EXHIBIT 4.1
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of February 7, 2001, is made by and among The
Leather Factory, Inc., a Delaware corporation, The Leather Factory, Inc., a
Texas corporation, The Leather Factory, Inc., an Arizona corporation, Roberts,
Cushman & Company, Inc., a New York corporation, Hi-Line Leather & Manufacturing
Company, a California corporation, and Leather Tan Acquisition, Inc., a Texas
corporation (collectively, the "Borrowers") and Wells Fargo Business Credit,
Inc., a Minnesota corporation (the "Lender").
Recitals
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The Borrowers and the Lender have entered into a Credit and Security
Agreement dated as of November 22, 1999, and a First Amendment to Credit and
Security Agreement dated as of November 30, 2000 (as so supplemented and
amended, the "Credit Agreement").
The Borrowers have requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
ACCORDINGLY, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as
defined therein, unless otherwise defined herein. In addition,
Section 1.1 of the Credit agreement is amended by adding or
amending, as the case may be, the following definitions:
"'Borrowing Base' means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 85% of Eligible Accounts, plus
(ii) the lesser of (A) the Eligible Inventory Advance Rate
times Eligible Inventory or (B) the Eligible Inventory
Cap, plus
(iii) the Special Accommodation Component."
"'Default Rate' means, with respect to the Revolving Advances other than
Special Accommodation Advances, an annual rate equal to three percent (3%) over
the Revolving Floating Rate, which rate shall change when and as the Revolving
Floating Rate changes, with respect to the Term Advances, an annual rate equal
to three percent (3%) over the Term Floating Rate, which rate shall change when
and as the Term Floating Rate changes, and with respect to the Special
Accommodation Advances, an annual rate equal to three percent (3%) over the
Special Accommodation Floating Rate, which rate shall change when and as the
Special Accommodation Floating Rate changes."
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"'Special Accommodation Advances' means the portion of the outstanding
Revolving Advances that is less than or equal to the Special Accommodation
Component."
"'Special Accommodation Component' means during each month listed below,
the amount set forth across from it:
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Month Amount
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February 2001 $300,000
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March 2001 $250,000
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April 2001 $200,000
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May 2001 $150,000
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June 2001 $100,000
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July 2001 $50,000
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August 1, 2001 and thereafter $0"
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"'Special Accommodation Floating Rate' means an annual rate equal to the
sum of the Prime Rate plus one and one half percent (1.5%), which annual rate
shall change when and as the Prime Rate changes."
2. Revolving Note. Section 2.9(a) of the Credit Agreement is hereby
amended to read as follows:
"(a) Revolving Note. Except as set forth in Sections 2.9(d)
and 2.9(f), the portion of the outstanding Revolving Advances that
is not a Special Accommodation Advance shall bear interest at the
Revolving Floating Rate and the Special Accommodation Advances
shall bear interest at the Special Accommodation Floating Rate."
3. No Waiver of Default. The execution and delivery of this Amendment
does not constitute a waiver of any Event of Default and the
Lender reserves the right to enforce its rights and remedies
provided in the Credit Agreement including its right to charge
interest at the Default Rate from the beginning of the Default
Period.
4. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall
remain in full force and effect and shall apply to any advance or
letter of credit thereunder.
5. Fee. The Borrowers shall pay to the Lender a fully earned and
non-refundable fee of $3,000 due and payable upon the execution of
this Amendment.
6. Conditions Precedent. This Amendment shall be effective when the
Lender shall have received an executed original hereof, together
with each of the following, each in substance and form acceptable
to the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Guarantors set forth
at the end of this Amendment, duly executed by each
Guarantor.
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(b) A certificate of the Secretary of the Borrowers certifying
as to (i) the resolutions of the boards of directors of the
Borrowers approving the execution and delivery of this
Amendment, (ii) the fact that the articles of incorporation
and bylaws of the Borrowers, which were previously
certified and delivered to the Lender pursuant to the
Certificates of Authority of the Borrowers' secretary or
assistance secretary each dated as of November 22, 1999,
continue in full force and effect and have not been amended
or otherwise modified except as set forth in the
Certificate to be delivered, and (iii) certifying that the
officers and agents of the Borrowers who have been
certified to the Lender, pursuant to the Certificates of
Authority of the Borrowers' secretary or assistance
secretary each dated as of November 22, 1999, as being
authorized to sign and to act on behalf of the Borrowers
continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of the
Borrowers authorized to execute and deliver this Amendment
and all other documents, agreements and certificates on
behalf of the Borrowers.
(c) Payment of the fee as described in paragraph 5 hereof.
(d) Such other matters as the Lender may require.
7. Representations and Warranties. The Borrowers hereby represent and
warrant to the Lender as follows:
(a) The Borrowers have all requisite power and authority to
execute this Amendment and to perform all of their
obligations hereunder and under the Loan Document and this
Amendment has been duly executed and delivered on behalf of
the Borrowers and constitutes the legal, valid and binding
agreement of the Borrowers, enforceable against them in
accordance with its terms.
(b) The execution, delivery and performance by the Borrowers of
the Amendment has been duly authorized by all necessary
action and does not (i) require any authorization, consent
or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or
foreign (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrowers,
or the organizational agreements applicable to the
Borrowers, or (iii) result in a breach of or constitute a
default under any indenture or credit agreement or any
other agreement, lease or instrument to which any Borrower
is a party or by which any properties of any Borrower may
be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of
the date hereof as though made on and as of such date,
except to the extent that such representations and
warranties relate solely to an earlier date.
8. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as
amended hereby; and any and all references in the Loan Documents
hereto to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
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9. Release. The Borrowers and each Guarantor, by signing the
Acknowledgment and Agreement of Guarantors set forth below, hereby
absolutely and unconditionally release and forever discharge the
Lender, and any and all participants, parent corporations,
subsidiary, affiliated corporations, insurers, indemnitors,
successors and assigns, together with all of the 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 any of the Borrowers or such Guarantor has had,
or 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 Amendment, whether such claims demands and causes of
action are matured or unmatured or known or unknown.
10. Costs and Expenses. The Borrowers hereby reaffirm their agreement
under the Credit Agreement to pay or reimburse the Lender on
demand for all costs and expenses incurred by the Lender in
connection with the Loan Documents and all other documents
contemplated thereby, including without limitation all reasonable
fees and disbursements of legal counsel. Without limiting the
generality of the foregoing, the Borrowers specifically agree to
pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments
incidental hereto. The Borrowers hereby agree that the Lender may,
at any time or from time to time in its sole discretion and
without further authorization by the Borrowers, make a Revolving
Advance to the Borrowers, or apply the proceeds of any loan, for
the purpose of paying any such fees, disbursements, costs and
expenses.
11. Counterparts. This Amendment and the Acknowledgment and Agreement
of Guarantors may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall
constitute one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
WELLS FARGO BUSINESS CREDIT, INC. THE LEATHER FACTORY, INC., a Delaware
corporation, THE LEATHER FACTORY, INC., an
Arizona corporation, THE LEATHER FACTORY,
By /s/ Thomas Kruger INC., a Texas corporation, ROBERTS,
----------------- CUSHMAN & COMPANY, INC., HI-LINE LEATHER
Thomas Krueger & MANUFACTURING COMPANY, TANDY LEATHER
Its Vice President COMPANY, INC. f/k/a Leather Tan
Acquisition, Inc.
By /s/Wray Thompson
--------------------
Wray Thompson
Its President
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