SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 3, 2003
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The Leather Factory, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-12368 75-2543540
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(Commission File Number) (IRS Employer Identification Number)
3847 East Loop 820 South, Fort Worth, Texas 76119
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(Address of Principal Executive Offices) (Zip Code)
(817) 496-4414
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(Registrant's Telephone Number, Including Area Code)
_________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS
On November 3, 2003, The Leather Factory, Inc. and its subsidiaries
(collectively referred to here as the "Company") entered into a Credit Agreement
(the "Credit Agreement") with Wells Fargo Bank Texas, N. A. (the "Lender"),
pursuant to which the Lender agreed to provide a credit facility of up to
$6,000,000 in debt (the "Debt Facility"). The Debt Facility has a two-year term
and is secured by all of the assets of the Company.
Proceeds of the closing of the Debt Facility in the amount of $2,057,984 were
used to pay all amounts due and owing by the Company pursuant to the Amended and
Restated Credit and Security Agreement by and between the Company and Wells
Fargo Bank Minnesota, N. A. ("WFB-MN"). The Company's revolving line of credit
with WFB-MN in the principal amount of $2,054,549 was satisfied in its entirety.
Moreover, at closing, the Company paid $3,435 to WFB-MN for accrued interest and
fees. The principal terms and conditions of the Debt Facility are described
below.
The Company is required to pay an annual fee equal to 0.35% annually of the
average undrawn balance of this line of credit. In an effort to reduce these
fees, the Company elected to reduce the maximum amount of this line of credit to
$6.0 million, instead of $7.5 million provided in the prior credit agreement.
The Company believes that its liquidity resources will be adequate and this
additional amount of credit is not needed.
Amounts drawn under the Credit Agreement accrue interest at the base (or
"prime") rate of interest less 0.5% announced daily by Wells Fargo Bank, N.A. in
San Francisco, California, although the Company may elect to have advances
accrue interest at the London interbank eurodollar market rate for U.S. dollars
(commonly know as "LIBOR") plus 2.00%.
The Credit Agreement contains covenants by the Company that it's Debt Service
Coverage Ratio will not be less than 1.5 to 1.0 as of each fiscal year end.
Increases in the Company's consolidated stockholders' equity are also required.
Capital expenditures are limited to $500,000 annually. Other covenants by the
Company are also contained in the Credit Agreement.
The Credit Agreement is secured by substantially all of the Company's assets.
A copy of the Credit Agreement is attached as an exhibit to this report. See
Item 7.
This Item 5 contains forward-looking statements including statements about
the Registrant's need for additional sources of liquidity. Unforeseen events,
such as unanticipated requirements for liquid assets could cause these
forward-looking statements to be incorrect. See the Registrant's Form 10-K for
2002 for additional information about forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The Registrant files the following exhibits as material contracts:
10.1 Credit Agreement, dated as of November 3, 2003, made by and among The
Leather Factory, Inc., a Delaware corporation; Roberts, Cushman &
Company, Inc., a New York corporation; Hi-Line Leather & Manufacturing
Company, a California corporation, The Leather Factory of Nevada
Investments, Inc., a Nevada corporation, The Leather Factory, Inc., a
Nevada corporation; The Leather Factory, L.P., a Texas limited
partnership; The Leather Factory, Inc., an Arizona corporation; Tandy
Leather Company Investments, Inc., a Nevada corporation; Tandy Leather
Company, Inc., a Nevada corporation; Tandy Leather Company, L.P., a
Texas limited partnership; and Wells Fargo Bank Texas, National
Association,.
10.2 Revolving Line of Credit Note, dated November 3, 2003, in the
principal amount of up to $6,000,000.00 given by The Leather Factory,
Inc., a Delaware corporation; Roberts, Cushman & Company, Inc., a New
York corporation; Hi-Line Leather & Manufacturing Company, a
California corporation, The Leather Factory of Nevada Investments,
Inc., a Nevada corporation, The Leather Factory, Inc., a Nevada
corporation; The Leather Factory, L.P., a Texas limited partnership;
The Leather Factory, Inc., an Arizona corporation; Tandy Leather
Company Investments, Inc., a Nevada corporation; Tandy Leather
Company, Inc., a Nevada corporation; Tandy Leather Company, L.P., a
Texas limited partnership, as borrowers, payable to the order of Wells
Fargo Bank Texas, National Association.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
THE LEATHER FACTORY, INC.
BY: /s/ Wray Thompson
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Wray Thompson, Chairman of the Board
and Chief Executive Officer
Date: November 7, 2003
Exhibit 10.1
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of November 3, 2003, by and between THE
LEATHER FACTORY, INC., a Delaware corporation, ROBERTS, CUSHMAN & COMPANY, INC.,
a New York corporation, HI-LINE LEATHER & MANUFACTURING COMPANY, a California
corporation, THE LEATHER FACTORY OF NEVADA INVESTMENTS, INC., a Nevada
corporation, THE LEATHER FACTORY, INC., a Nevada corporation, THE LEATHER
FACTORY, L.P., a Texas limited partnership, THE LEATHER FACTORY, INC., an
Arizona corporation, TANDY LEATHER COMPANY INVESTMENTS, INC., a Nevada
corporation, TANDY LEATHER COMPANY, INC., a Nevada corporation, TANDY LEATHER
COMPANY, L.P., a Texas limited partnership (collectively and individually
referred to herein as "Borrower"), and WELLS FARGO BANK TEXAS, NATIONAL
ASSOCIATION ("Bank"). Each reference herein to "Borrower" shall mean each and
every party, collectively and individually, defined above as a Borrower.
RECITALS
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Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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CREDIT TERMS
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SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including November 3, 2005, not to exceed at any time the aggregate
principal amount of Six Million Dollars ($6,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit "A"
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of eighty percent (80%) of Borrower's eligible accounts
receivable, plus fifty percent (50%) of the value of Borrower's eligible
inventory (exclusive of work in process and inventory which is obsolete,
unsaleable or damaged), with value defined as the lower of cost or market value;
provided however, that outstanding borrowings against inventory shall not at any
time exceed an aggregate of Five Million Dollars ($5,000,000.00). All of the
foregoing shall be determined by Bank upon receipt and review of all collateral
reports required hereunder and such other documents and collateral information
as Bank may from time to time require. Borrower acknowledges that said
borrowing base was established by Bank with the understanding that, among other
items, the aggregate of all returns, rebates, discounts, credits and allowances
for the immediately preceding three (3) months at all times shall be less than
five percent (5%) of Borrower's gross sales for said period. If such dilution
of Borrower's accounts for the immediately preceding three (3) months at any
time exceeds five percent (5%) of Borrower's gross sales for said period, or if
there at any time exists any other matters, events, conditions or contingencies
which Bank reasonably believes may affect payment of any portion of Borrower's
accounts, Bank, in its sole discretion, may reduce the foregoing advance rate
against eligible accounts receivable to a percentage appropriate to reflect such
additional dilution and/or establish additional reserves against Borrower's
eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is more than ninety (90) days past due;
(ii) that portion of any account for which there exists any right of
setoff, defense or discount (except regular discounts allowed in the ordinary
course of business to promote prompt payment) or for which any defense or
counterclaim has been asserted;
(iii) any account which represents an obligation of any state or
municipal government or of the United States government or any political
subdivision thereof (except accounts which represent obligations of the United
States government and for which the assignment provisions of the Federal
Assignment of Claims Act, as amended or recodified from time to time, have been
complied with to Bank's satisfaction);
(iv) any account which represents an obligation of an account debtor
located in a foreign country other than an account debtor located in the
Canadian provinces of Alberta, British Columbia, Manitoba, Ontario, Saskatchewan
or the Yukon Territory so long as, in Bank's determination, such Canadian
jurisdictions recognize Bank's first priority security interest in and right to
collect such account as a consequence of any security agreements and UCC filings
in favor of Bank, except to the extent any such account, in Bank's
determination, is supported by a letter of credit or insured under a policy of
foreign credit insurance, in each case in form, substance and issued by a party
acceptable to Bank;
(v) any account which arises from the sale or lease to or performance
of services for, or represents an obligation of, an employee, affiliate,
partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account, which represents interim or progress
billings or retention rights on the part of the account debtor;
(vii) any account which represents an obligation of any account debtor
when twenty percent (20%) or more of Borrower's accounts from such account
debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor which
represents the amount by which Borrower's total accounts from said account
debtor exceeds twenty-five percent (25%) of Borrower's total accounts;
(ix) any account deemed ineligible by Bank when Bank, in its sole
discretion, deems the creditworthiness or financial condition of the account
debtor, or the industry in which the account debtor is engaged, to be
unsatisfactory.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of each credit
subject hereto shall bear interest at the rate of interest set forth in each
promissory note or other instrument or document executed in connection
therewith.
(b) Computation and Payment. Interest shall be computed on the basis
of a 360-day year, actual days elapsed, unless such calculation would result in
a usurious rate, in which case interest shall be computed on the basis of a
365/366-day year, as the case may be, actual days elapsed. Interest shall be
payable at the times and place set forth in each promissory note or other
instrument or document required hereby.
(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
thirty-five hundredths percent (.35%) per annum (computed on the basis of a
360-day year, actual days elapsed) on the average daily unused amount of the
Line of Credit, which fee shall be calculated on a quarterly basis by Bank and
shall be due and payable by Borrower in arrears on each December 15, March 15,
June 15 and September 15.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all interest and fees due under each credit subject hereto by charging
Borrower's deposit account number XXXXXXXXXX with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.4. COLLATERAL; RENEWAL NOTE; ASSIGNMENT OF SECURITY
INTERESTS.
The Note has been given in renewal and extension of, and not in
extinguishment of, and is a restatement of, that certain Revolving Note dated
March 20, 2002, in the original amount of $7,500,000, executed by each Borrower,
payable to the order of Wells Fargo Bank Minnesota, National Association ("Prior
Note"), which note was assigned and transferred to Bank, along with the liens
and security interests securing same, created by or described in that certain
Amended and Restated Credit and Security Agreement dated March 20, 2002,
executed by Borrower (the "Prior Security Agreement") and any other applicable
security agreements. Borrower, and each of them, hereby affirm and ratify the
Prior Security Agreement, agreeing that it secures the Note and all other
indebtedness and obligations of each Borrower to Bank, and agreeing that it is
and remains valid and enforceable in all respects. Borrower, and each of them,
acknowledge and agree that (i) the Prior Security Agreement granted a security
interest in all of Borrower's accounts and other rights to payment, general
intangibles, inventory and equipment to secure such indebtedness, and that such
security interests have been assigned to Bank. As security for all indebtedness
of each Borrower to Bank, Borrower, and each of them, have granted, and hereby
grant to Bank, security interests of first priority in each such Borrower's
accounts receivable and other rights to payment, general intangibles, inventory
and equipment. Each Borrower agrees to execute additional or supplementary
security agreements, financing statements and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately upon demand for all costs and expenses incurred
by Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees and costs of appraisals, audits and
insurance.
SECTION 1.5. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed by, The Leather Factory of Canada Ltd., a Manitoba corporation, as
evidenced by and subject to the terms of guaranties in form and substance
satisfactory to Bank.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. The Leather Factory, Inc. is a corporation,
duly organized and existing and in good standing under the laws of the State of
Delaware, Roberts, Cushman & Company, Inc. is a corporation, duly organized and
existing and in good standing under the laws of the State of New York, Hi-Line
Leather & Manufacturing Company is a corporation, duly organized and existing
and in good standing under the laws of the State of California, The Leather
Factory of Nevada Investments, Inc. is a corporation, duly organized and
existing and in good standing under the laws of the State of Nevada, The Leather
Factory, Inc. is a corporation, duly organized and existing and in good standing
under the laws of the State of Nevada, The Leather Factory, L.P. is a limited
partnership, duly organized and existing and in good standing under the laws of
the State of Texas, The Leather Factory, Inc. is a corporation, duly organized
and existing and in good standing under the laws of the State of Arizona, Tandy
Leather Company Investments, Inc. is a corporation, duly organized and existing
and in good standing under the laws of the State of Nevada, Tandy Leather
Company, Inc. is a corporation, duly organized and existing and in good standing
under the laws of the State of Nevada, Tandy Leather Company, L.P. is a limited
partnership, duly organized and existing and in good standing under the laws of
the State of Texas, and are qualified or licensed to do business (and are in
good standing as a foreign corporation, if applicable) in all jurisdictions in
which such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws, or Partnership Agreements of Borrower, or result in any breach of or
default under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The consolidated
financial statements of Borrower dated September 30, 2003, a true copy of which
has been delivered by Borrower to Bank prior to the date hereof, (a) is complete
and correct and presents fairly the financial condition of Borrower, (b)
discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of such financial statement there has been no material adverse
change in the financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its
assets or properties except in favor of Bank or as otherwise permitted by Bank
in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower
to Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other instrument or
document required hereby.
(ii) Billing Invoice.
(iii) Certificate of Incumbency (8).
(iv) Corporate Resolution: Third Party Collateral (8).
(v) Corporate Resolution: Borrowing (8).
(vi) Exhibit "A" to UCC Financing Statement (2).
(vii) Partnership, Joint Venture or Association Certificate: Borrowing (2)
(viii) Partnership, Joint Venture or Association Certificate:
Third Party Collateral (2).
(ix) Continuing Security Agreement Rights to Payment & Inventory.
(x) Security Agreement Equipment.
(xi) Third Party Security Agreement Equipment.
(xii) Third Party Security Agreement Rights to Payment & Inventory.
(xiii) Insurance Letter.
(xiv) Amended and Restated Guaranty (The Leather Factory of Canada Ltd.,
a Manitoba corporation).
(xv) Certificate of Secretary (The Leather Factory of Canada Ltd., a
Manitoba corporation).
(xvi) Assignment of Indebtedness and Loan Documents.
(xvii) Such other documents as Bank may require under any other Section of
this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower or any such guarantor.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein, and immediately upon demand
by Bank, the amount by which the outstanding principal balance of any credit
subject hereto at any time exceeds any limitation on borrowings applicable
thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records
in accordance with generally accepted accounting principles consistently
applied, and permit any representative of Bank, at any reasonable time, to
inspect, audit and examine such books and records, to make copies of the same,
and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year,
an unqualified audited consolidated financial statement of Borrower, prepared by
certified public accountant acceptable to Bank, to include balance sheet, income
statement, and statement of cash flow;
(b) not later than 30 days after and as of the end of each quarter, a
consolidated financial statement of Borrower, prepared by Borrower, to include
balance sheet, income statement, and statement of cash flow;
(c) not later than 30 days after and as of the end of each month, a
borrowing base certificate, an inventory collateral report, an aged listing of
accounts receivable and accounts payable, and a reconciliation of accounts, and
immediately upon each request from Bank, a list of the names and addresses of
all Borrower's account debtors;
(d) contemporaneously with each quarterly financial statement of
Borrower required hereby, a certificate of the president or chief financial
officer or partner of Borrower that said financial statements are accurate and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default;
(e) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of
any litigation pending or threatened against Borrower.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition on a consolidated basis, as follows using generally accepted
accounting principles consistently applied and used consistently with prior
practices (except to the extent modified by the definitions herein), with
compliance determined quarterly, commencing with Borrower's financial statements
for the period ending December 31, 2003:
(a) Tangible Net Worth must equal Tangible Net Worth as of the end of
the immediately preceding fiscal year end plus fifty percent (50%) of year to
date net income, with "Tangible Net Worth" defined as the aggregate of total
stockholders' and partners' equity plus subordinated debt less any intangible
assets.
(b) Debt Service Coverage Ratio not less than 1.5 to 1.0 as of each
fiscal year end, with "EBITDA" defined as net profit before tax plus interest
expense (net of capitalized interest expense), depreciation expense and
amortization expense, and with "Debt Service Coverage Ratio" defined as EBITDA
less dividends divided by the aggregate of total interest expense plus current
maturities of long-term debt and capital leases.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in
fixed assets in any twelve-month period in excess of an aggregate of
$500,000.00.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) in any twelve-month period in excess of an
aggregate of $100,000.00.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business except Borrower may
purchase assets of small independent leather craft retailers, or of similar
businesses, in an amount up to One Hundred Fifty Thousand Dollars ($150,000.00)
per transaction and up to Five Hundred Thousand Dollars ($500,000.00) in the
aggregate during any fiscal year.
SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, except any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.7. TREASURY STOCK. Redeem, retire, repurchase or otherwise
acquire any shares of any class of Borrower's stock now or hereafter
outstanding.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except any of the foregoing in favor of
Bank or which is existing as of, and disclosed to Bank in writing prior to, the
date hereof, except (a) for purchase money security interest.
ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any guarantor
hereunder or any general partner in Borrower has incurred any debt or other
liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder or any general partner in Borrower; or the recording of any
abstract of judgment against Borrower or any guarantor hereunder or any general
partner in Borrower in any county in which Borrower or such guarantor or such
general partner has an interest in real property; or the service of a notice of
levy and/or of a writ of attachment or execution, or other like process, against
the assets of Borrower or any guarantor hereunder or any general partner in
Borrower; or the entry of a judgment against Borrower or any guarantor hereunder
or any general partner in Borrower.
(f) Borrower or any guarantor hereunder or any general partner in
Borrower shall become insolvent, or shall suffer or consent to or apply for the
appointment of a receiver, trustee, custodian or liquidator of itself or any of
its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower or any
guarantor hereunder or any general partner in Borrower shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to
time ("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any guarantor hereunder or any general
partner in Borrower, or Borrower or any such guarantor or any such general
partner shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any such
guarantor or any such general partner shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower or any such guarantor or any
such general partner by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower or any guarantor
hereunder or any general partner in Borrower; or Borrower or any such guarantor
or any such general partner, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such guarantor or such general partner. The withdrawal from Borrower of any
general partner.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower.
The resignation or expulsion during the term of this Agreement of any one or
more of the general partners in Borrower with an aggregate ownership interest in
Borrower of twenty-five percent (25%) or more.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default:
(a) all principal and accrued and unpaid interest outstanding under each of the
Loan Documents, any term thereof to the contrary notwithstanding, shall at
Bank's option and without notice become immediately due and payable without
presentment, demand, or any notices of any kind, including without limitation
notice of nonperformance, notice of protest, protest, notice of dishonor, notice
of intention to accelerate or notice of acceleration, all of which are hereby
expressly waived by each Borrower; (b) the obligation, if any, of Bank to extend
any further credit under any of the Loan Documents shall immediately cease and
terminate; and (c) Bank shall have all rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including without
limitation the right to resort to any or all security for any credit subject
hereto and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and remedies of Bank may
be exercised at any time by Bank and from time to time after the occurrence of
an Event of Default, are cumulative and not exclusive, and shall be in addition
to any other rights, powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and 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 each party at the following
address:
BORROWER: THE LEATHER FACTORY, INC., ET AL
3847 East Loop 820 South
Fort Worth, TX 76119
CC WHEN IN DEFAULT
OF THIS AGREEMENT: William M. Warren
Loe Warren Rosenfield Kaitcer & Hibbs PC
PO Box 100609
Fort Worth, TX 76185-0609
BANK: WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION
505 Main Street, 3rd Floor
Fort Worth, TX 76102
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay
to Bank immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of Bank's in-house counsel to the
extent permissible), expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Bank's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights
and/or the collection of any amounts which become due to Bank under any of the
Loan Documents, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank
may disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder.
SECTION 7.5. AMENDMENT. This Agreement may be amended or modified only
in writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action-
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
SECTION 7.11. SAVINGS CLAUSE. It is the intention of the parties to
comply strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "Maximum Rate"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with any Loan Documents, or in any communication by Bank
or any other person to Borrower or any other person, or in the event that all or
part of the principal or interest hereof or thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved or received on the amount of principal actually outstanding from time
to time under the Loan Documents shall exceed the Maximum Rate, then in such
event it is agreed that: (a) the provisions of this paragraph shall govern and
control; (b) neither Borrower nor any other person or entity now or hereafter
liable for the payment of any Loan Documents shall be obligated to pay the
amount of such interest to the extent it is in excess of the Maximum Rate; (c)
any such excess interest which is or has been received by Bank, notwithstanding
this paragraph, shall be credited against the then unpaid principal balance
hereof or thereof, or if any of the Loan Documents has been or would be paid in
full by such credit, refunded to Borrower; and (d) the provisions of each of the
Loan Documents, and any other communication to Borrower, shall immediately be
deemed reformed and such excess interest reduced, without the necessity of
executing any other document, to the Maximum Rate. The right to accelerate the
maturity of the Loan Documents does not include the right to accelerate, collect
or charge unearned interest, but only such interest that has otherwise accrued
as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with any of the Loan Documents which are made for the
purpose of determining whether such rate exceeds the Maximum Rate shall be made
to the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of such Loan Documents,
including all prior and subsequent renewals and extensions hereof or thereof,
all interest at any time contracted for, charged, taken, reserved or received by
Bank. The terms of this paragraph shall be deemed to be incorporated into each
of the other Loan Documents.
To the extent that either Chapter 303 or 306, or both, of the Texas Finance
Code apply in determining the Maximum Rate, Bank hereby elects to determine the
applicable rate ceiling by using the weekly ceiling from time to time in effect,
subject to Bank's right subsequently to change such method in accordance with
applicable law, as the same may be amended or modified from time to time.
SECTION 7.12. RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any
time and from time to time, without notice, which is hereby expressly waived by
each Borrower, and whether or not Bank shall have declared any credit subject
hereto to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower's obligations
and liabilities under the Loan Documents (whether matured or unmatured, fixed or
contingent, liquidated or unliquidated), any and all amounts owing by Bank to
Borrower (whether payable in U.S. dollars or any other currency, whether matured
or unmatured, and in the case of deposits, whether general or special (except
trust and escrow accounts), time or demand and however evidenced), and (b)
pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as Bank, in its sole discretion, may elect. Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank and with any other financial institution to secure the payment of all
obligations and liabilities of Borrower to Bank under the Loan Documents.
SECTION 7.13. BUSINESS PURPOSE. Borrower represents and warrants that
each credit subject hereto is for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal, family
or household use.
SECTION 7.14. AMENDMENT OF PRIOR CREDIT AGREEMENT. This Agreement
amends and supplements that certain Amended and Restated Credit and Security
Agreement dated March 20, 2002, executed by Borrower (referred to above as the
"Prior Security Agreement", and referred to herein as the "Prior Credit
Agreement"), which was executed in connection with the Prior Note. Articles II
(Amount and Terms of the Credit Facility), IV (Conditions of Lending), VI
(Covenants) and VII (Events of Default, Rights and Remedies) of the Prior Credit
Agreement are replaced and superceded by the terms of this Agreement and the
Note in their entirety. The balance of the Prior Credit Agreement shall remain
effective to the extent it does not conflict with the terms and provisions of
this Agreement or the Note.
SECTION 7.15 RELEASE. Each Borrower, and the Guarantor by signing the
Acknowledgment and Agreement of Guarantor set forth below, hereby absolutely and
unconditionally release and forever discharge Wells Fargo Bank Minnesota,
National Association, Wells Fargo Business Credit, Inc., and any participants,
and any and all parent, affiliate and subsidiary corporations or organizations,
and their successors and assigns, together with all present and former
directors, officers, agents and employees of any of the foregoing, from any and
all claims , demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or
federal law or otherwise, which a Borrower or Guarantor has had, now has or has
made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Agreement, whether such claims, demands and
causes of action are matured or unmatured, known or unknown.
SECTION 7.16. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by any party,
to submit to binding arbitration all claims, disputes and controversies between
or among them (and their respective employees, officers, directors, attorneys,
and other agents), whether in tort, contract or otherwise arising out of or
relating to in any way (i) the loan and related Loan Documents which are the
subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Texas selected by the American Arbitration Association ("AAA"); (ii)
be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. 91 or any
similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding
in which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly
limited to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of any
dispute arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the
parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH 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 RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK TEXAS,
THE LEATHER FACTORY, INC., NATIONAL ASSOCIATION
a Delaware corporation
By: /s/ Luis F. Ramirez
----------------------
By: /s/ Wray Thompson Luis F. Ramirez
--------------------- Relationship Manager
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, INC.,
a Nevada corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
HI-LINE LEATHER & MANUFACTURING COMPANY,
a California corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
ROBERTS, CUSHMAN & COMPANY, INC.,
a New York corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY, INC.,
a Nevada corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY, L.P.,
a Texas limited partnership
By: Tandy Leather Company, Inc.,
a Nevada corporation, General Partner
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, INC.,
an Arizona corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, L.P.,
a Texas limited partnership
By: The Leather Factory, Inc.,
a Nevada corporation, General Partner
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY OF NEVADA INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
SEE FOLLOWING PAGE FOR ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of The Leather Factory,
Inc., a Delaware corporation, Roberts, Cushman & Company, Inc., a New York
corporation, The Leather Factory, Inc., a Nevada corporation, The Leather
Factory Of Nevada Investments Inc., Tandy Leather Company, Inc., a Nevada
corporation, Tandy Leather Company Investments, Inc., a Nevada corporation, The
Leather Factory, L.P., a Texas limited partnership, Tandy Leather Company, L.P.,
a Texas limited partnership, Hi-Line Leather & Manufacturing Company, a
California corporation, and The Leather Factory, Inc., an Arizona corporation,
to Wells Fargo Bank Texas, National Association pursuant to an Amended and
Restated Guaranty of even date herewith, hereby (i) acknowledges receipt of a
copy of the foregoing Credit Agreement (the "Credit Agreement") and (ii)
consents to the terms (including without limitation the release set forth in
Section 7.15 of the Credit Agreement) and execution thereof.
Dated: November 3, 2003.
THE LEATHER FACTORY OF CANADA, LTD.
By: /s/ Wray Thompson
---------------------
Wray Thompson
Chief Executive Officer
EXHIBIT 10.2
REVOLVING LINE OF CREDIT NOTE
$6,000,000.00 Fort Worth, Texas
November 3, 2003
FOR VALUE RECEIVED, the undersigned THE LEATHER FACTORY, INC., a Delaware
corporation, ROBERTS, CUSHMAN & COMPANY, INC., a New York corporation, HI-LINE
LEATHER & MANUFACTURING COMPANY, a California corporation, THE LEATHER FACTORY
OF NEVADA INVESTMENTS, INC., a Nevada corporation, THE LEATHER FACTORY, INC., a
Nevada corporation, THE LEATHER FACTORY, L.P., a Texas limited partnership, THE
LEATHER FACTORY, INC., an Arizona corporation, TANDY LEATHER COMPANY
INVESTMENTS, INC., a Nevada corporation, TANDY LEATHER COMPANY, INC., a Nevada
corporation, and TANDY LEATHER COMPANY, L.P., a Texas limited partnership
(collectively and individually referred to herein as "Borrower") promise to pay
to the order of WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION ("Bank") at its
office at Fort Worth RCBO, 505 Main Street, Suite #300, Fort Worth, TX 76102, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Six Million Dollars ($6,000,000.00), or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 30 days, as designated by Borrower, during which all or a portion
of the outstanding principal balance of this Note bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may be selected for
a principal amount less than Five Hundred Thousand Dollars ($500,000.00); and
provided further, that no Fixed Rate Term shall extend beyond the scheduled
maturity date hereof. If any Fixed Rate Term would end on a day which is not a
Business Day, then such Fixed Rate Term shall be extended to the next succeeding
Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
Base LIBOR
LIBOR = -------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed,
unless such calculation would result in a usurious rate, in which case interest
shall be computed on the basis of a 365/366-day year, as the case may be, actual
days elapsed) at the lesser of (i) either (A) a fluctuating rate per annum .50%
below the Prime Rate in effect from time to time, or (B) a fixed rate per annum
determined by Bank to be 2.0% above LIBOR in effect on the first day of the
applicable Fixed Rate Term, or (ii) the Maximum Rate. When interest is
determined in relation to the Prime Rate, each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Bank. With respect to each LIBOR selection hereunder, Bank is hereby
authorized to note the date, principal amount, interest rate and Fixed Rate Term
applicable thereto and any payments made thereon on Bank's books and records
(either manually or by electronic entry) and/or on any schedule attached to this
Note, which notations shall be prima facie evidence of the accuracy of the
information noted.
(b) Selection of Interest Rate Options. At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.
(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be
payable on the 1st day of each month, commencing December 1, 2003.
(e) Default Interest. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on November 3, 2005.
(b) Advances. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) Wray Thompson or Ronald C. Morgan or Shannon L. Greene, any one acting
alone, who are authorized to request advances and direct the disposition of any
advances until written notice of the revocation of such authority is received by
the holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any deposit account of any Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of each Borrower regardless of the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Prime Rate at any time,
in any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto, Borrower shall pay to Bank immediately upon demand a fee which is the
sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:
(i) Determine the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to such amount had
it remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount prepaid for
the remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of November 3,
2003, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this Note.
RENEWAL NOTE:
This Note is given in renewal and extension of, and not in extinguishment
of, and is a restatement of, that certain Revolving Note dated March 20, 2002,
in the original amount of $7,500,000, executed by each Borrower, payable to the
order of Wells Fargo Bank Minnesota, National Association ("Prior Note"), which
note was assigned and transferred to Bank, along with the liens and security
interests securing same, created by or described in that certain Amended and
Restated Credit and Security Agreement dated March 20, 2002, executed by
Borrower (the "Prior Security Agreement") and any other applicable security
agreements. Borrower, and each of them, hereby affirm and ratify (i) the Prior
Note, as amended by this Note, and (ii) the Prior Security Agreement, agreeing
that the Prior Security Agreement secures this Note and all other indebtedness
and obligations of each Borrower to Bank, and is and remains valid and
enforceable in all respects.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) Savings Clause. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity
of this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas Finance
Code apply in determining the Maximum Rate, Bank hereby elects to determine the
applicable rate ceiling by using the weekly ceiling from time to time in effect,
subject to Bank's right subsequently to change such method in accordance with
applicable law, as the same may be amended or modified from time to time.
(e) Right of Setoff; Deposit Accounts. Upon and after the occurrence
of an Event of Default, (i) Borrower hereby authorizes Bank, at any time and
from time to time, without notice, which is hereby expressly waived by Borrower,
and whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in
all deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
(f) Business Purpose. Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment, agricultural
or other similar purpose and not primarily for a personal, family or household
use.
(g) Certain Tri-Party Accounts. Borrower and Bank agree that Chapter
346 of the Texas Finance Code (which regulates certain revolving credit accounts
and revolving triparty accounts) shall not apply to any revolving loan accounts
created under this Note or maintained in connection herewith.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
EVIDENCED HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH 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 RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
THE LEATHER FACTORY, INC.,
a Delaware corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, INC.,
a Nevada corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
HI-LINE LEATHER & MANUFACTURING COMPANY,
a California corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
ROBERTS, CUSHMAN & COMPANY, INC.,
a New York corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY, INC.,
a Nevada corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
TANDY LEATHER COMPANY, L.P.,
a Texas limited partnership
By: Tandy Leather Company, Inc.,
a Nevada corporation, General Partner
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, INC.,
an Arizona corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY, L.P.,
a Texas limited partnership
By: The Leather Factory, Inc.,
a Nevada corporation, General Partner
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer
THE LEATHER FACTORY OF NEVADA INVESTMENTS, INC.,
a Nevada corporation
By: /s/ Wray Thompson
-------------------
Wray Thompson
Chief Executive Officer