<PAGE> 1
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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, 1997 COMMISSION FILE NUMBER 0-18927
TANDY BRANDS ACCESSORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<C> <C>
A DELAWARE CORPORATION
(State or other jurisdiction of incorporation
or organization) 75-2349915
690 E. LAMAR BLVD., SUITE 200 (I.R.S. Employer
ARLINGTON, TEXAS, 76011 Identification Number)
(Address of Principal Executive Offices)
</TABLE>
(Registrant's Telephone Number, Including Area Code) (817) 548-0090
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
Common Stock, Par Value $1 Per Share
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant (based on the closing price of such stock as reported on
September 5, 1997, through the National Market System of the National
Association of Securities Dealers Automated Quotation System) was approximately
$55,722,000.
There were 5,538,052 shares of common stock, $1.00 par value per share,
outstanding at September 5, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Annual Report to Stockholders for Fiscal Year Ended June 30, 1997
(incorporated by reference in Parts II and IV).
(b) Definitive Proxy Statement for the Annual Meeting to be held October
16, 1997 (incorporated by reference in Part III).
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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FORM 10-K
PART I
ITEM 1. BUSINESS.
Tandy Brands Accessories, Inc. ("the Company") designs, purchases,
manufactures and markets fine leather goods, accessories and neckwear for men,
women and children. The Company was incorporated on November 1, 1990. However,
the predecessor companies to its leather product manufacturing division
("Accessories") have been manufacturers and marketers of men's and boys' leather
accessories for more than 50 years and of neckwear for more than 10 years. Men's
accessories are marketed and manufactured through not only the Accessories
division, but also through Canterbury and H.A. Sheldon. In addition to its men's
accessories operations, the Company designs and markets women's and children's
accessories through Accessory Design Group, Inc. ("ADG") and Prince Gardner
("PG").
The Company's merchandising strategy is to provide value to retailers and
to the ultimate consumer through a wide range of quality products. The Company's
largest selling products are belts and personal leather goods. Management
estimates these items represented approximately 86%, 87%, and 88% of the
Company's sales in fiscal 1997, 1996 and 1995, respectively. Neckwear, women's
handbags, men's jewelry, shaving kits, umbrellas and other fashion accessories
collectively accounted for the remaining sales. Accessories, Canterbury, HAS, PG
and ADG sell their products to a variety of retail outlets, including national
chain stores, discount stores, major department stores, specialty stores,
catalogue retailers and the retail exchange operations of the United States
military. PG sells primarily women's belts, handbags and small leather
accessories. ADG's largest selling category is belts, followed by scarves,
hosiery, hair goods, evening accessories and various other fashion accessories.
Accessories manufactures and markets its leather goods primarily under the
labels HICKOK(R), GREG NORMAN COLLECTION(R), PRINCE GARDNER(R), BUGLE BOY(R),
TEX TAN(R), DUCKS UNLIMITED(R), DON LOPER of BEVERLY HILLS(R), JOHN WEITZ(R),
JONES NEW YORK(R), HAGGAR(R) and various private store labels. Although
Accessories' leather product lines include similar types of merchandise,
Accessories tailors each line to appeal to the customer base of the specific
channel of distribution. The HICKOK(R), BUGLE BOY(R), and JOHN WEITZ(R) lines
are sold principally through national chain stores and mass merchandisers. The
TEX TAN(R), GREG NORMAN COLLECTION(R), PRINCE GARDNER(R), DUCKS UNLIMITED(R),
DON LOPER of BEVERLY HILLS(R), HAGGAR(R) and JONES NEW YORK(R) lines are sold
primarily through men's specialty stores and department stores. TEX TAN(R) and
DON LOPER of BEVERLY HILLS(R) goods are also sold to military retail operations.
Neckwear is sold under the labels BARRY WELLS(R), DUCKS UNLIMITED(R),
LUCARELLI(R), RHYNECLIFF(R), LE-BIL'S(R), HICKOK(R), JAMES B. FAIRCHILD(R),
ORLEANS(R), CARLOS TOMASSINI(TM) and various private store labels, and is sold
through the majority of Accessories' channels of distribution. ADG and PG
products are marketed under various labels including PRINCE GARDNER(R), PRINCESS
GARDNER(R), JONES NEW YORK(R), ACCESSORY DESIGN GROUP, and under various private
store labels. Canterbury manufactures and markets its products under the
CANTERBURY(R) label and various private store labels. HAS manufactures and
markets its products under the label JONES NEW YORK(R), GREG NORMAN
COLLECTION(R), HAGGAR(R), KODIAK(R), DICKIES(R) and various private store
labels.
The Company designs all of its leather products, women's accessories and
neckwear. Generally, new product styles are introduced each Spring and Fall.
Wallets and certain other accessories are less subject to seasonal tastes and
fashion trends.
In order to reduce its exposure to periods of economic decline, the Company
has diversified its channels of distribution and increased sales to other mass
merchandisers and national chain and discount stores. Wal-Mart is the Company's
largest customer, representing 36%, 35% and 40% of its total sales for the
fiscal years
2
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ended June 30, 1997, 1996 and 1995, respectively. The Company has no long-term
contracts with any of its customers and all accounts are subject to periodic
reviews. The Company had firm backlog orders for fiscal years 1997 and 1996
totaling $6,257,000 and $5,056,000, respectively. Shipment of backlog orders in
fiscal 1998 is subject to product availability prior to customer order
cancellation dates.
The Company's marketing strategy is to develop and maintain relationships
with its retail accounts by emphasizing service and product value. The Company's
accounts are developed through the efforts of senior management, regional
managers, account executives and a sales organization of salespeople and
independent sales representatives. Senior management, regional managers, and
account executives are all utilized for concentrated, specialized selling to
national chain stores, discount stores, major department stores and catalogue
retailers. Salespeople are involved in selling and servicing most account types
and are primarily responsible for selling to specialty stores.
The Company adjusts the respective percentages of domestically manufactured
and imported products and the sources of imported products, as appropriate, to
reduce labor and material costs, to diversify its product lines and to reduce
exposure to interruption of its product flow. ADG and PG import the majority of
their product lines from various foreign sources.
The Company's inventory constitutes approximately 49% of total assets and
has historically turned over about twice a year. This is consistent with other
companies in the small leather goods and accessories industries, with slight
variations from year to year. This rate of turnover is due to the long lead
times associated with the purchase of raw materials to manufacture belts and the
Company's commitment to satisfy customers' rapid delivery requirements. The
major raw materials for the Company's products are readily available from a
variety of foreign and domestic sources.
The Company's operating results are subject to seasonal variations as well
as the status of the economy. Its sales and operating results are fairly
consistent throughout the fiscal year, but there is generally a seasonal
increase during the second fiscal quarter. Due to receipt of cash from seasonal
sales peaks and payment terms granted certain customers of Accessories, cash
receipts increases usually occur in December and June. Current financial
resources (working capital and borrowing arrangements) and anticipated funds
from operations are expected to be adequate to meet capital requirements in the
year ahead.
The Company owns the trademarks HICKOK(R), CANTERBURY(R), PRINCE
GARDNER(R), PRINCESS GARDNER(R), LUCARELLI(R), RHYNECLIFF(R), DON LOPER of
BEVERLY HILLS(R), CARLOS TOMASSINI(R), ORLEANS(R), BARRY WELLS(R), and
LE-BIL'S(R). The PRINCE GARDNER(R), PRINCESS GARDNER(R) and CANTERBURY(R) trade
names, as well as various trade names used by HAS, were purchased by the Company
through the acquisition transactions. Additionally, the Company holds licenses
to use the JONES NEW YORK(R), GREG NORMAN COLLECTION(R), BUGLE BOY(R), DUCKS
UNLIMITED(R), HAGGAR(R), TEX TAN(R), JOHN WEITZ(R), and JAMES B. FAIRCHILD(R)
trademarks. Generally, the license agreements require that the Company pay
annual royalties, ranging from 2% to 10%, based on minimum sales quotas or
sales. The terms of the agreements are typically 4 to 10 years, with options to
extend the terms, provided certain sales or royalty minimums are achieved. For
fiscal 1997, no license agreement sales accounted for 5% or more of the
Company's net sales.
COMPETITION
The market for finished leather goods, neckwear and women's accessories is
fragmented and highly competitive. There are numerous competitors who serve the
same customers and markets as the Company.
EMPLOYEES
The Company had approximately 669 employees at June 30, 1997. In the
opinion of the Company's management, employee relations are good. The Company's
employees are not subject to a collective bargaining agreement.
3
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ITEM 2. PROPERTIES.
The Company owns and operates a facility in Yoakum, Texas, which is used
for leather product manufacturing, product distribution and offices. This
facility has the capacity to manufacture approximately 4.5 million belts in a
year. During fiscal 1997, the Company's utilization averaged about 72%. The
Company leases facilities in Scarborough, Canada, and the Dominican Republic
which are used for the manufacturing of leather goods. Additionally, the Company
leases warehouse space in Dallas, Texas, for ADG and office space in Arlington,
Texas, for the corporate headquarters, ADG and PG. The Company has a renewal
option for its office space in Arlington. In the opinion of management, the
various corporate, ADG, PG, and HAS spaces are adequate and suitable for the
particular use involved. The Yoakum, Texas manufacturing and distribution
centers are considered adequate.
The total space owned, leased and occupied by the Company as of June 30,
1997, was as follows:
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APPROXIMATE SQUARE FEET
---------------------------
OWNED LEASED TOTAL
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<S> <C> <C> <C>
Warehouse and Office............................ 127,000 110,000 237,000
Factory......................................... 63,000 55,000 118,000
------- ------- -------
Total........................................... 190,000 165,000 355,000
======= ======= =======
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any material pending legal proceedings,
other than ordinary routine litigation incidental to the Company's business. No
material legal proceedings were terminated during the fourth quarter of the 1997
fiscal year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of the 1997 fiscal year.
4
<PAGE> 5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) The principal market for the registrant's common stock is the NASDAQ
National Market System. The high and low bid information for the Company's
common stock for each full quarterly period within the two most recent fiscal
years appears on page 24 of the Company's 1997 Annual Report to Stockholders,
which information is incorporated herein by reference.
(b) The approximate number of record holders of common stock on September
5, 1997, was 1,212.
(c) The Company has not paid any cash dividends since its inception and
does not intend to pay cash dividends in the foreseeable future. The Company
presently intends to retain earnings for use in its business, although there are
currently no restrictions on the Company's present or future ability to pay
dividends.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on page 24 of the 1997 Annual
Report to Stockholders, which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 20 through 23 of the
1997 Annual Report to Stockholders, which information is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages 6 through 24 of the
1997 Annual Report to Stockholders, which information is incorporated herein by
reference. Following is a cross reference for location of the requested
information:
<TABLE>
<CAPTION>
PAGE NUMBER
IN
THE
TANDY BRANDS
ACCESSORIES, INC.
1997 ANNUAL
REPORT TO
STOCKHOLDERS
-----------------
<S> <C>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income for the Years Ended June
30, 1997, 1996 and 1995................................... 6
Consolidated Balance Sheets at June 30, 1997 and 1996....... 7
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997, 1996 and 1995.............................. 8
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1997, 1996 and 1995.................. 9
Notes to Consolidated Financial Statements.................. 10-18
Selected Unaudited Quarterly Financial Data................. 18
Report of Independent Auditors.............................. 19
Selected Financial Data..................................... 24
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
5
<PAGE> 6
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item appears under the captions "Election
of Directors," "Executive Officers" and "Security Ownership of Certain
Beneficial Owners -- Compliance with Section 16(a) of the Securities Exchange
Act of 1934" included in the Company's definitive Proxy Statement relating to
the Company's 1997 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item appears under the caption "Executive
Compensation" included in the Company's definitive Proxy Statement relating to
the Company's 1997 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item appears under the caption "Security
Ownership of Certain Beneficial Owners" included in the Company's definitive
Proxy Statement relating to the Company's 1997 Annual Meeting of Stockholders,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
(1) The financial statements listed in response to Item 8 of this
Report have been incorporated herein by reference to pages 6
through 24 of the Company's 1997 Annual Report to Stockholders.
(2) Financial Statement Schedule:
Report of Independent Auditors on Financial Statement Schedule
For the three years in the period ended June 30, 1997, Schedule
II -- Valuation and Qualifying Accounts
The financial statement schedule should be read in conjunction
with the consolidated financial statements in the Company's 1997
Annual Report to Stockholders. Financial statement schedules not
included in this Report have been omitted because they are not
applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(3) Exhibits:
A list of the exhibits required to be filed as part of this Report
is set forth in the Index to Exhibits, which immediately precedes
such exhibits and is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of fiscal
1997.
6
<PAGE> 7
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/ J.S.B. JENKINS
------------------------------------
J.S.B. Jenkins
President and Chief Executive
Date: September 24, 1997 Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
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<CAPTION>
NAME POSITION DATE
---- -------- ----
<C> <S> <C>
/s/ CLAYTON E. NILES Director and Chairman September 24, 1997
- ----------------------------------------------------- of the Board
Clayton E. Niles
/s/ J.S.B. JENKINS Director September 24, 1997
- -----------------------------------------------------
J.S.B. Jenkins
/s/ DR. JAMES GAERTNER Director September 24, 1997
- -----------------------------------------------------
Dr. James Gaertner
/s/ C. A. RUNDELL, JR. Director September 24, 1997
- -----------------------------------------------------
C. A. Rundell, Jr.
/s/ ROBERT E. RUNICE Director September 24, 1997
- -----------------------------------------------------
Robert E. Runice
/s/ GENE STALLINGS Director September 24, 1997
- -----------------------------------------------------
Gene Stallings
/s/ MAXINE CLARK Director September 24, 1997
- -----------------------------------------------------
Maxine Clark
/s/ STANLEY T. NINEMIRE Senior Vice President and September 24, 1997
- ----------------------------------------------------- Chief Financial Officer
Stanley T. Ninemire
</TABLE>
7
<PAGE> 8
REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Tandy Brands Accessories, Inc.
We have audited the consolidated financial statements of Tandy Brands
Accessories, Inc. and subsidiaries as of June 30, 1997 and 1996, and for each of
the three years in the period ended June 30, 1997, and have issued our report
thereon dated August 7, 1997, incorporated by reference in this Annual Report on
Form 10-K. Our audits also included the financial statement schedule listed in
Item 14(a) of this Annual Report on Form 10-K. The schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Fort Worth, Texas
August 7, 1997
8
<PAGE> 9
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED JUNE 30,
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ----------------------------------- BALANCE AT
BEGINNING CHARGED TO COSTS CHARGED TO OTHER END OF
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS(1) PERIOD
----------- ---------- ---------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Allowance for
Doubtful Accounts
and Returns............... $606,000 $ 787,000 $-0- $ 317,000 $1,076,000
1996
Allowance for
Doubtful Accounts
and Returns............... $520,000 $ 343,000 $-0- $ 257,000 $ 606,000
1995
Allowance for
Doubtful Accounts
and Returns............... $379,000 $1,372,000 $-0- $1,231,000 $ 520,000
</TABLE>
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(1) Represents uncollectable accounts written off, net of recoveries.
9
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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
(IF APPLICABLE)
---------------------------------------
EXHIBIT NUMBER AND DESCRIPTION FORM DATE FILE NO. EXHIBIT
------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
(3) Articles of Incorporation and by-laws
3.1 Certificate of Incorporation of Tandy
Brands Accessories, Inc.................... S-1 11/02/90 33-37588 3.1
3.2 By-laws of Tandy Brands Accessories,
Inc........................................ S-1 11/02/90 33-37588 3.2
(4) Instruments defining the rights of security
holders, including indentures
4.1 Certificate of Designations, Powers,
Preferences, and Rights of Series A Junior
Participating Cumulative Preferred Stock of
Tandy Brands Accessories, Inc.............. S-1 11/02/90 33-37588 4.1
4.2 Form of Common Stock Certificates of Tandy
Brands Accessories, Inc.................... S-1 11/02/90 33-37588 4.2
4.3 Form of Preferred Share Purchase Rights
Certificate of Tandy Brands Accessories,
Inc........................................ S-1 11/02/90 33-37588 4.3
4.4 Rights Agreement dated November 7, 1990,
between Tandy Brands Accessories, Inc. and
First National Bank of Boston.............. S-1 11/02/90 33-37588 4.4
(10) Material Contracts
10.1 Form of Distribution Agreement dated
December 31, 1990, between The Bombay
Company, Inc. and Tandy Brands
Accessories, Inc.......................... S-1 11/02/90 33-37588 10.1
10.2 Form of Service Agreement dated December
31, 1990, between The Bombay Company, Inc.
and Tandy Brands Accessories, Inc......... S-1 11/02/90 33-37588 10.2
10.3 Form of Tax Sharing Agreement dated
December 31, 1990, between The Bombay
Company, Inc. and Tandy Brands
Accessories, Inc.......................... S-1 11/02/90 33-37588 10.3
10.4 Form of Purchase Agreement dated December
31, 1990, between The Bombay Company, Inc.
and Mr. J.S.B. Jenkins.................... S-1 11/02/90 33-37588 10.4
10.6 Tandy Brands Accessories, Inc. Stock
Purchase Program.......................... S-1 11/02/90 33-37588 10.6
10.7 Tandy Brands Accessories, Inc. Employees
Investment Plan........................... S-1 11/02/90 33-37588 10.7
*10.8 Tandy Brands Accessories, Inc. 1991 Stock
Option Plan............................... S-1 11/02/90 33-37588 10.8
</TABLE>
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<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
(IF APPLICABLE)
---------------------------------------
EXHIBIT NUMBER AND DESCRIPTION FORM DATE FILE NO. EXHIBIT
------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
*10.9 Form of Stock Option Agreement -- 1991
Stock Option Plan........................ S-1 11/02/90 33-37588 10.9
*10.10 Tandy Brands Accessories, Inc. Stock
Bonus Plan............................... S-1 11/02/90 33-37588 10.10
10.11 Tandy Brands Accessories, Inc. Family
Security Plan ........................... S-1 11/02/90 33-37588 10.11
10.12 Form of Agreement under Family Security
Plan..................................... S-1 11/02/90 33-37588 10.12
*10.13 Tandy Brands Accessories, Inc. Key
Executive Disability Plan................ S-1 11/02/90 33-37588 10.13
*10.14 Tandy Brands Accessories, Inc. Benefit
Restoration Plan and related Trust
Agreement and Amendments No. 1 and 2
thereto.................................. N/A N/A N/A N/A
10.15 Form of Indemnification Agreement between
Tandy Brands Accessories, Inc. and Each
of its directors and Officers............ S-1 11/02/90 33-37588 10.15
10.16 Office Lease Agreement dated March 6,
1991, between John Hancock Mutual Life
Insurance Co. and Tandy Brands
Accessories, Inc. relating to the
corporate offices........................ S-1 11/02/90 33-37588 10.16
10.17 Tandy Brands Accessories, Inc.
Nonqualified Formula Stock Option Plan
for Non-Employee Directors............... S-8 02/10/94 33-75114 28.1
*10.18 Tandy Brands Accessories, Inc. 1993
Employee Stock Option Plan and form of
Stock Option Agreement thereunder........ S-8 02/10/94 33-75114 28.2
10.19 Tandy Brands Accessories, Inc.
NonQualified Stock Option Plan for
Non-Employee Directors................... S-8 02/10/94 33-75114 28.3
10.20 Tandy Brands Accessories, Inc. 1995 Stock
Deferral Plan for Non-Employee
Directors................................ S-8 06/03/96 333-8579 99.1
10.21 Credit Agreement between Tandy Brands
Accessories, Inc. and Texas Commerce
Bank, N.A. dated as of June 30, 1994 and
Amendments No. 1, 2 and 3 thereto........ N/A N/A N/A N/A
10.22 Credit Agreements between Tandy Brands
Accessories, Inc. and NationsBank of
Texas, N.A. dated as of May 16, 1997..... N/A N/A N/A N/A
(11) Statement re computation of per share earnings
11.1 Earnings per share statement.............. N/A N/A N/A N/A
(13) Annual Report to security holders, Form 10-Q or
quarterly report to security holders
13.1 Annual Report to Stockholders of Tandy
Brands Accessories, Inc................... N/A N/A N/A N/A
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
(IF APPLICABLE)
---------------------------------------
EXHIBIT NUMBER AND DESCRIPTION FORM DATE FILE NO. EXHIBIT
------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
(21) Subsidiaries of the registrant
21.1 List of subsidiaries...................... N/A N/A N/A N/A
(23) Consents of experts and counsel
23.1 Consent of Ernst & Young LLP.............. N/A N/A N/A N/A
(27) Financial Data Schedule
27.1 Financial Data Schedule................... N/A N/A N/A N/A
</TABLE>
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* Management compensatory plan.
<PAGE> 1
EXHIBIT 10.14
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV - WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V - CREDITING OF CONTRIBUTIONS AND INCOME . . . . . . . . . . . . . 4
ARTICLE VI - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VII - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VIII - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . 5
ARTICLE IX - CLAIM REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . 7
ARTICLE X - LIMITATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE XI - LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS . . . . . . . . 8
ARTICLE XII - AMENDMENT TO OR TERMINATION OF THE PLAN . . . . . . . . . . . 9
ARTICLE XIII - STATUS OF PARTICIPANT AS UNSECURED CREDITOR . . . . . . . . 9
ARTICLE XIV - GENERAL AND MISCELLANEOUS . . . . . . . . . . . . . . . . . . 9
</TABLE>
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TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
PREAMBLE
WHEREAS, Tandy Brands Accessories, Inc. desires to establish a benefit
restoration plan for the exclusive benefit of a select group of its management
and highly compensated employees to restore retirement benefits on behalf of
such employees decreased due to limitations imposed by the Internal Revenue
Code of 1986;
WHEREAS, Tandy Brands Accessories, Inc. intends that any participant or
beneficiary under the Plan shall have the status of an unsecured general
creditor as to the plan and any trust fund established in connection with the
plan;
NOW, THEREFORE, Tandy Brands Accessories, Inc. hereby establishes the
Tandy Brands Accessories, Inc. Benefit Restoration Plan, effective July 1,
1993.
ARTICLE I
DEFINITIONS
1.1 "Account" shall mean the account or record maintained by the
Committee showing the monetary value of the individual interest in the Plan of
each Participant or Beneficiary. Accounts shall be maintained primarily for
accounting purposes and no segregation of the Accounts shall be required.
1.2 "Beneficiary" shall mean the Beneficiary designated under the
Employees Investment Plan, provided that a Participant may designate a
Beneficiary hereunder by delivering to the Committee a written beneficiary
designation, in the form provided by the Committee, executed specifically with
respect to this Plan.
1.3 "Board" shall mean the Board of Directors of Tandy Brands
Accessories, Inc.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and the rules and regulations promulgated
thereunder.
1.5 "Committee" shall mean the Administrative Committee appointed by
the Board pursuant to Article II of the Employees Investment Plan.
1.6 "Company" shall mean Tandy Brands Accessories, Inc. or its
successor or successors.
<PAGE> 4
1.7 "Disability" means a medically determinable physical or mental
impairment that, as determined by the Committee, is of such permanence and
degree that the Participant is, and for the indefinite future will be, unable
to perform substantial gainful activity commensurate with his professional or
other training, education, and experience, and comparable to his then or prior
services for the Company.
1.8 "Effective Date" shall mean July 1, 1993.
1.9 "Employees Investment Plan" shall mean the Tandy Brands
Accessories, Inc. Employees Investment Plan, as amended from time to time.
1.10 "Plan" shall mean the Tandy Brands Accessories, Inc. Benefit
Restoration Plan, as amended from time to time.
1.11 "Plan Year" shall mean the annual period beginning July 1 and
ending June 30, both dates inclusive of each year.
1.12 "Trust Agreement" shall mean the agreement, if any, including any
amendments thereto entered into between the Company and the Trustee for the
accumulation and investment of contributions made under the Plan.
1.13 "Trust Fund" shall mean the cash and other properties held and
administered by the Trustee pursuant to the Trust Agreement.
1.14 "Trustee" shall mean the designated trustee acting at any time
under the Trust Agreement.
1.15 "Valuation Date" shall mean the last day of each calendar
quarter.
ARTICLE II
ELIGIBILITY
Participation in the Plan shall be made available to a select group of
individuals providing services to the Company in key positions of management
and responsibility who are eligible to make contributions to the Employees
Investment Plan, the amount of which is reduced by reason of the application of
the limitations set forth in Sections 401(a)(17) or 402(g)(1) of the Code.
Such individuals may elect to participate hereunder by executing a
participation agreement in such form and at such time as the Committee shall
require, provided that each participation agreement shall be executed no later
than the last day of June immediately preceding the Plan Year for which an
individual elects to make contributions to the Plan in accordance with the
provisions of Section 3.1 hereof. Notwithstanding the foregoing, in the first
year in which an individual becomes eligible to participate in the Plan, he may
elect to participate in the Plan by
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<PAGE> 5
executing a participation agreement, in such form as the Committee shall
require, within thirty (30) days of the date on which he is notified by the
Committee of his eligibility to participate in the Plan. In such event, his
election to participate in the Plan shall become effective as of the first full
payroll period beginning in the calendar quarter immediately following the
Committee's receipt of his participation agreement. The determination as to
the eligibility of any individual to participate in the Plan shall be in the
sole and absolute discretion of the Board, whose decision in that regard shall
be conclusive and binding for all purposes hereunder.
ARTICLE III
CONTRIBUTIONS
3.1 For any Plan Year, a Participant may elect to defer a portion of
the gross salary and wages otherwise payable to him by the Company during such
Plan Year, in the amount set forth below. The amount which a Participant may
elect to defer under this Plan for any Plan Year is five percent (5%) of his
gross salary and wages, reduced by the total contributions made by the
Participant during such Plan Year to the Employees Investment Plan. For
purposes of this Section 3.1, "gross salary and wages" shall mean all
compensation paid in cash, including bonuses, and including contributions to
the Employees Investment Plan, the Company's Section 125 cafeteria plan and
this Plan.
3.2 Within thirty (30) days following the last day of each calendar
quarter, the Company shall make matching contributions to the Plan on behalf of
each Participant who has deferred amounts under the Plan during such calendar
quarter in accordance with the provisions of Section 3.1 above, other than
Participants who terminated service with the Company during such calendar
quarter. The matching contribution shall equal one hundred fifty percent
(150%) of the amount deferred by the Participant during such calendar quarter.
In no event shall matching contributions be made in stock or other securities
of the Company.
ARTICLE IV
WITHDRAWALS
4.1 In the event of an unforeseeable emergency, a Participant may
make a written request to the Committee for a hardship withdrawal from his
Account. For purposes of this Section, the term "unforeseeable emergency"
shall mean a severe financial hardship to the Participant resulting from a
sudden and unexpected illness or accident of the Participant or of a dependent
(as defined in Section 152(a) of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. Any determination of the existence of an unforeseeable
emergency and the amount to be withdrawn on account thereof shall be made by
the Committee. However, notwithstanding the foregoing, a withdrawal will not
be permitted
-3-
<PAGE> 6
to the extent that the financial hardship is or may be relieved: (i) through
reimbursement or compensation by insurance or otherwise, or (ii) by liquidation
of the Participant's assets, to the extent that liquidation of such assets
would not itself cause severe financial hardship. In no event shall the need
to send a Participant's child to college or the desire to purchase a home be
deemed to constitute an unforeseeable emergency. No member of the Committee
shall vote or decide upon any matter relating to the determination of the
existence of his own financial hardship or the amount to be withdrawn by him on
account thereof. A request for a hardship withdrawal must be made in writing
on a form provided by the Committee, and must be expressed as a specific dollar
amount. The amount of a hardship withdrawal may not exceed the amount required
to meet the severe financial hardship. All hardship withdrawals shall be paid
in a lump sum in cash.
ARTICLE V
CREDITING OF CONTRIBUTIONS AND INCOME
5.1 All amounts deferred by a Participant pursuant to the provisions
of Section 3.1 hereof and all Company matching contributions shall be credited
to the Account of the Participant. All payments from an Account between
Valuation Dates shall be charged against the Account as of the preceding
Valuation Date.
5.2 The amounts credited to Participants' Accounts shall be invested
and, except as otherwise provided in the Plan, as of each Valuation Date, the
Committee shall credit to each Participant's Account the income, gains, losses,
and other credits or charges attributable thereto.
ARTICLE VI
BENEFITS
6.1 Upon the death of a Participant, the Beneficiary of such
Participant shall be entitled to the entire value of the Participant's Account,
as of the Valuation Date coincident with or preceding the date of distribution,
increased by the amount of Participant deferrals, if any, after such Valuation
Date. If a Participant fails to name a Beneficiary, or if the Beneficiary
named by a Participant predeceases him or dies before complete distribution of
the Participant's Account, then the entire value of the Participant's Account
shall be paid pursuant to the provisions of Section 6.12 of the Employees
Investment Plan.
6.2 In the event of the termination of service of a Participant for
reasons other than death, the Participant shall be entitled to the entire value
of his Account, as of the Valuation Date coincident with or next preceding the
date of distribution, increased by the amount of Participant deferrals, if any,
after such Valuation Date.
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<PAGE> 7
ARTICLE VII
PAYMENT OF BENEFITS
7.1 The payment of a Participant's benefit shall be made either in a
lump sum in cash, or in cash payments in monthly installments over a period
certain not exceeding ten (10) years, such method of payment to be elected by
the Participant on his initial participation agreement. Payment shall commence
at the time specified by the Participant on his initial participation
agreement, but in no event later than sixty (60) days following the calendar
year in which the Participant attains age sixty-five (65).
7.2 Notwithstanding the provisions of Section 7.1, the benefits
payable hereunder may be paid before they would otherwise be due if, based on a
change in the federal or applicable state tax or revenue laws, a published
ruling or similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a Beneficiary, or a closing
agreement made under Section 7121 of the Code that is approved by the Internal
Revenue Service and involves a Participant, the Committee determines that a
Participant has or will recognize income for federal or state income tax
purposes with respect to amounts that are or will be payable under the Plan
before they otherwise would be paid. The amount of any payments pursuant to
this Section 7.2 shall not exceed the lesser of (i) the amount in the
Participant's Account or (ii) the amount of taxable income with respect to
which the tax liability is assessed or determined.
7.3 The payment of benefits under the Plan shall begin at the date
specified by the Participant, in accordance with the provisions of Section 7.1
hereof; provided that, in case of administrative necessity, the starting date
of payment of benefits may be delayed up to thirty (30) days as long as such
delay does not result in the Participant or Beneficiary receiving the
distribution in a different taxable year than he would if no such delay had
occurred.
ARTICLE VIII
ADMINISTRATION OF THE PLAN
8.1 The Company may establish a Trust Fund for the purpose of
retaining assets set aside by the Company pursuant to the Trust Agreement for
payment of all or a portion of the benefits payable pursuant to the Plan. Any
benefits not paid from a Trust shall be paid from the Company's general assets.
The Trust Fund, if such shall be established, shall be subject to the claims of
general creditors of the Company in the event the Company is Insolvent, as
defined in the Trust Agreement.
8.2 Any benefits payable under the Employees Investment Plan shall be
payable solely in accordance with the terms and provisions thereof, and nothing
in this Agreement shall operate
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<PAGE> 8
or be construed in any way to modify, amend or affect the terms and provisions
of the Employees Investment Plan.
8.3 The Committee shall perform any act which the Plan authorizes
expressed by a vote at a meeting or in a writing signed by a majority of its
members without a meeting. The Committee may, by a writing signed by a
majority of its members, appoint any member of the Committee to act on behalf
of the Committee. Any person who is a member of the Committee shall not vote
or decide upon any matter relating solely to himself or vote in any case in
which his individual right or claim to any benefit under the Plan is
particularly involved. If, in any matter or case in which a person is so
disqualified to act, the remaining persons constituting the Committee cannot
resolve such matter or case, the Board will appoint a temporary substitute to
exercise all the powers of the disqualified person concerning the matter or
case in which he is disqualified.
8.4 (a) The Committee may designate in writing other persons to
carry out its responsibilities under the Plan. The Committee may remove any
person designated to carry out its responsibilities under the Plan by notice in
writing to that person.
(b) The Committee may employ persons to render advice with
regard to any of its responsibilities. Charges for all services rendered shall
be paid by the Company.
(c) The Company shall indemnify and hold harmless each member
of the Committee from and against any and all claims and expenses (including,
without limitation, attorney's fees and related costs), in connection with the
performance by the person of his duties in that capacity, other than any of the
foregoing arising in connection with the willful neglect or willful misconduct
of the person so acting.
8.5 The Committee shall establish rules, not contrary to the
provisions of the Plan, for the administration of the Plan and the transaction
of its business. The Committee shall interpret the Plan in its sole and
absolute discretion, and shall determine all questions arising in the
administration, interpretation and application of the Plan. All determinations
of the Committee shall be conclusive and binding on all employees, Participants
and Beneficiaries, subject to the provisions of this Plan and applicable law.
8.6 Any action to be taken by the Company shall be taken by
resolution adopted by the Board or an executive committee thereof; provided,
however, that by resolution, the Board or an executive committee thereof may
delegate to any officer of the Company the authority to take any actions
hereunder, other than the power to amend or terminate the Plan.
-6-
<PAGE> 9
ARTICLE IX
CLAIM REVIEW PROCEDURE
9.1 In the event that a Participant or Beneficiary is denied a claim
for benefits under this Plan (the "claimant"), the Committee shall provide to
the claimant written notice of the denial which shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on which
the Committee based its denial;
(c) a description of any additional material or information
needed for the claimant to perfect the claim and an explanation of why
the material or information is needed;
(d) a statement that the claimant may:
(i) Request a review upon written application to the
Committee;
(ii) Review pertinent Plan documents; and
(iii) Submit issues and comments in writing; and
(e) That any appeal the claimant wishes to make of the adverse
determination must be in writing to the Committee within sixty (60) days
after receipt of the Committee's notice of denial of benefits. The
Committee's notice must further advise the claimant that his failure to
appeal the action to the Committee in writing within the sixty (60) day
period will render the Committee's determination final, binding, and
conclusive.
9.2 If the claimant should appeal to the Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Committee
shall re-examine all facts related to the appeal and make a final determination
as to whether the denial of benefits is justified under the circumstances. The
Committee shall advise the claimant in writing of its decision on his appeal,
the specific reasons for the decision, and the specific Plan provisions on
which the decision is based. The notice of the decision shall be given within
sixty (60) days of the claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the sixty (60) day period infeasible, but in no event shall the Committee
render a decision regarding the denial of a claim for benefits later than 120
days after its receipt of a request for review. If an extension of time for
review is required because of special circumstances, written notice of the
extension shall be furnished to the claimant prior to the date the extension
period commences.
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<PAGE> 10
9.3 The Committee's notice of denial of benefits shall identify the
address to which the claimant may forward his appeal.
ARTICLE X
LIMITATION OF RIGHTS
The establishment of this Plan shall not be construed as giving to any
Participant, employee of the Company or any person whomsoever, any legal,
equitable or other rights against the Company, or its officers, directors,
agents or shareholders, or as giving to any Participant or Beneficiary any
equity or other interest in the assets or business of the Company or shares of
Company stock or as giving any employee the right to be retained in the
employment of the Company. All employees of the Company and Participants shall
be subject to discharge to the same extent they would have been if this Plan
had never been adopted. The rights of a Participant hereunder shall be solely
those of an unsecured general creditor of the Company.
ARTICLE XI
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
11.1 No benefit which shall be payable under the Plan to any person
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of the same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for or against any person, except to
the extent required by law.
11.2 Whenever any benefit which shall be payable under the Plan is to
be paid to or for the benefit of any person who is then a minor or determined
by the Committee to be incompetent by qualified medical advice, the Committee
need not require the appointment of a guardian or custodian, but shall be
authorized to cause the same to be paid over to the person having custody of
the minor or incompetent, or to cause the same to be paid to the minor or
incompetent without the intervention of a guardian or custodian, or to cause
the same to be paid to a legal guardian or custodian of the minor or
incompetent if one has been appointed or to cause the same to be used for the
benefit of the minor or incompetent.
-8-
<PAGE> 11
ARTICLE XII
AMENDMENT TO OR TERMINATION OF THE PLAN
The Company reserves the right at any time to amend or terminate the
Plan in whole or in part. No amendments shall have the effect of retroactively
changing or depriving Participants or Beneficiaries of rights already accrued
under the Plan. In the event that the Company shall change its name, the Plan
shall be deemed to be amended to reflect the name change without further action
of the Company, and the language of the Plan shall be changed accordingly.
ARTICLE XIII
STATUS OF PARTICIPANT AS UNSECURED CREDITOR
All benefits under the Plan shall be the unsecured obligations of the
Company and, except for those assets which may be placed in a Trust Fund
established in connection with this Plan, no assets will be placed in trust or
otherwise segregated from the general assets of the Company for the payment of
obligations hereunder. To the extent that any person acquires a right to
receive payments hereunder, such right shall be no greater than the right of
any unsecured general creditor of the Company.
ARTICLE XIV
GENERAL AND MISCELLANEOUS
14.1 Severability. In the event that any provision of this Plan shall
be declared illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining provisions of this Plan but shall be fully
severable and this Plan shall be construed and enforced as if said illegal or
invalid provision had never been inserted herein.
14.2 Construction. The section headings and numbers are included only
for convenience of reference and are not to be taken as limiting or extending
the meaning of any of the terms and provisions of this Plan. Whenever
appropriate, words used in the singular shall include the plural or the plural
may be read as the singular. When used herein, the masculine gender includes
the feminine gender.
14.3 Governing Law. The validity and effect of this Plan and the
rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the laws of the State of Texas unless superseded
by federal law.
14.4 No Requirement to Fund. The Company is not required to set aside
any assets for payment of the benefits provided under this Plan; however, it
may do so as provided in the Trust
-9-
<PAGE> 12
Agreement. A Participant shall have no security interest in any such amounts.
It is the Company's intention that this Plan be construed as a plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees.
14.5 Taxes. All amounts payable hereunder shall be reduced by any and
all federal, state and local taxes imposed upon the Participant or his
Beneficiary which are required to be paid or withheld by the Company.
IN WITNESS WHEREOF, Tandy Brands Accessories, Inc., the Company, has
caused its corporate seal to be affixed hereto and these presents to be duly
executed in its name and behalf by its proper officers thereunto duly
authorized as of the date first written above.
COMPANY:
TANDY BRANDS ACCESSORIES, INC.
By: /s/ J.S.B. Jenkins
------------------------------
ATTEST:
- ---------------------------------
(Title)
[CORPORATE SEAL]
-10-
<PAGE> 13
AMENDMENT NO. 1 TO THE
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
Pursuant to the authority of the Board of Directors of Tandy Brands
Accessories, Inc., and the provisions of Article XII thereof, the Tandy Brands
Accessories, Inc. Benefit Restoration Plan is hereby amended effective as of
April 1, 1996, in the following respect only:
Article II is hereby amended and restated as follows:
"Article II
Eligibility
Participation in the Plan shall be made available to a select
group of individuals providing services to the Company in key positions
of management and responsibility who are eligible to make contributions
to the Employees Investment Plan, the amount of which is reduced by
reason of the application of the limitations set forth in Sections
401(a)(17) or 402(g)(1) of the Code. Such individuals may elect to
participate hereunder by executing a participation agreement in such
form and at such time as the Committee shall require, provided that each
participation agreement shall be executed no later than the last day of
June immediately preceding the Plan Year for which an individual elects
to make contributions to the Plan in accordance with the provisions of
Section 3.1 hereof. Notwithstanding the foregoing, in the first year in
which an individual becomes eligible to participate in the Plan, he may
elect to participate in the Plan by executing a participation agreement,
in such form as the Committee shall require, within thirty (30) days of
the date on which he is notified by the Chief Executive Officer of the
Company ("Chief Executive Officer") of his eligibility to participate in
the Plan. In such event, his election to participate in the Plan shall
become effective as of the first full payroll period immediately
following the Chief Executive Officer's receipt of his participation
agreement. The determination as to the eligibility of any individual to
participate in the Plan shall be in the sole and absolute discretion of
the Chief Executive Officer, whose decision in that regard shall be
conclusive and binding for all purposes hereunder."
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising Amendment No. 1 to the Tandy Brands
Accessories, Inc. Benefit Restoration Plan, the Company has caused its
corporate seal to be affixed hereto and these
<PAGE> 14
presents to be duly executed in its name and behalf by its proper officers
thereunto duly authorized this 1st day of April, 1996.
ATTEST: TANDY BRANDS ACCESSORIES, INC.
By: /s/ J.S.B. Jenkins
- ----------------------------- -----------------------------
Secretary President
<PAGE> 15
AMENDMENT NO. 2
TO THE
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
This Amendment No. 2 to the Tandy Brands Accessories, Inc. Benefit
Restoration Plan ("Amendment") is made this 8th day of July, 1997, by Tandy
Brands Accessories, Inc., a corporation duly organized and existing under the
laws of the State of Delaware ("Company").
WHEREAS, the Company desires to amend the Tandy Brands Accessories, Inc.
Benefit Restoration Plan ("Plan") to permit participants under the Plan to
direct the investment of certain amounts credited to their separate accounts in
certain permitted investments;
WHEREAS, pursuant to Article XII of the Plan, the Plan may be amended by
the Company.
NOW, THEREFORE, effective June 12, 1997, Section 5.2 of the Plan is
hereby amended and restated as follows:
5.2 The amounts credited to each Participant's Account shall be
separated into two Sub-Accounts: the "First Sub-Account" and the "Second
Sub-Account." The First Sub-Account shall be credited with the Participant's
contributions pursuant to Section 3.1 of the Plan and earnings and losses
thereon. The amounts credited to each Participant's First Sub-Account shall be
invested at the direction of each Participant, provided, however, such
investment direction may only be made among those investment options
established from time to time by the Committee, which options shall be listed
on an Exhibit A attached hereto. (Exhibit A also contains policies to be
followed with Participant direction of investments.) Each Participant is only
authorized to direct the investment of amounts credited to his First
Sub-Account. Participant direction of investments may only be made once every
six (6) months, unless otherwise determined by the Committee. The Second
Sub-Account shall be credited with Company matching contributions made pursuant
to Section 3.2 of the Plan and earnings and losses thereon. Each Participant's
Second Sub-Account shall be invested solely in Company stock.
AMENDMENT NO. 2 TO THE
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN - PAGE 1
<PAGE> 16
IN WITNESS WHEREOF, this Amendment is adopted this 8th day of July,
1997.
ATTEST: TANDY BRANDS ACCESSORIES, INC.
/s/ Stanley T. Ninemire By: /s/ J.S.B. Jenkins
- ------------------------------- ------------------------------
Assistant Secretary Chief Executive Officer
AMENDMENT NO. 2 TO THE
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN - PAGE 2
<PAGE> 17
EXHIBIT A
INVESTMENT POLICY
FOR
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
Be it resolved that this investment policy is hereby established by the
Administrative Committee ("Committee") under the Tandy Brands Accessories, Inc.
Benefit Restoration Plan ("Plan") for Texas Commerce Bank National Association
("TCB") and this policy shall be reviewed periodically and adjusted as
necessary in the light of such reviews.
PURPOSE:
The purpose of this investment policy is to establish an understanding between
the Committee and TCB, regarding the asset options of the Plan and those of the
employee participants and beneficiaries.
The primary goal of the Plan is to establish a benefit restoration plan for the
exclusive benefit of a select group of the management and highly compensated
employees of Tandy Brands Accessories, Inc. ("Company") to restore retirement
benefits on behalf of such employees decreased due to limitations imposed by
the Internal Revenue Code of 1986. Although the Employer intends that any
participant or beneficiary under the Plan shall have the status of an unsecured
general creditor as to the Plan and any trust fund established in connection
with the Plan, the Employer has empowered (for participant contributions only)
each participant to select from the options listed below those funds which meet
his or her unique risk and return objective and has enabled each participant to
exercise independent control of the investment of assets for his or her
separate account. Such funds are to be held and invested by TCB, to the extent
not required for the payment of benefits under the Plan.
The overall investment goal of the Plan is to allow each participant through
their investment selection to achieve a long-term total return, resulting from
tax-exempt income, capital appreciation or both. Capital preservation is also a
primary investment consideration.
The investment options are the responsibility of and have been selected by the
Employer and/or Committee of the Plan.
RESPONSIBILITY AND AUTHORITY OF THE TRUSTEE:
It shall be the responsibility and authority of TCB, to effect investment
directives received by it from the fiduciary with investment discretion. These
directives, when received in proper form, will be executed as soon as it is
administratively feasible.
INVESTMENT OPTIONS:
The following funds are available for investment as directed by Plan
Participants:
Texas Commerce Bank Tax-Exempt Money Market Trust
1
<PAGE> 18
Texas Commerce Bank Short Intermediate Municipal Bond Trust
Texas Commerce Bank Limited Term Tax-Exempt Trust
Texas Commerce Bank Tax-Exempt Trust
Tandy Brand Accessories, Inc. Common Stock*
*NOTE: Stock trades shall be executed within a reasonable period of time after
receipt of contributions into the Trust. A reasonable period of time is defined
in this instance to be "within five (5) business days". Sales of stock will use
the same reasonable period of time definition dating from the later of the
receipt or effective date of the investment election form.
Any account balances which have not been directed by the Participant (other
than Employer Matching Contributions, which shall be invested in Employer
Stock) will be invested in the Texas Commerce Bank Tax-Exempt Money Market
Trust Fund.
PARTICIPANT RESTRICTIONS:
A participant may make a direction of investments only once every six (6)
months, on January 1 or July 1, unless otherwise determined by the Committee.
Investment election percentages are in 10% increments.
The participant will initially and periodically receive a fund fact sheet or
other pertinent information on the investment options selected by the
Committee. Changes in the investment options will be communicated to the
participants in a timely manner and will be implemented on a date agreed to
between TCB and the Committee.
REVIEW PROCESS:
The Committee will periodically review the investment performance and
appropriateness of the investment options.
AFFIRMATION:
This policy statement shall in no way diminish or alter TCB's, the Employer's
or the Committee's responsibilities as set forth in the Plan and Trust.
Executed this 8 day of July, 1997 by the undersigned Committee of the Tandy
Brands Accessories, Inc. Benefit Restoration Plan.
/s/ J. B. JENKINS
-----------------------------
-----------------------------
Committee
2
<PAGE> 19
TRUST UNDER
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
This Agreement made this 8th day of March, 1994, by and between TANDY
BRANDS ACCESSORIES, INC. a corporation duly organized and existing under the
laws of the State of Delaware (Company) and TEXAS COMMERCE BANK FORT WORTH,
N.A., a national banking association (Trustee);
WHEREAS, Company has adopted the nonqualified deferred compensation plan
as listed in Appendix A;
WHEREAS, Company has incurred or expects to incur liability under the
terms of such plan with respect to the individuals participating in such plan;
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust $2,613.17, which
shall become the principal of the Trust to be held, administered and disposed
of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established is revocable by Company; it shall
become irrevocable upon a change of control, as defined herein. Upon such
change of control, as defined herein, the President of the Company shall give
written notification of such event to the Trustee.
<PAGE> 20
(c) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan and this Trust Agreement shall
be mere unsecured contractual rights of Plan participants and their
beneficiaries against Company. Any assets held by the Trust will be subject to
the claims of Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with trustee
to augment the principal to be held, administered and disposed of by Trustee as
provided in this Trust Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional deposits.
Section 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to Trustee for determining the amounts so payable, the
form in which such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan participants
and their beneficiaries in accordance with such Payment Schedule. The Trustee
shall make provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan shall be determined by Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
-2-
<PAGE> 21
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such payment as it
falls due. Trustee shall notify Company where principal and earnings are not
sufficient.
Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT
(a) Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to
pay its debts as they become due, or (ii) Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the President of Company shall
have the duty to inform Trustee in writing of Company's Insolvency. If
a person claiming to be a creditor of Company alleges in writing to
Trustee that Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to
be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable basis for making
a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the
benefit of Company's general creditors. Nothing in this Trust Agreement
shall in any way diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of Company
with respect to benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments,
-3-
<PAGE> 22
the first payment following such discontinuance shall include the aggregate
amount of all payments due to Plan participants or their beneficiaries under
the terms of the Plan for the period of such discontinuance, less the aggregate
amount of any payments made to Plan participants or their beneficiaries by
Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
Section 4. PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return
to Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant
to the terms of the Plan.
Section 5. INVESTMENT AUTHORITY
In no event may Trustee invest in securities (including stock or rights
to acquire stock) or obligations issued by Company, other than a de minimis
amount held in common investment vehicles in which Trustee invests. All rights
associated with assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or rest with
Plan participants. Company shall have the right at any time, and from time to
time, in its sole discretion, to substitute assets of equal fair market value
for any asset held by the Trust. The Trustee shall invest and reinvest the
principal and income of the Trust Fund and keep the Trust Fund invested,
without distinction between principal and income, in such property, either real
or personal, including insurance contracts, securities, U.S. Treasury Bills,
Notes or Bonds, U.S. Government Agency issues, time deposits, certificates of
deposit, commercial paper, bankers' acceptances, repurchase agreements and
pooled short-term investment funds, as the Trustee in its sole discretion shall
determine.
Section 6. DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within ninety (90) days following the close of each
calendar year and within ninety (90) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and
-4-
<PAGE> 23
other transactions effected by it, including a description of all securities
and investments purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or resignation,
as the case may be.
Section 8. RESPONSIBILITY OF TRUSTEE
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company. In the event of a dispute
between Company and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's reasonable costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be primarily
liable for such payments. If Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, Trustee may obtain payment from the
Trust.
(c) Trustee may consult with legal counsel (who may also be counsel
for Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
-5-
<PAGE> 24
Section 9. COMPENSATION AND EXPENSES OF TRUSTEE
Company shall pay all administrative and Trustee's fees and expenses.
If not so paid, the fees and expenses shall be paid from the Trust.
Section 10. RESIGNATION AND REMOVAL OF TRUSTEE
(a) Trustee may resign at any time by written notice to Company,
which shall be effective sixty (60) days after receipt of such notice unless
Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on sixty (60) days notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within sixty (60) days
after receipt of notice of resignation, removal or transfer, unless Company
extends the time limit.
(d) If Trustee resigns or its removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 11. APPOINTMENT OF SUCCESSOR
(a) If Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new trustee, who
shall have all of the rights and powers of the former trustee, including
ownership rights in the Trust assets. The former trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior trustee and may retain or dispose of existing Trust assets, subject
to Sections 7 and 8 hereof. The successor trustee shall not be responsible for
any action or inaction of any prior trustee or from any other past event, or
any condition existing at the time it becomes successor trustee.
-6-
<PAGE> 25
Section 12. AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan, unless sooner revoked in accordance with
Section 1(b) hereof. Upon termination of the Trust any assets remaining in the
Trust shall be returned to Company.
(c) Upon written approval of participants or beneficiaries entitled
to payment of benefits pursuant to the terms of the Plan, Company may terminate
this Trust prior to the time all benefit payments under the Plan have been
made. All assets in the Trust at termination shall be returned to Company.
Section 13. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity) alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) For purposes of this trust, change of control shall mean the
occurrence of any of the following events: (i) any "person" or "group" of
persons, as such terms are used in Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than any employee
benefit plan sponsored by the Company, becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange Act, of thirty percent (30%) or more
of the outstanding shares of the Company's stock entitled to vote for the
election of directors; or (ii) any shares of any class of the Company's stock
are purchased pursuant to a tender or exchange offer other than an offer by the
Company; or (iii) the dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the Company or any sale or other
disposition of all or substantially all of its assets, if the stockholders of
the Company immediately before such transaction own, immediately after
consummation of such transaction, equity securities
-7-
<PAGE> 26
(other than options and other rights to acquire equity securities) possessing
less than thirty percent (30%) of the voting power of the surviving or
acquiring corporation.
Section 14. EFFECTIVE DATE
The effective date of this Trust Agreement shall be as of the day and
year first above written.
COMPANY:
ATTEST: TANDY BRANDS ACCESSORIES, INC.
/s/ Stanley T. Ninemire By: /s/ J.S.B. Jenkins
- ----------------------------- -----------------------------
Assistant Secretary President
TRUSTEE:
ATTEST: TEXAS COMMERCE BANK FORT WORTH, N.A.
By: /s/ Nancy N. Black
- ----------------------------- -----------------------------
Cashier
-8-
<PAGE> 27
Appendix A
Tandy Brands Accessories, Inc. Benefit Restoration Plan
<PAGE> 28
AMENDMENT NO. 1 TO THE TRUST
UNDER TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
This Amendment No. 1 to the Trust under Tandy Brands Accessories, Inc.
Benefit Restoration Plan ("Amendment") is made this 8th day of March, 1996, by
Tandy Brands Accessories, Inc., a corporation duly organized and existing under
the laws of the State of Delaware ("Company") and Texas Commerce Bank Fort
Worth, N.A., a national banking association ("Trustee").
WHEREAS, in connection with the Company's adoption of the Tandy Brands
Accessories, Inc. Benefit Restoration Plan, the Trust under Tandy Brands
Accessories, Inc. Benefit Restoration Plan ("Trust") was established by the
Company and the Trustee;
WHEREAS, the Company and the Trustee desire to amend the Trust to permit
the Trustee to invest in securities issued by the Company; and
WHEREAS, pursuant to Section 12 of the Trust, the Trust may be amended
by a written instrument executed by the Trustee and the Company.
NOW, THEREFORE, the Trust is hereby amended in the following respect
only:
Section 5 is hereby amended and restated as follows:
Section 5. INVESTMENT AUTHORITY
Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights associated
with assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or rest
with Plan participants, except that voting rights with respect to Trust
assets will be exercised by Company. Company shall have the right at
any time, and from time to time, in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. The
Trustee shall invest and reinvest the principal and income of the Trust
Fund and keep the Trust Fund invested, without distinction between
principal and income, in such property, either real or personal,
including insurance contracts, securities (including securities of the
Company), U.S. Treasury Bills, Notes or Bonds, U.S. Government Agency
issues, time deposits, certificates of deposit, commercial paper,
bankers' acceptances, repurchase agreements, and pooled short-term
investment funds, as the Trustee in its sole discretion shall determine.
<PAGE> 29
IN WITNESS WHEREOF, this Amendment is adopted this 8th day of March,
1996, to be effective as of such date.
COMPANY:
ATTEST: TANDY BRANDS ACCESSORIES, INC.
/s/ R. Bruce Cole By: /s/ J.S.B. Jenkins
- ------------------------------- -------------------------------
Secretary President
TRUSTEE:
ATTEST: TEXAS COMMERCE BANK FORT WORTH, N.A.
/s/ Susan R. Gazzola By: /s/ Stephanie R. Beatty
- ------------------------------- -------------------------------
Witness
<PAGE> 30
AMENDMENT NO. 2
TO THE TRUST UNDER
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
This Amendment No. 2 to the Trust under Tandy Brands Accessories, Inc.
Benefit Restoration Plan ("Amendment") is made this 8th day of July, 1997, by
Tandy Brands Accessories, Inc., a corporation organized and existing under the
laws of the State of Delaware ("Company") and Texas Commerce Bank Fort Worth,
N.A., a national banking association ("Trustee").
WHEREAS, in connection with the Company's adoption of the Tandy Brands
Accessories, Inc. Benefit Restoration Plan ("Plan"), the Trust under Tandy
Brands Accessories, Inc. Benefit Restoration Plan ("Trust") was established by
the Company and the Trustee;
WHEREAS, the Company and the Trustee desire to amend the Trust to permit
participants under the Plan to direct the investment of certain amounts
credited to their separate accounts under the Plan in certain permitted
investments; and
WHEREAS, pursuant to Section 12 of the Trust, the Trust may be amended
by a written instrument executed by the Trustee and the Company.
NOW, THEREFORE, effective June 12, 1997, Section 5 of the Trust is
hereby amended and restated as follows:
Section 5. INVESTMENT AUTHORITY
The amounts credited to each participant's account under the Plan shall
be separated into two sub-accounts: the "First Sub-Account" and the "Second
Sub-Account," both of which are defined in Section 5.2 of the Plan. Trustee
will invest First Sub-Account assets in accordance with the investment
direction of each of the participants of the Plan, provided, however, such
participant direction of investments may only be made among those investment
options established from time to time by the Committee under the Plan, which
options shall be listed on
AMENDMENT NO. 2 TO THE TRUST UNDER
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN - PAGE 1
<PAGE> 31
an Exhibit A attached hereto. (Exhibit A also contains policies to be followed
with Participant direction of investments.) Participant direction of
investments may only be made once every six (6) months, unless otherwise
determined by the Committee under the Plan. Trustee will invest Second
Sub-Account assets solely in Company stock. Trustee will maintain separate
accounts and sub-accounts for each Plan participant for these purposes.
IN WITNESS WHEREOF, this Amendment is adopted this 8th day of July,
1997.
ATTEST: COMPANY:
TANDY BRANDS ACCESSORIES, INC.
/s/ Stanley T. Ninemire
- --------------------------------
Assistant Secretary By: /s/ J.S.B. Jenkins
--------------------------------
Chief Executive Officer
ATTEST: TRUSTEE:
TEXAS COMMERCE BANK FORT WORTH, N.A.
/s/ Candace Greene
- --------------------------------
WITNESS
By: /s/ Susan R. Gazzola
--------------------------------
AMENDMENT NO. 2 TO THE TRUST UNDER
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN - PAGE 2
<PAGE> 32
EXHIBIT A
INVESTMENT POLICY
FOR
TANDY BRANDS ACCESSORIES, INC.
BENEFIT RESTORATION PLAN
Be it resolved that this investment policy is hereby established by the
Administrative Committee ("Committee") under the Tandy Brands Accessories, Inc.
Benefit Restoration Plan ("Plan") for Texas Commerce Bank National Association
("TCB") and this policy shall be reviewed periodically and adjusted as
necessary in the light of such reviews.
PURPOSE:
The purpose of this investment policy is to establish an understanding between
the Committee and TCB, regarding the asset options of the Plan and those of the
employee participants and beneficiaries.
The primary goal of the Plan is to establish a benefit restoration plan for the
exclusive benefit of a select group of the management and highly compensated
employees of Tandy Brands Accessories, Inc. ("Company") to restore retirement
benefits on behalf of such employees decreased due to limitations imposed by
the Internal Revenue Code of 1986. Although the Employer intends that any
participant or beneficiary under the Plan shall have the status of an unsecured
general creditor as to the Plan and any trust fund established in connection
with the Plan, the Employer has empowered (for participant contributions only)
each participant to select from the options listed below those funds which meet
his or her unique risk and return objective and has enabled each participant to
exercise independent control of the investment of assets for his or her
separate account. Such funds are to be held and invested by TCB, to the extent
not required for the payment of benefits under the Plan.
The overall investment goal of the Plan is to allow each participant through
their investment selection to achieve a long-term total return, resulting from
tax-exempt income, capital appreciation or both. Capital preservation is also a
primary investment consideration.
The investment options are the responsibility of and have been selected by the
Employer and/or Committee of the Plan.
RESPONSIBILITY AND AUTHORITY OF THE TRUSTEE:
It shall be the responsibility and authority of TCB, to effect investment
directives received by it from the fiduciary with investment discretion. These
directives, when received in proper form, will be executed as soon as it is
administratively feasible.
INVESTMENT OPTIONS:
The following funds are available for investment as directed by Plan
Participants:
Texas Commerce Bank Tax-Exempt Money Market Trust
1
<PAGE> 33
Texas Commerce Bank Short Intermediate Municipal Bond Trust
Texas Commerce Bank Limited Term Tax-Exempt Trust
Texas Commerce Bank Tax-Exempt Trust
Tandy Brand Accessories, Inc. Common Stock*
*NOTE: Stock trades shall be executed within a reasonable period of time after
receipt of contributions into the Trust. A reasonable period of time is defined
in this instance to be "within five (5) business days". Sales of stock will use
the same reasonable period of time definition dating from the later of the
receipt or effective date of the investment election form.
Any account balances which have not been directed by the Participant (other
than Employer Matching Contributions, which shall be invested in Employer
Stock) will be invested in the Texas Commerce Bank Tax-Exempt Money Market
Trust Fund.
PARTICIPANT RESTRICTIONS:
A participant may make a direction of investments only once every six (6)
months, on January 1 or July 1, unless otherwise determined by the Committee.
Investment election percentages are in 10% increments.
The participant will initially and periodically receive a fund fact sheet or
other pertinent information on the investment options selected by the
Committee. Changes in the investment options will be communicated to the
participants in a timely manner and will be implemented on a date agreed to
between TCB and the Committee.
REVIEW PROCESS:
The Committee will periodically review the investment performance and
appropriateness of the investment options.
AFFIRMATION:
This policy statement shall in no way diminish or alter TCB's, the Employer's
or the Committee's responsibilities as set forth in the Plan and Trust.
Executed this 8 day of July, 1997 by the undersigned Committee of the Tandy
Brands Accessories, Inc. Benefit Restoration Plan.
/s/ J. B. JENKINS
-----------------------------
-----------------------------
Committee
2
<PAGE> 1
EXHIBIT 10.21
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
REVOLVING
CREDIT AGREEMENT
BETWEEN
TANDY BRANDS ACCESSORIES, INC.
as Borrower
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Bank
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS AND ACCOUNTING TERMS ............................. 1
1.1 Definitions .................................................... 1
1.2 Accounting Terms ............................................... 6
SECTION 2. THE LOANS . .................................................. 6
2.1 Note and Terms of Commitment ................................... 6
2.2 Reduction or Termination of Commitment ......................... 6
2.3 Commitment Fee ................................................. 6
SECTION 3. LETTERS OF CREDIT . .......................................... 6
3.1 Letters of Credit .............................................. 6
3.2 Applications ................................................... 7
3.3 Procedure for Issuing Letters of Credit ........................ 7
3.4 Reimbursement; Payments ........................................ 7
3.5 Letter of Credit Commissions ................................... 7
SECTION 4. TERMS FOR ACCEPTANCES . ...................................... 7
4.1 The Acceptances ................................................ 7
4.2 Creating Acceptances ........................................... 8
4.3 Supply of Drafts ............................................... 8
4.4 Acceptance Commission .......................................... 8
4.5 Discount ....................................................... 8
4.6 Termination of the Acceptance Commitment ....................... 8
4.7 Acceptance Obligation .......................................... 9
4.8 Mandatory Prepayment ........................................... 9
4.9 Interest on Overdue Payments ................................... 9
SECTION 5. CAPITAL ADEQUACY ............................................. 9
SECTION 6. CONDITIONS PRECEDENT ......................................... 10
6.1 All Advances ................................................... 10
6.2 First Loan, Letter of Credit and/or Acceptance ................. 10
SECTION 7. REPRESENTATIONS AND WARRANTIES . ............................. 10
7.1 Existence ..................................................... 10
7.2 Good Standing ................................................. 10
7.3 Power and Authority ........................................... 10
7.4 Loan Documents ................................................ 10
7.5 No Subsidiaries ............................................... 10
7.6 Consents ...................................................... 10
7.7 No Material Litigation ........................................ 10
7.8 No Default .................................................... 11
7.9 Taxes ......................................................... 11
7.10 ERISA ......................................................... 11
7.11 No Change...................................................... 11
7.12 Regulations G, T, U and X ..................................... 11
7.13 Accuracy and Completeness of Information ...................... 11
7.14 Environmental.................................................. 11
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS (CONTINUED)
<TABLE>
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7.15 Eligible Acceptance ........................................... 11
7.16 Drafts ........................................................ 11
7.17 Existing Indebtedness ......................................... 12
SECTION 8. AFFIRMATIVE COVENANTS ......................................... 12
8.1 Taxes .......................................................... 12
8.2 Licenses, Permits .............................................. 12
8.3 Existence....................................................... 12
8.4 Legal Requirements.............................................. 12
8.5 Property Maintenance............................................ 12
8.6 Insurance....................................................... 12
8.7 Financial Statements............................................ 12
8.8 Access.......................................................... 12
8.9 Notices......................................................... 12
8.10 Change of Name ................................................. 13
8.11 Further Assurances ............................................. 13
SECTION 9. NEGATIVE COVENANTS............................................. 13
9.1 Use of Proceeds.................................................. 13
9.2 Sale of Assets................................................... 13
9.3 Mergers and Consolidation........................................ 13
9.4 Liens ........................................................... 13
9.5 No Inconsistent Actions ......................................... 14
9.6 Transactions with Affiliates..................................... 14
9.7 ERISA ........................................................... 14
9.8 Funded Indebtedness to EBITDA Ratio.............................. 14
9.9 Fixed Charge Ratio............................................... 14
9.10 Inventory Turnover Ratio......................................... 15
SECTION 10. EVENTS OF DEFAULT............................................. 15
10.1 Nonpayment ...................................................... 15
10.2 Misrepresentations .............................................. 15
10.3 Loan Documents .................................................. 15
10.4 Nonperformance .................................................. 15
10.5 Other Indebtedness .............................................. 15
10.6 Change of Control ............................................... 15
10.7 Judgments ....................................................... 15
10.8 Bankruptcy ...................................................... 15
10.9 Reportable Event ................................................ 15
SECTION 11. REMEDIES ..................................................... 16
11.1 Additional Remedies ............................................. 16
11.2 Remedies Cumulative ............................................. 16
</TABLE>
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<PAGE> 4
Table of Contents (continued)
<TABLE>
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SECTION 12. MISCELLANEOUS . .............................................. 16
12.1 No Waiver....................................................... 16
12.2 Notices......................................................... 16
12.3 Set-Off......................................................... 16
12.4 Governing and Venue............................................. 16
12.5 Survival of Warranties.......................................... 17
12.6 Usury........................................................... 17
12.7 Expenses........................................................ 17
12.8 Indemnification................................................. 17
12.9 Severability.................................................... 17
12.10 Entire Agreement ............................................... 18
12.11 Loan Sales and Assignments ..................................... 18
12.12 No Assignment .................................................. 18
12.13 Conflict between Loan Documents ................................ 18
EXHIBITS:
EXHIBIT A...(Not attached to Credit Agreement is the Revolving Promissory
Note for Alternate Base Rate, CD Rate, Negotiated Rate or
Eurodollar Loans dated June 30, 1994 in the amount of
$15,000,000.00 executed by Borrower and delivered to Bank)
EXHIBIT B .......................................................... 20
EXHIBIT C .......................................................... 21
EXHIBIT D .......................................................... 22
EXHIBIT E .......................................................... 23
SCHEDULES:
SCHEDULE I ........................................................... 24
SCHEDULE II ....................................................... 26
</TABLE>
<PAGE> 5
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement" as
the same may be amended, supplemented or restated from time to time) is by and
between TANDY BRANDS ACCESSORIES, INC., A Delaware corporation ("Borrower")
whose address for service of process is listed on the signature page hereof and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association ("the
Bank") whose principal banking office is located in Houston, Harris County,
Texas and whose address for notice purposes is listed on the signature page
hereof.
WHEREAS, the Borrower and Texas Commerce Bank - Fort Worth, National
Association ("TCB-Ft. Worth") entered into that certain Revolving Credit
Agreement dated January 2, 1991 which was amended by that certain First
Amendment to Revolving Credit Agreement dated as of April 30, 1992, by that
certain Second Amendment to Revolving Credit Agreement dated as of June 18,
1992, by that certain Third Amendment to Revolving Credit Agreement dated as of
April 30, 1993 and by that certain Fourth Amendment to Revolving Credit
Agreement dated as of April 30, 1994 (the "Credit Agreement"). TCB - Ft. Worth
was merged into Texas Commerce Bank, National Association which was the
predecessor in interest by merger into Texas Commerce Bank National
Association. The Borrower has requested that the Bank amend, restate and
replace the Credit Agreement and the Bank is willing to do so provided that
Borrower execute and deliver this Agreement on the terms and subject to the
conditions stated herein. This Agreement governs an unsecured revolving credit
facility which may be used for issuance of letters of credit and creation of
bankers' acceptances as well as money borrowings for the purpose of financing
and supporting the general corporate purposes, including, without limitation,
the working capital, the letters of credit and bankers' acceptance needs of
Borrower and TB Acquisitions, Inc. and acquisition financing and treasury stock
purchase requirements of the Borrower; and
WHEREAS, the Bank is willing, upon and subject to the terms and conditions
hereof, to make such credit facility available as long as terms and conditions
set forth herein are met;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the Borrower and the Bank hereby agree as
follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.
1. 1 Definitions. As used in this Agreement, the capitalized words below
and terms shall have the following respective meaning:
"Acceptance" shall mean any bankers' acceptance drawn by the Borrower on
and created by the Bank pursuant to Section 4 hereof.
"Acceptance Commitment" shall have the meaning specified in Section 4
hereof.
"Acceptance Obligation" has the meaning specified in Section 4 herein.
"Acquisition Capital Expenditures" shall mean, for any period, the
aggregate expenditures, costs, financings (which shall include Capitalized
Lease financings or transactions including such leases), cash expended, stock
transactions or other methods of purchasing a tangible fixed asset or capital
asset, i.e., the total "purchase price" of such acquisition which shall be
supported by appraisals, accounting practices, sales contracts or other
evidence generally utilized in reflecting the purchase price of acquisitions
and which purchase price will be reflected in the Borrower's financial
statements.
"Advances" shall mean collectively, the Loans, Letter of Credits and
Acceptances.
"Affiliate" of any Person shall mean any other Person directly or
indirectly, controlling, controlled by, or under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
Page 1 of 19 Pages
<PAGE> 6
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
management and policies of such person, whether through the ownership of
Voting Shares or by contract or otherwise.
"Application" shall mean the standard commercial and/or standby letter of
credit application of the Bank in form and substance satisfactory to the Bank
and its counsel.
"Authorized Person" shall mean the Chief Executive Officer, President, any
Vice President, Chief Financial Officer, Treasurer or Controller of the
Borrower and such other individuals as are authorized in writing to the Bank to
act on behalf of the Borrower, ADG (as defined hereinafter) or TBAC (as defined
hereinafter), as the case may be.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"Business Day" means a day when the main office of the Bank is open for
the conduct of commercial lending business.
"Capital Expenditures" shall mean, for any period, the aggregate of all
expenditures and costs of the Borrower (whether paid in cash or accrued as
liabilities during that period and including that portion of Capitalized Leases
of the Borrower) during such period that, in conformity with GAAP, are required
to be included in or classified as property, plant or equipment or another
similar fixed asset account reflected on the balance sheet of the Borrower.
"Capitalized Lease' shall mean any lease which, in accordance with GAAP,
would be treated as a capital item in the financial statements of Borrower.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean $15,000,000.00.
"Change in Control" shall mean that an event has occurred which requires a
Person, who reports beneficial ownership of more than 25 % of the then
outstanding Voting Stock of the Borrower, to file a Schedule 13D with the SEC
according to the Securities Act except for Tandy Brands Accessories, Inc.
Employees Investment Plan.
"Consolidated Inventory" shall mean (without duplication), as of any date,
(i) the inventory which would be reflected on a consolidated balance sheet of
Borrower prepared as of such date in accordance with GAAP, and (ii) the assets
of Borrower held for sale or lease or furnished or to be furnished under
contracts of service, raw materials, work-in-progress and materials used or
consumed by Borrower.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
"Cost of Goods Sold" shall mean the amount of cost of goods sold from the
consolidated financial statements of Borrower determined cumulatively for the
immediately, preceding four (4) fiscal quarters prepared as of such date in
accordance with GAAP,
"Current Liabilities" shall mean, as of any date, the current liabilities
which would be reflected on a consolidated balance sheet of Borrower prepared
as of such date in accordance with GAAP.
"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar laws from time to time in effect affecting the rights of creditors
generally.
Page 2 of 19 Pages
<PAGE> 7
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
"Default" shall mean any of the events specified in Section 10, or under
the Loan Documents, provided that there shall have been satisfied any
requirement in connection with such event for the giving of notice or lapse of
time or both, or the happening of any further condition, event or act.
"Discount Rate" means, with respect to any Acceptance at any time, the bid
rate in effect at such time for discount by the Bank of commercial drafts or
bills eligible for discount by the Federal Reserve Banks in the same face
amount, with the same maturity, and of the same type, as such Acceptance.
"Dollars" and "$" shall mean lawful currency of the United States of
America.
"Draft" shall mean the document as specified in Section 4 and in the form
of Exhibit D hereto.
"EBITDA" shall mean pretax income plus Interest Expense plus amortization
and depreciation.
"Effective Date" with respect of this Agreement, shall mean, June 30,
1994.
"Eligible Acceptance" shall mean an Acceptance (a) which complies with the
requirements for eligibility set forth in Section 13 of the Federal Reserve Act
and with applicable regulations of the Board governing bankers' acceptances,
(b) against the liability for which a bank is not required to maintain reserves
under Regulation D of the Board in effect from time to time, or under any law
or regulation, and (c) which is eligible for discount by Federal Reserve Banks.
"Eligibility Certificate" shall mean the document described in Section 4
hereof and shall be in the form of Exhibit C.
"ERISA" shall mean the Employment Retirement Income Security Act of 1974,
as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"Fixed Charges" shall mean, as of any date, on a consolidated basis, the
sum of Borrower's (i) cash Interest Expense, (ii) scheduled principal payments,
(iii) Capital Expenditures excluding Acquisition Capital Expenditures, (iv)
cash dividends, (v) treasury stock repurchased and (vi) cash tax expenses.
"Funded Indebtedness" shall mean, as of any date, the sum of the following
(without duplication): (i) all Indebtedness of Borrower as of such date, other
than consolidated Current Liabilities, (ii) all Indebtedness which would be
classified as "funded indebtedness' or "long-term indebtedness" on a
consolidated balance sheet of Borrower prepared as of such date in accordance
with GAAP, (iii) all Indebtedness, whether secured or unsecured, of Borrower
having a final maturity (or which is renewable or extendable at the option of
the obligor for a period ending more than one year after the date of creation
thereof), notwithstanding the fact that payments in respect thereof (whether
installment, serial maturity or sinking fund payments, or otherwise) are
required to be made by the obligor less than one year after the date of the
creation thereof and notwithstanding the fact that any amount thereof is at the
time included also in consolidated Current Liabilities of such obligor, (iv)
all Indebtedness of Borrower outstanding under a revolving credit or similar
agreement providing for borrowings (and renewals and extensions thereof) over a
period of more than one year, notwithstanding the fact that any such
Indebtedness is created within one year of the expiration of such agreement,
and (v) all obligations under guaranties of Borrower maturing more than one
year from the date of calculation of the covenants in Section 9 hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, applied on a basis consistent with those used in the
preparation of the financial statements required in Section 9.
"Governmental Authority" shall mean any Federal, state, municipal or other
governmental department, commission, board, bureau, agency, court or
instrumentality, domestic or foreign.
"Highest Lawful Rate" shall have the meaning ascribed thereto in the Note.
Page 3 of 19 Pages
<PAGE> 8
Amended And Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
"Indebtedness" shall mean, with respect to the Borrower, all indebtedness,
obligations and liabilities of such Borrower, including without limitation: (i)
all liabilities which would be reflected on a balance sheet of Borrower,
prepared in accordance with GAAP, (ii) all obligations of Borrower in respect
of any guaranty, (iii) all obligations of Borrower in respect of any
Capitalized Lease, and (iv) all obligations, indebtedness and liabilities
secured by any Encumbrance on any property or assets of Borrower.
"Interest Expense" shall mean for any period, the interest charges paid or
accrued during such period (including imputed interest on Capitalized Lease
obligations, but excluding amortization of debt discount and expense) on the
Indebtedness of Borrower.
"Legal Requirement" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
"Letters of Credit" shall have the meaning specified in Section 3.1
hereof.
"Lien" shall mean any claim, encumbrance, mortgage, lien, charge, pledge,
security interest, priority payment, conditional sales agreement, right, or
other title retention agreement right of any kind whatsoever, including but not
limited to, any right under a Capitalized Lease of the type listed in Section
1. 1 hereof, in, upon or against any asset of the Borrower.
"Loan" or "Loans" shall mean any loan by the Bank made to the Borrower
pursuant to Section 2 hereof and includes an Alternate Base Loan, a CD Rate
Loan and a Eurodollar Loan (each of which shall be a "type" of Loan as further
described in the Note).
"Note" shall mean the Revolving Promissory Note defined in Section 2
hereof and include any renewal, extension, modification, rearrangement,
supplement, increase or replacement thereof.
"Notice of Acceptance" shall mean the document specified in Section 4 and
Exhibit D attached hereto.
"Notice of Borrowing" shall mean the document specified in Exhibit B or
any other such document mutually agreed upon by Borrower and Bank.
"Loan Documents" shall mean (a) this Agreement and its Exhibits and
Schedules, (b) the Note, (c) Applications, (d) Letters of Credit, (e)
Acceptances, (f) Drafts and (g) any and all other agreements, documents or
instruments now or hereafter executed in connection with any of the foregoing
or the transactions evidenced thereby; as the same may be modified, amended,
restated, supplemented, renewed, extended or replaced from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean, an individual, partnership, joint venture, group,
corporation, bank, trust, unincorporated organization and/or a government or
any department or agency thereof.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Borrower or any member of the
Controlled Group for employees of the Borrower or any member of the Controlled
Group or (b) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which the Borrower or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
Plan years made contributions.
Page 4 of 19 Pages
<PAGE> 9
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
"Proper Form" shall mean in form and substance satisfactory to the Bank.
"Regulation D" shall mean Regulation D of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof
"Regulation G" shall mean Regulation G of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof
"Regulation T" shall mean Regulation T of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof
"Regulatory Change" shall mean any change on or after the date of this
Agreement in United States Federal, state or foreign laws or regulations
(including Regulation D) or the adoption or making on or after such date of any
interpretations, directives or requests applying to a class of banks including
the banks of or under any United States federal or state, or any foreign laws
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" shall mean that event as defined in Section 7.1 hereof.
"Schedules I and II" shall mean those schedules attached hereto listing
Borrower's Subsidiaries and existing Indebtedness.
"SEC" shall mean the Securities Exchange Commission and any successor
commission.
"Securities Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Subsidiary" shall mean any corporation of which fifty percent (50 %) or
more of the Voting Shares is owned, directly or indirectly, by Borrower.
"Termination Date" shall mean the earlier to occur of: (i) April 30, 1996
or (ii) that date as specified by the Bank pursuant to Section 10 hereof or
(iii) April 30, 1997 if such date is requested by Borrower in writing prior to
April 30, 1995 and if such date is approved by Bank in its sole discretion.
"Trust Company" shall mean Texas Commerce Trust Company, located at 80
Broad Street, New York, New York 10004.
"Unfunded Vested Liabilities" shall mean, with respect to any Plan at any
time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan using the interest rates and other factors
for Plan termination as announced by the PBGC and in effect at such time, but
only to the extent that such excess represents a potential liability to
Borrower or any member of the Controlled Group to the PBGC under Title IV of
ERISA.
"Voting Shares" of Borrower shall mean shares of any class or classes
(however designated) having ordinary voting power for the election of at least
a majority of the members of the board of directors (or other governing bodies)
of Borrower, other than shares having such power only by reason of the
happening of a contingency.
Page 5 of 19 Pages
<PAGE> 10
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
1.2 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP as in effect from time to time,
applied on a basis consistent with those followed in the preparation of the
most recent financial statements delivered pursuant to Section 8.7 hereof.
SECTION 2. THE LOANS.
2.1 Note and Terms of Commitment. Subject to the terms and conditions
hereof, the Bank agrees to make advances or loans to Borrower from time to time
before the Termination Date, not to exceed at any one time outstanding the
amount of the Commitment. Advances shall take the form of Loans under the Note,
issuances of Letters of Credit by Bank or Acceptances. The Loans shall be
evidenced by, and shall bear interest and be payable as provided in the Note
executed by Borrower dated as of the Effective Date and delivered to Bank which
is given in renewal, extension, modification of and increase in the amount of
that certain promissory note dated April 30, 1994 in the principal amount of
$5,000,000.00 (including all prior notes of which said note represents a
renewal, extension, modification, increase, substitution, rearrangement or
replacement thereof, the "Renewed Note"). Each Loan shall be in an amount not
less than that amount provided for in the Note. Borrower shall have the right
to borrow, repay and reborrow under the Note provided that at no time shall the
sum of the aggregate amount outstanding of: (i) Loans, (ii) L/C Obligations (as
defined in Section 3) and (iii) Acceptances exceed the amount of the
Commitment.
2.2 Reduction or Termination of Commitment. The Borrower may at any time
or from time to time irrevocably reduce the amount of the Commitment or
irrevocably terminate in whole the Commitment by giving not less than two full
Business Days' prior written notice to such effect to the Bank, provided that
(a) any partial reduction of the Commitment shall be in an aggregate amount of
not less than $250,000.00 or whole number multiples thereof and (b) in no event
shall the Borrower be entitled to terminate or reduce the Commitment if, after
giving effect thereto and to any concurrent prepayments made hereunder, the
Commitment shall be less than the sum of the aggregate amount of all
outstanding Advances. After each such reduction, the commitment fee owing
pursuant to Section 2.3 hereof shall be calculated upon the amount of
Commitment as so reduced. Upon any termination or reduction pursuant to this
Section 2.2, the Borrower shall pay to the Bank the commitment fee on the
amount of the Commitment so terminated or reduced accrued through the date of
such termination or reduction.
2.3 Commitment Fee. The Borrower agrees to pay to the Bank a commitment
fee at the rate of 1/4 of 1% per annum on the average daily unused portion of
the Commitment computed on the basis of a 365/366 day year consisting of twelve
months having the respective number of days actually contained in each calendar
month. Such commitment fee shall be payable on each June 30, September 30,
December 31 and March 31 during the term of this Agreement, commencing
September 30, 1994.
SECTION 3. LETTERS OF CREDIT.
3.1 Letters of Credit. Subject to this Agreement, the Letters of Credit may
be issued from time to time on and after the Effective Date, but, not
including, the Termination Date for the account of the Borrower or for the
account of TBA Acquisition, Inc. dba Accessories Design Group, Inc., a Delaware
corporation ("ADG") or TBAC - Prince Gardner, Inc., a wholly-owned Subsidiary of
Borrower ("TBAC") and in favor of such Person or Persons as may be designated
by Borrower, ADG or TBAC. Each Letter of Credit shall expire on a date not
later than 365 days from the date of issuance thereof for commercial letters of
credit ("Commercial L/Cs") and expire not later than 12 months from date of
issuance thereof for standby letters of credit ("Standby L/Cs") (except for
letters of credit containing evergreen clauses) and, in any event, no later
than the Termination Date and (d) be denominated in Dollars (or other
currencies that are acceptable to the Bank). The Commitment shall be reduced by
an amount equal to the sum of: (a) the face amount of all outstanding Letters
of Credit; and (b) the amount of any unreimbursed drawings or other amounts
owing to the Bank under or in respect of any Letter of Credit or Application
(items (a) and (b) are hereinafter collectively referred to as the "L/C
Obligations") such that, on any
Page 6 of 19 Pages
<PAGE> 11
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
date, the sum of (x) all Loans outstanding on such date and (y) all L/C
Obligations on such date does not exceed the Commitment. The total aggregate
amount of L/C Obligations shall never exceed $10,000,000.00.
3.2 Applications. As a condition precedent to the
issuance of any Letter of Credit for the account of Borrower and/or ADG, the
Bank shall have received an Application, duly completed and executed by ADG and
by the Borrower in Proper Form, not less than three (3) Business Days prior to
the date on which the Letter of Credit is to be issued and in the event that
any Application is delivered to Bank for the account of ADG without the
signature of Borrower, the Borrower agrees that for all purposes that any
Application executed by ADG and delivered to Bank without Borrower's signature
shall be as if the Borrower's signature did actually appear thereon and
Borrower shall be deemed to be liable in the same capacity as ADG as a
"co-applicant" thereon. In the event that any provision of a Letter of Credit
Application shall be inconsistent with any provision of this Agreement, the
provisions of this Agreement shall govern.
3.3 Procedure for Issuing Letters of Credit. The
issuance of each Letter of Credit shall be subject to the following conditions
precedent: (a) no Default shall have occurred and be continuing; (b) each
request by Borrower for the issuance of a Letter of Credit shall be deemed to
be a representation to that effect and to the further effect that the
representations and warranties contained in Section 6 of the Agreement are true
and correct as of the date of such request as if made on and as of such date;
and (c) Bank receives an Application in Proper Form and any and all other such
agreements and documents reasonably required by the Bank in connection with
such Letter of Credit.
3.4 Reimbursement; Payments. In the event the Bank makes
any payment under a Standby L/C, such action shall be deemed for all purposes
of this Agreement and the other Loan Documents to constitute the making of Loan
to the Borrower and, in connection therewith, the Borrower hereby
unconditionally and irrevocably authorizes, empowers and directs the Bank to
record and otherwise treat payments under such Standby L/C as Loans made to the
Borrower hereunder. Any determination by the Bank of the outstanding amount of
Loans made under this Section 3.4 shall be conclusive in the absence of
manifest error.
3.5 Letter of Credit Commissions. In consideration for
the issuance of each Letter of Credit, the Borrower agrees to pay to the Bank a
letter of credit issuance fee ("Fee") in respect of such Letter of Credit in an
amount equal to: (1) in the case of Commercial L/C's, one eighth of one percent
(1/8%) per annum per quarter or fraction thereof on the face amount of such
Letter of Credit; and (2) in the case of Standby L/C's, three-quarters of one
percent (3/4%) per annum on the face amount of such Letter of Credit. The Fee
shall be paid to the Bank at its main offices to the attention of the Manager,
Documentary Services Division in advance of issuance of the Letter of Credit.
SECTION 4. TERMS FOR ACCEPTANCES.
4.1 The Acceptances. Subject to the terms and conditions
of this Agreement, the Bank agrees to create Acceptances by accepting a Draft,
in Proper Form, as long as such Draft shall: (a) be drawn by the Borrower on
the Bank in accordance with the terms hereof; (b) be dated the date of
acceptance of such Draft by the Bank; (c) mature on a Business Day not less
than thirty (30) days nor more than one hundred eighty (180) days after the
date of such Draft, and in no event mature (i) earlier than 30 days or (ii)
later than the Termination Date; (d) have a face amount of not less than
$200,000.00 payable in Dollars; (e) be accompanied by an executed Eligibility
Certificate and (f) be an Eligible Acceptance.
Page 7 of 19 Pages
<PAGE> 12
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
4.2 Creating Acceptances.
(a) The creation of each Acceptance hereunder after
notice given not later than 10:00 a.m. (Houston time) on the Business
Day on which such Acceptance is requested by the Borrower from the
Bank shall occur after all requirements in Section 4.1 and Section 6
are met by Borrower. Each such notice shall be by telephone, telecopy,
telex or cable in substantially the form of Exhibit D (the "Notice of
Acceptance"), from the Borrower to the Bank, specifying the
information necessary to complete each such Notice of Acceptance.
(b) Not later than 11:00 a.m. (Houston time) on the date
of any such request for the creation on Acceptance by Borrower and
upon fulfillment of the applicable conditions set forth in Section 6,
the Bank or the Trust Company creating the Acceptance will, in
accordance with such Notice of Acceptance, (i) fill in the date,
amount and maturity of a Draft, (ii) stamp and complete the
Eligibility Certificate on such Draft, and (iii) accept such Draft
upon satisfactory determination of the applicable conditions
precedent.
4.3 Supply of Drafts. To enable the Banks to create
Acceptances in the manner specified in Section 4.2, the Borrower shall supply
the Bank, upon the Borrower's execution of this Agreement and thereafter
forthwith upon request by the Bank, with a sufficient number of blank Drafts as
the Bank may reasonably request, duly executed by the Borrower. The Trust
Company shall hold such Drafts in safekeeping to be filled in and completed as
Acceptances in accordance with Section 4.2(b). In case any authorized signatory
of the Borrower whose signature shall appear on any Draft shall cease to have
such authority before the creation of an Acceptance with respect to such Draft,
such signature shall nevertheless be valid and sufficient for all purposes as
if such authority had remained in force at the time of such creation.
4.4 Acceptance Commission. The Borrower agrees to pay to
the Bank an acceptance commission, with respect to each Acceptance created by
such Bank hereunder, on the face amount of such Acceptance, for the period from
the date of such Acceptance to the date of its maturity, of 3/4 of 1%, as a
percentage per annum, payable in full on the date such Acceptance is created.
Payment of such acceptance commission with respect to each Acceptance shall be
made for account of the Borrower by the Bank deducting the amount of such
acceptance commission from the proceeds of the discount of such Acceptance
pursuant to Section 4.5.
4.5 Discount. The Bank agrees, subject to the terms and
conditions of this Agreement, that on the date of the creation by Bank of each
Acceptance hereunder, the Bank will (a) discount such Acceptance at the
Discount Rate for such Acceptance in effect at the time of creation of such
Acceptance and (b) make available to the Borrower in same day funds at the
address referred to on the signature page hereof for Bank, an amount equal to
the proceeds of such discount less the acceptance commission payable to the
Bank with respect to such Acceptance under Section 4.4. The Bank may at any
time or from time to time, sell, rediscount or otherwise dispose of such
Acceptance.
4.6 Termination of the Acceptance Commitment.
Notwithstanding anything to the contrary herein, if any of the following events
shall occur:
(a) There is a reasonable determination made in good
faith by Bank or by any regulatory body (including, without
limitation, the staff of any Federal Reserve Bank or the officers of
the Office of the Comptroller of the Currency), or there is a change
in, or change in interpretation of, any applicable rule or regulation,
to the effect that any Acceptance created hereunder is not, or would
not be, an Eligible Acceptance; or
(b) Any restriction is imposed on the Bank by any
regulatory body (including, without limitation, any change in
acceptance limits imposed on the Bank) which would prevent the Bank
from creating Acceptances or performing Bank commitment with respect
of creation of Acceptances for Borrower; or
Page 8 of 19 Pages
<PAGE> 13
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
(c) Any Default as defined in Section 10 hereof shall occur
and remain uncured;
then the Bank may, by notice to the Borrower in writing or by telephone
(confirmed in writing), terminate the Bank's obligation to create Acceptances
for Borrower under the Commitment, effective on the date on which such Bank
gives such notice; provided that, in the case of the occurrence of any event
described in this Section 4.6(a) and (b), such notice shall describe in
reasonable detail the nature of such event. Upon such termination of the
Revolving Credit Commitment or any obligation with respect of creation of
Acceptances hereunder, as the case may be, the Bank shall have no further
obligation to the Borrower to create Acceptances or otherwise perform under
this Section 4.
4.7 Acceptance Obligation. The Borrower is obligated, and
hereby unconditionally agrees, to pay in immediately available funds, to the
Bank, the face amount of each Acceptance created by the Bank hereunder not
later than 3:00 p.m. (Houston time) on the maturity date of such Acceptance
(the obligation of tile Borrower under this Section 4.7 with respect to any
Acceptance being the 'Acceptance Obligation' with respect to such Acceptance).
4.8 Mandatory Prepayment. The Borrower shall, at any time
after a Default has occurred and is continuing as defined in Section 10 hereof,
or on the Termination Date with respect to Acceptances then outstanding, or
upon receipt of a termination notice as contemplated by Section 4.6, prepay the
Acceptance Obligation with respect to each such Acceptance then outstanding, by
paying to the Bank, promptly after the demand for payment by Bank, the face
amount of such Acceptance less (except as otherwise provided below) the
Prepayment Discount for such Acceptance in effect for such prepayment.
"Prepayment Discount" means, for any prepayment on any date of the Acceptance
Obligation with respect to any Acceptance, an amount equal to (i) the product
of the sum of (A) the face amount of such Acceptance and (B) the Discount Rate
with respect to such Acceptance in effect at the time of such prepayment minus
one-eighth of one percent (0.125%) per annum, multiplied by (ii) a fraction,
the numerator of which is the number of days from such date to the maturity
date of such Acceptance and the denominator of which is 360. In the event of a
prepayment of an Acceptance as a result of a demand pursuant to Sections 4.6,
the Borrower shall be required to prepay such Acceptance by paying the Banks
the face amount of such Acceptance, without deducting any Prepayment Discount.
4.9 Interest on Overdue Payments. The Borrower agrees to
pay interest on any amount of an Acceptance Obligation not paid when due
(whether by scheduled maturity, mandatory prepayment, acceleration or
otherwise), on demand, from the date such amount becomes due until such amount
is paid in full, at the Default Rate (as defined in the Note).
SECTION 5. CAPITAL ADEQUACY
If Bank determines after the date of this Agreement that any
change in applicable laws, rules or regulations regarding capital adequacy, or
any change in the interpretation or administration thereof by any appropriate
governmental agency, or compliance with any request or directive to Bank
regarding capital adequacy (whether or not having the force of law) of any such
agency, increases the capital required to be maintained with respect to the
Loans, Letters of Credit or Note and therefor reduces the rate of return on
Bank's capital below the level Bank could have achieved but for such change or
compliance (taking into consideration Bank's policies with respect to capital
adequacy), then Borrower will pay to Bank from time to time, within 15 days of
Bank's request, any additional amount required to compensate Bank for such
reduction. Bank will request any additional amount by delivering to Borrower a
certificate of Bank setting forth the amount necessary to compensate Bank. The
certificate will be conclusive and binding, absent manifest error. Bank may
make any assumptions, and may use any allocations of costs and expenses and any
averaging and attribution methods, which Bank in good faith finds reasonable.
Page 9 of 19 Pages
<PAGE> 14
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
SECTION 6. CONDITIONS PRECEDENT.
6.1 All Advances. The obligation of the Bank to make any
Loan, issue any Letter of Credit, create any Acceptance or renew the Renewed
Note is subject to satisfaction of the following conditions precedent: (a) the
Bank shall have received the following, all of which shall be duly executed and
in Proper Form: (1) for any Loan, a Notice of Borrowing, substantially in the
form of Exhibit B, as provided for in the Note; (2) for the issuance of any
Letter of Credit, a duly executed Application in Proper Form by Borrower or ADG
within the time set forth in Section 3.2; (3) in the case of an Acceptance, the
receipt of notice and Drafts by the Bank as required in Section 4.2 in Proper
Form and the receipt by the Bank of all Acceptance fees and commissions due the
Bank; and (b) no Default shall have occurred and be continuing; and (c) the
making of or issuance of any Advance shall not be prohibited by, or subject the
Bank to any penalty or onerous condition under, any Legal Requirement.
6.2 First Loan, Letter of Credit and/or Acceptance. In
addition to the matters described in the preceding section, the obligation, if
any, of the Bank to renew the Renewed Note, to make the first Loan, issue the
first Letter of Credit or create the first Acceptance or to renew and extend
any of the Letters of Credit or Acceptance is subject to the receipt by the
Bank of all of the Loan Documents, all of which shall be in Proper Form.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
In order to induce the Bank to enter into this Agreement and
to make the Advances, the Borrower represents and warrants to the Bank that:
7.1 Existence. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation.
7.2 Good Standing. To the best of Borrower's knowledge,
Borrower is duly qualified and in good standing in every jurisdiction in which
it presently engages in business and in which such qualification is required.
7.3 Power and Authority. Borrower has the power,
authority and legal right to own or lease and enjoy undisturbed, the assets of
its business and engage in business as now conducted.
7.4 Loan Documents. Borrower has the power, authority and
legal right to execute, deliver and perform under this Agreement, the Note, and
the other Loan Documents and when executed and delivered, the Loan Documents
will constitute a legal, valid and binding obligation enforceable in accordance
with their terms, except as may be limited by bankruptcy, insolvency and other
similar laws affecting creditors' rights generally and by general equitable
principles.
7.5 No Subsidiaries. Borrower has no subsidiaries except
those listed on Schedule I attached hereto.
7.6 Consents. To the best of Borrower's knowledge, no
consent of any Person, and no consent, license, permit, approval or
authorization of, exemption by, or registration, filing or declaration with any
Government Authority is required in connection with the execution, delivery,
performance, validity or enforceability by or against Borrower of the Loan
Documents to which it is or will be a party.
7.7 No Material Litigation. No litigation, investigation
or administrative proceeding of or before any court, arbitrator or Governmental
Authority is presently pending or, to the knowledge of Borrower, threatened
against it or any of its properties or assets (a) with respect to any Loan
Document or any of the transactions contemplated hereby or thereby or (b)
which, if adversely determined, could reasonably be expected to materially and
adversely affect the business, operations, properties, assets or financial or
other condition of the Borrower.
Page 10 of 19 Pages
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Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
7.8 No Default. Borrower is not in default, and the
execution, delivery and performance of the Loan Documents will not result in a
default, in the payment or performance of any of the Borrower's obligations or
in the performance of any mortgage, indenture, lease, contract or other
agreement or undertaking to which it is a party or by which it or any of its
properties or assets may be bound, and no Default hereunder has occurred and is
continuing. The Borrower is not in default under any order, award or decree of
any court, arbitrator or Governmental Authority binding upon or materially
affecting it or by which any of its properties or assets is bound or materially
affected, and no such order, award or decree has or will materially affect the
ability of the Borrower to perform its obligations under the Loan Documents or
the ability of the Borrower to carry on its businesses.
7.9 Taxes. Borrower, to the best of its knowledge, has
filed or caused to be filed all tax returns material for the continuation of
its business which are required to be filed, and have paid all taxes shown to
be due and payable on said returns or on any assessments made against it or any
of its properties and all other taxes, fees or other charges imposed on the
Borrower or any of its properties by any Governmental Authority and no tax
liens have been filed and, to the knowledge of the Borrower, no material claims
are being asserted with respect to any such taxes, fees or other charges.
7.10 ERISA. Borrower, to the best of its knowledge, is in
compliance in all material respects with ERISA and the rules and regulations
thereunder. There exists no Unfunded Vested Liabilities under any Plan to which
the Borrower is a party. No "Reportable Event", as such term is defined in
Section 4043(b) of Title IV of ERISA, has occurred and is continuing with
respect to any Plan.
7.11 No Change. Since the date of the most recent balance
sheet delivered to the Bank pursuant to Section 8.7 hereof, there has been no
material adverse change in the business, operations, property or financial or
other condition of the Borrower.
7.12 Regulations G, T, U and X. Borrower is not engaged
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" within the respective meanings of each of the quoted terms
under Regulation U of the Board. No part of the proceeds of the Commitment
hereunder will be used for any purpose which violates the provisions of
Regulations G, T, U or X of said Board.
7.13 Accuracy and Completeness of Information. All
information, exhibits, reports, other papers and data with respect to the
Borrower prepared and furnished to the Bank by or on behalf of the Borrower in
connection with the Loan Documents were at the time the same were so furnished
complete, accurate and correct in all material respects. No document furnished
or statement made to the Bank by the Borrower in connection with the
negotiation, preparation or execution of this Agreement contains any untrue
statement of a fact material to the creditworthiness of the Borrower or omits
to state any such material fact necessary in order to make the statements
contained therein not misleading, in either case which has not been corrected,
supplemented or remedied by subsequent documents furnished or statements made
in writing to the Bank.
7.14 Environmental. Borrower has complied and continues to
comply with all environmental laws materially applicable to the operation of
its property and business, and has not received any summons, complaint, order
or other notice that it is not in compliance with, or any governmental
authority is investigating its compliance with, any environmental laws.
7.15 Eligible Acceptance. Each Acceptance when created
hereunder is an Eligible Acceptance.
7.16 Drafts. At the time of presentation to the Banks,
each Draft shall represent one or more transactions involving the sale,
transportation or storage of goods in existence at such time; and Borrower's
Eligibility Certificate shall identify the goods, the countries from and to
which they are shipped, the approximate date of each shipment and any other
relevant information that the Banks may request with respect of each
transaction.
Page 11 of 19 Pages
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Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
7.17 Existing Indebtedness. Borrower has no other existing
Indebtedness as of the Effective Date except that Indebtedness listed on
Schedule II attached hereto.
SECTION 8. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees with the Bank that prior to
the termination of this Agreement Borrower will do, and if necessary cause to
be done each and all of the following:
8.1 Taxes. Pay all taxes and establish reserves deemed
adequate therefore, unless and only to the extent that the same shall be
contested in good faith and by appropriate proceedings;
8.2 Licenses, Permits. Renew and keep in full force and
effect all material licenses, permits, patents, trademarks, tradenames, and
franchises required to conduct Borrower's business;
8.3 Existence. Do all things to preserve its existence,
qualifications, rights and franchises in all jurisdictions where such
qualification is necessary;
8.4 Legal Requirements. Comply with all material legal
requirements in respect of the ownership of its property and the conduct of its
business;
8.5 Property Maintenance. Preserve, repair, and maintain
all of it property necessary to conduct its business in an efficient and proper
manner;
8.6 Insurance. Maintain adequate insurance with such
insurers, on such of its property, in such amounts and against such risks as is
customary with companies conducting similar businesses, and furnish the Bank
satisfactory evidence thereof promptly upon request;
8.7 Financial Statements. Furnish to the Bank the
following:
(a) Not later than 90 days after the end of its fiscal
year, its balance sheet and income statement and cash flow statement
("Financial Statements"), prepared in accordance with GAAP
consistently applied and certified in a manner satisfactory to the
Bank by independent, certified public accountants acceptable to the
Bank and also furnish along with such Financial Statements, unaudited
consolidating Financial Statements, if any;
(b) Not later than 45 days after the end of each fiscal
quarter, its balance sheet, statements of income and cash flow
certified in a manner satisfactory to the Bank by the chief financial
officer of Borrower;
(c) With each set of financial statements described in
(a) and (b) above, the certificate of the chief financial officer of
Borrower certifying that no event exists which alone or with notice,
the passage of time, or both, would constitute a Default and setting
forth the calculations and information necessary to demonstrate the
compliance or noncompliance with the financial covenants of Section 9
hereof; and
(d) Upon the request of the Bank, all such additional
information, financial or otherwise, of Borrower as the Bank may
reasonably request from time to time;
8.8 Access. Upon written request and the Bank's agreement
to maintain the confidentiality of same, the Bank's representatives and agents
shall be permitted access to any or all of Borrower's property and financial
records, to abstract from such records and to discuss the finances, business
and affairs of Borrower with its officers and accountants, all at such times
and intervals and to such extent as the Bank may reasonably require;
8.9 Notices. Give prompt written notice to the Bank of,
Page 12 of 19 Pages
<PAGE> 17
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
(a) The details of any Reportable Event which has
occurred;
(b) The occurrence of any event which alone or with
notice, the passage of time or both, would constitute a Default
hereunder;
(c) The commencement of any proceeding or litigation
which, if adversely determined, would have a material adverse affect
upon its financial condition or ability to conduct business as
currently conducted;
(d) The occurrence of any material adverse change in its
property, assets, financial condition, business or affairs; or
(e) The formation of any Subsidiary after the date of
this Agreement.
8.10 Change of Name. Notify the Bank in writing at least
30 Business Days prior to the date Borrower changes its name or location of its
principal place of business; and
8.11 Further Assurances. Promptly execute and deliver any
and all other agreements, documents, instruments and certificates which may be
reasonably requested by the Bank to cure any defect in the execution and
delivery of any of the Loan Documents.
SECTION 9. NEGATIVE COVENANTS.
The Borrower covenants and agrees with the Bank that prior to
the termination of this Agreement Borrower will NOT do each and all of the
following:
9.1 Use of Proceeds. Use, directly or indirectly, the
proceeds of any Advance for any purpose other than for working capital purposes
or for the financing of acquisitions or purchase of treasury stock.
Specifically, such proceeds will not be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin
stock", within the meaning of Regulation U of the Board. The Borrower will not
engage principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock within
the meaning of such Regulation U nor will the Borrower otherwise act so as to
cause the Bank to be in contention of Regulations T and U;
9.2 Sale of Assets. Sell, assign, lease or otherwise
dispose of any of its assets or property without prior written consent of the
Bank and such consent will not be unreasonably withheld, except that no consent
is required for sales in the ordinary course of business and sales in an
aggregate amount of $500,000.00 or less of the Borrower's Tangible Assets
during any twelve (12) month period.
9.3 Mergers and Consolidations. Merge or consolidate with
any other Person, except that so long as no Default has occurred and is
continuing or would result as a consequence thereof, the Borrower may merge or
consolidate with any other Person, provided the continuing or surviving Person
is Tandy Brands Accessories, Inc.
9.4 Liens. Create, assume, incur or permit to exist or
allow to be created, assumed or incurred or permitted to exist any Lien upon
any of its properties, now owned or hereafter acquired, nor acquire nor agree
to acquire any kind of property subject to a Lien provided, however, that the
foregoing restrictions shall not prevent the Borrower from:
(a) having Liens on Indebtedness existing prior to the
Effective Date hereof and as listed on Schedule II;
Page 13 of 19 Pages
<PAGE> 18
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
(b) making pledges or deposits to secure the Borrower's
obligations under workmen's compensation laws or similar legislation;
(c) in the ordinary course of business, making good faith
deposits in connection with bids, tenders, contracts or leases to
which the Borrower is a party, or making deposits to secure public or
statutory obligations;
(d) incurring mechanics', carriers', workmen's,
repairmen's or other like Liens in the ordinary course of business in
respect of obligations which are not overdue or being contested in
good faith, or making deposits to obtain the release of such Liens;
(e) making deposits to secure replevin, surety,
attachment or appeal bonds relating to legal proceedings to which the
Borrower is a party;
(f) incurring Liens arising out of judgments or awards
against the Borrower with respect to which it is currently engaged in
proceedings for review or appeal and with respect to which it shall
have secured a stay of execution pending such proceedings for review
or appeal;
(g) in the ordinary course of business, granting leases
or subleases to others or acquiring property subject to leases;
(h) permitting Liens consisting of zoning restrictions,
easements, restrictions on the use of real property or minor
irregularities in titles thereto which do not, in the opinion of the
Borrower's management, impair the use of such property by the Borrower
in the operation of its business; and
(i) incurring Liens when acquiring assets or properties
as contemplated in this Agreement.
9.5 No Inconsistent Actions. Undertake any course of
action inconsistent with the provisions of the Loan Documents. The Borrower
will promptly do all acts and things and take all such measures as may be
appropriate to comply as soon as practicable with the representations,
warranties, terms, conditions and provisions of this Agreement.
9.6 Transactions with Affiliates. Enter into any material
transaction (including, without limitation, the purchase, sale or exchange of
any property or the rendering of any service) with any Affiliate except in the
ordinary course of and pursuant to the reasonable requirements of the
Borrower's business and upon fair and reasonable terms no less favorable to the
Borrower than it would obtain in any other arms' length business transaction.
9.7 ERISA. (i) voluntarily terminate any Plan if such
termination is likely to result in any material liability of the Borrower to
the PBGC or any Person or (ii) enter into any 'prohibited transaction' (as
defined in the Code or in ERISA) involving any Plan which might result in any
material liability of Borrower to the PBGC or any Person, (iii) permit the
occurrence of any Reportable Event which might result in any material liability
of the Borrower to the PBGC or any other Person or (iv) permit to exist any
other event or condition which might result in any material liability of the
Borrower to the PBGC or any other Person.
9.8 Funded Indebtedness to EBITDA Ratio. Permit the ratio
of Borrower's Funded Indebtedness to EBITDA for the trailing four (4) quarters
to be greater than 2.50 to 1.00 at any time during the term of this Agreement,
but tested as of the end of each fiscal quarter, beginning June 30, 1994.
9.9 Fixed Charge Ratio. Permit the ratio of EBITDA to
Fixed Charges for the trailing four (4) quarters to be less than 1.50 to 1.00
at any time during the term of this Agreement, but tested as of the end of each
fiscal quarter, beginning June 30, 1994.
Page 14 of 19 Pages
<PAGE> 19
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
9.10 Inventory Turnover Ratio. Permit the ratio of Costs
of Goods Sold to the amount of the average inventory (the sum of: (i) amount of
Inventory for the most recent quarter's end plus (ii) the amount of the
Inventory as of the end of each of the prior three quarters divided by 4) for
the trailing four (4) quarters to be less than 1.50 to 1.00 at any time during
the term of this Agreement, but tested as of the end of each fiscal quarter,
beginning June 30, 1994.
SECTION 10. EVENTS OF DEFAULT.
In the event any of the following events shall occur and be
continuing (a 'Default"):
10.1 Nonpayment. Nonpayment of any principal and interest
or any other amount such as commissions, fees and legal expenses as and when
due in accordance with the terms of the Loan Documents and the same shall not
have been cured within 3 days of the occurrence of the Default;
10.2 Misrepresentations. Any representation or warranty
made in or in connection with the Loan Documents or in any other agreement,
instrument or certificate furnished in connection with any of the foregoing
shall prove false or misleading in any material respect when made or deemed
made;
10.3 Loan Documents. Subject to Section 10.04 below, the
occurrence of any event of default as such is defined in any of the Loan
Documents other than the Note and this Agreement;
10.4 Nonperformance. Borrower shall default in the due
observance or performance of any term, covenant or agreement contained in this
Agreement or in any of the other Loan Documents except that any Default under
Sections 8 and 9 shall not be cured within 30 days of the occurrence of said
Default;
10.5 Other Indebtedness. Borrower shall (x) fail to make
one or more payments when due on aggregate Indebtedness for borrowed money
exceeding $500,000 and such failure results in the acceleration of any
Indebtedness, (y) default in the performance of its material obligations under
any promissory note, credit agreement, loan agreement or collateral documents
relating to or securing any aggregate Indebtedness for borrowed money exceeding
$500,000 and such default results in the acceleration of any Indebtedness, or
(z) fail to pay when due any other Indebtedness in an aggregate amount in
excess of $500,000 beyond any applicable grace period, unless the payment
thereof is being contested in good faith and Borrower has adequate reserves set
aside for such payment;
10.6 Change of Control. There is an occurrence of a Change
in Control of Borrower;
10.7 Judgements. Any final, nonappealable judgment or
judgments in excess of $500,000.00 in the aggregate against Borrower or any
attachment or other levy against the property of Borrower with respect to a
claim remains unpaid, unstayed on appeal, undischarged, not bonded or not
dismissed for 60 days;
10.8 Bankruptcy. Except, in the event of an involuntary
bankruptcy, which has not been dismissed within 60 days, Borrower makes an
assignment for the benefit of creditors, files a petition in bankruptcy, is
adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any
receiver or any trustee of any substantial part of its property, commences any
action relating to Borrower under any reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, whether
or not hereafter in effect, or if there is commenced against Borrower any such
action, or Borrower by any act indicates its consent to or approval of any
trustee for Borrower or any substantial part of its property, or suffers any
such receivership or trustee to continue undischarged;
10.9 Reportable Event. A Reportable Event shall have
occurred with respect to any Plan as defined in ERISA and (i) the Bank has
notified the Borrower in writing that it has determined that such Reportable
Event constitutes reasonable grounds for termination of such Plan by the PBGC
or the appointment of a trustee, to administer the Plan, by an appropriate U.S.
District Court or (ii) such termination proceedings are commenced or such
appointment occurs;
Page 15 of 19 Pages
<PAGE> 20
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
THEN, the Bank's obligation to make any Loan, issue any Letter of Credit or
create any Acceptance is canceled without the need for notice to Borrower of
any kind and the Note and all Loans and any other amounts owing under the other
Loan Documents shall be immediately due and payable in full, without
presentment, demand, protest or notice of any kind, notice of intent to
accelerate and notice of acceleration all of which are hereby expressly waived
and Borrower shall deposit with the Bank cash equal to or cash equivalent
securities equal to the sum of the aggregate outstanding L/C Obligations and
Acceptances as security for Borrower's obligations under this Agreement.
SECTION 11. REMEDIES.
11.1 Additional Remedies. If any of the above events ("Events
of Default") shall occur, then, in addition to the remedies provided for above
in Section 6.1, the Bank may do any or all of the following: (1) declare the
Note to be, and thereupon such Note shall forthwith become, immediately due and
payable, together with all accrued and unpaid interest thereon and all other
obligations and indebtedness of the Borrower under the Loan Documents, without
notice of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to
Borrower, terminate the Commitment and accelerate the Termination Date,
provided that should an event occur and not be cured within the applicable
grace period provided for above, Bank will not be obligated to make any Loan,
issue any Letter of Credit or create any Acceptance until such Event of Default
is cured; and (3) exercise any and all other rights pursuant to the Loan
Documents, at law, in equity or otherwise.
11.2 Remedies Cumulative. No remedy, right or power of the
Bank is intended to be exclusive of any other remedy, right or power, and each
and every remedy, right and power shall be cumulative and in addition to every
other remedy, right and power given under this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise.
SECTION 12. MISCELLANEOUS.
12.1 No Waiver. No failure to exercise or delay in
exercising any right or power under any of the Loan Documents shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power preclude any further or other exercise thereof or the exercise of any
other right or power. No amendment, modification or waiver of any of the Loan
Documents shall be effective unless the same is in writing and signed by the
Person against whom such amendment is sought to be enforced.
12.2 Notices. All notices under the Loan Documents, except
a Notice of Borrowing or notices of payment or prepayment, which can be made by
telephone provided the same is promptly confirmed in writing shall be in
writing and either (i) delivered against receipt therefore, (ii) mailed by
registered or certified mail, return receipt requested, or (iii) sent by
telecopy, telex or telegram, in each case addressed to the names and addresses
as set forth on the execution page of this Agreement or to such other name or
address as a party may designate. Notices shall be deemed to have been given
when delivered (or, if mailed, on the third Business Day from date of posting).
12.3 Set-Off. If one or more Events of Default shall occur
and be continuing, the Bank shall have the right, in addition to all other
rights and remedies available to Bank, to set-off against the unpaid balance of
the Indebtedness owing to Bank on account of any Advance of Borrower,
including, without limitation, any funds in any deposit account whatsoever
maintained by the Borrower with the Bank, and nothing in this Agreement or any
of the other Loan Documents shall be deemed a waiver or prohibition of the
Bank's right of banker's lien or set-off. Bank shall immediately give Borrower
notice of any such set-off.
12.4. Governing and Venue. UNLESS OTHERWISE SPECIFIED
HEREIN, OR OTHERWISE REQUIRED BY ANY APPLICABLE LAW, EACH OF THE LOAN DOCUMENTS
(INCLUDING THIS AGREEMENT AND THE NOTE) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF
Page 16 of 19 Pages
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Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
AMERICA. THE NOTE HAS BEEN ENTERED INTO IN THE COUNTY OF THE BANK'S PRINCIPAL
OFFICE IN TEXAS, SHALL BE PERFORMABLE FOR ALL PURPOSES IN SUCH COUNTY AND THE
BORROWER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS
LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
BORROWER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
SUCH COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES
THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN
ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO
ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES.
12.5 Survival of Warranties All representations and warranties
made by or on behalf of Borrower in connection with this Agreement shall
survive the execution and delivery of the Loan Documents and shall bind
Borrower and its administrators, successors, trustees, receivers and assigns
and inure to the benefit of the successors and assigns of the Bank. The term of
this Agreement shall be until the Termination Date and final maturity of the
Note and the payment of all amounts due under the Loan Documents.
12.6 Usury. Borrower and Bank intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this Agreement
or any other Loan Document will never exceed the Highest Lawful Rate (as
defined in the Note). If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the Loan
Document or charge to conform to applicable law, and if excess interest has
been received, Bank will either refund the excess to Borrower or credit the
excess on any unpaid principal amount of the Note or any other Loan Document.
All amounts constituting interest will be spread throughout the full term of
the Loan Document or applicable Note in determining whether interest exceeds
lawful amounts.
12.7 Expenses. Any provision to the contrary notwithstanding, and
whether or not the transactions contemplated by this Agreement shall be
consummated, the Borrower shall pay, on demand costs and administrative
expenses including, without limitation, the expenses of counsel for the Bank in
connection with the preparation, execution, filing, and recording of this
Agreement and Borrower shall pay on demand, all reasonable out-of-pocket
expenses in connection with the refiling, re-recording, modification,
supplementing and waiver of the Loan Documents and the making, servicing and
collection of any Advances.
12.8 Indemnification. THE BORROWER AGREES TO INDEMNIFY, DEFEND
AND HOLD THE BANK, ITS DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (THE "BANK"
FOR THIS PARAGRAPH ONLY) HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY,
OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING
INTEREST, PENALTIES, ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) EXCEPT FOR
THE GROSS NEGLIGENCE AND WILLFUL MISCONDUCT OF THE BANK TO WHICH THE BANK MAY
BECOME SUBJECT TO OR ARISING OUT OF, OR BASED UPON THE LOAN DOCUMENTS OR ANY
ADVANCES.
12.9 Severability. If any provision of any of the Loan Documents
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions
shall not be affected or impaired thereby.
Page 17 of 19 Pages
<PAGE> 22
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
12.10 Entire Agreement. The Loan Documents embody the entire
agreement and understanding between the Borrower and the Bank, relating to the
subject matter hereof and thereof and supersedes all prior proposals,
negotiations, agreements, oral and written communications and understandings
relating to such subject matter. The Borrower and the Bank certify that each is
relying on no other representation, warranty, covenant or agreement except for
those set forth in the Loan Documents. NO COURSE OF DEALING BY BORROWER WITH
BANK, NO COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC
EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY
ANY TERM OF THIS AGREEMENT.
12.11 Loan Sales and Assignments. The Bank reserves the right,
in its sole discretion, without notice to the Borrower to sell participations
or assign its interest, or both, in all or any part of the Advances or other
Loan Documents.
12.12 No Assignment. The Borrower may not assign at any time
during the existence of the Advances its interests, rights, powers, obligations
or liabilities under any of the Loan Documents without the express written
consent of the Bank.
12.13 Conflict between Loan Documents. In the event any provision
herein shall be inconsistent with any provision of any of the other Loan
Documents, this Agreement shall control.
Page 18 of 19 Pages
<PAGE> 23
Amended and Restated Revolving Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
June 30, 1994
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A
"LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS &
COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMEPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
TANDY BRANDS ACCESSORIES, INC.
By: /s/ STANLEY T. NINEMIRE
------------------------------
Name: Stanley T. Ninemire
Title: Vice-President and Chief Financial Officer
Address for mail delivery:
Tandy Brands Accessories, Inc.
690 East Lamar, Suite 200
Arlington, Texas 76011
Attention: Stan Ninemire
Telecopy No: (817) 548-1144
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ LOREN K. JENSEN
------------------------------
Name: Loren K. Jensen
Title: Senior Vice President
Address for mail delivery:
201 Main Street
Fort Worth, Texas 76102
Attention: Loren Jensen, S.V.P.
Telecopy No: (817) 878-7591
Page 19 of 19 Pages
<PAGE> 24
EXHIBIT B
Date
Texas Commerce Bank National Association
201 Main Street
Fort Worth, Texas 76102
Attention: Loren Jensen or Susan Sheffield
Re: Notice of Borrowing under Amended and Restated Credit Agreement
Ladies and Gentlemen:
Pursuant to that certain Amended and Restated Revolving Credit
Agreement dated as of June 30, 1994 (the "Credit Agreement" or "Agreement"; the
defined terms herein being used herein as therein defined) between Tandy Brands
Accessories, Inc., a Delaware corporation (the "Borrower") and the Bank, the
Borrower hereby:
1. Gives you notice pursuant to Section 2 of the Agreement
and the Note that the Borrower hereby requests a Loan under the Note which is
subject to the Agreement, and in that connection sets forth below the
information relating to such Loan ("the Proposed Loan") as required by the
Note:
(i) The Borrowing Date of the Proposed Loan is _________, 19__;
(ii) The type of the Proposed Loan is (check one):
______________ Alternate Base Rate Loan
______________ CD Rate Loan
______________ Eurodollar Loan
______________ Negotiated Rate Loan
(iii) The Interest Period of the Proposed Loan is ____________;
(iv) The principal amount of the Proposed Loan is $__________,
and such amount, together with the sum of (i) the aggregate principal
amount of all outstanding Loans, (ii) the aggregate outstanding L/C
Obligations; and (iii) Acceptances (as defined in the Credit Agreement)
does not exceed the amount of the Commitment (as defined in the Credit
Agreement);
(v) The account of the Borrower into which the proceeds of the
Proposed Loan should be deposited is:_________________________.
2. Certifies that (a) no Default has occurred and is continuing
or will result from the making of such Proposed Loan, and (b) all
representations and warranties of the Borrower contained in Section 5 of
the Agreement are true and correct as of the date hereof (other than
those of such representations and warranties which speak to a date on or
before the date hereof) to the best of our knowledge, with the same
effect as if made on such date.
Very truly yours,
TANDY BRANDS ACCESSORIES, INC.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
EXHIBIT B Page 1 of 1
<PAGE> 25
EXHIBIT C
ELIGIBILITY CERTIFICATE
______________, 19__
Texas Commerce Bank National Association
201 Main Street
Fort Worth, Texas 76102
Re: Draft to be discounted to create an Acceptance subject to the Amended
and Restated Revolving Credit Agreement dated June 30, 1994 by and
between Tandy Brands Accessories, Inc. and Texas Commerce Bank National
Association
Ladies and Gentlemen:
The Drafts (Numbers:_____________) relevant to the attached
Notice of Acceptance shall (check or "X" the applicable box below):
[ ] Grow out of transactions involving the importation or exportation
of goods, to wit:
Bill of Lading No.
Goods Destination and/or Origin and/or Date
----- ------------------------- -----------
[ ] Grow out of transactions involving the domestic shipment of
goods, to wit:
Bill of Lading No.
Goods Destination and/or Origin and/or Date
----- ------------------------- -----------
[ ] Are presently secured (and will remain secured at least until the
time your Acceptance is created) by a warehouse receipt or other
such documents of title, conveying or securing title, covering
readily marketable staples, to wit:
Warehouse receipt No.
Staples Security and/or Date
------- -------- --------------------
[ ] Will mature at least 30 days and less than 181 days from date of
Draft; and
[ ] Are considered "Eligible Acceptances" as defined in the Amended
and Restated Revolving Credit Agreement dated June 30, 1994 by
and between the Borrower and Bank.
Borrower agrees to maintain records available for the Bank's
inspection to justify the foregoing and to show that the value of the relevant
transaction is at least equal to the amount of the applicable Drafts. Borrower
certifies to Bank that there is no other financing supporting this transaction.
TANDY BRANDS ACCESSORIES, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
EXHIBIT C Page 1 of 1
<PAGE> 26
EXHIBIT D
NOTICE OF ACCEPTANCE
Texas Commerce Bank National Association
201 Main Street
Fort Worth, Texas 76102
Attention: Loren Jensen or Susan Sheffield
Re: Amended and Restated Revolving Credit Agreement by and between Tandy
Brands Accessories, Inc. ("Borrower") and Texas Commerce Bank National
Association (the "Bank")
Ladies and Gentlemen:
Pursuant to the Amended and Restated revolving Credit Agreement
dated June 30, 1994 (the "Agreement", the capitalized terms herein shall have
the same meanings as the capitalized terms in the Agreement) by and between the
Borrower and the Bank, the Borrower hereby:
1. Gives Bank confirmation of Borrower's notice pursuant to
Section 4.2 of the Agreement and in connection therewith sets forth below the
information relating to such Acceptance as required in Section 4 of the
Agreement:
(i) The date of the Acceptance will be: ______________________;
(ii) The amount of the Acceptance will be: $___________ and such
amount, together with the sum of (a) the aggregate amount of Loans
outstanding, (b) the amount of L/C Obligations outstanding and (c) the
amount of Acceptances outstanding does not exceed the amount of the
Commitment;
(iii) The maturity of the proposed Acceptance will be:
__________________________;
(iv) The account of the Borrower into which the "proceeds" (the
amount of the proceeds shall be net of the amount of the commission fee
charged Borrower by Bank with respect of the creation of the Acceptance
as set forth in Section 4.5 of the Agreement) of the Acceptance should
be deposited in:
___________________________________;
2. Borrower certifies, warrants and represents that (a) no
Default has occurred and is continuing or will result from the creation of such
Acceptance and (b) all representations and warranties of the Borrower contained
in Section 7 of the Credit Agreement are true and correct to the best of
Borrower's knowledge as of the date hereof.
3. Accompanying this Notice of Acceptance is an Eligibility
Certificate which will be attached to the Acceptance.
Sincerely yours,
TANDY BRANDS ACCESSORIES, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
EXHIBIT D Page 1 of 1
<PAGE> 27
EXHIBIT E
HOLD HARMLESS ADDENDUM
Texas Commerce Bank National Association
201 Main Street
Fort Worth, Texas 76102
Re: Tandy Brands Accessories, Inc. (the "Borrower")
$15,000,000 Commitment
Dear Sir:
Please hold as custodian, blank pre-signed and pre-endorsed Drafts drawn
by us and payable by you under the terms herein set forth. The blank pre-signed
Drafts shall be received, completed, and accepted from time to time by the Bank
for Borrower's account, pursuant to the Amended and Restated Revolving Credit
Agreement (the "Agreement") dated June 30, 1994. The Bank will exercise the
same care with respect to the safekeeping of such drafts as it exercises with
respect to its own affairs.
The Bank and its Trust Company will hold such drafts and complete them
with such amounts, dates and other data as the Borrower shall instruct in
accordance with the terms of this Hold Harmless Addendum (the "Addendum") which
is an integral part of the Agreement to which this Addendum is attached, and of
which this Addendum is expressly made a part. The Bank shall accept and be
entitled to rely upon all instructions given on Borrower's behalf, including
instructions given by telephone or in writing. All instructions given by
telephone shall be promptly confirmed in writing. Each of the following
individuals is singly authorized, relevant to the Agreement and this Addendum,
to give you instructions on Borrower's behalf:
- ------------------------------- ------------------------------
- ------------------------------- ------------------------------
- ------------------------------- ------------------------------
The Bank's and Borrower's duties and responsibilities for these Drafts
shall be set forth in the Agreement. The Borrower further agrees to defend,
indemnify and hold the Bank and its liabilities, claims, damages, causes of
action, costs, expenses, and attorneys' fees, in connection with the Bank's
agents' handling of the herein described Drafts; provided that nothing
contained herein shall render the Bank liable to Borrower for any exemplary or
consequential damages.
Receipt of funds for each Draft shall be deposited in Borrower's account
with the Bank, numbered _________________ or other of Borrower's accounts with
the Bank as may be directed by any one of the above mentioned individuals.
We have herewith delivered blank pre-signed and pre-endorsed Drafts
numbered _______________ through _______________ to the Bank. The Bank, by its
signature below, acknowledges receipt thereof.
TANDY BRANDS ACCESSORIES, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
ATTEST:
------------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
ATTEST:
------------------------------
<PAGE> 28
SCHEDULE I
SUBSIDIARIES
<TABLE>
<CAPTION>
Name and Address Percentage
of Subsidiaries Borrower? State of Organization Ownership
- --------------- -------- --------------------- ---------
<S> <C> <C> <C>
TBA Acquisition, Inc. Yes Delaware ______ %
TBAC -
Prince Gardner, Inc. Yes
TBAC-AIS
</TABLE>
SCHEDULE I Page 1 of 1
<PAGE> 29
SCHEDULE II
List of Indebtedness Existing Before Effective Date
Encumbered Indebtedness
Unencumbered Indebtedness
SCHEDULE II Page 1 of 1
<PAGE> 30
FIRST AMENDMENT TO CREDIT AGREEMENT -ENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (THIS "AMENDMENT") dated effective as
of April 30, 1995 (the "Effective Date"), is by and between TANDY BRANDS
ACCESSORIES, INC., a Delaware corporation, ("Borrower"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association whose principal
office is located in Houston, Texas (the "Bank").
PRELIMINARY STATEMENT
The Bank and the Borrower have entered into an Amended and Restated Revolving
Credit Agreement dated as of June 30, 1994 (the "Credit Agreement"). The
"Agreement", as used in the Credit Agreement, shall also refer to the Credit
Agreement as amended by this Amendment. All capitalized terms defined in the
Credit Agreement and not otherwise defined herein shall have the same meanings
herein as in the Credit Agreement. The Bank and the Borrower have agreed to
amend the Credit Agreement to the extent set forth herein, and in order to,
among other things, renew, modify, extend and increase the Commitment to
Borrower for the issuance of letters of credit and money borrowings for the
purpose of financing and supporting the general corporate purposes, including,
without limitation, the working capital, the letters of credit needs and
acquisition financing and treasury stock purchase requirements of the Borrower.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the Bank and the Borrower hereby agree as follows:
Section 1. Section 1.1 Definitions of the Credit Agreement is amended by
deleting therefrom the definitions of "Acceptance", "Acceptance Commitment",
"Acceptance Obligation", "Eligible Acceptance", "Eligibility Certificate",
"Draft" and "Notice of Acceptance" in their entirety.
Section 2. Section 1.1 Definitions of the Credit Agreement is amended by
substituting the following for the definition of Commitment:
""Commitment" shall mean $20,000,000.00."
Section 3. Section 1.1 Definitions of the Credit Agreement is amended by
substituting the following for the definition of EBITDA:
""EBITDA" shall mean pretax income from continuing operations plus
Interest Expense plus amortization and depreciation."
Section 4. Section 1.1 Definitions of the Credit Agreement is amended by
substituting the following for the definition of Loan or Loans:
""Loan" or "Loans" shall mean any loan by the Bank made to the Borrower
pursuant to Section 2 hereof and includes an Alternate Base Rate Loan, a
CD Rate Loan, a Negotiated Rate Loan or a Eurodollar Loan (each of which
shall be a "type" of loan as further described in the Note)."
Section 5. Section 1.1 Definitions of the Credit Agreement is amended by
substituting the following for the definition of Termination Date:
""Termination Date" shall mean the earlier to occur of: (i) April 30,
1997; or (ii) that date as specified by the Bank pursuant to Section 10
hereof."
Page 1 of 5 Pages
<PAGE> 31
First Amendment to Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1995
Section 6. Section 1.1 Definitions of the Credit Agreement is amended by
substituting the following for the definition of Advances:
""Advances" shall mean collectively the Loans and Letters of Credit."
Section 7. Section 2.1 of the Credit Agreement is amended by substituting the
following for Section 2.1 of the Credit Agreement:
"2.1 Note and Terms of Commitment. Subject to the terms and
conditions hereof, the Bank agrees to make advances or loans to
Borrower from time to time before the Termination Date, not to exceed
at any one time outstanding the amount of the Commitment. Advances
shall take the form of Loans under the Note or issuances of Letters of
Credit by Bank. The Loans shall be evidenced by, and shall bear
interest and be payable as provided in the Note executed by Borrower
dated as of the Effective Date and delivered to Bank which is given in
renewal, extension, modification of and increase in the amount of that
certain promissory note dated April 30, 1994 in the principal amount
of $15,000,000.00 (including all prior notes of which said note
represents a renewal, extension, modification, increase, substitution,
rearrangement or replacement thereof, the "Renewed Note"). Each Loan
shall be in an amount not less than that amount provided for in the
Note. Borrower shall have the right to borrow, repay and reborrow
under the Note provided that at no time shall the sum of the aggregate
amount outstanding of: (i) Loans, and (ii) L/C Obligations (as defined
in Section 3) exceed the amount of the Commitment."
Section 8. Section 3.1 of the Credit Agreement is amended by substituting the
following for Section 3.1 of the Credit Agreement:
"3.1 Letters of Credit. Subject to this Agreement, the Letters of
Credit may be issued from time to time on and after the Effective
Date, but, not including, the Termination Date for the account of the
Borrower or each of its subsidiaries and in favor of such Person or
Persons as may be designated by the Borrower and each of its
subsidiaries. Each Letter of Credit shall (a) expire on a date not
later than 365 days from the date of issuance thereof for commercial
letters of credit ("Commercial L/Cs") and expire not later than 12
months from date of issuance thereof for standby letters of credit
("Standby L/Cs") (except for letters of credit containing evergreen
clauses) and, in any event, no Letter of Credit shall have an
expiration date later than the Termination Date and (b) be denominated
in Dollars (or other currencies that are acceptable to the Bank). The
Commitment shall be reduced by an amount equal to the sum of: (a) the
face amount of all outstanding Letters of Credit; and (b) the amount
of any unreimbursed drawings or other amounts owing to the Bank under
or in respect of any Letter of Credit or Application (items (a) and
(b) are hereinafter collectively referred to as the "L/C Obligations")
such that, on any date, the sum of (x) all Loans outstanding on such
date and (y) all L/C Obligations on such date does not exceed the
Commitment. The total aggregate amount of L/C Obligations shall never
exceed $10,000,000.00."
Section 9. Section 3.2 of the Credit Agreement is amended by substituting the
following for Section 3.2 of the Credit Agreement:
"3.2 Applications. As a condition precedent to the issuance of any
Letter of Credit for the account of Borrower and for each of its
subsidiaries, the Bank shall have received an Application, duly
completed and executed by the Borrower and for each of its
subsidiaries in Proper Form, not less than three (3) Business Days
prior to the date on which the Letter of Credit is to be issued. In
the event that any provision of a Letter of Credit Application shall
be inconsistent with any provision of this Agreement, the provisions
of this Agreement shall govern."
Page 2 of 5 Pages
<PAGE> 32
First Amendment to Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1995
Section 10. Section 3.5 of the Credit Agreement is amended by substituting the
following for Section 3.5 of the Credit Agreement:
"3.5 Letter of Credit Commissions. In consideration for the issuance
of each Letter of Credit, the Borrower agrees to pay to the Bank a
letter of credit issuance fee ("Fee") in respect of such Letter of
Credit in an amount equal to: (1) in the case of Commercial L/C's: (a)
one eighth of one percent (1/8%) per annum per quarter or fraction
thereof on the face amount of such Letter of Credit or (b) the minimum
fee for such Letter of Credit extended by the Bank and in effect as of
the date on which such Letter of Credit is to be issued; and (2) in
the case of Standby L/C's: (a) three-quarters of one percent (3/4%)
per annum on the face amount of such Letter of Credit or (b) the
minimum fee for such Letter of Credit extended by the Bank and in
effect as of the date on which such Letter of Credit is to be issued.
The Fee shall be paid to the Bank at its main offices to the attention
of the Manager, Documentary Services Division in advance of issuance
of the Letter of Credit."
Section 11. The Credit Agreement is amended by deleting therefrom Section 4 in
its entirety.
Section 12. Section 6 of the Credit Agreement is amended by substituting the
following for Section 6 of the Credit Agreement:
"6.1 All Advances. The obligation of the Bank to make any Loan, issue
any Letter of Credit or renew the Renewed Note is subject to
satisfaction of the following conditions precedent: (a) the Bank shall
have received the following, all of which shall be duly executed and
in Proper Form: (1) for any Loan, a Notice of Borrowing, substantially
in the form of Exhibit B, as provided for in the Note; (2) for the
issuance of any Letter of Credit, a duly executed Application in
Proper Form by Borrower within the time set forth in Section 3.2; and
(b) no Default shall have occurred and be continuing; and (c) the
making of or issuance of any Advance shall not be prohibited by, or
subject the Bank to any penalty or onerous condition under, any Legal
Requirement.
6.2 First Loan and/or Letter of Credit. In addition to the matters
described in the preceding section, the obligation, if any, of the
Bank to renew the Renewed Note, to make the first Loan, issue the
first Letter of Credit or to renew and extend any of the Letters of
Credit is subject to the receipt by the Bank of all of the Loan
Documents, all of which shall be in Proper Form."
Section 13. Sections 7.15 and 7.16 of the Credit Agreement is amended by
deleting Sections 7.15 and 7.16 therefrom in their entirety.
Section 14. The last paragraph of Section 10 of the Credit Agreement is amended
by substituting the following for the last paragraph of Section 10:
"THEN, the Bank's obligation to make any Loan or issue any Letter of
Credit is canceled without the need for notice to Borrower of any kind
and the Note and all Loans and any other amounts owing under the other
Loan Documents shall be immediately due and payable in full, without
presentment, demand, protest or notice of any kind, notice of intent
to accelerate and notice of acceleration all of which are hereby
expressly waived and Borrower shall deposit with the Bank cash equal
to or cash equivalent securities equal to the sum of the aggregate
outstanding L/C Obligations as security for Borrower's obligations
under this Agreement."
Page 3 of 5 Pages
<PAGE> 33
First Amendment to Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1995
Section 15. Section 11.1 of the Credit Agreement is amended by substituting the
following for Section 11.1 of the Credit Agreement:
"11.1 Additional Remedies. If any of the above events ("Events of
Default") shall occur, then, in addition to the remedies provided for
above in Section 6.1, the Bank may do any or all of the following: (1)
declare the Note to be, and thereupon such Note shall forthwith
become, immediately due and payable, together with all accrued and
unpaid interest thereon and all other obligations and indebtedness of
the Borrower under the Loan Documents, without notice of acceleration
or of intention to accelerate, presentment and demand or protest, all
of which are hereby expressly waived; (2) without notice to Borrower,
terminate the Commitment and accelerate the Termination Date, provided
that should an event occur and not be cured within the applicable
grace period provided for above, Bank will not be obligated to make
any Loan or issue any Letter of Credit until such Event of Default is
cured; and (3) exercise any and all other rights pursuant to the Loan
Documents, at law, in equity or otherwise."
Section 16. Exhibit B of the Credit Agreement is hereby amended by replacing
prior Exhibit B with the Exhibit B attached hereto and hereby incorporated into
this Amendment and the Credit Agreement for all purposes.
Section 17. Schedule I of the Credit Agreement is hereby amended by replacing
prior Schedule I with the Schedule I attached hereto and hereby incorporated
into this Amendment and the Credit Agreement for all purposes.
Section 18. The Credit Agreement is hereby amended by deleting therefrom
Exhibits C, D and E in their entirety.
Section 19. The Borrower hereby represents and warrants to the Bank that after
giving effect to the execution and delivery of this Amendment: (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date; and (b) no
Event of Default, or event which with passage of time, the giving of notice or
both would become an Event of Default, has occurred and is continuing as of the
date hereof.
Section 20. This Amendment shall become effective as of the Effective Date upon
its execution and delivery by each of the parties named in the signature lines
below, and the "Agreement" as used in the Credit Agreement shall also refer to
the Credit Agreement as amended by this Amendment.
Section 21. The Borrower further acknowledges that each of the other Loan
Documents is in all other respects ratified and confirmed, and all of the
rights, powers and privileges created thereby or thereunder are ratified,
extended, carried forward and remain in full force and effect except as the
Credit Agreement is amended by this Amendment.
Section 22. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
Section 23. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement.
Section 24. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. THE
BORROWER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS
LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
BORROWER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
SUCH COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO
Page 4 of 5 Pages
<PAGE> 34
First Amendment to Credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1995
THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE
BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE
CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed effective as of the Effective Date.
BORROWER: TANDY BRANDS ACCESSORIES, INC.
By: /s/ BRUCE COLE
-----------------------------------------------------------
Name: Bruce Cole
-----------------------------------------------------------
Title: Chief Financial Officer & Vice President
-----------------------------------------------------------
Address for mail delivery:
Tandy Brands Accessories, Inc.
690 East Lamar, Suite 200
Arlington, Texas 76011
Attention: Bruce Cole
Telecopy No: (817) 548-1144
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ B.B. WUTHRICH
-----------------------------------------------------------
Name: B. B. Wuthrich
-----------------------------------------------------------
Title: Vice President
-----------------------------------------------------------
Address for mail delivery:
201 Main Street
Fort Worth, Texas 76102
Attention: Buddy Wuthrich, S.V.P.
Telecopy No: (817) 878-7591
Page 5 of 5 Pages
<PAGE> 35
EXHIBIT B
Date
Texas Commerce Bank National Association
201 Main Street
Fort Worth, Texas 76102
Attention: Buddy Wuthrich
Re: Notice of Borrowing under Amended and Restated Credit Agreement
Ladies and Gentlemen:
Pursuant to that certain Amended and Restated Revolving Credit
Agreement dated as of June 30, 1994, as amended from time to time, (the "Credit
Agreement" or "Agreement"; the defined terms herein being used herein as
therein defined) by and between Tandy Brands Accessories, Inc., a Delaware
corporation (the "Borrower") and the Bank, the Borrower hereby:
1. Gives you notice pursuant to Section 2 of the Agreement and
pursuant to the Note that the Borrower hereby requests a Loan under the Note
which is subject to the Agreement, and in that connection sets forth below the
information relating to such Loan ("the Proposed Loan") as required by the
Note:
(i) The Borrowing Date of the Proposed Loan is __________
19_;
(ii) The type of the Proposed Loan is (check one):
_______ Alternate Base Rate Loan
_______ CD Rate Loan
_______ Eurodollar Loan
_______ Negotiated Rate Loan
(iii) The Interest Period of the Proposed Loan is ________;
(iv) The principal amount of the Proposed Loan is $_______
and such amount, together with the sum of (i) the aggregate principal
amount of all outstanding Loans, and (ii) the aggregate outstanding
L/C Obligations, does not exceed the amount of the Commitment;
(v) The account of the Borrower into which the proceeds
of the Proposed Loan should be deposited is: _________________________.
2. Certifies that (a) no Default has occurred and is continuing
or will result from the making of such Proposed Loan, and (b) all
representations and warranties of the Borrower contained in Section 5 of the
Agreement are true and correct as of the date hereof (other than those of such
representations and warranties which speak to a date on or before the date
hereof) to the best of our knowledge, with the same effect as if made on such
date.
Very truly yours,
TANDY BRANDS ACCESSORIES, INC.
By: /s/ BRUCE COLE
--------------------------------
Name: Bruce Cole
--------------------------------
Title: Chief Financial Officer &
Vice President
--------------------------------
EXHIBIT B Page 1 of 1
<PAGE> 36
SCHEDULE I
SUBSIDIARIES
<TABLE>
<CAPTION>
Name and Address Percentage
of Subsidiaries State of Organization Ownership
- ---------------- --------------------- ---------
<S> <C> <C>
TBA Acquisition, Inc. Delaware _________%
- -----------------------
- -----------------------
TBAC - _________%
Prince Gardner, Inc. -------------
- -----------------------
- -----------------------
TBAC-AIS _________%
- ----------------------- -------------
- -----------------------
</TABLE>
SCHEDULE I Page 1 of 1
<PAGE> 37
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as
of April 30, 1996 (the "Effective Date"), is by and between TANDY BRANDS
ACCESSORIES, INC., a Delaware corporation, ("Borrower"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association whose principal
office is located in Houston, Texas (the "Bank").
PRELIMINARY STATEMENT
The Bank and the Borrower have entered into an Amended and Restated Revolving
Credit Agreement dated as of June 30,1994 amended pursuant to a First Amendment
to Credit Agreement dated effective as of April 30, 1995 (the "Credit
Agreement"). The "Agreement", as used in the Credit Agreement shall also refer
to the Credit Agreement as amended by this Amendment. All capitalized terms
defined in the Credit Agreement and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement. The Bank and the Borrower have
agreed to amend the Credit Agreement to the extent set forth herein, and in
order to, to, among other things, renew, modify and extend the Commitment to
Borrower for the issuance of letters of credit and money borrowings for the
purpose of financing and supporting the general corporate purposes, including,
without limitation, the working capital, the letters of credit needs and
acquisition financing and treasury stock purchase requirements of the Borrower.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the Bank and the Borrower hereby agree as follows:
Section 1. Section 1.1 of the Credit Agreement entitled, "Definitions" is
amended by substituting the following for the definition of Termination Date:
"Termination Date" shall mean the earlier to occur of: (i) April 30,
1998; or (ii) &at date as specified by the Bank pursuant to Section 10
hereof."
Section 2, Section 2.1 of the Credit Agreement entitled, "Note and Terms of
Commitment" is amended by substituting the following for Section 2.1 of the
Credit Agreement:
"2.1 Note and Terms of Commitment. Subject to the terms and conditions
hereof, the Bank agrees to make advances or loans to Borrower from
time to time before the Termination Date, not to exceed at. any one
time outstanding the amount of the Commitment. Advances shall take the
form of Loans under the Note or issuances of Letters of Credit by
Bank. The Loan shall be evidenced by, and shall bear interest and be
payable as provided in the Note executed by Borrower dated as of April
30, 1996 and delivered to Bank which is given in renewal, extension
and modification of that certain promissory note dated April 30, 1995
in the principal amount of $20,000,000.00 (including all prior notes
of which said note represents a renewal, extension, modification,
increase, substitution, rearrangement or replacement thereof, the
"Renewed Note"). Each Loan shall be in an amount not less than that
amount provided for in the Note. Borrower shall have the right to
borrow, repay and reborrow under the Note provided that at no time
shall the sum of the aggregate amount outstanding of (i) Loans, and
(ii) L/C Obligations (as defined in Section 3) exceed the amount of
the Commitment"
Section 3. Section 9.8 of t the Credit Agreement entitled, "Funded Indebtedness
to EBITDA Ratio" is amended by substituting the following for Section 9.8 of
the Credit Agreement
"Permit the ratio of Borrower's Funded Indebtedness to EBITDA for the
trailing four (4) quarters to be greater than 2.75 to 1.0 at any time
during the term of this Agreement, but tested as of the end of each
fiscal quarter beginning June 30, 1996."
Section 4. The Borrower hereby represents and warrants to the Bank that after
giving effect to the execution and delivery of this Amendment: (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date; and (b) no
Event of Default, or event which with passage of time, the giving of notice or
both would become an Event of Default, has occurred and is continuing as of the
date hereof.
1
<PAGE> 38
Second Amendment to credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1996
Section 5. This Amendment shall become effective as of the Effective Date upon
its execution and delivery by each of the parties named in the signature lines
below, and the "Agreement" as used in the Credit Agreement shall also refer to
the Credit Agreement as amended by this Amendment.
Section 6. The Borrower further acknowledges that each of the other Loan
Documents is in all other respects ratified and confirmed, and all of the
rights, powers and privileges created thereby or thereunder are ratified,
extended, carried forward and remain in full force and effect except as the
Credit Agreement as amended by this Amendment.
Section 7. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
Section 8. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement.
Section 9. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. THE BORROWER
AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED
IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE BORROWER
OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING
AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH
COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NON EXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES
THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN
ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO
ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE
CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed effective as of the Effective Date.
BORROWER: TANDY BRANDS ACCESSORIES, INC.
By: /s/ BRUCE COLE
-------------------------------------------------------------------
Name: Bruce Cole
-------------------------------------------------------------------
Title: Chief Financial Officer & Vice President
-------------------------------------------------------------------
2
<PAGE> 39
Second Amendment to credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1996
Address for mail delivery:
Tandy Brands Accessories, Inc.
690 East Lamar, Suite 200
Arlington, Texas 76011
Attention: Bruce Cole
Telecopy No: (817) 548-1144
BANK: TEXAS BANK NATIONAL ASSOCIATION
By: /s/ B. B. WUTHRICH
-------------------------------------------------------------------
Title: Vice President
-------------------------------------------------------------------
Name: B. B. Wuthrich
-------------------------------------------------------------------
Address for mail delivery:
201 Main Street
Fort Worth, Texas 76102
Attention: Buddy Wuthrich, S.V.P.
Telecopy No: (817) 878-7591
3
<PAGE> 40
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated effective as
of April 30, 1997 (the "Effective Date"), is by and between TANDY BRANDS
ACCESSORIES, INC., a Delaware corporation, ("Borrower"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association whose principal
office is located in Houston, Texas (the "Bank").
PRELIMINARY STATEMENT
The Bank and the Borrower have entered into an Amended and Restated Revolving
Credit Agreement dated as of June 30, 1994 which has been amended by a First
Amendment dated as of April 30, 1995 and a Second Amendment dated as of April
30, 1996 (the "Credit Agreement"). The "Agreement", as used in the Credit
Agreement, shall also refer to the Credit Agreement as amended by this
Amendment. All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement. The Bank and the Borrower have agreed to amend the Credit Agreement
to the extent set forth herein, and in order to, among other things, renew,
modify and extend the Commitment to Borrower for the issuance of letters of
credit and money borrowings for the purpose of financing and supporting the
general corporate purposes, including, without limitation, the working capital,
the letters of credit needs and acquisition financing and treasury stock
purchase requirements of the Borrower.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the Bank and the Borrower hereby agree as follows:
Section 1. Section 1.1 of the Credit Agreement entitled, "Definitions" is
amended by substituting the following for the definition of Termination Date:
"Termination Date" shall mean the earlier to occur of: (i) April 30,
1999; or (ii) that date as specified by the Bank pursuant to Section
10 hereof."
Section 2. Section 2.1 of the Credit Agreement entitled, "Note and Terms of
Commitment" is amended by substituting the following for Section 2.1 of the
Credit Agreement:
"2.1 Note and Terms of Commitment Subject to the terms and conditions
hereof, the Bank agrees to make advances or loans to Borrower from
time to time before the Termination Date, not to exceed at any one
time outstanding the amount of the Commitment. Advances shall take the
form of Loans under the Note or issuances of Letters of Credit by
Bank. The Loans shall be evidenced by, and shall bear interest and be
payable as provided in the Note executed by Borrower dated as of April
30, 1997 and delivered to Bank, which is given in renewal, extension
and modification of that certain promissory note dated April 30, 1996
in the principal amount of $20,000,000.00 (including all prior notes
of which said note represents a renewal, extension, modification,
increase, substitution, rearrangement or replacement thereof, the
"Renewed Note"). Each Loan shall be in an amount not less than that
amount provided for in the Note. Borrower shall have the right to
borrow, repay and reborrow under the Note provided that at no time
shall the sum of the aggregate amount outstanding of: (i) Loans, and
(ii) L/C Obligations (as defined in Section 3) exceed the amount of
the Commitment."
Section 3. Section 9.8 of the Credit Agreement entitled, "Funded Indebtedness
to EBITDA Ratio" is amended by substituting the following for Section 9.8 of
the Credit Agreement:
"Permit the ratio of Borrower's Funded Indebtedness to EBITDA for the
trailing four (4) quarters to be greater than 3.0 to 1.0 at any time
during the term of this Agreement, but tested as of the end of each
fiscal quarter beginning June 30, 1997."
Section 4. Exhibit B of the Credit Agreement is replaced by Exhibit B attached
to this Amendment.
Page 1 of 3 Pages
<PAGE> 41
Third Amendment to credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1997
Section 5. The Borrower hereby represents and warrants to the Bank that after
giving effect to the execution and delivery of this Amendment: (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date; and (b) no
Event of Default, or event which with passage of time, the giving of notice or
both would become an Event of Default, has occurred and is continuing as of the
date hereof.
Section 6. This Amendment shall become effective as of the Effective Date upon
its execution and delivery by each of the parties named in the signature lines
below, and the "Agreement" as used in the Credit Agreement shall also refer to
the Credit Agreement as amended by this Amendment.
Section 7. The Borrower further acknowledges that each of the other Loan
Documents is in all other respects ratified and confirmed, and all of the
rights, powers and privileges created thereby or thereunder are ratified,
extended, carried forward and remain in full force and effect except as the
Credit Agreement is amended by this Amendment.
Section 8. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
Section 9. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement.
Section 10. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. THE
BORROWER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS
LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
BORROWER OR THE BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST THE BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
SUCH COUNTY. THE BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWER AGREES
THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN
ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF THE BANK TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO
ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS OR VENUES.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE
CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed effective as of the Effective Date.
Page 2 of 3 Pages
<PAGE> 42
Third Amendment to credit Agreement
TANDY BRANDS ACCESSORIES, INC.
April 30, 1997
BORROWER: TANDY BRANDS ACCESSORIES, INC.
By: /s/ J. S. B. JENKINS
---------------------------------------------------------------------
Name:
---------------------------------------------------------------------
Title:
---------------------------------------------------------------------
Address for mail delivery:
Tandy Brands Accessories, Inc.
690 East Lamar, Suite 200
Arlington, Texas 76011
Attention: Stan Ninemire
Telecopy No: (817) 548-1144
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ JERRY S. PETREY
---------------------------------------------------------------------
Name: Jerry Petrey
Title: Vice President
Address for mail delivery:
500 East Border Street
Arlington, Texas 76010
Attention: Jerry Petrey
Telecopy No: (817) 856-3183
Page 3 of 3 Pages
<PAGE> 43
EXHIBIT B
Date
Texas Commerce Bank National Association
500 East Border Street
P.O. Box 250
Arlington, Texas 76010
Attention: Jerry Petrey
Re: Notice of Borrowing under Amended and Restated Credit Agreement
Gentlemen:
Pursuant to that certain Amended and Restated Revolving Credit
Agreement dated as of June 30, 1994, as amended from time to time, (the
"Agreement", capitalized terms used in this notice shall have the meanings
assigned to them in the Agreement) by and between Tandy Brands Accessories,
Inc., a Delaware corporation (the "Borrower") and the Bank, the Borrower
hereby:
1. Gives you notice pursuant to the Agreement and the Note that
the Borrower hereby requests a Loan; and in that connection sets forth below
the information relating to such Loan ("the Proposed Loan"):
(i) The Borrowing Date of the Proposed Loan is _________,
19__;
(ii) The type of the Proposed Loan is (check one):
_____ Alternate Base Rate Loan
_____ Libor Loan
_____ Negotiated Rate Loan
(iii) The Interest Period of the Proposed Loan is _________.
(iv) The principal amount of the Proposed Loan is $______,
and such amount, together with the sum of (i) the aggregate principal
amount of all outstanding Loans, and (ii) the aggregate outstanding L/C
Obligations, does not exceed the amount of the Commitment;
(v) The account of the Borrower into which the proceeds of
the Proposed Loan should be deposited is: ___________________________.
2. Certifies that (a) no Default has occurred and is continuing
or will result from the making of such Proposed Loan, and (b) all
representations and warranties of the Borrower contained in Section 7 of the
Agreement are true and correct as of the date hereof (other than those of such
representations and warranties which speak to a date on or before the date
hereof) to the best of our knowledge, with the same effect as if made on such
date.
Very truly yours,
TANDY BRANDS ACCESSORIES, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
EXHIBIT B Page 1 of 1
<PAGE> 44
PROMISSORY NOTE
FOR LOANS
(this "Note")
U.S. $20,000,000.00 April 30, 1997
FOR VALUE RECEIVED, TANDY BRANDS ACCESSORIES, INC. (the "Maker"), a
Delaware corporation, promises to pay to the order of TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Bank") on or before April 30, 1999, (the
"Termination Date"), at its banking house at 712 Main Street Houston, Texas
77002 or at such other location as the Bank may designate, in lawful money of
the United States of America, the lesser of: (i) the principal sum of TWENTY
MILLION AND NO/100THS (U.S. $20,000,000.00) (the "Commitment"); or (ii) the
aggregate unpaid principal amount of all loans made by the Bank hereunder (each
such loan being a "Loan"), which may be outstanding on the Termination Date.
Each Loan shall be due and payable on the maturity date agreed to by the Bank
and the Maker with respect to such Loan (the "Maturity Date"). In no event
shall any Maturity Date fall on a date after the Termination Date. SUBJECT TO
THE LIMITATIONS SET FORTH HEREIN, MAKER MAY BORROW, REPAY AND REBORROW
HEREUNDER AND THERE IS NO LIMITATION ON THE NUMBER OF LOANS MADE HEREUNDER SO
LONG AS THE TOTAL UNPAID PRINCIPAL AMOUNT AT ANYTIME OUTSTANDING DOES NOT
EXCEED THE COMMITMENT.
The Loans may be either Negotiated Rate Loans, Alternate Base Rate
Loans or Libor Loans.
The Maker shall pay interest on each Alternate Base Rate Loan for the
Interest Period with respect thereto at a rate per annum equal to the lesser
of: (i) the Alternate Base Rate in effect from time to time (the "Effective
Alternate Base Rate"); or (ii) the Highest Lawful Rate, which interest shall be
due and payable on the last day of each calendar quarter and on the last day of
each Interest Period.
The Maker shall pay interest on each Negotiated Rate Loan for the
Interest Period with respect thereto on the unpaid principal amount thereof at
a rate per annum equal to the Negotiated Rate for such Interest Period, which
interest shall be due and payable on the last day of each such Interest Period,
and if such Interest Period has a duration exceeding ninety days, on each
ninetieth day during such Interest Period.
The Maker shall pay interest on each Libor Loan for the Interest
Period with respect thereto on the unpaid principal amount thereof at a rate
per annum equal to the lesser of: (i) the Adjusted Libor Rate plus three-
quarters of one percent (3/4%) (the "Effective Libor Rate"); or (ii) the
Highest Lawful Rate, which interest shall be due and payable on the last day of
each such Interest Period, and if such Interest Period has a duration exceeding
three months, on the day that is three months after the commencement of such
Interest Period.
Any amount not paid when due with respect to principal (whether at
Maturity Date, by acceleration or otherwise), costs, expenses, and to the
extent permitted by applicable law, interest, shall bear interest at a rate per
annum equal to the lesser of: (i) the Alternate Base Rate in effect from time
to time plus three percent (3%); or (ii) the Highest Lawful Rate, which
interest shall be due and payable on demand. The principal of any Loan shall
be deemed past due if not paid on or before the Maturity Date or any earlier
maturity date resulting from acceleration in accordance with the terms of this
Note or as provided by law or otherwise. Interest accrued and unpaid with
respect to any Loan shall be deemed past due if not paid on or before the
applicable interest payment due date as provided for herein.
Notwithstanding the foregoing, if at any time the effective rate of
interest which would otherwise be payable on any Loan evidenced by this Note
exceeds the Highest Lawful Rate, the rate of interest to accrue on the unpaid
principal balance of such Loan during all such times shall be limited to the
Highest Lawful Rate, but any subsequent reductions in such interest rate shall
not become effective to reduce such interest rate below the Highest Lawful Rate
until the total amount of interest accrued on the unpaid principal balance of
such Loan equals the total amount of interest which would have accrued if the
Effective Alternate Base Rate, Negotiated Rate, or Effective Libor Rate
whichever is applicable, had at all times been in effect.
Each Alternate Base Rate Loan, Negotiated Rate Loan or Libor Loan
shall be in an amount not less than $250,000.00 and an integral multiple of
$100,000.00. Interest with respect to Alternate Base Rate Loans shall be
calculated on the basis of a 365 day year or 366 day year, as the case may be,
for the actual number of days elapsed. Interest with respect to Negotiated
Rate Loans and Libor Loans shall be calculated on the basis of a 360 day year
for the actual days elapsed, unless such calculation would result in a usurious
interest rate, in which case such interest shall be calculated on the basis of
a 365 day or 366 day year, as the case may be.
The following terms shall have the respective meanings indicated:
"Adjusted Libor Rate" means a per annum interest rate determined by
Bank by dividing: (i) the Libor Rate by (ii) Statutory Reserves provided that
Statutory Reserves is greater than zero, otherwise Adjusted Libor Rate means a
per annum interest rate equal to the Libor Rate. "Libor Rate" means with
respect to any Libor Loan for any Interest Period the interest rate determined
by Bank by reference to the British Bankers' Association Interest Settlement
Rates (as set forth by any service selected by Bank which has been nominated by
the British Bankers' Association as an authorized information vender for the
purpose of displaying such rates including but not limited to Bloomberg,
Reuters or Telerate) to be the rate at approximately 11:00 a.m. London time,
two Business Days prior to the commencement of such Interest Period for dollar
deposits in an amount comparable to such Libor Loan with a maturity comparable
to such Interest Period.
"Alternate Base Rate" shall mean for any day, a rate per annum
(rounded upwards, if necessary, to the next higher 1/16 of 1%) equal to the
greatest of: (a) the Prime Rate in effect on such day; (b) the Base CD Rate in
effect on
Page 1 of 6 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 45
Promissory Note
Tandy Brands Accessories, Inc.
April 30, 1997
such day plus 1%; and (c) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of
interest per annum determined from time to time by the Bank as its prime rate
in effect at its principal office in Houston, Texas; each change in the Prime
Rate shall be effective on the date such change is determined; without special
notice to the Maker or any other person or entity. THE PRIME RATE IS A
REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE
ACTUALLY CHARGED TO ANY CUSTOMER AND ANY STATEMENT, REPRESENTATION OR WARRANTY
IN THAT REGARD OR TO THAT EFFECT IS EXPRESSLY DISCLAIMED BY BANK. BANK MAY
MAKE LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE. "Base CD
Rate" shall mean an interest rate per annum determined by the Bank to be the
sum of: (a) the rate per annum obtained by dividing: (i)the Three-Month
Secondary CD Rate by (ii) Statutory Reserves; plus (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on
such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the Secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Bank from three New York City negotiable
certificate of deposit dealers of recognized standing selected by Bank.
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for the day of such transactions received by the Bank from three
Federal funds brokers of recognized standing selected by Bank. If for any
reason the Bank shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Base CD Rate or the
Federal Funds Effective Rate, or both, for any reason, including the inability
or failure of the Bank to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective on the effective date of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"Alternate Base Rate Loan" means a Loan which bears interest at a
rate determined by reference to the Alternate Base Rate.
"Assessment Rate" means, for any date, the annual rate (rounded
upwards, if not already a whole multiple of 1/16 of 1%, to the next higher 1/16
of 1%) most recently estimated by the Bank as the then current net annual
assessment rate that will be employed in determining amounts payable by the
Bank to the Federal Deposit Insurance Corporation for insurance by the
Corporation of time deposits made in dollars at its domestic offices.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrowing Date" means any Business Day on which the Bank shall make
a Loan hereunder.
"Business Day" means a day: (i) on which the Bank and commercial
banks in New York City are generally open for business; and (ii) with respect
to Libor Loans, on which dealings in United States Dollar deposits are carried
out in the London interbank market.
"Credit Agreement" shall mean that certain Amended and Restated
Credit Agreement dated June 30, 1994 by and between Maker and Bank as amended
by a First Amendment dated April 30, 1995, a Second Amendment dated April 30,
1996, a Third Amendment dated April 30, 1997 and as it may be amended, restated
or supplemented from time to time.
"Highest Lawful Rate" as used herein shall mean the maximum
nonusurious interest rate permitted from time to time to be contracted for,
taken, reserved, charged or received on any Loan under applicable federal or
Texas laws, whichever permits the higher lawful rate; provided, however, that
in the event: (i) such maximum nonusurious interest rate shall, at any time or
times during the term of a Loan evidenced hereby, be reduced to a rate less
than the maximum nonusurious rate in effect on the date of such Loan; and (ii)
applicable law permits contracting for, taking, reserving, charging, and
receiving on such Loan throughout the duration thereof the maximum nonusurious
rate in effect on the date such Loan was made, then and at all such times the
Highest Lawful Rate shall be the maximum nonusurious rate permitted to be
contracted for, taken, reserved, charged or received on such Loan under
applicable law in effect on the date of such Loan. At all such times, if any,
as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate
shall be the "indicated rate ceiling" (as defined in Tex. Rev. Civ. Stat. art.
5069-1.04) from time to time in effect.
"Interest Period" means, with respect to any Loan, the period
commencing on the Borrowing Date and ending on the Maturity Date, consistent
with the following provisions. The duration of each Interest Period shall be:
(a) in the case of an Alternate Base Rate Loan, a period of up to 90
days; and
Page 2 of 6 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 46
Promissory Note
Tandy Brands Accessories, Inc.
April 30, 1997
(b) in the case of a Negotiated Rate Loan, a period of less
than 90 days; and
(c) in the case of a Libor Loan, 1, 2, 3 or 6 months;
in each case as selected by the Maker and agreed to by the Bank.
The Maker's choice of Interest Period is also subject to the
following limitations:
(i) No Interest Period shall end on a date after the
Termination Date; and
(ii) If the last day of an Interest Period would be a
day other than a Business Day, the Interest Period
shall end on the next succeeding Business Day
(unless the Interest Period relates to a Libor Loan
and the next succeeding Business Day is in a
different calendar month than the day on which the
Interest Period would otherwise end, in which case
the Interest Period shall end on the next preceding
Business Day).
"Libor Loan" means a Loan which bears interest at a rate determined
by reference to the Adjusted Libor Rate.
"Negotiated Rate" means, with respect to each Negotiated Rate Loan
hereunder, the rate of interest per annum quoted by the Bank to the Maker at
the time of the borrowing request with respect to such Negotiated Rate Loan as
the rate such Negotiated Rate Loan shall bear for the requested Interest
Period.
"Negotiated Rate Loan" means a Loan which bears interest at a rate
determined by reference to the Negotiated Rate.
"Statutory Reserves" shall mean the difference (expressed as a
decimal) of the number one minus the aggregate of the maximum reserve
percentages (including, without limitation, any marginal, special, emergency,
or supplemental reserves) expressed as a decimal established by the Board and
any other banking authority to which the Bank is subject for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such reserve
percentages shall include, without limitation, those imposed under such
Regulation D. Libor Loans shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Bank under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
The unpaid principal balance of this Note at any time shall
be the total of all Loans made by the Bank to or for the benefit of the Maker,
less the amount of all payments of principal made hereon by or for the account
of the Maker. The Bank's records shall serve as presumptive evidence of any
and all amounts outstanding hereunder.
Any Loan which the Bank agrees to make hereunder shall be
made on the Maker's irrevocable notice, given not later than 10:00 A.M.
(Houston time) on, in the case of Libor Loans, the third Business Day prior to
the proposed Borrowing Date, or in the case of Alternate Base Rate Loans or
Negotiated Rate Loans, the first Business Day prior to the proposed Borrowing
Date, from the Maker to the Bank. Each such notice of a requested borrowing (a
"Notice of Requested Borrowing") under this paragraph may be oral or written,
and shall specify: (i) the requested amount of such Loan; (ii) the proposed
Borrowing Date; (iii) whether the requested Loan is to be an Alternate Base
Rate Loan, Negotiated Rate Loan, or Libor Loan; and (iv) the Interest Period
for such Loan. If any Notice of Requested Borrowing shall be oral, the Maker
shall deliver to the Bank prior to the Borrowing Date a confirmatory written
Notice of Requested Borrowing, substantially in the form of Exhibit B attached
to the Credit Agreement.
If at any time the Bank determines in good faith (which determination
shall be conclusive) that any change in any applicable law, rule or regulation
or in the interpretation, application or administration thereof makes it
unlawful, or any central bank or other governmental authority asserts that it
is unlawful, for the Bank or its foreign branch or branches to maintain or fund
any Loan by means of dollar deposits obtained in the London interbank market
(any of the above being described as a "Libor Event"), then, at the option of
the Bank, the aggregate principal amount of the Banks Libor Loans then
outstanding, which Loans are directly affected by such Eurodollar Event shall
be prepaid by the Maker. Upon the occurrence of any Libor Event, and at any
time thereafter so long as such Eurodollar Event shall continue, the Bank may
exercise its aforesaid option by giving written notice thereof to the Maker.
Any prepayment of any Libor Loan which is required under the
preceding paragraph shall be made, together with accrued and unpaid interest
and all other amounts payable to the Bank under this Note with respect to such
prepaid Libor Loan on the date stated in the notice to the Maker referred to
above, which date ("required prepayment date") shall be not less than 15 days
from the date of such notice. If any Libor Loan is required to be prepaid
under the preceding paragraph, the Bank shall make on the required prepayment
date an Alternate Base Rate Loan in the same principal amount and with an
Interest Period ending on the same day as the Libor Loan so prepaid.
If any domestic or foreign law, treaty, rule or regulation (whether
now in effect or hereinafter enacted or promulgated, including Regulation D of
the Board of Governors of the Federal Reserve System) or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law):
Page 3 of 6 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 47
Promissory Note
Tandy Brands Accessories, Inc.
April 30, 1997
(a) changes, imposes, modifies, applies or deems applicable
any reserve, special deposit or similar requirements in
respect of any such Loan or against assets of, deposits
with or for the account of, or credit extended or
committed by, the Bank; or
(b) imposes on the Bank or the interbank eurocurrency deposit
and transfer market or the market for domestic bank
certificates or deposit any other condition affecting any
such Loan;
and the result of any of the foregoing is to impose a cost to the Bank of
agreeing to make, funding or maintaining any such Loan or to reduce the amount
of any sum receivable by the Bank in respect of any such Loan, then the Bank
may notify the Maker in writing of the happening of such event and Maker shall
upon demand pay to the Bank such additional amounts as will compensate the Bank
for such costs. Without prejudice to the survival of any other agreement of
the Maker under this Note, the obligations of the Maker under this paragraph
shall survive the termination of this Note.
The Maker may on any Business Day prepay the outstanding principal
amount of any Alternate Base Rate Loan, in whole or in part, together with
accrued interest to the date of such prepayment on the principal amount
prepaid. Partial prepayments shall be in an aggregate principal amount of
$50,000.00 or a greater integral multiple of $100,000.00. Except as specified
in this paragraph, the Maker shall have no right to prepay any Loan.
The Maker will indemnify the Bank against, and reimburse the Bank on
demand for, any loss, cost or expense incurred or sustained by the Bank
(including without limitation any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the Bank
to fund or maintain Loans bearing interest at the Negotiated Rate or the
Adjusted Libor Rate) as a result of: (a) any payment or prepayment (whether
permitted by the Bank or required hereunder or otherwise) of all or a portion
of any Negotiated Rate Loan or Libor Loan on a day other than Maturity Date of
such Loan; (b) any payment or prepayment, whether required hereunder or
otherwise, of any Negotiated Rate Loan or Libor Loan made after the delivery of
a Notice of Requested Borrowing but before the applicable Borrowing Date if
such payment or prepayment prevents the proposed Loan from becoming fully
effective; or (c) the failure of any Negotiated Rate Loan or Libor Loan to be
made by the Bank due to any action or inaction of the Maker. For purposes of
this paragraph, funding losses arising by reason of liquidation or reemployment
of deposits or other funds acquired by the Bank to fund or maintain Loans
bearing interest at the Negotiated Rate or Adjusted Libor Rate shall be
calculated as the remainder obtained by subtracting: (i) the yield (reflecting
both stated interest rate and discount, if any) to maturity of obligations of
the United States Treasury in an amount equal or comparable to such Loan for
the period of time commencing on the date of the payment, prepayment or change
of rate as provided above and ending on the last day of the subject Interest
Period; from (ii) the interest payable at the Negotiated Rate or Adjusted Libor
Rate for the period commencing on the date of such payment, prepayment or
change of rate and ending on the last day of such Interest Period. Such
funding losses and other costs and expenses shall be calculated and billed by
the Bank and such bill shall, as to the costs incurred, be conclusive absent
manifest error.
If after the date of this Note, the Bank shall have determined that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital as a consequence of making any Loans hereunder to a level
below that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank in good faith to be material,
then from time to time, the Maker shall pay to the Bank such additional amount
or amounts as will compensate the Bank for such reduction.
A certificate of the Bank setting forth such amount or amounts as
shall be necessary to compensate the Bank as specified in the immediately
preceding paragraphs above shall be delivered as soon as practicable to the
Maker and shall be conclusive and binding, absent manifest error. The Maker
shall pay the Bank the amount shown as due on any such certificate within 15
days after Bank delivers such certificate. In preparing such certificate, the
Bank may employ such assumptions and allocations of costs and expenses as it
shall in good faith deem reasonable and may use any reasonable averaging and
attribution method.
If any payment of interest or principal herein provided for is not
paid when due, or any other Default shall occur and be in existence under the
Credit Agreement, then the owner or holder of this Note may at its option, as
provided for in the Credit Agreement or any other Loan Document (i) declare the
unpaid principal balance of all Loans, all accrued and unpaid interest thereon
and all other amounts payable under this Note to be forthwith due and payable,
whereupon the Loans, all such interest and all such amounts shall become and be
forthwith due and payable in full, without presentment, demand, protest, notice
of intent to accelerate, notice of actual acceleration or further notice of any
kind, all of which are hereby expressly waived by the Maker; (ii) terminate
the Commitment; and (iii) exercise any and all other rights, powers and
remedies granted pursuant to any provision of any of the Loan Documents or
under any applicable law.
If default is made in the payment of this Note and it is placed in
the hands of an attorney for collection, or collected through probate or
bankruptcy proceedings, or if suit is brought on the same, the Maker agrees to
pay attorneys' fees and all costs and expenses.
Page 4 of 6 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 48
Promissory Note
Tandy Brands Accessories, Inc.
April 30, 1997
This Note is issued by the Maker to evidence Loans outstanding from
time to time not to exceed in the aggregate the Commitment under a
$20,000,000.00 revolving line of credit extended by the Bank to the Maker
extended pursuant to the terms of the Credit Agreement. Capitalized terms used
in this Note but not defined in this Note shall have the meanings assigned to
them in the Credit Agreement. This Note is given in renewal, extension and
modification of the promissory note dated April 30, 1996, executed by Maker and
payable to the order of the Bank in the principal amount of $20,000,000.00.
The Maker warrants and represents to the Bank, and to all other
owners and/or holders of any indebtedness evidenced hereby, that all Loans
evidenced by this Note are for business, commercial, investment or other
similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in Chapter One of the Texas Credit
Code, Tex. Rev. Civ. Stat. arts. 5069-1.01 et. seq.
The Maker warrants and represents to the Bank and to all other owners
or holders of this Note that no Loans shall be used for the purchase or
carrying of any "margin stock" within the meaning of Regulation "U" of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, as in
effect on the date hereof.
Except as otherwise specified in this Note, the Maker and any and all
co-makers, endorsers, guarantors and sureties hereby severally waive grace,
presentment, demand, notice of default, notice of intent to accelerate, notice
of acceleration, and all other demands and notices of any nature or type
whatsoever, in connection with the delivery, acceptance, performance, default,
dishonor or enforcement of, or entry of judgment in connection with this Note,
and further waive the filing of suit hereon for the purpose of fixing
liability.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THE MAKER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S
PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR
PROCEEDING BROUGHT BY THE MAKER OR THE BANK, WHETHER IN CONTRACT, TORT, OR
OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE MAKER MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT IN SUCH COUNTY. THE MAKER HEREBY IRREVOCABLY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM. THE MAKER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL
AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING
AGAINST THE MAKER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER
JURISDICTIONS OR VENUES.
The Maker and the Bank expressly agree, pursuant to Article 15.10(b)
of Chapter 15 ("Chapter 15") of the Texas Credit Code, that Chapter 15 shall
not apply to this Note or to any Loan and that this Note and all such Loans
shall not be governed by or subject to the provisions of Chapter 15 in any
manner whatsoever.
It is the intention of Maker and Bank to comply with usury laws in
force in the State of Texas and in the United States of America as applicable.
Anything in this Note to the contrary notwithstanding, the Maker shall never be
required to pay unearned interest on this Note and shall never be required to
pay interest on this Note at a rate in excess of the Highest Lawful Rate, and
if the effective rate of interest which would otherwise be payable under this
Note would exceed the Highest Lawful Rate, or if the holder of the Note shall
receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable
under this Note to a rate in excess of the Highest Lawful Rate, then: (i) the
amount of interest which would otherwise be payable under this Note shall be
reduced to the amount allowed under applicable law; and (ii) any unearned
interest paid by the Maker or any interest paid by the Maker in excess of the
Highest Lawful Rate shall, at the option of the holder of this Note, be either
refunded to the Maker or credited on the principal of this Note. It is further
agreed that, without limitation of the foregoing, all calculations of the rate
of interest contracted for, charged or received by the Bank or any holder of
this Note that are made for the purpose of determining whether such rate
exceeds the Highest Lawful Rate shall be made, to the extent permitted by usury
laws applicable to the Bank (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the period of the full stated
term of the Loans evidenced by this Note all interest at any time contracted
for, charged or received by the Bank in connection therewith.
The Bank reserves the right in its sole discretion without notice to
Maker, to sell participations or assign its interest, or both in all or part of
the Loans, the Note, or the Commitment.
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Page 5 of 6 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 49
Promissory Note
Tandy Brands Accessories, Inc.
April 30, 1997
IN WITNESS WHEREOF, the Maker has executed this Note effective the day,
month and year first aforesaid.
MAKER: TANDY BRANDS ACCESSORIES, INC.
BY: /s/ J. S. B. JENKINS
---------------------------------------
Name: J. S. B. Jenkins
-------------------------------------
Title:
-------------------------------------
Acknowledged for purposes
of notice pursuant to the above
cited statute by:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ JERRY S. PETREY
-----------------------------------
Name: Jerry Petrey
Title: Vice President
Page 6 of 6 Pages
Signed for Identification
By:
---------------------
<PAGE> 50
PROMISSORY NOTE
FOR DISCRETIONARY LOANS
(this "Note")
U.S. $5,000,000.00 April 30,1997
FOR VALUE RECEIVED, TANDY BRANDS ACCESSORIES, INC. (the "Maker"), a
Delaware corporation, promises to pay to the order of TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Bank") on or before April 30, 1998, (the
"Termination Date"), at its banking house at 712 Main Street, Houston, Texas
77002 or at such other location as the Bank may designate, in lawful money of
the United States of America, the lesser of: (i) the principal sum of FIVE
MILLION AND NO/100THS (U.S. $5,000,000.00 ) (the "Maximum Loan Total"); or
(ii) the aggregate unpaid principal amount of all loans made by the Bank at its
sole and absolute discretion hereunder (each such loan being a "Loan"), which
may be outstanding on the Termination Date. Each Loan shall be due and payable
on the maturity date agreed to by the Bank and the Maker with respect to such
Loan (the "Maturity Date"). In no event shall any Maturity Date fall on a date
after the Termination Date. SUBJECT TO THE LIMITATIONS SET FORTH HEREIN, MAKER
MAY BORROW, REPAY AND REBORROW HEREUNDER AT BANK'S SOLE DISCRETION AND THERE IS
NO LIMITATION ON THE NUMBER OF LOANS MADE HEREUNDER AT BANK'S SOLE DISCRETION
SO LONG AS THE TOTAL UNPAID PRINCIPAL AMOUNT AT ANYTIME OUTSTANDING DOES NOT
EXCEED THE MAXIMUM LOAN TOTAL.
The Loans may be either Libor Loans, Negotiated Rate Loans or
Alternate Base Rate Loans.
The Maker shall pay interest on each Alternate Base Rate Loan for the
Interest Period with respect thereto at a rate per annum equal to the lesser
of: (i) the Alternate Base Rate in effect from time to time (the "Effective
Alternate Base Rate"); or (ii) the Highest Lawful Rate, which interest shall
be due and payable on the last day of each calendar quarter and on the last day
of each Interest Period.
The Maker shall pay interest on each Negotiated Rate Loan for the
Interest Period with respect thereto on the unpaid principal amount thereof at
a rate per annum equal to the Negotiated Rate for such Interest Period, which
interest shall be due and payable on the last day of each such Interest Period.
The Maker shall pay interest on each Libor Loan for the Interest
Period with respect thereto at a rate per annum equal to the lesser of: (i) the
Adjusted Libor Rate for such Interest Period plus three-quarters of one percent
(3/4%) (the "Effective Libor Rate"); or (ii) the Highest Lawful Rate, which
interest shall be due and payable on the last day of each such Interest Period,
and if such Interest Period has a duration exceeding three months, on the day
that is three months after the commencement of such Interest Period.
Any amount not paid when due with respect to principal (whether at
Maturity Date, by acceleration or otherwise), costs, expenses, and to the
extent permitted by applicable law, interest, shall bear interest at a rate per
annum equal to the lesser of: (i) the Alternate Base Rate in effect from time
to time plus three percent (3%); or (ii) the Highest Lawful Rate, which
interest shall be due and payable on demand. The principal of any Loan shall
be deemed past due if not paid on or before the Maturity Date or any earlier
maturity date resulting from acceleration in accordance with the terms of this
Note or as provided by law or otherwise. Interest accrued and unpaid with
respect to any Loan shall be deemed past due if not paid on or before the
applicable interest payment due date as provided for herein.
Notwithstanding the foregoing, if at any time the effective rate of
interest which would otherwise be payable on any Loan evidenced by this Note
exceeds the Highest Lawful Rate, the rate of interest to accrue on the unpaid
principal balance of such Loan during all such times shall be limited to the
Highest Lawful Rate, but any subsequent reductions in such interest rate shall
not become effective to reduce such interest rate below the Highest Lawful Rate
until the total amount of interest accrued on the unpaid principal balance of
such Loan equals the total amount of interest which would have accrued if the
Effective Alternate Base Rate, Negotiated Rate or Effective Libor Rate
whichever is applicable, had at all times been in effect.
Each Loan shall be in an amount not less than $100,000.00 and an
integral multiple of $25,000.00. Interest with respect to Alternate Base Rate
Loans shall be calculated on the basis of a 365 day year or 366 day year, as
the case may be, for the actual number of days elapsed. Interest with respect
to Negotiated Rate Loans or Libor Rate Loans shall be calculated on the basis
of a 360 day year for the actual days elapsed, unless such calculation would
result in a usurious interest rate, in which case such interest shall be
calculated on the basis of a 365 day or 366 day year, as the case may be.
The following terms shall have the respective meanings indicated:
"Adjusted Libor Rate" means a per annum interest rate determined by
Bank by dividing: (i) the Libor Rate by (ii) Statutory Reserves provided that
Statutory Reserves is greater than zero, otherwise Adjusted Libor Rate means a
per annum interest rate equal to the Libor Rate. "Libor Rate" means with
respect to any Libor Loan for any Interest Period the interest rate determined
by Bank by reference to the British Bankers' Association Interest Settlement
Rates (as set forth by any service selected by Bank which has been nominated by
the British Bankers' Association as an authorized information vender for the
purpose of displaying such rates including but not limited to Bloomberg,
Reuters or Telerate) to be the rate at approximately 11:00 a.m. London time, two
Business Days prior to the commencement of such Interest Period for dollar
deposits in an amount comparable to such Libor Loan with a maturity comparable
to such Interest Period.
"Alternate Base Rate" shall mean for any day, a rate per annum
(rounded upwards, if necessary, to the next higher 1/6 of 1%) equal to the
greatest of: (a) the Prime Rate in effect on such day; and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes
hereof, "Prime Rate" shall mean the rate of interest per annum determined from
time to time by the Bank as its prime rate in effect at its principal office in
Houston, Texas; each
Page 1 of 5 Pages
Signed for Identification
By: /s/ JSP
-------------------------
<PAGE> 51
Promissory Note for Discretionary Loans
Tandy Brands Accessories, Inc.
April 30, 1997
change in the Prime Rate shall be effective on the date such change is
determined; without special notice to the Maker or any other person or entity.
THE PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE
LOWEST OR BEST RATE ACTUALLY CHARGED TO ANY CUSTOMER AND ANY STATEMENT,
REPRESENTATION OR WARRANTY IN THAT REGARD OR TO THAT EFFECT IS EXPRESSLY
DISCLAIMED BY BANK. BANK MAY MAKE LOANS AT RATES OF INTEREST AT, ABOVE OR
BELOW THE PRIME RATE. "Federal Funds Effective Rate" shall mean, for any day,
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for the day of such transactions received by
the Bank from three Federal funds brokers of recognized standing selected by
Bank. If for any reason the Bank shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate, for any reason, including the inability or
failure of the Bank to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" means a Loan which bears interest at a
rate determined by reference to the Alternate Base Rate.
"Assessment Rate" means, for any date, the annual rate (rounded
upwards, if not already a whole multiple of 1/16 of 1%, to the next higher 1/16
of 1%) most recently estimated by the Bank as the then current net annual
assessment rate that will be employed in determining amounts payable by the
Bank to the Federal Deposit Insurance Corporation for insurance by the
Corporation of time deposits made in dollars at its domestic offices.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrowing Date" means any Business Day on which the Bank shall make
a Loan hereunder.
"Business Day" means a day: (i) on which the Bank and commercial
banks in New York City are generally open for business; and (ii) with respect
to Libor Loans, on which dealings in United States Dollar deposits are carried
out in the London interbank market.
"Credit Agreement" shall mean that certain Amended and Restated
Credit Agreement dated June 30, 1994 by and between Maker and Bank as amended
by a First Amendment dated April 30, 1995, a Second Amendment dated April 30,
1996, a Third Amendment dated April 30, 1997 and as, may be amended, restated
or supplemented from time to time.
"Highest Lawful Rate" as used herein shall mean the maximum
nonusurious interest rate permitted from time to time to be contracted for,
taken, reserved, charged or received on any Loan under applicable federal or
Texas laws, whichever permits the higher lawful rate; provided, however, that
in the event: (i) such maximum nonusurious interest rate shall, at any time or
times during the term of a Loan evidenced hereby, be reduced to a rate less
than the maximum nonusurious rate in effect on the date of such Loan; and (ii)
applicable law permits contracting for, taking, reserving, charging, and
receiving on such Loan throughout the duration thereof the maximum nonusurious
rate in effect on the date such Loan was made, then and at all such times the
Highest Lawful Rate shall be the maximum nonusurious rate permitted to be
contracted for, taken, reserved, charged or received on such Loan under
applicable law in effect on the date of such Loan. At all such times, if any,
as Texas law shall establish the Highest Lawful Rate, the Highest Lawful Rate
shall be the "indicated rate ceiling" (as defined in Tex. Rev. Civ. Stat. art.
5069-1.04) from time to time in effect.
"Interest Period" means, with respect to any Loan, the period
commencing on the Borrowing Date and ending on the Maturity Date, consistent
with the following provisions. The duration of each Interest Period shall be:
(a) in the case of an Alternate Base Rate Loan, a period of up to
90 days;
(b) in the case of a Negotiated Rate Loan, a period of not longer
than 30 days; and
(c) in the case of a Libor Loan, 1, 2, 3, or 6 months.
in each case as selected by the Maker and agreed to by the Bank at Bank's sole
discretion. The Maker's choice of Interest Period is also subject to the
following limitations:
(i) No Interest Period shall end on a date after the Termination
Date; and
(ii) If the last day of an Interest Period would be a day other than
a Business Day, the Interest Period shall end on the next succeeding Business
Day.
"Libor Loan" means a Loan which bears interest by reference to the
Adjusted Libor Rate.
"Negotiated Rate" means, with respect to each Negotiated Rate Loan
hereunder, the rate of interest per annum quoted by the Bank to the Maker at
the time of the borrowing request with respect to such Negotiated Rate Loan as
the rate such Negotiated Rate Loan shall bear for the requested Interest
Period.
Page 2 of 5 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 52
Promissory Note for Discretionary Loans
Tandy Brands Accessories, Inc.
April 30, 1997
"Negotiated Rate Loan" means a Loan which bears interest at a rate
determined by reference to the Negotiated Rate.
"Statutory Reserves" shall mean the difference (expressed as a
decimal) of the number one minus the aggregate of the maximum reserve
percentages (including, without limitation, any marginal, special, emergency,
or supplemental reserves) expressed as a decimal established by the Board and
any other banking authority to which the Bank is subject for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such reserve
percentages shall include, without limitation, those imposed under such
Regulation D. Libor Loans shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Bank under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
The unpaid principal balance of this Note at any time shall be the
total of all Loans made by the Bank to or for the benefit of the Maker, less
the amount of all payments of principal made hereon by or for the account of
the Maker. The Bank's records shall serve as presumptive evidence of any and
all amounts outstanding hereunder.
Any Loan which the Bank agrees in its sole discretion to make
hereunder shall be made on the Maker's irrevocable notice, given not later than
10:00 A.M. (Houston time) on, in the case of Libor Loans, the third Business
Day prior to the proposed Borrowing Date, or in the case of Alternate Base Rate
Loans or Negotiated Rate Loans, the first Business Day prior to the proposed
Borrowing Date, from the Maker to the Bank. Each such notice of a requested
borrowing (a "Notice of Requested Borrowing") under this paragraph may be oral
or written, and shall specify: (i) the requested amount of such Loan; (ii) the
proposed Borrowing Date; (iii) whether the requested Loan is to be an Alternate
Base Rate Loan, Libor Rate Loan or Negotiated Rate Loan; and (iv) the Interest
Period for such Loan. If any Notice of Requested Borrowing shall be oral, the
Maker shall deliver to the Bank prior to the Borrowing Date a confirmatory
written Notice of Requested Borrowing.
If any domestic or foreign law, treaty, rule or regulation (whether
now in effect or hereinafter enacted or promulgated, including Regulation D of
the Board of Governors of the Federal Reserve System) or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law):
(a) changes, imposes, modifies, applies or deems applicable
any reserve, special deposit or similar requirements in
respect of any such Loan or against assets of, deposits
with or for the account of, or credit extended or
committed by, the Bank; or
(b) imposes on the Bank or the interbank eurocurrency deposit
and transfer market or the market for domestic bank
certificates or deposit any other condition affecting any
such Loan;
and the result of any of the foregoing is to impose a cost to the Bank of
agreeing to make, funding or maintaining any such Loan or to reduce the amount
of any sum receivable by the Bank in respect of any such Loan, then the Bank
may notify the Maker in writing of the happening of such event and Maker shall
upon demand pay to the Bank such additional amounts as will compensate the Bank
for such costs. Without prejudice to the survival of any other agreement of
the Maker under this Note, the obligations of the Maker under this paragraph
shall survive the termination of this Note.
The Maker may on any Business Day prepay the outstanding principal
amount of any Alternate Base Rate Loan, in whole or in part, together with
accrued interest to the date of such prepayment on the principal amount
prepaid. Partial prepayments shall be in an aggregate principal amount of
$100,000.00 or a greater integral multiple of $25,000.00. Except as specified
in this paragraph, the Maker shall have no right to prepay any Loan.
The Maker will indemnify the Bank against, and reimburse the Bank on
demand for, any loss, cost or expense incurred or sustained by the Bank
(including without limitation any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the Bank
to fund or maintain Loans bearing interest at the Negotiated Rate or the Libor
Rate) as a result of: (a) any payment or prepayment (whether permitted by the
Bank or required hereunder or otherwise) of all or a portion of any Negotiated
Rate Loan or Libor Loan on a day other than Maturity Date of such Loan; (b) any
payment or prepayment, whether required hereunder or otherwise, of any
Negotiated Rate Loan or Libor Loan made after the delivery of a Notice of
Requested Borrowing but before the applicable Borrowing Date if such payment or
prepayment prevents the proposed Loan from becoming fully effective; or (c) the
failure of any Negotiated Rate Loan or Libor Loan to be made by the Bank due to
any action or inaction of the Maker. For purposes of this paragraph, funding
losses arising by reason of liquidation or reemployment of deposits or other
funds acquired by the Bank to fund or maintain Loans bearing interest at the
Negotiated Rate or the Adjusted Libor Rate shall be calculated as the remainder
obtained by subtracting: (i) the yield (reflecting both stated interest rate
and discount, if any) to maturity of obligations of the United States Treasury
in an amount equal or comparable to such Loan for the period of time commencing
on the date of the payment, prepayment or change of rate as provided above and
ending on the last day of the subject Interest Period; from (ii) the interest
payable at the Negotiated Rate or the Adjusted Libor Rate for the period
commencing on the date of such payment, prepayment or change of rate and ending
on the last day of such Interest Period. Such funding losses and other costs
and expenses shall be calculated and billed by the Bank and such bill shall, as
to the costs incurred, be conclusive absent manifest error.
If after the date of this Note, the Bank shall have determined that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
Page 3 of 5 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 53
Promissory Note for Discretionary Loans
Tandy Brands Accessories, Inc.
April 30, 1997
compliance by the Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital as a consequence of making any Loans hereunder to a level
below that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank in good faith to be material,
then from time to time, the Maker shall pay to the Bank such additional amount
or amounts as will compensate the Bank for such reduction.
A certificate of the Bank setting forth such amount or amounts as
shall be necessary to compensate the Bank as specified in the immediately
preceding paragraphs above shall be delivered as soon as practicable to the
Maker and shall be conclusive and binding, absent manifest error. The Maker
shall pay the Bank the amount shown as due on any such certificate within 15
days after Bank delivers such certificate. In preparing such certificate, the
Bank may employ such assumptions and allocations of costs and expenses as it
shall in good faith deem reasonable and may use any reasonable averaging and
attribution method.
If any payment of interest or principal herein provided for is not
paid when due, or if there shall exist a Default under that certain Amended and
Restated Revolving Credit Agreement dated as of June 30, 1994 by and between
Maker and Bank, as amended from time to time, or if the Maker shall default
under or with respect to any other debts, obligations or liabilities of the
Maker due to the Bank, (whether such debts, obligations or liabilities be
direct or indirect, primary or secondary, joint or several, fixed or contingent
and whether such debt, obligations or liabilities are evidenced by note, open
account, overdraft endorsement application for letter of credit guaranty or
otherwise), then the owner or holder of this Note may at its option, by notice
to the Maker, (i) declare the unpaid principal balance of all Loans, all
accrued and unpaid interest thereon and all other amounts payable under this
Note to be forthwith due and payable, whereupon the Loans, all such interest
and all such amounts shall become and be forthwith due and payable in full,
without presentment, demand, protest, notice of intent to accelerate, notice of
actual acceleration or further notice of any kind, all of which are hereby
expressly waived by the Maker, (ii) terminate the Line of Credit (as
hereinafter defined), and (ii) exercise any and all other rights, powers and
remedies granted pursuant to any provision of any of the Loan Documents or
under any applicable law.
If default is made in the payment of this Note and it is placed in
the hands of an attorney for collection, or collected through probate or
bankruptcy proceedings, or if suit is brought on the same, the Maker agrees to
pay attorneys' fees and all costs and expenses.
This Note is issued by the Maker to evidence Loans outstanding from
time to time not to exceed the Maximum Loan Total in the aggregate, pursuant to
a $5,000,000.00 uncommitted discretionary line of credit (the "Line of Credit")
extended by the Bank to the Maker. THE BANK IS NOT OBLIGATED IN ANY WAY TO
MAKE ANY LOANS HEREUNDER, AND ALL ADVANCES HEREUNDER AND ANY LOANS SHALL BE AT
THE BANK'S SOLE AND ABSOLUTE DISCRETION. This Note is given in renewal and
extension and modification of that certain promissory note dated April 30,
1996, executed by Maker and payable to the order of the Bank in the principal
amount of $5,000,000.00. THE BANK IS NOT OBLIGATED IN ANY WAY TO MAKE ANY
LOANS HEREUNDER AND NOTHING HEREIN OR IN ANY OTHER AGREEMENTS OR OTHER WRITINGS
EXECUTED OR DELIVERED IN CONNECTION WITH THE LINE OF CREDIT OR THIS NOTE IS
INTENDED OR TO BE CONSTRUED AS A COMMITMENT ON THE PART OF THE BANK OR ANY
SUBSEQUENT OWNER OR HOLDER OF THIS NOTE TO MAKE ANY LOAN HEREUNDER OR UNDER THE
LINE OF CREDIT. ALL LOANS HEREUNDER OR UNDER THE LINE OF CREDIT SHALL BE AT
THE SOLE AND ABSOLUTE DISCRETION OF THE BANK OR ANY SUBSEQUENT OWNER OR HOLDER
OF THIS NOTE AND THE BANK OR ANY SUBSEQUENT OWNER OR HOLDER OF THIS NOTE MAY,
FOR ANY REASON OR NO REASON AT ALL, REFUSE TO MAKE ANY LOAN TO THE MAKER
HEREUNDER OR UNDER THE LINE OF CREDIT.
The Maker warrants and represents to the Bank, and to all other
owners and/or holders of any indebtedness evidenced hereby, that all Loans
evidenced by this Note are for business, commercial, investment or other
similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in Chapter One of the Texas Credit
Code, Tex. Rev. Civ. Stat. arts. 5069-1.01 et. seq.
The Maker warrants and represents to the Bank and to all other owners
or holders of this Note that no Loans shall be used for the purchase or
carrying of any "margin stock" within the meaning of Regulation "U" of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, as in
effect on the date hereof.
Except as otherwise specified in this Note, the Maker and any and all
co-makers, endorsers, guarantors and sureties hereby severally waive grace,
presentment demand, notice of default, notice of intent to accelerate, notice
of acceleration, and all other demands and notices of any nature or type
whatsoever, in connection with the delivery, acceptance, performance, default,
dishonor or enforcement of, or entry of judgment in connection with this Note,
and further waive the filing of suit hereon for the purpose of fixing
liability.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THE MAKER AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S
PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR
PROCEEDING BROUGHT BY THE MAKER OR THE BANK WHETHER IN CONTRACT, TORT, OR
OTHERWISE. ANY ACTION OR PROCEEDING AGAINST THE MAKER MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT IN SUCH COUNTY. THE MAKER
Page 4 of 5 Pages
Signed for Identification
By: /s/ JSP
---------------------
<PAGE> 54
Promissory Note for Discretionary Loans
Tandy Brands Accessories, Inc.
April 30, 1997
HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT
IS AN INCONVENIENT FORUM. THE MAKER AGREES THAT SERVICE OF PROCESS UPON IT MAY
BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS
SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR
PROCEEDING AGAINST THE MAKER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS
IN OTHER JURISDICTIONS OR VENUES.
The Maker and the Bank expressly agree, pursuant to Article 15.10(b)
of Chapter 15 ("Chapter 15") of the Texas Credit Code, that Chapter 15 shall
not apply to this Note or to any Loan and that this Note and all such Loans
shall not be governed by or subject to the provisions of Chapter 15 in any
manner whatsoever.
It is the intention of Maker and Bank to comply with usury laws in
force in the State of Texas and in the United States of America as applicable.
Anything in this Note to the contrary notwithstanding, the Maker shall never be
required to pay unearned interest on this Note and shall never be required to
pay interest on this Note at a rate in excess of the Highest Lawful Rate, and
if the effective rate of interest which would otherwise be payable under this
Note would exceed the Highest Lawful Rate, or if the holder of the Note shall
receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable
under this Note to a rate in excess of the Highest Lawful Rate, then: (i) the
amount of interest which would otherwise be payable under this Note shall be
reduced to the amount allowed under applicable law; and (ii) any unearned
interest paid by the Maker or any interest paid by the Maker in excess of the
Highest Lawful Rate shall, at the option of the holder of this Note, be either
refunded to the Maker or credited on the principal of this Note. It is
further agreed that, without limitation of the foregoing, all calculations of
the rate of interest contracted for, charged or received by the Bank or any
holder of this Note that are made for the purpose of determining whether such
rate exceeds the Highest Lawful Rate shall be made, to the extent permitted by
usury laws applicable to the Bank (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the period of the full stated
term of the Loans evidenced by this Note all interest at any time contracted
for, charged or received by the Bank in connection therewith.
The Bank reserves the right in its sole discretion without notice to
Maker, to sell participations or assign its interest, or both in all or part of
the Loans, the Note, or the Line of Credit.
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Maker has executed this Note effective the
day, month and year first aforesaid.
MAKER: TANDY BRANDS ACCESSORIES, INC.
By: /s/ J.S.B. JENKINS
--------------------------------
Name: J.S.B. Jenkins
-----------------------------
Title:
-----------------------------
Acknowledged for purposes of
notice pursuant to the above
cited statute by:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ JERRY S. PETREY
------------------------------------
Name: JERRY PETREY
Title: Vice President
Page 5 of 5 Pages
Signed for Identification
By:
---------------------
<PAGE> 1
EXHIBIT 10.22
NationsBank of Texas, NA.
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of May 16,1997, by and
between NationsBank, N.A. a national banking association ("Bank") and the
Borrower described below.
[THIS AGREEMENT CONTAINS SOME PROVISIONS PRECEDED BY BOXES. MARK ONLY
THOSE BOXES BESIDE PROVISIONS WHICH WILL BE APPLICABLE TO THIS TRANSACTION. A
BOX WHICH IS NOT MARKED MEANS THAT THE PROVISION BESIDE IT IS NOT APPLICABLE TO
THIS TRANSACTION.]
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other
terms defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. BORROWER: Tandy Brands Accessories, Inc.
---------------------------
a Delaware Corporation
----------------------------------
B. BORROWER'S ADDRESS:
690 East Lamar Blvd.
------------------------------------
Suite 200
------------------------------------
Arlington, Texas 76011
------------------------------------
C. Accounting Terms. All accounting terms not
specifically defined or specified herein shall have the meanings generally
attributed to such terms under generally accepted accounting principles
("GAAP") as in effect from time to time consistently applied, with respect to
the financial statements referenced in Section 3.H. hereof.
D. "Acquistion Capital Expenditures" shall mean for
any period the aggregate expenditures, costs, financings (which shall include
Capitalized Lease financings or transactions including such leases) cash
expended, stock transactions or other methods of purchasing a tangible fixed
asset or capital asset i.e., the total "Purchase Price" of such acquisition
which shall be supported by appraisals, accounting practices sales contracts or
other evidence generally utilized in reflecting the purchase price of
acquisitions and which purchase price will be reflected in the Borrower's
financial statements.
E. "Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures and costs of the Borrower (whether paid in
cash or accrued as liabilities during that period and including that portion of
Capitalized Leases of the Borrower) during such period that, in conformity with
GAAP, are required to be included in or classified as property, plant or
equipment or another similar fixed asset account reflected on the balance sheet
of the Borrower.
F. Current Assets. Current Assets means the aggregate
amount of all Borrower's assets which would, in accordance with GAAP properly
be defined as current assets.
G. Current Liabilities. Current Liabilities means the
aggregate amount of all current liabilities as determined in accordance with
GAAP, but in any event shall include all liabilities except those having a
maturity date which is more than one year from the date as of which such
computation is being made.
H. "EBITDA" Shall mean pretax income plus Interest
Expense plus amortization and depreciation.
I. "Effective Date" with respect of this Agreement,
shall mean May 16, 1997.
<PAGE> 2
J. "Fixed Charges" shall mean, as of any date, on a
consolidated basis, the sum of Borrower's (i) cash Interest Expense, (ii)
scheduled principal payments, (iii) Capital Expenditures excluding Acquisition
Capital Expenditures, (iv) cash dividends, (v) treasury stock repurchased and
(vi) cash tax expenses.
K. "Funded Indebtedness" shall mean, as of any date,
the sum of the following (without duplication): (i) all Indebtedness of
Borrower as of such date, other than consolidated Current Liabilities, (ii) all
Indebtedness which would be classified as "funded indebtedness" or "long-term
indebtedness" on a consolidated balance sheet of Borrower prepared as of such
date in accordance with GAAP, (iii) all Indebtedness, whether secured or
unsecured, of Borrower having a final maturity (or which is renewable or
extendible at the option of the obligor for a period ending more than one year
after the date of creation thereof), notwithstanding the fact that payments
made by the obligor less than one year after the date of creation thereof and
notwithstanding the fact that any amount thereof is at the time included also
in consolidated Current Liabilities of such obligor, (iv) all Indebtedness of
Borrower outstanding under a revolving credit or similar agreement providing
for borrowings (and renewals and extensions thereof) over a period of more
than one year, notwithstanding the fact that any such Indebtedness is created
within one year of the expiration of such agreement.
L. "GAAP" shall mean generally accepted accounting
principles in the United States of America, applied on a basis consistent with
those used in the preparation of the financial statements.
M. "Governmental Authority" shall mean any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency court or instrumentality, domestic or foreign.
N. "Highest Lawful Rate" shall have the meaning
ascribed thereto in the Note.
0. Hazardous Materials Hazardous Materials include
all materials defined as hazardous materials or substances under any local,
state or federal environmental laws, rules or regulations, and petroleum,
petroleum products, oil and asbestos.
P. Loan. Any loan described in Section 2 hereof and
any subsequent loan which states that is subject to this Loan Agreement.
Q. Loan Documents. Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower in favor of
Bank and all other documents, instruments, guarantees, certificates and
agreements executed and/or delivered by Borrower, any guarantor or third party
in connection with any Loan.
R. Maturity Date. Shall mean two (2) years from the
effective date, unless otherwise extended by Bank at its sole discretion.
S. Permitted Liens. Liens permitted as described in
Exhibit A attached hereto.
2. LOANS.
A. Loan. Bank hereby agrees to make (or has made) one
or more loans to Borrower in the aggregate principal face amount of $5,000,000.
The obligation to repay the loans is evidenced by a promissory note or notes
dated May 16, 1997 (the promissory note or notes together with any and all
renewals, extensions or rearrangements thereof being hereafter collectively
referred to as the "Note") having a maturity date, repayment terms and interest
rate as set forth in the Note.
i. [X] Revolving Credit Feature. The Loan provides
for a revolving line of credit (the "Line") under which Borrower may from time
to time, borrow, repay and re-borrow funds.
- 2 -
<PAGE> 3
ii. [X] Useage Fee. Borrower will pay hereafter on
August 1, 1997 and on the lst day of each Aug., Nov., Feb., May for the period
from and including the date the Line was established to and including the
maturity date of the Line, a usage fee at a rate per annum of 1/4% of the [X]
average daily unused portion of the Line during such period [ ] average daily
used portion of the Line during such period [ ] committed amount of the Line.
The Borrower may at any time upon written notice to the Bank permanently reduce
the amount of the Line at which time the obligation of the Borrower to pay a
usage fee shall thereupon correspondingly be reduced.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrant to Bank as follows:
A. Good Standing. Borrower is a Corporation, duly
organized, validly existing and in good standing under the laws of Delaware and
has the power and authority to own its property and to carry on its business in
each jurisdiction in which Borrower does business.
B. Authority and Compliance. Borrower has full power
and authority to execute and deliver the Loan Documents and to incur and
perform the obligations provided for therein, all of which have been duly
authorized by all proper and necessary action of the appropriate governing body
of Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to which
it is subject.
C. Binding Agreement. This Agreement and the other
Loan Documents executed by Borrower constitute valid and legally binding
obligations of Borrower, enforceable in accordance with their terms.
D. Litigation. There is no proceeding involving
Borrower pending or, to the knowledge of Borrower, threatened before any court
or governmental authority, agency or arbitration authority, except as disclosed
to Bank in writing and acknowledged by Bank prior to the date of this
Agreement.
E. No Conflicting Agreements. There is no charter,
bylaw, stock provision, partnership agreement or other document pertaining to
the organization, power or authority of Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on Borrower or
affecting its property, which would conflict with or in any way prevent the
execution, delivery or carrying out of the terms of this Agreement and the other
Loan Documents.
F. Ownership of Assets. Borrower has good title to
its assets, and its assets are free and clear of liens, except those granted
to Bank and as disclosed to Bank in writing prior to the date of this
Agreement, except permitted liens hereinafter defined.
G. Taxes. All taxes and assessments due and payable
by Borrower have been paid or are being paid are being contested in good faith
by appropriate proceedings and the Borrower has filed all tax returns which it
is required to file.
H. Financial Statements. The financial statements
of Borrower heretofore delivered to Bank have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved and fairly present Borrower's financial condition as of the date or
the dates thereof, and there has been no material adverse change in Borrower's
financial condition or operations since December 31, l997. All factual
information furnished by Borrower to Bank in connection with this Agreement and
the other Loan Documents is and will be accurate and complete in all material
respects on the date as of which such information is delivered to Bank and is
not and will not be incomplete by the omission of any material fact
necessary to make such information not misleading.
- 3 -
<PAGE> 4
I. PLACE OF BUSINESS. Borrower's chief executive office is
located at
690 East Lamar Blvd.
---------------------------------------------------
Suite 200
---------------------------------------------------
Arlington, TX 76011
---------------------------------------------------
J. ENVIRONMENTAL. The conduct of Borrower's business operations
and the condition of Borrower's property does not and will not violate any
federal laws, rules or ordinances for environmental protection, regulations of
the Environmental Protection Agency, any applicable local or state law, rule,
regulation or rule of common law or any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials.
K. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any advance
under any Loan.
4. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will, unless Bank
consents otherwise in writing (and without limiting any requirement of any
other Loan Document):
A. FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows, determined in accordance with GAAP applied on a consistent basis
throughout the period involved except to the extent modified by the following
definitions:
Funded Indebtedness to EBITDA Ratio. Not permit the ratio of
Borrower's Funded Indebtedness to EBITDA for the trailing four (4) quarters to
be greater than 3.00 to 1.00 at any time during the term of this Agreement, but
tested as of the end of each fiscal quarter, beginning June 30, 1997.
Fixed Charge Ratio. Not permit the ratio of EBITDA to Fixed
Charges for the trailing four (4) quarters to be less than 1.50 to 1.00 at any
time during the term of this Agreement, but tested as of the end of each fiscal
quarter, beginning June 30, 1997.
B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a system
of accounting reasonably satisfactory to Bank and in accordance with GAAP
applied on a consistent basis throughout the period involved, permit Banks's
officers or authorized representatives to visit and inspect Borrower's books of
account and other records at such reasonable times and as often as Bank may
desire, and pay the reasonable fees and disbursements of any accountants or
other agents of Bank selected by Bank for the foregoing purposes. Unless
written notice of another location is given to Bank, Borrower's books and
records will be located at Borrower's chief executive office set forth above.
All financial statements called for below shall be prepared in form and content
reasonably acceptable to Bank and by independent certified public accountants
acceptable to Bank, except the quarterly financial statements referred to in
paragraph 4.B ii below which will be internally prepared by borrower.
In addition, Borrower will:
i.[X] Furnish to Bank Audited financial statements of Borrower for
each fiscal year Borrower, within 90 days after the close of each such fiscal
year.
ii.[X] Furnish to Bank Internally Prepared financial statements
(including a balance sheet and profit and loss statement) of Borrower for each
Quarter of each of the first three quarters of each fiscal year of Borrower,
within 45 days after the close of each such period.
iii.[X] Furnish to Bank a compliance certificate for (and executed by
an authorized officer of) Borrower concurrently with and dated as of the date
of delivery of each of the financial statements as
-4-
<PAGE> 5
required in paragraphs i and ii above, containing (a) a certification that the
financial statements of even date fairly present in all material respects the
financial position and results of operation and cash flow of Borrower at the
date and for the period indicated subject to changes resulting from year-end
adjustments, and that the borrower is not in default under the terms of this
Agreement, and (b) computations and conclusions, in such detail as Bank may
request, with respect to compliance with this Agreement, and the other Loan
Documents, including computations of all quantitative covenants.
iv. [X] Furnish to Bank promptly such additional information,
reports and statements respecting the business operations and financial
condition of Borrower, from time to time, as Bank may reasonably request.
C. INSURANCE. Maintain insurance with responsible
insurance companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses, specifically to
include fire and extended coverage insurance covering all assets, workers
compensation insurance and liability insurance. Satisfactory evidence of such
insurance will be supplied to Bank prior to funding under the Loan(s) and 30
days prior to each policy renewal.
D. EXISTENCE AND COMPLIANCE. Maintain its existence, good
standing and qualification to do business, where required and comply with all
laws, regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in
writing of (i) any condition, event or act which comes to its attention that
would or might materially adversely affect Borrower's financial condition or
operations or Bank's rights under the Loan Documents, (ii) any material
litigation filed by or against Borrower, (iii) any event that has occurred that
would constitute an event of default under any Loan Documents and (iv) any
material uninsured or partially uninsured loss through fire, theft, liability
or property damage.
F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes,
assessments and other obligations, including, but not limited to taxes, costs
or other expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
G. MAINTENANCE. Maintain all of its tangible property in
good condition and repair, ordinary wear and tear excepted and make all
necessary replacements thereof, and preserve and maintain all licenses,
trademarks, privileges, permits, franchises, certificates and the like
necessary for the operation of its business.
H. ENVIRONMENTAL. Immediately advise Bank in writing of
(i) any and all enforcement, cleanup, remedial, removal, or other governmental
or regulatory actions instituted, completed or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations relating to
any Hazardous Materials affecting Borrower's business operations; and (ii) all
claims made or threatened by any third party against Borrower relating to
damages, contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials. Borrower shall immediately notify Bank of any
remedial action taken by Borrower with respect to Borrower's business
operations. Borrower will not use or permit any other party to use any
Hazardous Materials at any of Borrower's places of business or at any other
property owned by Borrower except such materials as are incidental to
Borrower's normal course of business, maintenance and repairs and which are
handled in compliance with all applicable environmental laws. Borrower agrees
to permit Bank, its agents, contractors and employees to enter and inspect any
of Borrower's places of business or any other property of Borrower at any
reasonable times upon three (3) days prior notice for the purposes of
conducting an environmental investigation and audit (including taking physical
samples) to insure that Borrower is complying with this covenant and Borrower
shall reimburse Bank on demand for the costs of any such environmental
investigation and audit. Borrower shall provide Bank, its agents, contractors,
employees and
-5-
<PAGE> 6
representatives with access to and copies of any and all data and documents
relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by Borrower's business operations within
five (5) days of the request therefore.
5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without
the prior written consent of Bank (and without limiting any requirement of any
other Loan Documents).
A. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign or
otherwise dispose of or transfer any assets, except in the normal course of its
business, or enter into any merger or consolidation, in which Borrower is not
the surviving entity, or transfer control or ownership of the Borrower.
B. LIENS. Grant, suffer, or permit any contractual or
noncontractual lien on or security interest in its assets, except in favor of
Bank and except as described in Exhibit A attached hereto, or fail to promptly
pay when due all lawful claims, whether for labor, materials or otherwise.
C. CHARACTER OF BUSINESS. Change the general character of
business as conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
6. DEFAULT. Borrower shall be in default under this Agreement and
under each of the other Loan Documents if it shall default in the payment of
any amounts due and owing under the Loan or should it fail to timely and
properly observe, keep or perform any term, covenant, agreement or condition in
any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of Borrower to Bank
or any affiliate or subsidiary of NationsBank Corporation.
7. REMEDIES UPON DEFAULT. If an event of default shall occur, Bank
shall have all rights, powers and remedies available under each of the Loan
Documents as well as all rights and remedies available at law or in equity.
8. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party under any provision
of this Agreement must be in writing delivered to the other party at the
following address:
Borrower:
Tandy Brands Accessories, Inc.
----------------------------------------------------
690 E. Lamar Blvd. Suite 200
----------------------------------------------------
Arlington, TX 76011 Attn: Stan Ninemire
----------------------------------------------------
Fax. No.
-----------------------
Bank:
NationsBank of Texas, N.A.
----------------------------------------------------
500 W. 7th Street
----------------------------------------------------
Fort Worth, TX 76113 Attn: Vince Liberio
----------------------------------------------------
Fax. No.
-----------------------
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid:
B. If sent by any other means, upon delivery.
-6-
<PAGE> 7
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel if permitted by applicable law),
incurred by Bank in connection with (a) negotiation and preparation of this
Agreement and each of the Loan Documents, and (b) all other costs and
attorneys' fees incurred by Bank for which Borrower is obligated to reimburse
Bank in accordance with the Terms of the Loan Documents.
10. MISCELLANEOUS. Borrower and Bank further covenant and agree
as follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every
right granted to Bank under any Loan Document, or allowed it by law or equity
shall be cumulative of each other and may be exercised in addition to any and
all other rights of Bank, and no delay in exercising any right shall operate as
a waiver thereof, nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
B. APPLICABLE LAW. This Loan Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted in
accordance with the laws of Texas and applicable United States federal law.
C. AMENDMENT. No modification, consent, amendment or
waiver of any provision of this Loan Agreement, nor consent to any departure
by Borrower therefrom, shall be effective unless the same shall be in writing
and signed by an officer of Bank, and then shall be effective only in the
specified instance and for the purpose for which given. This Loan Agreement is
binding upon Borrower, its successors and assigns, and inures to the benefit of
Bank, its successors and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be effective
without Bank's prior written consent, nor shall it relieve Borrower of any
obligations hereunder. There is no third party beneficiary of this Loan
Agreement.
D. DOCUMENTS. All documents, certificates, and other
items required under this Loan Agreement to be executed and/or delivered to
Bank shall be in form and content satisfactory to Bank and its counsel.
E. PARTIAL INVALIDITY. the unenforceability or
invalidity of any provision of this Loan Agreement shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
F. INDEMNIFICATION. Notwithstanding anything to the
contrary contained in Section 10(G), Borrower shall indemnify, defend and hold
Bank and its successors and assigns harmless from and against any and all
claims, demands, suits, losses, damages, assessments, fines, penalties, costs
or other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous Materials,
arising from Borrower's business operations, any other property owned by
Borrower or in the surface or ground water arising from Borrower's business
operations, or gaseous emissions arising from Borrower's business operations or
any other condition existing or arising from Borrower's business operations
resulting from the use or existence of Hazardous Materials, whether such claim
proves to be true or false. Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under
-7-
<PAGE> 8
fines, penalties, costs or other expenses (including reasonable attorney's fees
and court costs) arising from or in any way related to any of the transactions
contemplated hereby, including but not limited to actual or threatened damage
to the environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous Materials,
arising from Borrower's business operations, any other property owned by
Borrower or in the surface or ground water arising from Borrower's business
operations, or gaseous emissions arising from Borrower's business operations of
any other condition existing or arising from Borrower's business operations
resulting from the use or existence of Hazardous Materials, whether such claim
proves to be true or false. Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under the workmen's
compensation laws of any state or other similar federal or state legislation
for the protection of employees. The term "property damage" as used in this
paragraph includes, but is not limited to, damage to any real or personal
property of the Borrower, the Bank, and of any third parties. The Borrower's
obligations under this paragraph shall survive the repayment of the Loan and
any deed in lieu of foreclosure or foreclosure of any Deed to Secure Debt, Deed
of Trust, Security Agreement or Mortgage securing the Loan.
G. SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loan and shall continue in full force and effect so long as the Loan is
outstanding or the obligation of the Bank to make any advances under the Line
shall not have expired.
11. GOVERNING LAW. THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS COUNTY,
TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND THE FEDERAL LAWS OF THE UNITED STATES OF
AMERICA. TEX. REV. CIV. STAT. ANN. ART. 5069 CH. 15 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY
TO THE LOANS EVIDENCED BY THIS NOTE. WITHOUT EXCLUDING ANY OTHER JURISDICTION,
BORROWER AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, DALLAS
COUNTY, TEXAS, AND THE FEDERAL COURTS SITTING IN DALLAS, DALLAS COUNTY, TEXAS,
WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
12. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the
date first above written.
BORROWER: BANK:
By: /s/ JS. B. JENKINS (Seal) By: /s/ VINCE LIBERIO (Seal)
----------------------- ---------------------
Name: JS. B. Jenkins Name: Vince Liberio
--------------------- -------------------
Title: PRESIDENT, CEO Title: SVP
-------------------- ------------------
[Corporate Seal]
If the Borrower is a corporation, the signature
should be attested by the Secretary or Assistant
Secretary of the corporation and the corporate seal
affixed.
Attest: /s/ STAN NINEMIRE (Seal)
-------------------
Name: Stan Ninemire
---------------------
Title: CFO
--------------------
<PAGE> 9
EXHIBIT "A"
Permitted Liens
Borrower may grant, suffer or permit any contractual or non-contractual
liens or security interests in its assets, as set forth below (liens described
below are herein referred to as "Permitted Liens"):
1. Inchoate liens for taxes, assessments or governmental charges
or levies not yet due or liens for taxes, assessments or governmental charges
or levies being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP;
2. Liens in respect to property or assets of the Borrower or any
of its subsidiaries imposed by law, which were incurred in the ordinary course
of business, and do not secure indebtedness for borrowed money, such as
carriers', warehousemen's materialmen's and mechanics' liens and other similar
liens arising in the ordinary course of business, and which do not in the
aggregate materially detract from the value of the Borrower's or such
subsidiary's property or assets or materially impair the use thereof in the
operation of the business of the Borrower or such subsidiary, or which are
being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale or property or assets
subject to any such lien;
3. Liens in existence on the date of this Agreement, plus renewals
and extensions of such liens to the extent that the aggregate principal amount
of the indebtedness, if any, secured by such liens is not increased from the
amount outstanding at the time of any such renewal or extension, and any such
renewals or extensions do not encumber any additional assets or properties of
the Borrower or any of its subsidiaries;
4. Leases or subleases granted to other persons not materially
interfering with the conduct of the business of the Borrower and its
subsidiaries taken as a whole;
5. Liens placed on equipment or machinery used in the ordinary
course of business of Borrower of any of its subsidiaries, or on real property
of the Borrower or any of its subsidiaries, in each case at the time of
acquisition thereof by the Borrower or any such subsidiary or within sixty days
thereafter to secure indebtedness incurred to pay all or a portion of the
purchase price thereof, provided that the lien encumbering the equipment,
machinery or real property so acquired does not encumber any other asset of the
Borrower or such subsidiary;
6. Easements, right-of-way restrictions, encroachments and other
similar charges or encumbrances and minor title deficiencies in each case not
securing indebtedness and not materially interfering with the conduct of the
business of the Borrower or any of its subsidiaries;
7. Statutory and common law landlord's liens under leases to which
the Borrower or any of its subsidiaries is a party; and
<PAGE> 10
8. Liens resulting from pledges or deposits to secure payments of
workmen's compensation, unemployment insurance or other social security
programs or securing the performance of surety and bid and performance bonds,
tenders, leases and other obligations of similar nature, in each case incurred
in the ordinary course of business (exclusive of obligations in respect to the
payment for borrowed money).
<PAGE> 11
NATIONSBANK OF TEXAS, N.A. 4393245
Texas 35901
M993552-001-001
NS
PROMISSORY NOTE
Date: MAY 16, 1997 NEW
Amount: $5,000,000.00
===============================================================================
<TABLE>
<S> <C>
Bank: Borrower:
NationsBank of Texas, N.A.
Banking Center:
Fort Worth Tandy Brands Accessories, Inc.
500 West 7th Street 690 East Lamar Blvd.
Fort Worth, TX 76102-4700 Suite 200
Arlington, TX 76011
Tarrant County Tarrant County
</TABLE>
===============================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank,
the principal amount of FIVE MILLION DOLLARS AND NOT CENTS ($5,000,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
1. RATE.
See "Exhibit A, Interest Rate Option Provisions", attached hereto and
made a part hereof by reference.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges
in excess of the maximum permitted by applicable law. Borrower agrees that
during the full term hereof, the maximum lawful interest rate for this Note as
determined under Texas law shall be the indicated rate ceiling as specified in
Article 5069-1.04 of VATS. Further, to the extent that any other lawful rate
ceiling exceeds the rate ceiling so determined then the higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to
Borrower or credited against principal, at the option of Bank.
2. ACCRUAL METHOD. Interest at the Rate set forth above will be calculated
by the actual/360 day method (a daily amount of interest is computed for a
hypothetical year of 360 days; that amount is multiplied by the actual number
of days for which any principal is outstanding hereunder).
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate
will change, unless otherwise provided, each time and as of the date that the
index or base rate changes. In the event any index is discontinued, Bank shall
substitute an index determined by Bank to be comparable, at its sole
discretion.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied
first to the payment of any expense or charges payable hereunder or under any
other loan documents executed in connection with this Note, then to interest
due and payable, with the balance applied to principal, or in such other order
as Bank shall determine at its option.
See "Exhibit A, Interest Rate Option Provisions", attached hereto and
made a part hereof by reference.
5. REVOLVING FEATURE. Borrower may borrow, repay and reborrow hereunder
at any time, up to a maximum aggregate amount outstanding at any one time equal
to the principal amount of this Note, provided, that Borrower is not in default
under any provision of this Note, any other documents executed in connection
with this Note, or any other note or other loan documents now or hereafter
executed in connection with any other obligation of Borrower to Bank, and
provided that the borrowings hereunder do not exceed any borrowing base or
other limitation on borrowings by Borrower. Bank shall incur no liability for
its refusal to advance funds based upon its determination that any conditions
of such further advances have not been met. Bank records of the amounts
borrowed from time to time shall be conclusive proof thereof.
6.
7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any
Obligor in connection with the delivery, acceptance, performance, default or
enforcement of this Note, any indorsement or guaranty of this Note, or any
other documents executed in connection with this Note or any other note or
other loan documents now or hereafter executed in connection with any
obligation of Borrower to Bank (the "Loan Documents");
Promissory Note Page 1 Legal Version: 9/95
AS041 Power 1 Version: 5/31/96
Printed: 05/12/97 3:11pm
<PAGE> 12
(b) consent to all delays, extensions, renewals or other modifications of this
Note or the Loan Documents, or waivers of any term hereof or of the Loan
Documents, or release or discharge by Bank of any of Obligors, or release,
substitution or exchange of any security for the payment hereof, or the failure
to act on the part of Bank, or any indulgence shown by Bank (without notice to
or further assent from any of Obligors), and agree that no such action, failure
to act or failure to exercise any right or remedy by Bank shall in any way
affect or impair the obligations of any Obligors or be construed as a waiver by
Bank of, or otherwise affect, any of Bank's rights under this Note, under any
indorsement or guaranty of this Note or under any of the Loan Documents; and
(c) agree to pay, on demand, all costs and expenses of collection or defense of
this Note or of any indorsement or guaranty hereof and/or the enforcement or
defense of Bank's rights with respect to, or the administration, supervision,
preservation, or protection of, or realization upon, any property securing
payment hereof, including, without limitation, reasonable attorney's fees,
including fees related to any suit, mediation or arbitration proceeding, out of
court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding, in such amount as may be determined reasonable by any arbitrator or
court, whichever is applicable.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time
on any loan for which the Rate is based on the Prime Rate. All prepayments of
principal shall be applied in the inverse order of maturity, or in such other
order as Bank shall determine in its sole discretion. No prepayment of any
other loan shall be permitted without the prior written consent of Bank.
Notwithstanding such prohibition, if there is a prepayment of any such loan,
whether by consent of Bank, or because of acceleration or otherwise, Borrower
shall, within 15 days of any request by Bank, pay to Bank any loss or expense
which Bank may incur or sustain as a result of such prepayment. For the
purposes of calculating the amounts owed only, it shall be assumed that Bank
actually funded or committed to fund the loan through the purchase of an
underlying deposit in an amount and for a term comparable to the loan, and such
determination by Bank shall be conclusive, absent a manifest error in
computation.
9. EVENTS OF DEFAULT. The following are events of default hereunder: (a)
the failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to Texas Commerce
Bank, N.A. (e) the commencement of a proceeding against any Obligor for
dissolution or liquidation, the voluntary or involuntary termination or
dissolution of any Obligor or the merger or consolidation of any Obligor with
or into another entity in which the Obligor is not the surviving entity; (f)
the insolvency of, the business failure of, the appointment of a custodian,
trustee, liquidator or receiver for or for any of the property of, the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
adjustment of indebtedness, composition or extension by or against any Obligor;
(g) the determination by Bank that any material representation or warranty made
to Bank by any Obligor in any Loan Documents or otherwise is or was, when it
was made, untrue or materially misleading; (h) the failure of any Obligor to
timely deliver such financial statements, including tax returns, other
statements of condition or other information, as Bank shall reasonably request
from time to time;
10. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Bank (however acquired or evidenced) shall, at the option of Bank,
become immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate shall not be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving Obligors a right to cure any default. At
Bank's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the principal
balance, and interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of principal and interest is paid in full. Upon a default under this Note,
Bank is hereby authorized at any time, at its option and without notice or
demand, to set off and charge against any deposit accounts of any Obligor, (as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor), which at any time shall come into the possession or custody or under
the control of Bank or any of its agents, affiliates or correspondents, any and
all obligations due hereunder. Additionally, Bank shall have all rights and
remedies available under each of the Loan Documents, as well as all rights and
remedies available at law or in equity.
11. NON-WAIVER. The failure at any time of Bank to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof,
nor shall it be a bar to the exercise of any of its options or rights at a
later date. All rights and remedies of Bank shall be cumulative and may be
pursued singly, successively or together, at the option of Bank. The
acceptance by Bank of any partial payment shall not constitute a waiver of any
default or of any of Bank's rights under this Note. No waiver of any of its
rights hereunder, and no modification or amendment of this Note, shall be
deemed to be made by Bank unless the same shall be in writing, duly signed on
behalf of Bank; each such waiver shall apply only with respect to the specific
instance involved, and shall in no way impair the rights of Bank or the
obligations of Obligors to Bank in any other respect at any other time.
12. APPLICABLE LAW, VENUE AND JURISDICTION. Borrower agrees that this Note
shall be deemed to have been made in the State of Texas at Bank's address
indicated at the beginning of this Note and shall be governed by, and construed
in accordance with, the laws of the State of Texas, and is performable in the
City and County of Texas indicated at the beginning of this Note. In any
litigation in connection with or to enforce this Note or any indorsement or
guaranty of this Note or any Loan Documents, Obligors, and each of them,
irrevocably consent to and confer personal jurisdiction on the courts of the
State of Texas or the United States courts located within the State of Texas.
Nothing contained herein shall, however, prevent Bank from bringing any action
or exercising any rights within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means available under applicable
law.
13. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or enforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons
or circumstances.
14. BINDING EFFECT. This Note shall be binding upon and inure to the
benefit of Borrower, Obligors and Bank and their
Promissory Note Page 2 Legal Version: 9/95
AS041 Power 1 Version: 5/31/96
Printed: 05/12/97 3:11pm
<PAGE> 13
Obligors hereunder can be assigned without prior written consent of Bank.
15. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is
in any way incompatible with any other document related specifically to the
loan evidenced by this Note, this Note shall control over any other such
document, and if this Note does not address an issue, then each other such
document shall control to the extent that it deals most specifically with an
issue.
16. GOVERNING LAW. THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS COUNTY,
TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND THE FEDERAL LAWS OF THE UNITED STATES OF
AMERICA. TEX. REV. CIV. STAT. ANN. ART. 5069 CH.15 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT
APPLY TO THE LOANS EVIDENCED BY THIS NOTE. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, BORROWER AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN
DALLAS, DALLAS COUNTY, TEXAS, AND THE FEDERAL COURTS SITTING IN DALLAS, DALLAS
COUNTY, TEXAS, WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
TANDY BRANDS ACCESSORIES, INC.
(A DELAWARE CORPORATION)
By: /s/ STAN NINEMIRE
------------------------------------------
Name: Stan Ninemire
--------------------------------
Title: CFO
--------------------------------
(Corporate Seal)
Bank: NationsBank of Texas, N.A.
By: /s/ VINCE LIBERIO SVP
------------------------------------------
Name: Vince Liberio
Title: Sr. Vice President
Promissory Note Page 3 Legal Version: 9/95
AS041 Power 1 Version: 5/31/96
Printed: 05/12/97 3:11pm
<PAGE> 14
Customer # 4393425
EXHIBIT A
INTEREST RATE OPTION PROVISIONS
THIS EXHIBIT A is attached to and forms a part of that certain PROMISSORY
NOTE (the "Note"), dated MAY 16, 1997, executed by TANDY BRANDS ACCESSORIES,
INC., a DELAWARE CORPORATION ("Borrower"), and made payable to the order of
NationsBank of Texas, N.A. ("Bank").
1. Borrower's Rates. On the terms and subject to the conditions
set forth below, Borrower will be able to select, from one of the following
Rate Options, an interest rate which will be applicable to a particular dollar
increment of amounts outstanding, or to be disbursed, under the Note: [check
the available options]
[X] The Prime Rate plus 0.00 (the "Prime Rate Option");
[ ] The Treasury Securities Rate plus _ (the "Treasury
Securities Rate Option"); or
[X] The LIBOR Funding Rate, plus .75 (the "LIBOR Rate
Option");
[ ] The Eurodollar Rate, plus _ (the "Eurodollar Rate
Option");
[ ] The CD Rate plus _ (the "CD Rate Option"); or
[ ] The Quoted Rate, plus _ (the "Quoted Rate Option");
[ ] The Transaction Rate of - (the "Transaction Rate Option").
Interest based on the Prime Rate Option is a floating rate and will change on
and as of the date of a change in the Prime Rate. The period of time during
which the Prime Rate shall be applicable shall be a Prime Rate Interest Period.
Interest based on the Treasury Securities Rate Option will be fixed for periods
of _ year(s) (each a "Treasury Securities Interest Period"). Interest based on
the LIBOR Rate Option will be fixed for periods of ONE, TWO, THREE, OR SIX
MONTHS (each a "LIBOR Interest Period"). Interest based on the Eurodollar Rate
Option will be fixed for periods of _ (each a "Eurodollar Interest Period").
Interest based on the CD Rate Option will be fixed for periods of _(each a "CD
Interest Period"). Interest based on the Quoted Rate Option will be fixed for
periods of _ (each a "Quoted Interest Period"). Interest based on the
Transaction Rate Option will be fixed for periods of _ (each a "Transaction
Interest Period"). The Treasury Securities Rate, the LIBOR Rate, the
Eurodollar Rate, the CD Rate, the Quoted Rate, and the Transaction Rate each
being hereafter from time to time referred to as a "Fixed Rate Option").
2. Selection of Applicable Interest Rate.
(a) Request. Borrower may request (a "Rate Request") that a
$100,000.00 increment or any amount in excess thereof (an "Increment") of the
outstanding principal of, or amounts to be disbursed under, the Note bear
interest at the Prime Rate Option, Treasury Securities Rate Option, the LIBOR
Rate Option, the Eurodollar Rate Option, the CD Rate Option, the Quoted Rate
Option or the Transaction Rate Option, as applicable, by telephonic notice no
later than 10:00 a.m. (Central time) a sufficient (in Bank's sole discretion)
number of Business Days prior to the effective date of the Rate Request to
permit Bank to quote the rate requested.
(b) Applicable Interest Rates. Borrower's Rate Request will
become effective, and interest on the Increment designated will be calculated
at the rate (the "Effective Rate") requested by Borrower for the applicable
Interest Period, subject to the following:
(i) Notwithstanding any Rate Request, interest shall be
calculated on the basis of the Prime Rate Option if (a) Bank, in good faith, is
unable to ascertain the requested Fixed Rate Option by reason of circumstances
then affecting the applicable money market or otherwise, (b) it becomes
unlawful or impracticable for the Bank to maintain loans based upon the
requested Fixed Rate Option, or (c) Bank, in good faith, determines that it is
impracticable to maintain loans based on the requested Fixed Rate Option
because of increased taxes, regulatory costs, reserve requirements, expenses or
any other costs or charges that affect such Interest Rate Options. Upon the
occurrence of any of the above events, any Increment to which a requested Fixed
Rate Option applies, shall be immediately (or at the option of Bank, at the end
of the current Fixed Rate Interest Period), without further action of Borrower
or Bank, converted to an Increment to which the Prime Rate Option applies.
(ii) Borrower may have no more than a total of 10
Effective Rates applicable to amounts outstanding under the Note at any given
time.
(iii) A Rate Request shall be effective as to amounts to
be distributed under the Note only if, on the effective date of the Rate
Requests, such amounts are in fact disbursed to or for the account of the
Borrower in accordance with the provisions of the Note and any related loan
TX045 -1- Approved: 11/10/95
Revised: 05/30/96
<PAGE> 15
documents.
(iv) Any amounts of outstanding principal for which a Rate
Request has not been made, or is otherwise not effective, shall bear interest
until paid in full at the Prime Rate Option.
(v) Any amounts of outstanding principal bearing interest
based upon a Fixed Rate Option shall bear interest at such rate until the end of
the Interest Period therefor, and thereafter shall bear interest based upon the
Prime Rate Option unless a new Rate Request for a Fixed Rate Option complying
with the terms hereof has been made and has become effective.
(vi) If Borrower shall be in default under the Note
("Default"), then Bank shall no longer be obligated to honor any Rate Requests.
(vii) No Fixed Rate Interest Period shall extend beyond the
maturity date of the Note.
(c) Repayment. Principal shall be payable on May 14, 1999 and
interest shall be payable as follows: [check all that apply]
[X] For any Interest Period during which the Prime Rate is
applicable to any of the outstanding principal, interest thereon shall
be payable Quarterly and continuing on the same day of each successive
month, quarter or other period (as applicable) thereafter, with a
final payment of all accrued and unpaid interest on the last day of
such Interest Period.
[] For any Interest Period during which the Quoted Rate is
applicable to any of the outstanding principal, interest thereon shall
be payable _ and continuing on the _ day of each successive month,
quarter or other period (as applicable) thereafter, with a final
payment of all accrued and unpaid interest on the last day of such
Interest Period.
[] For any Interest Period during which the Transaction Rate is
applicable to any of the outstanding principal, interest thereon shall
be payable - and continuing on the _ day of each successive month,
quarter or other period (as applicable) thereafter, with a final
payment of all accrued and unpaid interest on the last day of such
Interest Period.
[X] For any Interest Period during which the LIBOR Funding Rate is
applicable to any of the outstanding principal, all accrued and unpaid
interest thereon shall be payable on the last day of each applicable
Interest Period and, in the case of an Interest Period greater than
three months, at three month intervals after the first day of such
Interest Period.
[] For any Interest Period during which the Eurodollar Rate is
applicable to any of the outstanding principal, all accrued and unpaid
interest thereon shall be payable on the last day of each applicable
Interest Period and, in the case of an Interest Period greater than
three months, at three month intervals after the first day of such
Interest Period.
[] For any Interest Period during which the CD Rate is applicable
to any of the outstanding principal, all accrued and unpaid interest
thereon shall be payable on the last day of each applicable Interest
Period and, in the case of an Interest Period greater than 90 days, at
90 day intervals after the first day of such Interest Period.
[] For any Interest Period during which the Treasuries Securities
Rate is applicable to any outstanding principal, interest thereon
shall be payable _ and continuing on the _ day of each successive
month, quarter or other period (as applicable) thereafter, with a
final payment of all accrued and unpaid interest on the last day of
such Interest Period.
3. Defined Terms. The following terms as used in this Exhibit A
shall have the following meanings:
"Business Day" shall mean a day on which Bank is open for business and
dealing in deposits in FORT WORTH, TEXAS.
"Treasury Securities Rate" shall mean the rate of interest per annum
determined by Bank, in accordance with its customary general practice from time
to time, to be the weekly average yield on all United States Treasury Securities
adjusted to a constant maturity for a term comparable to such Interest Period,
as most recently reported by the Federal Reserve System in the weekly FEDERAL
RESERVE STATISTICAL RELEASE NO. H-15(519), entitled "Selected Interest Rates"
(or any succeeding publication)(the "Treasury Securities Rate") adjusted from
time to time in Bank's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs.
"CD Rate" shall mean the rate of interest per annum (rounded upwards,
if necessary, to the next higher 1/16 of 1%) determined by Bank, in accordance
with its customary general practice from time to time, paid from time to time
by major banks on negotiable certificates of deposit (secondary market) in
amounts of $1,000,000.00 or more for a term comparable to such Interest Period,
as most recently reported by the Federal Reserve System in the weekly FEDERAL
RESERVE STATISTICAL RELEASE NO. H-15(519), entitled "Selected Interest Rates"
(or any succeeding publication) (the "CD Rate") adjusted from time to time in
Bank's sole discretion for then applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs.
TX045 -2- Approved: 11/10/95
Revised: 05/30/96
<PAGE> 16
"LIBOR Funding Rate" shall mean the rate of interest set by Bank as
the LIBOR Funding Rate as of and at any time during the second Business Day
immediately preceding the first day of such Interest Period, for a term
comparable to such Interest Period, as adjusted from time to time in Bank's
sole discretion for then applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs.
"Eurodollar Rate" shall mean the rate of interest set by Bank as the
Eurodollar Rate, as of and at any time during the second Business Day
immediately preceding the first day of such Interest Period, for a term
comparable to such Interest Period, as adjusted from time to time in Bank's
sole discretion for then applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs.
"Prime Rate" is the fluctuating rate of interest established by Bank
from time to time, at its discretion, whether or not such rate shall be
otherwise published. The Prime Rate is established by Bank as an index and may
or may not at any time be the best or lowest rate charged by Bank on any loan.
"Quoted Rate" shall mean a fixed rate of interest per annum agreed
upon by the Bank and Borrower on or prior to the first day of the Interest
Period for which such rate shall be in effect.
"Transaction Rate" shall mean the fixed rate of _ % per annum.
4. Notices; Authority to Act. Borrower acknowledges and agrees that
the agreement of Bank herein to receive certain notices by telephone is solely
for the convenience of Borrower. Bank shall be entitled to rely on the
authority of the person purporting to be a person authorized by Borrower to
give such notice, and Bank shall have no liability to Borrower on account of
any action taken by Bank in reliance upon such telephonic notice. The
obligation of Borrower to repay all sums owing under the Note shall not be
affected in any way or to any extent by any failure by Bank to receive written
confirmation of any telephonic notice or the receipt by Bank of a confirmation
which is at variance with the terms understood by Bank to be contained in the
telephonic notice.
IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A to
Note as of the 14 day of May 1997.
Borrower: Tandy Brands Accessories, Inc.
By: /s/ STAN NINEMIRE
------------------------------------
Bank: NationsBank Texas, N.A.
By: /s/ VINCE LIBERIO
------------------------------------
Vince Liberio, Sr., Vice President
TX045 -3- Approved: 11/10/95
Revised: 05/30/96
<PAGE> 17
NOTE
$10,000,000 Fort Worth, Texas May 16, 1997
For value received, TANDY BRANDS ACCESSORIES, INC., a Delaware Corporation
(the "Borrower"), promises to pay to the order of NATIONSBANK OF TEXAS, N.A.
(the "Bank") the unpaid principal amount of each advance made by the Bank to the
Borrower pursuant to the Letter Agreement referred to below ON DEMAND or, if
not theretofore demanded, on the maturity date therefore determined in
accordance with the Letter Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such advance ON DEMAND or, if not
theretofore demanded, on such maturity date and at the rate determined in
accordance with the Letter Agreement. AR such payments of principal and
interest shall be made in lawful money of the the United States in Federal or
other immediately available funds at the office of the Bank, 500 West Seventh
Street, Fort Worth, Texas 76102-4700.
All advances made by the Bank, the respective interest rates applicable
thereto and maturities thereof and all repayments of the principal thereof
shall be recorded by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof, provided that
the inaccuracy of, or the failure of the Bank to make, any such recordation
shall not affect the obligations of the Borrower hereunder.
This note is the Note referred to in the Letter Agreement dated as of
October 31, 1996 between the Borrower and the Bank (as the same may be amended
from time to time, the "Letter Agreement"). Reference is made to the Letter
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
TANDY BRANDS ACCESSORIES, INC.
By: /s/ STAN NINEMIRE
---------------------------
Title: CFO
------------------------
<PAGE> 18
NOTE
$10,000,000 Fort Worth, Texas May 16,1997
For value received, TANDY BRANDS ACCESSORIES, INC., a Delaware Corporation
(the "Borrower"), promises to pay to the order of NATIONSBANK OF TEXAS, N.A.
(the "Bank") the unpaid principal amount of each advance made by the Bank to
the Borrower pursuant to the Letter Agreement referred to below ON DEMAND or,
if not theretofore demanded, on the maturity date therefore determined in
accordance with the Letter Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such advance ON DEMAND or, if not
theretofore demanded, on such maturity date and at the rate determined in
accordance with the Letter Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of the Bank, 500 West Seventh Street,
Fort Worth, Texas 76102-4700.
All advances made by the Bank, the respective interest rates applicable
thereto and maturities thereof and all repayments of the principal thereof shall
be recorded by the Bank on the schedule attached hereto, or on a continuation
of such schedule attached to and made a part hereof, provided that the
inaccuracy of, or the failure of the Bank to make, any such recordation shall
not affect the obligations of the Borrower hereunder.
This note is the Note referred to in the Letter Agreement dated as of May
16, 1996 between the Borrower and the Bank (as the same may be amended from
time to time, the "Letter Agreement"). Reference is made to the Letter
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
TANDY BRANDS ACCESSORIES, INC.
By: /s/ STAN NINEMIRE
---------------------------
Title: CFO
------------------------
<PAGE> 1
EXHIBIT 11.1
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
Statement Re: Computation Of Earnings Per Share
EXHIBIT (11): STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
11.1 Earnings per share statement
Earnings per Share - Earnings per share is determined by dividing net income by
the average number of common shares outstanding plus common stock equivalents
of dilutive stock options. Earnings per share, as presented, is both primary
and fully diluted.
<TABLE>
<CAPTION>
(In thousands)
Year Ended June 30,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Common shares outstanding:
Weighted average shares outstanding 5,444 5,329 5,201
Share equivalents
44 36 68
-------- -------- --------
Total 5,488 5,365 5,269
======== ======== ========
</TABLE>
16
<PAGE> 1
EXHIBIT 13.1
CONSOLIDATED STATEMENT OF INCOME
- -------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
(In thousands except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Net sales.......................................................... $102,507 $ 86,694 $ 83,721
Royalty, interest and other income................................. 141 151 224
102,648 86,845 83,945
Costs and expenses:
Cost of goods sold............................................ 64,249 53,974 50,892
Selling, general and administrative expenses 28,123 25,279 23,618
Depreciation and amortization................................. 1,750 2,103 1,780
Interest expense.............................................. 1,242 1,267 1,048
Prince Gardner impairment write-off........................... -- 3,976 --
95,364 86,599 77,338
Income from continuing operations before income taxes 7,284 246 6,607
Provision for income taxes..................................... 2,720 145 2,412
Income from continuing operations............................. 4,564 101 4,195
Discontinued operation: (1,341)
Pre-tax loss from operations of discontinued operation........ -- -- (3,685)
Pre-tax loss from liquidation of discontinued operation....... -- -- 1,784
Income tax benefit applicable to discontinued operation....... -- -- (3,242)
Loss from discontinued operation.............................. -- --
Net income................................................ $ 4,564 $ 101 $ 953
Average common shares and common share
equivalents outstanding....................................... 5,488 5,365 5,269
Earnings per average common share and common share equivalent:
Income from continuing operations............................. $ .83 $ .02 $ .80
Loss from discontinued operation.............................. -- -- (.62)
Net income.................................................... $ .83 $ .02 $ .18
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30,
ASSETS 1997 1996
--------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................... $ 554 $ 88
Accounts receivable, net of allowances of $1,076 and $606................................... 15,210 13,746
Inventories................................................................................. 32,260 26,610
Other current assets........................................................................ 2,489 2,505
Total current assets..................................................................... 50,513 42,949
Property, plant and equipment, at cost:
Buildings................................................................................... 2,446 2,436
Leasehold improvements...................................................................... 855 553
Machinery and equipment..................................................................... 6,351 6,337
9,652 9,326
Accumulated depreciation.................................................................... (4,797) (4,246)
Net property, plant and equipment........................................................ 4,855 5,080
Other assets:
Goodwill, net of accumulated amortization of $2,990 and $2,437.............................. 7,941 8,526
Other intangibles, net of accumulated amortization of $1,709 and $1,468..................... 1,175 1,230
Other noncurrent assets..................................................................... 880 626
Total other noncurrent assets............................................................ 9,996 10,382
$ 65,364 $ 58,411
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................................ $ 3,180 $ 4,624
Notes payable............................................................................... -- 2,200
Accrued payroll and bonuses................................................................. 1,867 656
Accrued expenses............................................................................ 2,112 1,387
Total current liabilities................................................................ 7,159 8,867
Other liabilities:
Notes payable............................................................................... 15,850 12,400
Other noncurrent liabilities................................................................ 226 297
Total other liabilities.................................................................. 16,076 12,697
Commitments (Note 7)
Stockholders' equity:
Preferred stock, $1 par value; 1,000,000 shares authorized; none issued..................... -- --
Common stock, $1 par value; 10,000,000 shares authorized; 5,490,091 shares..................
and 5,382,267 shares issued and outstanding as of June 30, 1997 and 1996, respectively... 5,490 5,382
Additional paid in capital.................................................................. 18,732 18,038
Retained earnings........................................................................... 17,907 13,427
Total stockholders' equity............................................................... 42,129 36,847
$ 65,364 $ 58,411
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
7
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................................. $ 4,564 $ 101 $ 953
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Prince Gardner impairment write-off .................................... -- 3,976 --
Loss from discontinued operation ....................................... -- -- 3,242
Depreciation ........................................................... 1,074 985 908
Amortization ........................................................... 849 1,222 952
Deferred taxes ......................................................... (265) (607) (457)
Other .................................................................. (76) (376) 43
Change in assets and liabilities, net of effects from acquisitions and
liquidation of discontinued operation:
Accounts receivable .................................................... (1,464) (466) 1,506
Inventories ............................................................ (5,650) 3,600 (6,757)
Accounts payable ....................................................... (1,444) 352 434
Accrued expenses ....................................................... 1,865 (1,320) (1,939)
Other assets ........................................................... 276 (244) (1,992)
Net operating activities of discontinued operation ......................... -- (67) (609)
Net cash provided by (used for) operating activities ....................... (271) 7,156 (3,716)
Cash flows from investing activities:
Purchases of property and equipment ........................................ (1,507) (796) (1,438)
Sale of property and equipment ............................................. 192 234 --
Payment for purchase of the assets and liabilities, net of
cash acquired and notes retired, for the following:
Canterbury Belts, Ltd. ................................................. -- -- (6,546)
H.A. Sheldon, Inc. ..................................................... -- -- (3,960)
Net cash used for investing activities ..................................... (1,315) (562) (11,944)
Cash flows from financing activities:
Sale of stock to stock purchase program ................................... 802 862 1,002
Exercise of employee stock options, net of purchase and
retirement of treasury stock ............................................. -- 21 --
Proceeds from borrowings ................................................... 44,750 26,845 60,745
Payments under borrowings .................................................. (43,500) (35,722) (45,268)
Net cash provided by (used for) financing activities ....................... 2,052 (7,994) 16,479
Net increase (decrease) in cash and cash equivalents ........................ 466 (1,400) 819
Cash and cash equivalents at beginning of period ............................ 88 1,488 669
Cash and cash equivalents at end of period ................................... $ 544 $ 88 $ 1,488
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................................ $ 1,179 $ 1,259 $ 1,001
Income taxes ............................................................. 2,278 691 1,683
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
8
<PAGE> 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30,1994 ........................................ 5,155,349 $ 5,155 $ 16,011 $ 12,407
Sale of stock to the Tandy Brands Accessories, Inc.
Stock Purchase Program ........................................ 78,420 78 924 --
Compensation related to director stock option grants
and employment contracts ...................................... 23,689 24 345 --
Foreign currency translation adjustment ........................ -- -- -- (58)
Net income ..................................................... -- -- -- 953
Balance at June 30, 1995 ...................................... 5,257,458 5,257 17,280 13,302
Sale of stock to the Tandy Brands Accessories, Inc.
Stock Purchase Program ........................................ 117,384 117 745 --
Sale of unissued common stock to employees
for exercise of stock options ................................. 7,425 8 13 --
Foreign currency translation adjustment ........................ -- -- -- 24
Net income ..................................................... -- -- -- 101
Balance at June 30, 1996 ....................................... 5,382,267 5,382 18,038 13,427
Sale of stock to the Tandy Brands Accessories, Inc.
Stock Purchase Program ........................................ 107,824 108 694 --
Foreign currency translation adjustment ........................ -- -- -- (84)
Net income ..................................................... -- -- -- 4,564
Balance at June 30,1997 ........................................ 5,490,091 $ 5,490 $ 18,732 $ 17,907
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
9
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
THE COMPANY AND BASIS OF PRESENTATION
Tandy Brands Accessories, Inc. (the "Company") designs, manufactures and
markets fine leather goods, accessories and neckwear for men, women and
children. The Company sells its products to a variety of retail outlets,
including national chain stores, discount stores, major department stores,
specialty stores, catalogue retailers and the retail exchange operations of the
United States military.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers cash on hand, deposits in banks and short-term
investments with original maturities of less than three months as cash and cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost (principally standard cost which
approximates actual cost on a first-in, first-out basis) or market. Cost
includes materials, direct and indirect labor and factory overhead. Market,
with respect to raw materials, is replacement cost, and for work-in-process and
finished goods, it is net realizable value.
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1997 1996
-----------------------------
<S> <C> <C>
Raw materials.................... $ 4,881,000 $ 3,882,000
Work-in-process.................. 1,101,000 2,164,000
Finished goods................... 26,278,000 20,564,000
$ 32,260,000 $ 26,610,000
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are depreciated over the estimated useful lives of the
assets using the straight-line method and at the rates shown:
<TABLE>
<S> <C>
Buildings 3%
Leasehold improvements The lesser of the life of the lease or asset
Machinery and equipment 10% to 33 1/3%
</TABLE>
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments which materially prolong the useful lives of the assets are
capitalized. The cost and the related accumulated depreciation of property
retired or sold are removed from the accounts, and gains or losses from
retirements and sales are recognized in the consolidated statements of income.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles are amortized using the straight-line method over
their estimated useful lives ranging from three to forty years. The weighted
average number of years over which goodwill and other intangibles are amortized
is 16 years. Goodwill and other intangibles are reviewed for impairment based
on estimated future undiscounted cash flows.
10
<PAGE> 6
- --------------------------------------------------------------------------------
REVENUES
The Company recognizes revenue when merchandise is shipped to customers and
title to the goods has passed from the Company to the customer. Sales returns
and allowances are recorded at the time the amounts can be reasonably estimated
by the Company.
The Company performs periodic credit evaluations of its customers' financial
conditions and generally does not require collateral. Credit losses have
historically been within management's expectations.
MAJOR CUSTOMERS
Consolidated net sales to Wal-Mart accounted for approximately 36%, 35%, and
40% of the Company's sales in fiscal 1997, 1996, and 1995, respectively. No
other customers accounted for 10% or more of total revenues.
STOCK-BASED COMPENSATION
The Company may with the approval of its Board of Directors grant stock options
for a fixed number of shares to employees with an exercise price equal to the
fair value of the shares at the date of grant. The Company accounts for stock
option grants in accordance with APB Opinion No. 25, "Accounting For Stock
Issued To Employees," and, accordingly, recognizes no compensation expense for
the stock option grants. The Company has adopted the disclosure-only provisions
as specified by Financial Accounting Standards Board (FASB) Statement No. 123,
"Accounting For Stock-Based Compensation."
INCOME TAXES
Income taxes have been provided for using the liability method in accordance
with FASB Statement No. 109, "Accounting for Income Taxes." Under FASB
Statement No. 109, deferred tax assets and liabilities are determined based on
the differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws.
EARNINGS PER SHARE
Net income per share is based upon the weighted average number of common shares
outstanding during each year and common stock equivalents of dilutive stock
options.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement No. 128, "Earnings per Share." The
Company is required to adopt Statement No. 128 in the second quarter of fiscal
1998. The adoption of this standard will impact earnings per share
calculations; however, the adoption will have no impact on the Company's
results of operations.
NOTE 2 - PRINCE GARDNER IMPAIRMENT WRITE-OFF
- --------------------------------------------------------------------------------
On April 4, 1994, the Company purchased for $7,690,000 certain assets of Prince
Gardner Incorporated (PG) through a foreclosure sale held by PG's primary
secured lender. PG is a manufacturer and marketer of women's and men's small
leather goods. After a thorough review conducted in 1996 by management based
upon future estimated undiscounted cash flows, it was determined that future
cash flows would be insufficient to recover the Prince Gardner division's
goodwill and other intangibles. Accordingly, an impairment write-off of
$3,976,000 was recognized in the fourth quarter of fiscal 1996.
NOTE 3 - ACQUISITION
- --------------------------------------------------------------------------------
On May 1, 1995, TBAC-Canterbury, Inc. (Canterbury), a wholly owned subsidiary
of Tandy Brands Accessories, Inc., acquired substantially all the assets and
assumed substantially all the liabilities of Canterbury Belts, Ltd., and its
wholly owned subsidiary. The assets acquired included, but were not limited to,
accounts receivable, inventory, equipment, trade names and other intangibles.
The cash
11
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued)
Tandy Brands Accessories, Inc. and Subsidiaries
purchase price of approximately $4,946,000 was provided by drawing on existing
bank credit lines. In connection with the purchase, the Company immediately
retired approximately $1,600,000 in bank indebtedness, which was part of the
assumed liabilities. The acquisition has been accounted for under the purchase
method of accounting and the resultant goodwill of approximately $4,250,000 is
being amortized over a 15 year period.
On August 30, 1994, H.A. Sheldon Canada, Ltd. (HAS), a wholly owned Canadian
subsidiary of Tandy Brands Accessories, Inc., acquired substantially all the
assets and assumed substantially all the liabilities of H.A. Sheldon, Inc. The
cash purchase price of approximately $2,550,000 was provided by drawing on
existing bank credit lines. In conjunction with the acquisition, the Company
immediately retired approximately $1,410,000 in notes payable. The acquisition
has been accounted for under the purchase method of accounting and the
resultant goodwill of approximately $2,350,000 is being amortized over a 15
year period.
Operations of the acquired companies have been included in
the Company's consolidated statements of income since
the applicable date of their acquisition.
The pro forma results shown in the following table have
been prepared for comparative purposes only and do
not purport to be indicative of the results of
operations which would have actually been
obtained if the acquisitions had been
consummated at the beginning of
the periods presented, nor
does it purport to be
indicative of
12
<PAGE> 8
- --------------------------------------------------------------------------------
results which may be obtained in the future. Unaudited pro forma consolidated
results from continuing operations of Tandy Brands Accessories, Inc.,
Canterbury and HAS, as if the acquisitions had occurred at the beginning of
fiscal year 1995, are as follows:
<TABLE>
<CAPTION>
(Unaudited)
1995
-----------
<S> <C>
Net sales ......................................... $ 91,950,000
Income from continuing operations ................. $ 4,375,000
Income from continuing operations per share ....... $ .83
</TABLE>
NOTE 4 - DISCONTINUED OPERATION
- --------------------------------------------------------------------------------
During fiscal 1995, the Company announced its decision to dispose of the Always
In Style operations. Always In Style was acquired in November of 1993 for total
consideration of $1,350,000 which included 36,364 shares of Company common
stock and cash. Always In Style was originally acquired by the Company in an
effort to establish a position in the emerging shop-at-home market. The
decision to discontinue Always In Style was made after a reevaluation of the
Company's present position in the home-TV shopping business.
The consolidated statements of income for fiscal years 1997, 1996 and 1995
exclude sales and expenses of the discontinued operation from captions
applicable to continuing operations. Net sales for Always In Style were
approximately $2,690,000 for the period prior to the measurement date in 1995.
The after-tax loss from discontinuing Always In Style, including the write-off
of $1,363,000 of goodwill, reduced income by approximately $3,242,000, or $0.62
per share, for the year ended June 30, 1995.
NOTE 5 - CREDIT ARRANGEMENTS
- --------------------------------------------------------------------------------
The Company has an unsecured line of credit with a bank for $25,000,000. Of
this amount, $20,000,000, which expires on April 30, 1999, is a committed
facility that requires the maintenance of certain financial covenants and the
payment of a commitment fee of 1/4% on the unused balance. The line may be used
for borrowings or letters of credit and bears interest at negotiated rates. The
remaining $5,000,000, which expires on April 30, 1998, is an uncommitted
facility that may be used for borrowings or letters of credit and bears
interest at various rates and durations at the option of the Company. At June
30, 1997 and 1996, the Company had borrowings under this line of $10,850,000
and $12,400,000, bearing interest at 7% and 6.20%, respectively.
In fiscal 1996, the Company had an uncommitted, unsecured line of credit with
another bank for $10,000,000 that could have been used for borrowings or
letters of credit. Borrowings bore interest at negotiated rates. As of June 30,
1996, there were no borrowings under this line; however, the Company had
$5,014,000 in letters of credit outstanding at June 30, 1996, which were issued
in conjunction with merchandise procurement. This line of credit has expired
and is no longer available for borrowings or letters of credit at June 30,
1997.
The Company has an unsecured line of credit with another bank for $25,000,000.
Of this amount, $5,000,000, which expires on May 14, 1999, is a committed
facility that requires the maintenance of certain financial covenants and the
payment of a commitment fee of 1/4% on the unused balance. The line may be used
for borrowings or letters of credit and bears interest at negotiated rates. The
remaining $20,000,000, which expires on various dates during fiscal year 1998,
is an uncommitted facility that may be used for borrowings or letters of credit
and bears interest at various rates and durations at the option of the Company.
At June 30, 1997 and 1996, the Company had borrowings under the committed
facility of $5,000,000 and $2,200,000, bearing interest at 6.44% and 6.48%,
respectively. Additionally, the Company had $4,985,0OO in letters of credit
outstanding at June 30, 1997, which were used in conjunction with merchandise
procurement.
The Company also has a Canadian line of credit for approximately $1,000,000
secured by a letter of credit from a U.S. bank. At June 30, 1997 and 1996,
there were no borrowings under this line of credit.
Under the above credit facilities, future payments required for debt maturities
will be $15,850,000 in fiscal 1999.
13
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued)
Tandy Brands Accessories, Inc. and Subsidiaries
NOTE 6 - INCOME TAXES
- --------------------------------------------------------------------------------
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for accounts receivable....... $ 348,000 $ 175,000
Inventory valuation..................... 592,000 545,000
Goodwill and other intangibles.......... 569,000 616,000
Accrued insurance....................... 47,000 63,000
Other, net.............................. 193,000 151,000
Total deferred tax assets.............. 1,749,000 1,550,000
Deferred tax liabilities:
Depreciation............................ (64,000) (130,000)
Total deferred tax liabilities......... (64,000) (130,000)
Net deferred tax asset................. $1,685,000 $1,420,000
</TABLE>
Significant components of the provision for income taxes from continuing
operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Current:
Federal.................. $2,722,000 $ 709,000 $2,683,000
Foreign.................. 51,000 (66,000) 121,000
State and local.......... 212,000 109,000 65,000
2,985,000 752,000 2,869,000
Deferred:
Federal.................. (254,000) (547,000) (457,000)
State and local.......... (11,000) (60,000) --
(265,000) (607,000) (457,000)
Income tax provision..... $2,720,000 $ 145,000 $2,412,000
</TABLE>
The following table reconciles the statutory federal income tax rate to the
effective income tax rate for continuing operations:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Statutory rate............................... 34.0% 34.0% 34.0%
State and local taxes, net of federal
income tax benefit........................ 1.8% 23.6% 0.6%
Other, net................................... 1.5% 1.3% 1.9%
37.3% 58.9% 36.5%
</TABLE>
14
<PAGE> 10
- --------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS
- --------------------------------------------------------------------------------
The Company leases property which includes office, manufacturing and warehouse
facilities under operating leases, expiring through the year 2006 with varying
renewal and escalation clauses. Rental expense for 1997, 1996 and 1995 totaled
$1,074,000, $851,000 and $862,000, respectively.
The Company has entered into licensing agreements with other companies for the
purpose of using their trademarks on the Company's products. Royalty expense
for 1997, 1996 and 1995 totaled $1,209,000, $909,000 and $881,000,
respectively.
Future minimum rental and royalty commitments as of June 30, 1997, are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------------------------------------------
<S> <C>
1998............................ $ 1,473,000
1999............................ 1,512,000
2000............................ 974,000
2001............................ 926,000
2002............................ 621,000
Thereafter...................... 1,509,000
$ 7,015,000
</TABLE>
NOTE 8 - EMPLOYEE STOCK OPTIONS
- --------------------------------------------------------------------------------
The Company has adopted various stock option incentive plans for officers and
key management employees. All options will be granted at market price as of the
date of grant and have a contractual life of ten years. Options are generally
exercisable annually at a rate of 20% per year beginning one year after the
grant date. At June 30, 1997 and 1996, the number of shares available for grant
were 107,317 and 170,267, respectively. The following table reflects the
employee stock option transactions subsequent to June 30, 1994:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
---------------------------------
<S> <C> <C>
Outstanding at June 30, 1994..... 258,893 $ 12.81
Options granted.................. 90,750 $ 10.29
Options exercised................ (1,012) $ 2.81
Options cancelled or expired..... (2,000) $ 19.91
Outstanding at June 30, 1995..... 346,631 $ 12.16
Options granted.................. -- --
Options exercised................ (7,425) $ 2.74
Options cancelled or expired..... (52,602) $ 16.28
Outstanding at June 30, 1996..... 286,604 $ 11.68
Options granted.................. 82,000 $ 6.72
Options exercised................ -- --
Options cancelled or expired..... (19,050) $ 11.04
Outstanding at June 30, 1997..... 349,554 $ 10.55
Exercisable at June 30, 1997..... 206,312 $ 11.06
</TABLE>
15
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Tandy Brands Accessories, Inc. and Subsidiaries
The following table segregates outstanding options into groups based on price
ranges of less than and more than ten dollars per share:
<TABLE>
<CAPTION>
$2.07-$9.25 $10.33-$19.75
-----------------------------
<S> <C> <C>
All outstanding options:
Number of shares............................. 192,701 156,853
Weighted-average exercise price.............. $6.38 $15.67
Weighted-average remaining contractual life.. 6.3 years 6.2 years
Exercisable options:
Number of shares............................. 78,001 128,311
Weighted-average exercise price.............. $4.72 $14.92
</TABLE>
Pro forma information regarding net income and earnings per share is required
by FASB No. 123, "Accounting for Stock-Based Compensation," and has been
determined as if the Company had accounted for its stock options under the fair
value method of that statement. The fair value for these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for 1997 and 1996: dividend yield of
0.0%; expected volatility of 0.55%; a risk free interest rate of 6.42%; and an
expected holding period of seven years. Using these assumptions for the options
granted during fiscal 1997, the weighted-average grant date fair value of such
options was $4.25.
The Black-Scholes valuation models are used in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility and the average
holding period of options. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its stock
options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense on a straight-line basis over the options' vesting
period. The pro forma effects on net income for 1997 and 1996 are not
representative of the pro forma effect on net income in future years because
they do not take into consideration pro forma compensation expense related to
grants made prior to 1996. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1997 1996
-----------------
<S> <C> <C>
Net income:
As reported............. $4,564 $ 101
Pro forma............... $4,527 $ 101
Earnings per share:
As reported............. $ .83 $ .02
Pro forma............... $ .82 $ .02
</TABLE>
NO. 9 - NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
- -------------------------------------------------------------------------------
In fiscal 1995, the stockholders of the Company adopted the Tandy Brands
Accessories, Inc. 1995 Stock Deferral Plan for NonEmployee Directors (the
Deferral Plan). The Deferral Plan was established to provide non-employee
directors an equity interest in the Company in order to attract and retain
well-qualified individuals to serve as non-employee directors and to enhance
the identity of interests between the non-employee directors and the
stockholders of the Company. The Deferral Plan provides the directors with an
election to defer the receipt of their annual and committee chair retainer fees
until a future date determined by each director. The pay-
16
<PAGE> 12
- --------------------------------------------------------------------------------
ment of such fees will be in the form of shares of the Company's common stock.
The shares are calculated by dividing the deferred cash amount by the average
closing price of the stock for each day of the period during which such cash
amount would have been paid but for the deferral election. The Company records
compensation expense for the amount of the directors' retainer fees. The
Company benefits from cash retained when directors elect to defer their
retainer fees and receive stock. The Deferral Plan provides for the granting of
up to 50,000 shares of the Company's common stock to non-employee directors.
The Deferral Plan became active in May 1996. There were no shares issued to the
directors during fiscal years 1997 and 1996. Amounts recorded as compensation
expense related to the Deferral Plan for 1997 and 1996 were $98,395 and
$15,327, respectively.
The Company offers other stock incentive plans for non-employee directors. In
conjunction with these plans, 55,222 options were outstanding as of June 30,
1997. The options range in price from $8.00 to $19.00 and are generally
exercisable at a rate of 20% per year beginning one year after the grant date.
There have been no options exercised as of June 30, 1997.
NOTE 10 - EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
The Tandy Brands Accessories Employees Investment Plan (the Plan) is open to
substantially all employees who have been employed by the Company for over two
years. Under the Plan, participants may contribute 5% of their earnings, with
the Company matching 150%. The contributions are paid to a trustee and invested
primarily in Company common stock. Employer contributions are fully vested upon
payment.
The Tandy Brands Accessories Stock Purchase Program (the Program) is open to
all full-time employees who are enrolled in the Tandy Brands Accessories
Employees Investment Plan. Under the Program, participants may contribute 5% or
10% of their earnings, with the Company matching 50% of each participant's
contribution. The Program also permits employees with six months to two years
of service to participate in the Program with the Company matching 25% of each
participant's contribution. The Program purchases treasury, if available, or
unissued common stock directly from the Company at monthly average market
prices. The participant's shares are fully vested upon purchase, the employee
may withdraw at any time and the shares purchased under the Program are
distributed to participants annually.
Total Company contributions to these plans were approximately $952,000,
$692,000 and $733,000 in 1997, 1996 and 1995, respectively.
NOTE 11 - RELATED PARTY TRANSACTION
- --------------------------------------------------------------------------------
During 1997 and 1996, the Company purchased inventory of approximately
$18,900,000 and $13,000,000, respectively, from a supplier who is controlled by
a principal shareholder of the Company. The merchandise is purchased at amounts
which approximate fair market value. Although the potential exposure for
product flow interruption may be significant, this exposure is mitigated in
that the inventory may be purchased from various other sources.
NOTE 12 - PREFERRED STOCK AND PREFERRED SHARE PURCHASE RIGHTS
- --------------------------------------------------------------------------------
PREFERRED STOCK
The Company's Board of Directors is authorized to approve the issuance of
preferred stock without further stockholder approval. The Board of Directors of
the Company is also authorized to determine, without any further action by the
holders of the Company's common stock, 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 such series and the designation thereof.
No shares of preferred stock have been issued.
In connection with the adoption of its Preferred Share Purchase Rights Plan
(the Rights Plan), the Company has designated and reserved for issuance upon
exercise of such rights 150,000 shares of Series A Junior Participating
Cumulative Preferred Stock.
17
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued)
Tandy Brands Accessories, Inc. and Subsidiaries
Should the Board of Directors elect to exercise its authority to issue any
additional series of preferred stock, the rights, preferences and privileges of
holders of the Company's common stock would be made subject to the rights,
preferences and privileges of such additional series.
PREFERRED SHARE PURCHASE RIGHTS
Prior to the spin-off of the Company, the Board of Directors authorized the
Rights Plan. In conjunction with the spin-off, each share of the Company's
common stock was distributed with one preferred share purchase right
(collectively, the Rights) which entities the registered holder to purchase
from the Company one one-hundredth (1/100) of a share of Series A Junior
Participating Cumulative Preferred Stock at a price of $36 per one
one-hundredth of a share, subject to adjustment. The Rights Plan is designed to
deter coercive or unfair takeover tactics and to prevent an acquirer from
gaining control of the Company without offering a fair price to all of the
Company's stockholders. The Rights will cause substantial dilution to a person
or group that attempts to acquire the Company on terms not approved by the
Company's Board of Directors, except pursuant to an offer conditioned upon a
substantial number of Rights being acquired. The description and terms of the
Rights are set forth in a Rights Agreement between the Company and BankBoston,
N.A., as Rights Agent.
The Rights are not exercisable until the Rights Distribution Date as defined in
the Rights Agreement and will expire on December 31, 2000, unless earlier
redeemed by the Company
NOTE 13 - SELECTED QUARTERLY FINANCIAL DATA
- -------------------------------------------------------------------------------
(UNAUDITED)
OPThe summarized quarterly financial data (in thousands, except per share
amounts) for the two years ended June 30, 1997, is set forth below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1997 QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales ................................................ $23,661 $29,879 $23,922 $25,045
Gross profit ............................................. 8,933 10,886 8,937 9,502
Income before income taxes ............................... 1,681 2,680 1,241 1,682
Net income ............................................... 1,063 1,700 745 1,056
Net income per average common share
and common share equivalent ............................ $ .20 $ .31 $ .14 $ .19
FISCAL 1996
Net sales ................................................ $22,703 $24,406 $19,180 $20,405
Gross profit ............................................. 8,602 9,508 7,265 7,345
Income (loss) before income taxes (1) .................... 1,312 1,305 659 (3,030)
Net income (loss) ........................................ 846 841 429 (2,015)
Net income (loss) per average common
share and common share equivalent ...................... $ .16 $ .16 $ .08 $ (.37)
</TABLE>
(1) See Note 2 for discussion of the Prince Gardner goodwill impairment
write-off of $3,976,000 recorded in the fourth quarter.
18
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors of Tandy Brands Accessories, Inc.
We have audited the accompanying consolidated balance sheets of Tandy Brands
Accessories, Inc. and subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1997. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tandy Brands
Accessories, Inc. and subsidiaries at June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles
/s/ Ernst & Young LLP
Fort Worth, Texas
August 7, 1997
19
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
GENERAL
Tandy Brands Accessories, Inc. (the Company) manufactures and markets men's,
women's and children's accessories. Key product categories include belts,
wallets, neckwear, handbags and socks. Merchandise is sold under various
national brand names, as well as private labels, to all major levels of retail
distribution. The business is conducted primarily in the United States;
however, the Company does have manufacturing and marketing operations in Canada
through its H.A. Sheldon division. The Company's sales and operating results
are fairly consistent throughout the fiscal year, with a seasonal increase
during the second quarter.
Although the Company's operations are affected by general economic trends, the
Company does not believe that inflation has had a material effect on the
results of the Company during the past three fiscal years.
The Company seeks increased accessory sales and earnings through a variety of
means, including increased sales through the Company's current operating units,
as well as growth through acquisition of similar businesses. During years 1997
and 1996, no acquisitions were made by the Company; however, during the period
between fiscal 1992 and 1995, the Company acquired five businesses. See Note 3
for a description of the acquisitions completed in fiscal 1995.
On May 1, 1995, the Company acquired Canterbury Belts, Ltd. (Canterbury), under
which name the Company has continued to manufacture and market leather and
fabric accessories for men, women and children to better specialty stores and
golf pro-shops.
On August 30, 1994, the Company purchased substantially all the assets and
assumed substantially all the liabilities of H.A. Sheldon, Inc. (HAS). HAS is a
manufacturer and marketer of men's belts, wallets and suspenders, located in
Toronto, Canada. HAS sells to a broad range of retail distribution, including
department stores, chain stores, and mass merchants, as well as specialty
stores across Canada.
On April 4, 1994, the Company purchased certain assets of Prince Gardner
Incorporated (PG) through a foreclosure sale held by PG's primary secured
lender. PG has historically been a manufacturer and marketer of women's and
men's small leather goods. During fiscal 1997, in addition to its small leather
goods products, PG began selling handbags under the Jones New York label to
department stores and better specialty stores. After a thorough review
conducted in 1996 by management, based upon the future estimated undiscounted
cash flows of its PG division, it was determined that future cash flows would
be insufficient to recover the PG division's goodwill and other intangibles.
Accordingly, an impairment write-off of $3,976,000 was recognized in the fourth
quarter of fiscal 1996.
On March 27, 1995, after conducting an extensive review, the Company announced
its decision to discontinue its Always In Style operations. This business was
originally acquired by the Company in November of 1993, to establish an early
position in home-TV shopping through the sales of women's apparel and accessory
items. See Note 4.
20
<PAGE> 16
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of Fiscal Years Ended June 30, 1997, 1996 and 1995
Sales and cost of goods sold and selling, general and administrative expenses
for fiscal 1997 compared to the previous two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1996 1995
----------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Net sales................................................... $102,507 $86,694 $83,721
Net sales percentage increase
over comparable prior period.............................. 18.2% 3.6% 24.5%
Cost of goods sold.......................................... $ 64,249 $53,974 $50,892
Cost of goods sold as a percentage of sales................. 62.7% 62.3% 60.8%
Selling, general and administrative expenses................ $ 28,123 $25,279 $23,618
Selling, general and administrative expenses
as a percentage of sales ................................. 27.4% 29.2% 28.2%
</TABLE>
Net sales increased $15,813,000, or 18.2% in fiscal 1997. The net sales
increase during fiscal 1997 was attributable to additional product sales
through existing channels of distribution by the Company's women's and men's
accessory businesses, which had percentage increases of 13.8% and 4.4%,
respectively.
Net sales increased $2,973,000, or 3.6% in fiscal 1996. Virtually all of this
increase was due to sales generated by Canterbury, which was acquired in May
1995, and increased mass merchant sales by the Company's Accessory Design Group
(ADG) division. These increases were offset, to some degree, by a 26% decrease
in PG's net sales in fiscal 1996.
Gross margins decreased 0.4% in fiscal 1997, compared to fiscal 1996. This
decrease was the result of an increasing women's mass merchant accessory sales
mix as a percentage of net sales. Although these women's mass merchant sales
were at lower gross margins than the Company's historical gross margins, they
also carry a lower selling, general and administrative expense as a percentage
of sales as compared to the Company's historical rates. During fiscal 1996,
gross margins declined 1.5% primarily due to merchandise sold at lower prices
in an effort to reduce slow moving inventory.
Selling, general and administrative expenses as a percentage of net sales
decreased 1.8%. A portion of this decrease resulted from a larger mix of
women's sales which, on a percentage of sales basis, incur lower variable
selling expenses than men's sales. Other contributing factors include decreased
selling costs due to the consolidation of divisional sales personnel and volume
efficiencies generated by greater than planned sales. Selling, general and
administrative expenses as a percentage of net sales increased 1% in fiscal
1996. The increase was due more to lower than anticipated revenues than to the
actual amount of selling, general and administrative expenses which, for the
most part were very close to planned amounts.
21
<PAGE> 17
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
(continued)
Tandy Brands Accessories, Inc. and Subsidiaries
Depreciation and amortization expenses were $1,750,000 in 1997, compared to
$2,103,000 in 1996. The decrease in 1997 of $353,000 was largely the result of
lower amortization expense due to the write-off of impaired goodwill in the
fourth quarter of 1996. See Note 2.
The effective tax rates for 1997, 1996 and 1995 were 37.3%, 58.9% and 36.5%,
respectively. The effective tax rate in 1997 returned to historical trends
increasing 0.8% compared to 1995 due to additional state and local taxes. The
increase in the effective tax rate in 1996 was due, for the most part, to the
non-tax deductibility in certain states of the losses associated with PG's
operations and impaired asset write-offs.
Income from continuing operations for fiscal 1997 was $4,564,000 or $0.83 a
share, compared to $101,000 or $0.02 a share for 1996 and $4,195,000 or $0.80 a
share for 1995. The increase in the 1997 income from continuing operations was
attributable to significant sales increases, a decrease in depreciation and
amortization expenses and a decrease in selling, general and administrative
expenses on a percent of sales basis. The decrease in income from continuing
operations for 1996 was due to the PG write-off, a lower gross profit margin
percentage and higher selling, general and administrative costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash flows from operations
and borrowings under bank credit arrangements. The Company has two unsecured
bank credit lines aggregating $50,000,000 which can be used for seasonal debt
or letters of credit (See Note 5). The Company also has a Canadian line of
credit for approximately $1,000,000 secured by a letter of credit from a U.S.
bank. The Company had approximately $35,150,000 available under such lines of
credit at June 30, 1997.
During fiscal 1997, the Company provided (used) cash flows from operating
activities of ($271,000) compared to $7,156,000 and ($3,716,000) for 1996 and
1995, respectively. The decrease in cash flow in 1997 was attributable to
increased net income, offset by increased inventory, accounts receivable and
decreased accounts payable, partially offset by an increase in accrued
expenses. These changes in cash flows were caused primarily by increased net
sales of the Company in 1997, which resulted in increased accounts receivable
and inventory levels to support continuing higher levels of sales activity.
In fiscal 1997, the Company provided net cash from financing activities of
$2,052,000 due to seasonal borrowings required by increases in inventory and
receivables.
22
<PAGE> 18
- -------------------------------------------------------------------------------
The Company plans to use future cash flows from operations to develop and
expand current operations. The Company believes that its cash flows from
operations and borrowings available under existing bank lines of credit will be
sufficient to fund its operations; however, the Company's financial policy is
to maintain a debt-to-total capital ratio below 30%. On June 30, 1997, the
debt-to-total capital ratio was 27%, compared to 28% in 1996. The Company
continues to reduce this ratio below the maximum target of 30% by increasing
total capital through increased profits and, as demonstrated in 1996, the use
of cash flows generated by operations to reduce outstanding indebtedness. The
Company believes it has adequate financial resources and sufficient credit
facilities to satisfy its future working capital needs.
23
<PAGE> 19
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Tandy Brands Accessories, Inc. and Subsidiaries
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1996 1995 1994 1993
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales................................................ $102,507 $ 86,694 $ 83,721 $ 67,254 $ 50,204
Income from continuing operations (1).................... 4,564 101 4,195 5,363 4,082
Loss from discontinued operation (2)..................... - - (3,242) (301) -
Net income............................................... 4,564 101 953 5,062 4,082
Income from continuing operations per share (3).......... .83 .02 .80 1.03 .80
Net income per share (3)................................. .83 .02 .18 .97 .80
Total assets............................................. 65,364 58,411 67,315 49,318 32,231
Long-term debt........................................... 15,850 12,400 16,650 8,000 -
Cash dividends per common share.......................... - - - - -
</TABLE>
(1) See Note 2 for discussion of the Prince Gardner impairment write-off.
(2) See Note 4 for discussion of the discontinued operation.
(3) Net income per share has been adjusted to reflect a 3-for-2 stock split
payable to stockholders of record on April 9, 1993.
PRICE RANGE OF COMMON
- --------------------------------------------------------------------------------
Quoted by quarter for the two fiscal years ended June 30, 1997
<TABLE>
<CAPTION>
FISCAL 1997 HIGH LOW FISCAL 1996 HIGH LOW
<S> <C> <C> <C> <C> <C>
September....................... $ 7.50 $6.50 September...................... $9.00 $6.75
December........................ $ 7.50 $6.00 December....................... $8.50 $6.25
March........................... $ 9.00 $6.00 March.......................... $8.00 $5.25
June............................ $10.13 $8.00 June........................... $9.50 $7.25
</TABLE>
As of August 21,1997, there were approximately 1,221 stockholders of record.
24
<PAGE> 1
EXHIBIT 21.1
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT (21): SUBSIDIARIES OF THE REGISTRANT
21.1 List of subsidiaries
<TABLE>
<CAPTION>
Subsidiaries of State or Other Jurisdiction of Names Under Which Such
the Registrant Incorporation or Organization Subsidiaries Do Business
- --------------- ----------------------------- ------------------------
<S> <C> <C>
Accessory Design Group, Inc. A Delaware Corporation Accessory Design Group, Inc.
Accessory Design Group
TBAC-Prince Gardner, Inc. A Delaware Corporation TBAC-Prince Gardner, Inc.
Prince Gardner
TBAC-AIS, Inc. A Delaware Corporation TBAC-AIS, Inc.
H.A. Sheldon Canada Ltd. A Canadian Corporation 1088258 Ontario, Inc.
H.A. Sheldon Canada Ltd.
TBAC-Canterbury, Inc. A Delaware Corporation TBAC-Canterbury, Inc.
</TABLE>
17
<PAGE> 1
EXHIBIT 23
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT (23): CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Tandy Brands Accessories, Inc. of our report dated August 7, 1997, included
in the 1997 Annual Report to Stockholders of Tandy Brands Accessories, Inc.
We also consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-41262, 33-46814, 33-91996, 33-75114 and
333-8579) and in the related Prospectuses of (i) our report dated August 7,
1997, with respect to the consolidated financial statements of Tandy Brands
Accessories, Inc. included in the 1997 Annual Report to Stockholders of Tandy
Brands Accessories, Inc. and (ii) our report dated August 7, 1997, with respect
to the financial statement schedule included in this Annual Report on Form 10-K
for the year ended June 30, 1997.
/s/ ERNST & YOUNG LLP
Fort Worth, Texas
September 23, 1997
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TANDY BRANDS
ACCESSORIES, INC.'S JUNE 30, 1997, ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K FILINGS. DOLLARS ARE IN
THOUSANDS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 554
<SECURITIES> 0
<RECEIVABLES> 16,286
<ALLOWANCES> 1,076
<INVENTORY> 32,260
<CURRENT-ASSETS> 50,513
<PP&E> 9,652
<DEPRECIATION> 4,797
<TOTAL-ASSETS> 65,364
<CURRENT-LIABILITIES> 7,159
<BONDS> 15,850
0
0
<COMMON> 5,490
<OTHER-SE> 36,639
<TOTAL-LIABILITY-AND-EQUITY> 65,364
<SALES> 102,507
<TOTAL-REVENUES> 102,507
<CGS> 64,249
<TOTAL-COSTS> 64,249
<OTHER-EXPENSES> 1,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,242
<INCOME-PRETAX> 7,284
<INCOME-TAX> 2,720
<INCOME-CONTINUING> 4,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,564
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
