EXHIBIT 4.15
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
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This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of August 12, 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 and Second Amendment to
Loan and Security Agreement dated as of May 13, 1999 (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.
(A) Section 6.1.13 (Financial Covenants) of the Schedule to the Loan
Agreement is hereby amended as set forth below:
(i) EBITDA. is hereby deleted in its entirety and the following is
substituted in lieu thereof:
EBITDA. Borrower shall maintain Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") of not less than(i)
Five Hundred Thousand and No/100 Dollars ($500,000) for the first six
month period of the first Loan Year, (ii) Seven Hundred Forty Thousand
and No/100 Dollars ($740,000) for the second six month period of the
first Loan Year, (iii) Nine Hundred Thousand and No/100 Dollars
($900,000) for the first six month period of each Loan Year thereafter
and (iv) One Million Fifty Thousand and No/100 Dollars ($1,050,000)
for the second six month period of each Loan Year thereafter; provided
however, Borrower shall maintain EBITDA of not less than Seven Hundred
Thousand and No/100 Dollars ($700,000) for the six month period ending
June 30, 1999.
(ii) 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 on each of March 31, 1999,
and June 30, 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.
(iii) 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 on each of March 31, 1999 and June 30, 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.
(B) Section 6.2 (Negative Covenants) of the Schedule to the Loan
Agreement is hereby amended as set forth below:
Capital Expenditures is hereby deleted in its entirety and the
following is substituted in lieu thereof:
Borrower shall not make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all
Capital Expenditures by Borrower: (i) would exceed $600,000
for the 1998 fiscal year, provided that, (a) Borrower shall
not make any Capital Expenditures during such fiscal year in
connection with the acquisition of computer systems in an
aggregate amount in excess of $350,000 and (b) Borrower shall
not make or incur any other Capital Expenditures during such
fiscal year in the aggregate amount in excess of $250,000, and
(ii) would exceed $600,000 for the 1999 fiscal year.
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 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 June 30, 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/ Ronald C. Morgan
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Name: Ronald C. Morgan
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Title: Executive Vice President and
Chief Operating Officer
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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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