Execution Copy
FOURTH AMENDMENT TO CREDIT AGREEMENT
     THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) made as of the
30th day of September, 2005, by and among TANDY BRANDS ACCESSORIES, INC.
(“Borrower”), WELLS FARGO HSBC TRADE BANK, N. A. (“Agent”), and the lenders
specified herein (“Lenders”).
     WHEREAS, Borrower, Agent and certain lenders entered into a Credit
Agreement dated as of June 27, 2001 (the “Original Credit Agreement”), as
amended by that First Amendment to Credit Agreement dated as of June 28, 2002,
(the “First Amendment”); as amended by that Second Amendment to Credit Agreement
dated as of June 26, 2003 (the “Second Amendment”); as amended by that Third
Amendment to Credit Agreement dated as of August 26, 2004 (the “Third
Amendment”); the Original Credit Agreement, the First Amendment, the Second
Amendment and the Third Amendment together, the “Credit Agreement”); and
     WHEREAS, Borrower has requested that Agent and Lenders make certain
amendments to the Credit Agreement, and Agent and Lenders are willing to do so
subject to the terms and conditions set forth herein;
     NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
     1. Defined Terms. All capitalized terms used but not otherwise defined in
this Amendment shall have the meaning ascribed to them in the Credit Agreement.
Unless otherwise specified, all section references herein refer to sections of
the Credit Agreement.
     2. Amendments to Credit Agreement. The Credit Agreement is hereby amended
as follows:
     2.1 Definitions
     (a) Applicable Commitment Fee. The chart in clause (b) in the definition of
“Applicable Commitment Fee Percentage” is revised to read as follows:

              APPLICABLE TOTAL FUNDED INDEBTEDNESS   COMMITMENT FEE TO EBITDA
RATIO   PERCENTAGE
Less than 1.00 to 1.00
    0.20 %
 
       
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00
    0.25 %
 
       
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00
    0.30 %
 
       
Greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00
    0.375 %
 
       
Greater than or equal to 3.00 to 1.00
    0.375 %*

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*   Applicable from Effective Date of Fourth Amendment through Review Date.

     (b) Applicable Margin. The definition of “Applicable Margin” is revised to
read as follows:
“‘Applicable Margin’ means, the following percentages per annum, which
percentages shall be added to the applicable interest rates for purposes of
calculating the interest rates payable to the Lenders, as more fully described
by Section 2.8:
     (a) For the period from the Effective Date of the Fourth Amendment until
receipt and satisfactory review of the financial statements for the fiscal
quarter ending March 31, 2006 (the “Review Date”), the Applicable Margin for
Alternate Base Borrowings shall be 0.0%, the Applicable Margin for Eurodollar
Borrowings shall be 2.00%, and the Applicable Commitment Fee Percentage shall be
0.375%.
     (b) Following the Review Date, (i) the Applicable Margin for Alternate Base
Borrowings shall be 0.0%; and (ii) the following Applicable Margins per annum
for Eurodollar Borrowings shall apply, and shall be determined as a function of
the Total Funded Indebtedness to EBITDA Ratio, as set forth on the most recent
certificate showing compliance delivered to the Agent by the Borrower pursuant
to Section 9.1(b), as follows:

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

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              APPLICABLE     MARGIN FOR TOTAL FUNDED INDEBTEDNESS   EURODOLLAR
TO EBITDA RATIO   BORROWINGS
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00
    1.500 %
 
       
Greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00
    1.75 %
 
       
Greater than or equal to 3.00 to 1.00
    2.00%” *

 

*   Applicable from Effective Date of Fourth Amendment through Review Date.

     (c) Effective Date of Fourth Amendment. The definition of “Effective Date
of the Fourth Amendment” is added to the Credit Agreement as follows:
“‘Effective Date of the Fourth Amendment’ means the date on which the Borrower
satisfies the conditions set forth in Section 3 of the Fourth Amendment to
Credit Agreement dated as of September 30, 2005.”
     (d) Fixed Charge Coverage Ratio. The definition of “Fixed Charge Coverage
Ratio” is amended to read as follows:
“‘Fixed Charge Coverage Ratio’, means, for the four consecutive fiscal quarterly
periods ending on the date of determination for Borrower and its Subsidiaries,
the ratio of (a) EBITDA determined on a consolidated basis minus Capital
Expenditures minus federal, state, local and foreign income taxes divided by
(b) Interest Expense plus payments made in respect of Capitalized Lease
Obligations plus any cash dividend made by Borrower or any of its Subsidiaries,
plus any payments made by Borrower or any of its Subsidiaries in respect of the
redemption, retirement, acquisition, or prepayment of any Borrower’s capital
stock, or any other equity interest during the term of this Agreement, plus, for
any determination based on the quarterly period ending September 30, 2004 and
thereafter, implied principal payments in an amount equal to one-fifth (1/5th)
of Revolving Credit Loans in excess of $20,000,000 outstanding on the last day
of each such quarterly period, plus any Investments in Sheldon.”
     2.2 Leverage Ratio
     Section 10.14 is amended to read as follows:
“10.14 Leverage Ratio. Borrower shall not permit the ratio of (a) Total Funded
Indebtedness, on a consolidated basis, as of the last day of each fiscal quarter
of the Borrower to (b) EBITDA, on a
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consolidated basis, for the four (4) fiscal quarters ending on September 30,
2005 to exceed 3:50 to 1:00; for the four (4) fiscal quarters ending on
December 31, 2005 to exceed 3.25 to 1.00; and for any fiscal quarter thereafter
to exceed 3.00 to 1.00.”
     2.3 Fixed Charge Coverage Ratio
     Section 10.15 is amended to read as follows:
“10.15 Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed Charge
Coverage Ratio as of the last day of each fiscal quarter of Borrower to be less
than 1.05:1.00 for the fiscal quarter ending on September 30, 2005; and 1.25 to
1.00 for any fiscal quarter thereafter.”
     3. Effectiveness of Amendment. This Amendment shall be effective upon
receipt by Agent of:
(a) A copy or copies of this Amendment signed by each of the parties hereto;
(b) A Confirmation of Guaranty executed by each Guarantor (other than Sheldon);
(c) A Compliance Certificate executed by Borrower; and
(d) Payment for all other fees and expenses due and owing by the Borrower.
     4. Ratifications, Representations and Warranties.
(a) The terms and provisions set forth in this Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement and, except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect. Borrower, Agent and Lenders agree that
the Credit Agreement and the Loan Documents, as amended hereby, shall continue
to be legal, valid, binding and enforceable in accordance with their respective
terms.
(b) To induce Agent and Lenders to enter into this Amendment, Borrower ratifies
and confirms each representation and warranty set forth in the Credit Agreement
as if such representations and warranties were made on the even date herewith,
(except to the extent that such representations and warranties related solely to
an earlier date and except to the extent that the facts upon which such
representations are based have been changed by the transactions contemplated in
the Credit Agreement) and further represents and warrants (i) that there has
occurred since the
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date of the last financial statements delivered to Agent and Lenders no event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Change, (ii) that after giving effect to this Amendment no
Event of Default exists on the date hereof after giving effect to this
Amendment, (iii) that Borrower is fully authorized to enter into this Amendment,
and (iv) that the Guarantors signing the Confirmation of Guaranty attached
hereto are all of the Borrower’s Subsidiaries as of the date of this Amendment
(other than Sheldon).
     5. Benefits. This Amendment shall be binding upon and inure to the benefit
and Borrower, Agent and Lenders and their respective successors and assigns;
provided, however, that Borrower may not, without the prior written consent of
Agent and Lenders, assign any rights, powers, duties or obligations under this
Amendment, the Credit Agreement or any of the other Loan Documents.
     6. Construction. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
     7. Invalid Provisions. If any provision of this Amendment is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully several and the remaining provisions of this Amendment shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
     8. Entire Agreement. The Credit Agreement, as amended by this Amendment,
contains the entire agreement among the parties regarding the subject matter
hereof and supersedes all prior written and oral agreements and understandings
among the parties hereto regarding same.
     9. Reference to Credit Agreement. The Credit Agreement and any and all
other agreements, documents or instruments now or hereafter executed and
delivered pursuant to the terms hereof or pursuant to the terms of the Credit
Agreement, as amended hereby, are hereby amended so that any reference in the
Credit Agreement to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.
     10. Counterparts. This Amendment may be separately executed in any number
of counterparts, each of which shall be an original, but all of which, taken
together, shall be deemed to constitute one and the same agreement.
[The remainder of this page intentionally left blank.]
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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                  BORROWER:    
 
                TANDY BRANDS ACCESSORIES, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                AGENT:    
 
                WELLS FARGO HSBC TRADE BANK, N.A.    
 
           
 
  By:
Name:             / s/ Yousuf Omar
 
          Yousuf Omar    
 
  Title:             Senior Relationship Manager    
 
                WELLS FARGO BANK, N. A.    
 
           
 
  By:
Name:             /s/ John Johnson
 
          John W. Johnson    
 
  Title:             Senior Vice President    

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                  LENDERS:    
 
                WELLS FARGO HSBC TRADE BANK, N. A.    
 
           
 
  By:             /s / Yousuf Omar    
 
           
 
  Name:             Yousuf Omar    
 
  Title:             Senior Relationship Manager    
 
  Address:             1445 Ross Avenue, Suite 450    
 
                Dallas, TX 75202    
 
  Attention:             Yousuf Omar    
 
  Fax No.:             214-220-1585    

Tandy Brands Accessories, Inc. — Fourth Amendment

 

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                  COMERICA BANK    
 
           
 
  By:             / s/ Corey R. Bailey    
 
           
 
  Name:             Corey R. Bailey    
 
  Title:             Vice President — Texas Division    
 
  Address:             8828 Stemmons, Suite 441    
 
                Dallas, TX 75247    
 
  Attention:                                                                   
 
  Fax No.:                                                                   

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                  BANK OF AMERICA, N.A.    
 
           
 
  By:             / s/ Curtis L. Anderson    
 
           
 
  Name:             Curtis L. Anderson    
 
  Title:             Senior Vice President    
 
  Address:             901 Main Street    
 
                67th Floor    
 
                Dallas, Texas 75202    
 
  Attention:                                                                   
 
  Fax No.                                                                   

Tandy Brands Accessories, Inc. — Fourth Amendment

 

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

Tandy Brands Accessories, Inc. — Fourth Amendment

 

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CONFIRMATION OF GUARANTY
     Reference is made to the Credit Agreement dated as of June 27, 2001 (as
amended, the “Credit Agreement”) among Tandy Brands Accessories, Inc.
(“Borrower”), Wells Fargo HSBC Trade Bank, N. A. (“Agent”), and the lenders
specified therein (“Lenders”). The undersigned Guarantors hereby confirm that
their guaranty under the Subsidiary Guaranty dated as of June 27, 2001 for the
benefit of Agent, Lenders, and Wells Fargo Bank, N. A., continues in full force
and effect notwithstanding the Fourth Amendment to Credit Agreement dated as of
September 30, 2005, which Fourth Amendment is hereby accepted and consented to
by each Guarantor. In accordance herewith, the aforesaid guaranty shall be
deemed to cover and support the Obligations at any time due from Borrower to
Lenders pursuant to the Credit Agreement as the latter has been modified by the
Fourth Amendment. This Confirmation of Guaranty shall be governed by and
construed in accordance with the laws of the State of Texas.
Dated as of the 30th day of September, 2005.

                  ACCESSORY DESIGN GROUP, INC.    
 
           
 
  By:
Name:              / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                AMITY/ROLFS, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
           Mark J. Flaherty    
 
  Title:             Chief Financial Officer    

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                  TANDY BRANDS ACCESSORIES HANDBAGS, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC INVESTMENTS, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC GENERAL MANAGEMENT COMPANY    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC MANAGEMENT COMPANY L.P.    
 
                By: TBAC General Management Company, its general partner    
 
           
 
  By:
Name:              / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC PRINCE GARDNER, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
           Mark J. Flaherty    
 
  Title:             Chief Financial Officer    

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                  STAGG INDUSTRIES, INC.    
 
           
 
  By:
Name:              / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC — TOREL, INC.    
 
           
 
  By:
Name:              / s/ Mark J. Flaherty
 
           Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC — MASS MERCHANT QUALITY CONTROL, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC INVESTMENT TRUST    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                SUPERIOR MERCHANDISE COMPANY    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    
 
                TBAC — ACQUISITION, INC.    
 
           
 
  By:
Name:             / s/ Mark J. Flaherty
 
          Mark J. Flaherty    
 
  Title:             Chief Financial Officer    

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          ACCEPTED as of the date first written above.               BORROWER:  
            TANDY BRANDS ACCESSORIES, INC.               By:
Name:              / s/ Mark J. Flaherty
 
           Mark J. Flaherty     Title:              Chief Financial Officer    

Tandy Brands Accessories, Inc. — Fourth Amendment

 

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COMPLIANCE CERTIFICATE
As of September 30, 2005
     Reference is made to that certain Credit Agreement dated as of June 27,
2001 among Tandy Brands Accessories, Inc. (“Borrower”), Wells Fargo HSBC Trade
Bank, N. A. (“Agent”), and the lenders specified therein (“Lenders”), by and
among Borrower, Agent, and Lenders (as amended, the “Credit Agreement”). Terms
which are defined in the Credit Agreement and which are used but not defined
herein shall have the meanings given them in the Credit Agreement. The
undersigned, Mark J. Flaherty, Borrower’s Chief Financial Officer, hereby
certifies in the name, and on behalf, of Borrower that Borrower has made a
thorough inquiry into all matters certified herein and based upon such inquiry,
experience, and the advice of counsel, does hereby further certify that:
     1. All representations and warranties made by Borrower in any Loan Document
delivered on or before the date hereof (including, without limitation, the
representations and warranties contained in Section 4 of the Fourth Amendment to
Credit Agreement of even date herewith [“Fourth Amendment]) are true in all
material respects on and as of the date hereof (except to the extent that such
representations and warranties related solely to an earlier date and except to
the extent that the facts upon which such representations are based have been
changed by the transactions contemplated in the Credit Agreement) as if such
representations and warranties had been made as of the date hereof.
     2. After giving effect to the Fourth Amendment no Event of Default exists
on the date hereof.
     3. Borrower has performed and complied with all agreements and conditions
required in the Loan Documents to be performed or complied with by it on or
prior to the date hereof.
     IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
the date first above written.

                  TANDY BRANDS ACCESSORIES, INC.    
 
           
 
  By:
Name:              / s/ Mark J. Flaherty
 
           Mark J. Flaherty    
 
  Title:              Chief Financial Officer    

Tandy Brands Accessories, Inc. — Fourth Amendment