SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of May 13, 1999, is among THE LEATHER FACTORY, INC., a
Delaware corporation, THE LEATHER FACTORY, INC., a Texas corporation, THE
LEATHER FACTORY, INC., an Arizona corporation, HI-LINE LEATHER & MANUFACTURING
COMPANY, a California corporation and ROBERTS, CUSHMAN & COMPANY, INC., a New
York corporation (hereinafter referred to individually as "Borrower" and
collectively as "Borrowers"), and FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA").
R E C I T A L S
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A. Borrowers and FINOVA are parties to a certain Loan and Security
Agreement dated as of November 21, 1997, as amended by that certain Amendment to
Loan and Security Agreement dated as of May 13, 1998 (as the same may be further
amended, restated, supplemented or otherwise modified, the "Loan Agreement").
B. Borrowers and FINOVA desire to amend the Loan Agreement to make
certain changes in the covenants and to correct certain matters, all as set
forth below.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, Borrowers and FINOVA
agree as follows:
1. Definitions. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Loan
Agreement, as amended by this Amendment.
2. Amendments to Loan Agreement. Section 6.1.13 (Financial
Covenants) of the Schedule to the Loan Agreement is hereby amended as set forth
below:
(a) Senior Debt Service Coverage Ratio is hereby deleted in
its entirety and the following is substituted in lieu thereof:
Senior Debt Service Coverage Ratio. As of the last
day of each calendar quarter ended March 31, June 30,
September 30 or December 31 commencing with the calendar
quarter ended June 30, 1998, Borrower's Operating Cash
Flow/Actual for the consecutive 12-month period ending as of
such last day must be at least 1.35 times the amount necessary
to meet Borrower's Senior Contractual Debt Service for such
12-month period; provided however, with respect to the
consecutive 12-month period ending March 31, 1999, Borrower's
Operating Cash Flow/Actual must be at least 1.25 times the
amount necessary to meet Borrower's Senior Contractual Debt
Service for such 12-month period; provided however, that, with
respect to the calculations set forth herein for the period
from March 1, 1998 through December 31, 1998, Borrower's
Operating Cash Flow/Actual and Senior Contractual Debt Service
shall be determined beginning as of March 1, 1998 (the "Start
Date") and be measured as follows: (x) the time period from
the Start Date through June 30, 1998, shall be for such
amounts for such period, (y) the time period from the Start
Date through September 30, 1998, shall be for such amounts for
such period, and (z) the time period from the Start Date
through December 31, 1998, shall be for such amounts for such
period; and, provided further, that all such determinations
shall be made on a consolidated basis.
(b) Total Debt Service Coverage Ratio is hereby deleted in its
entirety and the following is substituted in lieu thereof:
Total Debt Service Coverage Ratio. As of the last day
of each calendar quarter ended March 31, June 30, September 30
or December 31 commencing with the calendar quarter ended June
30, 1998, Borrower's Operating Cash Flow/Actual for the
consecutive 12-month period ending as of such last day must be
at least 1.10 times the amount necessary to meet Borrower's
Total Contractual Debt Service for such 12-month period;
provided however, with respect to the consecutive 12-month
period ending March 31, 1999, Borrower's Operating Cash
Flow/Actual must be at least 1.05 times the amount necessary
to meet Borrower's Total Contractual Debt Service for such 12
month period; provided however, that, with respect to the
calculations set forth herein for the period from March 1,
1998, through December 31, 1998, Borrower's Operating Cash
Flow/Actual and Total Contractual Debt Service shall be
determined beginning as of the Start Date and be measured as
follows: (x) the time period from the Start Date through June
30, 1998, shall be for such amounts for such period, (y) the
time period from the Start Date through September 30, 1998,
shall be for such amounts for such period and (z) the time
period from the Start Date through December 31, 1998, shall be
for such amounts for such period; and, provided further, that
all such determinations shall be made on a consolidated basis.
3. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the satisfaction of all of the following conditions in a
manner, form and substance satisfactory to FINOVA:
(a) Representations and Warranties. All of the representations
and warranties of Borrowers set forth in the Loan Documents shall be
true and correct in all material respects.
(b) Approvals. The approval and/or consent shall have been
obtained from all persons whose approval or consent is necessary or
required to enable Borrowers to enter into this Amendment and the
documents delivered in connection herewith and therewith and to perform
its obligations hereunder and thereunder;
(c) Material Adverse Change. No event shall have occurred
since December 31, 1998 which has had or reasonably could be expected
to have a material adverse effect.
(d) Performance; No Default. Each Borrower shall have
performed and complied with all agreements and conditions contained in
the Loan Documents to be performed by or complied with by such Borrower
prior to the date hereof, and no Event of Default then shall exist.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the execution and delivery of this
Amendment by Borrowers shall be satisfactory to FINOVA, and FINOVA
shall have received all such counterpart originals or certified or
other copies of evidence of such as FINOVA may request.
(f) Payment of Fees and Expenses. Borrowers shall have paid
all fees and expenses of FINOVA incurred in connection with this
Amendment, including, without limitation, (i) attorneys' fees and
expenses and (ii) $1,500 amendment fee.
4. References. From and after the Effective Date, all references in the
Loan Agreement to (i) the "Loan and Security Agreement" shall be deemed to refer
to the Loan Agreement as amended hereby and (ii) a term defined in the Loan
Agreement shall be deemed to refer to such defined term as amended by this
Amendment.
5. Representations and Warranties.
(a) Each Borrower hereby confirms to FINOVA that the
representations and warranties set forth in Section 5 of the Loan
Agreement, as amended by this Amendment, are true and correct in all
material respects as of the date hereof, and shall be deemed to be
remade as of the date hereof.
(b) Each Borrower represents and warrants to FINOVA that:
(i) such Borrower has full power and authority to
execute and deliver this Amendment and to perform such
Borrower's obligations hereunder,
(ii) upon the execution and delivery hereof, this
Amendment will be valid, binding and enforceable upon such
Borrower in accordance with its terms,
(iii) the execution and delivery of this Amendment
does not and will not contravene, conflict with, violate or
constitute a default under (A) the Loan Agreement, (B) any
Loan Document, (C) any applicable law, rule, regulation,
judgment, decree or order or any agreement, indenture or
instrument to which such Borrower is a party or is bound or
which is binding upon or applicable to all or any portion of
such Borrower's property,
(iv) no Event of Default exists,
(v) such Borrower's property is free and clear of all
Liens other than Permitted Liens,
(vi) such Borrower has no Indebtedness except (A)
such Borrower's Obligations and (B) Subordinated Debt,
(vii) all balance sheets, all statements of
operations and of changes in financial position, and other
financial data which have been or shall hereafter be furnished
to FINOVA for the purposes of or in connection with this
Amendment have been and will be prepared in accordance with
GAAP consistently applied throughout the periods involved and
do and will present fairly the financial condition of the
entities involved as of the dates thereof and the results of
their operations for the periods covered thereby, and
(viii) no material litigation (including, without
limitation, derivative actions), arbitrations, governmental
investigation or proceeding or inquiry shall, on the date
hereof, be pending which was not previously disclosed in
writing to FINOVA and no material adverse development shall
have occurred in any litigation (including, without
limitation, derivative actions), arbitration, government
investigations, or proceeding or inquiry previously disclosed
to FINOVA in writing.
6. Costs and Expenses. Borrowers agree to reimburse FINOVA for all fees
and expenses incurred in the preparation, negotiation and execution of this
Amendment, including, without limitation, the reasonable fees and expenses of
counsel for FINOVA.
7. No Further Amendments; Ratification of Liability. Except as amended
hereby, the Loan Agreement and each of the other Loan Documents shall remain in
full force and effect in accordance with their respective terms. Each Borrower
hereby ratifies and confirms its liabilities, obligations and agreements under
the Loan Agreement and the other Loan Documents, all as amended by this
Amendment, and the Liens created thereby, and acknowledges that (i) it has no
defenses, claims or set-offs to the enforcement by FINOVA of such liabilities,
obligations and agreements, (ii) FINOVA has fully performed all obligations to
Borrowers which it may have had or has on and as of the date hereof and (iii)
other than as specifically set forth herein, FINOVA does not waive, diminish or
limit any term or condition contained in the Loan Agreement or the other Loan
Documents. FINOVA's agreement to the terms of this Amendment shall not be deemed
to establish or create a custom or course of dealing among FINOVA and Borrowers.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
9. Further Assurances. Each Borrower covenants and agrees that it will
at any time and from time to time do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
documents and instruments as reasonably may be required by FINOVA in order to
effectuate fully the intent of this Amendment.
10. Governing Law. This Amendment, including without limitation
enforcement of the obligations, shall be interpreted in accordance with the
internal laws (and not the conflict of laws rules) of the State of Arizona
governing contracts to be performed entirely within such state.
11. Severability. If any term or provision of this Amendment or the
application thereof to any party or circumstance shall be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the validity, legality and enforceability of the remaining terms and provisions
of this Amendment shall not in any way be affected or impaired thereby, and the
affected term or provision shall be modified to the minimum extent permitted by
law so as most fully to achieve the intention of this Amendment.
12. Captions. The captions in this Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Amendment or any of the provisions hereof.
13. Successors. This Amendment shall be binding upon each Borrower and
FINOVA and their respective representatives, successors and assigns, and shall
inure to the sole benefit of each Borrower and FINOVA and their respective
representatives, successors and assigns.
14. Effective Date. Upon execution by each of the parties hereto, the
amendments herein shall be deemed to take effect as of March 31, 1999.
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IN WITNESS WHEREOF, this Amendment has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
THE LEATHER FACTORY, INC., a Delaware corporation, THE
LEATHER FACTORY, INC., a Texas corporation, THE LEATHER
FACTORY, INC., an Arizona corporation, HI-LINE LEATHER &
MANUFACTURING COMPANY, a California corporation, and ROBERTS
CUSHMAN & COMPANY, INC., a New York corporation
By: /s/ Wray Thompson
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Name: Wray Thompson
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Title: President
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FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/ Kenneth Sepp
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Name: Kenneth Sepp
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Title: Vice President
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EXHIBIT 27.1