EXHIBIT 4.10
SECOND AMENDMENT TO
SECOND RESTATED LOAN AGREEMENT
SECOND AMENDMENT TO
SECOND RESTATED LOAN AGREEMENT
This Second Amendment to Second Restated Loan Agreement ("Amendment") is
entered into and is effective as of March 31, 1996, by and among NATIONSBANK OF
TEXAS, N.A. ("Bank"), THE LEATHER FACTORY, INC., a Delaware corporation
("Borrower"), and THE LEATHER FACTORY, INC., a Texas corporation, and ROBERTS,
CUSHMAN & COMPANY, INC., a New York corporation (together hereinafter referred
to as "Guarantors"). This Amendment amends a Second Restated Loan Agreement
dated as of July 24, 1995, by and among Bank, Borrower and Guarantors, as
amended by a First Amendment to Second Restated Loan Agreement dated as of
December 31, 1995 ("Loan Agreement"), and for purposes of this Amendment, the
capitalized terms used herein shall have the same meaning as assigned to them in
the Loan Agreement, except as otherwise provided herein.
WHEREAS, Borrower is in default under certain financial covenants contained
in the Loan Agreement and Borrower has requested Bank to: (i) forbear exercising
its legal rights arising from the default for a specified period of time; and
(ii) amend the Loan Agreement in certain respects, and Bank has agreed to the
same subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, Borrower, Bank and Guarantors
hereby agree as follows:
1. Existing Defaults. Borrower acknowledges that it is in default of the
Borrowing Base under Section 2D and certain financial covenants under Section 4A
of the Loan Agreement ("Existing Defaults") as follows:
Actual Required
------ --------
Borrowing Base
(Multiple of Net Income) 5.5 3.5
Total Liabilities/
Tangible Net Worth 3.27 2.75
EBITDA Ratio 3.77 2.50
Cash Flow Ratio 0.99 1.50
2. Waiver. The Bank agrees that from the effective date hereof until June
30, 1996 ("Waiver Period"), it will not make demand or institute legal
proceedings to enforce collection of the Loans; provided, however, Bank's
temporary waiver in exercising these rights and remedies will be conditioned
upon there being no other default under the Loan Documents, and in the event any
such default occurs, this Agreement will become null and void and the Bank may
exercise any and all rights and remedies available at law or in equity. At the
end of the Waiver Period, the Bank's waiver of the Existing Defaults will cease,
and Borrower will be subject to compliance with the Borrowing Base set forth in
Section 2D and the financial covenant ratios set forth in Section 4A of the Loan
Agreement, as well as all other terms and provisions of the Loan Documents.
3. Amendments to Loan Documents. The Loan Documents are amended as follows:
(a) Revolving Line Maturity. The maturity of the Revolving Line set forth
in the Promissory Note dated July 24, 1995, in the face amount of
$10,000,000.00, executed by Borrower and payable to the order of Bank,
is extended from March 31, 1997 to June 30, 1997.
(b) Prime Rate Option. Paragraph 2B(i) of the Loan Agreement is hereby
amended to read in its entirety as follows:
2
(i) Prime Rate Option. A rate equal to the Prime Rate established by
Bank from time to time, being the variable rate of interest
announced by Bank from time to time as its general reference rate
of interest charged on similar loans, which rate of interest may
not be the lowest rate of interest charged by the Bank to other
borrowers, plus the "Applicable Percentage" set forth below,
determined based upon Borrower's compliance, as reflected in the
most recent Compliance Certificate, as defined herein, furnished
to Bank of the EBITDA Ratio ("Prime Rate Option"):
Applicable Percentage EBITDA Ratio
--------------------- ------------
0.0 % Under 3.01
0.25% 3.01 to 1.0 - 4.0 to 1.0
0.50% 4.01 to 1.0 and greater
(c) Libor Rate Option. The Applicable Percentages set forth in Paragraph
2B(ii) of the Loan Agreement are hereby amended by adding the
following:
Applicable Percentage EBITDA Ratio
--------------------- ------------
2.50% 2.26 to 1.0 - 3.0 to 1.0
2.75% 3.01 to 1.0 - 4.0 to 1.0
3.0 % 4.01 to 1.0 and greater
4. Waiver Fee. As additional consideration for the Bank's waiver of the
Existing Defaults during the Waiver Period, Borrower will pay the Bank a fee
equal to $10,000.00 simultaneously with the execution of this Agreement.
5. No Waiver. The Bank's waiver of the Existing Defaults will not be
construed as a waiver of the Existing Defaults after the Waiver Period or a
waiver of any other default now existing or hereafter arising under the Loan
Documents, or a waiver of any rights, remedies or recourses available to Bank or
an election of remedies resulting from any default under the Loan Documents.
3
6. Ratification. The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the Loan
Agreement and the other Loan Documents, and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement and
the other Loan Documents are ratified and confirmed and shall continue in full
force and effect. The Loan Agreement and the other Loan Documents, as amended
hereby, shall continue to be legal, valid, binding and enforceable in accordance
with their respective terms.
7. Representations and Warranties. Borrower and Guarantors hereby represent
and warrant to the Bank that: (a) the execution, delivery and performance of
this Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate and/or Articles of
Incorporation or Bylaws of Borrower; (b) the officers executing this Amendment
on behalf of Borrower have been authorized by the Board of Directors to execute
this Amendment and any and all other Loan Documents to be executed and/or
delivered in connection herewith; (c) the representations and warranties
contained in the Loan Agreement, as amended hereby, and the other Loan Documents
are true and correct on and as of the date hereof as though made on and as of
each such date; (d) except for the Existing Defaults, no default under the Loan
Agreement, as amended hereby, has occurred and is continuing; (e) except for the
Existing Defaults, Borrower and Guarantors are in full compliance with all
covenants and agreements contained in the Loan Agreement and the other Loan
Documents, as amended hereby; and (f) Borrower has not amended its Certificate
and/or Articles of Incorporation or its Bylaws since the date of the Loan
Agreement.
4
8. Survival of Representations and Warranties. All representations and
warranties made in the Loan Agreement or any other Loan Documents, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
9. Reference to Loan Agreement. The Loan Agreement and each of the other
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Loan Agreement, as amended hereby, are hereby amended so that
any reference to the Loan Agreement and such other Loan Documents to the Loan
Agreement shall mean a reference to the Loan Agreement as amended hereby.
10. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
11. Successors and Assigns. This Amendment is binding upon and shall inure
to the benefit of the Bank, Borrower and Guarantors, and their respective heirs,
executors, successors and assigns, except that Borrower and Guarantors may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Bank.
12. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
5
13. Headings. The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
14. Governing Law. This Amendment and the rights and obligations of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of Texas and applicable United States federal law, and is performable by
Borrower and Guarantors in the county or city of Bank's address set out in the
Loan Agreement, and they expressly waive any objection as to venue in such
location.
15. NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT, AND THE OTHER LOAN
DOCUMENTS SPECIFICALLY REFERENCED HEREIN, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.
BANK:
NATIONSBANK OF TEXAS, N.A.
By:/s/ Eric Kosmin
----------------
ERIC KOSMIN, Vice President
BORROWER:
THE LEATHER FACTORY, INC., a Delaware
corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
6
GUARANTORS:
THE LEATHER FACTORY, INC., a Texas
corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
ROBERTS, CUSHMAN & COMPANY, INC., a
New York corporation
By:/s/ John Tittle, Jr.
--------------------
JOHN TITTLE, JR., Chief Financial
Officer and Treasurer
7