UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-12368
THE LEATHER FACTORY, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2543540
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3847 East Loop 820 South, Ft. Worth, Texas 76119
(Address of principal executive offices) (Zip code)
(817) 496-4414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to by filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Shares outstanding as of May 15, 1996
- ---------------------------------------- -------------------------------------
Common Stock, par value $.0024 per share 9,853,161
1
<PAGE>
THE LEATHER FACTORY, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 .............................. 3
Consolidated Statements of Income
Three months ended March 31, 1997 and 1996 ........................ 4
Consolidated Statements of Cash Flow
Three months ended March 31, 1997 and 1996 ........................ 5
Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1997 ................................. 6
Notes to Consolidated Financial Statements ......................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 11
SIGNATURES ............................................................. 12
EXHIBIT INDEX .......................................................... 13-17
2
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
1997 1996
----------------- -----------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash $ $
327,064 488,192
Accounts receivable-trade, net of allowance for
doubtful accounts of $82,000 and $54,000
in 1997 and 1996, respectively
2,192,990 1,947,698
Inventory
7,333,428 7,737,320
Prepaid income taxes
521,749 538,458
Deferred income taxes
137,088 126,955
Other current assets
504,898 542,809
----------------- -----------------
Total current assets
11,017,217 11,381,432
----------------- -----------------
PROPERTY AND EQUIPMENT, at cost
2,770,921 2,672,253
Less-accumulated depreciation and amortization
(1,344,606) (1,273,609)
----------------- -----------------
Property and equipment, net
1,426,315 1,398,644
GOODWILL and other, net of accumulated amortization of
$714,000 and $660,000 in 1997 and 1996, respectively
5,454,179 5,484,471
----------------- -----------------
$ $
17,897,711 18,264,547
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,201,506 $ 940,549
Accrued expenses and other liabilities 453,800 597,007
Income taxes payable - -
Notes payable and current maturities of
long-term debt 8,061,502 8,549,366
------------------ ---------------
Total current liabilities 9,716,808 10,086,922
------------------ ---------------
DEFERRED INCOME TAXES 134,309 137,310
NOTES PAYABLE AND LONG-TERM DEBT,
net of current maturities 63,621 17,378
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000,000
shares authorized, none issued or outstanding - -
Common stock, $0.0024 par value; 25,000,000 shares authorized, 9,853,161
shares issued in 1997 and 1996 23,648 23,648
Paid-in capital 4,130,796 4,130,796
Retained earnings 4,428,092 4,464,277
Less: Notes receivable - secured by common stock (269,305) (269,305)
Cumulative translation adjustments (4,074) (295)
Less: Unearned shares held by ESOP, 64,631
shares in 1997 and 1996 (326,184) (326,184)
------------------ ---------------
Total stockholders' equity 7,982,973 8,022,937
------------------ ---------------
$ 17,897,711 $ 18,264,547
================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
--------------- ---------------
NET SALES $ 6,459,892 $ 7,356,805
COST OF SALES 3,896,081 4,462,141
--------------- ---------------
Gross Profit 2,563,811 2,894,664
OPERATING EXPENSES 2,397,342 2,753,592
--------------- ---------------
INCOME FROM OPERATIONS 166,469 141,072
OTHER (INCOME) EXPENSE:
Interest expense 201,338 170,983
Other, net (844) (5,097)
--------------- ---------------
Total other (income) expense 200,494 165,886
--------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (34,025) (24,814)
PROVISION (BENEFIT) FOR INCOME TAXES 2,160 (2,820)
--------------- ---------------
NET INCOME (LOSS) $ (36,185) $ (21,994)
=============== ===============
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ - $ -
=============== ===============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 9,788,530 9,788,530
=============== ===============
DIVIDENDS PAID PER SHARE $ - $ -
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (36,185) $ (21,994)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation & amortization 125,954 118,283
(Gain) loss on sales of assets - (346)
Deferred income taxes (13,134) (10,292)
Other (1,623) -
Net changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable-trade, net (245,292) (3,734)
Inventory 403,892 (403,096)
Income taxes 16,709 1,163
Other current assets 37,911 (126,807)
Accounts payable 260,957 491,292
Accrued expenses and other liabilities (143,207) (178,447)
----------------- ----------------
Total adjustments 442,167 (111,984)
----------------- ----------------
Net cash provided by (used in) operating activities 405,982 (133,978)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (98,804) (119,480)
Proceeds from sales of assets - 236
Cash paid for acquisitions, net of cash acquired - (300,000)
Other intangible costs (26,685) (3,792)
----------------- ----------------
Net cash used in investing activities (125,489) (423,036)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 271,204 1,300,000
Payments on notes payable and long-term debt (712,825) (1,061,976)
----------------- ----------------
Net cash provided by (used in) financing activities (441,621) 238,024
----------------- ----------------
NET INCREASE (DECREASE) IN CASH (161,128) (318,990)
CASH, beginning of period 488,192 477,159
----------------- ----------------
CASH, end of period $ 327,064 $ 158,169
================= ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 198,303 $ 37,243
Income taxes paid during the period
- 6,715
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Notes Cumulative
receivable
-----------------------
Number Paid-in Retained - secured Translation Unearned
by
of Shares Par Value Capital Earnings common stock Adjustments ESOP Total
Shares
----------- ----------- ------------- -------------- ------------- ---------- ----------- ------------
BALANCE, December 31, 9,853,161 $ 23,648 $ 4,130,796 $ 4,464,277 $(269,305) $ (295) $ (326,184) $ 8,022,937
1996
Translation adjustment - - - - - (3,779) - (3,779)
Net loss - - - (36,185) - - - (36,185)
----------- ----------- ------------- -------------- ----------- ---------- ----------- ------------
BALANCE, 9,853,161 $ 23,648 $ 4,130,796 $ 4,428,092 $(269,305) $ (4,074) $ (326,184) $ 7,982,973
March 31, 1997 =========== =========== ============= ============== =========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE LEATHER FACTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of March 31,
1997 and December 31, 1996, and the results of operations and cash flows for the
three month periods ended March 31, 1997 and 1996. The results of operations for
the three month period are not necessarily indicative of the results to be
expected for the full fiscal year. The consolidated financial statements should
be read in conjunction with the financial statement disclosures contained in the
Company's 1996 Annual Report to Stockholders.
2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
1997 1996
----------------- ------------------
Finished goods held for sale $ 6,119,980 $ 6,516,517
Raw materials and work in process 1,213,448 1,220,803
================= ==================
$ 7,333,428 $ 7,737,320
================= ==================
</TABLE>
3. Notes Payable and Long-Term Debt
As reported in the Company's 1996 Annual Report on Form 10-K, the
Company has certain financing arrangements with NationsBank of Texas, N.A.
("NationsBank") which were to mature on April 30, 1997. Effective as of April
30, 1997, the Company and NationsBank entered into the Sixth Amendment to the
Second Restated Loan Agreement dated July 24, 1995, which among other changes
extended the maturity date to August 31, 1997.
The other primary provisions of the amendment are listed below:
Interest rate increased to prime plus 2%
Extension fee of $15,417 was paid
Agreed to apply all proceeds from expected tax refunds of
approximately $500,000 to reduce the term note.
Wray Thompson, Ron Morgan and Robin Morgan agreed to pledge their
stock in the Company as collateral on the notes.
The extension was granted to allow the Company additional time to pursue
alternative financing arrangements pursuant to the plan implemented in January.
Management believes that the restructuring of the Company's financing
arrangements on a favorable, long term basis will be accomplished. However, in
the event alternative financing cannot be arranged, the Company would enter
negotiations with NationsBank to restructure the existing loans. If neither of
these strategies were successful, the Company could experience a material
adverse impact.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
- -------
The Leather Factory, Inc. ("the Company") is a leading one stop source
for leather, traditional leathercraft materials involving such products as
do-it-yourself kits, stamping sets, and leatherworking tools, craft-related
items including various types of leather lace, beads, and wearable art
accessories, hardware, metal garment accessories such as belt buckles, belt
buckle designs and conchos, shoe repairing supplies and leather finishes. These
products are distributed primarily on a wholesale level and principally through
the Company's twenty-two sales/distribution units in the United States and
Canada. Moreover, the Company is a manufacturer and distributor of hat trims in
braids, leather, and woven fabrics. These hat trims are sold to hat
manufacturers and distributors.
Results of Operations
- ---------------------
Income Statement Comparison
The following table sets forth, for the interim periods indicated,
certain items from the Company's Consolidated Statements of Income expressed as
a percentage of net sales:
Quarterly Period Ended
March 31,
1997 1996
---- ----
Net sales 100.0% 100.0%
Cost of sales 60.3 60.7
------ ------
Gross profit 39.7 39.3
Operating expenses 37.1 37.4
------ ------
Income from operations 2.6 1.9
Interest expense, net 3.1 2.2
------ -------
Income before income taxes -0.5 -0.3
Provision for income taxes -0.0 0.0
------ ------
Net income -0.5% -0.3%
====== ======
Revenues
- --------
The Company's net sales decreased by 12.2% to $6,459,892 during the
first fiscal quarter ended March 31, 1997 from $7,356,805 generated in the first
quarter of 1996. The 12.2% decrease in revenues was primarily comprised of two
pieces. Reduced sales of western hatbands comprised 8.4% and retail craft
industry sales comprised 1.8%. The remaining 2.0% of the revenue decrease
resulted from reduced sales in five other markets partially offset by increases
in three markets. The Company's sales continued to be impacted by the softness
in the craft and western markets and while long term trends are difficult to
determine, management believes that those markets have stabilized although this
may not be reflected in overall sales until the second half of 1997.
The Company is continuing efforts to develop new products and sell to
new markets and expects these efforts to gradually replace some of the declines
that have been experienced in current markets.
Costs, Gross Profit, and Expenses
- ---------------------------------
Cost of sales as a percentage of revenue was 60.3% for the first fiscal
quarter of 1997 as compared to 60.7% for the same quarter in 1996. This 0.4%
reduction resulted from efforts by Company management to increase manufacturing
productivity and was achieved while operating in a very competitive market
environment.
8
<PAGE>
Operating expenses decreased $356,250 or 12.9% to $2,397,342 during the
first fiscal quarter of 1997 from $2,753,592 during the quarter ended March 31,
1996. The decrease in the dollar amount of operating expenses between the two
quarters resulted from a determined effort by Company management to reduce
expenses and improve efficiency so that cost levels are more in line with
current sales levels.
Other (Income) Expense
- ----------------------
Other expenses increased $34,608 or 20.9% to $200,494 for the first
fiscal quarter of 1997 from $165,887 during the same quarter in 1996. This
increase was primarily due to higher interest expenses resulting from higher
interest rates on existing debt and a reduction in discounts taken for early
invoice payment. It should be noted that while these expenses are higher than
they were during the same quarter in 1996, due to reductions in bank debt, they
are $39,032 or 16.3% less than the third fiscal quarter of 1996 when they were
$239,526.
Net Income
- ----------
The net loss of the Company increased by $14,190 to a net loss of
$36,185 during the first fiscal quarter of 1997 compared to a net loss of
$21,994 during the quarter ended March 31, 1996. The increased loss resulted
from the factors noted above regarding revenues, costs and expenses.
Capital Resources and Liquidity
- -------------------------------
The primary source of funds for the Company during the first quarter of
1997 resulted from funds generated by a $403,892 reduction in inventory. The
current inventory turn rate of 2.07 indicates that additional funds should be
available as management continues its efforts to adjust inventory levels to be
more in line with the 2.25, 2.32 and 2.84 turn rates during 1996, 1995 and 1994
respectively.
The availability of funds under the Company's credit facility with
NationsBank of Texas, N.A. ("NationsBank") continues to be the primary source of
liquidity and capital resources.
Background of Agreement with Bank. The NationsBank financing
---------------------------------------
arrangements, which include a working capital line of credit and a term
facility, are governed by the Second Restated Loan Agreement dated July 24, 1995
as amended (the "Loan Agreement"). The Company presently has outstanding
principal balances on its working capital line of credit and its term facility
of $5,250,000 and $2,750,000, respectively. From June 30, 1996 through December
31, 1996, the Company had been in default under certain financial covenants
contained in the Loan Agreement. These financial covenants related to the
following ratio tests:
(1) Current Assets to Current Liabilities;
(2) Total Liabilities to Tangible Net Worth;
(3) Senior Funded Debt to Earnings Before Interest, Taxes, Depreciation
and Amortization ("EBITDA"); and
(4) Cash Flow Ratio.
On August 14, 1996, effective June 30, 1996, NationsBank and the Company
entered into an amendment to the Loan Agreement pursuant to which NationsBank
agreed to forbear the exercising of their legal rights due to the aforementioned
events of default under the Loan Agreement until September 30, 1996 (the
"Forbearance Period"). NationsBank also waived a default under the Borrowing
Base and the element of the Borrowing Base which gave rise to the default, the
net income test, was eliminated as part of said Borrowing Base.
On September 30, 1996, NationsBank and the Company entered into another
amendment to the Loan Agreement whereby NationsBank agreed to extend the
Forbearance Period until December 31, 1996 (the "Extended Forbearance Period").
NationsBank and the Company also agreed to decrease the amount of the working
capital line of credit from $10 million to $7.5 million. Additionally the
Company agreed to grant NationsBank a lien on its facility located in Tampa,
Florida.
The Company remained in default under the financial covenants described
above.
December 31, 1996 Agreement. As of December 31, 1996, NationsBank and the
-----------------------------
Company entered into the Fifth Amendment to the Second Restated Loan Agreement
(the "Fifth Amendment") whereby NationsBank and the Company agreed to modify the
Loan Agreement. In the Fifth Amendment the Company agreed to employ Price
Waterhouse to assist in obtaining alternative financing of the obligations to
NationsBank. The Company and Nations Bank also agreed:
9
<PAGE>
1. To decrease the amount of the working capital line of credit from $7.5
million to $6.5 million;
2. To modify the maturity date of the working capital line of credit
note to April 30, 1997;
3. To modify the maturity date of the Roberts Cushman & Company note
to April 30, 1997.
4. The financial covenants under which the Company was in default previously
were eliminated or modified.
Current Agreement. Effective April 30, 1997 the Company and NationsBank
-------------------
entered into the Sixth Amendment to the Second Restated Loan Agreement whereby
the maturity dates of the working capital line of credit and the term loan are
extended until August 31, 1997. The Company and NationsBank also agreed:
1. To modify the interest rate from prime plus 1.5% to prime plus 2.0%;
2. To apply all proceeds from expected tax refunds of approximately
$500,000 to reduce the term note:
3. That Wray Thompson, Ron Morgan and Robin Morgan would pledge their stock
in the Company as collateral on the notes and
4. The Company would pay a $15,417 fee for the extension.
Management remains confident that the restructuring of our financing
arrangements on a favorable, long term basis will be accomplished. However, in
the event alternative financing cannot be arranged, the Company would enter
negotiations with NationsBank to restructure the existing loans. If neither of
these strategies were successful, the Company could experience a material
adverse impact.
While subject to the issues surrounding the Company's financing arrangements,
the Company's management believes that current sources of liquidity and capital
resources will be sufficient to fund current operations and internal growth.
Cautionary Statement
- --------------------
The disclosures under "-Results of Operations" and "-Capital Resources
and Liquidity" and in the Notes to Consolidated Financial Statements as provided
elsewhere herein contain forward-looking statements. There are certain important
factors which could cause results to differ materially than those anticipated by
some of the forward-looking statements. Some of the important factors which
could cause actual results to differ materially from those in the
forward-looking statements include, among other things, changes from anticipated
levels of sales, whether due to future national or regional economic and
competitive conditions, including, but not limited to, retail craft buying
patterns, and possible negative trends in the craft and western retail markets,
customer acceptance of existing and new products, or otherwise, pricing
pressures due to competitive industry conditions, increases in prices for
leather, which is a world-wide commodity, which for some reason, may not be
passed on to the customers of the Company's products, change in tax rates,
change in interest rates, problems with the importation of the products which
the Company buys in 14 countries around the world, including, but not limited
to, transportation problems or changes in the political climate of the countries
involved, including the maintenance by said countries of Most Favored Nation
status with the United States of America, and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
Company.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
A list of exhibits required to be filed as part of this report is set
forth in the Exhibit Index which immediately precedes such exhibits, and is
incorporated herein by reference.
(b) Reports on Form 8-K
-------------------
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LEATHER FACTORY, INC.
(Registrant)
Date: May 15, 1997 By /s/ Wray Thompson
-----------------
Wray Thompson
Chairman of the Board,
President and
Chief Executive Officer
Date: May 15, 1997 By /s/ Fred N. Howell
------------------
Fred N. Howell
Chief Financial Officer,
Treasurer and Director
(Chief Financial and
Accounting Officer)
12
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation of The Leather Factory, Inc., filed
as Exhibit 3.1 to the Registration Statement on Form SB-2 of The
Leather Factory, Inc. (Commission File No. 33-81132) filed with
the Securities and Exchange Commission on July 5, 1994, and
incorporated by reference herein.
3.2 Bylaws of The Leather Factory, Inc., filed as Exhibit 3.2 to the
Registration Statement on Form SB-2 of The Leather Factory, Inc.
(Commission File No. 33-81132) filed with the Securities and
Exchange Commission on July 5, 1994, and incorporated by
reference herein.
3.3 Amendment to Certificate of Incorporation of The Leather Factory,
Inc. -- Certificate of Designation, Preferences and Rights of the
Senior Cumulative Convertible Preferred Stock Dated July 24,
1995, filed as Exhibit 3.3 to the Quarterly Report on Form 10-QSB
of The Leather Factory, Inc. (Commission File No. 1-12368) filed
with the Securities and Exchange Commission on August 10, 1995,
and incorporated by reference herein.
4.1 Second Restated Loan Agreement dated July 24, 1995, by and
between The Leather Factory, Inc., a Delaware corporation, and
NationsBank of Texas, N.A., filed as Exhibit 4.1 to the Quarterly
Report on Form 10-QSB of The Leather Factory, Inc. (Commission
File No. 1-12368) filed with the Securities and Exchange
Commission on August 10, 1995, and incorporated by reference
herein.
4.2 Promissory Note (Working Capital Line of Credit) dated September
30, 1996, in the principal amount of $7,500,000, payable to the
order of NationsBank of Texas, N.A., which matures March 31,
1997.
4.3 Promissory Note (Acquisition Line) dated July 24, 1995, in the
principal amount of $10,000,000, payable to the order of
NationsBank of Texas, N.A., which matures August 1, 2000, filed
as Exhibit 4.3 to the Quarterly Report on Form 10-QSB of The
Leather Factory, Inc. (Commission File No. 1-12368) filed with
the Securities and Exchange Commission on August 10, 1995, and
incorporated by reference herein.
4.4 Promissory Note dated December 28, 1994 in the principal amount
of $5,000,000, payable to the order of NationsBank of Texas,
N.A., which matures December 28, 1999, filed as Exhibit No. 4.5
to the 1994 Annual Report on Form 10-KSB of The Leather Factory,
Inc. (Commission File No. 1-12368) filed with the Securities and
Exchange Commission on March 27, 1995, and incorporated herein by
reference.
4.5 Stock Purchase Agreement dated as of July 28, 1995, by and
between Center Street Capital Partners, L.P., a Delaware Limited
Partnership, Stratford Capital Partners, L.P., a Texas Limited
Partnership, and The Leather Factory, Inc., a Delaware
Corporation, filed as Exhibit 4.5 to the Quarterly Report on Form
10-QSB of The Leather Factory, Inc. (Commission File No. 1-12368)
filed with the Securities and Exchange Commission on August 10,
1995, and incorporated by reference herein.
13
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
Exhibit
Number Description
------- -----------
4.6 Commitment Agreement dated July 28, 1995, by and among The
Leather Factory, Inc., a Delaware Corporation, Center Street
Capital Partners, L.P., a Delaware Limited Partnership, and
Stratford Capital Partners, L.P., a Texas Limited Partnership,
filed as Exhibit 4.6 to the Quarterly Report on Form 10-QSB of
The Leather Factory, Inc. (Commission File No. 1-12368) filed
with the Securities and Exchange Commission on August 10,
1995, and incorporated by reference herein.
4.7 Registration Rights Agreement dated July 28, 1995, by and
between Center Street Capital Partners, L.P., a Delaware
Limited Partnership, Stratford Capital Partners, L.P., a Texas
Limited Partnership, and The Leather Factory, Inc., a Delaware
Corporation, filed as Exhibit 4.7 to the Quarterly Report on
Form 10-QSB of The Leather Factory, Inc. (Commission File No.
1-12368) filed with the Securities and Exchange Commission on
August 10, 1995, and incorporated by reference herein.
4.8 Shareholders Agreement dated July 28, 1995, by and between
Wray Thompson, an individual and resident of the State of
Texas, Sally A. Thompson, an individual and resident of the
State of Texas, Ronald C. Morgan, an individual and resident
of the State of Texas, Robin L. Morgan, an individual and
resident of the State of Texas, Center Street Capital
Partners, L.P., a Delaware Limited Partnership, Stratford
Capital Partners, L.P., a Texas Limited Partnership, and The
Leather Factory, Inc., a Delaware Corporation, filed as
Exhibit 4.8 to the Quarterly Report on Form 10-QSB of The
Leather Factory, Inc. (Commission File No. 1-12368) filed with
the Securities and Exchange Commission on August 10, 1995, and
incorporated by reference herein.
4.9 First Amendment to Second Restated Loan Agreement effective as
of December 31, 1995, by and between The Leather Factory,
Inc., a Delaware Corporation, and NationsBank of Texas, N.A.,
filed as Exhibit No. 4.9 to the 1995 Annual Report on Form
10-KSB of The Leather Factory, Inc. (Commission File No.
1-12368), filed with the Securities and Exchange Commission on
March 28, 1996, and incorporated herein by reference.
4.10 Second Amendment to Second Restated Loan Agreement effective
as of March 31, 1996, by and between The Leather Factory,
Inc., a Delaware Corporation, and NationsBank of Texas,
N.A., filed as Exhibit No. 4.10 to the Quarterly Report on
Form 10-Q of The Leather Factory, Inc. (Commission File No.
1-12368) filed with the Securities and Exchange Commission
on May 20, 1996, and incorporated by reference herein.
4.11 Forbearance Agreement and Third Amendment to the Second
Restated Loan Agreement effective as of June 30, 1996, by and
between The Leather Factory, Inc., a Delaware Corporation, and
NationsBank of Texas, N.A., filed as Exhibit No. 4.11 to the
Quarterly Report on Form 10-Q of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and
Exchange Commission on August 19, 1996, and incorporated by
reference herein.
4.12 Forbearance Agreement and Fourth Amendment to Second Restated
Loan Agreement effective as of September 30, 1996, by and
between The Leather Factory, Inc., a Delaware Corporation, and
NationsBank of Texas, N.A.
14
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
Exhibit
Number Description
------- -----------
4.13 Fifth Amendment to Second Restated Loan Agreement effective as
of December 31, 1996, by and between The Leather Factory,
Inc., a Delaware Corporation, and NationsBank of Texas, N.A.
*4.14 Sixth Amendment to Second Restated Loan Agreement effective as
of April 30, 1997, by and between The Leather Factory, Inc., a
Delaware Corporation, and NationsBank of Texas, N.A.
10.1 Stock Exchange Agreement dated July 9, 1993, by and among
The Leather Factory, Inc., a Texas corporation, National
Transfer & Register Corp., a Colorado corporation, J. Wray
Thompson, Sr., Ronald C. Morgan, Robin L. Morgan and The
Leather Factory, Inc. Employees' Stock Ownership Plan &
Trust, filed as Exhibit No. 10.1 to the Registration
Statement on Form 10-SB of The Leather Factory, Inc.
(Commission File No. 0-22128), including any amendments
thereto, filed with the Securities and Exchange Commission
on July 22, 1993, and incorporated herein by reference.
10.2 Stock Exchange Agreement dated July 10, 1993, by and between
National Transfer & Register Corp., a Colorado corporation
and Vicki Byrd, filed as Exhibit No. 10.2 to the
Registration Statement on Form 10-SB of The Leather Factory,
Inc. (Commission File No. 0-22128), including any amendments
thereto, filed with the Securities and Exchange Commission
on July 22, 1993, and incorporated herein by reference.
10.3 Stock Purchase Agreement dated as of June 30, 1993, by and
between The Leather Factory, Inc., a Texas corporation
and Steve Lindley, filed as Exhibit No. 10.3 to the
Registration Statement on Form 10-SB of The Leather Factory,
Inc. (Commission File No. 0-22128), including any
amendments thereto, filed with the Securities and Exchange
Commission on July 22, 1993, and incorporated herein by
reference.
10.4 Amendment to Stock Purchase Agreement executed September 20,
1993, to be effective June 30, 1993, by and between The
Leather Factory, Inc., a Texas corporation and Steve Lindley,
filed as Exhibit No. 19.1 to the 1993 Annual Report on Form
10-KSB of The Leather Factory, Inc. (Commission File No.
1-12368), filed with the Securities and Exchange Commission on
March 30, 1994, and incorporated herein by reference.
10.5 Stock Purchase Agreement dated as of June 30, 1993, by and
between The Leather Factory, Inc., a Texas corporation and
Kevin F. White and Durham Hefta, filed as Exhibit No. 10.4
to the Registration Statement on Form 10-SB of The Leather
Factory, Inc. (Commission File No. 0-22128), including any
amendments thereto, filed with the Securities and Exchange
Commission on July 22, 1993, and incorporated herein by
reference.
10.6 Stock Purchase Agreement dated as of June 30, 1993, by and
between The Leather Factory, Inc., a Texas corporation and
James Durr, filed as Exhibit No. 10.5 to the Registration
Statement on Form 10-SB of The Leather Factory, Inc.
(Commission File No. 0-22128), including any amendments
thereto, filed with the Securities and Exchange Commission
on July 22, 1993, and incorporated herein by reference.
15
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
Exhibit
Number Description
------- -----------
10.7 The Leather Factory, Inc. 1993 Non-Qualified Incentive Stock
Option Plan, filed as Exhibit No. 10.6 to the 1993 Annual
Report on Form 10-KSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and
Exchange Commission on March 30, 1994, and incorporated
herein by reference.
10.8 Acquisition Agreement dated as of January 10, 1994, by and
between The Leather Factory, Inc., a Colorado corporation
and Hi-Line Leather & Manufacturing Company, filed as
Exhibit No. 2.1 to the Current Report on Form 8-K of The
Leather Factory, Inc. (Commission File No. 1-12368) filed
with the Securities and Exchange Commission on January 10,
1994, and incorporated herein by reference.
10.9 Asset Purchase Agreement dated as of April 15, 1994, by and
among The Leather Factory, Inc., a Colorado corporation, The
Leather Warehouse Company, a Michigan corporation, Daniel W.
Holbert, Linda S. McCleary, Richard J. Hill, and the Richard
J. Hill Trust, filed as Exhibit No. 2.1 to the Current
Report on Form 8-K of The Leather Factory, Inc. (Commission
File No. 1-12368) filed with the Securities and Exchange
Commission on April 15, 1994, and incorporated herein by
reference.
10.10 Acquisition Agreement by and among The Leather Factory, Inc.
and David Lieberman, Individually and as the Shareholder of
Roberts, Cushman & Company, Inc., related to the acquisition
of the issued and outstanding capital stock of Roberts,
Cushman & Company, Inc., filed as Exhibit No. 2.1 to the
Current Report on Form 8-K of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and
Exchange Commission on January 9, 1995, and incorporated
herein by reference.
10.11 The Leather Factory, Inc. Employees' Stock Ownership Plan
and Trust (Restated), dated February 22, 1994, effective as
of October 1, 1993, filed as Exhibit No. 4.1 to the
Registration Statement on Form S-8 of The Leather Factory,
Inc. (Commission File No. 33-81214), including any
amendments thereto, filed with the Securities and Exchange
Commission on July 5, 1994, and incorporated herein by
reference.
10.12 Amendment No. 1 to The Leather Factory, Inc. Employees'
Stock Ownership Plan and Trust (Restated as of October 1,
1993), dated October 5, 1994 to be effective December 28,
1990, filed as Exhibit No. 10.12 to the 1994 Annual Report
on Form 10-KSB of The Leather Factory, Inc. (Commission File
No. 1-12368) filed with the Securities and Exchange
Commission on March 27, 1995, and incorporated herein by
reference.
10.13 Participation Agreement in The Leather Factory, Inc.
Employees' Stock Ownership Plan and Trust (Restated as of
October 1, 1993), dated February 28, 1995 to be effective
January 2, 1995, filed as Exhibit No. 10.13 to the 1994
Annual Report on Form 10-KSB of The Leather Factory, Inc.
(Commission File No. 1-12368) filed with the Securities and
Exchange Commission on March 27, 1995, and incorporated
herein by reference.
16
<PAGE>
THE LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
(Continued)
Exhibit
Number Description
------- -----------
10.14 Indemnification Agreement dated October 17, 1994, by and among
The Leather Factory, Inc., a Delaware corporation, Securities
Transfer Corporation, a Texas corporation, and Halter Capital
Corporation, a Texas corporation, filed as Exhibit No. 10.14
to the 1994 Annual Report on Form 10-KSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the
Securities and Exchange Commission on March 27, 1995, and
incorporated herein by reference.
10.15 Guaranty, as amended, dated July 24, 1995, by and between
NationsBank of Texas, N. A., The Leather Factory, Inc., Wray
Thompson, Ronald Morgan, and Robin Morgan, filed as Exhibit
No. 10.15 to the Quarterly Report on Form 10-QSB of The
Leather Factory, Inc. (Commission File No. 1-12368) filed
with the Securities and Exchange Commission on November 9,
1995, and incorporated herein by reference.
10.16 The Leather Factory, Inc. 1995 Director Non-Qualified Stock
Option Plan and Stock Option Agreement, effective as of
September 26, 1995, subject to approval by the Company's
stockholders at the 1996 Annual Meeting of Stockholders,
filed as Exhibit No. 10.16 to the Quarterly Report on Form
10-QSB of The Leather Factory, Inc. (Commission File No.
1-12368) filed with the Securities and Exchange Commission
on November 9, 1995, and incorporated herein by reference.
10.17 The Leather Factory, Inc. 1995 Stock Option Plan and Stock
Option Agreements, effective as of September 26, 1995,
subject to approval by the Company's stockholders at the
1996 Annual Meeting of Stockholders, filed as Exhibit No.
10.17 to the Quarterly Report on Form 10-QSB of The Leather
Factory, Inc. (Commission File No. 1-12368) filed with the
Securities and Exchange Commission on November 9, 1995, and
incorporated herein by reference.
22.1 Subsidiaries of the Company, filed as Exhibit No. 22.1 to
the 1995 Annual Report on Form 10-KSB of The Leather
Factory, Inc. (Commission File No. 1-12368), filed with the
Securities and Exchange Commission on March 28, 1996, and
incorporated herein by reference.
* 27.1 Financial Data Schedule
- ------------
*Filed herewith.
17
<PAGE>
EXHIBIT 4.14
18
<PAGE>
SIXTH AMENDMENT TO SECOND RESTATED LOAN AGREEMENT
This Sixth Amendment to Second Restated Loan Agreement ("Amendment")
dated effective as of April 30, 1997 ("Effective Date") is entered into among
The Leather Factory, Inc., a Delaware corporation ("Borrower"), The Leather
Factory, Inc., a Texas corporation, and Roberts, Cushman & Company, Inc., New
York corporation (collectively, "Guarantors"), and NationsBank of Texas, N.A.
("Bank"), as follows:
Recitals
--------
(a) Bank, Borrower and Guarantors are parties to the certain
Second Restated Loan Agreement dated as of July 24, 1995, as amended by
the First Amendment to Second Restated Loan Agreement dated as of
December 31, 1995, the Second Amendment to Second Restated Loan
Agreement dated as of March 31, 1996, the Forbearance Agreement and
Third Amendment to Second Restated Loan Agreement dated as of June 30,
1996, the Forbearance Agreement and Fourth Amendment to Second Restated
Loan Agreement dated as of September 30, 1996 and the Fifth Amendment
to Second Restated Loan Agreement dated as of December 31, 1996 (the
"Forbearance Agreement"), each among Borrower, Guarantors and Bank
(collectively the "Loan Agreement"). Terms defined in the Loan
Agreement, wherever used in this Agreement, shall have the same
meanings herein as are prescribed by the Loan Agreement.
(b) Borrower, Guarantors and Bank wish to further amend the
Loan Agreement as provided hereinbelow. Therefore, for valuable
consideration, the receipt and sufficiency of which hereby is
acknowledged, and in consideration of the mutual agreements provided
herein, Bank, Borrower and each of the Guarantors hereby agree as
follows:
Agreement
---------
Section 1. Amendment of Loan Agreement. As of the Effective
---------------------------
Date, the Loan Agreement is amended as follows:
1.1 Effective as of April 30, 1997, Section 2.B ("Interest") is
amended and restated in its entirety to read as follows:
"B. Interest. The interest to be paid by Borrower and collected
---------
by Bank on the Notes (except with respect to the Acquisition
Line which has terminated and is no longer in effect on such
date) shall be a rate per annum 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, which rate of interest
may not be the lowest rate of interest charged by Bank to
other borrowers, plus two percent (2.00%)."
1.2 Section 4.A ("Financial Condition") hereby is amended as
follows:
a. Subparagraph (i), which prescribes minimum requirements for
the ratio of current assets to current liabilities, is
amended and restated to read in its entirety as follows:
"(i) Maintain a minimum ratio of current
assets to current liabilities as follows:
Ratio Effective Date
----- --------------
1.08 to 1.00 January 31, 1997
1.10 to 1.00 March 31, 1997 and
thereafter"
b. Subparagraph (ii), which prescribes minimum requirements
for the ratio of total liabilities to Tangible Net Worth, hereby is
amended, with respect to the applicable periods ending January 31, 1997
and March 31, 1997, and thereafter, to read as follows:
Ratio Period
----- ------
"3.75 to 1.0 January 31, 1997
3.54 to 1.0 March 31, 1997
3.50 to 1.0 at all times following
March 31, 1997"
1.3 Section 5.H ("Capital Expenditures") hereby is amended and
restated to read in its entirety as follows:
"H. Capital Expenditures. Make capital expenditures during any
----------------------
period of twelve (12) calendar months which, in the
aggregate with all other capital expenditures by Borrower
and Guarantors during such period, would exceed the maximum
aggregate amount of $250,000.00. As used herein "capital
expenditures" means expenditures which would be classified
as capital expenditures according to GAAP, provided, that
any such capital expenditures made in connection with
Borrower's purchase and installation of a "POS (point of
sale)" computer system, in the aggregate amount up to but
not exceeding $400,000.00, shall be excluded in measuring
compliance with the foregoing requirement."
19
<PAGE>
1.4 Section 5.K ("Leases") hereby is deleted in its entirety.
Section 2. Amendment of Notes. As of the Effective Date, the
-------------------
Note evidencing the Revolving Line and the R,C&Co. Loan, respectively, in
each case is modified and amended, as follows:
a. Revolving Line. The certain promissory note dated September
---------------
30, 1996 executed by Borrower payable to the order of Bank in the face
amount of $7,500,00.00 (subsequently amended to be $6,500,000,00),
evidencing the Revolving Line, hereby is modified and amended as
follows: The stated maturity as set forth therein is modified and
amended to be August 31, 1997.
b. R,C&Co. Loan. The certain promissory note dated December
--------------
28, 1994 executed by Borrower payable to the order of Bank in the face
amount of $5,000,000.00, evidencing the R,C&Co. Loan, hereby is
modified and amended as follows:
(i) The stated maturity of the R,C&Co. Loan as set forth therein
hereby is modified to be August 31, 1997; and
(ii) Notwithstanding the payment schedule presently provided
thereby, the Note evidencing the R,C&Co. Loan shall be
payable as follows: Accrued interest shall be payable
monthly on the first (1st) day of each calendar month, and
principal payments shall be payable on March 31, 1997 and
June 30, 1997, in the amount of $250,000.00 each, and all
remaining unpaid principal shall be paid on the final
maturity date, August 31, 1997.
Section 3. Agreement Regarding Disposition of Tax Refunds; Amendment
---------------------------------------------------------
of Security Agreements.
-----------------------
a. Borrower has advised Bank that Borrower has filed an income
tax return which reflects the right of Borrower to payment
of a refund of federal income taxes previously paid, in an
estimated amount of $500,000, payment of which Borrower
anticipates receipt during the months of August or September
of 1997 (all such amounts, whenever received, being herein
called the "Tax Refund Proceeds"). Borrower hereby agrees
that all Tax Refund Proceeds, immediately upon receipt by
Borrower, shall be promptly remitted to Bank for application
in reduction of principal evidenced by the certain
promissory note dated December 28, 1994 executed by Borrower
payable to the order of Bank in the face amount of
$5,000,000.00, evidencing the R,C&Co. Loan, such payments to
be applied in inverse order of maturity to the latest
maturing payments of principal.
b. Borrower and each Guarantor each expressly acknowledges and
agrees that all tax refunds (including federal income tax
refunds) and all proceeds thereof at any time received
(specifically including, without limitation, the Tax Refund
Proceeds), and the right of Borrower or any Guarantor to
receive same, is covered and included as a "General
Intangible" under each of the Security Agreements. In this
regard, as clarification only, it is agreed that, as of the
Effective Date, the unnumbered paragraph entitled "General
Intangibles" in each of the Security Agreements hereby is
amended and restated to read in its entirety as follows:
"General Intangibles. All general intangibles now owned or
hereafter acquired by Debtor. General intangibles includes,
without limitation, all tax refunds (including federal income
tax refunds), and all proceeds thereof at any time received,
and all customer lists, mailing lists and similar data
respecting names and addresses of customers or potential
customers, whether in tangible or intangible form and however
recorded or stored, together with all systems and software for
retrieving or utilizing same."
Section 4. Additional Agreements. In consideration of this Amendment:
----------------------
4.1 Within thirty (30) days after the Effective Date, Borrower shall
cause each of Wray Thompson, Ron Morgan and Robin Morgan (each a "Pledgor") to
grant to Bank a continuing first priority pledge, security interest, collateral
assignment and lien in and to all shares of Borrower, now owned and hereafter
acquired, as continuing security for payment and performance of all obligations
and indebtedness from time to time owing by Borrower and each Guarantor,
(including without limitation obligations and indebtedness pursuant to the Loan
Agreement), in each case pursuant to a pledge and security agreement, in form
satisfactory to Bank. Borrower shall cause each such Pledgor to execute and
deliver to Bank such additional agreements, opinions or other documentation as
may be required by Bank in connection therewith.
4.2 Borrower agrees to pay to Lender an extension and amendment fee in
the amount of $15,416.67, which shall be payable in cash upon Borrower's
execution of this Amendment.
20
<PAGE>
4.3 Borrower and Guarantors each represents and warrants to Bank the
following:
4.3.1 The execution, delivery and performance of this
Agreement are within its corporate power and authority and have been
duly authorized by appropriate proceedings and this Agreement
constitutes a legal, valid and binding obligation of Borrower and
Guarantors, enforceable in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the rights of creditors generally and general
principles of equity.
4.3.2 Borrower and Guarantors each has disclosed to Bank all
material facts known to it concerning its financial condition and
business operations. All such information furnished by Borrower and any
Guarantor to Bank was true and complete at the time of delivery thereof
to Bank, and there has been no material change in any such information
except as may have been disclosed to Bank in writing. There is no fact
known to Borrower or Guarantors which would be reasonably expected to
materially and adversely effect Borrower's or a Guarantor's financial
condition, operations or ability to perform its obligations under the
Loan Documents. Upon execution of this Amendment (i) all
representations and warranties provided by the Loan Documents, as
amended, are true and correct in all material respects and (ii) no
Default is in existence other than the Existing Defaults.
4.4 The following items shall be delivered to Bank prior to or
simultaneously with execution and delivery of this Amendment:
4.4.1 A certificate signed by the corporate secretary of
Borrower and each Guarantor (i) certifying to Bank that its Certificate
of Incorporation and Bylaws have not been amended since its most recent
certification thereof to Bank, and certifying the names and signatures
of its duly appointed officers authorized to act in respect of the Loan
Documents and (ii) attaching and certifying resolutions duly adopted by
its board of directors authorizing this Amendment and the transactions
evidenced hereby, and authorizing and directing one or more named
officers to execute and deliver this Amendment, and all related
documentation required by Bank on behalf of Borrower and Guarantors,
which certificate shall be in form satisfactory to Bank;
4.2.2 Such other amendments of any of the Loan Documents in
conformity with this Agreement, duly executed, as may be required by
Bank and in form satisfactory to Bank.
4.5 Borrower and Guarantors each shall reimburse Bank for all expenses,
including attorneys fees and disbursements of legal counsel for Bank, in
connection with the preparation, negotiation and closing of this Amendment. In
consideration of this Amendment, Borrower and Guarantors each agrees to pay to
Bank on demand any and all costs and expenses, including reasonable attorneys'
fees, legal expenses and disbursements, appraisal fees, search fees, filing and
recording fees, fees and costs of experts or other consultants, court costs,
travel expenses, and all other costs and expenses incurred or paid by Bank in
administering the Loan Documents and protecting or enforcing any of its rights
thereunder, including without limitation (i) ongoing administration of the Loan
Documents, including field examinations and inspection of Collateral, (ii)
negotiating, preparing and closing any amendment, waiver or consent relating to
the Loan Documents, and (iii) taking possession, holding, storing, preparing for
sale, selling or otherwise disposing of, or collecting the proceeds of, the
Collateral, collecting the Obligations, or exercising or enforcing any other
rights or remedies or pursuing or defending any claim arising out of, or in any
way relating to the Loan Documents. Borrower and Guarantors each will pay any
applicable stamp, registration, recordation and similar taxes, fees and charges
in respect of the Collateral or perfection or maintenance of Bank's rights under
the Loan Documents, and agrees to indemnify Bank against any liabilities
resulting from any delay, deferral or omission in payment of any such taxes,
fees or charges. All fees, costs and expenses for which Borrower or a Guarantor
is obligated under the Loan Documents shall be payable to Bank on demand. At
Bank's option, the amount of such fees, costs and expenses may be deducted from
the proceeds of any loan hereunder or added to the unpaid principal due by
Borrower under the Revolving Line, in which event such amount will be deemed
paid and the amount thereof shall be treated as a loan thereunder.
4.6 Except as amended by this Amendment, the Loan Agreement (including
all previous amendments to the extent not superseded by the terms hereof) and
all other Loan Documents remain in full force and effect as provided therein.
Borrower and Guarantors each hereby ratifies and confirms the Loan Documents, as
amended hereby, and agrees that the Security Agreements, and all Collateral,
continue to secure all Obligations. Without limiting the foregoing, each of the
Guarantors hereby expressly ratifies and confirms its obligations under the
certain guaranty agreements previously executed by it for the benefit of Bank,
and agrees that the Obligations continue to be included within the obligations
and indebtedness guaranteed thereby. Borrower and Guarantors each agrees that it
will comply with all terms and provisions of the Loan Documents, as amended by
this Amendment.
4.7 Wherever any Loan Document makes reference to the Agreement, the
same shall be deemed to mean the Agreement as amended by this Amendment. This
Amendment is a Loan Document for purposes of the provisions of all other Loan
Documents. Any breach of the representations, warranties and covenants under
this Amendment shall constitute a Default under the Loan Documents.
4.8 Borrower has informed Bank that the ratio of total liabilities to
Tangible Net Worth, calculated pursuant to the Loan Agreement as of March 31,
1997, was 3.54 to 1.0, which exceeded the maximum amount allowable under Section
4.A(ii) of the Loan Agreement. In consideration of this Amendment, Bank hereby
confirms that such noncompliance is hereby waived, provided, that such waiver is
extends only to the foregoing specifically identified instance of noncompliance
and is expressly limited as provided herein, and Bank shall be entitled to
expect and require strict compliance with all other requirements of the Loan
Documents in accordance with their respective terms.
21
<PAGE>
4.9 This Agreement shall be governed by the laws of the State of Texas.
If any provision in this Agreement is held to be unenforceable, such provision
shall be severed and the remaining provisions shall remain in full force and
effect. All representations, warranties, and covenants of this Agreement shall
survive the execution of this Agreement and any other contract or agreement. The
provisions of this Agreement may be waived or amended only in a writing signed
by all of the parties hereto. This Agreement shall bind Borrower and Guarantors
and their respective successors and assigns and shall inure to the benefit of
Bank and its successors and assigns. This Agreement may be executed in multiple
counterparts which together shall constitute one and the same agreement.
4.10 The provisions of Section 10 ("Arbitration") of the Loan Agreement
shall be deemed applicable to this Amendment and are incorporated herein by
reference.
4.11 This Amendment (i) shall be deemed effective prospectively as of
the Effective Date, (ii) contains the entire agreement among the parties and may
not be amended or modified except in writing signed by all parties, (iii) shall
be governed and construed according to the laws of the State of Texas and (iv)
may be executed in any number of counterparts, each of which shall be valid as
an original and all of which shall be one and the same agreement. A telecopy of
any executed counterpart shall be deemed valid as an original.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT 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.
[Reminder of Page Intentionally Left Blank]
22
<PAGE>
Executed as of the Effective Date.
NATIONSBANK OF TEXAS, N.A.
By: /s/ Mark L Henze
Mark L. Henze, Vice President
THE LEATHER FACTORY, INC.
A Delaware corporation
By: /s/ Fred N Howell
Title: Chief Financial Officer and Treasurer
THE LEATHER FACTORY, INC.
A Texas corporation
By: /s/ Fred N Howell
Title: Chief Financial Officer and Treasurer
ROBERTS, CUSHMAN & COMPANY, INC.
By: /s/ Fred N Howell
Title: Chief Financial Officer and Treasurer
23
<PAGE>
EXHIBIT 27.1
24
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 327064
<SECURITIES> 0
<RECEIVABLES> 2274990
<ALLOWANCES> 82000
<INVENTORY> 7333428
<CURRENT-ASSETS> 11017217
<PP&E> 2770921
<DEPRECIATION> 1344606
<TOTAL-ASSETS> 17897711
<CURRENT-LIABILITIES> 9716808
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0
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<COMMON> 23648
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<TOTAL-LIABILITY-AND-EQUITY> 17897711
<SALES> 6459892
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<CGS> 3896081
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<OTHER-EXPENSES> 2397342
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<INTEREST-EXPENSE> 201338
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<INCOME-TAX> 2160
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