (ii) the Master Agreement between Maker and EPK Financial Corporation, dated as of even date herewith (the "KTC Master Agreement") or any Confirmation (as defined in such KTC Master Agreement) or other agreement furnished in connection with the KTC Master Agreement.

d."Subordinated Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under this Note or any related agreement, document or instrument with, to or in favor of Vendor.

9.Subordination.  Notwithstanding anything in this Note or any other agreement referred to herein to the contrary, all obligations and liabilities of Maker to Vendor under this Note are subordinated in right of payment to the prior and complete payment in full of all Senior Indebtedness and the termination of all commitments of Senior Lender thereunder as provided herein; provided, however, that until such time as a Stop Notice is issued and existing, subject to the Payment Conditions requirements set forth in Paragraphs 1 and 3 hereof, Maker may make and Vendor may accept all payments and prepayments of principal and accrued interest under this Note.  Notwithstanding anything to the contrary contained in this Note, (a) Maker shall not make any payment (whether of principal, accrued interest or otherwise) of, on, with respect to the Subordinated Indebtedness, after receiving notice (a "Stop Notice") from Senior Lender that a default in the Senior Indebtedness has occurred, and Vendor shall not accept any such payment until the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated, and (b) no property or collateral security or guarantee of any nature to secure, guarantee or pay the Subordinated Indebtedness shall be made or given, directly or indirectly, by Maker or any affiliate of Maker or received, accepted, retained or applied by Vendor (and no right or remedy of Vendor with respect to any of the foregoing may be exercised) unless and until all Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  A Stop Notice shall remain in effect so long as a default in the Senior Indebtedness continues.  Upon the issuance and continuation of a Stop Notice, Vendor waives, and agrees not to exercise, any and all rights of setoff that it may now or hereafter have against the property or assets of Maker, unless and until all of the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  Furthermore, any payments received by Vendor in violation of this Note shall be held in trust for the benefit of the Senior Lender, and Vendor hereby agrees that it shall promptly (as and when received) turn over any and all such payments to the Senior Lender.  All subordination provisions of this Note shall continue to be effective after payment of the Subordinated Indebtedness, and also shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment of any of the Senior Indebtedness, in whole or in part, is rescinded or must otherwise be restored or refunded by Senior Lender as a preference,

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fraudulent conveyance or otherwise under any Bankruptcy Law or otherwise, all as though such payment had not been made.  Maker and Vendor agree that any other promissory note, document or agreement evidencing any Subordinated Indebtedness shall expressly incorporate by reference all subordination provisions of this Note.

10.Senior Lender Lien on Collateral.  Vendor authorizes and empowers Senior Lender, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, to demand, enforce payment by legal proceedings, receive and give acquittances for the Subordinated Indebtedness and to exercise all rights (if any) of Vendor in any security (other than a deed of trust, mortgage or security interest covering real property or a principal dwelling) now or later held for the Subordinated Indebtedness.  Vendor agrees that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, Vendor will not accept any collateral or security in support of the Subordinated Indebtedness.  As a precaution, Vendor hereby pledges, assigns and grants to Senior Lender, as collateral for the Senior Indebtedness, a security interest in any collateral or other security (other than a deed of trust. mortgage or security interest covering real property or a principal dwelling) which Vendor may be granted in support of the Subordinated Indebtedness, and all claims or demands of Vendor in connection with any such collateral or other security, with full right on the part of Senior Lender, in its own name or in the name of Vendor, to collect and enforce these claims or demands, by suit, proof of debt in bankruptcy, or in any other proceeding involving dissolution, insolvency, liquidation or an adjustment of the indebtedness of Maker.  Senior Lender has no obligation to Vendor to take any steps with regard to these claims or demands or any collateral or other security for the Subordinated Indebtedness.

11.UCC Rights; Etc.  Vendor agrees to execute all financing statements deemed necessary by Senior Lender to perfect the Senior Lender's rights and interests under Paragraph 10 of this Note.  Senior Lender is to have all the rights and remedies of a secured creditor under the Texas Uniform Commercial Code, as amended from time to time, with respect to such interests.  "Uniform Commercial Code" means the Texas Business and Commerce Code.

12.Waivers by Vendor.  Vendor waives any right to require Senior Lender to:  (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Maker or any other person, or otherwise comply with the provisions of Section 9.504 of the Texas or other applicable Uniform Commercial Code; or (c) pursue any other remedy in Senior Lender's power.  Vendor waives notice of acceptance of this Note and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration of any Senior Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Senior Indebtedness, and agrees that Senior Lender may, once or any number of times, modify the terms of any Senior Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Senior Indebtedness, or permit Maker to incur additional Senior Indebtedness, all without notice to Vendor and without affecting in any manner the unconditional obligations of Vendor to Senior Lender under this Note.

13.Restricted Modification.  Maker and Vendor hereby acknowledge and agree that Senior Lender is a third party beneficiary of Paragraphs 8, 9, 10, 11, 12 and 13 of this Note.  

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Furthermore, Maker and Vendor agree that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, the amount, interest rate, payment and subordination terms of this Note, the unsecured nature of this Note, and the maturity date hereof may not be shortened, extended, modified or otherwise amended without the prior written approval of Senior Lender.

14.Termination of Senior Indebtedness.  Upon payment and performance in full of the Senior Indebtedness and termination of all commitments of Senior Lender thereunder, all provisions of this Note relating to and/or running in favor of or agreed to for the benefit of Senior Lender and/or the Senior Indebtedness shall immediately terminate and be of no further force and effect.

MAKER:

TANDY BRANDS ACCESSORIES, INC.,

a Delaware corporation

By:

Name:

Title:

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EX-4.18

Exhibit 4.18 and 10.41

SUBORDINATED PROMISSORY NOTE

$1,206,030.03 dated as of July __, 2013

For value received, Tandy Brands Accessories, Inc., a Delaware corporation ("Maker") does hereby promise to pay to the order of Ample Sources Industries Limited ("Vendor"), at such address as Vendor may notify Maker from time to time, in legal and lawful money of the United States of America, the sum of $1,206,030.03, together with interest from the date hereof on the principal balance outstanding from time to time as hereinafter provided.  Interest shall be computed on a per annum basis of a year of 365 days or 366 days in a leap year, as the case may be.

1.Payment Terms.  Subject to Paragraph 9 hereof, principal and accrued interest shall be due and payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2014 and continuing regularly and semi-annually thereafter until paid in full (each such payment date, a "Payment Date"); provided that if on any Payment Date the applicable Payment Conditions (as defined below) are not then satisfied then the principal payment then due shall be deferred to the next Payment Date.  Subject to Paragraph 3, all principal and interest shall be paid in equal installments so as to amortize all outstanding amounts existing at such time over a twenty-four (24) month period (the "Amortization Schedule"); provided that subject to the proviso set forth above and the subordination provisions set forth in Paragraph 9 hereof, the entire amount hereof, principal and interest then remaining unpaid, shall be then due and payable in full on the two (2) year anniversary date of this Subordinated Promissory Note (this "Note").

As used herein, "Payment Conditions" shall mean the following:  (x) Maker shall be in compliance with the covenant set forth in Section 7.17 of the Senior Credit Agreement, and (y)

(I)   for any payments to be made hereunder on any date during the period commencing July 12, 2013 and ending August 16, 2013, (a) for the twenty (20) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability (as defined in the Senior Credit Agreement) shall be not less than $4,000,000, and (b) for the five (5) day period immediately preceding any such date, average Availability shall be not less than fifteen percent (15%) of Maximum Revolving Loan Amount (as defined in the Senior Credit Agreement);

(II)   for any payments to be made hereunder on any date during the period commencing August 17, 2013 and ending September 20, 2013, (a) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability shall be not less than $4,000,000, (b) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan (as defined in the Senior Credit Agreement), (c) Availability, as tested from the Closing Date (as defined in the Senior Credit Agreement) shall not be less than fifteen percent (15%) of the Maximum

Revolving Loan Amount, (d) sales of Inventory of Maker, as tested for the immediately preceding month prior to such date, are within thirteen percent (13%) of the projected amount of such sales as set forth in the Business Plan, and (e) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan;

(III)   for any payments to be made hereunder on any date during the period commencing September 21, 2013 and ending October 25, 2013, (a) sales of Inventory of Maker, as tested for the immediately preceding two months prior to such date, are within twelve percent (12%) of the projected amount of such sales as set forth in the Business Plan, (b) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan, (c) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan, and (d) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount; and

(IV)   for any payments to be made on any date (including any Payment Date) thereafter (a) sales of Inventory of Maker, as tested on a rolling three month basis as of the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan; (b) accounts payable of the Maker, as tested for the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan; (c) Availability, as tested for the immediately preceding month prior to the applicable Payment Date, is within ten percent (10%) of projected Availability as set forth in the Business Plan; and (d) for the thirty (30) day period immediately preceding any such Payment Date, and on a projected basis for the thirty (30) day period immediately succeeding any such Payment Date after giving effect to the applicable payment made on such Payment Date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount.

2.Interest Rate.  Interest shall be calculated on the unpaid principal each day principal is outstanding and all payments made credited to the discharge of the interest accrued and to the reduction of the principal, in such order as Vendor shall determine.  As of the date of this Note, interest on the outstanding and unpaid principal balance hereof shall be computed at a per annum rate equal to the lesser of (a) six percent (6.00%) per annum or (b) the highest rate permitted by applicable law, but in no event shall interest contracted for, charged or received hereunder plus any other charges in connection herewith which constitute interest exceed the maximum interest permitted by applicable law, said rate to be effective prior to maturity.

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3.Prepayment.  Subject to Paragraph 9, Maker reserves the right to prepay, prior to maturity, all or any part of the principal and interest of this Note without penalty; provided that Maker shall be permitted to make any such payment only if the Payment Conditions are satisfied at the time of such prepayment.  Maker will use its best efforts to make a prepayment of $126,909.19 in cash as soon as possible (21 days after closing our Senior Credit Agreement (as defined in the Note)) but not later than October 31, 2013.  Any prepayments shall be applied first to accrued interest and then to principal.  Maker will provide written notice to Vendor of any such prepayment at the time thereof.  All payments and prepayments of principal or interest on this Note shall be made in lawful money of the United States of America in immediately available funds at such place as Vendor shall designate from time to time.  All partial prepayments of principal shall be applied to the principal repayment installments thereof on a pro rata basis.  Upon any such prepayment the Amortization Schedule shall be revised to reflect such prepayment and the current outstanding amount of the Note.

4.Default.  It is expressly provided that upon the failure of Maker to pay any amount due under this Note within ten (10) days after the same becomes due and payable and after written notice is given to Maker by Vendor demanding payment thereof, unless such payment is prohibited by the terms of the Senior Indebtedness or otherwise hereunder, Vendor may, at its option, pursue any rights, remedies and recourses available to Vendor at law or in equity, subject to Paragraph 9 hereof. 

5.No Usury Intended.  In no event shall interest contracted for, charged or received hereunder, plus any other charges in connection herewith which constitute interest, exceed the maximum interest permitted by applicable law.

6.Unsecured.  This Note is not, and shall not at any time be secured.

7.Governing Law, Venue.  This Note is being executed and delivered, and is intended to be performed in the State of Texas.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

8.Subordination Definitions.  As used herein, the following terms shall have the following meanings:

a."Bankruptcy Law" means any bankruptcy, insolvency, reorganization, moratorium, receivership or similar law generally affecting creditors' rights, including, without limitation, the U.S. Bankruptcy Code, as amended.

b."Senior Credit Agreement" means that certain Credit Agreement, of even date herewith, by and between Maker, Salus Capital Partners, LLC, in its capacity as Administrative Agent and Lender, and the other Lenders party thereto (as such terms are defined therein), as amended, restated, extended, increased, consented to, waived or modified from time to time.

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c."Senior Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under:  (i) the Senior Credit Agreement or any of the Loan Documents (as such term is defined in the Senior Credit Agreement) with, to or in favor of Administrative Agent and the other Lenders party thereto, or any of their permitted successors and assigns (collectively, "Senior Lender"), including, without limitation, all amendments, restatements, refinancings and extensions thereof and (ii) the Master Agreement between Maker and EPK Financial Corporation, dated as of even date herewith (the "KTC Master Agreement") or any Confirmation (as defined in such KTC Master Agreement) or other agreement furnished in connection with the KTC Master Agreement

d."Subordinated Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under this Note or any related agreement, document or instrument with, to or in favor of Vendor.

9.Subordination.  Notwithstanding anything in this Note or any other agreement referred to herein to the contrary, all obligations and liabilities of Maker to Vendor under this Note are subordinated in right of payment to the prior and complete payment in full of all Senior Indebtedness and the termination of all commitments of Senior Lender thereunder as provided herein; provided, however, that until such time as a Stop Notice is issued and existing, subject to the Payment Conditions requirements set forth in Paragraphs 1 and 3 hereof, Maker may make and Vendor may accept all payments and prepayments of principal and accrued interest under this Note.  Notwithstanding anything to the contrary contained in this Note, (a) Maker shall not make any payment (whether of principal, accrued interest or otherwise) of, on, with respect to the Subordinated Indebtedness, after receiving notice (a "Stop Notice") from Senior Lender that a default in the Senior Indebtedness has occurred, and Vendor shall not accept any such payment until the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated, and (b) no property or collateral security or guarantee of any nature to secure, guarantee or pay the Subordinated Indebtedness shall be made or given, directly or indirectly, by Maker or any affiliate of Maker or received, accepted, retained or applied by Vendor (and no right or remedy of Vendor with respect to any of the foregoing may be exercised) unless and until all Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  A Stop Notice shall remain in effect so long as a default in the Senior Indebtedness continues.  Upon the issuance and continuation of a Stop Notice, Vendor waives, and agrees not to exercise, any and all rights of setoff that it may now or hereafter have against the property or assets of Maker, unless and until all of the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated. Furthermore, any payments received by Vendor in violation of this Note shall be held in trust for the benefit of the Senior Lender, and Vendor hereby agrees that it shall promptly (as and when received) turn over any and all such payments to the Senior Lender. All subordination provisions of this Note shall continue to be effective after payment of the Subordinated Indebtedness, and also shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment of any of the Senior Indebtedness, in whole or in part, is rescinded or must otherwise be restored or refunded by Senior Lender as a preference, fraudulent conveyance or otherwise under any Bankruptcy Law or otherwise, all as though such

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payment had not been made.  Maker and Vendor agree that any other promissory note, document or agreement evidencing any Subordinated Indebtedness shall expressly incorporate by reference all subordination provisions of this Note.

10.Senior Lender Lien on Collateral.  Vendor authorizes and empowers Senior Lender, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, to demand, enforce payment by legal proceedings, receive and give acquittances for the Subordinated Indebtedness and to exercise all rights (if any) of Vendor in any security (other than a deed of trust, mortgage or security interest covering real property or a principal dwelling) now or later held for the Subordinated Indebtedness.  Vendor agrees that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, Vendor will not accept any collateral or security in support of the Subordinated Indebtedness. As a precaution,  Vendor hereby pledges, assigns and grants to Senior Lender, as collateral for the Senior Indebtedness, a security interest in any collateral or other security (other than a deed of trust, mortgage or security interest covering real property or a principal dwelling) which Vendor may be granted in support of the Subordinated Indebtedness, and all claims or demands of Vendor in connection with any such collateral or other security, with full right on the part of Senior Lender, in its own name or in the name of Vendor, to collect and enforce these claims or demands, by suit, proof of debt in bankruptcy, or in any other proceeding involving dissolution, insolvency, liquidation or an adjustment of the indebtedness of Maker.  Senior Lender has no obligation to Vendor to take any steps with regard to these claims or demands or any collateral or other security for the Subordinated Indebtedness.

11.UCC Rights; Etc.  Vendor agrees to execute all financing statements deemed necessary by Senior Lender to perfect the Senior Lender's rights and interests under Paragraph 10 of this Note.  Senior Lender is to have all the rights and remedies of a secured creditor under the Texas Uniform Commercial Code, as amended from time to time, with respect to such interests.  "Uniform Commercial Code" means the Texas Business and Commerce Code.

12.Waivers by Vendor.  Vendor waives any right to require Senior Lender to:  (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Maker or any other person, or otherwise comply with the provisions of Section 9.504 of the Texas or other applicable Uniform Commercial Code; or (c) pursue any other remedy in Senior Lender's power.  Vendor waives notice of acceptance of this Note and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration of any Senior Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Senior Indebtedness, and agrees that Senior Lender may, once or any number of times, modify the terms of any Senior Indebtedness, compromise, extend increase, accelerate, renew or forbear to enforce payment of any or all Senior Indebtedness, or permit Maker to incur additional Senior Indebtedness, all without notice to Vendor and without affecting in any manner the unconditional obligations of Vendor to Senior Lender under this Note.

13.Restricted Modification.  Maker and Vendor hereby acknowledge and agree that Senior Lender is a third party beneficiary of Paragraphs 8, 9, 10, 11, 12 and 13 of this Note.  Furthermore, Maker and Vendor agree that, so long as any Senior Indebtedness is outstanding or

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Senior Lender has any commitment thereunder, the amount, interest rate, payment and subordination terms of this Note, the unsecured nature of this Note, and the maturity date hereof may not be shortened, extended, modified or otherwise amended without the prior written approval of Senior Lender.

14.Termination of Senior Indebtedness.  Upon payment and performance in full of the Senior Indebtedness and termination of all commitments of Senior Lender thereunder, all provisions of this Note relating to and/or running in favor of or agreed to for the benefit of Senior Lender and/or the Senior Indebtedness shall immediately terminate and be of no further force and effect.

MAKER:

TANDY BRANDS ACCESSORIES, INC.,

a Delaware corporation

By:

Name:

Title:

6

EX-4.19

Exhibit 4.19 and 10.42

SUBORDINATED PROMISSORY NOTE

USD $5,389,821.80 dated as of July __, 2013

For value received, Tandy Brands Accessories, Inc., a Delaware corporation ("Maker") does hereby promise to pay to the order of Best Development Company (Hong Kong) Limited ("Vendor"), at such address as Vendor may notify Maker from time to time, in legal and lawful money of the United States of America, the sum of $5,389,821.80, together with interest from the date hereof on the principal balance outstanding from time to time as hereinafter provided.  Interest shall be computed on a per annum basis of a year of 365 days or 366 days in a leap year, as the case may be.

1.Payment Terms.  Subject to Paragraph 9 hereof, principal and accrued interest shall be due and payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2014 and continuing regularly and semi-annually thereafter until paid in full (each such payment date, a "Payment Date"); provided that if on any Payment Date the applicable Payment Conditions (as defined below) are not then satisfied then the principal payment then due shall be deferred to the next Payment Date.  Subject to Paragraph 3, all principal and interest shall be paid in equal installments so as to amortize all outstanding amounts existing at such time over a twenty-four (24) month period (the "Amortization Schedule"); provided that subject to the proviso set forth above and the subordination provisions set forth in Paragraph 9 hereof, the entire amount hereof, principal and interest then remaining unpaid, shall be then due and payable in full on the two (2) year anniversary date of this Subordinated Promissory Note (this "Note").

As used herein, "Payment Conditions" shall mean the following:  (x) Maker shall be in compliance with the covenant set forth in Section 7.17 of the Senior Credit Agreement, and (y)

(I)   for any payments to be made hereunder on any date during the period commencing July 12, 2013 and ending August 17, 2013, (a) for the twenty (20) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability (as defined in the Senior Credit Agreement) shall be not less than $4,000,000, and (b) for the five (5) day period immediately preceding any such date, average Availability shall be not less than fifteen percent (15%) of Maximum Revolving Loan Amount (as defined in the Senior Credit Agreement);

(II)   for any payments to be made hereunder on any date during the period commencing August 17, 2013 and ending September 20, 2013, (a) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, Availability shall be not less than $4,000,000, (b) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan (as defined in the Senior Credit Agreement), (c) Availability, as tested from the Closing Date (as defined in the Senior Credit Agreement) shall not be less than fifteen percent (15%) of the Maximum

Revolving Loan Amount, (d) sales of Inventory of Maker, as tested for the immediately preceding month prior to such date, are within thirteen percent (13%) of the projected amount of such sales as set forth in the Business Plan, and (e) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan;

(III)   for any payments to be made hereunder on any date during the period commencing September 21, 2013 and ending October 25, 2013, (a) sales of Inventory of Maker, as tested for the immediately preceding two months prior to such date, are within twelve percent (12%) of the projected amount of such sales as set forth in the Business Plan, (b) accounts payable of the Maker, as tested for the immediately preceding month prior to such date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan, (c) Availability, as tested for the immediately preceding month prior to such date, is within ten percent (10%) of projected Availability as set forth in the Business Plan, and (d) for the thirty (30) day period immediately preceding any such date, and on a projected basis for the thirty (30) day period immediately succeeding any such date after giving effect to the applicable payment made on such date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount; and

(IV)   for any payments to be made on any date (including any Payment Date) thereafter (a) sales of Inventory of Maker, as tested on a rolling three month basis as of the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such sales as set forth in the Business Plan; (b) accounts payable of the Maker, as tested for the immediately preceding month prior to the applicable Payment Date, are within ten percent (10%) of the projected amount of such accounts payable as set forth in the Business Plan; (c) Availability, as tested for the immediately preceding month prior to the applicable Payment Date, is within ten percent (10%) of projected Availability as set forth in the Business Plan; and (d) for the thirty (30) day period immediately preceding any such Payment Date, and on a projected basis for the thirty (30) day period immediately succeeding any such Payment Date after giving effect to the applicable payment made on such Payment Date, average Availability shall be not less than fifteen percent (15%) of the Maximum Revolving Loan Amount.

2.Interest Rate.  Interest shall be calculated on the unpaid principal each day principal is outstanding and all payments made credited to the discharge of the interest accrued and to the reduction of the principal, in such order as Vendor shall determine.  As of the date of this Note, interest on the outstanding and unpaid principal balance hereof shall be computed at a per annum rate equal to the lesser of (a) six percent (6.00%) per annum or (b) the highest rate permitted by applicable law, but in no event shall interest contracted for, charged or received hereunder plus any other charges in connection herewith which constitute interest exceed the maximum interest permitted by applicable law, said rate to be effective prior to maturity.

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3.Prepayment.  Subject to Paragraph 9, Maker reserves the right to prepay, prior to maturity, all or any part of the principal and interest of this Note without penalty; provided that Maker shall be permitted to make any such payment only if the Payment Conditions are satisfied at the time of such prepayment.  Any prepayments shall be applied first to accrued interest and then to principal.  Maker will provide written notice to Vendor of any such prepayment at the time thereof.  All payments and prepayments of principal or interest on this Note shall be made in lawful money of the United States of America in immediately available funds at such place as Vendor shall designate from time to time.  All partial prepayments of principal shall be applied to the principal repayment installments thereof on a pro rata basis.  Upon any such prepayment, the Amortization Schedule shall be revised to reflect such prepayment and the current outstanding amount of the Note.

4.Default.  It is expressly provided that upon the failure of Maker to pay any amount due under this Note within ten (10) days after the same becomes due and payable and after written notice is given to Maker by Vendor demanding payment thereof, unless such payment is prohibited by the terms of the Senior Indebtedness or otherwise hereunder, Vendor may, at its option, pursue any rights, remedies and recourses available to Vendor at law or in equity, subject to Paragraph 9 hereof.

5.No Usury Intended.  In no event shall interest contracted for, charged or received hereunder, plus any other charges in connection herewith which constitute interest, exceed the maximum interest permitted by applicable law.

6.Unsecured.  This Note is not, and shall not at any time be secured.

7.Governing Law, Venue.  This Note is being executed and delivered, and is intended to be performed in the State of Texas.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

8.Subordination Definitions.  As used herein, the following terms shall have the following meanings:

a."Bankruptcy Law" means any bankruptcy, insolvency, reorganization, moratorium, receivership or similar law generally affecting creditors' rights, including, without limitation, the U.S. Bankruptcy Code, as amended.

b."Senior Credit Agreement" means that certain Credit Agreement, of even date herewith, by and between Maker, Salus Capital Partners, LLC, in its capacity as Administrative Agent and Lender, and the other Lenders party thereto (as such terms are defined therein), as amended, restated, extended, increased, consented to, waived or modified from time to time.

c."Senior Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under:  (i) the

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Senior Credit Agreement or any of the Loan Documents (as such term is defined in the Senior Credit Agreement) with, to or in favor of Administrative Agent and the other Lenders party thereto, or any of their permitted successors and assigns (collectively, "Senior Lender"), including, without limitation, all amendments, restatements, refinancings and extensions thereof and (ii) the Master Agreement between Maker and EPK Financial Corporation, dated as of even date herewith (the "KTC Master Agreement") or any Confirmation (as defined in such KTC Master Agreement) or other agreement furnished in connection with the KTC Master Agreement

d."Subordinated Indebtedness" means any and all indebtedness, liabilities and obligations of Maker, whether or not contingent, at any time outstanding under this Note or any related agreement, document or instrument with, to or in favor of Vendor.

9.Subordination.  Notwithstanding anything in this Note or any other agreement referred to herein to the contrary, all obligations and liabilities of Maker to Vendor under this Note are subordinated in right of payment to the prior and complete payment in full of all Senior Indebtedness and the termination of all commitments of Senior Lender thereunder as provided herein; provided, however, that until such time as a Stop Notice is issued and existing, subject to the Payment Conditions requirements set forth in Paragraphs 1 and 3 hereof, Maker may make and Vendor may accept all payments and prepayments of principal and accrued interest under this Note.  Notwithstanding anything to the contrary contained in this Note, (a) Maker shall not make any payment (whether of principal, accrued interest or otherwise) of, on, with respect to the Subordinated Indebtedness, after receiving notice (a "Stop Notice") from Senior Lender that a default in the Senior Indebtedness has occurred, and Vendor shall not accept any such payment until the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated, and (b) no property or collateral security or guarantee of any nature to secure, guarantee or pay the Subordinated Indebtedness shall be made or given, directly or indirectly, by Maker or any affiliate of Maker or received, accepted, retained or applied by Vendor (and no right or remedy of Vendor with respect to any of the foregoing may be exercised) unless and until all Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  A Stop Notice shall remain in effect so long as a default in the Senior Indebtedness continues.  Upon the issuance and continuation of a Stop Notice, Vendor waives, and agrees not to exercise, any and all rights of setoff that it may now or hereafter have against the property or assets of Maker, unless and until all of the Senior Indebtedness has been paid and performed in full (whether or not the same are then due or payable) and all commitments of Senior Lender thereunder have been terminated.  Furthermore, any payments received by Vendor in violation of this Note shall be held in trust for the benefit of the Senior Lender, and Vendor hereby agrees that it shall promptly (as and when received) turn over any and all such payments to the Senior Lender.  All subordination provisions of this Note shall continue to be effective after payment of the Subordinated Indebtedness, and also shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment of any of the Senior Indebtedness, in whole or in part, is rescinded or must otherwise be restored or refunded by Senior Lender as a preference, fraudulent conveyance or otherwise under any Bankruptcy Law or otherwise, all as though such payment had not been made.  Maker and Vendor agree that any other promissory note, document

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or agreement evidencing any Subordinated Indebtedness shall expressly incorporate by reference all subordination provisions of this Note.

10.Senior Lender Lien on Collateral.  Vendor authorizes and empowers Senior Lender, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, to demand, enforce payment by legal proceedings, receive and give acquittances for the Subordinated Indebtedness and to exercise all rights (if any) of Vendor in any security (other than a deed of trust, mortgage or security interest covering real property or a principal dwelling) now or later held for the Subordinated Indebtedness.  Vendor agrees that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, Vendor will not accept any collateral or security in support of the Subordinated Indebtedness.  As a precaution, Vendor hereby pledges, assigns and grants to Senior Lender, as collateral for the Senior Indebtedness, a security interest in any collateral or other security (other than a deed of trust, mortgage or security interest covering real property or a principal dwelling) which Vendor may be granted in support of the Subordinated Indebtedness, and all claims or demands of Vendor in connection with any such collateral or other security, with full right on the part of Senior Lender, in its own name or in the name of Vendor, to collect and enforce these claims or demands, by suit, proof of debt in bankruptcy, or in any other proceeding involving dissolution, insolvency, liquidation or an adjustment of the indebtedness of Maker.  Senior Lender has no obligation to Vendor to take any steps with regard to these claims or demands or any collateral or other security for the Subordinated Indebtedness.

11.UCC Rights; Etc.  Vendor agrees to execute all financing statements deemed necessary by Senior Lender to perfect the Senior Lender's rights and interests under Paragraph 10 of this Note.  Senior Lender is to have all the rights and remedies of a secured creditor under the Texas Uniform Commercial Code, as amended from time to time, with respect to such interests.  "Uniform Commercial Code" means the Texas Business and Commerce Code.

12.Waivers by Vendor.  Vendor waives any right to require Senior Lender to:  (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Maker or any other person, or otherwise comply with the provisions of Section 9.504 of the Texas or other applicable Uniform Commercial Code; or (c) pursue any other remedy in Senior Lender's power.  Vendor waives notice of acceptance of this Note and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration of any Senior Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Senior Indebtedness, and agrees that Senior Lender may, once or any number of times, modify the terms of any Senior Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Senior Indebtedness, or permit Maker to incur additional Senior Indebtedness, all without notice to Vendor and without affecting in any manner the unconditional obligations of Vendor to Senior Lender under this Note.

13.Restricted Modification.  Maker and Vendor hereby acknowledge and agree that Senior Lender is a third party beneficiary of Paragraphs 8, 9, 10, 11, 12 and 13 of this Note.  Furthermore, Maker and Vendor agree that, so long as any Senior Indebtedness is outstanding or Senior Lender has any commitment thereunder, the amount, interest rate, payment and

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subordination terms of this Note, the unsecured nature of this Note, and the maturity date hereof may not be shortened, extended, modified or otherwise amended without the prior written approval of Senior Lender.

14.Termination of Senior Indebtedness.  Upon payment and performance in full of the Senior Indebtedness and termination of all commitments of Senior Lender thereunder, all provisions of this Note relating to and/or running in favor of or agreed to for the benefit of Senior Lender and/or the Senior Indebtedness shall immediately terminate and be of no further force and effect.

MAKER:

TANDY BRANDS ACCESSORIES, INC.,

a Delaware corporation

By:

Name:

Title:

6

EX-4.20

Exhibit 4.20 and 10.43

AMENDMENT NO. 1 TO CREDIT AGREEMENT

This Amendment No. 1 to Credit Agreement (this “Agreement”) is dated as of September 26, 2013, between TANDY BRANDS ACCESSORIES, INC., a Delaware corporation (“Borrower”), the Persons named on Schedule 1.01 to the Credit Agreement (defined below)(collectively, the “Guarantors”), each Lender (as defined in the Credit Agreement) from time to time party to the Credit Agreement, and SALUS CAPITAL PARTNERS, LLC, a Delaware limited liability company, as  a lender, Administrative Agent and Collateral Agent (“Agent”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Loan Documents (defined below).

R E C I T A L S:

A.Borrower, for itself as a borrower under and for the other obligors thereunder (collectively with Borrower, the “Obligors”), Agent and Lenders are parties to that certain to Credit Agreement, dated as of July 24, 2013 (the “Credit Agreement”).

B.In connection with the Credit Agreement, Obligors executed and delivered, or caused to be executed and delivered to or for the benefit of the Agent and each Lender certain other Loan Documents, including, but not limited to, deposit account control agreements, consents, assignments, security agreements, pledge agreements, agreements, instruments, guarantees and financing statements in connection with the indebtedness referred to in the Credit Agreement (all of the foregoing, together with the Credit Agreement, are hereinafter collectively referred to as the “Loan Documents”).

C.On September 24, 2013, Borrower delivered to Agent a revised thirteen week budget reflecting the Borrower’s updated forecasts for the period covered thereby (“Budget”).

D.Pursuant to a certain letter dated August 29, 2013 (“First ROR Letter”), Agent informed Borrower that (i) it was in the process of reviewing the contents and disclosures contained in Borrower’s Compliance Certificate dated August 27, 2013, including, but not limited to, evaluating whether one or more defaults and Events of Default then existed, and (ii) pending completion of Agent’s review, the First ROR Letter served as notice to Borrowers that Agent and Lenders expressly reserved all of their rights, remedies, powers, and privileges pursuant to the Credit Agreement and the Loan Documents, and applicable Law, including, but not limited to, with respect to any defaults or Events of Default that may then exist (collectively, the “First Reservations”).

E. Pursuant to a certain letter dated September 9, 2013 (“Second ROR Letter”, and collectively with the First ROR Letter, the “Reservation Letters”)), Agent informed Borrower that (i) it was in the process of reviewing the contents and disclosures contained in Borrower’s Compliance Certificate dated September 6, 2013, including, but not limited to, evaluating whether one or more defaults and Events of Default then existed, and (ii) pending completion of Agent’s review, the Second ROR Letter served as notice to Borrowers that Agent and Lenders expressly reserved all of their rights, remedies, powers, and privileges pursuant to the Credit Agreement and the Loan Documents, and applicable Law, including, but not limited to, with respect to any defaults or Events of Default that may then exist (the “Second Reservations”, and collectively with the First Reservations the “Reservations”).

F.Notwithstanding the disclosures contained in Borrower’s Compliance Certificates dated August 27, 2013, September 6, 2013, September 10, 2013, September 18, 2013 and September 25, 2013, respectively (the “Compliance Certificates”), Borrower and the other Obligors have requested that Agent and Lenders agree to amend the Credit

amendment no. 1 to credit Agreement

Page 1 of 10

Agreement and Loan Documents, where applicable, and to forbear from exercising certain remedies available to Agent and Lenders under the Credit Agreement and other Loan Documents, and to continue to make extensions of credit to Borrower pursuant to the Credit Agreement, on the terms and subject to satisfaction of the conditions set forth in the Credit Agreement and this Agreement, respectively.

NOW, THEREFORE, in consideration of the foregoing premises, which are hereby incorporated into and made a part of this Agreement, the covenants and agreements hereinafter set forth, the sum of TEN and NO/100 DOLLARS ($10.00) cash in hand paid, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned, intending to be legally bound, does hereby agree as follows:

1.Definitions.  All capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Loan Documents.

2.Acknowledgements and Stipulations. In order to induce Agent and Lenders to enter into this Agreement, Borrower acknowledges, stipulates and agrees that:

a)each of the Recitals contained at the beginning of this Agreement is true and correct;

b)as of the close of business on September 25, 2013, the aggregate principal balance outstanding under the Credit Agreement totaled $14,876,168.06, plus accrued and/or accruing interest, costs fees, attorneys’ fees and other Credit Party Expenses under the Loan Documents;

c)all of the Loans and other Obligations are absolutely due and owing by Obligors to Lenders without any defense, deduction, offset or counterclaim (and, to the extent any Obligor had any defense, deduction, offset or counterclaim on the date hereof, the same is hereby waived by each such Obligor);

d)the Loan Documents executed by Borrower and the other Obligors are legal, valid and binding obligations enforceable against Borrower and the other Obligors in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and general principles of equity (whether considered in an action of law or in equity);

e)the liens granted by Borrower and the other Obligors to Lender in the Collateral are valid and duly perfected, first-priority liens, subject only to Permitted Liens; and

f)prior to executing this Agreement, Borrower consulted with and had the benefit of advice of legal counsel of its own selection and has relied upon the advice of such counsel, and in no part upon the representation of Agent or any Lender, or any counsel or advisor to Agent or any Lender, concerning the legal effects of this Agreement or any provision hereof.

3.Amendments to Credit Agreement.

a)Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions:

“’Amendment Effective Date’ means the date of execution and delivery of Amendment No. to Credit Agreement, dated as of September 26, 2013.”

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Page 2 of 10

b)Section 1.01 of the Credit Agreement shall be amended by deleting the definition of “Material Contract” in its entirety and by substituting the following in its stead”

“Material Contract” means with respect to any Person, each contract to which such Person is a party involving aggregate consideration payable to or by such Person of $500,000 or more in any fiscal year or otherwise material to the business, condition (financial or otherwise), operations, performance or properties of such Person, or with respect to the Borrower, otherwise designated as such by the Administrative Agent and the Borrower; provided that the KTC Financing Documents and the Licensor/Vendor Subordinated Notes shall at all times be considered Material Contracts, regardless of the amount thereof.”

c)Section 6.01 of the Credit Agreement shall be amended by deleting clause (a) thereof in its entirety and by substituting the following in its stead:

“(a)           as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Borrower, a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and, except as set forth below, shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit; provided that, for the Fiscal Year ended June 30, 2013, the requirements set forth above with respect to the opinion of a Registered Public Accounting Firm that such opinion shall not be subject to any “going concern” or like qualification or exception shall not apply;”

d)Section 6.02(a) of the Credit Agreement shall be amended by deleting clause (a) thereof in its entirety and by substituting the following in its stead:

“(a)           concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary for their certification of such financial statements, such Registered Public Accounting Firm has not obtained any knowledge of the existence of any Default or Event of Default under the financial covenants set forth herein or, if any such Default or Event of Default shall exist, stating the nature and status of such event; provided that, for the financial statements required under Section 6.01(a) for the  Fiscal Year ended June 30, 2013, the requirements set forth above with respect to the certificate of its Registered Public Accounting Firm that has not obtained any knowledge of the existence of any Default or Event of Default under the financial covenants set forth herein or, if any such Default or Event of Default shall exist, stating the nature and status of such event shall not apply;”

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c)The Credit Agreement shall be amended by inserting the following new Section:

“7.21           Compliance with Budget.  Borrower’s:

(i)           revenues shall not be less than 90% of the projected 13-week rolling cash flow amounts set forth in the Budget;

(ii)           accounts receivable collections shall not be less than 90% of the projected 13-week rolling cash flow amounts set forth in the Budget;

(iii)           net operating cash flow shall not be less than 90% of the projected 13-week rolling cash flow amounts set forth in the Budget;

(iv)           actual expenses and cash expenditures, each shall not be greater than 110%  of the aggregate projected amounts set forth in the Budget;

(v)           Availability shall not be less than 90% of the projected 13-week rolling cash flow amounts set forth in the Budget;

(vi)           the ratio of accounts payable to Eligible Inventory shall not be greater than 0.25:1.00 on a weekly basis.

The foregoing shall be tested on a rolling 3-week basis commencing on Wednesday of the third (3rd) week after the Amendment Effective Date, and continuing each week thereafter following the Amendment Effective Date. Commencing on the first Wednesday after the Amendment Effective Date, and continuing each week thereafter, the Borrower shall provide the Agent with a weekly variance report, which variance report shall be prepared on both a weekly and a cumulative basis.”

4.Amendment to Fee Letter. Paragraph 3(b) of the Fee Letter shall be deleted in its entirety and the following shall be substituted in its place:

“Monitoring Fee. In addition to any other fee to be paid by the Borrower hereunder, as of the Closing Date, the Agent has earned in full, and the Borrower shall pay to the Agent, for its own account, a collateral monitoring fee in the amount of $340,000 (the "Collateral Monitoring Fee"). The Collateral Monitoring Fee payable pursuant to this Section 3(b) shall be fully earned on the Closing Date. The Collateral Monitoring Fee shall be paid in monthly installments commencing on the Closing Date, and thereafter, on the first business day after the end of each month in the following amounts:

1)    months prior to October 2013, the sum of $20,000 per month; and

2)   commencing October 2013 through the Termination Date, the sum of $30,000 per month.

Any unpaid balance of the Collateral Monitoring Fee outstanding on the Termination Date shall be paid on the Termination Date.”

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5.Expenses of Lender; Lender Consultant; Appraisal.

a)Borrower agrees to pay, on demand, all reasonable costs and expenses incurred by Agent and any Lender in connection with the preparation, negotiation and execution of this Agreement and any other Loan Documents executed pursuant hereto and any and all Agreements, modifications, and supplements to the Credit Agreement, including, without limitation, the reasonable fees of Agent and Lenders’ legal counsel and any taxes (other than Agent and/or Lenders’ income taxes) or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby.  Borrower acknowledges that Agent and each Lender may charge any and all such fees, costs and expenses to Borrower’s loan account in accordance with the Credit Agreement, and Agent and Lenders agree to promptly provide all invoices to Borrower related to such fees, costs and expenses after charging the loan account therefor.

b)Borrower acknowledges that Agent has engaged Consilium Advisors, LLC as Agent’s consultant to, inter alia, conduct evaluations of Borrower’s business, forecasts and cash flows, and further that the costs and expenses of such consulting services shall constitute Credit Party Expenses under the Credit Agreement. In accordance with the Credit Agreement, Borrower shall cooperate with Agent’s consultant in connection with any access and/or information or other requests it may present.

6.Licensor Consents.  Not later than 30 days after the Amendment Effective Date, the Agent shall have received licensor consent agreements with respect to each of the license agreements set forth on Schedule 4.01 of the Credit Agreement (to the extent not previously provided), which consents shall be in form satisfactory to the Agent, in its exclusive discretion, and which shall provide, at a minimum, that the applicable licensor under each such license agreement shall provide the Agent notice of any default under, or termination of, such license agreement contemporaneously with any delivery of such notice to the applicable Loan Party thereof. In the event Borrower fails to deliver a required licensor consent by the date set forth herein, any and all inventory associated with the subject licensor shall be deemed ineligible for Borrowing Base purposes.

7.No-Waiver.  None of this Agreement, or Agent’s or Lenders’ continued making of loans or other extensions of credit at any time extended to Borrower in accordance with this Agreement, the Credit Agreement, and the Loan Documents shall be deemed a waiver of or consent to any default or Event of Default.  Borrower agrees that any such default(s) or Event(s) of Default shall not be deemed to have been waived, released or cured by virtue of Loans or other extensions of credit at any time extended to Borrower, or by the Agent’s and/or Lenders’ execution of this Agreement.  Nothing in this Agreement shall restrict Agent’s or Lenders’ ability to take or refrain from taking or exercise any right with respect to any Subordinated Indebtedness that it is otherwise entitled to take, refrain from taking or exercise, as the case may be.

8.Release of Claims. To induce Agent and each Lender to enter into this Agreement, Borrower and each Obligor hereby waives, remises, acquits, releases and forever discharges Agent and each Lender and its respective predecessors, successors, assigns, affiliates, shareholders, directors, officers, directors, accountants, attorneys, employees, agents, representatives and servants of, from and against any and all claims, actions, causes of action, suits, proceedings, contracts, judgments, damages, accounts, reckonings, executions, and liabilities whatsoever of every name and nature, whether known or unknown, whether or not well founded in fact or in law, and whether in law, or at equity, which Borrower or any Obligor ever had or now has for or by reason of any matter, cause or anything whatsoever to this date relating to or arising out of any of the Loan Documents or otherwise, including, without limitation, any actual or alleged act or omission of or on behalf of Agent and each Lender with respect to the Loan Documents and any security interest, liens or collateral in connection therewith, or the enforcement of any of Agent and Lenders’ rights or remedies thereunder.  Borrower and each Obligor represent and warrant

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to Lender that neither Borrower nor any Obligor has transferred or assigned to any person any claim that Borrower or such Obligor ever had or claimed to have against Agent or any Lender.  The terms of this Section shall survive the termination of the Loan Documents.

9.Representations and Warranties.  In consideration of the execution and delivery of this Agreement by Agent, Borrower hereby represents and warrants in favor of the Agent and each Lender as follows:

i.Borrower has the corporate power and authority (i) to enter into this Agreement and (ii) to do all acts and things as are required or contemplated hereunder to be done, observed and performed by Borrower;

ii.Borrower has the power and has taken all necessary action, corporate or otherwise, to authorize it to execute, deliver, and perform this Agreement in accordance with the terms hereof and to consummate any transactions contemplated hereby;

iii.The execution and delivery by Borrower of this Agreement and the performance of the obligations of Borrower hereunder and the consummation by Borrower of any transactions contemplated hereby: (i) are not in contravention of the terms of the organizational documents of Borrower or of any material agreement or undertaking to which Borrower is a party or by which Borrower or its property is bound; (ii) do not require the consent, registration or approval of any governmental authority or any other person (except such as have been duly obtained, made or given, and are in full force and effect and except for consents of persons (other than a governmental authority) that are not material); (iii) do not contravene in any material respect any statute, law, ordinance regulation, rule, order or other governmental restriction applicable to or binding upon Borrower; and (iv) will not result in the imposition of any liens upon any property of Borrower except Permitted Liens;

iv.This Agreement has been duly executed and delivered by Borrower and each Obligor, and is a legal, valid and binding obligation of Borrower and such Obligor, enforceable in accordance with its terms except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditor’s rights generally or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law);

v.Other than the matters addressed in the Reservation Letters and the Compliance Certificates, no default or Event of Default exists under the Credit Agreement or the other Loan Documents;

vi.Except as disclosed to the Agent prior to the Amendment Effective Date and except as would not reasonably be expected to have a Material Adverse Effect, the Loan Parties are not in breach of or in default under, in any material respect, any Material Contract (which breach or default is continuing beyond any applicable cure periods or which has not been waived) and have not received any notice of the intention of any other party thereto to terminate any Material Contract; and

vii.On and as of the date hereof, all representations and warranties of Borrower set forth in the Credit Agreement and the other Loan Documents are true, correct and complete in all respects as though made on and as of such date, except to the extent that: (i) such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true, correct and complete on and as of such earlier date); or (ii) the matters addressed in the Reservation Letters or the Compliance Certificates would render any of such representations and warranties untrue.

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10.Reaffirmation of Secured Obligations.  Borrower and each Obligor hereby ratifies and reaffirms the Loan Documents and all of its obligations and liabilities thereunder, including all of the Obligations.

11.Application of Proceeds.Borrower hereby waives the right, if any, to direct the manner in which Agent and/or any Lender applies any payments, collections or Collateral proceeds to the Obligations and agrees that Agent and Lenders may apply and reapply all such payments, collections or proceeds to the Obligations as Agent and Lenders, in their sole and absolute discretion, elect from time to time.

12.Conditions Precedent to Effectiveness.  This Agreement shall be effective as of the date first written above upon satisfaction of the following:

i.   Agent’s receipt of a counterpart hereof duly executed by Borrower; and

ii.Agent’s receipt of such other information, documents, instruments and approvals as Agent’s counsel may reasonably require.

13.Full Force and Effect; No Further Agreement.  Except as expressly set forth in this Agreement, the execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of, Agent and/or any Lender under the Credit Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Credit Agreement or any of the other Loan Documents.  Except as expressly set forth in this Agreement, the text of the Credit Agreement and all other Loan Documents shall remain unchanged and in full force and effect and Borrower hereby ratifies and confirms its obligations thereunder.  Except as expressly provided herein, this Agreement shall not constitute a modification of the Credit Agreement or any of the other Loan Documents or a course of dealing with Agent and/or any Lender at variance with the Credit Agreement or the other Loan Documents such as to require further notice by Lender to require strict compliance with the terms of the Credit Agreement and the other Loan Documents in the future, except as expressly set forth herein.  Borrower acknowledges and expressly agrees that, Agent and each Lender reserves the right to, and does in fact, require strict compliance with all terms and provisions of the Credit Agreement and the other Loan Documents, as amended herein.  Borrower does not have any knowledge of any challenge to Agent and/or any Lender’s claim(s) arising under the Loan Documents or to the effectiveness of the Loan Documents.

14.Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement.  In proving this Agreement in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought.  Any signatures delivered by a party by facsimile or other electronic method of transmission shall be deemed an original signature hereto.

15.Reference to and Effect on the Loan Documents.  Upon the effectiveness of this Agreement, on and after the date first written above, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby.

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16.No Novation, etc.  This Agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction and the Credit Agreement and the other Loan Documents shall remain in full force and effect.

17.Fraud.  Borrower represents and warrants that Borrower has not committed any act of fraud or deceit in connection with the transactions involving Lender, including, without limitation, knowingly furnishing of any materially false information, financial or non-financial, knowingly withholding of any material information, financial or non-financial, or knowingly making of any warranties or representations which are materially untrue as of the date hereof.

18.Relationship of Parties; No Third Party Beneficiaries.  Nothing in this Agreement shall be construed to alter the existing debtor-creditor relationship among Borrower, Agent and the Lenders, nor is this Agreement intended to change or affect in any way the relationship among Agent and/or any Lender and Borrower to one other than a debtor-creditor relationship.  This Agreement is not intended, nor shall it be construed, to create a partnership or joint venture relationship between or among any of the parties hereto.  No Person other than a party hereto is intended to be a beneficiary hereof and no Person other than a party hereto shall be authorized to rely upon or enforce the contents of this Agreement.

19.Section Titles.  The section titles contained in this Agreement are included for the sake of convenience only, shall be without substantive meaning or content of any kind whatsoever, and are not a part of the agreement between the parties.

20.Entire Agreement.  This Agreement and the other Loan Documents constitute the entire agreement and understanding between the parties hereto with respect to the transactions contemplated hereby and thereby and supersede all prior negotiations, understandings and agreements between such parties with respect to such transactions.

21.GOVERNING LAW.  THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

22.JURY TRIAL WAIVER.  BORROWER, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AGREEMENT IN RESPECT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER AND ANY GUARANTOR, THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWER, GUARANTORS, AGENT AND EACH LENDER EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SUCH BORROWER PARTY, AGENT AND/OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL BY JURY.

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23.Loan Document.  This Agreement shall be deemed to be a Loan Document for all purposes.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

BORROWER:
TANDY BRANDS ACCESSORIES, INC.
By:
	Name:
	Title:
AGENT/LENDER:
SALUS CAPITAL PARTNERS, LLC
By:
	Name: Kyle Shonak
	Title:   Senior Vice President-Special Opportunities

ACKNOWLEDGED AND CONSENTED TO:
H.A. SHELDON CANADA LTD.,
As a Guarantor
By:
	Name:
	Title:

TBAC INVESTMENT TRUST,
As a Guarantor
By:
	Name:
	Title:

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EX-10.33

Exhibit 10.33

NON-EMPLOYEE DIRECTOR

RESTRICTED STOCK AWARD AGREEMENT

pursuant to the

TANDY BRANDS ACCESSORIES, INC. 2012 OMNIBUS PLAN

This NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD AGREEMENT is made as of this ____ day of _____, 2013 (the "Date of Grant"), between Tandy Brands Accessories, Inc., a Delaware corporation (the "Company"), and ___________, a non-employee member of the Board of Directors of the Company ("Director"). Capitalized terms used in this Agreement shall have the meaning ascribed under the Tandy Brands Accessories, Inc. 2012 Omnibus Plan (the "Plan") unless expressly provided herein.

WITNESSETH:

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

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

1.Grant of Award.  Pursuant to the Plan, the Committee hereby grants ___________ shares of Common Stock (the "Restricted Shares") to Director to be issued as hereinafter provided in Director's name subject to certain restrictions thereon as hereinafter set forth.  Director shall not be required to pay any consideration (the "Purchase Price") to the Company for the Restricted Shares.  If the outstanding shares of Common Stock shall at any time be changed or exchanged by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares or other event described in the Plan, then the aggregate number of shares subject to this Agreement shall be automatically adjusted such that Director's proportionate interest shall be maintained as before the occurrence of such event.  The determination of any such adjustment by the Committee shall be final, binding and conclusive.

2.Issuance and Delivery of Restricted Shares.  The Restricted Shares shall be issued upon acceptance and execution hereof by Director (and, if applicable, full payment of the Purchase Price) and shall be delivered to Director upon vesting pursuant to the terms of this Agreement.  Prior to vesting, the certificates representing the Restricted Shares awarded hereunder shall be held in escrow by the Assistant Secretary of the Company as provided in Section 10.

3.Vesting of Restricted Shares.

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

(b)Notwithstanding anything to the contrary in this Agreement, 100% of the Restricted Shares shall become fully vested and shall no longer be subject to forfeiture

(i) upon the death or Total and Permanent Disability of Director during Director's term as a member of the Board; (ii) upon Director's Termination of Service as a result of not being nominated for or elected to a new term as a member of the Board; or (iii) upon Director's involuntary resignation as a member of the Board at the request and for the convenience of the Company other than for Cause.  For purposes of this Agreement, "Cause" shall mean, in the determination of the remaining members of the Board,  (i) Director's willful, material and irreparable breach of any agreement that governs the terms and conditions of his or her service to the Company; (ii) Director's breach of any fiduciary or other material duty to the Company or its stockholders; (iii) Director's gross negligence or gross incompetence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of written notice of such negligence from the Company) of any of Director's material duties and responsibilities; (iv) Director's dishonesty, fraud or willful misconduct with respect to the business or affairs of the Company or any of its subsidiaries; or (v) Director's conviction of a felony crime.

4.Forfeiture of Restricted Shares. Upon Director's Termination of Service prior to the vesting dates specified in Section 3(a) above, for any reason except as a result of (i) Director's death or Total and Permanent Disability; (ii) Director's not being nominated for or elected to a new term as a member of the Board or (iii) Director's resignation as a member of the Board at the request and for the convenience of the Company other than for Cause, all nonvested Restricted Shares held by Director shall, immediately upon the occurrence of such event, be forfeited and, except as provided in Section 5 below, no compensation or other amounts shall be paid to Director with respect thereto.  Such forfeited Restricted Shares shall cease to be outstanding and shall no longer confer on Director any rights as a stockholder with respect to the forfeited Restricted Shares as of the date of forfeiture and upon such forfeiture, Director shall cease to have any further rights or claims with respect to such forfeited Restricted Shares.

5.Repurchase of Shares in Case of Forfeiture.

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

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

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

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

6.Restrictions on Transfer.

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

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

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

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

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

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

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

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

On the face of the certificate:

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

On the reverse:

"The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Tandy Brands Accessories, Inc. 2012 Omnibus Plan, a copy of which is on file at the principal office of the Company in Dallas, Texas.  No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan."

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

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

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

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

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10.Escrow.

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

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

(1)As the interest of Director in the Restricted Shares (or any other assets and securities issued with respect thereto) vests in accordance with Section 3, the certificates for such vested shares (as well as all other assets and securities issued with respect thereto) shall be released from escrow and delivered to Director within five (5) business days following the date such Restricted Shares become so vested.

(2)Upon Director's Termination of Service (as defined in the Plan), any escrowed Restricted Shares (or other assets and securities issued with respect thereto) in which Director is at the time vested shall be promptly released from escrow.

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

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11.Section 83(b) Election.  Director understands that under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the Fair Market Value of the Restricted Shares on the date any forfeiture restrictions applicable to such Restricted Shares lapse, less the Purchase Price paid, if any, will be reportable as ordinary income at that time.  Director understands that Director may, instead, elect to be taxed at the time the Restricted Shares are issued hereunder.  By filing an election under Section 83(b) of the Code with the I.R.S. within thirty (30) days after the Date of Grant, the Fair Market Value of the Restricted Shares on the Date of Grant, less the Purchase Price, if any, will be reportable as ordinary income as of the Date of Grant.  Director understands that it may be advisable to file such election even if the Fair Market Value of the Restricted Shares at the Date of Grant equals the Purchase Price paid (and thus no tax is payable).  The form for making this election is attached as Exhibit B hereto.  Director understands that failure to make this filing within the 30-day period will result in the recognition of additional ordinary income by Director (in the event the Fair Market Value of the Restricted Shares increases after the Date of Grant) as the forfeiture restrictions lapse.  DIRECTOR ACKNOWLEDGES THAT IT IS DIRECTOR'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF DIRECTOR REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON DIRECTOR'S BEHALF.  DIRECTOR IS RELYING SOLELY ON DIRECTOR'S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE AN 83(b) ELECTION AND NOT ON THE REPRESENTATIONS OF THE COMPANY OR ANY OF ITS EMPLOYEES OR AGENTS.  DIRECTOR AGREES TO PROVIDE THE COMPANY A COPY OF ANY 83(b) ELECTION FILED WITH RESPECT TO THE RESTRICTED SHARES ISSUED UNDER THIS AGREEMENT.

12.Miscellaneous Provisions.

(a)Director Undertaking.  Director hereby agrees to take whatever additional action and execute whatever additional documents the Committee or the Company may in its judgment deem necessary or advisable in order to carry out or effect the express provisions of the Plan and this Agreement.

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

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

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

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

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

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

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

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

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

(k)Notice.  Any notice relating to this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the Company at its main office at 3631 West Davis Street, Suite A, Dallas, Texas 75211 or to such other address as may be hereafter specified by the Company, to the attention of the Company's Assistant Secretary.  All notices to Director shall be delivered to Director at Director's address specified below or to such other address as may be hereafter specified by Director.

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

              (m) No Fractional Shares. No fractional shares shall be issued or delivered pursuant to this Agreement.  If this Award becomes vested with respect to a fractional share, such installment will instead be rounded to the next highest whole number of shares, except for the final installment, which will be for the balance of the total shares subject to the Award.  If the final installment results in a fractional share, the Committee shall determine, in its sole discretion, whether cash, other securities or other property shall be paid or transferred in lieu of any such fractional shares or whether such fractional shares or any rights thereto shall be cancelled, terminated or otherwise eliminated.

-7-

IN CONSIDERATION FOR THE FOREGOING, the Company and Director hereby agree to be bound by the terms of this Agreement and cause these presents to be duly executed effective as of the Date of Grant.

Agreed and Accepted:

TANDY BRANDS ACCESSORIES, INC.

By:

Name:

Title:

DIRECTOR1

Address:

____________________________ 

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

-8-

EXHIBIT A

ASSIGNMENT SEPARATE FROM CERTIFICATE

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

Dated:_________________________________
(Signature)	(Signature of Spouse, if any)
(Print Name)	(Print Name)

EXHIBIT B

FORM OF 83(B) ELECTION

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

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

Name of Taxpayer:
Address of Taxpayer:
Taxpayer's ID No.:
Taxable Year:	Calendar Year ______________

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

(3)The property was issued on _____________, 2013.

(4)The property is subject to forfeiture if the undersigned taxpayer's provision of services to the Company is terminated under certain circumstances.  The forfeiture restrictions lapse in a series of installments over a three-year period ending on ___________, 2016.

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

(6)The amount paid for such property is $0.00 per share.

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

(8)This statement is executed as of: ____________________, 2013.

Taxpayer

(Signature)

(Print Name)

CONSENT OF SPOUSE

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

Dated:  _________________

Spouse of Director

(Signature)

(Print Name)

EX-21.1

Exhibit 21.1

List of Subsidiaries

State Or Other Jurisdiction Of	Names Under Which
Subsidiaries Of The Registrant	Incorporation Or Organization	Subsidiaries Do Business
H.A. Sheldon Canada, Ltd.	Ontario, Canada	1088258 Ontario, Inc.
		H.A. Sheldon Canada, Ltd.
TBAC Investment Trust	Pennsylvania	TBAC Investment Trust
Tandy Brands Accessories Handbags, Inc.	Delaware	Tandy Brands Accessories
		Handbags, Inc.
TBAC - Torel, Inc.	Delaware	TBAC - Torel, Inc.
Maquiladora Chambers de Mexico, S.A de C.V.	Sonora, Mexico	Maquiladora Chambers de Mexico, S.A. de C.V.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated September 27, 2013, with respect to the consolidated financial statements included in the Annual Report of Tandy Brands Accessories, Inc. on Form 10-K for the year ended June 30, 2013.  We hereby consent to the incorporation by reference of said report in the Registration Statements of Tandy Brands Accessories, Inc. on Forms S-8 (File Nos. 333-189737, 33-41262, 33-75114, 333-08579, 333-42211, 333-94251, 333-38526, 333-88276, and 333-105294).

 /s/ GRANT THORNTON LLP

Dallas, Texas

September 27, 2013

EX-31.1

Exhibit 31.1

Certification Pursuant To

Rule 13a-14(a)/15d-14(a)

(Principal Executive Officer)

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Roger R. Hemminghaus, certify that:

1. I have reviewed this annual report on Form 10-K of Tandy Brands Accessories, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 27, 2013	/s/ Roger R. Hemminghaus
	Roger R. Hemminghaus Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a)/15d-14(a)

(Principal Financial Officer)

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Joseph C. Talley, certify that:

1. I have reviewed this annual report on Form 10-K of Tandy Brands Accessories, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 27, 2013	/s/ Joseph C. Talley
	Joseph C. Talley Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

Section 1350 Certification

(Principal Executive Officer and Principal Financial Officer)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Tandy Brands Accessories, Inc. (the “Company”) for the fiscal year ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Roger R. Hemminghaus and Joseph C. Talley, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 27, 2013	/s/ Roger R. Hemminghaus
	Roger R. Hemminghaus Chief Executive Officer (Principal Executive Officer)
	/s/ Joseph C. Talley
	Joseph C. Talley Chief Financial Officer (Principal Financial Officer)

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Note 11 - Director Stock Deferral Plan

12 Months Ended

Jun. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 11 - Director Stock Deferral Plan

The 1995 Stock Deferral Plan for Non-Employee Directors (“Deferral Plan”) provides non-employee directors with an opportunity to defer receipt of their fees until a future date determined by each director.  We record compensation expense for the amount of the deferred fees which are credited, together with dividend equivalents, to an account we maintain in phantom stock units equivalent in value to our common stock.  The payment of deferred fees will be settled in shares of our common stock or, at our option, in cash based on the then current market price of our stock.  No director is currently deferring fees and changes in the market value of our common stock affected the value of previously deferred amounts by ($20,000) and ($15,000) in fiscal 2013 and 2012, respectively.  At June 30, 2013, there were 28,375 shares of common stock available for settlement of future deferrals.

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Note 10 - Employee Benefit Plans (Details) (401 (k) Plan [Member], USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	35.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount (in Dollars)	$ 291,000	$ 347,000
First [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	3.00%
Next [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	2.00%
Safe Harbor Match [Member]
Note 10 - Employee Benefit Plans (Details) [Line Items]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	4.00%

XML

Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net sales	$ 114,010	$ 117,601
Cost of goods sold	81,825	79,718
Inventory write-down	7,158
	88,983	79,718
Gross margin	25,027	37,883
Selling, general and administrative expenses	34,758	37,742
Depreciation and amortization	1,818	2,205
Intangibles and held for sale impairment	3,011
Restructuring charges	3,072
Total operating expenses	42,659	39,947
Operating loss	(17,632)	(2,064)
Interest expense	(1,741)	(1,159)
Other expense	(107)	(44)
Loss before income taxes	(19,480)	(3,267)
Income tax (benefit) expense	(303)	385
Net loss	(19,177)	(3,652)
Other comprehensive loss:
Currency translation adjustments	(170)	(399)
Total comprehensive loss	$ (19,347)	$ (4,051)
Loss per share:
Basic (in Dollars per share)	$ (2.69)	$ (0.52)
Diluted (in Dollars per share)	$ (2.69)	$ (0.52)
Weighted average common shares outstanding:
Basic (in Shares)	7,131	7,075
Diluted (in Shares)	7,131	7,075

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Note 4 - Credit Facility

12 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 4 - Credit Facility

Our previous $35 million credit facility for borrowings and letters of credit was set to expire in August 2015 and bore interest at either the daily three-month LIBOR rate plus 3.75% or a fixed LIBOR rate for three months plus 3.75%.  The facility was amended various times in fiscal 2013 to waive our failure to satisfy a fixed charge coverage ratio covenant for certain months, eliminate the ratio covenant going forward, adjust the minimum excess availability requirement, extend the time period required to deliver certain post-close deliverables and title matters related to real property, to modify certain definitions used in the credit agreement, and to extend the deadline to pay the indebtedness in full or raise additional cash equity.  At June 30, 2013, we had outstanding letters of credit totaling $230,000 and $9.1 million outstanding borrowings under the facility.  In order to provide higher borrowing capacity so that we could fund our inventory purchases for holiday 2013, the facility was terminated on July 24, 2013 and all borrowings were paid and obligations were fulfilled.

Effective July 24, 2013, we along with our subsidiaries, (1) H. A. Sheldon Canada, Ltd. (“HA Sheldon”) and (2) TBAC Investment Trust, a Pennsylvania business trust (“TBAC Trust”), each as guarantors, entered into a new credit agreement (the “Credit Agreement”) with Salus Capital Partners, LLC, as lender, administrative agent and collateral agent (“Salus”).  The Credit Agreement provides for senior financing in an aggregate principal amount of up to $29.0 million at any one time outstanding.  The facility is comprised of a revolving credit facility in the amount of $27.5 million and a first-in, last-out term loan facility in the amount of $1.5 million, and expires in July 2015 (the “Credit Facility”).  Under the Credit Facility, borrowings bear interest at either 0.75% per annum or the rate per annum for LIBOR as published for an interest period of thirty days, plus (i) 8.50% with respect to the revolver, and (ii) 11.25% with respect to the term loan.

The Credit Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by a first priority lien on substantially all of our assets, excluding certain goods and related accounts receivable financed pursuant to the King Trade Facility (see “King Trade Facility” below), for which Salus will have a second priority lien.  The Credit Facility contains covenants which establish minimum consolidated EBITDA requirements, account concentration limitations, budgeted expenses and accounts payable to inventory ratios.  The Credit Facility also permits Salus, as agent, to establish reserves with respect to inventory, availability, real estate and accounts receivable in determining the borrowing base under the Credit Agreement.  The borrowing base is generally determined by calculating (i) the cost of eligible finished goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible finished goods, plus (ii) the lesser of (a) the cost of eligible piece goods inventory, net of reserves, multiplied by the product of the applicable appraisal percentage multiplied by the appraised value of eligible piece goods inventory, or (b) the costs of eligible piece goods inventory, net of reserves, multiplied by the applicable advance rate , plus (iii) the applicable receivables advance rate multiplied by the face amount of eligible trade receivables, net of applicable reserves, plus (iv) the applicable real estate advance rate multiplied by the appraised value of eligible real estate.  The following amounts are then subtracted from that calculation: the reserve for the term loan, an availability block of $900,000, and the amount of any other availability reserves deemed applicable by the agent in certain circumstances.

The Credit Agreement contains customary representations and warranties and, pursuant to the Credit Agreement, we have agreed to certain customary affirmative covenants, including reporting requirements, insurance maintenance requirements, engagement of a financial advisor, compliance with laws and the maintenance of records.  The Credit Agreement provides for certain fees in connection with unused commitments and early termination of the agreement, as well as other fees.  The Credit Agreement also contains customary negative covenants which limit our ability to engage in certain actions without the lender’s consent, including creating additional liens on its properties, making certain investments, guaranteeing or incurring certain debt, repurchasing our common stock, entering into certain mergers or consolidations, paying dividends, making certain investments in other entities, prepaying debt, and making certain property transfers.  The Credit Agreement also provides for customary events of default.

Effective July 24, 2013, we also entered into a Master Agreement (“Master Agreement”) with EPK Financial Corporation, d/b/a King Trade Capital (“King Trade”) that provides for a purchase and sale facility (the “King Trade Facility”).  This facility provides us with additional financing to purchase certain inventory related to our holiday 2013 seasonal gifts business.

In order to receive financing under the King Trade Facility, we must present the transaction to King Trade for its consideration.  King Trade reserves the right to accept or reject proposed transactions.  The King Trade Facility is guaranteed by HA Sheldon and TBAC Trust and is secured by (i) a first priority lien on the goods and related accounts receivable financed by the Company under the King Trade Facility, and (ii) a second priority lien on substantially all of our other assets.

The Master Agreement contains representations and warranties and covenants that are customary for such financing arrangements.  The maximum aggregate amount permitted to be outstanding under the King Trade Facility is $11.5 million, unless King Trade otherwise agrees.  The amounts payable under the King Trade Facility bear interest at varying rates which depend primarily on the length of time such amounts are outstanding, the amount advanced for each transaction and the aggregate of all amounts advanced.

Interest expense includes interest incurred on our outstanding borrowings, amortization of costs incurred in connection with our credit facilities over the periods of the facilities (2013 - $389,000; 2012 - $196,000).  At June 30, 2013, the remaining debt costs to be amortized were $323,000.

In connection with our new facilities, we incurred $1.3 million in debt costs which will be amortized over the terms of each of the facilities.

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Note 5 - Disclosures About Segments Of Our Business And Related Information: (Tables)

12 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	2013			2012
Net sales:
Accessories	$	77,073		$	86,188
Gifts		36,937			31,413
	$	114,010		$	117,601
Segment operating income (loss):
Accessories (1)	$	9,356		$	17,710
Gifts (2)		(972	)		3,010
	$	8,384		$	20,720
Selling, general and administrative expenses		(18,115	)		(20,579	)
Restructuring charges		(3,072	)		-
Depreciation and amortization		(1,818	)		(2,205	)
Intangibles and held for sale impairment		(3,011	)		-
Operating loss	$	(17,632	)	$	(2,064	)

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	2013		2012
Net sales:
United States	$	105,037	$	107,108
Canada		8,973		10,493
	$	114,010	$	117,601
Property and equipment:
United States	$	3,668	$	4,425
Canada		77		97
Mexico		628		952
	$	4,373	$	5,474
Total assets:
United States	$	28,148	$	47,880
Canada		3,637		5,157
Mexico		3,391		3,419
	$	35,176	$	56,456

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Note 13 - Loss Per Share (Details) - Summary of potentially dilutive securities which could have had an antidilutive effect on our earnings (losses): (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options (exercise prices per share: 2013 - $1.40 to $15.60; 2012 - $1.98 to $15.60)	$ 132	$ 277

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Note 12 - Preferred Stock

12 Months Ended

Jun. 30, 2013

Disclosure Text Block Supplement [Abstract]

Preferred Stock [Text Block]

Note 12 - Preferred Stock

Without any further action by the holders of our common stock, our board of directors is authorized to approve and determine the issuance of preferred stock, as well as the dividend rights, dividend rate, conversion or exchange rights, voting rights, rights and terms of redemption, liquidation preferences and sinking fund terms of any series of preferred stock, the number of shares constituting any series of preferred stock and the designation thereof.  No shares of preferred stock have been issued.  Should preferred stock be issued, the rights, preferences, and privileges of holders of our common stock would be made subject to the rights, preferences, and privileges of the preferred stock.

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Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to intangible assets: (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to intangible assets: [Line Items]
	$ 1,100	$ 4,115
Allocated Business Combination Costs [Member]
Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to intangible assets: [Line Items]
Gross carrying amount	10,665	10,665
Accumulated amortization	$ (9,565)	$ (6,550)

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Note 13 - Loss Per Share (Details) - Summary of potentially dilutive securities which could have had an antidilutive effect on our earnings (losses): (Parentheticals) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Minimum [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, exercise prices per share (in Dollars per share)	$ 1.40	$ 1.98
Maximum [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, exercise prices per share (in Dollars per share)	$ 15.60	$ 15.60

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Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) - Summary of operating information by segment and reconciliation of segment income to consolidated operating income: (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2013		Jun. 30, 2012
Net sales:
Net Sales			$ 114,010		$ 117,601
Segment operating income (loss):
Selling, general and administrative expenses			(18,115)		(20,579)
Restructuring charges	(497)	(2,575)	(3,072)
Depreciation and amortization			(1,818)		(2,205)
Intangibles and held for sale impairment			(3,011)
Operating loss			(17,632)		(2,064)
Accessories [Member]
Net sales:
Net Sales			77,073		86,188
Segment operating income (loss):
Segment Income			9,356	[1]	17,710	[1]
Intangibles and held for sale impairment			(2,300)
Gifts [Member]
Net sales:
Net Sales			36,937		31,413
Segment operating income (loss):
Segment Income			(972)	[2]	3,010	[2]
Income (Loss) [Member]
Segment operating income (loss):
Segment Income			$ 8,384		$ 20,720

[1] Accessories' segment income for fiscal 2013 includes inventory write-downs of $5.4 million.

[2] Gifts' segment income for fiscal 2013 includes inventory write-downs of $1.8 million.

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Note 8 - Intangibles (Tables)

12 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Allocated Business Acquisition Cost Allocated to Intangible Assets [Table Text Block]

	2013			2012
Gross carrying amount	$	10,665		$	10,665
Accumulated amortization		(9,565	)		(6,550	)
	$	1,100		$	4,115

	Net Balance		Weighted-Average Life Remaining
Customer lists	$	841		2.9
Trade brand		259		2.8
Total	$	1,100		2.9

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Note 7 - Income Taxes (Tables)

12 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2013			2012
Net operating loss carryover	$	24,532		$	19,643
Inventory valuation		2,533			1,688
Uncertain tax positions		1,174			1,147
Compensation plans		332			486
Depreciation		152			94
Accounts receivable valuation		554			932
Other, net		1,910			638
		31,187			24,628
Valuation allowance		(30,841	)		(24,486	)
Net	$	346		$	142

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2013			2012
Current:
Federal	$	-		$	-
State		25			79
Foreign		(142	)		32
		(117	)		111
Deferred:
Federal		(5,719	)		(938	)
State		(531	)		(83	)
Foreign		(318	)		(188	)
Uncertain tax positions		27			147
Valuation allowance		6,355			1,336
		(186	)		274
	$	(303	)	$	385

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2013			2012
Statutory rate		(34.0	)%		(34.0	)%
Deferred tax valuation allowance		32.6			40.9
State and foreign taxes net of federal tax benefit		(1.0	)		(5.1	)
Uncertain tax positions		0.1			4.5
Repatriation of foreign earnings		-			3.3
Other, net		0.7			2.2
		(1.6	)%		11.8	%

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	2013			2012
Unrecognized tax benefits:
Beginning of year	$	1,477		$	1,530
Decreases in prior years' tax positions		(72	)		(53	)
End of year		1,405			1,477
Accrued interest and penalties		1,920			1,819
Uncertain tax positions liability	$	3,325		$	3,296
Unrecognized tax benefits affecting tax rate if recognized	$	927		$	975
Interest and penalty expense	$	101		$	200

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Note 7 - Income Taxes (Details) - Unrecognized tax benefits of uncertain tax positions: (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Unrecognized tax benefits:
Beginning of year	$ 1,477	$ 1,530
Decreases in prior years' tax positions	(72)	(53)
End of year	1,405	1,477
Accrued interest and penalties	1,920	1,819
Uncertain tax positions liability	3,325	3,296
Unrecognized tax benefits affecting tax rate if recognized	927	975
Interest and penalty expense	$ 101	$ 200

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Note 3 - Significant Events (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Jun. 30, 2013		Jun. 30, 2012		Aug. 25, 2011
Note 3 - Significant Events (Details) [Line Items]
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent			33.00%
Other Restructuring Costs		$ 110,000	$ 13,700,000
Future Cash Expenditures Resulting from Restructuring Costs, Approximate Amount			3,100,000
Inventory Write-down (in Dollars)			7,158,000
Inventories Impacted by Write-Down, Amount			1,100,000
Gross Profit			25,027,000		37,883,000
Asset Impairment Charges	400,000
Selling, General and Administrative Expense			34,758,000		37,742,000
Other Investments					597,000
Lease Termination Costs		39,000
Severance Costs		73,000
Provision for Doubtful Accounts		900,000	174,000		802,000
Debt Instrument, Face Amount					35,000,000		27,500,000
Related Party Transaction, Amounts of Transaction			3,400,000		4,300,000
Related Party Transaction, Due from (to) Related Party			922,000		290,000
Underperforming Products [Member]
Note 3 - Significant Events (Details) [Line Items]
Revenues			8,000,000
Gross Profit			2,400,000
Accessories [Member]
Note 3 - Significant Events (Details) [Line Items]
Inventory Write-down (in Dollars)			5,400,000
Revenues			9,356,000	[1]	17,710,000	[1]
Asset Impairment Charges			2,300,000
Gifts [Member]
Note 3 - Significant Events (Details) [Line Items]
Inventory Write-down (in Dollars)			1,800,000
Revenues			(972,000)	[2]	3,010,000	[2]
Investments to Procure and Launch New Licenses [Member]
Note 3 - Significant Events (Details) [Line Items]
Selling, General and Administrative Expense			1,400,000
Non-Cash Inventory Impairment Charge [Member]
Note 3 - Significant Events (Details) [Line Items]
Other Restructuring Costs			7,200,000
Employee Severance [Member]
Note 3 - Significant Events (Details) [Line Items]
Other Restructuring Costs			700,000
Intangible and Held for Sale [Member]
Note 3 - Significant Events (Details) [Line Items]
Other Restructuring Costs			3,000,000
Contractual Liabilities [Member]
Note 3 - Significant Events (Details) [Line Items]
Other Restructuring Costs			1,600,000
Other Restructuring [Member]
Note 3 - Significant Events (Details) [Line Items]
Other Restructuring Costs			$ 1,200,000

[1] Accessories' segment income for fiscal 2013 includes inventory write-downs of $5.4 million.

[2] Gifts' segment income for fiscal 2013 includes inventory write-downs of $1.8 million.

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Note 6 - Leases And Royalties (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Commitments and Contingencies Disclosure [Abstract]
Operating Leases, Rent Expense	$ 1.8	$ 1.9
Royalty Expense	$ 3.0	$ 2.2

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Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to finite and indefinite-lived assets: (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to finite and indefinite-lived assets: [Line Items]
Net Balance (in Dollars)	$ 1,100	$ 4,115
Expense	2 years 328 days
Chambers Trade Brand [Member]
Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to finite and indefinite-lived assets: [Line Items]
Net Balance (in Dollars)	259
Expense	2 years 292 days
MCM Customer List [Member]
Note 8 - Intangibles (Details) - Summary of business acquisition costs allocated to finite and indefinite-lived assets: [Line Items]
Net Balance (in Dollars)	$ 841
Expense	2 years 328 days

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Note 2 - Summary Of Significant Accounting Policies (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Jun. 30, 2013	Jun. 30, 2012
Note 2 - Summary Of Significant Accounting Policies (Details) [Line Items]
Provision for Doubtful Accounts	$ 900,000	$ 174,000	$ 802,000
Sales Discounts, Returns and Allowances, Goods		3,400,000	3,900,000
Advances on Inventory Purchases		837,000	7,107,000
Depreciation		1,388,000	1,634,000
Assets Held-for-sale, Long Lived		900,000	1,500,000
Selling, General and Administrative Expense		34,758,000	37,742,000
Shipping, Handling and Transportation Costs		1,200,000	1,300,000
Advertising Expense		1,100,000	1,000,000
Distribution Center [Member]
Note 2 - Summary Of Significant Accounting Policies (Details) [Line Items]
Selling, General and Administrative Expense		8,100,000	7,800,000
Gift Product Deliveries [Member]
Note 2 - Summary Of Significant Accounting Policies (Details) [Line Items]
Advances on Inventory Purchases		800,000
Material Customer [Member]
Note 2 - Summary Of Significant Accounting Policies (Details) [Line Items]
Provision for Doubtful Accounts			$ 900,000

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Note 7 - Income Taxes (Details) - Significant components of net deferred tax assets: (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Significant components of net deferred tax assets: [Abstract]
Net operating loss carryover	$ 24,532	$ 19,643
Inventory valuation	2,533	1,688
Uncertain tax positions	1,174	1,147
Compensation plans	332	486
Depreciation	152	94
Accounts receivable valuation	554	932
Other, net	1,910	638
	31,187	24,628
Valuation allowance	(30,841)	(24,486)
Net	$ 346	$ 142

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Note 6 - Leases And Royalties (Tables)

12 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases and Royalties [Table Text Block]

Fiscal Year	Rent		Royalty
2014	$	1,228	$	2,399
2015		1,344		2,494
2016		1,304		1,364
2017		1,157		621
2018		1,084		-
Thereafter		3,179		-
	$	9,296	$	6,878

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Consolidated Statements Of Stockholders' Equity (USD $) In Thousands, unless otherwise specified	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Comprehensive Income [Member]	Total
Balance at Jun. 30, 2011	$ 7,075	$ 34,119	$ (12,318)	$ 2,053	$ 30,929
Balance (in Shares) at Jun. 30, 2011	7,075
Comprehensive loss:
Net loss			(3,652)		(3,652)
Currency translation adjustments				(399)	(399)
Comprehensive income (loss)					(4,051)
Share-based compensation	27	10			37
Share-based compensation (in Shares)	27
Balance at Jun. 30, 2012	7,102	34,129	(15,970)	1,654	26,915
Balance (in Shares) at Jun. 30, 2012	7,102
Comprehensive loss:
Net loss			(19,177)		(19,177)
Currency translation adjustments				(170)	(170)
Comprehensive income (loss)					(19,347)
Share-based compensation	28	12			40
Share-based compensation (in Shares)	28
Balance at Jun. 30, 2013	$ 7,130	$ 34,141	$ (35,147)	$ 1,484	$ 7,608
Balance (in Shares) at Jun. 30, 2013	7,130

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Note 2 - Summary Of Significant Accounting Policies

12 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 - Summary Of Significant Accounting Policies

Fair Values

We measure fair values using unadjusted quoted prices in active markets (Level 1 inputs), quoted prices for similar instruments in active or inactive markets, or other directly-observable factors (Level 2 inputs), or inputs that are unobservable and significant to the fair value measurement (Level 3 inputs).  Our financial instruments consist primarily of cash, trade receivables and payables, and our credit facility.  The carrying values of cash and trade receivables and payables are considered to be representative of their respective fair values.  Our credit facility, which was amended effective June 28, 2013, bears interest at floating market interest rates; therefore, we believe the fair value of amounts borrowed approximates the carrying value.  At June 30, 2013 and June 30, 2012, no other material financial assets or liabilities were measured at fair value.

Cash And Cash Equivalents

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

Accounts Receivable and Allowances

We perform periodic credit evaluations of our customers’ financial conditions and reserve against accounts deemed uncollectible based upon historical losses and customer specific events.  After all collection efforts are exhausted and an account is deemed uncollectible, it is written off against the allowance for doubtful accounts.  With the exception of a material customer account which ultimately resulted in an accounts receivable allowance of $900,000 in fiscal 2012, credit losses have historically been within our expectations and we generally do not require collateral.

Accounts receivable are net of an allowance for doubtful accounts, discounts and returns of $3.4 million and $3.9 million for fiscal 2013 and 2012, respectively.

Inventories

Inventories are stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market.  Cost includes the direct cost of purchased products (product, duty and freight) and, for manufactured products, procurement costs, materials, direct and indirect labor, and factory overhead.  Market, with respect to raw materials, is replacement cost and, with respect to work-in-process and finished goods, is net realizable value.  Inventories consist of (in thousands):

	2013		2012
Raw materials	$	3,772	$	3,416
Work-in-process		148		412
Finished goods		17,441		24,915
	$	21,361	$	28,743

Inventory deposits of $800,000 and $7.1 million were paid against future gift product deliveries from suppliers at June 30, 2013 and 2012, respectively.

Property And Equipment

Property and equipment are carried at cost less accumulated depreciation calculated using the straight-line method (in thousands):

		2013		2012	Depreciation Rates
Buildings	$	278	$	278	3%
Leasehold improvements		2,567		3,490	Lesser of lease term or asset life
Machinery and equipment		27,698		27,766	10	%	to	50	%
		30,543		31,534
Accumulated depreciation		(26,170)		(26,060)
	$	4,373	$	5,474

Depreciation expense: 2013 - $1,388; 2012 - $1,634

The net book value of accessories segment property and equipment no longer used in our operations is included in other current assets (2013 - $0.9 million; 2012 - $1.5 million) and is held for sale without expectation of incurring a loss; however, amounts actually realized from the sale of such property and equipment may differ from our estimates.

Maintenance and repairs are charged to expense as incurred.  Renewals and betterments which materially prolong the useful lives of the assets are capitalized.  The cost and related accumulated depreciation of assets retired or sold are removed from the accounts and gains or losses are recognized in operations upon disposition.

Intangibles And Impairment Of Long-Lived Assets

Finite-lived intangibles are amortized either using the straight-line method over their estimated useful lives (e.g., trade names) or using an undiscounted cash flows model (e.g., Chambers customer list).

We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an asset might be impaired.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to undiscounted future net cash flows they are expected to generate.  If the undiscounted cash flows are less than the carrying amount, the impairment recognized is measured by the amount the carrying value of the assets exceeds their fair value.

Indefinite-lived intangibles are assessed annually or sooner if a triggering event occurs, for impairment using a fair value method such as discounted cash flows.

Derivative Instruments

We did not have any significant derivative activities as of June 30, 2013 and 2012 and we do not enter into derivative investments for the purpose of speculative investment.  Our overall risk management philosophy is re-evaluated as business conditions change.

Sales

Sales are recognized when merchandise is shipped and title to the goods has passed to the customer.  We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances, and customer returns, as a reduction of sales based upon historical experience, current trends in the retail industry, and individual customer and product experience.  Actual returns and allowances may differ from our estimates and differences would affect the operating results of subsequent periods.

Costs And Expenses

Cost of goods sold includes our costs associated with the procurement and manufacture of inventory, such as the cost of inventory and raw materials purchased from overseas, costs of shipping from our suppliers, ticketing and labeling of product and, where applicable, labor and overhead related to our product manufacturing facilities.  SG&A includes our costs related to activities incurred in the normal course of business which are not associated with the procurement or production of inventory.  They also include costs associated with our distribution centers (2013 - $8.1 million; 2012 - $7.8 million).  Those amounts include $1.2 million and $1.3 million of shipping and handling expenses in fiscal 2013 and 2012, respectively.

Advertising Costs

Advertising costs, consisting primarily of shows and conventions as well as display and print advertising, are expensed as they are incurred (2013 - $1.1 million; 2012 - $1.0 million).

Share-Based Compensation

Compensation expense for all share-based payments expected to vest is recognized on the straight-line basis over the requisite service period based on grant-date fair values.

Income Taxes

Deferred income taxes are recognized for the future income tax effects of differences in the carrying amounts of assets and liabilities for financial reporting and income tax return purposes using enacted tax laws and rates.  A valuation allowance is recognized if it is more likely than not that some or all of a deferred tax asset may not be realized.  Tax liabilities, together with interest and applicable penalties included in the income tax provision, are recognized for the benefits of uncertain tax positions in the financial statements which more likely than not may not be realized.

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Note 5 - Disclosures About Segments Of Our Business And Related Information:

12 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 5 - Disclosures About Segments Of Our Business And Related Information

We are organized along product categories and have two reportable segments: (1) accessories, which include belts, small leather goods and other products, and (2) gifts.  Each segment is measured by management based on income consisting of net sales less cost of goods sold, product distribution expenses, and royalties utilizing accounting policies consistent in all material respects with those described in Note 2.  No inter-segment revenue is recorded. Assets, related depreciation and amortization, and certain SG&A expenses are not allocated to the segments.

The following table presents operating information by segment and a reconciliation of segment operating income to our consolidated operating loss (in thousands):

	2013			2012
Net sales:
Accessories	$	77,073		$	86,188
Gifts		36,937			31,413
	$	114,010		$	117,601
Segment operating income (loss):
Accessories (1)	$	9,356		$	17,710
Gifts (2)		(972	)		3,010
	$	8,384		$	20,720
Selling, general and administrative expenses		(18,115	)		(20,579	)
Restructuring charges		(3,072	)		-
Depreciation and amortization		(1,818	)		(2,205	)
Intangibles and held for sale impairment		(3,011	)		-
Operating loss	$	(17,632	)	$	(2,064	)

(1)   Accessories’ segment income for fiscal 2013 includes inventory write-downs of $5.4 million.

(2)   Gifts’ segment income for fiscal 2013 includes inventory write-downs of $1.8 million.

Significant customers which accounted for 10% or more of our total net sales were Walmart (2013 and 2012 - 46%) and Kohl’s (2013 – 15%; 2012 – 13%).

Our net sales, property and equipment, and total assets by geographic location were (in thousands):

	2013		2012
Net sales:
United States	$	105,037	$	107,108
Canada		8,973		10,493
	$	114,010	$	117,601
Property and equipment:
United States	$	3,668	$	4,425
Canada		77		97
Mexico		628		952
	$	4,373	$	5,474
Total assets:
United States	$	28,148	$	47,880
Canada		3,637		5,157
Mexico		3,391		3,419
	$	35,176	$	56,456

Our Canadian subsidiary is part of our accessories segment.  Its sales and income are converted to U.S. dollars at monthly average exchange rates.  Property and equipment and total assets are converted at each fiscal year-end exchange rate.  Our Mexican subsidiary is part of our accessories segment.  Its functional currency is the U.S. dollar and all of the net sales are inter-company and are eliminated in consolidation.

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Note 3 - Significant Events

12 Months Ended

Jun. 30, 2013

Significant Events [Abstract]

Significant Events [Text Block]

Note 3 - Significant Events

Fiscal 2013 Restructuring Plan Announced March 18, 2013

Our second quarter fiscal 2013 financial results for our gifts segment were severely impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012, which was higher than both our expectations and historical levels.  These events were primarily driven by lack of consumer acceptance of two new products, unfavorable placement of our products in certain retailers, and lower than expected consumer purchases in our categories.  As a result, our gifts segment net sales and gross margins were significantly lower than expectations and historical results.  This caused our December profits to fall, resulting in the previously-announced violation of our monthly minimum fixed charge coverage ratio within our prior credit agreement.  Additionally, the performance of the gifts segment products resulted in higher than expected sales concessions, such as allowing certain retailers to return certain unsold products, which also reduced net sales, gross margins and accounts receivable, while increasing inventories.  Each of these events unfavorably impacted our liquidity forecasts.  As a result of the covenant violation and liquidity restraints, we decided to implement a restructuring plan.

On March 18, 2013, the Board of Directors (the “Board”) approved the Restructuring plan pursuant to which we reduced the complexity of our business through paring down the customer base we serve, focusing on the most profitable belts, small leather goods, and gifts products, streamlining our operations and further reducing operating expenses.

The primary components of the Restructuring included:  (1) exiting under-performing product offerings which do not support our primary customer base and do not represent strategic components of our portfolio, (2) reducing corporate employee headcount by 33%, which occurred on March 18, 2013, (3) recognizing charges for certain intangible assets impaired as a result of our decision to immediately cease production and development of products under certain proprietary trade names and trade brands,  and (4) accelerating the recognition of future expenses under certain contractual obligations.  In connection with the foregoing, we incurred pre-tax charges of $13.7 million in fiscal 2013, which included (a) a non-cash inventory impairment charge of $7.2 million, (b) employee severance costs of $0.7 million, (c) non-cash intangible and held for sale impairment charges of $3.0 million, (d) charges related to the recognition of expenses under contractual liabilities of $1.6 million that we otherwise would have recorded over the life of the contract and related revenues attributable to those contracts, and (e) other charges of $1.2 million.  

Approximately $3.1 million of the charges will result in future cash expenditures.  The restructuring plan was substantially complete by June 30, 2013 and the remaining cash expenditures are expected to be recognized over the next 12 months.

The following table presents the movement in the severance liability and other restructuring costs (in thousands):

	Severance			Other			Total
Accrued restructuring charges, January 1, 2013	$	-		$	-		$	-
Charges		649			1,926			2,575
Cash spent		(49	)		(289	)		(338	)
Accrued restructuring charges, March 31, 2013	$	600		$	1,637		$	2,237
Charges		54			443			497
Cash spent		(355	)		(293	)		(648	)
Accrued restructuring charges, June 30, 2013	$	299		$	1,787		$	2,086

Fiscal 2013 - Inventory Write-down and Intangibles and Held for Sale Impairments

Due to (1) higher than expected holiday 2012 sales allowances and higher returns of unsold inventories in our gifts segment in December 2012; (2) the violation of the fixed charge covenant in our credit agreement with our senior lender; and (3) the Restructuring announced in March 2013 in which we made the decision to exit low-volume products and emphasize our focus on licensed products and high volume private label products, we concluded there was a need to generate immediate liquidity by selling returned, exited and slow moving inventories at prices discounted deeply below historical averages.  As a result of our determination to accelerate the liquidation of this inventory at deeply discounted prices, we recorded a $7.2 million noncash inventory write-down ($5.4 million and $1.8 million related to the accessories and gifts segments, respectively), which is included as an inventory write-down in our consolidated statement of operations.  The inventory was marked down to our best estimate of the market value we anticipated realizing based on actual close-out orders received for the inventory and our experiences selling through inventory liquidation channels in the past, including in certain cases, an incremental write-down compared to our historical experiences to reflect the need to immediately liquidate the effected inventory.  At June 30, 2013, the carrying value of impacted inventories was $1.1 million.  We expect to sell off all impacted inventory at approximately its current net book value by September 30, 2013.  Sales and gross margins of underperforming products were $8.0 million and $2.4 million, respectively, in fiscal 2013.  We do not expect any additional material write-offs related to the sell-off of this inventory.

Due to the Restructuring and our decision to cease production and development of products under certain proprietary trade names and trade brands, we tested our definite and indefinite-lived intangible assets for recoverability during the third quarter of fiscal 2013 using fair value methods, such as discounted cash flows (indefinite-lived intangible) and undiscounted cash flows (definite-lived intangibles).  As a result of the impairment tests, in connection with our restructuring plan, we recorded a $2.3 million impairment charge (accessories segment), which was included in the intangibles and held for sale impairments line in our consolidated statement of operations.

Due to our strategy to exit certain low-volume and unprofitable products and transition from proprietary to licensed brands, we determined that the life for our indefinite-lived trade brand intangible asset was no longer indefinite, and therefore the intangible asset will be amortized over the remaining period in which it is expected to contribute to cash flows, which is three years.

We recorded a $0.4 million impairment charge in the third quarter of fiscal 2013 on a held for sale property, which is included in the intangibles and held for sale impairments line in our consolidated statement of operations.  Due to the length of time our last held for sale property has been on the market and our current liquidity forecasts, we decided to market the property below its carrying value. 

Fiscal 2013 New License with Samsonite® and American Tourister®

During the second quarter of fiscal 2013, we announced the execution of a new licensing agreement with brands Samsonite® and American Tourister® (gifts segment).  Under the terms of the agreement (which expires December 31, 2016), we will distribute gifts among a wide array of channels, including but not limited to, national retail and department stores, specialty stores and wholesale clubs.  Revenues from this new license are expected to benefit results in the second half of fiscal 2014.

During fiscal year 2013, we made investments to procure and launch new licenses and incurred costs of $1.4 million without any significant associated sales or gross margins.  These costs include charges for personnel, travel, and samples, which are included in selling, general and administrative expenses.

Fiscal 2012 New Licenses

During the first quarter of fiscal 2012, we entered into licensing agreements with brands Elie Tahari® (accessories segment), Miss Me® (accessories segment), and The Sharper Image® (gifts segment).  The terms for each of the Elie Tahari®, Miss Me® and The Sharper Image® agreements are through December 31, 2014, December 31, 2014 and December 31, 2016, respectively.  Under the terms of the agreements, we distribute belts or gifts among a wide array of channels, including but not limited to, national retail and department stores, clubs and specialty and boutique stores.  In connection with our 2013 restructuring plan we ceased development and marketing of belts under the Elie Tahari® license and gifts under The Sharper Image license®.

During the third quarter of fiscal 2012, we entered into licensing agreements with brands Sperry Top-Sider® and Arnold Palmer®.  The terms for each of the Sperry Top-Sider® and Arnold Palmer® agreements are through January 31, 2016 and December 31, 2016, respectively.  Under the terms of the Sperry Top-Sider® agreement, we distribute belts and small leather goods for both men and women through department stores, specialty retail locations throughout the United States and Canada, Sperry Top-Sider’s own retail stores, and on sperrytopsider.com.  Under the terms of the Arnold Palmer® agreement, we distribute belts through green grass shops, off-course golf specialty stores, department stores as well as in corporate and e-commerce shops.

During the third quarter of fiscal 2012, we expanded our previously executed Eddie Bauer® license to also include the rights to license and market belts and small leather goods.

During the fiscal year 2012, we made investments to procure and launch our new licenses and incurred costs of $597,000 without any associated sales or gross margins.  These costs included charges for personnel, travel, and samples, which are included in selling, general and administrative expenses.

Fiscal 2012 Facilities Consolidation

During the third quarter of fiscal 2012, we consolidated certain facilities to simplify operations and reduce operating expenses.  In connection with this consolidation, we incurred lease termination ($39,000), severance ($73,000) and other costs ($110,000) which were included in selling, general and administrative expenses.

Fiscal 2012 Bad Debt Provision

During the third quarter of fiscal 2012, we recognized a $900,000 provision for doubtful accounts for one close-out customer due to the customer’s financial difficulties raising doubts about the customer’s ability to make payment in the foreseeable future.

Fiscal 2012 Credit Facility

Effective August 25, 2011, we replaced our prior $27.5 million credit facility with a $35 million credit facility.  The credit facility was guaranteed by substantially all of our and our subsidiaries assets, and required a specified profitability and fixed charge coverage and a minimum availability.  

Related Party Transactions

During fiscal 2013 and 2012, we purchased $3.4 million and $4.3 million, respectively of accessories inventory from an entity affiliated with Chiang Chih-Chiang, a passive shareholder of the Company.  At June 30, 2013 and 2012, the amount due to the passive shareholder for inventory purchases was $922,000 and $290,000, respectively.  These amounts were included in the accounts payable line on the consolidated balance sheets.  Although it is likely that we will continue our purchasing relationship with this existing shareholder, we believe there are numerous sources of products available at similar terms and conditions, and we do not believe the success of our operations is dependent on this or any one or more of our present suppliers.

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Note 6 - Leases And Royalties (Details) - Summary of future payments for operating leases and royalties: (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Summary of future payments for operating leases and royalties: [Abstract]
2014	$ 1,228
2014	2,399
2015	1,344
2015	2,494
2016	1,304
2016	1,364
2017	1,157
2017	621
2018	1,084
Thereafter	3,179
	9,296
	$ 6,878

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Note 9 - Share-Based Compensation (Tables)

12 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Number Of Shares			Weighted-Average Grant-Date Fair Value
Nonvested June 30, 2012		35,218		$	2.25
Granted		32,000			1.43
Vested		(15,588	)		2.45
Nonvested June 30, 2013		51,630			1.68

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

				Weighted-Average				Aggregate
	Number Of Shares			Exercise  Price		Remaining Contractual Term (Years)		Intrinsic Value ($000)
Outstanding June 30, 2012		269,316		$	10.22
Granted		35,000			1.40
Forfeited and cancelled		(199,319	)		9.74
Outstanding June 30, 2013		104,997			8.20
Vested and expected to vest		104,997			8.20		4.2	$	-
Exercisable		83,331			9.95		3.0		-

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Note 2 - Summary Of Significant Accounting Policies (Details) - Summary of inventories: (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Summary of inventories: [Abstract]
Raw materials	$ 3,772	$ 3,416
Work-in-process	148	412
Finished goods	17,441	24,915
	$ 21,361	$ 28,743

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Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Number of Reportable Segments	2
Inventory Write-down (in Dollars)	$ 7,158
Walmart [Member] | Customer Concentration Risk [Member]
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Concentration Risk, Percentage	10.00%
Walmart [Member]
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Concentration Risk, Percentage	46.00%	46.00%
Kohl's [Member]
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Concentration Risk, Percentage	15.00%	13.00%
Accessories [Member]
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Inventory Write-down (in Dollars)	5,400
Gifts [Member]
Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) [Line Items]
Inventory Write-down (in Dollars)	$ 1,800

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Note 13 - Loss Per Share (Details) - Summary of basic and diluted earnings (losses) per common share: (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Numerator for basic and diluted earnings per share:
Net loss (in Dollars)	$ (19,177)	$ (3,652)
Denominator for basic and diluted earnings per share (in Shares)	7,131	7,075
Loss per common share	$ (2.69)	$ (0.52)
Loss per common share assuming dilution	$ (2.69)	$ (0.52)

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Note 9 - Share-Based Compensation (Details) (USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Restricted Stock And Stock Options [Member] Omnibus Plan [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2012 Restricted Stock [Member]	Jun. 30, 2013 Employee Stock Option [Member]	Jun. 30, 2013 Performance Shares [Member]	Jun. 30, 2011 Performance Shares [Member] Minimum [Member]	Jun. 30, 2011 Performance Shares [Member] Maximum [Member]	Jun. 30, 2013 Phantom Share Units (PSUs) [Member]
Note 9 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	3 years		10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)			736,326
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)			694,706
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value				$ 20,000	$ 78,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	2 years					6 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period						3 years	2 years
Share-Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Units Earned Percentage								0.00%	200.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Intrinsic Value, Amount Per Share (in Dollars per share)							$ 1.00
Share-based Compensation Arrangement by Share-based Payment Award, Settled In Cash Percentage							50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent										50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number (in Shares)	104,997
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	35,000						950,000
Allocated Share-based Compensation Expense	(110,000)	169,000
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense	(41,000)	62,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 11,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 255 days

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Note 7 - Income Taxes (Details) - Federal statutory income tax rate reconciles to our effective income tax rate as follows:	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Federal statutory income tax rate reconciles to our effective income tax rate as follows: [Abstract]
Statutory rate	(34.00%)	(34.00%)
Deferred tax valuation allowance	32.60%	40.90%
State and foreign taxes net of federal tax benefit	(1.00%)	(5.10%)
Uncertain tax positions	0.10%	4.50%
Repatriation of foreign earnings		3.30%
Other, net	0.70%	2.20%
	(1.60%)	11.80%

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Preferred stock par value (in Dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized (in Shares)	1,000	1,000
Preferred stock, shares issued (in Shares)	0	0
Common stock par value (in Dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized (in Shares)	10,000	10,000
Common stock, shares issued (in Shares)	7,130	7,102
Common stock, shares outstanding (in Shares)	7,130	7,102

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Note 8 - Intangibles

12 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 8 - Intangibles

The following tables present information about the costs we have allocated to finite-lived intangible assets we acquired as part of business acquisitions (in thousands):

	2013			2012
Gross carrying amount	$	10,665		$	10,665
Accumulated amortization		(9,565	)		(6,550	)
	$	1,100		$	4,115

	Net Balance		Weighted-Average Life Remaining
Customer lists	$	841		2.9
Trade brand		259		2.8
Total	$	1,100		2.9

Amortization expense: 2013 - $680; 2012 - $821

Estimated annual amortization expense: 2014 - $423; 2015 - $368; 2016 - $309

As a result of the impairment tests, in connection with our restructuring plan, we recorded a $2.3 million impairment charge (accessories segment), which was included in the intangibles and held for sale impairments line in our consolidated statement of operations.  Due to our strategy to exit certain low-volume and unprofitable products and transition from proprietary to licensed brands, we determined that the life for our previously indefinite-lived trade brand intangible asset was no longer indefinite, and therefore the intangible asset will be amortized over the remaining period in which it is expected to contribute to cash flows, which is three years.

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows provided by operating activities:
Net loss	$ (19,177,000)	$ (3,652,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Inventory write-down	7,158,000
Intangibles and held for sale impairments	3,011,000
Deferred income taxes	(215,000)	127,000
Doubtful accounts receivable provision	174,000	802,000
Depreciation and amortization	2,068,000	2,455,000
Stock compensation expense	(130,000)	152,000
Amortization of debt costs	389,000	196,000
Loss on sale of property and equipment	111,000	20,000
Changes in assets and liabilities:
Accounts receivable	2,251,000	6,375,000
Inventories	542,000	12,000
Other assets	154,000	380,000
Inventory deposits	6,270,000	(2,906,000)
Accounts payable	(1,461,000)	2,289,000
Accrued expenses and restructuring charges	2,935,000	(1,337,000)
Net cash provided by operating activities	4,080,000	4,913,000
Cash flows used for investing activities:
Purchases of property and equipment	(592,000)	(664,000)
Sales of property and equipment	391,000	192,000
Net cash used for investing activities	(201,000)	(472,000)
Cash flows used for financing activities:
Change in cash overdrafts	(737,000)	145,000
Change in restricted cash		1,405,000
Net repayments under credit facility	(2,752,000)	(6,091,000)
Net cash used for financing activities	(3,489,000)	(4,541,000)
Effect of exchange-rate changes on cash and cash equivalents	(89,000)	(97,000)
Net increase (decrease) in cash and cash equivalents	301,000	(197,000)
Cash and cash equivalents beginning of year	217,000	414,000
Cash and cash equivalents end of period	518,000	217,000
Supplemental cash flow information:
Interest paid	1,080,000	1,146,000
Income taxes paid	$ 33,000	$ 144,000

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Note 14 - Subsequent Events (Details) (USD $)			3 Months Ended			1 Months Ended
	Jun. 30, 2012	Aug. 25, 2011	Sep. 30, 2013 Subsequent Event [Member] Settlement Agreement For Sharper Image License [Member]	Aug. 31, 2013 Subsequent Event [Member] Settlement Agreement For Sharper Image License [Member]	Jul. 24, 2013 Subsequent Event [Member] Unsecured Subordinated Promissory Notes [Member]	Jul. 24, 2013 Subsequent Event [Member]	Jun. 30, 2013 Restructuring Plan March 2013 [Member]
Note 14 - Subsequent Events (Details) [Line Items]
Number of Significant Licensors						2
Number of Significant Vendors						3
Debt Instrument, Face Amount	$ 35,000,000	$ 27,500,000			$ 8,900,000
Contractual Obligation							895,000
Contractual Obligation, Due in Next Twelve Months				350,000
Gain (Loss) Related to Litigation Settlement			$ 545,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Current assets:
Cash and cash equivalents	$ 518	$ 217
Accounts receivable, net	4,605	7,042
Inventories, net	21,361	28,743
Inventory deposits	837	7,107
Other current assets	1,757	2,824
Total current assets	29,078	45,933
Property and equipment, net	4,373	5,474
Other assets:
Intangibles	1,100	4,115
Other assets	625	934
Total other assets	1,725	5,049
	35,176	56,456
Current liabilities:
Accounts payable	9,294	10,548
Accrued compensation	776	1,309
Accrued expenses	2,204	1,584
Accrued restructuring charges (see Note 3)	2,086
Credit facility	9,058	11,810
Total current liabilities	23,418	25,251
Other liabilities	4,150	4,290
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, none issued
Common stock, $1.00 par value, 10,000 shares authorized, 7,130 shares and 7,102 shares issued and outstanding, respectively	7,130	7,102
Additional paid-in capital	34,141	34,129
Accumulated deficit	(35,147)	(15,970)
Other comprehensive income	1,484	1,654
Total stockholders' equity	7,608	26,915
	$ 35,176	$ 56,456

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Note 9 - Share-Based Compensation (Details) - Summary of restricted stock outstanding: (Restricted Stock [Member], USD $)	12 Months Ended
	Jun. 30, 2013
Restricted Stock [Member]
Note 9 - Share-Based Compensation (Details) - Summary of restricted stock outstanding: [Line Items]
Number of shares	35,218
Weighted-average grant-date fair value (in Dollars per share)	$ 2.25
Granted	32,000
Granted (in Dollars per share)	$ 1.43
Vested	(15,588)
Vested (in Dollars per share)	$ 2.45
Number of shares	51,630
Weighted-average grant-date fair value (in Dollars per share)	$ 1.68

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Note 13 - Loss Per Share (Tables)

12 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	2013			2012
Numerator for basic and diluted earnings per share:
Net loss	$	(19,177	)	$	(3,652	)
Denominator for basic and diluted earnings per share		7,131			7,075
Loss per common share	$	(2.69	)	$	(0.52	)
Loss per common share assuming dilution	$	(2.69	)	$	(0.52	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	2013		2012
Stock options (exercise prices per share: 2013 - $1.40 to $15.60; 2012 - $1.98 to $15.60)		132		277

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Note 3 - Significant Events (Tables)

12 Months Ended

Jun. 30, 2013

Significant Events [Abstract]

Restructuring and Related Costs [Table Text Block]

	Severance			Other			Total
Accrued restructuring charges, January 1, 2013	$	-		$	-		$	-
Charges		649			1,926			2,575
Cash spent		(49	)		(289	)		(338	)
Accrued restructuring charges, March 31, 2013	$	600		$	1,637		$	2,237
Charges		54			443			497
Cash spent		(355	)		(293	)		(648	)
Accrued restructuring charges, June 30, 2013	$	299		$	1,787		$	2,086

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Note 7 - Income Taxes (Details) - Significant components of our income tax expense (benefit): (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Current:
State	$ 25	$ 79
Foreign	(142)	32
	(117)	111
Deferred:
Federal	(5,719)	(938)
State	(531)	(83)
Foreign	(318)	(188)
Uncertain tax positions	27	147
Valuation allowance	6,355	1,336
	(186)	274
	$ (303)	$ 385

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Note 11 - Director Stock Deferral Plan (Details) (Deferral Plan [Member], USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Deferral Plan [Member]
Note 11 - Director Stock Deferral Plan (Details) [Line Items]
Share-Based GoodsAnd Nonemployee Services Increase Decrease In Common Stock Value	$ (20,000)	$ (15,000)
Deferred Compensation Arrangement with Individual, Common Stock Reserved for Future Issuance (in Shares)	28,375

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Note 5 - Disclosures About Segments Of Our Business And Related Information: (Details) - Net sales, property and equipment, and total assets by geographic location: (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net sales:
Net Sales	$ 114,010	$ 117,601
Property and equipment:
Property and equipment	4,373	5,474
Total assets:
Total assets	35,176	56,456
United States [Member]
Net sales:
Net Sales	105,037	107,108
Property and equipment:
Property and equipment	3,668	4,425
Total assets:
Total assets	28,148	47,880
Canada [Member]
Net sales:
Net Sales	8,973	10,493
Property and equipment:
Property and equipment	77	97
Total assets:
Total assets	3,637	5,157
Mexico [Member]
Property and equipment:
Property and equipment	628	952
Total assets:
Total assets	$ 3,391	$ 3,419

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Note 3 - Significant Events (Details) - Summary of severance liability and other restructuring costs (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2013
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 2,086	$ 2,237	$ 2,086
Charges	497	2,575	3,072
Cash spent	(648)	(338)
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges	299	600	299
Charges	54	649
Cash spent	(355)	(49)
Other Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges	1,787	1,637	1,787
Charges	443	1,926
Cash spent	$ (293)	$ (289)

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Note 4 - Credit Facility (Details) (USD $)	12 Months Ended				13 Months Ended				12 Months Ended	13 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jul. 24, 2013 Subsequent Event [Member] Salus Capital Partners, LLC [Member] Revolving Credit Facility [Member]	Jul. 24, 2013 Subsequent Event [Member] Salus Capital Partners, LLC [Member] Loan Facility [Member]	Jul. 24, 2013 Subsequent Event [Member] Salus Capital Partners, LLC [Member]	Jul. 24, 2013 Subsequent Event [Member] One Month LIBOR [Member] Revolving Credit Facility [Member]	Jul. 24, 2013 Subsequent Event [Member] One Month LIBOR [Member] Loan Facility [Member]	Jul. 24, 2013 Subsequent Event [Member] King Trade Facility [Member]	Jun. 30, 2013 Subsequent Event [Member]	Jul. 24, 2013 Subsequent Event [Member]	Jun. 30, 2012 Three Month LIBOR [Member]	Jun. 30, 2012 Fixed LIBOR [Member]	Jun. 30, 2013 Chambers Acquisition [Member]
Note 4 - Credit Facility (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 35,000,000	$ 27,500,000	$ 1,500,000	$ 29,000,000			$ 11,500,000
Debt Instrument, Basis Spread on Variable Rate					0.75%	8.50%	11.25%				3.75%	3.75%
Letters of Credit Outstanding, Amount	230,000
Line of Credit Facility, Amount Outstanding	9,058,000	11,810,000
Line of Credit Facility, Expiration Date									Jul. 24, 2013
Minimum Availability Covenant, Amount										900,000
Interest Expense, Debt	389,000	196,000
Debt Instrument, Unamortized Discount													323,000
Debt Issuance Cost	$ 1,300,000

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Note 7 - Income Taxes

12 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 7 - Income Taxes

Significant components of our net deferred tax assets were (in thousands):

	2013			2012
Net operating loss carryover	$	24,532		$	19,643
Inventory valuation		2,533			1,688
Uncertain tax positions		1,174			1,147
Compensation plans		332			486
Depreciation		152			94
Accounts receivable valuation		554			932
Other, net		1,910			638
		31,187			24,628
Valuation allowance		(30,841	)		(24,486	)
Net	$	346		$	142

Significant components of our income tax expense were (in thousands):

	2013			2012
Current:
Federal	$	-		$	-
State		25			79
Foreign		(142	)		32
		(117	)		111
Deferred:
Federal		(5,719	)		(938	)
State		(531	)		(83	)
Foreign		(318	)		(188	)
Uncertain tax positions		27			147
Valuation allowance		6,355			1,336
		(186	)		274
	$	(303	)	$	385

The federal statutory income tax rate reconciles to our effective income tax rate as follows:

	2013			2012
Statutory rate		(34.0	)%		(34.0	)%
Deferred tax valuation allowance		32.6			40.9
State and foreign taxes net of federal tax benefit		(1.0	)		(5.1	)
Uncertain tax positions		0.1			4.5
Repatriation of foreign earnings		-			3.3
Other, net		0.7			2.2
		(1.6	)%		11.8	%

Our $64.8 million federal income tax net operating loss carryover will expire beginning in 2029. While it is reasonably possible a current examination of state income tax returns for fiscal 1999 through fiscal 2003 involving uncertain tax positions could be resolved within the next twelve months through settlement or administrative proceedings, the potential impact cannot be estimated at this time. Otherwise, the majority of our state income tax returns are no longer subject to examination for years before 2007. U.S. federal income tax returns are no longer subject to examination for years before fiscal 2009 and Canadian income tax returns are no longer subject to examination for years before 2006.

The following presents information about our unrecognized tax benefits of uncertain tax positions (in thousands).

	2013			2012
Unrecognized tax benefits:
Beginning of year	$	1,477		$	1,530
Decreases in prior years' tax positions		(72	)		(53	)
End of year		1,405			1,477
Accrued interest and penalties		1,920			1,819
Uncertain tax positions liability	$	3,325		$	3,296
Unrecognized tax benefits affecting tax rate if recognized	$	927		$	975
Interest and penalty expense	$	101		$	200

During the first quarter of fiscal 2013, $161,000 of the liability previously recorded for uncertain state tax positions was released from the reserve as it no longer failed to meet the more likely than not threshold.

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Note 1 - Overview (Details) (USD $)		12 Months Ended
	Sep. 25, 2013	Jun. 30, 2014 Minimum [Member]	Jun. 30, 2014 Maximum [Member]
Note 1 - Overview (Details) [Line Items]
Annual Savings Due To Restructuring Efforts		$ 6,000,000	$ 7,000,000
Line of Credit Facility, Remaining Borrowing Capacity	1,200,000
Line of Credit Facility Minimum Excess Availability	$ 900,000

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Note 7 - Income Taxes (Details) (USD $)	12 Months Ended
	Jun. 30, 2013
Note 7 - Income Taxes (Details) [Line Items]
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration (in Dollars)	$ 64,800,000
Liability for Uncertain Tax Positions, Current (in Dollars)	$ 161,000
Reasonably Possible [Member] | State and Local Jurisdiction [Member] | Minimum [Member]
Note 7 - Income Taxes (Details) [Line Items]
Open Tax Year	1999
Reasonably Possible [Member] | State and Local Jurisdiction [Member] | Maximum [Member]
Note 7 - Income Taxes (Details) [Line Items]
Open Tax Year	2003
State and Local Jurisdiction [Member] | Minimum [Member]
Note 7 - Income Taxes (Details) [Line Items]
Open Tax Year	2007
Internal Revenue Service (IRS) [Member] | Minimum [Member]
Note 7 - Income Taxes (Details) [Line Items]
Open Tax Year	2009
Foreign Tax Authority [Member] | Minimum [Member]
Note 7 - Income Taxes (Details) [Line Items]
Open Tax Year	2006

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Note 10 - Employee Benefit Plans

12 Months Ended

Jun. 30, 2013

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 10 - Employee Benefit Plans

401(k) PlanOur 401(k) Plan, also known as the Employees Investment Plan, is open to substantially all of our full-time employees.  Participants may contribute up to 35% of their eligible annual compensation as elective pretax and Roth contributions to the 401(k) Plan, subject to IRS limits.  For each participant who elects to make elective deferrals under the 401(k) Plan during the plan year, we make safe-harbor contributions to the plan equal to 100% of the first 3% of the participant’s eligible annual compensation contributed for the plan year plus 50% of the next 2% of the participant’s eligible annual compensation contributed for the plan year, for a maximum safe harbor matching contribution equal to 4% of the participant’s eligible annual compensation.  The 401(k) Plan allows participants to direct the investment of both employee and matching employer contributions from a variety of investment alternatives, one of which is our common stock.  Our total contributions to our 401(k) Plan were $291,000 and $347,000 in fiscal 2013 and 2012, respectively.

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Note 6 - Leases And Royalties

12 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 6 - Leases And Royalties

We lease office, warehouse, and manufacturing facilities under noncancellable operating leases expiring through 2020 with varying renewal and escalation clauses.  Our rental expense in fiscal 2013 and 2012 totaled $1.8 million and $1.9 million, respectively.

We have licensing agreements with third parties to use their trademarks on our products.  Royalty expense in fiscal 2013 and 2012 related to these agreements totaled $3.0 million and $2.2 million, respectively.

As of June 30, 2013, future payments under our leases, including additional rents under escalation clauses, and minimum royalty commitments were (in thousands):

Fiscal Year	Rent		Royalty
2014	$	1,228	$	2,399
2015		1,344		2,494
2016		1,304		1,364
2017		1,157		621
2018		1,084		-
Thereafter		3,179		-
	$	9,296	$	6,878

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Note 1 - Overview

12 Months Ended

Jun. 30, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 - Overview

The Company

We are a leading designer and marketer of branded men’s, women’s and children’s accessories, including belts, gifts and small leather goods.  Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, as well as private brands for major retail customers.  We sell our products through all major retail distribution channels throughout North America, including, without limitation, mass merchants, national chain stores, department stores, specialty stores, catalog retailers, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military.

Basis Of Presentation and Liquidity; Going Concern Uncertainties

The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and extinguishment of liabilities in the normal course of business.  We have incurred a net loss in each of our two most recent fiscal years and we have an accumulated deficit. Our financial results and liquidity forecasts were negatively impacted by lower than expected consumer point-of-sale purchases and retailer promotional activity in December 2012 in our gifts segment, which was markedly higher than both our expectations and historical levels.  These factors raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

In response to these negative factors we executed the following initiatives which we believe will allow us to effectively manage our liquidity over the near-term:

· Announced and executed a restructuring plan (“Restructuring”) which (1) eliminated unprofitable products; (2) reduced the amount of risk in our gifts business; (3) reduced corporate and distribution employee headcount; (4) closed or downsized four facilities; (5) outsourced and relocated our gifts distribution facility from Dallas to a third-party provider in California; and (6) exited development efforts and accelerated recognition of future expenses associated with non-core brands. We expect these efforts will result in annual cost savings of $6.0 to $7.0 million in fiscal 2014.

· On July 24, 2013, we replaced our previous credit facility with a new senior credit facility expiring in July 2015. We believe this new senior facility, along with a new purchase order financing arrangement with another lender, will provide us with sufficient credit availability to fund our operations in the foreseeable future. At September 23, 2013, we had $1.2 million in borrowing availability under our new senior credit facility after accounting for the $900,000 minimum excess availability requirement. Covenants set by our senior lender place additional restrictions on the use of the credit availability on a week-to-week basis.

· In July 2013, we entered into agreements with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. The arrangements with these parties consist of unsecured, subordinated promissory notes which are to be paid under varying payment terms and interest rates over a period of 12 to 24 months. These payments are subject to pre-established minimum availability levels as set by our new senior lender.

· On September 26, 2013 we, along with our subsidiaries, H.A. Sheldon Canada, Ltd. and TBAC Investment Trust, and our senior lender Salus Capital Partners LLC, entered into a First Amendment to Credit Agreement, dated July 24, 2013 (the “Amendment”). Pursuant to the Amendment, our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

In addition, we are continuing to evaluate and execute initiatives to improve liquidity such as selling unproductive assets (such as our held-for-sale facility in Yoakum, Texas) and raising additional capital.  We cannot make assurances as to whether any of these actions can be effected on a timely basis, on satisfactory terms or maintained once initiated.  Even if such actions are successfully implemented, our liquidity plan could result in limiting certain operational and strategic initiatives that were designed to grow our business over the long term. In addition, our current credit facility requires us to maintain minimum profitability and leverage ratios, as further described in Note 4, which we could have difficulty meeting to the extent that our plans are unsuccessfully implemented or for a number of additional reasons that are outside of our control, including but not limited to, the loss of key customers or suppliers.  Any potential covenant violation and our ability to successfully obtain waivers from our senior lender of such violations could negatively impact our ability to continue as a going concern.

The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates that affect the reported value of assets, liabilities, revenues, and expenses. These estimates are based on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our conclusions.  We continually evaluate the information used to make these estimates as the business and economic environment changes, including evaluation of events subsequent to our fiscal year end through the financial statements issuance date.  Actual results may differ from these estimates under different assumptions or conditions.  Such differences could have a material impact on our future financial position, results of operations, and cash flows.

The consolidated financial statements include the accounts of the Company and our subsidiaries, all of which are wholly owned.  Intercompany accounts and transactions have been eliminated in consolidation.  Amounts related to costs for a third party provider to assemble and package gift products have been reclassified from cost of goods sold to the selling, general and administrative expense line item in the consolidated statements of operations and business segment information in the fiscal 2012 financial statements to conform to the fiscal 2013 presentation.

Foreign Currency Translation

For our Canadian operations, the functional currency is the Canadian dollar (“CAD”).  Its assets and liabilities are translated into U.S. dollars (“USD”) at the exchange rates in effect at each balance sheet date, and resulting translation gains or losses are accumulated in other comprehensive income as a separate component of stockholders’ equity.  Revenue and expenses are translated at monthly average exchange rates.  For our Mexican operations, the functional currency is the U.S. dollar.

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Note 9 - Share-Based Compensation (Details) - Summary of fair values of stock options: (USD $)	12 Months Ended
	Jun. 30, 2013
Summary of fair values of stock options: [Abstract]
Outstanding June 30, 2012	269,316
Outstanding June 30, 2012 (in Dollars per share)	$ 10.22
Granted	35,000
Granted (in Dollars per share)	$ 1.40
Forfeited and cancelled	(199,319)
Forfeited and cancelled (in Dollars per share)	$ 9.74
Outstanding June 30, 2013	104,997
Outstanding June 30, 2013 (in Dollars per share)	$ 8.20
Vested and expected to vest	104,997
Vested and expected to vest (in Dollars per share)	$ 8.20
Vested and expected to vest	4 years 73 days
Exercisable	83,331
Exercisable (in Dollars per share)	$ 9.95
Exercisable	3 years

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Note 8 - Intangibles (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 8 - Intangibles (Details) [Line Items]
Amortization of Intangible Assets	$ 680	$ 821
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	423
Finite-Lived Intangible Assets, Amortization Expense, Year Two	368
Finite-Lived Intangible Assets, Amortization Expense, Year Three	309
Impairment of Intangible Assets, Finite-lived	3,011
Accessories [Member]
Note 8 - Intangibles (Details) [Line Items]
Impairment of Intangible Assets, Finite-lived	$ 2,300
Finite-Lived Intangible Assets, Remaining Amortization Period	3 years

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Note 2 - Summary Of Significant Accounting Policies (Details) - Summary of property and equipment: (USD $) In Thousands, unless otherwise specified					12 Months Ended					12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Building [Member]	Jun. 30, 2012 Building [Member]	Jun. 30, 2013 Building [Member] Minimum [Member]	Jun. 30, 2013 Leasehold Improvements [Member]	Jun. 30, 2012 Leasehold Improvements [Member]	Jun. 30, 2013 Machinery and Equipment [Member]	Jun. 30, 2012 Machinery and Equipment [Member]	Jun. 30, 2013 Machinery and Equipment [Member] Minimum [Member]	Jun. 30, 2013 Machinery and Equipment [Member] Maximum [Member]
Property, Plant and Equipment [Line Items]
Balance	$ 30,543	$ 31,534	$ 278	$ 278		$ 2,567	$ 3,490	$ 27,698	$ 27,766
Depreciation Rates					3.00%					10.00%	50.00%
Accumulated depreciation	(26,170)	(26,060)
	$ 4,373	$ 5,474

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Note 13 - Loss Per Share

12 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 13 – Loss Per Share

Our basic and diluted losses per common share are computed as follows (in thousands except per share amounts):

	2013			2012
Numerator for basic and diluted earnings per share:
Net loss	$	(19,177	)	$	(3,652	)
Denominator for basic and diluted earnings per share		7,131			7,075
Loss per common share	$	(2.69	)	$	(0.52	)
Loss per common share assuming dilution	$	(2.69	)	$	(0.52	)

Potentially dilutive securities which could have had an antidilutive effect on our losses per share were (in thousands except per share amounts):

	2013		2012
Stock options (exercise prices per share: 2013 - $1.40 to $15.60; 2012 - $1.98 to $15.60)		132		277

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Note 9 - Share-Based Compensation

12 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 9 - Share-Based Compensation

Omnibus Plan

The Tandy Brands Accessories, Inc. 2012 Omnibus Plan (“Omnibus Plan”), approved by our stockholders in 2012, is designed to attract and retain the services of key management employees and members of our board of directors through the granting of incentive stock options (other than to directors), nonqualified stock options, performance units, stock appreciation rights, or restricted stock.  Restricted stock and stock option awards under the Omnibus Plan and prior stock option plans have a maximum contractual life of ten years and specific vesting terms and performance goals are addressed in each equity award grant.  All shares which were available for grant under our prior plans have been transferred to the Omnibus Plan and are authorized and reserved for issuance under the Omnibus Plan.  All shares of common stock presently authorized and reserved for issuance on the exercise of stock options or vesting of restricted stock will automatically be authorized and reserved for issuance under the Omnibus Plan on their cancellation, forfeiture, or expiration up to a maximum of 736,326 shares.  At June 30, 2013, there were 694,706 shares of common stock available for future grants.

A committee of non-employee members of our board of directors may grant awards to directors and employees.  Shares issued to satisfy awards may be from authorized but unissued common stock, treasury stock, or shares purchased on the open market.  Currently, we issue new shares under the Omnibus Plan.

Awards Granted

Restricted StockRestricted stock awards are not transferable, but bear rights of ownership including voting and dividend rights.  Awards to our non-employee directors vest annually at a rate of one-third per year, beginning one year after the grant date.  However, upon the death, disability, resignation, or termination of a non-employee director, that director’s shares generally become fully vested.  Consequently, there is no requisite service period and the fair value of the awards is expensed on the award date.  Restricted stock awarded to employees either cliff vests on the third anniversary of the award or vests at a rate of one-third per year.  The requisite service periods are either the vesting period or the total period over which multiple-tranche awards vest.  Although there are no performance requirements related to the vesting of restricted stock awarded to employees, participants must be continually employed through the vesting period.  We estimate the fair value of restricted stock awards to be the market price of our common stock on the award date.  As of June 30, 2013, no restricted stock awards granted to employees were outstanding.

	Number Of Shares			Weighted-Average Grant-Date Fair Value
Nonvested June 30, 2012		35,218		$	2.25
Granted		32,000			1.43
Vested		(15,588	)		2.45
Nonvested June 30, 2013		51,630			1.68

Restricted stock fair values on the vesting dates in fiscal 2013 and 2012 were $20,000 and $78,000, respectively.

Stock OptionsStock options granted to our non-employee directors are nonqualified and become fully vested six months after the grant date, the requisite service period.  Nonqualified options granted to employees vest annually at a rate of one-third per year, beginning one year after the grant date, and have a three-year requisite service period.

The exercise prices of our stock options are the grant-date market values of our common stock.  Their fair value is estimated using the Black-Scholes valuation model.  That model is used to estimate the fair value of traded options that have no vesting restrictions and are fully transferable.  Option valuation models require the input of highly subjective assumptions.  Because our stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect fair value estimates.

				Weighted-Average				Aggregate
	Number Of Shares			Exercise  Price		Remaining Contractual Term (Years)		Intrinsic Value ($000)
Outstanding June 30, 2012		269,316		$	10.22
Granted		35,000			1.40
Forfeited and cancelled		(199,319	)		9.74
Outstanding June 30, 2013		104,997			8.20
Vested and expected to vest		104,997			8.20		4.2	$	-
Exercisable		83,331			9.95		3.0		-

Performance Units  Performance units outstanding as of June 30, 2013 were awarded to certain employees in fiscal 2013.  For the award, the units earned during the applicable performance cycle vary from 0% to 200% of the units awarded based on our basic earnings per share for each year in the performance cycle, excluding the effects of accounting principles changes, extraordinary items, recognized capital gains and losses and, as determined by our board of directors, one-time, non-operating items.  Performance units generally cliff vest at the end of the applicable performance cycle.  Assuming continued employment, if, at the end of the performance cycle, at least the threshold performance level has been achieved, the performance units will cliff vest.  Notwithstanding the foregoing, employees vest in a portion of units earned based on the number of fiscal years employed during the cycle upon death, disability, or normal (age 65) or early (age 55 and 15 years service) retirement and, upon a change of control, employees vest in 100% of the units awarded under the fiscal 2013 awards.

Each performance unit has a $1.00 assigned value.  To the extent earned, performance units awarded are comprised 50% of cash and 50% of phantom shares of our common stock and, to the extent earned following the end of the two-year performance period, will generally be settled in cash (if shares are available under our benefit plans, the Board may, in its discretion, settle the phantom shares attributable to an award in shares of our common stock).

As of June 30, 2013, we expect none of the 950,000 units granted in fiscal 2013 to vest and be paid because performance measures for the two year period were either not met or are not expected to be met.

Expense  Share-based compensation expense of ($110,000) and $169,000 was recognized in fiscal 2013 and 2012, respectively, together with income tax benefits of ($41,000) and $62,000, respectively.  Estimated unrecognized expense of $11,000 remained at June 30, 2013 to be recognized over a weighted-average period of 1.7 years.  The number of stock options and performance units expected to vest in determining compensation expense to be recognized were estimated based on employment termination, forfeiture patterns, and actual and estimated earnings per share.

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Note 2 - Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Schedule of Inventory, Current [Table Text Block]

	2013		2012
Raw materials	$	3,772	$	3,416
Work-in-process		148		412
Finished goods		17,441		24,915
	$	21,361	$	28,743

Property, Plant and Equipment [Table Text Block]

		2013		2012	Depreciation Rates
Buildings	$	278	$	278	3%
Leasehold improvements		2,567		3,490	Lesser of lease term or asset life
Machinery and equipment		27,698		27,766	10	%	to	50	%
		30,543		31,534
Accumulated depreciation		(26,170)		(26,060)
	$	4,373	$	5,474

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Note 14 - Subsequent Events

12 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 14 – Subsequent Events

Effective July 24, 2013, we entered into new credit facilities with two lenders, Salus and King Trade.

In connection with the entry into these credit arrangements, we also entered into agreements with two significant licensors and three significant vendors to address outstanding accounts payable owed to these parties. Generally, the arrangements with these parties consist of the agreement (i) to pay a portion of the outstanding amount owed within specified time periods following the closing of the Credit Facility, and (ii) to pay the remainder of the outstanding amounts pursuant to unsecured, subordinated promissory notes. The aggregate amount financed through the use of the unsecured, subordinated promissory notes is $8.9 million and such notes bear interest at varying interest rates. Although the individual notes contain varying payment terms, the final principal and interest under such notes is due either July 15, 2014 or July 15, 2015.

On August 27, 2013 we announced the appointment of Roger R. Hemminghaus, a director since June 2000 and our lead independent director, as Chief Executive Officer and Chairman and a new plan of responsibilities for existing members of the management team, both of which were in response to the resignation of Rod McGeachy, our previous Chairman, Chief Executive Officer and President.

In connection with our March 2013 restructuring plan we ceased development and marketing of gifts under the Sharper Image® license and recognized all future obligations ($895,000) as set forth in the original license agreement.  In August 2013, we entered into a settlement agreement for the Sharper Image® license in which we would pay $350,000 to settle all remaining contractual obligations and terminate the license.  As a result of this settlement, we recognized a gain of $545,000 during first quarter fiscal 2014.

On September 26, 2013 we, along with our subsidiaries, H.A. Sheldon Canada, Ltd. and TBAC Investment Trust, and our senior lender Salus Capital Partners LLC, entered into a First Amendment to Credit Agreement, dated July 24, 2013 (the “Amendment”).  Pursuant to the Amendment, our lender formally waived the going concern qualification in the audit report as an event of default, our failure to satisfy a minimum availability requirement for certain weeks, and extended the time period to deliver certain post-close deliverables.

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Document And Entity Information (USD $)	12 Months Ended
	Jun. 30, 2013	Sep. 25, 2013	Dec. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	TANDY BRANDS ACCESSORIES INC
Document Type	10-K
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		7,161,713
Entity Public Float			$ 9,849,710
Amendment Flag	false
Entity Central Index Key	0000869487
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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Accounting Policies, by Policy (Policies)

12 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Fair Value Measurement, Policy [Policy Text Block]

Fair Values

We measure fair values using unadjusted quoted prices in active markets (Level 1 inputs), quoted prices for similar instruments in active or inactive markets, or other directly-observable factors (Level 2 inputs), or inputs that are unobservable and significant to the fair value measurement (Level 3 inputs).  Our financial instruments consist primarily of cash, trade receivables and payables, and our credit facility.  The carrying values of cash and trade receivables and payables are considered to be representative of their respective fair values.  Our credit facility, which was amended effective June 28, 2013, bears interest at floating market interest rates; therefore, we believe the fair value of amounts borrowed approximates the carrying value.  At June 30, 2013 and June 30, 2012, no other material financial assets or liabilities were measured at fair value.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash And Cash Equivalents

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

Receivables, Policy [Policy Text Block]

Accounts Receivable and Allowances

We perform periodic credit evaluations of our customers’ financial conditions and reserve against accounts deemed uncollectible based upon historical losses and customer specific events.  After all collection efforts are exhausted and an account is deemed uncollectible, it is written off against the allowance for doubtful accounts.  With the exception of a material customer account which ultimately resulted in an accounts receivable allowance of $900,000 in fiscal 2012, credit losses have historically been within our expectations and we generally do not require collateral.

Accounts receivable are net of an allowance for doubtful accounts, discounts and returns of $3.4 million and $3.9 million for fiscal 2013 and 2012, respectively.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market.  Cost includes the direct cost of purchased products (product, duty and freight) and, for manufactured products, procurement costs, materials, direct and indirect labor, and factory overhead.  Market, with respect to raw materials, is replacement cost and, with respect to work-in-process and finished goods, is net realizable value.  Inventories consist of (in thousands):

	2013		2012
Raw materials	$	3,772	$	3,416
Work-in-process		148		412
Finished goods		17,441		24,915
	$	21,361	$	28,743

Inventory deposits of $800,000 and $7.1 million were paid against future gift product deliveries from suppliers at June 30, 2013 and 2012, respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

Property And Equipment

Property and equipment are carried at cost less accumulated depreciation calculated using the straight-line method (in thousands):

		2013		2012	Depreciation Rates
Buildings	$	278	$	278	3%
Leasehold improvements		2,567		3,490	Lesser of lease term or asset life
Machinery and equipment		27,698		27,766	10	%	to	50	%
		30,543		31,534
Accumulated depreciation		(26,170)		(26,060)
	$	4,373	$	5,474

Depreciation expense: 2013 - $1,388; 2012 - $1,634

The net book value of accessories segment property and equipment no longer used in our operations is included in other current assets (2013 - $0.9 million; 2012 - $1.5 million) and is held for sale without expectation of incurring a loss; however, amounts actually realized from the sale of such property and equipment may differ from our estimates.

Maintenance and repairs are charged to expense as incurred.  Renewals and betterments which materially prolong the useful lives of the assets are capitalized.  The cost and related accumulated depreciation of assets retired or sold are removed from the accounts and gains or losses are recognized in operations upon disposition.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Intangibles And Impairment Of Long-Lived Assets

Finite-lived intangibles are amortized either using the straight-line method over their estimated useful lives (e.g., trade names) or using an undiscounted cash flows model (e.g., Chambers customer list).

We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an asset might be impaired.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to undiscounted future net cash flows they are expected to generate.  If the undiscounted cash flows are less than the carrying amount, the impairment recognized is measured by the amount the carrying value of the assets exceeds their fair value.

Indefinite-lived intangibles are assessed annually or sooner if a triggering event occurs, for impairment using a fair value method such as discounted cash flows.

Derivatives, Policy [Policy Text Block]

Derivative Instruments

We did not have any significant derivative activities as of June 30, 2013 and 2012 and we do not enter into derivative investments for the purpose of speculative investment.  Our overall risk management philosophy is re-evaluated as business conditions change.

Revenue Recognition, Policy [Policy Text Block]

Sales

Sales are recognized when merchandise is shipped and title to the goods has passed to the customer.  We record allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances, and customer returns, as a reduction of sales based upon historical experience, current trends in the retail industry, and individual customer and product experience.  Actual returns and allowances may differ from our estimates and differences would affect the operating results of subsequent periods.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

Costs And Expenses

Cost of goods sold includes our costs associated with the procurement and manufacture of inventory, such as the cost of inventory and raw materials purchased from overseas, costs of shipping from our suppliers, ticketing and labeling of product and, where applicable, labor and overhead related to our product manufacturing facilities.  SG&A includes our costs related to activities incurred in the normal course of business which are not associated with the procurement or production of inventory.  They also include costs associated with our distribution centers (2013 - $8.1 million; 2012 - $7.8 million).  Those amounts include $1.2 million and $1.3 million of shipping and handling expenses in fiscal 2013 and 2012, respectively.

Advertising Costs, Policy [Policy Text Block]

Advertising Costs

Advertising costs, consisting primarily of shows and conventions as well as display and print advertising, are expensed as they are incurred (2013 - $1.1 million; 2012 - $1.0 million).

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Compensation

Compensation expense for all share-based payments expected to vest is recognized on the straight-line basis over the requisite service period based on grant-date fair values.

Income Tax, Policy [Policy Text Block]

Income Taxes

Deferred income taxes are recognized for the future income tax effects of differences in the carrying amounts of assets and liabilities for financial reporting and income tax return purposes using enacted tax laws and rates.  A valuation allowance is recognized if it is more likely than not that some or all of a deferred tax asset may not be realized.  Tax liabilities, together with interest and applicable penalties included in the income tax provision, are recognized for the benefits of uncertain tax positions in the financial statements which more likely than not may not be realized.