Summary of SPY INC. - Yahoo! Finance

Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or

Item 1.01. Entry into a Material Definitive Agreement

On August 2, 2012, our wholly owned subsidiary, Spy Optic Inc., a California corporation ("SPY North America") entered into an amendment and restatement of
(1) the Amended and Restated $7.0 million Promissory Note issued on December 23, 2011 (the "Costa Brava Term Note") to Costa Brava Partnership III, L.P. ("Costa Brava"), and (2) the Second Amended and Restated $7.0 million Promissory Note issued on June 28, 2012 (the "Costa Brava Line of Credit Note") to Costa Brava. Costa Brava beneficially owns approximately 48.6%, or 52.3% on an as converted basis, of our common stock as of August 1, 2012. Mr. Seth Hamot, Chairman of our Board of Directors of SPY Inc., is the President and sole member of the sole general partner of Costa Brava.

The terms of the Costa Brava Term Note as amended and restated on August 2, 2012 differ from the previous terms of the Costa Brava Term Note in the following material respect:
- the Costa Brava Term Note matures on April 1, 2014 instead of June 21, 2013.

The terms of the Costa Brava Line of Credit Note as amended and restated on August 2, 2013 differ from the previous terms of the Costa Brava Line of Credit Note in the following material respects:
- the Costa Brava Line of Credit Note matures on April 1, 2014 instead of June 21, 2013;
- the principal amount of the Costa Brava Line of Credit Note was increased by $3 million, from $7 million to $10 million, excluding unpaid interest added to principal balance ("PIK Interest")since January 1, 2012;
- SPY North America is obligated repay up to $4.0 million of its indebtedness under the Costa Brava Line of Credit Note to Costa Brava, at the election of Costa Brava, in the event that we complete an equity financing of $4.0 million or more. Any amount so repaid will reduce dollar-for-dollar Costa Brava's commitment to make advances under the Costa Brava Line of Credit Note.

Both the Costa Brava Term Note and the Costa Brava Line of Credit Note are subordinated to the amounts borrowed by SPY North America under its loan and security agreement with BFI Business Finance ("BFI") pursuant to the terms of a debt subordination agreement between Costa Brava and BFI. Other than described above, the terms and conditions of the Costa Brava Term Note and the Costa Brava Line of Credit Note as amended and restated on August 2, 2012 are otherwise generally similar to the terms and conditions of such notes prior to such amendment and restatement. SPY North America has borrowed $8 million under the Costa Brava Line of Credit Note as of August 8, 2012, excluding PIK Interest.

The foregoing summary of the terms of the promissory notes with Costa Brava are qualified in their entirety by reference to the promissory notes, copies of which are attached as Exhibits 10.1 and 10.2 and incorporated herein by reference.