Exhibit 10.2
 
BUSINESS LOAN AGREEMENT (ASSET BASED)
 

Borrower:
Tandy Leather Factory, Inc.
Lender:
BOKF, NA dba Bank of Texas
 
1900 SE Loop 820
 
P.O. Box 29775
 
Fort Worth, TX  76140
 
Dallas, TX  75229-9775

 

 

 

 
THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated September 18, 2015, is made and
executed between Tandy Leather Factory, Inc. ("Borrower") and BOKF, NA dba Bank
of Texas  ( "Lender")  on the  following terms  and conditions
.  Borrower  has  received prior  commercial  loans from Lender or has applied
to Lender for a commercial loan or loans or other financial accommodations,
including those which may be described on any exhibit or schedule attached to
this
Agreement.  Borrower  understands  and  agrees  that:  (Al  in  granting,  renewing,  or
extending any Loan, Lender is relying upon Borrower's representations,
warranties, and agreements as set forth  in this  Agreement;  (8)  the granting,
renewing, or extending of any Loan by Lender at all times shall be subject to
Lender's sole judgment and discretion; and  (Cl  all such  Loans shall be and
remain subject to the terms and conditions of this   Agreement.
 
TERM. This Agreement shall be effective as of September 18, 2015, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.

 
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this  Agreement  to the  Expiration Date,  provided the
aggregate amount of such Advances outstanding at any time does not exceed the
Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or
wholly prepay, and reborrow under this Agreement as follows :
 
Conditions Precedent to Each Advance.  Lender's obligation to make any
Advance  to or  for  the account  of  Borrower  under this Agreement  is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement  to be in form
and substance satisfactory  to  Lender:
 
(1) Lender shall have received evidence that this Agreement and all Related
Documents have been duly authorized, executed, and delivered by Borrower
to  Lender.
 
(2) Lender shall have received such opinions of counsel, supplemental opinions,
and documents as Lender may request.

 
(3) The security interests in the Collateral shall have been duly
authorized,  created, and perfected with first  lien priority  and shall be
in  full force  and effect.
 
(4) All guaranties required by Lender for the credit facility(ies)  shall have
been executed  by each Guarantor,  delivered to  Lender, and  be in full
force  and effect.
 
(5) Lender, at its option and for its sole benefit, shall have conducted an
audit of Borrower's  Inventory,  books,  records,  and  operations, and Lender
shall be satisfied as to their   condition.
 
(6) Borrower shall have paid to Lender all fees, costs, and expenses specified
in this Agreement  and the  Related Documents as are  then due and payable.
 
(7) There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement, and Borrower shall have
delivered to Lender the compliance certificate called for in the paragraph below
titled "Compliance Certificate."
 
Making Loan Advances. Advances under this credit facility, as well as directions
for payment from Borrower's accounts,  may be requested  orally or in writing by
authorized persons . Lender  may, but need not, require that  all oral
requests  be confirmed  in writing.  Each Advance  shall be conclusively deemed
to have been made at the request of and for the benefit  of  Borrower  (
1)  when  credited to  any  deposit  account of  Borrower maintained with Lender
or  (2)  when advanced in accordance  with the instructions of an
authorized  person.  Lender, at  its option, may set a cutoff time, after which
all requests for Advances will be treated as  having been requested on the  next
succeeding Business Day.
 
Mandatory Loan Repayments. If at any time the aggregate principal amount of the
outstanding Advances shall exceed  the  applicable  Borrowing Base, Borrower,
immediately upon written or oral notice from Lender, shall pay to Lender  an
amount  equal to  the difference  between the outstanding principal balance of
the Advances  and the  Borrowing  Base.  On the  Expiration Date,
Borrower  shall pay to  Lender in full the aggregate unpaid principal amount of
all Advances then outstanding and all accrued unpaid
interest,  together  with  all  other applicable fees, costs and charges, if
any, not yet   paid.
 
Loan Account. Lender shall maintain on its books a record of account in which
Lender shall make entries for each Advance and such other debits and credits as
shall be appropriate in connection with the credit facility . Lender shall
provide Borrower with periodic statements of Borrower's account, which
statements shall be considered to be correct and  conclusively  binding
on  Borrower  unless  Borrower  notifies Lender to the  contrary  within
thirty  (30) days  after  Borrower's  receipt of  any  such statement  which
Borrower deems to be incorrect .
 
COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loans, obligations and duties owed by Borrower to Lender, Borrower
(and others, if required) shall grant to Lender Security Interests in such
property and assets as Lender may require. Lender's Security Interests in the
Collateral shall be continuing liens and shall include the proceeds and products
of the  Collateral,  including  without  limitation the proceeds of any
insurance.       With respect to the Collateral, Borrower agrees and represents
and warrants to Lender :
 
Perfection of Security Interests. Borrower agrees to execute
all  documents  perfecting  Lender's  Security  Interest  and  to  take  whatever
actions are requested by Lender to perfect and continue Lender's Security
Interests in the Collateral. Upon request of Lender, Borrower will deliver to
Lender any and all of the documents evidencing or  constituting  the
Collateral,  and Borrower  will note Lender's interest  upon any  and all
chattel paper and instruments if not delivered to Lender for possession by
Lender. Contemporaneous with the execution of this Agreement, Borrower will
execute one or more UCC financing statements and any similar statements  as may
be required by applicable  law,  and Lender will file such financing statements
and all such similar statements in the appropriate location
or  locations.  Borrower  hereby  appoints  Lender  as  its
irrevocable  attorney-in-fact  for  the  purpose  of  executing  any  documents  necessary  to  perfect
or  to continue  any Security Interest. Lender may at any time, and without
further authorization from Borrower, file a carbon, photograph, facsimile, or
other reproduction of any financing statement for use as a financing statement.
Borrower  will  reimburse  Lender  for  all  expenses  for  the  perfection,
termination, and the continuation of the perfection of Lender's security
interest in the Collateral.  Borrower  promptly  will notify  Lender before any
change in Borrower's name including any change to the assumed business names
of  Borrower.  Borrower  also promptly   will notify Lender before any change in
Borrower's Social Security Number or Employer  Identification Number.  Borrower
further  agrees to  notify Lender in writing prior to any change in address or
location of Borrower's principal governance office or should Borrower merge or
consolidate  with any  other entity.
 
Collateral Records. Borrower does now, and at all times hereafter shall, keep
correct and accurate records of the  Collateral,  all of  which  records shall
be available to Lender or Lender's representative upon demand
for  inspection  and  copying  at  any  reasonable  time.  With respect to the
Inventory, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible Inventory
and records itemizing and describing the  kind, type,  quality,  and
quantity  of  Inventory, Borrower's  Inventory costs  and selling prices,  and
the daily  withdrawals  and additions to  Inventory.  Records  related
to  Inventory are or will  be located at  1900  SE Loop 820, Fort Worth, TX
76140. The above is an accurate and complete list of all locations at which
Borrower  keeps  or  maintains  business records concerning  Borrower's
collateral.
 
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall  execute  and  deliver  to  Lender  schedules of
Inventory and schedules of Eligible Inventory in form and substance satisfactory
to the Lender.  Thereafter  supplemental  schedules  shall be
delivered  according to the following  schedule:   With respect
to  Eligible  Inventory, schedules  shall be delivered   Forty-five (45) days
after the end of each quarter and consist of a borrowing base report.
 
Representations and Warranties Concerning Inventory. With respect to the
Inventory,  Borrower  represents  and  warrants  to  Lender:  (1)  All Inventory
represented by Borrower to be Eligible Inventory for purposes of
this  Agreement  conforms  to  the  requirements  of  the  definition  of 
Eligible Inventory; (2) All Inventory values listed
on  schedules  delivered  to  Lender  will  be  true  and  correct,  subject  to  immaterial
variance; (3)  The value of the  Inventory will  be determined  on a consistent
accounting  basis;  (4)  Except as agreed to the contrary  by Lender
in  writing, all Eligible Inventory is now and at all times hereafter will be in
Borrower's physical possession and shall not be held by others on consignment,
sale on approval, or sale or return; (5) Except  as  reflected  in
the  Inventory  schedules  delivered  to  Lender,  all  Eligible Inventory is
now  and at  all times  hereafter  will  be of good and merchantable  quality,
free  from defects;  (6)  Eligible  Inventory  is not now  and will not at any
time hereafter be stored with a  bailee,  warehouseman,  or
similar  party  without  Lender's prior  written consent,  and,  in such
event,  Borrower  will concurrently  at the time of bailment  cause  any such
bailee, warehouseman,  or similar  party to issue and deliver   to Lender, in
form acceptable to Lender, warehouse receipts in Lender name
evidencing  the  storage  of  Inventory;  and  (7)  Lender,  its assigns, or
agents shall  have the  right at any time  and at  Borrower's expense to inspect
and examine the  Inventory and to check and test    the same as to quality,
quantity, value,  and   condition.
 
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement  and  in the  Related Documents.
 
Loan Documents. Borrower shall provide to
Lender  the  following  documents  for  the  Loan:  ( 1)  the  Note;  (
2)  Security  Agreements granting to Lender security interests in the
Collateral; (3) financing statements
and  all  other  documents  perfecting  Lender's  Security Interests; (4)
evidence of insurance  as  required
below;  (5)  guaranties;  (6)  together  with all such Related
Documents  as  Lender  may require for the Loan; all in form and
substance  satisfactory  to Lender and Lender's   counsel.
 
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related
Documents.  In addition,  Borrower  shall have provided  such other resolutions,
authorizations,  documents and instruments as Lender or its counsel,    may
require.
 
Fees and Expenses  Under This Agreement.  Borrower shall have paid to  Lender
all fees,  costs, and expenses  specified in this Agreement  and the Related
Documents as are then due and  payable.
 
Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or
certificate  delivered to Lender under this Agreement  are true and   correct.
 
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement or
under any Related  Document.
 
Limitation on Advances. Notwithstanding anything to the contrary contained
herein, availability under the revolving line of credit may be reduced by the
amount of unrealized losses related to foreign exchange transactions entered
into by Borrower.
 
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
 
Organization. Borrower is a corporation for profit which is, and at all
times  shall be, duly organized,  validly  existing,  and in good
standing  under and by virtue of the laws of the State of Delaware. Borrower is
duly  authorized  to  transact  business  in all  other  states  in which
Borrower is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which  Borrower is  doing
business.  Specifically,  Borrower  is, and at all times shall be, duly
qualified as a foreign corporation  in all states  in which the failure to   so
qualify would have a material adverse effect on its business or financial
condition. Borrower has the full power and authority to own its properties and
to transact the business in which it is presently engaged or presently  proposes
to  engage.  Borrower  maintains  an office  at 1900 SE Loop 820, Fort
Worth,  TX  76140.  Unless  Borrower  has  designated  otherwise  in
writing,  the  principal  office  is the  office  at  which Borrower  keeps its
books and records including its records concerning the Collateral.   Borrower
will notify Lender prior to any change     in the  location of  Borrower's state
of organization  or any change  in Borrower's name.  Borrower  shall do all
things  necessary  to  preserve  and to keep in full force and effect its
existence, rights and privileges,  and shall  comply  with all
regulations,  rules,  ordinances,  statutes,  orders and decrees of any
governmental or quasi-governmental authority or court applicable to Borrower and
Borrower's business activities.
 
Assumed Business Names.  Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by Borrower. 
Excluding the name of Borrower, the following is a complete list of all assumed
business names under which Borrower does business:  None.
 
Authorization.  Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a violation of,
or constitute a default under (1) any provision of (a) Borrower's articles of
incorporation or organization, or bylaws, or (b) any agreement or other
instrument binding upon Borrower or (2) any law, governmental regulation, court
decree, or order applicable to Borrower or to Borrower's properties.

 

 
Financial Information. Each of Borrower's financial statements supplied to
Lender truly and  completely  disclosed  Borrower's  financial  condition as of
the date of the statement, and there  has been no material adverse  change  in
Borrower's  financial  condition  subsequent to  the date of the most recent
financial statement supplied to Linder.  Borrower  has no material
contingent  obligations  except  as disclosed in such financial statements.
 
Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to  give  under  this  Agreement  when delivered will
constitute legal, valid, and binding obligations of Borrower enforceable against
Borrower in accordance with their  respective  terms.
 
Properties. Except as contemplated by this Agreement  or as
previously  disclosed in Borrower's financial statements  or in writing
to  Lender  and as accepted by Lender, and except for  property tax  liens for
taxes  not presently due and payable, Borrower owns and has good title to  all
of Borrower's properties free and clear of all Security Interests, and has not
executed any security documents  or financing  statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal name,
and Borrower has not used or filed a financing statement  under any other name
for at least the last five (5)   years.
 
Hazardous Substances.  Except as disclosed to and acknowledged  by Lender in
writing, Borrower represents and warrants that:  (1)  During  the period
of  Borrower's ownership of the Collateral, there  has been no use,
generation,  manufacture, storage, treatment,  disposal,  release  or threatened
release of any Hazardous Substance by any person on, under, about or from any of
the Collateral. ( 2) Borrower has no knowledge of, or reason to believe that
there has been (a) any breach or violation of any Environmental Laws; (b) any
use, generation, manufacture , storage, treatment, disposal, release or
threatened release of any Hazardous Substance
on,  under,  about  or  from  the  Collateral by any prior owners or occupants
of any of the Collateral; or (c)  any actual or threatened litigation or claims
of any  kind by any  person relating to such matters. (3)  Neither  Borrower
nor  any  tenant,  contractor,  agent or other authorized  user of any
of  the  Collateral  shall use, generate, manufacture, store, treat, dispose of
or release any Hazardous Substance
on,  under,  about  or  from  any  of  the  Collateral; and any such activity
shall be conducted in compliance with all applicable federal, state, and
local  laws,  regulations,  and  ordinances, including without limitation all
Environmental Laws. Borrower authorizes Lender  and its agents  to enter  upon
the  Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with
this  section  of  the Agreement. Any inspections or tests made by Lender shall
be at Borrower's expense and for Lender's purposes only  and shall  not
be  construed to create any responsibility or liability on the part of Lender to
Borrower  or  to  any  other  person.  The  representations  and warranties
contained herein are based on Borrower's due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby ( 1)
releases and waives
any  future  claims  against  Lender  for  indemnity  or  contribution  in  the  event
Borrower becomes liable for cleanup or other costs under any such laws, and (2)
agrees to indemnify, defend, and hold harmless Lender  against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender may
directly or indirectly sustain or suffer  resulting from a breach of this
section of the Agreement or as  a  consequence  of  any  use,
generation,  manufacture,  storage,  disposal, release or threatened release of
a hazardous waste or substance on the
Collateral.  The  provisions  of  this  section  of  the  Agreement, including
the obligation to indemnify and defend, shall survive the
payment  of  the  Indebtedness  and  the  termination,  expiration  or
satisfaction of this Agreement and shall not be affected by Lender's acquisition
of any interest
in  any  of  the  Collateral,  whether  by  foreclosure  or otherwise.
 
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding  or  similar  action  (including  those  for  unpaid  taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower's financial  condition or properties, other
than litigation, claims, or other events, if any, that have been disclosed to
and acknowledged  by  Lender  in  writing.
 
Taxes. To the  best of  Borrower's  knowledge,  all of  Borrower's  tax  returns
and reports that  are or  were  required to be filed, have  been  filed, and all
taxes, assessments and other governmental charges have been paid in full, except
those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate reserves have been provided.
 
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower  has  not  entered  into  or  granted  any  Security  Agreements, or
permitted the filing or attachment of any Security Interests
on  or  affecting  any  of  the  Collateral  directly  or  indirectly  securing
repayment of Borrower's Loan and Note, that would be prior or that may in any
way be superior to Lender's Security Interests and  rights in and to such
Collateral.
 
Binding Effect. This Agreement, the Note, all Security Agreements (if any),
and  all  Related  Documents  are  binding  upon the  signers  thereof, as well
as upon their successors, representatives and assigns, and
are  legally  enforceable  in accordance  with their  respective  terms.
 
AFFIRMATIVE COVENANTS.      Borrower covenants and agrees with Lender that, so
long as this Agreement  remains in effect, Borrower will:
 
Notices of Claims and Litigation.  Promptly  inform  Lender  in
writing  of  (1)  all material adverse  changes  in Borrower's  financial
condition,  and (2) all existing and all threatened litigation, claims,
investigations,  administrative  proceedings  or
similar  actions  affecting  Borrower  or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
 
Financial Records. Maintain its books and records  in
accordance  with  GAAP,  applied  on  a  consistent  basis,  and  permit  Lender  to  examine  and  audit  Borrower's  books  and  records  at
all  reasonable times .
 
Financial Statements. Furnish Lender with such financial statements and other
related information at such frequencies and in such detail as Lender may
reasonably request.
 
Additional  Information.   Furnish such additional information and
statements,  as Lender may request from time to    time.
 
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require  with  respect to  Borrower's
properties and operations, in form, amounts,
and  coverages  reasonably  acceptable  to  Lender  and  by  insurance  companies  authorized
to transact business in Texas . BORROWER MAY FURNISH THE INSURANCE REQUIRED BY
THIS AGREEMENT  WHETHER
THROUGH   EXISTING  POLICIES   OWNED  OR  CONTROLLED   BY   BORROWER   OR  THROUGH   EQUIVALENT   COVERAGE   FROM ANY
 
INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS . Borrower, upon
request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form
satisfactory  to  Lender,  including  stipulations  that  coverages  will  not  be  cancelled
or diminished without at least ten ( 10) days prior written notice to Lender.
Each  insurance  policy  also  shall  include  an  endorsement providing that
coverage in favor of Lender will not be impaired in any way by any  act,
omission or default of  Borrower or any  other person. In connection with all
policies covering assets  in which  Lender  holds or is offered  a
security  interest for  the  Loans, Borrower will provide Lender with such
lender's loss payable or other endorsements  as Lender may   require.
 
Insurance Reports. Furnish to Lender, upon request of Lender, reports  on each
existing  insurance  policy  showing  such  information  as Lender may
reasonably request, including without  limitation
the  following:  (1)  the  name
of  the  insurer;  (2)  the  risks  insured;  (3)  the amount  of the
policy;  (4)  the  properties  insured;  (5)  the then current property  values
on the basis of which insurance has been obtained,  and the manner of
determining those values; and (6)  the expiration date of the  policy.  In
addition,  upon request of  Lender  (however  not  more often than annually),
Borrower will have an independent appraiser satisfactory to  Lender
determine,  as applicable,  the  actual  cash  value or replacement cost of any
Collateral.      The cost of such appraisal shall be paid by Borrower.
 
Guaranties.      Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor  of Lender, executed by the
guarantors named below, on Lender's forms, and in the amounts and under the conditions set forth in those guaranties.
 

 Name of Guarantors Amounts  The Leather Factory, Inc. (AZ) Unlimited  Roberts,
Cushman and Company, Inc.  Unlimited
 Tandy Leather Factory Espana, SL
 Unlimited  Tandy Leather Factory UK Limited  Unlimited  Tandy Leather Factory
Autralia PTY LTD  Unlimited  The Leather Factory of Canada Ltd.  Unlimited
 Tandy Letaher Company Investments, Inc.  Unlimited  The Leatther Factory, Inc.
(NV)  Unlimited  Hi-Line Leather & Manufacturing Company  Unlimited  The Leather
Factory, L.P.  Unlimited  The Leather Factory of Neada investments, Inc.
 Unlimited  Tandy Leather Company, Inc.  Unlimited  Tandy Leather Company, L.P.
 Unlimited

 
 
Other Agreements. Comply with all terms and conditions  of  all
other  agreements,  whether  now  or  hereafter  existing,  between Borrower and
any other party and notify  Lender immediately  in writing of any default in
connection  with any    other such agreements.
 
Loan Proceeds. Use all Loan proceeds solely tor Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
 
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, it unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits. Provided
however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as ( 1) the legality of the same shall
be contested in good faith by appropriate proceedings, and (2) Borrower
shall have established on Borrower's books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with GAAP.
 
Performance. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements
between  Borrower  and  Lender.  Borrower  shall  notify  Lender  immediately  in
writing  of  any default  in connection  with any agreement.
 
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience  as  the  present  executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner.
 
Environmental Studies. Promptly conduct and complete, at Borrower's expense, all
such  investigations,  studies,  samplings  and testings  as may be requested by
Lender or any governmental authority  relative to any substance,  or
any  waste  or by-product of any substance  defined  as toxic or a hazardous
substance under applicable federal, state, or
local  law,  rule,  regulation,  order  or  directive,  at  or  affecting  any
property or any facility  owned, leased or used by   Borrower.
 
Compliance with Governmental Requirements. Comply with all laws, ordinances, and
regulations, now or hereafter in effect,  of  all  governmental authorities
applicable to the conduct of Borrower's properties, businesses and operations,
and to the use or occupancy of the Collateral,  including  without  limitation,
the Americans  With  Disabilities  Act.  Borrower  may  contest  in good
faith  any  such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals,  so long as  Borrower  has
notified Lender in  writing prior to doing so and so long as, in
Lender's  sole  opinion,  Lender's interests  in the  Collateral  are  not
jeopardized.  Lender  may require Borrower to post adequate security  or a
surety  bond, reasonably  satisfactory to Lender, to    protect Lender's
interest.
 
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral tor the Loan or  Loans  and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of  Borrower's books, accounts, and records. It
Borrower now or at any time hereafter
maintains  any  records  (including  without  limitation computer generated
records and computer software programs tor the generation of such records) in
the possession  of  a  third  party,  Borrower, upon request of Lender, shall
notify such party to permit  Lender tree  access  to  such records  at all
reasonable  times  and
to  provide Lender with copies of any records it may request, all at Borrower's expense.
 
Compliance Certificates. Unless waived in writing by Lender, provide  Lender
within forty-five  (45) days  after the end of each fiscal quarter,  with a
certificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that  the  representations  and
warranties  set forth  in this  Agreement  are true  and correct as of the  date
of the certificate  and further  certifying that,  as of the date of the
certificate,  no Event of    Default exists under this Agreement.
 
Environmental Compliance and Reports. Borrower shall comply in all respects with
any and all Environmental Laws; not cause or  permit to  exist, as a result of
an intentional or unintentional action or omission  on  Borrower's  part or  on
the  part of  any  third  party,  on property  owned and/or occupied by
Borrower, any environmental activity where damage may result to the environment,
unless such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state  or  local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty  (30)  days  after  receipt thereof  a  copy  of
any  notice,  summons, lien, citation, directive, letter or other communication
from any governmental agency or instrumentality concerning any intentional
or  unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment  and/or
other natural resources.
 
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security Interests.
 
Financial Statements.  Furnish Lender with the following:
 
For Borrower:
 
Annual  Business  Financial Statements.  As  soon as  available  but  in no
event  later  than  one  hundred  twenty  ( 120)  days  after  the  end of  each
fiscal year, annual financial statements, including a balance sheet and profit
and loss statement for the period ended, audited by a certified public
accountant  satisfactory  to Lender.
 
Interim Business Financial Statements. As soon as available but in no event
later than forty-five (45) days after the end of each quarter, consolidated
financial statements, including a balance sheet and profit and loss statement
for  the  period  ended,  prepared  in  form  satisfactory  to Lender.
 
All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.

 
Financial  Covenants  and Ratios.
 
Comply  with the following  covenants  and ratios:
 
Fixed Charge Coverage Ratio. Borrower must maintain a Fixed Charge Coverage
Ratio greater than or equal to 1 .20 to 1 .00, calculated quarterly  on the
consolidated financial statements of Borrower and based on a trailing four
quarter basis.  Fixed Charge coverage  Ratio shall  be defined as net income
plus interest expense plus taxes plus depreciation and amortization minus cash
taxes paid minus cash capital expenditures minus distributions divided by
current maturities of long term debt and current maturities of  long
term  leases  plus  interest expense .
 
Funded Debt to EBITDA. Borrower must maintain a funded debt to
EBITDA  (Earnings  before Interest Taxes  Depreciation Amortization)  ratio  of
no greater than 1.50 to 1.00, calculated quarterly on the consolidated financial
statements  of  Borrower  and  based on  a  trailing  four  quarter basis.
 
Except as provided above, all computations made to determine compliance with
requirements  contained  in the  above  Financial Covenants  and Ratios shall be
made in accordance with generally accepted accounting principles, applied on
a  consistent  basis,  and  certified  by Borrower as being true and  correct.
 
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline,  or the  interpretation  or  application of any
thereof by any court or administrative or governmental
authority  (including  any  request or policy  not having the
force  of  law)  shall impose, modify or make applicable any taxes (except
federal, state or local income or franchise taxes imposed on Lender), reserve
requirements, capital adequacy requirements or other obligations which
would  (A)  increase the cost to Lender tor  extending or maintaining
the  credit facilities to  which this Agreement  relates,   (B)   reduce the
amounts  payable to  Lender  under this Agreement  or   the  Related Documents,
or (C) reduce the rate of return on Lender's capital as a consequence of
Lender's obligations with respect to the credit facilities to which this
Agreement relates, then Borrower agrees to pay Lender such additional amounts as
will compensate Lender therefor, within five (5) days after Lender's written
demand for such payment, which demand shall be accompanied by an
explanation  of  such  imposition  or  charge  and  a  calculation in reasonable
detail of the additional amounts payable by Borrower, which explanation and
calculations shall  be conclusive  in the  absence of manifest error.
 
LENDER 'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the  Collateral  or  it  Borrower fails
to comply with any provision of this Agreement or any Related Documents,
including  but  not  limited  to  Borrower's  failure  to discharge or pay when
due any amounts Borrower is required to discharge or pay under this Agreement or
any Related Documents, Lender on Borrower's behalf may (but shall not be
obligated to) take any action that Lender deems  appropriate,  including but not
limited to discharging or  paying all taxes, liens, security interests,
encumbrances and other claims, at any time levied or placed on any Collateral
and paying all costs for insuring, maintaining and
preserving  any  Collateral.  All such expenditures  paid by Lender for such
purposes will then bear interest at the  Note   rate from the date paid by
Lender to the date of repayment by Borrower.  To
the  extent  permitted  by  applicable  law, all such  expenses  will  become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any  installment payments to become due during either   ( 1)  the term of
any applicable  insurance  policy;   or   (2)  the remaining term of the Note;
or   (C)       be treated as a balloon payment which will be due and payable at
the Note's maturity .
 
NEGATIVE COVENANTS. Borrower covenants and agrees with  Lender
that  while  this  Agreement  is in effect,  Borrower  shall not, without  the
prior written  consent of Lender:
 
Indebtedness and Liens. (1)  Except for trade debt incurred in the normal course
of business and indebtedness  to Lender contemplated  by  this Agreement,
create, incur or assume additional indebtedness for borrowed money, including
capital leases, in excess of the aggregate amount of $250,000.00,  (2)  sell,
transfer,  mortgage, assign,  pledge, lease, grant  a security  interest in, or
encumber  any of  Borrower's  assets  (except as allowed as Permitted Liens),
or   (3)  sell with recourse any of Borrower's accounts, except to Lender.
 
Continuity  of Operations.   (1)   Engage in
any  business  activities  substantially  different  than those  in
which  Borrower  is presently engaged, (2) cease operations, liquidate, merge,
transfer, acquire or consolidate with any other entity, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of business,
or (3) pay any dividends on Borrower's stock (other than dividends payable in
its stock), provided, however that notwithstanding the foregoing,  but
only  so  long  as no  Event of  Default has occurred and is
continuing  or  would  result from the payment of dividends, if Borrower is a
"Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as
amended), Borrower may pay cash dividends on its stock to its shareholders from
time to time in amounts necessary  to  enable  the  shareholders to pay income
taxes and make estimated income tax payments to
satisfy  their  liabilities  under  federal  and state  law  which  arise solely
from their status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of Borrower's stock, or
purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure .
 
Loans, Acquisitions and Guaranties. ( 1) Except as expressly stated hereafter,
loan, invest in or advance  money  or  assets to  any  other person, enterprise
or entity, (2)  purchase, create or acquire any  interest in any  other
enterprise  or entity, or  (3)  incur any  obligation  as  surety or guarantor
other than in the ordinary course of business. The following exceptions are
expressly exempted from the foregoing restrictions:     $250,000.00.
 
Agreements. Enter into any agreement containing any provisions which would be
violated or breached by the performance of Borrower's obligations  under this
Agreement  or  in connection herewith.
 
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether  under this Agreement or under any  other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor  is in  default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower  or
any  Guarantor  has  with Lender;   (B)   Borrower or any Guarantor  dies,
becomes  incompetent or becomes insolvent, files a petition in bankruptcy  or
similar proceedings,    or is adjudged a bankrupt; (C) there occurs a material
adverse change in  Borrower's  financial  condition,  in
the  financial  condition  of  any Guarantor, or in the value of any Collateral
securing any  Loan; or  (D)  any  Guarantor  seeks,  claims or
otherwise  attempts  to limit, modify or  revoke such Guarantor's guaranty of
the Loan or any other loan with Lender; or  (E)  Lender in good faith
deems  itself insecure, even though no  Event of Default shall have  occurred.
 
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings,  or some other  account).   This  includes all
accounts  Borrower  holds jointly  with someone  else and all accounts  Borrower
may open in the future. However, this does not include any IRA or  Keogh
accounts, or any  trust  accounts  for  which setoff  would  be
prohibited  by  law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff  all sums owing on the
Indebtedness  against  any  and all such accounts.
 
DEFAULT.  Each of the following shall constitute an Event of Default under this
Agreement: 
 

Payment Default.  Borrower fails to make any payment when due under the Loan.
 
Other  Defaults.  Borrower  fails to comply  with or to  perform any  other
term, obligation,  covenant  or condition contained in this Agreement   or in
any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other  agreement between
Lender and Borrower.
 
Default in Favor of Third Parties. Borrower or any Grantor defaults
under  any  loan, extension  of credit, security  agreement,  purchase  or sales
agreement, or any other agreement, in favor of any other creditor or person that
may materially affect  any of  Borrower's  or  any  Grantor's property or
Borrower's or any Grantor's ability to repay the Loans or  perform
their  respective obligations  under this  Agreement  or any of the Related
Documents .
 
False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time  thereafter.
 
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a  receiver for any
part of Borrower's property, any assignment for the benefit
of  creditors,  any  type  of  creditor  workout,  or  the  commencement  of any
proceeding under any bankruptcy or insolvency laws by or against    Borrower.
 
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
 
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower  or by any
governmental  agency  against  any  collateral securing the  Loan.  This
includes a garnishment of any of  Borrower's accounts, including
deposit  accounts,  with  Lender.  However, this  Event of  Default shall  not
apply if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture  proceeding  and if Borrower gives Lender written notice of the
creditor  or forfeiture  proceeding and deposits with Lender monies or    a
surety bond for the creditor or forfeiture proceeding, in an amount
determined  by  Lender,  in its sole  discretion,  as  being  an adequate
reserve or bond for the  dispute.
 
Events Affecting Guarantor. Any of the preceding events occurs with respect
to  any  Guarantor  of  any  of  the  Indebtedness  or  any  Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.
 
Change in Ownership.  Any  change  in ownership  of twenty-five  percent (
25%)  or  more of the common stock of  Borrower.
 
Adverse Change.  A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the Loan
is impaired.

 
Insecurity.   Lender in good faith believes itself  insecure.
 
Right to Cure. If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been  given a notice of
a similar default within the preceding  twelve  (12)  months, it may  be cured
if Borrower or  Grantor,  as the  case  may  be,  after Lender sends written
notice to Borrower or Grantor, as the case may be, demanding cure of such
default:  (1)  cure the default within  twenty (20) days; or ( 2) if the cure
requires more than twenty (20) days, immediately initiate steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continue and complete all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
 
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise.  Except as  may  be prohibited  by  applicable  law, all of  Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently.  Election by  Lender to pursue any  remedy shall not  exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to  perform an obligation  of  Borrower  or  of  any  Grantor shall not
affect  Lender's right to declare a default and to exercise  its rights    and
remedies.
 
ADDENDUM TO BUSINESS LOAN AGREEMENT. An exhibit, titled "Addendum to Business
Loan Agreement," is attached to this Agreement and by this reference is made a
part of this Agreement just as if all the provisions, terms and conditions of
the Exhibit had been fully set forth in this Agreement .
 
MISCELLANEOUS  PROVISIONS.   The  following  miscellaneous  provisions  are  a  part
of  this Agreement:

 
Amendments.  This Agreement,  together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.
 
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's
costs  and  expenses,  including  Lender's  reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this  Agreement.  Lender  may  hire  or  pay someone else to help enforce this
Agreement, and Borrower shall pay the costs and expenses of such enforcement .
Costs and expenses include Lender's reasonable attorneys' fees and legal
expenses  whether  or not there  is a  lawsuit, including  Lender's  reasonable
attorneys' fees and legal expenses for bankruptcy  proceedings  (including
efforts to modify or vacate  any  automatic  stay or injunction),
appeals,  and  any  anticipated  post-judgment  collection services .  Borrower
also shall pay all court costs and such additional  fees  as may  be directed
by  the court.
 
Caption Heading.  Caption heading in this Agreement are for convenience purposes
only and are not to e used to interpret or define the provisions of this
Agreement.
 
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer,  whether  now  or  later,  of  one  or  more  participation interests
in the Loan to one or more purchasers, whether related or unrelated to Lender.
Lender  may provide, without  any  limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information
or  knowledge  Lender  may  have  about Borrower or about any other matter
relating to the Loan, and Borrower hereby waives any rights to privacy Borrower
may have with respect to such matters.   Borrower additionally  waives  any and
all notices of sale of participation interests, as well as all notices of
any  repurchase     of such participation interests. Borrower also agrees that
the purchasers of any  such  participation  interests  will  be considered  as
the  absolute owners of such interests in the Loan and will have all the rights
granted  under  the  participation  agreement  or  agreements  governing the
sale of such participation interests. Borrower further waives all rights of
offset or counterclaim  that it may have now or later  against Lender or against
any purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the Loan
irrespective of the failure or insolvency of any holder of any  interest in
the  Loan.  Borrower  further agrees that the purchaser of any such
participation interests may enforce
its  interests  irrespective  of  any  personal  claims  or  defenses that
Borrower may have against  Lender.
 
Governing Law. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Texas without regard to its conflicts of law provisions. This Agreement has been
accepted by Lender in the State of Texas.
 
Choice of Venue.  If there is a lawsuit, and if the transaction evidenced by
this Agreement occurred in Dallas County, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Dallas County, State of Texas.

 
No Waiver by Lender. Lender shall not be deemed to  have waived  any  rights
under this Agreement  unless  such waiver  is given in writing and signed by
Lender. No delay or omission on the part of  Lender  in exercising  any  right
shall operate  as  a waiver  of such right or  any  other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute  a
waiver  of  Lender's  right otherwise  to demand strict compliance with that
provision or any other provision
of  this  Agreement.  No  prior  waiver  by  Lender,  nor  any  course  of
dealing between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any of Borrower's or any
Grantor's obligations as to any  future transactions.  Whenever  the  consent
of  Lender  is required under this  Agreement,  the granting of such consent by
Lender in any instance shall not constitute continuing consent to
subsequent  instances where such consent     is required and in all cases such
consent may be granted or withheld  in the sole discretion of   Lender.
 
Notices. Any notice required to be given under this  Agreement  shall  be
given  in writing, and  shall  be effective  when  actually  delivered, when
actually received by telefacsimile  (unless otherwise  required by law). when
deposited  with a  nationally  recognized overnight  courier,  or, if mailed,
when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any  party may change its address for notices under
this Agreement  by giving formal written  notice to the other parties,
specifying that  the  purpose  of  the  notice  is
to  change  the  party's  address.  For  notice  purposes,  Borrower agrees to
keep Lender  informed at all times of  Borrower's current address.  Unless
otherwise  provided or required by law, if there  is
more  than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.
 
Payment of Interest and Fees. Notwithstanding any other provision of this
Agreement or any provision of any  Related Document, Borrower  does not agree or
intend to pay, and Lender does not agree or intend to charge,
collect,  take,  reserve or  receive  (collectively  referred to  herein as
"charge or collect"), any amount in the nature of interest or in the nature of a
fee for the Loan which would in any way  or event (including demand, prepayment,
or acceleration) cause Lender to contract
for,  charge  or  collect  more  for  the  Loan than  the  maximum Lender would
be permitted to charge or collect by any applicable federal or Texas
state  law.  Any  such excess  interest or unauthorized fee  will, instead of
anything stated to the  contrary,  be applied  first to  reduce the  unpaid
principal balance of the  Loan, and when the  principal  has been paid in
full,  be refunded to Borrower.
 
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending  provision illegal,  invalid, or
unenforceable  as to any  other  circumstance.  If feasible, the offending
provision shall be considered modified so that it becomes legal, valid and
enforceable. If the offending provision cannot be so modified,  it shall be
considered deleted from this Agreement.   Unless otherwise  required by law,
the  illegality, invalidity, or  unenforceability   of  any  provision of this
Agreement  shall not affect the  legality, validity  or enforceability  of  any
other  provision of this  Agreement.
 
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this  Agreement  makes  it appropriate,  including without
limitation any representation, warranty or covenant, the word "Borrower" as used
in this Agreement shall include all of Borrower's subsidiaries and affiliates.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any of Borrower's subsidiaries or affiliates.
 
Successors and Assigns. All covenants and agreements by or on behalf of
Borrower  contained  in  this  Agreement  or  any  Related  Documents shall bind
Borrower's successors and assigns and shall inure to the benefit of Lender and
its successors and assigns. Borrower  shall not, however, have the right to
assign Borrower's rights
under  this  Agreement  or  any  interest  therein,  without  the  prior  written  consent
of Lender.
 
Survival of Representations and Warranties. Borrower understands and agrees that
in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate  or  other  instrument  delivered  by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless of
any investigation made by Lender, all such representations, warranties and
covenants will survive the extension of  Loan
Advances  and  delivery  to  Lender  of  the Related Documents, shall be
continuing in nature, shall be deemed made and redated by Borrower at the time
each Loan Advance is made,   and shall remain in full force and effect until
such time as Borrower's Indebtedness shall be paid in full, or until this
Agreement  shall  be terminated in the  manner provided above, whichever  is
the  last to  occur.
 
Time is of the Essence.  Time  is of the essence  in the performance of
this  Agreement.
 
Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.
 
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this  Agreement.  Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the  United States of America.  Words  and terms  used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this   Agreement:
 
Advance. The word "Advance" means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrower's  behalf  under the  terms  and conditions of
this Agreement .
 
Agreement.  The word "Agreement" means this Business Loan Agreement (Asset
Bsed), as this Business Loan Agreement (Asset Based) may be amended or modified
from time to time, together with all exhibits and schedules attached to this
Business Loan Agreement (Asset Based) from time to time.

 
Borrower. The word "Borrower" means Tandy Leather Factory, Inc. and includes all
co-signers and co-makers signing the Note and all their successors and assigns.
 
Borrowing Base. The words "Borrowing Base" mean As determined by Lender from
time to time, the lesser of (1) $6,000,000.00 or ( 2) 50.000% of the aggregate
amount of Eligible Inventory.
 
Notwithstanding the above, availability under the Borrowing Base may be reduced
by the amount of unrealized losses related to  foreign
exchange  transactions  entered into by Borrower.
 
Business Day.  The words  "Business Day" mean a day on which commercial banks
are open in the State of   Texas.
 
Collateral. The word "Collateral" means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future,
and  whether  granted  in  the  form  of  a  security  interest,  mortgage,
collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel  mortgage,  chattel trust, factor's lien, equipment
trust, conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract, or
otherwise. The word Collateral also includes without  limitation all collateral
described  in the  Collateral section of this  Agreement.
 
Eligible Inventory.      The words  "Eligible Inventory" mean, at any time, all
of Borrower's Inventory as defined below, except:
 
( 1)   Inventory  which is not owned by Borrower free  and clear of  all
security  interests, liens, encumbrances,  and claims of third    parties.
 
(2)   Inventory which  Lender, in its sole discretion,  deems to be
obsolete,  unsalable, damaged, defective, or unfit for  further    processing.

 
Environmental Laws. The words "Environmental Laws" mean any and all state,
federal and  local statutes,  regulations  and  ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"),  the  Hazardous  Materials
Transportation  Act,  49  U.S.C.  Section  1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other  applicable  state  or  federal  laws,  rules,  or  regulations  adopted
pursuant thereto.
 
Event of Default. The words "Event of Default" mean any of the events of default
set forth in this Agreement in the default section of this Agreement.
 
Expiration Date.  The words  "Expiration  Date"  mean the date of termination
of  Lender's commitment to lend under this  Agreement.
 
GAAP.  The word "GAAP"  means generally  accepted accounting  principles.
 
Grantor. The word "Grantor" means each and all of the persons or entities
granting  a  Security  Interest in any  Collateral for
the  Loan,  including  without  limitation all Borrowers  granting  such
a  Security Interest.
 
Guarantor.  The word    "Guarantor"  means any guarantor, surety, or
accommodation  party of any or all of the Loan.
 
Guaranty. The word "Guaranty" means the guaranty from Guarantor to  Lender,
including without  limitation a guaranty  of all or  part of the Note.
 
Hazardous Substances. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential
hazard  to  human  health  or  the  environment  when  improperly used, treated,
stored, disposed of, generated, manufactured, transported or otherwise handled.
The  words  "Hazardous  Substances" are used in their very broadest sense and
include without limitation any and all hazardous  or
toxic  substances,  materials  or  waste as defined by or listed under the
Environmental Laws. The term "Hazardous Substances"  also includes,
without  limitation, petroleum  and petroleum by-products or any fraction
thereof  and  asbestos.
 
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other  indebtedness  and costs and expenses for  which Borrower  is
responsible  under this Agreement  or under  any  of the Related Documents.
 
Inventory. The word  "Inventory"  means  all of  Borrower's raw  materials,
work  in process, finished  goods,  merchandise,  parts and supplies, of every
kind and description, and goods held for sale or lease or
furnished  under  contracts  of  service  in which  Borrower  now  has  or
hereafter acquires any right, whether held by  Borrower  or  others,  and all
documents  of title,  warehouse  receipts, bills of  lading,  and all  other
documents of every type  covering all or any  part of the foregoing.   Inventory
includes inventory temporarily  out of Borrower's  custody    or possession and
all returns on  Accounts.
 
Lender.  The word "Lender"  means BOKF, NA dba Bank of Texas, its successors
and  assigns.
 
Loan. The word "Loan" means any and all loans and
financial  accommodations  from  Lender  to  Borrower  whether  now  or  hereafter  existing,
and however evidenced, including without limitation those  loans  and
financial  accommodations  described  herein or described  on any exhibit or
schedule  attached to this Agreement  from time to   time.
 
Note. The word "Note" means the Promissory Note in the principal amount
of  $6,000,000.00  dated  September  18,  201 5  and  the  Promissory Note in
the principal amount of $10,000,000.00 dated September 18, 2015 together with
all renewals of, extensions  of,  modifications  of, refinancings  of,
consolidations  of, and substitutions  for  the  note or  credit agreement.
 
Permitted Liens.  The words  "Permitted Liens"  mean   (1)   liens and
security  interests securing  Indebtedness owed by Borrower to   Lender; (2)
liens for taxes, assessments, or similar charges either not yet
due  or  being  contested  in  good  faith;  (3)  liens  of  materialmen,
mechanics,  warehousemen,  or carriers, or other  like liens arising in the
ordinary  course of business and securing obligations  which are not  yet
delinquent; (4) purchase money liens or purchase money security interests upon
or in any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or  permitted  to  be  incurred  under  the paragraph of this Agreement titled
"Indebtedness  and Liens";  (5)  liens  and security  interests  which,  as  of
the  date  of  this  Agreement,  have been disclosed to and approved by
the  Lender in writing;  and  (6)  those  liens and
security  interests  which  in the aggregate  constitute an immaterial and
insignificant  monetary  amount  with respect to the  net value  of  Borrower's
assets.
 
Primary Credit Facility. The words "Primary Credit Facility" mean the credit
facility described in  the  Line  of  Credit  section  of  this  Agreement.
 
Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements  and documents,
whether  now  or hereafter  existing, executed  in connection  with the Loan.
 
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating  a Security Interest.
 
Security  Interest.  The  words  "Security  Interest"  mean,  without  limitation,  any  and  all  types  of  collateral  security,  present  and  future,
whether in the form of a lien, charge, encumbrance,
mortgage,  deed  of  trust,  security  deed,  assignment,  pledge,  crop  pledge,  chattel  mortgage, 
collateral chattel mortgage, chattel trust, factor's lien,
equipment  trust,  conditional  sale,  trust  receipt,  lien  or  title  retention
contract, lease or consignment intended as a security device, or
any  other  security  or  lien  interest  whatsoever  whether  created  by  law,  contract,  or
 otherwise.
 
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS.  THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED SEPTEMBER 18,  2015.
 

BORROWER :
 
TANDY LEATHER FACTORY, INC.
 
 
 
By:  /s/ Shannon L. Greene
Shannon Greene, Chief Financial Officer of Tandy Leather Factory, Inc.
 
 
 
LENDER :
 
BOKKF, NA DBA BANK OF TEXAS
 
 
By:  /s/ Jennifer Baggs
Authorized Officer

 
 
 

--------------------------------------------------------------------------------

 

 
ADDENDUM TO BUSINESS LOAN  AGREEMENT
 
[

 
Borrower:          Tandy Leather Factory, Inc.
1900 SE Loop 820
Fort Worth, TX  76140

 
Lender:              BOKF, NA dba  Bank of  Texas
       P.O. Box 29775
        Dallas, TX  75229-9775

 
 
   
 
This ADDENDUM TO BUSINESS LOAN AGREEMENT is attached to and by this reference is
made a part of the Business Loan Agreement (Asset Based), dated September 18,
2015, and executed in connection with a loan or other financial accommodations
between BOKF, NA DBA BANK OF TEXAS and Tandy Leather Factory, Inc.
 
The Business Loan Agreement dated September 18, 2015 ("Loan Agreement") between
Tandy Leather Factory, lnc.("Borrower") and BOKF, NA dba Bank of Texas
("Lender") is hereby amended to incorporate the following. Capitalized terms
used below and not defined herein shall have the meanings given in the Business
Loan Agreement.
 
Definitions:
 
"Commodity Exchange Act" means the Commodity Exchange Act (7 U.S.C. §  1 et
seq.),  as amended  from time to time,  and any  successor  statute.
 
"Effective  Date" means the date of the  Loan Agreement.
 
"Excluded Swap Obligation" means (a) with respect to any Guarantor, any Swap
Obligation if, and to the extent that,  all or  a  portion of  the guarantee of
such Guarantor of, or the grant by such Guarantor of a security interest to
secure, as applicable, such Swap Obligation (or any guarantee thereof) is or
becomes illegal under the Commodity Exchange Act or any rule, regulation, or
order of the Commodity Futures Trading Commission  (or the application or
official interpretation of any thereof)  and  (b) with respect to any  Borrower,
any  Swap Obligation of  another   Loan Party if, and to the extent that, all or
a portion of the joint  and several  liability  of  such Borrower  with  respect
to, or the grant of  such  Borrower of a security interest to secure, as
applicable, such Swap Obligation is or becomes illegal under
the  Commodity  Exchange Act  or  any rule, regulation, or order of the
Commodity Futures Trading Commission  (or the application  or official
interpretation of any thereof),  by virtue of  such Guarantor's (in the case of
(a)) or Borrower's (in the case of (b)) failure to constitute an "eligible
contract participant," as defined in the Commodity Exchange Act and the
regulations thereunder, at the time the guarantee of such
Guarantor,  joint  and  several  liability  of  such  Borrower, or grant of such
security interest by such Guarantor or  Borrower, as applicable,  becomes
or  would  become effective  with respect to  such Swap Obligation. If a Swap
Obligation arises under a master  agreement governing  more than one  Swap
Obligation, such exclusion shall  apply only to the  portion of  such
Swap  Obligation that is attributable to  Swap Obligations  for  which such
guarantee  or security  interest or joint  and several liability, as
applicable,  is or becomes illegal.
 
"Guarantee Obligation" means as to any Person (the "guaranteeing person"),
any  obligation,  including  a reimbursement,  counterindemnity  or similar
obligation, of the guaranteeing Person that guarantees or in effect guarantees,
or which is given to induce the  creation of  a  separate obligation by another
Person (including any bank under any letter of credit) that guarantees or in
effect guarantees, any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether  directly  or  indirectly, including any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase  any  such
primary  obligation or  any property constituting direct or indirect security
therefor, (ii) to advance or supply funds ( 1) for the purchase or payment
of  any  such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor  or otherwise  to  maintain the  net  worth or
solvency  of  the primary obligor, (iii) to purchase property, securities  or
services  primarily for the purpose of assuring the owner of  any such
primary  obligation of  the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. For
the avoidance of doubt, for purposes of determining any Guarantee Obligations of
any Guarantor pursuant to the  Loan Agreement  and any  Related Documents, the
definition of  "Specified Swap Agreement"  shall  not create any guarantee by
any Guarantor of (or grant of security interest by any Guarantor to support,
if  applicable)  any  Excl\.lded  Swap Obligation of such Guarantor.
 
"Loan Party" means any Borrower, Guarantor, or Grantor under the Loan Agreement or any of the Related Documents.
 
"Person" means any natural person, corporation, association, limited liability
company, partnership, joint venture, trust, and every other entity of  every
kind.
 
"Qualified   ECP  Guarantor"   means,   in  respect   of   any   Swap  Obligation,   each  Borrower   and  Guarantor   that   has  total  assets exceeding
$10,000,000 at the time the relevant Guarantee or grant of the
relevant  security  interest  becomes  effective  with  respect  to  such  Swap  Obligation
or such other person as constitutes an "eligible contract participant" under the
Commodity  Exchange  Act  or  any  regulations  promulgated thereunder and can
cause another person to qualify as an "eligible contract participant"  at such
time  by entering  into a  keepwell  under Section 1a(18)(A)(v) (II) of the
Commodity Exchange  Act.
 
"Specified Swap Agreement" means any  Swap Agreement  in respect
of  interest  rates, currency  exchange  rates, commodities,  weather,  power or
emissions entered into by any Borrower or any Guarantor and any Person that is a
Lender or an affiliate of a Lender at the time such Swap Agreement is entered
into (or, in respect of any Swap Agreement entered into prior to the Effective
Date, any Person that  is a  Lender  or  any  affiliate of a Lender on the
Effective Date), which has been designated as a "Specified Swap Agreement" by
such Lender and such Borrower, by notice to the Administrative Agent not later
than 15 days after the later of (i) the Effective Date and
(ii)  the  execution  and delivery  by  such  Borrower or such Guarantor  of
such Swap Agreement  (or such later date agreed  by Lender  and such Borrower,
but in no event  more than 30  days after such later date referred to above);
provided that for  purposes of determining  any Guarantee Obligations of any
Guarantor  pursuant to  the Loan Agreement and any Related Documents, the
definition of "Specified Swap
Agreement"  shall  not  create  any  guarantee  by  any  Guarantor of (or grant of security interest by any Guarantor to support, if applicable) any Excluded Swap Obligation of such Guarantor.
 
"Swap Agreement" means, any agreement, contract or transaction that constitutes
a "swap" within the meaning of  section  1a(47)  of  the  Commodity Exchange
Act, including any agreement with respect to any swap, forward, future or
derivative transaction or  option  or  similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities,
equity  or  debt  instruments  or  securities,  or  economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of  these transactions; provided that
no phantom stock or similar plan providing for payments only on account  of
services  provided by current  or  former  directors, officers, employees or
consultants  of any  Borrower or any of its subsidiaries  shall be
a  "Swap   Agreement".
 
"Swap Obligations"  means with respect to any  Person, any  and all obligations
of such Person, whether  absolute or contingent  and howsoever  and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Swap
Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.
 
Representations  and Warranties:
 
Borrower hereby represents and warrants to Lender and covenants   that:
 
a) the rate, asset, liability or other notional item underlying any Specified
Swap  Agreement  regarding  an interest or  monetary  rate, or  foreign exchange
swap, entered into or executed in connection  with this  Loan Agreement  is, or
is directly  related to, a financial   term hereof;

b) the aggregate notional amount of all Swap Agreements entered into or
executed  by  Borrower  in connection  with the financial terms  of this Loan
Agreement, whether entered into or executed with Borrower or any other
individual  or  entity,  will  not  at  any  time  exceed  the  aggregate
principal amount outstanding hereunder, as such amounts may be determined or
calculated  contemporaneously  from  time  to time during and throughout the
term of this Loan   Agreement;

c) each Swap Agreement entered into or executed in
connection  with  the  financial  terms  of  this  Loan  Agreement  has  been  or  will  be  entered
into no earlier than ninety (90) days before and no later than one hundred
eighty ( 180) days after the  Effective  Date or
of  any  transfer  of  principal  hereunder;

d) the purpose of any Swap Agreements  in respect of any commodity  entered into
or executed  in connection  with this  Loan Agreement  is  to hedge
commodity  price risks incidental to the  Borrower's business and arising from
potential changes  in the  price of such commodity;    and

e) each Swap Agreement entered into or executed in connection with this Loan
Agreement  mitigates against the risk of repayment  hereof  and is not for the
purpose of  speculation .
 
For purposes hereof, the term  (i)  "financial term"  shall
include,  without  limitation, the duration or term of the  Loan
Agreement,  rate of  interest,  the currency or currencies in which the Loan is
made and its principal amount,  and  (ii)  "transfer  of principal" means any
draw  of principal under  the Loan Agreement,  any amendment , restructuring,
extension or other modification of the Loan   Agreement.
 
Agreement:
 
Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely,
unconditionally  and irrevocably undertakes to provide such funds  or other
support as may be needed from time to time by each other Guarantor to honor all
of its Guarantee Obligations in respect of Swap  Obligations (provided, however,
that each Qualified ECP Guarantor shall only  be liable under  this  section for
the  maximum  amount of  such  liability that can be hereby incurred without
rendering its obligations under this section,
or  otherwise  under  any  Guarantee  Obligations,  as  it relates to such other
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer, and not for any greater amount). The obligations of each
Qualified ECP Guarantor under this section shall remain in full force and effect
until discharged pursuant to the terms of the Loan Agreement  and  Related
Documents.  Each Qualified ECP Guarantor  intends that this
section  constitute,  and this section shall  be deemed to constitute, a
"keepwell,  support,  or  other  agreement"  for  the  benefit  of  each  other  Guarantor  for  all  purposes  of  Section  1a(18)
(A) (v)(II) of the Commodity Exchange Act.
 
THIS ADDENDUM TO BUSINESS LOAN AGREEMENT IS EXECUTED ON SEPTEMBER 18, 2015.
 
 
 
BORROWER:
 
TANDY LEATHER FACTORY, INC.
 
 
 
By:  /s/ Shannon L. Greene
Shannon Greene, Chief Financial Officer of Tandy Leather Factory, Inc.
 
 
LENDER:
 
BOKF, NA DBA BANK Of TEXAS
 
 
 
By:  /s/ Jennifer Baggs
Authorized Officer