Tandy Leather Factory Inc 10-K for FY2024
Tandy Leather Factory Inc (TLF)
10-K
2025-02-26
For: 2024-12-31
View Original
Added on
April 08, 2026
About this 10-K
Tandy Leather Factory Inc filed this 10-K on February 26, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $74.39M
- down 2.4% from $76.23M a year earlier
- Net income
- $827K
- down 78.1% from net income of $3.77M a year earlier
- Diluted EPS
- $0.09
- down 80.0% from $0.45 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2024
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period ________ to ________
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(I.R.S. Employer Identification No.)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer
☒ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $15,218,690 at December 31, 2024 (based on the price at which the common stock was last traded on the last business day of its most recently completed second fiscal quarter).
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of February 26, 2024, there
were 8,496,581 shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
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The following discussion, as well as other portions of this Form 10-K, contains forward-looking statements that reflect our plans, estimates and beliefs. Any such forward-looking statements
(including, but not limited to, statements to the effect that Tandy Leather Factory, Inc. (“TLF”) or its management “anticipates,” “plans,” “estimates,” “expects,” “believes,” “intends,” and other similar expressions) that are not statements of
historical fact should be considered forward-looking statements and should be read in conjunction with our Consolidated Financial Statements and related notes contained elsewhere in this report. These forward-looking statements are made based
upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and should be read carefully because they involve risks and uncertainties. We assume no obligation to update or otherwise
revise these forward-looking statements, except as required by law. Specific examples of forward-looking statements include, but are not limited to, statements regarding our forecasts of financial performance, share repurchases, store openings
or store closings, capital expenditures and working capital requirements. Our actual results could materially differ from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this Form 10-K and particularly in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless the context
otherwise indicates, references in this Form 10-K to “TLF,” “we,” “our,” “us,” the “Company,” “Tandy,” or “Tandy Leather” mean Tandy Leather Factory, Inc., together with its subsidiaries.
General
Tandy Leather Factory, Inc. (“TLF,” “we,” “our,” “us,” the” Company,” “Tandy,” or “Tandy Leather” mean Tandy Leather Factory, Inc., together with its subsidiaries) is one of the world’s largest specialty retailers
of leather and leathercraft-related items. Founded in 1919 in Fort Worth, Texas, the Company introduced leathercrafting to millions of American and later Canadian and other international customers and has built a track record as the trusted
source of quality leather, tools, hardware, supplies, kits and teaching materials for leatherworkers everywhere. Today, our mission remains to build on our legacy of inspiring the timeless art and trade of leatherworking.
What differentiates Tandy from the competition is our high brand equity, awareness, and strong brand equity and loyalty, our network of retail stores that provides convenience, a high-touch customer service
experience, and a hub for the local leathercrafting community, and our 100-year plus heritage.
We believe that this combination of qualities is unique to Tandy and gives the brand competitive advantages that are difficult for others to replicate.
We sell our products primarily through company-owned stores and through orders generated from our global websites, and through direct account representatives in our commercial division. We produce leather lace,
cut leather pieces and most of the do-it-yourself kits that are sold in our stores and on our websites. We also offer production services to our business customers such as cutting (“clicking”) and splitting and some assembly. We maintain our
principal offices at 1900 Southeast Loop 820, Fort Worth, Texas 76140.
The Company’s common shares currently trade on the Nasdaq Capital Market Group under the symbol “TLF.”
Retail Fleet
The Company currently operates a total of 101 retail stores. There are 91 stores in the United States (“U.S.”), 9 stores in Canada and one store in Spain.
As of December 31, 2024, all Tandy locations, other than our corporate headquarters facilities (which includes our flagship store, corporate offices, distribution center, and production facility) were leased.
Since January 22, 2025, when the Company completed the sale of its corporate headquarters facilities in Fort Worth, Texas, all Tandy locations are leased.
Business Strategy
Tandy Leather has been introducing people to leatherworking for over 100 years. Our stores have been, and continue to be, our competitive advantage: where our consumers learn the craft in classes, open table, and
from the expertise of our store staff, where they can touch, feel, and test the product, and where they can connect and commune with others passionate about leather. Our websites provide inspiration, detailed product descriptions and
specifications, educational information and videos, and a convenient place to also purchase product – especially for those who are far from our retail stores, including a growing international customer base. For many of our retail and web
customers, leatherworking evolves from a passion to a trade. Our commercial division is tailored to the needs of those customers who build businesses around leather. With dedicated direct account representatives, a direct-from-our-warehouse
shipping model, volume-based competitive pricing, customized product development, and assembly and pre-assembly services, we are building long-term, strategic relationships with our largest customers.
Going forward, our strategy is to continue to:
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manage our cost base and use of cash and focus on strengthening our sales by leveraging our competitive advantage of our retail stores.
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improving our employee product knowledge, customer service level, and in-store and virtual classes and community engagement as well as expanding workshop space in stores with machines are the highest priorities.
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give customers good reasons to visit stores, and an excellent return on their time investment when they do.
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Economic Conditions
Over the past 3 years, as post-covid inflation had significant impact on food and housing costs, our customers have pulled back on discretionary spending. At the time of filing this Form 10-K,
the American and world economies continue to be affected by a combination of factors arising from the continuing war in Ukraine, the more recent and worsening crisis in Israel and the Middle East, and continued tensions between the U.S. and
China. Furthermore, it is not clear how a new U.S. administration will affect inflation, employment, cost of goods through tariffs, tax policy and other external factors that may have an impact on our employees, our customers or the financial
performance of Tandy.
Customers
Our customers fall into two broad categories: those who shop in retail stores and on our website (“Retail Customers”) and those whom we serve through our commercial division (“Commercial Customers”). Retail
Customers range from hobbyists to institutions (schools, camps, and other groups) to small businesses. Affinity groups like Military and First Responders and smaller and larger businesses who purchase in our retail stores receive special pricing
or general discounts. To be served through our commercial division, customers generally need to spend more than $20,000 annually.
Merchandise
We carry a wide assortment of products organized into a number of categories including leather, hand tools, hardware, kits, liquids, machines, and other supplies. We operate a production facility in Fort Worth,
Texas, where we produce kits, thread lace, belt strips and straps, and Craftaid® tooling templates, and provide some custom production services for commercial and business customers. The factory produces approximately 10% of our products. We
distribute product under the Tandy LeatherTM, Eco-FloTM, CraftoolTM, CraftoolProTM and Dr. Jackson’sTM brands, along with our premium TandyPro® line of products. We develop and invest in new products through the ideas and referrals of customers and store personnel as well as the analysis of trends in the market
and sales performance at retail. In addition, we have been focused on broadening our assortment through strategic partnerships with key brands to drive category growth and better meet the needs of our customers.
Operations
Information regarding net sales, gross profit, operating income, and total assets is included within Item 7, Management’s Discussion and Analysis of financial condition and results of operations, and within Item
8, Financial Statements and Supplementary Data.
Our stores offer a broad selection of products combined with leathercraft expertise in a one-stop shop. Not only can customers purchase leather, related accessories and supplies necessary to complete their
projects from a single source, but many of our store associates are also leathercrafters themselves and can provide suggestions and advice on our customers’ projects. Customers value the expertise and high level of customer service from our
store associates, the convenience of taking their purchases immediately, as well as the ability to touch, feel and choose their individual pieces of leather, an organic product in which each piece is unique. We also offer numerous classes and
open workbenches where customers can work on projects together with the leathercrafting community, and test new tools and techniques.
Most of our stores range in size from 1,300 square feet to 9,000 square feet, with the average at approximately 3,500 square feet. Our Fort Worth flagship store is approximately 22,000 square feet. Stores are
located in light industrial warehouse spaces or older strip shopping centers in proximity to major freeways or well-known crossroads. We believe that many of our customers view our stores as a destination: customers interested in leathercrafting
seek us out, reducing the value of paying high rents for high foot-traffic locations.
Historically, we generate slightly more sales in the fourth quarter of each year due to the holiday shopping season (approximately 28-30% of annual sales), while the other three quarters average approximately
22-24% of annual sales each quarter.
Distribution
Our stores receive the majority of their inventory from our central distribution center located in Fort Worth, Texas, in weekly or, increasingly, bi-monthly shipments, using third-party transportation providers.
Occasionally, merchandise is shipped to stores directly from the vendor. We now fulfill all of our U.S. and many of our international web orders from our Fort Worth distribution center. Canada web orders are fulfilled out of our 9 Canada
stores, and European web orders are fulfilled out of our Spain store. We have a global customer service team that handles web order inquiries and phone orders. Our goal is to optimize the tradeoff between the sales and market share we realize
from having a broad product line against the safety stock required to support those items. We generally maintain higher inventories of imported or long-lead-time items to ensure a continuous supply. Increased product assortment and some supply
chain disruptions over the past several years have put upward pressure on inventory, offset by better sell-throughs, test-and-learn buying, and strategic partnerships with vendors. We have been executing a number of strategic initiatives to
test smaller quantities of new items online, buying into them only when we are certain of their success, to tailor product assortments to the needs of local customers in each store, and to ship directly from vendors to customers. We carry about
6,500 stock-keeping units (SKUs) in our current product line and continue to refine both the line, the lead times and safety stock levels required to meet customer demand, online vs. in-store assortment, and overall total inventory levels needed
to grow sales and market share.
Competition
Our competitors include smaller, independently-owned brick-and-mortar retailers, internet-based retailers including those selling on platforms like Amazon and eBay, national craft chains like Michaels Stores, Inc.
and Hobby Lobby Stores, Inc., some wholesale-focused distributors, and two mid-sized competitors – Weaver Leather and Springfield Leather – who have one store and an online business. All of these competitors carry a more limited line of
leathercraft products compared to Tandy. We are competitive on convenience, price, availability of merchandise, customer service, depth of our product line, and delivery time. Tandy Leather is the only multi-store chain specializing in
leathercraft, which we believe provides a competitive advantage over internet-based retailers, the large general craft retailers, and the mid-sized competitors. We also believe that our large size relative to most competitors gives us an
advantage in sourcing as well as deep product and leathercrafting expertise among our employees.
Suppliers
We purchase merchandise and raw materials from nearly 150 suppliers from the United States and approximately 20 foreign countries. In general, our 10 largest suppliers account for approximately 55% of our
inventory purchases, and we had one supplier in 2024 who represented about 12% of our purchases.
Because leather is sold internationally, market conditions abroad are likely to affect the price of leather in the U.S. Aside from increasing purchases when we anticipate price increases (or possibly delaying
purchases if we foresee price declines), we do not attempt to hedge our inventory costs.
Our supply chain and vendor relationships remain strong. We are focused on continuing to align our product and sourcing strategies to elevate the overall quality, consistency, and agility to meet the diverse needs
of our existing consumers and attract new ones to the brand. While pandemic-related supply chain shocks have been resolved, freight costs and reliability remain volatile and tight labor markets and rising wages continue to pressure costs across
all areas.
Compliance with Environmental Laws
Our compliance with federal, state and local environmental protection laws has not had, and is not expected to have, a material effect on our capital expenditures, earnings, or competitive position.
Employees
As of December 31, 2024, we employed 542 people, 414 of whom were employed on a full-time basis. We are not a party to any collective bargaining agreements. Overall, we believe that our relations with employees
are good.
Intellectual Property
The Company owns all the material trademark rights used in connection with the production, marketing, distribution and sale of all Tandy-branded products. In addition, we license a limited number of our trademarks
and copyrights used in connection with the production, marketing and distribution of certain categories of goods and limited edition co-branded projects. Major trademarks include federal trade name registrations for “Tandy Leather Factory,”
“Tandy Leather Company,” and “Tandy.” The Company is not dependent on any one particular trademark or design patent, although it believes that the “Tandy” and “Tandy Leather” names are important for its business. In addition, Tandy owns several
patents for specific belt buckles and leather-working equipment. Tandy monitors its trademarks and trade names and where appropriate pursues infringers. The Company expects that its material trademarks will remain in full force and effect for
as long as we continue to use and renew them.
Foreign Sales
Information regarding our sales from the United States and abroad and our long-lived assets is found in Note 2, Significant Accounting Policies: Revenue Recognition and
Note 3, Balance Sheet Components, of the notes to the consolidated financial statements. For a description of some of the risks related to our foreign operations, see Item 1A, Risk Factors.
Available Information
We file reports with the SEC. These reports include our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these filings. These reports are available on
the Securities and Exchange Commission’s website at www.sec.gov.
Our corporate website is located at www.tandyleather.com. We make copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and any amendments thereto
filed with or furnished to the SEC available to investors on or through our website free of charge as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. Our SEC filings can be found on the Investor
Relations page of our website through the “SEC Filings” link. In addition, certain other corporate governance documents are available on our website through the “Corporate Governance” link. No information contained on any of our websites is
intended to be included as part of, or incorporated by reference into, this Form 10-K.
Information about our Executive Officers
The following table sets forth information concerning our executive officers as of December 31, 2024:
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Janet Carr
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63
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2018
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Chief Executive Officer
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Janet Carr has served as our Chief Executive Officer and as a member of our Board of Directors since October 2018. Prior to her current role, Ms. Carr served as the Senior
Vice-President of Global Business Development for Caleres Inc. (formerly Brown Shoe Company Inc.) from 2016 to 2017. While there, she was responsible for international wholesale and retail for all of their brands. Prior to Caleres, Ms. Carr was
the President of the Handbag Division of Nine West Group Inc. from 2013 to 2014, where she was responsible for all aspects of design, development and sales in both wholesale and retail. Ms. Carr has deep experience in strategy and consumer
insights in various roles at a number of prominent retailers, including Tapestry, Inc. (formerly Coach, Inc.), Gap Inc. and Safeway.
Ms. Carr resigned as Chief Executive Officer and was replaced on January 6, 2025, by Johan Hedberg. See note on “Subsequent Events” below.
Risks Related to our Business and Business Strategy
The successful execution of our multi-year transformation and operational efficiency initiatives is key to the long-term growth of our business.
The Company continues to implement a large number of initiatives to transform the Company’s business, improve sales long term and improve operational efficiency. These include the closing or relocation of
underperforming stores and opening of new store concepts, the further development of our new division focused on serving commercial customers, pricing and marketing initiatives, systems improvements, and other changes. The Company believes that
long-term growth will be realized through these transformational efforts over time, however there is no assurance that such efforts will be successful. Actual costs incurred and the timeline of these initiatives may differ from our
expectations. If these initiatives are unsuccessful, our business, financial condition and results of operation could be materially adversely affected.
Our business is subject to the risks inherent in global sourcing activities.
As a Company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities, including, but not limited to:
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unavailability of, or significant fluctuations in the cost of, raw materials;
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disruptions or delays in shipments; and volatility of pricing in shipment costs.
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loss or impairment of key assembly or distribution sites, which also could result in a former manufacturer beginning to produce similar products that compete with ours;
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inability to engage new independent manufacturers that meet the Company’s cost-effective sourcing model;
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product quality issues;
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compliance by us and our independent manufacturers and suppliers with labor laws and other foreign governmental regulations;
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imposition of additional duties, taxes, new tariffs, and other charges on imports or exports;
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embargoes against products originating in countries from which we source;
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increases in the cost of labor, fuel (including volatility in the price of oil), travel and transportation;
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compliance by our independent manufacturers and suppliers with our Code of Business Conduct and Ethics and our Animal Welfare Policy;
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political unrest;
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unforeseen public health crises, such as pandemic (e.g., the COVID-19 pandemic) and epidemic diseases;
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natural disasters or other extreme weather events, whether as a result of climate change or otherwise; and
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acts of war or terrorism and other external factors over which we have no control.
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Increases in the price of leather and other items we sell or a reduction in availability of those products could increase our cost of goods and decrease our profitability.
The prices we pay our suppliers for our products are dependent in part on the market price for leather, metals, and other products. The cost of these items may fluctuate substantially, depending on a variety of
factors, including demand, supply conditions, transportation and fuel costs, government regulation including potential trade barriers such as tariffs, economic climates, war or other political considerations, and other unpredictable factors.
Leather prices worldwide have been relatively stable for the past several years although the outlook for future prices is uncertain. Increases in these costs, together with other factors, would make it difficult for us to sustain the gross
margin level we have achieved in recent years and result in a decrease in our profitability unless we are able to pass higher prices on to our customers or reduce costs in other areas. Changes in consumers’ product preferences or lack of
acceptance of our products whose costs have increased may prohibit us from passing those increases on to customers, which could cause our gross margin to decline. If our product costs increase and our sale prices do not, our future operating
results could be adversely affected unless we are able to offset such gross margin declines with comparable reductions in operating costs. Accordingly, such increases in costs could adversely affect our business and our results of operations.
Further, involvement by the United States in war and other military operations abroad could disrupt international trade and affect our inventory sources. Finally, livestock diseases, such as mad cow, could reduce
the availability of hides and leathers or increase their cost. The occurrence of any of these events could adversely affect our business and our results of operations.
Relocation of the Company’s headquarters and main distribution facility in 2025 might cause significant disruption to the Company’s business and operations.
In January 2025, the Company completed the sale of its headquarters facilities, including its main distribution facility and flagship store, in Fort Worth, Texas. The Company plans to relocate these operations to
new spaces beginning around the third quarter of 2025. These relocation activities will inevitably cause disruption to the Company’s business and operations, including (but not limited to) requiring the Company set up temporary fulfillment
centers for web orders while the move is in progress and establishing new facilities and procedures for distribution of products to stores and all customers during and after this period. The Company is actively working to plan for and manage
these transitions, but we cannot assure you that these processes will be completed as planned, that they will not cost significantly more than expected, or that we will not encounter unforeseen problems or challenges. These issues could have a
material adverse effect on the Company’s business and operations in 2025 or beyond.
We are subject to risks associated with leasing retail, distribution and office space under long-term and non-cancelable leases. We may be unable to renew leases on acceptable terms. If we
close a leased retail space, we might remain obligated under the applicable lease.
We lease our retail store locations under long-term, non-cancelable leases, which have initial or renewed terms typically ranging from three years to ten years and may include lease renewal options. In addition,
we have signed a lease for the Company’s future principal offices and distribution center (including some factory production) that will run through September 2035. We believe that most of the lease agreements we will enter into in the future
will be long-term and non-cancelable. Generally, our leases are “net” leases, which require us to pay our proportionate share of the cost of insurance, taxes, maintenance, and utilities. We generally cannot cancel these leases at our option.
If we determine that it is no longer economical to operate a retail store or other facility subject to a lease and decide to close it, as we have done in the past and will do in the future, we would generally remain obligated under the applicable
lease for, among other things, payment of the base rent, common charges, and other net payments for the balance of the lease term. In some instances, we may be unable to close an underperforming retail store without a significant financial
penalty due to continuous operation clauses in our lease agreements. In addition, as each of our leases expire, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close retail
stores in desirable locations. Our inability to secure desirable retail space or favorable lease terms could impact our ability to grow. Likewise, our obligation to continue making lease payments in respect of leases for closed retail or other
spaces could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to sustain our financial performance or our past growth, which could have a material adverse effect on our future operating results.
In 2020, we experienced declines in sales and operating income primarily resulting from the COVID-19 pandemic. In 2024, we also experienced declines, which management believes were primarily resulting from
macroeconomic factors, including inflation (particularly higher food, fuel, housing and transportation costs), higher interest rates and lower government subsidies, all of which impacted the specialty retail industry and impacts our customers’
ability to make discretionary purchases such as our products. Many other specialty retailers have experienced declining sales and losses due to the overall challenging retail environment. Our sales and profits may continue to be negatively
affected in the future. We anticipate that our financial performance will depend on a number of factors, including consumer preferences, the strength and protection of our brand, the introduction of new products, and the success of our business
strategy.
Competition, including internet-based competition, could negatively impact our business.
The retail industry is competitive, which could result in the reduction of our prices and loss of our market share. While we remain competitive in the areas of quality, price, breadth of selection, customer
service, and convenience, we compete with smaller and larger retailers focused on leather and leather crafting, some of whom have been able to offer competitive products at lower prices than ours. We also compete with larger specialty retailers
(e.g., Michaels Stores, Inc., and Hobby Lobby Stores, Inc.) that dedicate a small portion of their selling space to products that compete with ours but are larger and have greater financial resources than we do. The Company also faces
competition from internet-based retailers, in addition to traditional store-based retailers. This could result in increased price competition since our customers can more readily search and compare products from internet-based retailers who do
not need to support a physical store fleet and may be able to undercut our prices for products. The growth of internet retailers has also significantly reduced traffic to many shopping centers and physical stores, which, if not countered by an
increase in our own online retailing, could have a material adverse effect on our in-store or overall sales.
Declines in foot traffic in our retail store locations could negatively impact our sales and profits.
The success of our retail stores is affected by (1) the location of the store within its community or shopping center; (2) surrounding tenants or vacancies; (3) increased competition in areas where shopping centers
are located; (4) the amount spent on advertising and promotion to attract consumers to the stores; and (5) a shift towards online shopping resulting in a decrease in retail store traffic. Many of our stores are located in light industrial areas,
where foot traffic tends to be lower than in traditional retail shopping areas. Furthermore, our initiatives to service our larger customers through a dedicated Commercial Program rather than primarily through local stores may also lead to a
decline in the traffic to our store locations. Declines in consumer traffic could have a negative impact on our net sales and could materially adversely affect our financial condition and results of operations. Furthermore, declines in traffic
could result in store impairment charges if expected future cash flows of the related asset group do not exceed the carrying value.
Our business could be harmed if we are unable to maintain our brand image.
Tandy Leather is one of the most recognized brand names in our industry. Our success to date has been due in large part to the strength of that brand. If we are unable to provide quality products and exceptional
customer service to our customers, including education, which Tandy Leather has traditionally been known for, our brand name may be impaired which could adversely affect our operating results.
Changes in customer demand could materially adversely affect our sales, results of operations and cash flow.
Our success depends on our ability to anticipate and respond in a timely manner to changing customer demands and preferences for leather and leathercraft-related items. If we misjudge the market, we might
significantly overstock unpopular products and be forced to take significant inventory markdowns, or experience shortages of key items, either of which could have a material adverse impact on our operating results and cash flow. In addition,
adverse weather conditions, economic or political instability and consumer confidence volatility could have material adverse impacts on overall customer demand, which may impact our sales and operating results.
Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel.
The ability to successfully execute our goals is heavily dependent on attracting, developing and retaining qualified employees, including our senior management team. Competition in our industry to attract and
retain these employees is intense and is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and
non-solicitation agreements and macro unemployment rates.
We depend on the guidance of our senior management team and other key employees who have significant experience and expertise in our industry and our operations. The unexpected loss of one or more of our key
personnel or any negative public perception with respect to these individuals could have a material adverse effect on our business, results of operations and financial condition. We do not maintain key-person or similar life insurance policies
on any of senior management team or other key personnel.
Disruptions in the operation of our Fort Worth distribution center or assembly facility could have an adverse effect on our ability to supply our retail stores, fulfill web orders and/or
manufacture product, resulting in possible decreases in sales and margin.
We are dependent on a limited number of distribution and sourcing centers, primarily the center located at our Fort Worth, Texas headquarters, which will be relocated during 2025 as referenced above and in Note 11
of this document. Our ability to meet the needs of our customers and our retail stores and e-commerce sites depends on the proper operation of these centers. If any of these centers were to shut down or otherwise become inoperable or
inaccessible for any reason, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers. We anticipate, and are planning for, a period of disruption in 2025 while we move our
distribution facilities to their new location near Fort Worth, but we cannot be sure that this disruption will not exceed our forecast or interfere with our ability to allocate or distribute products as needed. While we have business continuity
and contingency plans for our sourcing and distribution center sites, significant disruption of assembly or distribution for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs,
disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business.
Risks Related to Cash Flow and Capitalization
If our cash from operations falls short and we are unable to raise additional working capital, we might be unable to fully fund our operations or to otherwise execute our business plan.
Historically, the Company has funded its business primarily with cash from operations and has utilized only small lines of working capital for seasonal expenditures. In 2023, we obtained a line of credit facility
through JP Morgan Chase Bank to provide working capital as needed; as of the date of this report, we have not borrowed any amounts under this facility. However, should (1) our costs and expenses prove to be greater than we currently anticipate,
or (2) seasonal fluctuations in sales or inventory purchases result in needing additional capital, and (3) we are unable to borrow sufficient short- or long-term capital, the depletion of our working capital would be accelerated and could leave
us unable to make required payments. We may also seek capital through the private issuance of debt or equity securities. We cannot guarantee that we will be able to secure all of the additional cash or working capital we might require to
continue our operations.
Risks Related to Technology, Data Security and Privacy
Failure to protect the integrity and security of personal information of our customers and employees could result in substantial costs, expose us to litigation and damage our reputation.
We receive and maintain certain personal, financial, and other information about our customers, employees, and vendors. In addition, our vendors receive and maintain certain personal, financial, and other
information about our employees and customers. The use and transmission of this information is regulated by evolving and increasingly demanding laws and regulations across various jurisdictions. If our security and information systems are
compromised as a result of data corruption or loss, cyber-attack or a network security incident or if our employees or vendors fail to comply with these laws and regulations and this information is obtained by unauthorized persons or used
inappropriately, it could result in liabilities and penalties and could damage our reputation, cause us to incur substantial costs and result in a loss of customer confidence, which could materially affect our results of operations and financial
condition. Additionally, we could be subject to litigation and government enforcement actions because of any such failure.
Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries where we operate. For example, the General Data Protection
Regulation (“GDPR”), which was adopted by the European Union effective May 2018, requires companies to meet new requirements regarding the handling of personal data. In addition, the State of California enacted the California Consumer Privacy
Act (the “CCPA”), which became effective January 2020 and requires companies that process information on California residents to, among other things, provide new disclosures and options to consumers about data collection, use and sharing
practices.
Moreover, each of the GDPR and the CCPA confer a private right-of-action on certain individuals and associations. Our failure to adhere to or successfully implement appropriate processes to adhere to the
requirements of GDPR, CCPA and other evolving laws and regulations in this area could result in financial penalties, legal liability and could damage our reputation, which could have a material adverse effect on our business, financial condition
and results of operations.
A cybersecurity incident and other technology disruptions could negatively affect our business and our relationships with customers.
We use technology in substantially all aspects of our business operations. The widespread use of technology, including mobile devices, cloud computing, and the internet, gives rise to cybersecurity risks,
including security breaches, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual
property, including information relating to customers and suppliers, private information about employees, and financial and strategic information about us and our business partners. The Company has implemented measures to prevent cybersecurity
breaches and incidents, as described in Item 1C below. However, we cannot guarantee that these preventative measures and incident response efforts will be entirely effective. If we fail to effectively assess and identify cybersecurity risks
associated with the use of technology in our business operations, we may become increasingly vulnerable to such risks. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual
property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers,
potential liability and competitive disadvantage.
Unreliable or inefficient information technology or the failure to successfully implement or invest in technology initiatives in the future could adversely impact operating
results.
We rely heavily on information technology systems in the conduct of our business, some of which are managed, and/or hosted by third parties, including, for example, point-of-sale processing in our stores,
management of our supply chain, and various other processes and procedures. These systems are subject to damage, interruption or failure due to theft, fire, power outages, telecommunications failure, computer viruses, security breaches,
malicious cyber-attacks or other catastrophic events. Certain technology systems may also be unreliable or inefficient, and technology vendors may limit or terminate product support and maintenance, which could impact the reliability of critical
systems operations. If our information technology systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them and may experience loss of critical data and interruptions or delays in our ability to
manage inventories or process transactions, which could result in lost sales, customer or employee dissatisfaction, or negative publicity that could negatively impact our reputation, results of operations and financial condition.
Moreover, our failure to adequately invest in new technology or adapt to technological developments and industry trends, particularly with respect to digital commerce capabilities, could result in a loss of
customers and related market share. If our digital commerce platforms do not meet customers’ expectations in terms of security, speed, attractiveness or ease of use, customers may be less inclined to return to such digital commerce platforms,
which could negatively impact our business.
Risks Related to the Macroeconomic Environment
Our business may be negatively impacted by general economic conditions in the United States and abroad.
Our performance is subject to global economic conditions and their impact on levels of consumer spending that affect not only the ultimate consumer, but also small businesses and other retailers. Specialty retail,
and retail in general, is heavily influenced by general economic cycles. Specifically, at the time of filing this Form 10-K, the American and world economies have been acutely affected by a combination of factors resulting from post-pandemic
inflation and weak economic growth, multiple major military conflicts, and tensions with key U.S. trade partners caused by the uncertainty of a new administration. The impacts of these events over the last year include (but are not limited to)
continued high food and housing costs as a result of multiple years of high inflation, continued higher wages as a result of multiple years high employment and the associated wage growth, rising real estate prices and continued high interest
rates.
Purchases of non-essential, discretionary products tend to decline in periods (such as the current one) of recession or uncertainty regarding future economic prospects, as disposable income declines. During these
periods of economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new stores, maintain sales levels at our existing stores, maintain or increase our
international operations on a profitable basis, maintain our earnings from operations as a percentage of net sales, or generate sufficient cash flows to fund our operational and liquidity needs. As a result, our operating results may be
adversely and materially affected by continued downward trends or uncertainty in the United States or global economies.
Foreign currency fluctuations could adversely impact our financial condition and results of operations.
We generally purchase our products in U.S. dollars. However, we source a large portion of our products from countries other than the United States. The cost of these products may be affected by changes in the
value of the applicable currencies. Changes in currency exchange rates may also affect the U.S. dollar value of the foreign currency denominated sales that occur in other countries (currently Canada and the European Union). This revenue, when
translated into U.S. dollars for consolidated reporting purposes, could be materially affected by fluctuations in the U.S. dollar, negatively impacting our results of operations and our ability to generate revenue growth.
We face risks related to the effect of economic uncertainty.
During events of economic downturn and slow recovery, our growth prospects, results of operations, cash flows and financial condition could be adversely impacted. Our stores offer leather and leathercraft-related
items, which are viewed as discretionary items. Pressure on discretionary income brought on by economic downturns and slow recoveries, including housing market declines, rising energy prices and weak labor markets, may cause consumers to reduce
the amount they spend on discretionary items. The inherent uncertainty related to predicting economic conditions makes it difficult for us to accurately forecast future demand trends, which could cause us to purchase excess inventories,
resulting in increases in our inventory carrying cost, or limit our ability to satisfy customer demand and potentially lose market share.
While the impact of the COVID-19 pandemic has mostly receded, there are residual effects such as higher consumer prices and interest rates. Furthermore, another serious outbreak of coronavirus or other deadly
disease could also have a material adverse effect on our business and liquidity.
The COVID-19 pandemic had an unprecedented and lasting impact on the U.S. economy, some of which continues to today. The possibility of another outbreak of a coronavirus variant or other deadly disease that would
have material adverse effect on the economy, our supply chain partners, our employees and our customers is now all too real. While we are better prepared to handle a future pandemic, it could impact our ability to keep our stores open, to obtain
merchandise or payment terms from our vendors, to transport merchandise to and from our warehouse, to operate our warehouse, factory and other facilities that require on-site activities, and thus materially adversely affect our revenues,
earnings, liquidity and cash flows.
Risks Related to Legal, Regulatory and Compliance
If the United States maintains current tariffs on products manufactured in China, or if additional tariffs or trade restrictions are implemented by other countries or by the U.S., the cost of our
products manufactured in China or other countries and imported into the U.S. or other countries could increase. This could in turn adversely affect the profitability for these products and have an adverse effect on our business, financial
condition and results of operations.
In addition, the violation of labor, environmental or other laws by an independent manufacturer or supplier, or divergence of an independent manufacturer’s or supplier’s labor practices from those generally
accepted as ethical or appropriate in the U.S., could interrupt or otherwise disrupt the shipment of our products, harm our trademarks or damage our reputation. The occurrence of any of these events could materially adversely affect our
business, financial condition and results of operations.
Our success depends on the continued protection of our trademarks and other proprietary intellectual property rights.
Our trademarks and other intellectual property rights are important to our success and competitive position, and the loss of or inability to enforce our trademark and other proprietary intellectual property rights
could harm our business. We devote substantial resources to the establishment and protection of our trademark and other proprietary intellectual property rights on a worldwide basis. Despite any precautions we may take to protect our
intellectual property, policing unauthorized use of our intellectual property is difficult, expensive, and time consuming, and we may be unable to adequately protect our intellectual property or determine the extent of any unauthorized use. Our
efforts to establish and protect our trademark and other proprietary intellectual property rights may not be adequate to prevent imitation or counterfeiting of our products by others, which may not only erode sales of our products but may also
cause significant damage to our brand name. Further, we could incur substantial costs in legal actions relating to our use of intellectual property or the use of our intellectual property by others. Even if we are successful in these actions,
the costs we incur could have a material adverse effect on us.
None.
Cybersecurity Risk Management and Strategy
We design and assess
our program based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF and AI Risk Management Framework). This does not mean that we meet any particular technical standards, specifications, or requirements, but
only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Information about
cybersecurity risks and our risk management processes is collected, analyzed and considered as part of our overall enterprise risk management program.
Key components of our cybersecurity risk management program
The Company’s
cybersecurity program includes:
| • |
Advanced security infrastructure with state-of-the-art firewalls and intrusion detection systems.
|
| • |
Regular cybersecurity training for employees.
|
| • |
Strict data access controls and authentication protocols.
|
| • |
Continuous monitoring of our networks and systems for signs of unauthorized activity.
|
| • |
|
In the event of a
cybersecurity incident, the Company’s response plan includes:
| • |
Immediate containment and assessment of the incident.
|
| • |
|
| • |
Cooperation with law enforcement and regulatory bodies as needed.
|
| • |
Post-incident analysis and measures to prevent future occurrences.
|
Cybersecurity Governance
The Company remains vigilant in its efforts to protect its systems, data, and stakeholders from cybersecurity threats and believes that its proactive and comprehensive
approach positions it well to manage these risks effectively.
We lease our store locations, with the exception of our flagship store located in Fort Worth, Texas which we still owned as of December 31, 2024. The majority of our stores have initial lease terms of at least
five years. The leases are generally renewable, with increases in lease rental rates in some cases. We believe that all of our properties are adequately covered by insurance. As of December 31, 2024, we owned the 22,000 square foot building
that houses our flagship store. Further, we owned our corporate headquarters, which includes our central distribution center and production facility, sales, marketing, administrative, and executive offices. The facility consists of 191,000
square feet located on approximately 30 acres. In January 2025, the Company completed the sale of its flagship store and corporate headquarters buildings, and those spaces have also been leased since that time as referenced in our “Subsequent
Events” footnote below.
The following table summarizes the locations of our leased premises as of the date of this filing:
|
U. S. Locations:
|
||||
|
Alabama
|
1
|
Missouri
|
3
|
|
|
Alaska
|
1
|
Montana
|
1
|
|
|
Arizona
|
3
|
Nebraska
|
1
|
|
|
Arkansas
|
1
|
Nevada
|
2
|
|
|
California
|
7
|
New Jersey
|
1
|
|
|
Colorado
|
4
|
New Mexico
|
2
|
|
|
Connecticut
|
1
|
New York
|
2
|
|
|
Florida
|
4
|
North Carolina
|
2
|
|
|
Georgia
|
2
|
Ohio
|
3
|
|
|
Idaho
|
1
|
Oklahoma
|
2
|
|
|
Illinois
|
1
|
Oregon
|
2
|
|
|
Indiana
|
1
|
Pennsylvania
|
2
|
|
|
Iowa
|
1
|
South Dakota
|
1
|
|
|
Kansas
|
1
|
Tennessee
|
3
|
|
|
Kentucky
|
1
|
Texas
|
18
|
|
|
Louisiana
|
2
|
Utah
|
4
|
|
|
Maryland
|
1
|
Washington
|
3
|
|
|
Massachusetts
|
1
|
Wisconsin
|
1
|
|
|
Michigan
|
2
|
Wyoming
|
1
|
|
|
Minnesota
|
2
|
Virginia
|
1
|
|
|
Canadian Locations:
|
||||
|
Alberta
|
3
|
Ontario
|
2
|
|
|
British Columbia
|
1
|
Saskatchewan
|
1
|
|
|
Manitoba
|
1
|
|||
|
Nova Scotia
|
1
|
|||
|
International Locations:
|
||||
|
Spain
|
1
|
|||
The broader economic impact of the pandemic and the war in Ukraine and the Middle East have put pressure on store profitability with dampened demand, higher wages and staffing challenges, rising retail rents, and
increases in other retail store operating costs. We regularly review recent and future projected store 4-wall cash flow taking these forecasted costs as well as projected consumer demand, other nearby stores and a number of other factors into
consideration when making decisions to close or open stores in a given location.
We are periodically involved in various litigation that arises in the ordinary course of business and operations. There are no such matters pending that we expect to have a material impact on our financial
position or operating results. See discussion of legal proceedings in note 8, Commitments and Contingencies of the notes to the consolidated financial statements included in Item 8 of this Form 10-K.
Not applicable.
Our common stock trades on the Nasdaq Capital Market under the symbol “TLF.”
There were approximately 271 stockholders of record on February 26, 2025.
We did not sell any shares of our equity securities during our fiscal year ended December 31, 2024 that were not registered under the Securities Act.
On January 24, 2025, our Board of Directors authorized a $1.50 per share special one-time cash dividend that was paid to our stockholders of record at the close of business on February 3, 2025. The dividend,
totaling $12.7 million, was paid to our stockholders on February 18, 2025.
Our Board of Directors may consider future cash dividends after giving consideration to our profitability, cash flow, capital requirements, current and forecasted liquidity, as well as financial and other business
conditions existing at the time. This policy is subject to change based on future industry and market conditions, as well as other factors.
We did not repurchase any shares of our common stocks during the fourth quarter of fiscal year 2024.
We are a smaller reporting company as defined in Item 10(f)(1) of SEC Regulation S-K and are not required to provide information under this item.
This discussion is intended to assist in understanding our financial performance and should be read in conjunction with our consolidated financial statements and the notes accompanying those consolidated financial
statements included elsewhere in this Form 10-K, including the information under the caption “Summary of Critical Accounting Policies.” In addition to historical financial information, the following management’s discussion and analysis may
contain forward-looking statements. These statements reflect our expectations or estimates based on the information we have today but are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties,
and other factors, many of which are beyond our control, and which may cause actual results to differ materially from the statements contained here. You are cautioned not to put undue reliance on these forward-looking statements. The Company
assumes no obligation to update or otherwise revise these forward-looking statements, except as required by law. More discussion of risks can be found under Item 1A, Risk Factors.
Summary
The Business and Strategy
Tandy Leather Factory, Inc. is one of the world’s largest specialty retailers of leather and leathercraft-related items. Founded in 1919 in Fort Worth, Texas, and organized in 2005 as a Delaware corporation, the
Company introduced leathercrafting to millions of American and later Canadian and other international customers and has built a track record as the trusted source of quality leather, tools, hardware, supplies, kits and teaching materials for
leatherworkers everywhere. Today, our mission remains to build on our legacy of inspiring the timeless art and trade of leatherworking.
What differentiates Tandy from the competition is our high brand awareness and strong brand equity and loyalty, our network of retail stores that provides convenience, a high-touch customer service experience, and
a hub for the local leathercrafting community, and our 100-year heritage. We believe that this combination of qualities is unique to Tandy and gives the brand competitive advantages that are difficult for others to replicate.
We sell our products primarily through company-owned stores and through orders generated from our global websites, and through direct account representatives in our commercial division. We produce leather lace,
cut leather pieces and most of the do-it-yourself kits that are sold in our stores and on our websites. We also offer production services to our business customers such as cutting (“clicking”) and splitting and some assembly. We maintain our
principal offices at 1900 Southeast Loop 820, Fort Worth, Texas 76140.
Currently, the Company operates a total of 101 retail stores. There are 91 stores in the United States (“U.S,”), 9 stores in Canada and one store in Spain.
Tandy Leather has been introducing people to leatherworking for over 100 years. Our stores have been and continue to be our competitive advantage: where our consumers learn the craft in classes, open table, and
from the expertise of our store staff, where they can touch, feel and test the product, and where they can connect and commune with others passionate about leather. Our websites provide inspiration, detailed product descriptions and
specifications, educational information and videos, and a convenient place to also purchase product – especially for those who are far from our retail stores, including a growing international customer base. For many of our retail and web
customers, leatherworking evolves from a passion to a trade. Our Commercial Division is tailored to the needs of those customers who build businesses around leather. With dedicated direct account representatives, a direct-from-our-warehouse
shipping model, volume-based competitive pricing, customized product development, and production and pre-production services, we are building long-term, strategic relationships with our largest customers.
Going forward, our strategy is to continue to manage our cost base and use of cash and focus on strengthening our sales by leveraging our competitive advantage of our retail stores. Improving our employee product
knowledge, customer service level, in-store and virtual classes and community engagement as well as expanding workshop space in stores with machines are the highest priorities. We need to continue to give customers good reasons to visit stores,
and an excellent return on their time investment when they do.
Results of Operations
The following table presents selected financial data:
|
(in thousands)
|
2024
|
2023
|
$
Change
|
%
Change
|
||||||||||||
|
Sales
|
$
|
74,391
|
$
|
76,229
|
$
|
(1,838
|
)
|
(2.4
|
)%
|
|||||||
|
Gross profit
|
41,804
|
45,163
|
(3,359
|
)
|
(7.4
|
)%
|
||||||||||
|
Gross margin percentage
|
56.2
|
%
|
59.2
|
%
|
-
|
(3.0
|
)%
|
|||||||||
|
Operating expenses
|
41,176
|
40,753
|
423
|
1.0
|
%
|
|||||||||||
|
Income from operations
|
$
|
628
|
$
|
4,410
|
$
|
(3,782
|
)
|
(85.8
|
)%
|
|||||||
Net Sales
Consolidated net sales decreased by $1.8 million, or 2.4%, from 2023 to 2024. We believe the decrease in sales was due to ongoing weak consumer demand compared to a year ago, resulting from continued weakness in
consumer discretionary spending related to sustained increases in key non-discretionary items like food and housing, exacerbated by temporary store closures and moves.
Our store footprint consisted of 101 stores at December 31, 2024 and 102 stores at December 31, 2023.
Since January 1, 2024, we closed two stores and opened one store. We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projections for the store, the
long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use
similar factors to determine whether to open new stores.
Gross Profit
Gross profit decreased by $3.4 million, or 7.4%, from 2023 to 2024. Our gross margin percentage for the year ended December 31, 2024 decreased to 56.2% versus 59.2% in the same period in 2023, due to higher freight and warehouse overhead
throughout the year, and increased promotional activity to compensate for weak consumer discretionary spending.
Operating Expenses
Operating expenses increased by $0.4 million in 2024 as compared to the prior year. The primary drivers of the increase were higher employment costs of approximately $1.4 million for full time employees across the
Company, and an increase in occupancy and utilities of $0.4 million due to the renewal of our store leases; offset by reduction in accrued bonus of $0.9 million, the expiration and forfeiture of RSUs of $0.2 million, a reduction in credit card
fees of $0.2 million, a reduction in office supplies of $0.1 million, and a reduction in repair and maintenance of $0.1 million.
Other Income
Other income consists primarily of interest income and foreign currency gain. For the year ended December 31, 2024 and 2023, we recognized other income of $0.5 million of which $0.3 million was related to interest
earned on our short term investment and $0.3 million in foreign currency exchange gain offset by $0.1 million in foreign tax penalties.
Provision for Income Taxes
Our effective tax rate was 24.2% and 17.1% for the years ended December 31, 2024 and 2023, respectively. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax
expense, expenses that are nondeductible for tax purposes, and the release of valuation allowance associated with our deferred tax assets in 2023.
Capital Resources, Liquidity and Financial Condition
We require cash principally for day-to-day operations, to purchase inventory and to finance capital investments. We expect to fund our operating and liquidity needs primarily from a combination of current cash
balances, and cash generated from operating activities. Any excess cash will be invested as determined by our Board of Directors in accordance with its approved investment policy. Our cash balance as of December 31, 2024 totaled $13.3 million.
On January 3, 2023, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. Under the Credit Agreement, the bank will provide the Company a credit
facility of up to $5,000,000 on standard terms and conditions, including affirmative and negative covenants set forth in the Credit Agreement. As security for the credit facility, the Company has pledged, as collateral, certain of its assets,
including the Company’s cash in deposit accounts, inventory and equipment. The interest rate is based on CME term SOFR + 210 basis points and the maturity is 1 year. As of the date of this filing, no funds had been borrowed under this
facility, and we are in compliance with all covenants.
In the fourth quarter of 2024, the Company renewed the promissory note under its Credit Agreement with JPMorgan Chase Bank, N.A. through October 31, 2025 under the same terms as above.
Share Repurchase Program
On August 8, 2022, the Board of Directors approved a new program to repurchase up to $5.0 million of the Company’s common stock on the open market on or prior to August 31, 2024. As of
December 31, 2024, the Company had purchased less than $10,000 of shares under this plan.
On September 17, 2024, the Board of Directors approved the renewal of the stock plan, and the Company shall be authorized to repurchase up to $5 million (at then-current market value) of the
Company’s common stock in open-market transactions at prevailing market prices upon periodic instructions from the Board or an authorized sub-committee of the Board until September 30, 2026. As of December 31, 2024, $5.0 million remained
available for repurchase under this new program.
Cash Flows
|
(amounts in thousands)
|
2024
|
2023
|
||||||
|
Net cash provided by operating activities
|
$
|
4,548
|
$
|
4,537
|
||||
|
Net cash used in investing activities
|
(2,983
|
)
|
(576
|
)
|
||||
|
Net cash used in financing activities
|
(1
|
)
|
(26
|
)
|
||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(452
|
)
|
249
|
|||||
|
Net increase in cash and cash equivalents
|
$
|
1,112
|
$
|
4,184
|
||||
For 2024, we generated $4.6 million of cash from operations driven by net income of $0.8 million, the add-back of non-cash expenses of $5.4 million, including depreciation, amortization, loss on disposal of fixed
assets, stock based compensation, and deferred taxes, a decrease in inventory of $2.0 million, and an increase in accrued expense of $0.3 million; offset by a decrease in operating lease liabilities payments of $3.5 million and an increase in
prepaid expense of $0.4 million. We invested $2.9 million in capital expenditures for store build-out and fixtures for new and relocated stores, a new roof for our Fort Worth headquarters building of $1 million, and expenditures related to our
ERP and e-commerce systems. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $1.1 million.
For 2023, we generated $4.5 million of cash from operations driven by net income of $3.8 million, the add-back of non-cash expenses of $4.5 million, including depreciation, amortization, loss on disposal of fixed
assets, stock based compensation, and deferred taxes, an increase in accrued expenses and other liabilities of $0.5 million, a decrease in inventory of $0.2 million and a decrease in accounts receivable of $0.1 million; offset by a decrease in
operating lease liabilities payments of $3.6 million, a decrease in accounts payable of $0.8 million, and an increase in prepaid expenses of $0.2 million. We invested $0.6 million in capital expenditures for the purchase of store fixtures and
systems implementations. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $4.2 million.
We believe that cash flow from operations and our existing cash reserves will be adequate to fund our operations through 2025, considering the current effects of the inflationary pressure on our business and cash
flow and our current business performance. In addition, we anticipate that this cash flow and our current cash reserves will enable us to meet our contractual obligations and commercial commitments throughout 2025. There can be no assurance,
however, that the current global economic conditions would not result in further restrictions on our business operations in a manner that would more materially impact our cash flow.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during 2024 or 2023, and we do not currently have any such arrangements.
Summary of Critical Accounting Policies
The preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States requires the use of estimates that affect the reported value of
assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for the Company’s
conclusions. The Company continually evaluates the information used to make these estimates as the business and the economic environment changes. Actual results may differ from these estimates, and estimates are subject to change due to
modifications in the underlying conditions or assumptions. The policies discussed below require estimates that contain a significant degree of judgement. The use of estimates is pervasive throughout the Consolidated Financial Statements, but
the accounting policies and estimates considered most critical are as follows.
Revenue Recognition. Our revenue is earned from sales of merchandise and generally occurs via three methods: (1) at the store counter, (2) shipment of product generally via
web sales, and (3) sales of product directly to commercial customers through our commercial account representatives. We recognize revenue when we satisfy the performance obligation of transferring control of product merchandise over to a
customer. At the store counter, our performance obligation is met, and revenue is recognized when a sales transaction occurs with a customer. For (2) and (3) above, our performance obligation is met when merchandise is shipped to a customer,
and revenue is recognized when control passes to the customer. Shipping terms are normally free on board (“FOB”) shipping point and control passes when the merchandise is shipped to the customer. Sales tax and comparable foreign tax is excluded
from net sales, while shipping charged to our customers is included in net sales. Net sales are based on the amount of consideration that we expect to receive, reduced by estimates for future merchandise returns.
The sales return allowance is based each year on historical customer return behavior and other known factors and reduces net sales and cost of sales, accordingly. Under our sales returns policy, merchandise may be
returned, under most circumstances, up to 60 days after date of purchase. As merchandise is returned, the company records the sales return against the sales return allowance.
We record a gift card liability for the unfulfilled performance obligation on the date we issue a gift card to a customer. We record revenue and reduce the gift card liability as the customer redeems the gift
card. In addition, for gift card breakage, we recognize a proportionate amount for the expected unredeemed gift cards over the expected customer redemption period, which is one year.
Inventory. Inventory is stated at the lower of first-in, first-out (“FIFO”) cost or net realizable value, and FIFO layers are maintained at the location level. Finished
goods held for sale includes the cost of merchandise purchases, the costs to bring the merchandise to our Texas distribution center, warehousing and handling expenditures, and distributing and delivering merchandise to our stores. These costs
include depreciation of long-lived assets utilized in acquiring, warehousing and distributing inventory. Assembled inventory including raw materials and work-in-process is valued on a FIFO basis using full absorption accounting which includes
material, labor, and other applicable assembly overhead. Carrying values of inventory are analyzed and, to the extent that the cost of inventory exceeds the net realizable value, provisions are made to reduce the carrying amount of the
inventory.
We regularly review all inventory items to determine if there are (i) damaged goods (e.g., for leather, excessive scars or damage from ultra-violet (“UV”) light), (ii) items that need to be removed from our product
line (e.g., slow-moving items, inability of a supplier to provide items of acceptable quality or quantity, and to maintain freshness in the product line) and (iii) pricing actions that need to be taken to adequately value our inventory at the
lower of FIFO cost or net realizable value.
Since the determination of net realizable value of inventory involves both estimation and judgement with regard to market values and reasonable costs to sell, differences in these estimates could result in ultimate
valuations that differ from the recorded asset.
The majority of inventory purchases and commitments are made in U.S. dollars in order to limit the Company’s exposure to foreign currency fluctuations. Goods shipped to us are recorded as inventory owned by us
when the risk of loss shifts to us from the supplier. Inventory is physically counted twice annually in the Texas distribution center. At the store level, inventory is physically counted each quarter. Inventory is then adjusted in our
accounting system to reflect actual count results.
Leases. We lease certain real estate for our retail store locations and periodically lease warehouse equipment for our Texas distribution center, both usually under
long-term lease agreements. Starting in 2019, with the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), once we have determined an arrangement is a lease, at inception we
recognize a lease asset and lease liability at commencement date based on the present value of the lease payments over the lease term. We elected not to record leases with an initial term of 12 months or less on the balance sheet for all our
asset classes. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.
For our operating leases, the present value of our lease payments may include: (1) rental payments adjusted for inflation or market rates, and (2) lease terms with options to renew the lease when it is reasonably
certain we will exercise such an option. The exercise of lease renewal options is generally at our discretion. Payments based on a change in an index or market rate are not considered in the determination of lease payments for purposes of
measuring the related lease liability. We discount lease payments using our incremental borrowing rate based on information available as of the measurement date.
We recognize rent expense related to our operating leases on a straight-line basis over the lease term. Rent expense is recorded in operating expenses.
For finance leases, our right-of-use assets are amortized on a straight-line basis over the earlier of the useful life of the right-of-use asset or the end of the lease term with rent expense recorded to operating
expenses. We adjust the lease liability to reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The remaining asset balance in our finance lease is only residual value
and only an insignificant interest expense of less than $100 dollars was incurred and is recorded on the consolidated statements of operations and comprehensive income.
None of our lease agreements contain material residual value guarantees or material restrictive covenants. As of December 31, 2024, we have no sublease agreements and no lease agreements in which we are named as a
lessor. We do not have any contingent rental payment agreements.
Impairment of Long-Lived Assets. We evaluate long-lived assets on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the
carrying value of certain assets may not be recoverable. Upon the occurrence of a triggering event, right-of-use (“ROU”) lease assets, property and equipment and definite-lived intangible assets are reviewed for impairment and an impairment
loss is recorded in the period in which it is determined that the carrying amount of the assets is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at
the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The
Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the individual store level. If the estimated undiscounted future net cash flows for a given store are less than the
carrying amount of the related store assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group’s major
classifications which in this case are operating lease assets and property and equipment. Triggering events at the store level could include material declines in operational and financial performance or planned changes in the use of assets, such
as store relocation or store closure. This evaluation requires management to make judgements relating to future cash flows, growth rates and economic and market conditions. The fair value of an asset group is estimated using a discounted cash
flow valuation method.
Stock-based Compensation. The Company’s stock-based compensation relates primarily to restricted stock unit (“RSU”) awards. Accounting guidance requires measurement and
recognition of compensation expense at an amount equal to the grant date fair value. Compensation expense is recognized for service-based stock awards on a straight-line basis or ratably over the requisite service period, based on the closing
price of the Company’s stock on the date of grant. The service-based awards typically vest ratably over the requisite service period, provided that the participant is employed on the vesting date. The total compensation expense is reduced by
actual forfeitures as they occur over the requisite service period of the awards. Performance-based RSUs vest, if at all, upon the Company satisfying certain performance targets. The Company records compensation expense for awards with a
performance condition when it is probable that the condition will be achieved. If the Company determines it is not probable a performance condition will be achieved, no compensation expense is recognized. If the Company changes its assessment
in a subsequent period and concludes it is probable a performance condition will be achieved, the Company will recognize compensation expense ratably between the period of the change in assessment through the expected date of satisfying the
performance condition for vesting. If the Company subsequently assesses that it is no longer probable that a performance condition will be achieved, the accumulated expense that has been previously recognized will be reversed. The compensation
expense ultimately recognized, if any, related to performance-based awards will equal the grant date fair value based on the number of shares for which the performance condition has been satisfied. We issue shares from authorized shares upon the
lapsing of vesting restrictions on RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards.
Income Taxes. Income taxes are estimated for each jurisdiction in which we operate. This involves assessing current tax exposure together with temporary differences
resulting from differing treatment of items for tax and financial statement accounting purposes. Any resulting deferred tax assets are evaluated for recoverability based on estimated future taxable income. To the extent it is
more-likely-than-not that all or a portion of a deferred tax asset will not be realized, a valuation allowance is recorded. Our evaluation regarding whether a valuation allowance is required or should be adjusted also considers, among other
things, the nature, frequency, and severity of recent losses, forecasts of future profitability and the duration of statutory carryforward periods. Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the
years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws
and rates could affect recorded deferred tax assets and liabilities in the future. A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. We recognize tax liabilities for uncertain tax positions
and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is
materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which new information becomes available. We
may be subject to periodic audits by the Internal Revenue Service and other taxing authorities. These audits may challenge certain of our tax positions, such as the timing and amount of deductions and allocation of taxable income to the various
jurisdictions.
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Tandy Leather Factory
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tandy Leather Factory, Inc. and Subsidiaries (the Company) as of December 31, 2023 and 2022, and the
related consolidated statements of operations and comprehensive income, cash flows, and stockholders’ equity for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matters or on the accounts or
disclosures to which it relates.
Valuation of Inventory
The Company’s accounting policy for the recognition of inventory and cost of sales is described in Note 2 to the financial statements. The Company has recorded an
inventory balance of approximately $37.9 million and cost of sales of approximately $31.0 million as of and for the year ended December 31, 2023. Additionally, Note 3 to the financial statements provides further detail of the components of the
year-end inventory balance.
The Company’s merchandise inventories are stated at the lower of cost or net realizable value using a first-in, first-out costing principle. Finished goods inventory
costs include the cost of merchandise purchases, the costs to bring the merchandise to the Company’s distribution center, warehousing and handling expenditures, and distributing and delivering merchandise to the Company’s stores. The
determination of amounts that are required to be capitalized to inventory resulting from warehouse and handling expenditures and transportation costs (together “overhead costs”) are subjective and are generally based on an allocation ratio
calculated by the Company using the previous year’s actual overhead costs and the value of inventory handled during that year, subject to adjustment for current economic or market conditions. Additionally, to determine if the value of their
inventory should be written down, the Company considers many factors, including condition of the product (excessive scars, discoloring or damage from UV light), current and anticipated demand that may cause the product to become slow moving and
age of the merchandise to ensure that the product line is considered fresh. If a write-down is warranted, the carrying value of the merchandise is reduced from its original cost to the lower of its cost or net realizable value.
Our audit procedures to evaluate these items involved a higher degree of auditor judgment and the involvement of more senior members of the engagement team in
executing, supervising, and reviewing the results of the procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of inventories included the following, among others:
| • |
We obtained an understanding of the controls over the valuation of inventory.
|
| • |
We tested the inventory costs incurred by the Company by reviewing supplier invoices and ensuring that appropriate application of the first-in first-out principle was followed.
|
| • |
We evaluated the appropriateness and consistency of management’s methodology used in allocating overhead costs to inventory.
|
| • |
We evaluated the appropriateness of the capitalized overhead costs by analyzing them against actual overhead costs incurred during the year.
|
| • |
We tested the mathematical accuracy of the Company’s inventory obsolescence reserve calculation.
|
| • |
We evaluated the appropriateness and consistency of management’s methodology and assumptions used in developing its estimate of the inventory obsolescence reserve.
|
| • |
We performed analytical procedures on the current year reserve by comparing it to the prior year reserve and obtaining corroborating evidence to support any assumptions.
|
| • |
We tested on a sample basis, sales subsequent to year-end of the written-down items to ensure that the net realizable value was not lower than the previously written down value.
|
We have served as Tandy Leather Factory, Inc.’s auditor since 2003.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Tandy Leather Factory, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Tandy Leather Factory, Inc. and subsidiaries (the “Company”) as of December
31, 2024, and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the account or disclosures to which it relates.
Valuation of Inventory
The Company’s accounting policy for the recognition of inventory and cost of sales is described in Note 2 Significant Accounting Polices to the financial statements. The Company has recorded an inventory balance of approximately $35.6 million and cost of sales of
approximately $32.6 million as of and for the year ended December 31, 2024. Additionally, Note 3 Balance Sheet Components to the financial
statements provides further detail of the components of the year-end inventory balance.
The Company’s merchandise inventories are stated at the lower of cost or net realizable value using a first-in, first-out costing
principle. Finished goods inventory costs include the cost of merchandise purchases, the costs to bring the merchandise to the Company’s distribution center, warehousing and handling expenditures, and distributing and delivering
merchandise to the Company’s stores. Additionally, to determine if the value of their inventory should be written down, the Company considers many factors, including condition of the product (excessive scars, discoloring or damage
from UV light), current and anticipated demand that may cause the product to become slow moving and age of the merchandise to ensure that the product line is considered fresh. If a write-down is warranted, the carrying value of the
merchandise is reduced from its original cost to the lower of its cost or net realizable value. Our audit procedures to evaluate these items involved a higher degree of auditor judgment and the involvement of more senior members of
the engagement team in executing, supervising, and reviewing the results of the procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of inventories included the following, among others:
|
•
|
We obtained an understanding of the controls over the valuation of inventory.
|
|
•
|
We tested the inventory costs incurred by the Company by reviewing supplier invoices and ensuring that appropriate application of the first-in
first-out principle was followed.
|
|
•
|
We tested the inventory cost layers through computer assisted audit tools to ensure the cost layers were mathematically accurate.
|
|
•
|
We evaluated the appropriateness and consistency of management’s methodology used in allocating overhead costs to inventory.
|
|
•
|
We evaluated the appropriateness of the capitalized overhead costs by analyzing them against actual overhead costs incurred during the year.
|
|
•
|
We tested the mathematical accuracy of the Company’s inventory obsolescence reserve calculation.
|
|
•
|
We evaluated the appropriateness and consistency of management’s methodology and assumptions used in developing its estimate of the inventory
obsolescence reserve.
|
|
•
|
We performed analytical procedures on the current year reserve by comparing it to the prior year reserve and obtaining corroborating evidence
to support any assumptions.
|
|
•
|
We tested on a sample basis, sales subsequent to year-end of the written-down items to ensure that the net realizable value was not lower than
the previously written down value.
|
/s/ Whitley Penn LLP
We have served as the Company's auditor since 2024.
February 26, 2025
Tandy Leather Factory, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share data and per share data)
| December 31, |
December 31, |
|||||||
| 2024 | 2023 | |||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS:
|
||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
|
Accounts receivable-trade, net of allowance for doubtful accounts of $
|
|
|
||||||
|
Inventory, net
|
|
|
||||||
|
Income tax receivable
|
|
|
||||||
|
Prepaid expenses
|
|
|
||||||
|
Other current assets
|
|
|
||||||
|
Total current assets
|
|
|
||||||
|
Property and equipment, at cost
|
|
|
||||||
|
Less accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Property and equipment, net
|
|
|
||||||
|
Operating lease assets
|
|
|
||||||
|
Financing lease assets
|
|
|
||||||
| Deferred income taxes |
||||||||
|
Other assets
|
|
|
||||||
|
TOTAL ASSETS
|
$
|
|
$
|
|
||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Accounts payable-trade
|
$
|
|
$
|
|
||||
|
Accrued expenses and other liabilities
|
|
|
||||||
|
Income taxes payable
|
||||||||
|
Current portion of operating lease liabilities
|
|
|
||||||
|
Total current liabilities
|
|
|
||||||
| Deferred income taxes |
||||||||
|
Uncertain tax positions
|
|
|
||||||
|
Other non-current liabilities
|
|
|
||||||
|
Operating lease liabilities, non-current
|
|
|
||||||
|
Finance lease liabilities, non-current
|
|
|
||||||
|
COMMITMENTS AND CONTINGENCIES (Note 8)
|
|
|
||||||
|
STOCKHOLDERS’ EQUITY:
|
||||||||
|
Common stock, $
|
|
|
||||||
|
Paid-in capital
|
|
|
||||||
|
Retained earnings
|
|
|
||||||
|
Treasury stock at cost (
|
(
|
)
|
(
|
)
|
||||
|
Accumulated other comprehensive loss, net of tax
|
(
|
)
|
(
|
)
|
||||
|
Total stockholders’ equity
|
|
|
||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tandy Leather Factory, Inc.
Consolidated Statements of Operations and Comprehensive Income
(amounts in thousands, except share and per share data)
|
For the Years Ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Net sales
|
$
|
|
$
|
|
||||
|
Cost of sales
|
|
|
||||||
|
Gross profit
|
|
|
||||||
|
Operating expenses
|
|
|
||||||
|
Income from operations
|
|
|
||||||
|
Other income:
|
||||||||
|
Interest income
|
|
|
||||||
|
Other, net
|
|
|
||||||
|
Total other income
|
||||||||
|
Income before income taxes
|
|
|
||||||
|
Income tax provision
|
|
|
||||||
|
Net income
|
$
|
|
$
|
|
||||
|
Foreign currency translation adjustments, net of tax
|
(
|
)
|
|
|||||
|
Comprehensive income
|
$
|
|
$
|
|
||||
|
Net income per common share:
|
||||||||
|
Basic
|
$
|
|
$
|
|
||||
|
Diluted
|
$
|
|
$
|
|
||||
|
Weighted average number of shares outstanding:
|
||||||||
|
Basic
|
|
|
||||||
|
Diluted
|
|
|
||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
|
For the Years Ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
|
$
|
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
|
|
||||||
|
Operating lease asset amortization
|
|
|
||||||
|
Stock-based compensation
|
|
|
||||||
|
Deferred income taxes
|
(
|
)
|
(
|
)
|
||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable-trade
|
( |
) |
|
|||||
|
Inventory
|
|
|
||||||
|
Prepaid expenses
|
(
|
)
|
(
|
)
|
||||
|
Other current assets
|
|
(
|
)
|
|||||
|
Accounts payable-trade
|
(
|
)
|
||||||
|
Accrued expenses and other liabilities
|
|
|
||||||
|
Income taxes, net
|
(
|
)
|
|
|||||
|
Other assets
|
( |
) |
(
|
)
|
||||
|
Operating lease liabilities
|
(
|
)
|
(
|
)
|
||||
|
Total adjustments
|
|
|
||||||
|
Net cash provided by operating activities
|
|
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Payment of finance lease obligations
|
(
|
)
|
(
|
)
|
||||
|
Repurchase of common stock
|
|
(
|
)
|
|||||
|
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
|
Effect of exchange rate changes on cash and cash equivalents
|
( |
) |
|
|||||
|
Net increase in cash and cash equivalents
|
|
|
||||||
|
Cash and cash equivalents, beginning of period
|
|
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows - continued
(amounts in thousands)
|
For the Years Ended December 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Supplemental disclosures of cash flow information:
|
||||||||
|
Interest paid during the period
|
$
|
|
$
|
|
||||
|
Income tax paid during the period, net
|
$
|
|
$
|
|
||||
|
Supplemental disclosures of non-cash activity:
|
||||||||
| Operating lease assets obtained in exchange for lease liabilities, net |
$ | $ | ||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
Tandy Leather Factory, Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands, except share data)
|
Number of
Shares
Common
Stock
Outstanding
|
Par
Value
|
Paid-in
Capital
|
Treasury
Stock
|
Retained
Earnings
|
Accumulated
Other Comprehensive
Income (Loss)
|
Total
|
||||||||||||||||||||||
|
Balance, December 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|
||||||||||||||
|
Stock-based compensation expense
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Issuance of restricted stock
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Repurchase of common stock
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
|
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Foreign currency translation adjustments, net of tax
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance, December 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||
|
Stock-based compensation expense
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Vesting of restricted stock units
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Repurchase of common stock | ( |
) | ||||||||||||||||||||||||||
|
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Foreign currency translation adjustments, net of tax
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Balance, December 31, 2024
|
|
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
TANDY LEATHER FACTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2024 and 2023
1. DESCRIPTION OF BUSINESS
Tandy Leather Factory, Inc. (“TLF,” “we,” “our,” “us,” the “Company,” “Tandy,” or “Tandy Leather” mean Tandy Leather Factory, Inc., together with its subsidiaries)
is one of the world’s largest specialty retailers of leather and leathercraft-related items. Founded in 1919 in Fort Worth, Texas, the Company introduced leathercrafting to millions of American and later Canadian and other international
customers and has built a track record as the trusted source of quality leather, tools, hardware, supplies, kits and teaching materials for leatherworkers everywhere. Today, our mission remains to build on our legacy of inspiring the timeless
art and trade of leatherworking.
What differentiates Tandy from the competition is our high brand awareness and strong brand equity and loyalty, our network of retail stores that provides
convenience, a high-touch customer service experience, and a hub for the local leathercrafting community, and our 100-year heritage. We believe that this combination of qualities is unique to Tandy and gives the brand competitive advantages that
are difficult for others to replicate.
We sell our products
primarily through company-owned stores and through orders generated from our global websites, and through direct account representatives in our commercial division. We produce leather lace, cut leather pieces and most of the do-it-yourself kits
that are sold in our stores and on our websites. We also offer production services to our business customers such as cutting (“clicking”) and splitting and some assembly. We maintain our principal offices at 1900 Southeast Loop 820, Fort
Worth, Texas 76140.
The Company currently operates a total of 101
retail stores. There are 91 stores in the United States (“U.S.”), 9 stores in Canada and one store in Spain.
The Company’s common shares currently trade on Nasdaq Capital Market under the symbol “TLF.”
We operate as a
segment and report on a consolidated basis.
2. SIGNIFICANT ACCOUNTING POLICIES
Management estimates and reporting
The preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”)
requires the use of estimates that affect the reported value of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for the Company’s conclusions. The Company continually evaluates the information used to make these estimates as the business and the economic environment changes. Actual results may differ
from these estimates, and estimates are subject to change due to modifications in the underlying conditions or assumptions. The policies discussed below require estimates that contain a significant degree of judgement. The use of estimates is
pervasive throughout the Consolidated Financial Statements, but the accounting policies and estimates considered most significant are as follows.
Principles of consolidation
Our consolidated financial statements include the accounts of Tandy Leather Factory, Inc. and its active wholly-owned subsidiaries, The Leather Factory, L.P. (a
Texas limited partnership), Tandy Leather Company, L.P. (a Texas limited partnership), The Leather Factory of Canada, Ltd. (a Canadian corporation), and Tandy Leather Factory España, S.L. (a Spanish corporation). All intercompany accounts and
transactions have been eliminated in consolidation.
Deconsolidation of
Foreign Subsidiaries
The UK and
Australia entities were legally terminated in 2023 and as a result of the termination, we deconsolidated our UK and Australia entities and the impact of the deconsolidation resulted in a $0.5 million loss that is reported as part of “Other, net” on the consolidated statement of operations and comprehensive income.
Cash and cash equivalents
The Company considers investments with a maturity when purchased of three months or less to be cash equivalents. All
credit card, debit card and electronic transfer transactions that are processed in less than ninety days including our T-Bills are classified as cash and cash equivalents.
Accounts receivable and expected credit losses
Our receivables primarily arise from the sale of merchandise to customers that have applied for and been granted
credit. Accounts receivable are stated at amounts due, net of an allowance for credit losses. Accounts receivable are generally due within 30 days of invoicing. Our accounts receivable balance as of December 31, 2024, December 31, 2023 and
January 1, 2023 was $0.3 million, $0.3
million, and $0.4 million, respectively.
We estimate expected credit losses based on factors such as the composition of accounts receivable, the age of the
accounts, historical bad debt experience, and our evaluation of the financial condition and past collection history of each customer. Management believes that the historical loss information it has compiled is a reasonable base on which to
determine expected credit losses for trade receivables held at December 31, 2024, because the composition of the trade receivables at that date is consistent with that used in developing the historical credit-loss percentages (i.e., the
similar risk characteristics of its customers and its credit practices have not changed significantly over time). Accordingly, the allowance for expected credit losses at December 31, 2024, December 31, 2023, and January 1, 2023 each totaled
less than $0.1
Foreign currency translation and transactions
Foreign currency translation adjustments arise from activities of our foreign
subsidiaries. Results of operations are translated into U.S. dollars using the average exchange rates during the period, while assets and liabilities are translated using period-end exchange rates. Foreign currency translation adjustments
are recorded in stockholders’ equity, net of tax. For the years ended December 31, 2024 and 2023, we recorded foreign currency translation loss of $0.6
million and a gain of $0.4 million, respectively.
Gains and losses resulting from foreign currency transactions are recorded in other, net within
the statements of operations and comprehensive income.
Revenue recognition
Our revenue is earned from sales of merchandise and generally occurs via three methods: (1) at the store counter, (2) shipment of product
generally via web sales, and (3) sales of product directly to commercial customers through our commercial account representatives. We recognize revenue when we satisfy the performance obligation of transferring control of product merchandise
over to a customer. At the store counter, our performance obligation is met, and revenue is recognized when a sales transaction occurs with a customer. Our performance obligation for 2) and 3) are met when merchandise is shipped to a
customer, and revenue is recognized when control passes to the customer. Shipping terms are normally free on board (“FOB”) shipping point and control passes when the merchandise is shipped to the customer. Sales tax and comparable foreign
tax is excluded from net sales, while shipping charged to our customers is included in net sales. Net sales is based on the amount of consideration that we expect to receive, reduced by estimates for future merchandise returns. As of
December 31, 2024, December 31, 2023, and January 1, 2023, we had received approximately $0.3 million, $0.3 million, and $0.3 million in
credit card payments that had not shipped as of the end of the year, and this was recorded in deferred revenue under accrued expenses and other liabilities on the Balance Sheet.
The sales return allowance included in accrued expense and other liabilities was $0.2 million, $0.5 million, and $0.5 million as of December 31, 2024 and 2023 and January 1, 2023 respectively.
We record a gift card
liability for the unfulfilled performance obligation on the date we issue a gift card to a customer. We record revenue and reduce the gift card liability as the customer redeems the gift card. In addition, for gift card breakage, we recognize
a proportionate amount for the expected unredeemed gift cards over the expected customer redemption period, which is one year . We
include our gift card liability in accrued expenses and other liabilities. On January 1, 2024, the opening balance of the gift card liability was $0.3
million. During 2024, we issued $0.5 million of gift cards, and $0.4 million of gift cards were redeemed and recognized as revenue. At December 31, 2024, our gift card liability balance was $0.3 million. On December 31, 2023 and January 1, 2023, the gift card liability was $0.2 and $0.3 million respectively.
Disaggregated revenue
In the following table, revenue for the years ended December 31, 2024 and 2023 is disaggregated by geographic areas as follows:
|
(in thousands)
|
2024
|
2023
|
||||||
|
United States
|
$
|
|
$
|
|
||||
|
Canada
|
||||||||
|
Other
|
||||||||
|
Net sales
|
$
|
|
$
|
|
||||
Geographic sales information is based on the location where the order was fulfilled.
Discounts
We offer six classes of customer discounts: 1)
Retail, 2) Military/First Responder, 3) Business, 4) Commercial, 5) Commercial Pro, and 6) Employees. There are no other classes of discounts and any discounts given will fall into one of these six categories. Such discounts are not deemed to be variable consideration nor convey a material right to these customers since the discounted pricing they receive in a
discount class is not incremental to others within the same class and there is no retrospective impact of such discounts. As a result, sales are reported after deduction of discounts at the point of sale. We do not pay slotting fees or make
other payments to resellers.
Operating expense
Operating expenses include all selling, general and administrative costs, including wages and benefits, rent and occupancy costs, depreciation, advertising, store
operating expenses, outbound freight charges (to ship merchandise to customers), and corporate office costs.
Property and equipment, net of accumulated depreciation
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are to ten years for equipment and
machinery, to fifteen years
for furniture and fixtures, five years for vehicles, and forty years for buildings and related improvements. Leasehold improvements are amortized over the lesser of the life of the lease or the useful life of the asset. Repairs and maintenance
costs are expensed as incurred.
Inventory
Inventory is stated at the lower of first-in, first-out (“FIFO”) cost or net realizable value, and the FIFO layers are maintained at the location level. Finished
goods held for sale include the cost of merchandise purchases, the costs to bring the merchandise to our Texas distribution center, warehousing and handling expenditures, and distributing and delivering merchandise to our stores. These costs
include depreciation of long-lived assets utilized in acquiring, warehousing and distributing inventory. Assembled inventory including raw materials and work-in-process is valued on a first-in, first-out basis using full absorption accounting
which includes material, labor, and other applicable assembly overhead.
Carrying values of inventory are analyzed and, to the extent that the cost of inventory exceeds the net realizable value, provisions are made to reduce the carrying amount of the inventory.
We regularly review all inventory items to determine if
there are (i) damaged goods (e.g., for leather, excessive scars or damage from ultra-violet (“UV”) light), (ii) items that need to be removed from our product line (e.g., slow-moving items, inability of a supplier to provide items of acceptable
quality or quantity, and to maintain freshness in the product line) and (iii) pricing actions that need to be taken to adequately value our inventory at the lower of cost or net realizable value. Since the determination of net realizable value
of inventory involves both estimation and judgement with regard to market values and reasonable costs to sell, differences in these estimates could result in ultimate valuations that differ from the recorded asset.
The majority of inventory purchases and commitments are made in U.S. dollars in order to limit the Company’s exposure to foreign currency fluctuations. Goods
shipped to us are recorded as inventory owned by us when the risk of loss shifts to us from the supplier.
Inventory is physically counted twice annually in the Texas distribution center. At the store level, inventory is physically counted each
quarter. Inventory is then adjusted in our accounting system to reflect actual count results.
Leases
We lease certain real estate for our retail
store locations and periodically lease warehouse equipment for our Texas distribution center, both under long-term lease agreements. We determine if an arrangement is a lease at inception and recognize right-of-use (“ROU”) assets and lease
liabilities at commencement date based on the present value of the lease payments over the lease term. We elected not to record leases with an initial term of 12 months or less on the balance sheet for all our asset classes. The depreciable
life of related leasehold improvements is based on the shorter of the useful life or the lease term.
For operating leases, the present value of
our lease payments may include: (1) rental payments adjusted for inflation or market rates, and (2) lease terms with options to renew the lease or options to purchase leased equipment, when it is reasonably certain we will exercise such an
option. The exercise of lease renewal or purchase option is generally at our discretion. Payments based on a change in an index or market rate are not considered in the determination of lease payments for purposes of measuring the related
lease liability. We discount lease payments using our incremental borrowing rate based on information available as of the measurement date.
We recognize rent expense related to our operating leases on a straight-line basis over the lease term. Rent expense is recorded in operating expenses.
For finance leases, our right-of-use assets are amortized on a straight-line basis over the earlier of the useful life of the right-of-use asset or the end of the
lease term with rent expense recorded to operating expenses. We adjust the lease liability to reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The remaining asset
balance in our finance lease is only residual value and only an insignificant interest expense of less than $100 dollars was incurred
and is recorded on the consolidated statements of operations and comprehensive income.
None of our lease agreements contain material residual value guarantees or material restrictive covenants. We do not have any contingent rental payment agreements.
We have no sublease agreements and no lease agreements in which we are named as a lessor. Refer to Note 4, Leases for further discussion of the Company’s leases.
Impairment of long-lived assets
We evaluate long-lived assets on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain
assets may not be recoverable. Upon the occurrence of a triggering event, right-of-use (“ROU”) lease assets, property and equipment and definite-lived intangible assets are reviewed for impairment and an impairment loss is recorded in the period
in which it is determined that the carrying amount of the assets is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there
are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The Company determined the lowest level
of identifiable cash flows that are independent of other asset groups to be primarily at the individual store level. If the estimated undiscounted future net cash flows for a given store are less than the carrying amount of the related store
assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group’s major classifications which in this case are operating
lease assets and property and equipment. Triggering events at the store level could include material declines in operational and financial performance or planned changes in the use of assets, such as store relocation or store closure. This
evaluation requires management to make judgements relating to future cash flows, growth rates and economic and market conditions. The fair value of an asset group is estimated using a discounted cash flow valuation method.
For the year ended December 31, 2024, the Company recorded $0.02
million in impairment of two stores whereas there was no impairment expense recognized as of December 31, 2023.
Earnings per share
Basic earnings per share (“EPS”) are computed based on the weighted average number of common shares outstanding during the period. Diluted EPS includes additional
common shares that would have been outstanding if potential common shares with a dilutive effect, such as stock awards from the Company’s restricted stock plan, had been issued. Anti-dilutive securities represent potentially dilutive securities
which are excluded from the computation of diluted EPS as their impact would be anti-dilutive. Diluted EPS is computed using the treasury stock method.
|
(in thousands, except share data)
|
2024
|
2023
|
||||||
|
Numerator:
|
||||||||
|
Net income
|
$
|
|
$
|
|
||||
|
Denominator:
|
||||||||
|
Basic weighted-average common shares outstanding
|
|
|
||||||
|
Dilutive effect of service-based restricted stock awards granted to Board of Directors under the Plan
|
|
|
||||||
|
Dilutive effect of service-based restricted stock awards granted to employees under the Plan
|
||||||||
|
Diluted weighted-average common shares outstanding
|
||||||||
|
|
||||||||
| Basic earnings per share |
||||||||
| Diluted earnings per share |
||||||||
For the years ended December 31, 2024 and 2023, there were 38 and 65,075 shares, respectively, excluded from the diluted EPS calculation because the impact of their assumed vesting would be anti-dilutive. The significant change was due to
expiration and forfeiture of the CEO and board member shares as of December 31, 2024.
For additional disclosures regarding restricted stock awards and employee stock options, see Note 10, Stockholders’ Equity –
Equity Compensation Plans.
Other intangible
assets
Our intangible assets and related accumulated amortization relate to trademarks and copyrights that are definite-lived intangibles and are
subject to amortization. The weighted average amortization period is 15
years for trademarks and copyrights. Amortization expense related to other intangible assets was less than $0.01 0.01
Fair value of financial instruments
We measure fair value as an exit price, which is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. As a basis for considering such assumptions, accounting standards establish a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
|
Level 1 – observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
|
|
Level 2 – significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or
similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
|
Level 3 – significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
|
Classification of the financial asset or
liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Our principal financial instruments consist of our money market investment or T-Bills maturing less than 90 days, accounts receivable, and
accounts payable. As of December 31, 2024 and 2023, the carrying values of our financial instruments, included in our Consolidated Balance Sheets, approximated their fair values. There were no
Income taxes
Income taxes are estimated for each jurisdiction in which we operate. This involves assessing current tax exposure together with temporary differences resulting
from differing treatment of items for tax and financial statement accounting purposes. Any resulting deferred tax assets are evaluated for recoverability based on estimated future taxable income. To the extent it is more-likely-than-not that
all or a portion of a deferred tax asset will not be realized, a valuation allowance is recorded. Our evaluation regarding whether a valuation allowance is required or should be adjusted also considers, among other things, the nature, frequency,
and severity of recent losses, forecasts of future profitability and the duration of statutory carryforward periods.
Deferred tax assets and liabilities
are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that
includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
We recognize tax liabilities for uncertain tax positions and adjust these liabilities when our judgement changes as a result of the evaluation of new information not
previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as
increases or decreases to income tax expense and the effective tax rate in the period in which new information becomes available. We recognize interest and/or penalties related to all tax positions in income tax expense. To the extent that
accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made.
We may be subject to periodic audits by the Internal
Revenue Service and other taxing authorities. These audits may challenge certain of our tax positions, such as the timing and amount of deductions and allocation of taxable income to the various jurisdictions.
Stock-based compensation
The Company’s stock-based compensation relates primarily to restricted stock unit (“RSU”) awards. Accounting guidance requires measurement and recognition of
compensation expense at an amount equal to the grant date fair value. Compensation expense is recognized for service-based stock awards on a straight-line basis or ratably over the requisite service period, based on the closing price of the
Company’s stock on the date of grant. The service-based awards typically vest ratably over the requisite service period, provided that the participant is employed on the vesting date. Compensation expense is reduced by actual forfeitures as
they occur over the requisite service period of the awards.
Performance-based RSUs vest, if at all, upon the Company satisfying certain performance targets. The Company records compensation expense for awards with a
performance condition when it is probable that the condition will be achieved. If the Company determines it is not probable a performance condition will be achieved, no compensation expense is recognized. If the Company changes its assessment
in a subsequent period and concludes it is probable a performance condition will be achieved, the Company will recognize compensation expense ratably between the period of the change in assessment through the expected date of satisfying the
performance condition for vesting. If the Company subsequently assesses that it is no longer probable that a performance condition will be achieved, the accumulated expense that has been previously recognized will be reversed. The compensation
expense ultimately recognized, if any, related to performance-based awards will equal the grant date fair value based on the number of shares for which the performance condition has been satisfied. We issue shares from authorized shares upon the
lapsing of vesting restrictions on RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards.
Comprehensive income
Comprehensive income includes net income and certain other items that are recorded directly to stockholders’ equity. The Company’s only source of other
comprehensive income is foreign currency translation adjustments, and those adjustments are presented net of tax.
Shipping and handling costs
Costs to ship products to our customers are included in operating expenses on the consolidated
statements of operations and comprehensive income. Total costs were $3.2 million and $3.2 million for both the years ended December 31, 2024, and 2023, respectively.
Advertising
Advertising costs include the cost of print, digital, direct mail, community events, trade shows, and our e-commerce platform. Advertising costs are expensed as
incurred. Total advertising expense was $1.3 million and $1.1 million in 2024 and 2023, respectively.
Recently Adopted Accounting Pronouncements
The Financial Accounting Standard Board (FASB) issued an Accounting Standard Update (ASU 2023-07 Segment Reporting Topic 250: Improvements to Reportable segment
Disclosures) on segment reporting in November 2023 that is effective for 2024 financial reporting and the Company adopted the standard as a single reportable segment. The Chief Operating Decision Maker (CODM), which is our CEO, uses both the
net sales, cost of goods sold and net operating income to assess the Company’s performance and allocation of resources. All three measures are currently included on the face of our income statement.
The Company did not adopt any other new accounting guidance that was applicable for the year ended December 31, 2024.
3. BALANCE SHEET COMPONENTS
Inventory
|
(in thousands)
|
December 31, 2024
|
December 31, 2023
|
||||||
|
On hand:
|
||||||||
|
Finished goods held for sale
|
$
|
|
$
|
|
||||
|
Raw materials and work in process
|
|
|
||||||
|
Inventory in transit
|
|
|
||||||
|
TOTAL
|
$
|
|
$
|
|
||||
Property
and Equipment
|
(in thousands)
|
December 31, 2024
|
December 31, 2023
|
||||||
| Building | $ | $ | ||||||
|
Land
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
Equipment and machinery
|
|
|
||||||
|
Furniture and fixtures
|
|
|
||||||
|
Vehicles
|
|
|
||||||
|
|
|
|||||||
|
Less: accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
TOTAL
|
$
|
|
$
|
|
||||
Our property and equipment, net,
was located in the following countries:
|
(in thousands)
|
December 31, 2024
|
December 31, 2023
|
||||||
|
United States
|
$
|
|
$
|
|
||||
|
Canada
|
|
|
||||||
|
Spain
|
|
|
||||||
|
$
|
|
$
|
|
|||||
Depreciation expense was $1.2
Short-term Liabilities
|
Accrued Expenses and Other Liabilities
|
December 31, 2024
|
December 31, 2023
|
||||||
|
(in thousands)
|
||||||||
|
Accrued employee related costs
|
|
|
||||||
|
Unearned gift card revenue
|
|
|
||||||
|
Estimated returns
|
|
|
||||||
|
Sales and payroll taxes payable
|
|
|
||||||
|
Accrued vendor payables
|
|
|||||||
|
Other Short Term Liability (1)
|
||||||||
|
TOTAL
|
$
|
|
$
|
|
||||
| (1) |
4. LEASES
The Company leases certain real estate and periodically leases warehouse equipment under long-term lease agreements.
The Company performs interim reviews of its operating and finance lease assets for impairment when evidence exists that the carrying value of
an asset group, including a lease asset, may not be recoverable. The Company recognized $0.02 million in impairment expense related
to its operating lease assets during the year ended December 31, 2024 and did no t recognize any expense for the period ending
December 31, 2023.
Additional information regarding the Company’s operating and finance leases is as follows (in thousands, except for lease term and discount rate information):
|
Leases
|
Balance Sheet Classification
|
December 31, 2024
|
December 31, 2023
|
|||||||
|
(in thousands)
|
||||||||||
|
Assets:
|
||||||||||
|
Operating
|
|
$
|
|
$
|
|
|||||
|
Finance
|
|
|
|
|||||||
|
Total assets
|
$
|
|
$
|
|
||||||
|
Liabilities:
|
||||||||||
|
Current
|
||||||||||
|
Operating
|
|
$
|
|
$
|
|
|||||
|
Finance
|
Current portion of finance lease liabilities
|
|
|
|||||||
|
Non-current
|
||||||||||
|
Operating
|
|
|
|
|||||||
|
Finance
|
|
|
|
|||||||
|
Total lease liabilities
|
$
|
|
$
|
|
||||||
|
Lease Cost
|
Income Statement Classification
|
December 31, 2024
|
December 31, 2023
|
|||||||
|
(in thousands)
|
||||||||||
|
Operating lease cost
|
Operating expenses
|
$ | $ | |||||||
|
Operating lease cost
|
Impairment expense
|
( |
) | |||||||
| Short-term lease cost |
Operating expenses
|
|||||||||
|
Variable lease cost (1)
|
Operating expenses
|
|||||||||
| Finance: |
||||||||||
|
Amortization of lease assets
|
Operating expenses
|
|||||||||
|
Interest on lease liabilities
|
Interest expense
|
|||||||||
|
Total lease cost
|
$ | $ | ||||||||
(1) Variable lease cost includes payment for certain real
estate taxes, insurance, common area maintenance, and other charges related to lease agreements, which are not included in the measurement of the operating lease liabilities.
|
December 31, 2024
|
||||||||
|
Maturity of Lease Liabilities
|
Operating Leases
|
Finance Leases
|
||||||
|
(in thousands)
|
||||||||
|
2025
|
|
|
||||||
|
2026
|
|
|||||||
|
2027
|
|
|||||||
|
2028
|
|
|||||||
|
Thereafter
|
|
|||||||
|
Total lease payments
|
$
|
|
$ | |||||
|
Less: Interest
|
(
|
)
|
||||||
|
Present value of lease liabilities
|
$
|
|
$ | |||||
|
Other Information
|
December 31, 2024
|
December 31, 2023
|
||||||
|
(in thousands)
|
||||||||
|
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||
|
Operating cash flows used in operating leases
|
$
|
|
$
|
|
||||
|
Operating cash flows used in finance leases
|
|
|
||||||
|
Financing cash flows used in finance leases
|
|
|
||||||
|
Operating lease assets obtained in exchange for lease obligations
|
||||||||
|
Operating leases, initial recognition
|
||||||||
|
Operating leases, modifications and remeasurements
|
||||||||
|
Lease Term and Discount Rate
|
December 31, 2024
|
December 31, 2023
|
||||||
|
Weighted-average remaining lease term (years):
|
||||||||
|
Operating leases
|
||||||||
|
Finance leases
|
- |
- |
||||||
|
Weighted-average discount rate:
|
||||||||
|
Operating leases
|
% |
% |
||||||
|
Finance leases
|
N/A |
% |
||||||
5. NOTES PAYABLE AND LONG-TERM DEBT
On January 3, 2023, the Company entered
into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. Under the Credit Agreement, the bank will provide the Company a credit facility of up to $5,000,000 on standard terms and conditions, including affirmative and negative covenants set forth in the Credit Agreement. As security for the credit facility, the
Company has pledged, as collateral, certain of its assets, including the Company’s cash in deposit accounts, inventory and equipment. The interest rate is based on CME term + basis points and the maturity is 1 year . As of the date of this filing, no
funds had been borrowed under this facility, and we are in compliance with all covenants.
In the fourth
quarter of 2024, the Company renewed the promissory note under its Credit Agreement with JPMorgan Chase Bank, N.A. through October 31, 2025 under the same terms as above.
6. EMPLOYEE BENEFIT AND SAVINGS PLANS
We have a 401(k) plan to provide retirement benefits for our employees. As allowed under Section 401(k) of the Internal Revenue Code, the plan provides tax-deferred
salary contributions for eligible employees and allows employees to contribute a percentage of their annual compensation to the plan on a pretax basis. Employee contributions are limited to a maximum annual amount as set periodically by the
Internal Revenue Code. In 2024 and 2023, we matched 100 3 50 2 0.3 million and $0.3 million, respectively.
The
plan allows employees who meet the age requirements and reach the plan contribution limits to make a catch-up contribution. The catch-up contributions are not eligible for matching contributions. In addition, the plan provides for
discretionary matching contributions as determined by the Board of Directors. There were no
We offer no postretirement or postemployment benefits to our employees.
7. INCOME TAXES
The provision for income taxes consists of the following:
|
(in thousands)
|
Year Ended December 31,
|
|||||||
|
Income Tax Provision (Benefits)
|
2024
|
2023
|
||||||
|
Current provision (benefit):
|
||||||||
|
Federal
|
$
|
|
$
|
|
||||
|
State
|
|
|
||||||
|
Foreign
|
(
|
)
|
|
|||||
|
Related to UTP
|
(
|
)
|
(
|
)
|
||||
|
|
|
|||||||
| Deferred provision (benefit): | ||||||||
|
Federal
|
( |
) | ||||||
| State | ( |
) | ||||||
| Foreign | ( |
) | ||||||
| ( |
) | |||||||
|
Total tax provision
|
$ | $ | ||||||
Earnings occurring outside the U.S. are deemed to be indefinitely reinvested outside of the U.S. to support the Company’s foreign operations. As a result, if the Company accumulates earnings overseas, they will be used
for investment in the Company’s businesses outside the U.S. The Company will use cash generated from U.S. operations and short- and long-term borrowings to meet the Company’s U.S. cash needs. The determination of unrecognized deferred tax
liabilities for temporary differences in investments in foreign subsidiaries is not practicable.
The Company has $0.7 million of state tax net operating loss (“NOL”) carryovers which will begin to expire in 2025. We also have a full valuation allowance on $0.6 million of foreign tax NOL carryovers that do not expire.
Income before income taxes was earned in the following tax jurisdictions:
|
(in thousands)
|
Year Ended December 31,
|
|||||||
|
Income Before Income Taxes
|
2024
|
2023
|
||||||
|
United States
|
$
|
|
$
|
|
||||
|
Spain
|
(
|
)
|
|
|||||
|
Canada
|
(
|
)
|
|
|||||
|
TOTAL
|
$
|
|
$
|
|
||||
The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows:
|
Deferred income tax assets:
|
2024
|
2023
|
||||||
|
(in thousands)
|
||||||||
|
Inventory
|
$
|
|
$
|
|
||||
|
Stock-based compensation
|
|
|
||||||
|
Accounts receivable
|
|
|
||||||
|
Sales returns
|
|
|
||||||
|
Foreign currency translation gain in OCI
|
|
|
||||||
|
Goodwill and other intangible assets amortization
|
||||||||
|
Net operating losses
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
Leases
|
|
|
||||||
|
Total deferred income tax assets
|
|
|
||||||
|
Less: valuation allowance
|
(
|
)
|
(
|
)
|
||||
|
Total deferred income tax assets, net of valuation allowance
|
$
|
|
$
|
|
||||
|
Property and equipment depreciation
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Total deferred income tax liabilities
|
(
|
)
|
(
|
)
|
||||
|
Net deferred tax asset (liability)
|
$
|
|
$
|
|
||||
We are required to reduce deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a
portion of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible.
As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2024,
management determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $1.2
million are realizable. However, we increase the valuation allowance by $0.02 million due to foreign tax NOL carryovers that do not
expire.
Our
effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, the difference in tax rates for loss carryback periods, foreign income positions, expenses that are nondeductible for tax purposes, the
change in our valuation allowance associated with our deferred tax assets, and differences in tax rates. Below is a reconciliation of our effective tax rate from the statutory rate:
|
Year Ended December 31,
|
||||||||
| 2024 |
2023
|
|||||||
|
Statutory rate – Federal U.S. income tax
|
|
%
|
|
%
|
||||
|
State and local taxes
|
|
%
|
|
%
|
||||
|
Permanent book/tax differences
|
|
%
|
|
%
|
||||
|
Difference in tax rates in loss carryback periods
|
% | % | ||||||
|
Change in valuation allowance
|
|
%
|
(
|
)%
|
||||
|
Rate differential on UTP reversals
|
(
|
)%
|
(
|
)%
|
||||
| Income tax credits |
% | ( |
)% | |||||
|
Other, net
|
(
|
)%
|
(
|
)%
|
||||
|
Effective rate
|
|
%
|
|
%
|
||||
We file a
consolidated U.S. income tax return as well as state tax returns on a consolidated, combined, or stand-alone basis, depending on the jurisdiction. We are no longer subject to U.S. federal income tax examinations by tax authorities for years
prior to the tax year ended December 2021. Depending on the jurisdiction, we are no longer subject to state examinations by tax authorities for years prior to the December 2020 and December 2021 tax years. We file tax returns in a limited
number of foreign jurisdictions.
A reconciliation of the beginning and ending amount of uncertain tax positions (“UTP”) is as follows:
|
2024
|
2023
|
|||||||
|
UTP at beginning of the year
|
$
|
|
$
|
|
||||
|
Gross increase to tax positions in current period
|
(
|
)
|
(
|
)
|
||||
|
Interest expense
|
(
|
)
|
( |
) | ||||
|
UTP at end of year
|
$
|
|
$
|
|
||||
8. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are periodically involved in various litigation that arises in the ordinary course of business and operations. There are no such matters pending that we expect
to have a material impact on our financial position or operating results. Legal costs associated with the resolution of claims, lawsuits, and other contingencies are expensed as incurred.
9. SIGNIFICANT BUSINESS CONCENTRATIONS AND RISK
Major Customers
Our revenues are derived from a diverse group of customers, from hobbyist crafters to small and large businesses across a wide variety of industries. No five 2.0 %
of consolidated revenues in each of those years. While we do not believe the loss of one of these customers would have a significant negative impact on our operations, we do believe the loss of several of these customers simultaneously or a
substantial reduction in sales generated by them could temporarily affect our operating results.
Major Suppliers
We purchase merchandise and raw materials from nearly 150 suppliers from the United States and approximately 20 foreign
countries. In general, our 10 largest suppliers account for approximately 55 % of our inventory purchases, and we had one supplier in 2024 who
represented about 12% of our purchases.
Credit Risk
Due to the large number of customers comprising our customer base, concentrations of credit risk with respect to customer receivables are limited. The top two 8.6 % and 8.0 % of net accounts receivable balance, respectively. These top two
We maintain a majority of our cash in marketable securities and bank deposit accounts that, at times, may exceed federally insured limits. We have not experienced any losses in such accounts. We believe we are not exposed to any
significant credit risk on our cash and cash equivalents.
10. STOCKHOLDERS’ EQUITY
Equity Compensation Plans
The
Tandy Leather Factory, Inc. 2013 Restricted Stock Plan (the “2013 Plan”) was adopted by our Board of Directors in January 2013 and approved by our stockholders in June 2013. The 2013 Plan initially reserved up to 300,000 shares of our common stock for restricted stock unit (“RSU”) awards to our executive officers, non-employee directors and other key
employees. In June 2020, our stockholders approved an increase to the plan reserve to 800,000 shares of our common stock and
extended the 2013 Plan through June 2023. Awards granted under the 2013 Plan may be service-based awards or performance-based awards and may be subject to a graded vesting schedule with a minimum vesting period of four years , unless otherwise determined by the Compensation Committee of the Board of Directors that administers the plan.
The Tandy Leather
Factory, Inc. 2023 Incentive Stock Plan (the “2023 Plan”) was adopted by our Board of Directors in April 2023 and approved by our stockholders in June 2023. The 2023 Plan initially reserved up to 1,000,000 shares of our common stock for a variety of equity awards (including, but not limited to, RSUs, the only type of awards that have been granted to date) to our
executive officers, non-employee directors and other key employees. In June 2024, as part of their annual director compensation, certain of our non-employee directors were granted a total of 12,528 service-based RSUs under the 2023 Plan, which will vest ratably over the next four years , subject to each participant’s continued service on the board as of each vesting date. In October 2023, the Company granted to Ms. Carr a total of 276,000 service-based RSUs under the 2023 Plan, which were to vest ratably over the next three years , subject to Ms. Carr’s continued employment as of each vesting date. 92,000 of these
RSUs vested in October 2024; the rest was forfeited as of December 31, 2024.
A summary of the activity for restricted stock and RSU awards is as follows:
| Shares | Weighted Average | |||||||
| (in thousands) | Share Price | |||||||
|
Balance, January 1, 2024
|
|
$
|
|
|||||
|
Granted
|
|
|
||||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Vested
|
(
|
)
|
|
|||||
|
Balance, December 31, 2024
|
|
$
|
|
|||||
The Company’s stock-based compensation relates to restricted stock and RSU awards. For these service-based awards, our stock-based compensation expense, included in
operating expenses, was $0.6 million and $0.8
million in 2024 and 2023, respectively.
As of December 31, 2024, there was unrecognized compensation cost related to non-vested, service-based awards of $0.3 million which will be recognized over 3.1 weighted average
years in each of the following years:
|
Unrecognized Expense
|
||||
|
2025
|
$
|
|
||
|
2026
|
|
|||
|
2027
|
|
|||
| 2028 | ||||
|
$
|
|
|||
We issue shares from authorized shares upon the lapsing of vesting restrictions on restricted stock and RSUs. In 2024 and 2023, we issued 97,588 and 108,796 shares,
respectively, net of shares withheld to pay participants’ income taxes, resulting from the vesting of restricted stock and RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards.
Share Repurchase Program
On August 8, 2022, the Board of Directors approved a new
program to repurchase up to $5.0 million of the Company’s common stock on the open market on or prior to August 31, 2024. As of
December 31, 2024, the Company had repurchased less than $10,000 of shares under this plan.
On September 17, 2024, the Board of
Directors approved the renewal of the stock plan, and the Company shall be authorized to repurchase up to $5 million (at
then-current market value) of the Company’s common stock in open-market transactions at prevailing market prices upon periodic instructions from the Board or an authorized sub-committee of the Board until September 30, 2026. As of September
30, 2024, $5.0 million remained available for repurchase under this new program.
The direct share repurchase transactions were separately authorized by our Board of Directors and did not reduce the remaining amount authorized to be
repurchased under the plans described above.
11. SUBSEQUENT
EVENTS
On
January 22, 2025, the Company finalized the sale of its corporate headquarters and distribution facilities in Fort Worth, Texas for a gross sale of $26.5
million before deduction of commission and relevant closing fees as referenced in the Company’s 8-K filed on January 22, 2025. On January 28, 2025, the Company also signed a 10-year lease for new corporate headquarters and distribution facilities in Benbrook, Texas and the Company has the ability to renew the lease for an additional 10 years at market rate.
The Company hired Johan Hedberg as its new Chief Executive Officer as of January 6, 2025. Prior to the hiring of Mr. Hedberg, Janet Carr resigned as Chief Executive
Officer, effective January 3, 2025; she intends to remain employed by the Company to assist with transition until March 31, 2025.
| ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None.
| ITEM 9A. |
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the design and operation of our “disclosure controls and procedures” (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon our evaluation of these disclosure controls and procedures, our Chief Executive Officer and
Principal Financial Officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation in ensuring that information required to be disclosed in the reports that we file or submit under the
Exchange Act is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Our internal control system was designed to provide reasonable assurance to our
management and our board of directors regarding the reliability of the preparation and fair presentation of our published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
We have assessed the effectiveness of our internal controls over financial reporting as of December 31, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commissions (COSO) in Internal Control – Integrated Framework. Based on our assessment, we believe that, as of December 31, 2024, our internal control over financial
reporting is effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Changes in internal control
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
| ITEM 9B. |
OTHER INFORMATION
|
|
ITEM 11.
|
EXECUTIVE COMPENSATION*
|
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*
|
* The information required by Items 10, 11, 12, 13, and 14 is or will be set forth in the definitive proxy statement relating to the 2024 Annual Meeting of Stockholders of Tandy Leather Factory, Inc., which is
to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. This definitive proxy statement relates to a meeting of stockholders involving the election of
directors and the portions therefrom required to be set forth in this Form 10-K by Items 10, 11, 12, 13, and 14 are incorporated herein by reference pursuant to General Instruction G(3) to Form 10-K.
| (a) |
The following are filed as part of this Form 10-K:
|
1. Financial Statements
The following Consolidated Financial Statements are included in Item 8, Financial Statements and Supplementary Data:
Report of Independent Registered Public Accounting Firm (PCAOB ID Numbers and )
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023
2. Financial Statement Schedules
All financial statement schedules are omitted because the required information is not present or not present in sufficient amounts to require submission of the schedule or because the information is reflected
in the consolidated financial statements or notes thereto.
3. Exhibits
|
TANDY LEATHER FACTORY, INC. AND SUBSIDIARIES
EXHIBIT INDEX
|
|
|
Exhibit
Number
|
Description
|
|
Certificate of Incorporation of The Leather Factory, Inc., and Certificate of Amendment to Certificate of Incorporation of The Leather Factory, Inc. filed as Exhibit 3.1 to Tandy Leather Factory,
Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 12, 2005 and incorporated by reference herein.
|
|
|
Bylaws of Tandy Leather Factory, Inc., filed as Exhibit 3.1 to Tandy Leather Factory, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2021 and
incorporated by reference herein.
|
|
|
|
Certificate of Designations of Series A Junior Participating Preferred Stock of Tandy Leather Factory, Inc. filed as Exhibit 3.1 to Tandy Leather Factory, Inc.’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 10, 2013 and incorporated by reference herein.
|
| 3.4 | Certificate of Amendment of Certificate of Incorporation of Tandy Leather Factory, Inc. dated March 1, 2023, filed as Exhibit 3.4 to Tandy Leather Factory, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2023. |
|
Description of Securities filed as Exhibit 4.1 to Tandy Leather Factory, Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 22, 2021
and incorporated by reference herein.
|
|
|
Tandy Leather Factory, Inc. 2013 Restricted Stock Plan, filed as Exhibit 10.1 to Tandy Leather Factory’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November
14, 2013 and incorporated by reference herein.
|
|
|
Amendment #1 to Tandy Leather Factory, Inc. 2013 Restricted Stock Plan filed as Exhibit 10.5 to Tandy Leather Factory, Inc.’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on June 22, 2021 and incorporated by reference herein.
|
|
Form of Non-Employee Director Restricted Stock Agreement under Tandy Leather Factory, Inc.’s 2013 Restricted Stock Plan, filed as Exhibit 10.1 to Tandy Leather Factory, Inc.’s Current Report on Form
8-K filed with the Securities and Exchange Commission on February 14, 2014 and incorporated by reference herein.
|
|
|
Form of Employee Restricted Stock Award Agreement under Tandy Leather Factory, Inc.’s 2013 Restricted Stock Plan, filed as Exhibit 10.7 to Tandy Leather Factory, Inc.’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 14, 2014 and incorporated by reference herein.
|
|
|
Form of Employment Agreement dated October 2, 2018 between the Company and Janet Carr, filed as Exhibit 10.1 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 5, 2018 and incorporated by reference herein.
|
|
|
Form of Stand-Alone Restricted Stock Unit Agreement dated October 2, 2018 between the Company and Janet Carr, filed as Exhibit 10.2 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 5, 2018 and incorporated by reference herein.
|
|
|
Form of Stand-Alone Restricted Stock Unit Agreement dated October 2, 2018 between the Company and Janet Carr, filed as Exhibit 10.3 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 5, 2018 and incorporated by reference herein.
|
|
| 10.8 | Credit Agreement dated October 26, 2022 between the Company and JP Morgan Chase Bank, N.A., filed as Exhibit 10.8 to Tandy Leather Factory, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2023 |
| 10.9 | Tandy Leather Factory, Inc. 2023 Incentive Stock Plan, filed as Exhibit 10.10 to Tandy Leather Factory, Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2023 |
| *10.10 |
Purchase and Sale Agreement dated December 6, 2024, between The Leather Factory, L.P. and Colonna Brothers, Inc.
|
| *10.11 |
Commercial Lease Agreement dated January 28, 2025, between the Company and Jackson-Shaw / Benbrook North, LP.
|
|
Letter agreement dated January 2, 2025, between the Company and Janet Carr
|
|
| *10.13 | Employment Agreement dated January 2, 2025, between the Company and Johan Hedberg |
| *10.14 | Form of Restricted Stock Unit Agreement dated February 19, 2025, between the Company and Johan Hedberg |
| *10.15 | Form of Restricted Stock Unit Agreement dated February 19, 2025, between the Company and Johan Hedberg |
| 14.1 | Code of Business Conduct and Ethics of Tandy Leather Factory, Inc., adopted by the Board of Directors on December 4, 2018, filed as Exhibit 14.1 to Tandy Leather Factory, Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 22, 2021 and incorporated by reference herein. |
|
Subsidiaries of Tandy Leather Factory, Inc.
|
|
|
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
*101.INS
|
XBRL Instance Document.
|
|
*101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
*101.CAL
|
XBRL Taxonomy Extension Calculation Document.
|
|
*101.DEF
|
XBRL Taxonomy Extension Definition Document.
|
|
*101.LAB
|
XBRL Taxonomy Extension Labels Document.
|
|
*101.PRE
|
XBRL Taxonomy Extension Presentation Document.
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*Filed Herewith
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
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TANDY LEATHER FACTORY, INC.
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By:
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/s/ Johan Hedberg | ||
| Johan Hedberg | |||
| Chief Executive Officer | |||
| Dated: February 26, 2025 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
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Signature
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Title
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Date
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/s/ Jefferson Gramm
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Chairman of the Board
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February 26, 2025
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Jefferson Gramm
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||
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/s/ Johan Hedberg
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Chief Executive Officer, Director
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February 26, 2025
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Johan Hedberg
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(principal executive officer)
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/s/ John Sullivan
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Director
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February 26, 2025
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John Sullivan
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||
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/s/ Vicki Cantrell
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Director
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February 26, 2025
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Vicki Cantrell
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/s/ Sejal Patel
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Director
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February 26, 2025
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Sejal Patel
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||
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/s/ Diana Saadeh-Jajeh
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Director
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February 26, 2025
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Diana Saadeh-Jajeh
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58
Exhibit 10.10
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into and is effective as of the 26th day of November, 2024 (the “Effective Date”), by and between The Leather Factory, L.P., a Texas limited partnership (“Seller”), and Colonna Brothers,
Inc., a New Jersey corporation, or its permitted assigns pursuant to Section 11.2 below (as applicable, “Purchaser”).
RECITALS
WHEREAS, Seller desires to sell the Property (as hereinafter defined) located in Tarrant County, Texas, and whose Improvements (as hereinafter
defined) have street addresses of 1900 SE Loop 820 and 2300 S. Campus Ct., Fort Worth, Texas 76140, and Purchaser desires to purchase the Property;
WHEREAS, in connection with the contemplated purchase and sale of the Property, Seller and Purchaser entered into that certain Pre-Purchase Right of
Entry and Due Diligence Agreement dated October 6, 2024 (the “Original Access Agreement”), as amended by that certain Amendment #1 to Pre-Purchase Right of
Entry and Due Diligence Agreement dated October 29, 2024 (the “First Amendment to Access Agreement,” and together with the Original Access Agreement, the “Access Agreement”); and
WHEREAS, Seller and Purchaser, intending to be bound by this Agreement, hereby (a) set forth hereinbelow the terms, conditions and agreements under
and by which Seller shall sell, and Purchaser shall purchase, the Property, and (b) acknowledge and agree that the terms, conditions and agreements set forth herein are in addition to and/or in replacement of those terms and conditions set forth in
the Access Agreement regarding said sale and purchase of the Property.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller hereby agree as set forth below:
1. PURCHASE AND SALE OF PROPERTY. Subject to and in accordance with the terms and conditions set forth in this Agreement, Purchaser shall purchase from Seller and Seller shall sell to Purchaser an approximately
29.78-acre tract of land (the “Real Property”) in the City of Fort Worth, County of Tarrant, State of Texas, which is more particularly described in Exhibit 1 and depicted in Exhibit 1-A attached hereto and
incorporated herein by reference, and upon which is located three (3) commercial buildings located at 1900 SE Loop 820 and 2300 S. Campus Ct., Fort Worth, Texas 76140 (collectively, the “Buildings”), together with (a) all other improvements, parking facilities and fixtures, including all mechanical, electrical, heating and air conditioning, and plumbing systems servicing the Buildings, located
on the Real Property owned by Seller , and any and all of Seller’s rights, easements, licenses and privileges presently thereon or appertaining thereto (collectively, the “Improvements”); (b) all rights, titles and interests of Seller in and to any easements, hereditaments, appurtenances, development rights, and other benefits, if any, pertaining to or affecting the Real Property, and all of
Seller’s rights to use rights‑of‑way, rights of ingress or egress or other interests in, on or to any land, highway, street, road or avenue, opened or proposed, in, on, across, in front of, abutting or adjoining the Real Property (collectively,
the “Easements”); (c) all machinery, furniture, furnishings, equipment and personal property set forth in Schedule 1, such inventory list to be attached to
this Agreement on or before Closing upon the parties’ mutual agreement as to the items of personal property included in the sale (the “Personal Property”);
(d) any and all permits and any and all warranties, architectural or engineering plans and specifications and development rights that exist as of the Closing Date (as hereinafter defined) and relate to the Real Property or the Personal Property
(collectively, the “Intangible Property”); and (e) all right,
title and interest of Seller under any and all of the maintenance, service, and other like contracts and agreements with respect to the ownership and operation of the Property, in each case, to the extent assignable at no cost to Seller
(excluding contracts that also affect other properties owned by Seller or its affiliates) (collectively, the “Service Contracts”), subject to the terms of Section 8.2 herein; all to the extent applicable to the period from and after the Closing (as defined in Section
4 below), except as expressly set forth to the contrary in this Agreement. Items (a) through (e) above, together with the Real Property, are collectively referred to in this Agreement as the “Property”; provided, however, the term “Property” expressly excludes all rights with respect to any refund of taxes applicable to any period prior to the Closing Date (as defined
below), all rights to any insurance proceeds or settlements for events occurring prior to Closing (subject to the terms below), all cash on hand, checks, money orders, prepaid postage in postage meters, and accounts receivable applicable to
periods on or prior to the Closing Date.
2. PURCHASE PRICE. The total consideration to be paid by Purchaser to Seller for the Property is an amount equal to Twenty-Six Million Five Hundred Thousand and No/100 Dollars ($26,500,000.00) (the “Purchase Price”).
2.1 Earnest Money. The parties hereby acknowledge and agree that Purchaser has delivered or will deliver to Republic
Title of Texas, 201 Main Street, Suite 1400, Fort Worth, Texas 76102, Attn: Janet Ceron (email: jceron@republictitle.com) (“Title Company”, and in its capacity as escrow agent hereunder, “Escrow Agent”) an amount equal to Two Hundred Thousand and No/100 Dollars ($200,000.00) (the “Initial
Earnest Money”) pursuant to Section 1 of the Access Agreement in good funds, by certified bank or cashier’s check or by federal wire transfer. On or before the date that is the later of: (i) five (5) business days after the Effective
Date, (ii) November 18, 2024, if Purchaser does not timely deliver notice to Seller of any Material Environmental Matter(s) (as more particularly described in Section 3.2 below), or (iii) November 25, 2024, if Purchaser timely delivers notice to
Seller of any Material Environmental Matter(s), Purchaser shall deposit with Escrow Agent an additional amount equal to Eight Hundred Thousand and No/100 Dollars ($800,000.00) (the “Additional Earnest Money” and together with the Initial Earnest Money and any interest earned thereon, the “Earnest Money”).
The Earnest Money shall be held by Escrow Agent in an interest-bearing account subject to receipt of a form W-9 from Purchaser. All interest earned on the Earnest Money shall be added to the principal held in the escrow and shall constitute a
part of the Earnest Money. Interest earned on the Earnest Money shall be deemed earned by Purchaser. Except as otherwise expressly provided herein, as of the Effective Date, the Earnest Money is non-refundable upon deposit pursuant to the terms
of the Access Agreement but otherwise shall still be treated as a part of the Earnest Money and credited to the Purchase Price if the transaction closes.
2.2 Independent Consideration. Notwithstanding anything in this Agreement to the contrary, One Hundred and No/100 Dollars ($100.00) of the Initial Earnest Money will be non-refundable to Purchaser and
distributed to Seller upon any termination of this Agreement as Independent Consideration (the “Independent Consideration”) in cash or immediately available
funds, in consideration for Seller entering into this Agreement to the exclusion of potential other purchasers and granting Purchaser the right to inspect and evaluate the Property during the Inspection Period (as defined below). The Independent
Consideration is not refundable to Purchaser under any circumstances but will be applied to the Purchase Price if Closing occurs.
2.3 Cash Balance. At Closing, Purchaser shall pay to Seller the Purchase Price, less the Earnest Money, plus or minus the prorations described in this Agreement (such amount, as adjusted, being
referred to as the “Cash Balance”). Purchaser shall pay the Cash Balance in good and immediately available funds through Escrow Agent.
3. TITLE AND SURVEY.
3.1 Evidence of Title. Purchaser has caused the Title Company to deliver to Purchaser and Seller (a) a commitment dated effective September 27, 2024, issued on October 10, 2024, GF No.
1003-403175-1-RTT (the “Title Commitment”) for an Owner’s Policy of Title Insurance on the standard form prescribed and promulgated by the Texas Department
of Insurance (i.e., a Texas Land Title Association (TLTA) Form T-1 Owner’s Policy of Title Insurance) in the amount of the Purchase Price (the “Title Policy”), (b) available copies of all title exception documents referred to in the Title Commitment, in accordance with the Access Agreement, and (c) UCC search reports, both from the
Secretary of State of Texas, the Secretary of State of the state of incorporation of Seller and from Tarrant County, Texas (the “UCC Searches”). Seller shall
have, as part of the Due Diligence Materials (as defined below), delivered a copy of the most recent survey of the Real Property and the Improvements in Seller’s possession, if any, to Purchaser (the “Survey”). Prior to the Effective Date, Purchaser may have, if it so elected and at its sole cost and expense, arranged for the preparation of a new survey (or an update of the existing Survey) with
respect to the Property (the “Updated Survey”).
3.2 Title Review. All items shown in Schedule B of the Title Commitment and the Survey (or Updated Survey) other than Mandatory Removal Items and Material Environmental Matters (as defined below)
shall be deemed to be “Permitted Exceptions.” Pursuant to the terms of the First Amendment to Access Agreement, Purchaser shall have the right to make
written objections to Seller on or before November 18, 2024 to any Material Environmental Matters, and Seller may, but shall not be obligated, to cure such Material Environmental Matters in accordance with the Access Agreement; provided, however,
that it is expressly understood and agreed that Seller shall have no obligation to effect such curative matters. Failure by Seller to deliver a response to Purchaser’s timely objections to any Material Environmental Matters within the
four-business day period set forth in the First Amendment to Access Agreement shall be deemed an election by Seller not to cure such matter(s). If Seller elects or is deemed to have elected not to cure any Material Environmental Matter timely
objected to by Purchaser, and Purchaser elects to accept such title as Seller can deliver and proceeds to Closing in accordance with the Access Agreement, such remedy shall be without reduction of the Purchase Price and such matter or matters
shall become a Permitted Exception. Purchaser’s failure to timely terminate this Agreement pursuant to its right to do so under the Access Agreement shall be deemed an election to accept title and proceed to Closing. If Purchaser terminates the
Agreement pursuant to this section, the Earnest Money will be returned to Purchaser in accordance with the Access Agreement and neither party shall have any further rights or obligations under this Agreement except those which expressly survive
termination of this Agreement. For purposes of this Agreement, a “Material Environmental Matter” means an environmental issue with the Property identified in Purchaser’s Phase II Environmental Site Assessment report that (1) was not shown on any
Phase I Environmental Site Assessment report or any other materials delivered by Seller to Purchaser with the Due Diligence Items, and (2) results in a recommendation by an environmental consultant to take remedial action because of one or more
recognized environmental conditions. A Material Environmental Matter expressly excludes all small risks (or matters) and business environmental risks, including, without limitation, any recommendation of an O&M Plan or like matters.
Notwithstanding the foregoing, Seller shall, at or prior to Closing, (i) discharge all liens of deeds of trust and/or mortgages or other collateral financing interests, and all other monetary liens created by, under or through Seller, or assumed
by Seller (with Seller having the right to apply the Purchase Price or a portion thereof for such purpose), whether voluntary or involuntary, listed in the Title Commitment or the UCC Searches (ii) discharge all mechanics’ or materialman’s liens
listed in the Title Commitment or the UCC Searches that are not created by Purchaser, (iii) satisfy or otherwise eliminate to the satisfaction of the Title Company any and all judgment liens against Seller and pertaining to the Property or
against the Property and are listed either in the Title Commitment or the UCC Searches, and (iv) cure and/or remove any exception or encumbrance noted on the updated Title Commitment or Updated Survey and created by, under or through Seller after
the Effective Date without Purchaser’s written consent (each a “Mandatory Removal Item”), and in no event shall any Mandatory Removal Item be deemed a
Permitted Exception. Purchaser may, at Purchaser’s election and at Purchaser’s sole cost and expense, have the standard printed exception as to discrepancies, conflicts, or shortages in area and boundary lines, or any encroachments or
protrusions, or any overlapping improvements amended to read “shortages in area.”
3.3 Supplemental Title Objections. If any update of the Title Commitment or Survey delivered to Purchaser after the Effective Date contains exceptions or items that were not set forth in the original
Title Commitment or Survey or on any update thereof previously delivered to Purchaser during the Inspection Period pursuant to the terms of the Access Agreement, Purchaser may notify Seller in writing of Purchaser’s objections to any such new
exceptions or new items (the “Supplemental Objections”) as contemplated by the Access Agreement. Seller must be notified of such Supplemental Objections
within two (2) business days after Purchaser’s receipt of the updated Title Commitment or Survey. If Purchaser timely notifies Seller of any Supplemental Objections, Seller may, but has no obligation to, cure any of the Supplemental Objections.
If Seller elects to cure any of the Supplemental Objections, Seller, within two (2) business days following Seller’s receipt of notice of the Supplemental Objections (the “Seller’s Supplemental Response Period”), shall deliver to Purchaser a written notice (the “Supplemental Cure Notice”) stating which, if any,
Supplemental Objections Seller elects to cure. If Seller does not deliver a Supplemental Cure Notice to Purchaser or delivers a Supplemental Cure Notice but does not agree to cure all of the Supplemental Objections and such new exceptions are
Material Title Defects, then Purchaser may, as its sole right and remedy, terminate this Agreement by giving written notice thereof to Seller within one (1) business day after the end of Seller’s Supplemental Response Period (the “Supplemental Termination Period”), whereupon the Earnest Money shall be returned to Purchaser and the parties shall have no other or further obligation or
liability to each other except as expressly provided in this Agreement. In other words, notwithstanding anything to the contrary contained in the Access Agreement, Purchaser shall only have the right to terminate this Agreement pursuant to this
section if the uncured new exceptions in the Supplemental Objections constitute a Material Title Defects. In the event that Purchaser does not terminate this Agreement prior to expiration of the Supplemental Termination Period, each Supplemental
Objection which Seller has not cured or committed in writing to cure at or prior to Closing shall be deemed waived by Purchaser. For the purposes hereof, a “Material
Title Defect” is a matter that has a material and adverse effect on the insurable, indefeasible title to the Property.
3.4 Except for Mandatory Removal
Items and any of Material Environmental Matters that Seller cures or agrees to cure on or prior to the Closing or any deeds of trust, mortgages, or other liens encumbering the Property as security for amounts owed by Seller to third parties
(which Seller shall cause to be released on or prior to Closing), all exceptions to title shown by the Title Commitment, the Survey and any encumbrance arising from the acts of Purchaser shall be deemed to be Permitted Exceptions for all purposes
hereunder.
4. CLOSING. The payment of the Purchase Price, the transfer of title to the Property, and the consummation of the transactions contemplated by this Agreement (the “Closing”) shall occur on December 13, 2024 (such date being sometimes referred to as the “Closing Date”) through escrow
at the Title Company.
4.1 Seller’s Closing Deliveries. At Closing, Seller shall execute (as necessary) and deliver to Purchaser (either through escrow or as otherwise provided below) each of the documents described below:
(a) one original Special Warranty
Deed (the “Deed”) warranting title to the Real Property against all persons claiming by, through or under Seller, but not otherwise, subject to the Permitted
Exceptions in substantially the form as attached hereto as Exhibit 4.1(a);
(b) a Bill of Sale assigning to
Purchaser the Personal Property and Intangible Property in substantially the form attached hereto as Exhibit 4.1(b);
(c) Seller’s non-foreign affidavit;
(d) one (1) original of the Closing
Statement (as defined below);
(e) the Leases (as defined in
Section 8.4) executed by Seller and countersigned by Purchaser and in substantially the forms attached hereto as Exhibits 8.4-A and 8.4-B;
(f) a restatement of the
representations and warranties set out in Section 9.1 hereof (subject to any “knowledge” qualifications set forth in Section 9.1);
(g) possession of the Property
(subject only to the Permitted Exceptions and the terms and provisions of the Leases); and
(h) such other instruments and
documents as are in Seller’s actual possession or direct control, and are reasonably appropriate, necessary and required by the Title Company or the Purchaser to complete and evidence the transactions contemplated hereby.
The Closing Statement may be signed by electronic counterparts on the Closing Date. To the extent available, Seller shall leave all of the original
Service Contracts, and all plans and specifications, contracts, licenses and permits pertaining to the Property at the premises.
4.2 Purchaser’s Closing Deliveries. At Closing, Purchaser shall deliver or cause to be delivered to Seller (i) executed counterparts of the Closing Statement and each of the instruments described
above to be executed by Purchaser, (ii) the Cash Balance described in Section 2.3 above, and (iii) such evidence of Purchaser’s power and authority as Seller or the
Title Company may reasonably request.
4.3 Closing Prorations and Adjustments. Seller shall prepare a statement of the prorations and adjustments required by this Agreement (the “Closing Statement”), and submit it to Purchaser and the Title Company for approval prior to the Closing. The items listed below are to be equitably prorated or adjusted as of the close of business on the
Closing Date, it being understood that for purposes of prorations and adjustments, Seller shall be deemed the owner of the Property through the day prior to the Closing Date and Purchaser shall be deemed the owner of the Property as of the
Closing Date and thereafter.
4.3.1 Taxes. Real estate and personal property taxes and assessments shall be prorated for the period for which such taxes and assessments are assessed, regardless of when payable, on the basis of the number of days in such period the Property will have been owned by Seller and Purchaser, respectively. If the current tax bill is not
available at Closing, then the proration shall be made on the basis of the most recent ascertainable tax bill. Any taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid. If taxes and assessments for the fiscal
year in which Closing occurs have been determined but have not been paid before Closing, Seller shall be charged and Purchaser credited at Closing with an amount equal to that portion of such taxes and assessments which relates to the period
before the date of Closing, and Purchaser shall pay the taxes and assessments prior to the same becoming delinquent. To the extent that the actual taxes and assessments for the current year, when the tax bill is received, differ from the amount
apportioned at Closing, the parties shall make the appropriate adjusting payment between themselves within thirty (30) days after Purchaser presents to Seller a copy of the final tax bill and Purchaser’s calculation of the re-proration of the
taxes and assessments and the appropriate back-up materials related to the calculation which Purchaser agrees to do within thirty (30) days of its receipt of the final tax bill. If any Rollback Taxes (as defined below) are due before the Closing
due to a change in use of the Property by Seller or a denial of any special use valuation of the Property before the Closing, then Seller shall pay those Rollback Taxes (including any interest and penalties) at or before the Closing. If this sale
or a change in use of the Property or denial of any special use valuation of the Property after the Closing would result in the assessment after the Closing of additional taxes and interest applicable to the period of time before the Closing ("Rollback Taxes"), then Purchaser shall pay the Rollback Taxes (including any interest and penalties) if and when they are assessed, without receiving any credit
from Seller. This Section 4.3.1 will survive the Closing.
4.3.2 Utility Deposits. Seller shall receive a credit at Closing in the amount of all refundable cash or other deposits posted with utility companies servicing the Property which are duly assigned to
and assumed by Purchaser at Closing, if any.
4.3.3 Utilities. Water, electric, telephone and all other utility and any other payments to utility companies shall be prorated. If possible, utility prorations will be handled by final meter readings
on the Closing Date. If final readings are not possible, or if any such charges are not separately metered, such charges will be prorated based on the most recent period for which costs are available.
4.3.4 Service Contracts. Amounts due and prepayments under the Service Contracts shall be prorated after the Closing Date in accordance with the terms of the Leases. Notwithstanding anything herein to
the contrary, there shall be no proration of bonuses or lump sum payments, if any, received by Seller under Service Contracts prior to the expiration of the respective lease terms under the Leases, telephone communication agreements, or other
property agreements, whether characterized as “decorating fees,” “sign-up bonuses”, “additional rents” or the like, all of which shall belong to Seller.
4.3.5 Fees Payable. Assignable license and permit fees, and similar fees and expenses of operation shall be prorated.
If any item of income or expense set forth in this section is subject to final adjustment after Closing, then Seller and Purchaser shall make, and
each shall be entitled to, an appropriate reproration to each such item promptly when accurate information becomes available. Any amounts due from one party to the other as a result of such reproration shall be paid promptly in cash to the party
entitled thereto. Seller and Purchaser hereby covenant and agree to make available to each other for review such records as are necessary to complete such reprorations. The foregoing provisions of this section shall survive the Closing.
4.4 Reservation of Rights to Contest. Notwithstanding anything to the contrary contained in this Agreement, Seller reserves the right (all at its sole cost and expense) to meet with governmental
officials and to contest any reassessment or assessment of the Property or any portion thereof and to attempt to obtain a refund for any taxes previously paid. Seller shall retain all rights with respect to any refund of taxes applicable to any
period prior to the Closing Date, and Purchaser shall be entitled to the benefit of any refund of taxes applicable to any period on or after the Closing Date.
4.5 Transaction Costs. Except as otherwise specifically set forth in this Agreement, the closing costs and other costs incurred in connection with the transactions contemplated by this Agreement shall
be paid as follows: (a) Seller shall pay (i) one-half of all escrow fees, (ii) the recordation costs in connection with the removal of any encumbrances or other Mandatory Removal Items, and any other title curative documents pursuant to Section 3.2, and (iii) the base or basic premium charged by the Title Company for the Title Policy in the amount of the Purchase Price; (b) Purchaser shall pay (i) the base
or basic premium charged by the Title Company for the Title Policy in the amount in excess of the Purchase Price (if and to the extent applicable), (ii) all title charges in connection with any title insurance policy endorsements, mortgagee or
loan policies or any reinsurance or coinsurance requested by Purchaser, (iii) the cost of recording the Deed and any loan documents, (iv) all costs incurred by Purchaser in connection with Purchaser’s due diligence investigation of the Property,
(v) the cost of the Updated Survey; and (vi) one-half of all escrow fees; and (c) all other charges shall be paid by the party customarily responsible for such charges in like transactions in the City of Fort Worth, Texas. Seller and Purchaser
shall be responsible for the fees of their respective attorneys.
5. RISK OF LOSS.
5.1 Minor Damage. In the event of loss or damage to all or a portion of the Property prior to Closing arising out of a casualty or condemnation, which loss or damage is not “major” (as defined in Section 5.3 hereof), this Agreement shall remain in full force and effect provided Seller performs any necessary repairs or, upon mutual agreement of Seller and Purchaser,
assigns to Purchaser at Closing all of Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any casualty insurance policies or condemnation awards relating to the premises in question, less costs actually
incurred by Seller prior to Closing in pursuing such claim, securing the Property or making repairs, without recourse to Seller. If Seller and Purchaser do not agree to have Seller assign to Purchaser at Closing all of Seller’s right, title and
interest to such claims and proceeds, then Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time in order to allow for the completion of such repairs. Upon Closing, full
risk of loss with respect to the Property shall pass to Purchaser (except to the extent expressly provided otherwise in the Leases).
5.2 Major Damage. In the event of a “major” loss or damage, either Seller or Purchaser may terminate this Agreement by written notice to the other party, in which event the Independent Consideration
shall be released to Seller, all Earnest Money will be returned to Purchaser (if any), and neither party will have any further rights or obligations hereunder except those which by their express terms survive termination. If neither Seller nor
Purchaser have elected to terminate this Agreement within ten (10) days after Seller has sent Purchaser written notice of the occurrence of a major loss or damage, then Seller and Purchaser shall be deemed to have elected to proceed with Closing,
in which event Seller shall, at Seller’s option, either (a) perform any necessary repairs, or (b) assign to Purchaser at Closing all of Seller’s right, title and interest to any claims and proceeds Seller may have with respect to any casualty
insurance policies or condemnation awards relating to the premises in question less costs actually incurred by Seller prior to Closing in pursuing such claim, securing the Property or making repairs. If Seller elects to perform repairs upon the
Property, Seller shall use reasonable efforts to complete such repairs promptly and the Closing Date shall be extended a reasonable time in order to allow for the completion of such repairs. Upon Closing, full risk of loss with respect to the
Property shall pass to Purchaser.
5.3 Definition of “Major” Loss or Damage. For purposes of Sections 5.1 and 5.2, “major” loss or damage refers to the
following: (a) loss or damage to the Property or any portion thereof such that the cost of repairing or restoring the premises in question to a condition substantially identical to that of the premises in question prior to the event of damage
would be, in the opinion of an architect selected by Seller and reasonably approved by Purchaser, equal to or greater than five percent (5%) of the Purchase Price, and (b) any loss due to a condemnation which permanently and materially impairs
the current use of, access to or parking for the Property.
6. BROKERAGE. Seller agrees to pay at and contingent upon Closing (but not otherwise) a brokerage commission due to Stream Realty (“Seller’s
Broker”) for services rendered in connection with the sale and purchase of the Property pursuant to a separate written agreement with Seller’s Broker. The parties acknowledge and agree that Seller’s Broker and Cushman & Wakefield (“Purchaser’s Broker”) shall enter into a separate written agreement
whereby Seller’s Broker agrees to pay Purchaser’s Broker a brokerage commission at and entirely contingent upon Closing for services rendered in connection with the sale and purchase of the Property. Seller and Purchaser shall each indemnify and
hold the other harmless from and against any and all claims of all other brokers, agents and finders claiming by, through or under the indemnifying party and in any way related to the sale and purchase of the Property, this Agreement or
otherwise, including, without limitation, attorneys’ fees and expenses incurred by the indemnified party in connection with such claim. The provisions of this section shall survive Closing or any termination of this Agreement.
7. DEFAULT AND REMEDIES.
7.1 Purchaser’s Remedies. Notwithstanding anything to the contrary contained in this Agreement, if Closing does not occur due to a Seller default that remains uncured for a period of thirty (30) days
following Seller’s receipt of written notice from Purchaser describing such default in reasonable detail (the parties hereby acknowledge and agree that Closing will be automatically extended to the extent reasonably necessary to accommodate such
notice and cure), then, as Purchaser’s sole and exclusive remedy, Purchaser may either (a) terminate this Agreement and the Earnest Money shall be returned to Purchaser, in which event this Agreement shall be null and void, and neither party
shall have any further rights or obligations under this Agreement, or (b) upon notice to Seller not more than one (1) month after Purchaser becomes aware of such failure, and provided an action is filed within one (1) month thereafter, Purchaser
may seek specific performance of this Agreement, but not damages. Purchaser’s failure to seek specific performance as aforesaid shall constitute its election to proceed under clause (a) above. In addition, and notwithstanding anything to the
contrary contained above, if Seller voluntarily sells, mortgages or otherwise disposes of the Property (or any portion thereof) to another party (i.e., other than Purchaser or its permitted assigns pursuant to the terms hereof) during the term of
this Agreement, then in addition to the above‑listed remedies: (1) Purchaser, at its sole option may sue Seller for damages, and (2) Seller shall promptly reimburse Purchaser for all bona fide and verified, reasonable out-of-pocket expenses and
costs incurred by Purchaser in connection with this Agreement, including (without limitation) reasonable attorneys’ fees and expenses.
7.2 Seller’s Remedies. Purchaser and Seller acknowledge that it would be extremely impractical and difficult to ascertain the actual damages which would be suffered by Seller if Purchaser fails to
consummate the purchase and sale contemplated herein for any reason other than Seller’s default hereunder in any material respect. Purchaser and Seller have considered carefully the loss to Seller occasioned by taking the Property off the market
as a consequence of the negotiation and execution of this Agreement, the expenses of Seller incurred in connection with the preparation of this Agreement and Seller’s performance hereunder, and the other damages, general and special, which
Purchaser and Seller realize and recognize Seller will sustain but which Seller cannot at this time calculate with absolute certainty. Based on all those considerations, Purchaser and Seller have agreed that the damage to Seller in such event
would reasonably be expected to be equal to the sum of the Earnest Money. Accordingly, if Purchaser defaults under the terms of this Agreement or if Closing does not occur on the Closing Date due to a Purchaser default, then Seller shall have
the right to retain the Earnest Money as full and complete liquidated damages, and as its sole and exclusive remedy for Purchaser’s default hereunder. Notwithstanding the foregoing, this Section 7.2 shall not limit Seller’s rights pursuant to Purchaser’s indemnity obligations under this Agreement.
7.3 Post-Closing Remedies. After Closing, Seller and Purchaser shall, subject to the terms and conditions of this Agreement, have such rights and remedies as are available at law or in equity, except
that neither Seller nor Purchaser shall be entitled to recover from the other consequential or special damages.
8. CONDITIONS PRECEDENT.
8.1 Inspection Period. Pursuant to the terms of the Access Agreement, Seller has delivered or will deliver or make available to Purchaser certain due diligence materials, as more particularly described
in the Access Agreement (collectively, the “Due Diligence Materials”). Moreover, pursuant to Section 2 of the Original Access Agreement and paragraph 3 of
the First Amendment to Access Agreement, Purchaser had until 5:00 p.m., Fort Worth, Texas time on November 5, 2024 (the “Inspection Period”) within which to
inspect the Property, obtain any necessary internal approvals to the transaction, and satisfy itself as to all matters relating to the Property, including, but not limited to, environmental, engineering, structural, financial, title and survey
matters. The parties hereby acknowledge and agree that Purchaser did not terminate the Access Agreement prior to the expiration of the Inspection Period and, as such, Purchaser has waived the condition relating to Purchaser’s satisfaction as to
the condition of the Property contained in the Access Agreement, subject to any Material Environmental Matters that may exist on the Property and to which Purchaser timely objects to pursuant to the terms set forth in paragraphs 1 and 2 of the
First Amendment to Access Agreement. In connection with Purchaser’s inspections of the Property, Seller shall not be required to provide Purchaser access to any internal organizational information or materials of Seller or any other proprietary
or confidential information. Purchaser shall use reasonable efforts to minimize interference with Seller’s operation of the Property during its inspections, and no on-site inspection shall be undertaken without forty-eight (48) hours’ prior
notice to Seller. Seller or Seller’s representative shall have the right to be present at any or all inspections. No inspection shall involve the taking of samples or other physically invasive procedures without the prior consent of Seller.
Purchaser agrees not to permit any mechanic’s or materialmen’s liens or claims for such liens to attach to the Property as a result of Purchaser’s inspections. Notwithstanding anything to the contrary contained in the Access Agreement, Purchaser
shall indemnify, defend (with counsel reasonably acceptable to Seller) and hold Seller and its employees and agents harmless from and against any and all loss, cost, expense, liability, damage, cause of action or claim (including, without
limitation, reasonable attorneys’ fees incurred in connection therewith) arising out of or resulting from Purchaser’s exercise of its rights under this Agreement, including, without limitation, its right of entry upon and inspection and testing
of the Property as provided for in this section, and such indemnity shall survive the Closing and any termination of this Agreement. Purchaser will not reveal to any third party not approved by Seller the results of its inspections or tests
(unless required to do so by law), and upon Seller’s request, Purchaser agrees to provide Seller with a copy of any third-party inspection or test report, if Purchaser terminates this Agreement.
8.2 Service Contracts. The parties hereby acknowledge and agree that Seller will continue to occupy the Property after Closing pursuant to the Leases described below and, in connection with such
occupancy post-Closing, will maintain in full force and effect the Service Contracts necessary for Seller’s continued operations on the Property. To the extent Purchaser does not notify Purchaser that it elects to assume any one or all of the
Service Contracts, Seller shall cause the termination any such Service Contracts on or before the end of the respective lease terms of the Leases in accordance with the terms and conditions set forth in the Leases; provided, however, Seller shall
have no obligation to terminate and Purchaser must assume any and all Service Contracts that are not terminable without the payment of a penalty or premium for early termination.
8.3 No Financing Contingency. This Agreement is not subject to any financing contingency.
8.4 Leaseback of the Property. At, but conditioned upon, Closing, the parties shall enter into two (2) lease agreements substantially in the forms attached hereto as Exhibits 8.4-A and 8.4-B,
respectively (the “Leases”) whereby Purchaser shall lease to Seller, and Seller shall lease from Purchaser, each of the Buildings, as well as the Real
Property the Buildings are located thereon beginning as of the Closing Date. The parties hereby acknowledge and agree that Seller shall have the right to terminate either or both of the Leases for any reason upon at least thirty (30) days’
advance written notice to Purchaser.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS.
9.1 Seller’s Representations and Warranties. Subject to Section 9.5 below, Seller hereby represents and warrants to
Purchaser as to the following matters, as of the Effective Date:
9.1.1 Organization and Authority. Seller is duly organized and is in existence and good standing under the laws of the State of Texas. Seller has the power and authority under its organizational
documents to sell, transfer, convey and deliver the Property to be sold and purchased hereunder, and all action and approvals required thereunder have been duly taken and obtained.
9.1.2 No Conflict. The execution and delivery of this Agreement, the consummation of the transactions provided for herein and the fulfillment of the terms hereof will not result in a breach of any of
the terms or provisions of, or constitute a default under, any provision of Seller’s organizational documents.
9.1.3 Condemnation. To Seller’s knowledge, Seller has not received from any governmental authority any written notice of any condemnation of the Property or any part thereof.
9.1.4 Litigation. To Seller’s knowledge, there is no pending material litigation against Seller with respect to its ownership or operation of the Property.
9.1.5 Bankruptcy. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorships or voluntary or involuntary proceedings in bankruptcy or pursuant to any
other debtor relief laws pending against Seller, or, to Seller’s knowledge, threatened against Seller or the Property.
9.1.6 Liens. Except as set forth in the Title Commitment or the UCC Searches, to Seller’s knowledge, no bills for work completed on the Property are outstanding which create -- or, after the Closing,
may create -- a mechanics lien against all or any portion of the Property that will not be satisfied on or before Closing.
9.1.7 Non-Foreign. Seller is not a “foreign person” as that term is used in Section 1445 of the Internal Revenue Code of 1986, as amended.
9.1.8 OFAC. Neither Seller nor to Seller’s knowledge any beneficial owner of Seller: (i) is listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign
Assets Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 133224 66 Fed. Reg. 49079 (September 25, 2001) (the “Order”) and/or on
any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable orders (such lists are collectively referred to as the “Lists”); (ii) is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii) to Seller’s knowledge is owned or
controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Order, or (iv) is or has engaged in any
dealings or transactions, or is otherwise associated, with any Forbidden Entity. A “Forbidden Entity” is defined as (A) the governments of Cuba, Iran, North
Korea, Myanmar, Syria and Sudan (each, a “Prohibited Country”) and any of their agencies, including, but not limited to, political units and subdivisions
(each, a “Prohibited Government”); and (B) any company that (1) is wholly or partially managed or controlled by a Prohibited Government, (2) is established,
organized under, or whose principal place of business is in any Prohibited Country, or (3) has failed to submit an affidavit following request therefore averring that it does not own or control any property or asset in and has not and does not
transact business with any Prohibited Country. For purposes of this Section 9.1.8, a “company” is any entity whether publicly traded or privately owned capable of affecting commerce, including, but not limited to, a government, governmental
agency, natural person, legal person, sole proprietorship, partnership, firm corporation, subsidiary, affiliate, franchisor, franchisee, joint venture, trade association, financial institution, utility, public franchise, provider of financial
services, trust, or enterprise and any association thereof. The foregoing does not apply to any person or entity to the extent that such person’s interest in Seller is through a US publicly traded entity.
9.2 Representations Remade. It will be a condition to Purchaser’s obligations to consummate the Closing that all above representations and warranties of Seller be accurate in all
material respects as of the Closing Date. Seller shall promptly advise Purchaser in writing if any representation or warranty contained in Section 9.1 shall become false or misleading in any material respect prior to the Closing Date. As of Closing, Seller shall be deemed to remake and restate the representations set forth in Section 9.1, except
that the representations shall be updated by delivering written notice to Purchaser in order to reflect any fact, matter or circumstance which Seller has become aware of that would make any of Seller’s representations or warranties contained
herein untrue or incorrect (any such disclosure being referred to as a “Pre-Closing Disclosure”). When used herein, the term “to Seller’s knowledge” shall refer to the actual knowledge of Janet Carr and of no other person or entity and is made solely on the basis of the current, conscious, and actual, as
distinguished from implied, imputed, and constructive, knowledge upon the date that such representation or warranty is made, without inquiry or investigation thereof. So qualifying Seller’s knowledge shall in no event give rise to any personal
liability on the part of Janet Carr or any other officer or employee of Seller.
9.3 Covenants. Seller hereby covenants and agrees with Purchaser as to the following matters.
9.3.1 Operations; Insurance. Between the Effective Date and the Closing Date, Seller shall (a) operate the Property in the normal course of Seller’s business, (b) use commercially reasonable efforts to
maintain the Property in the same condition as of the Effective Date, ordinary wear and tear excepted, and subject to Section 5 above, and (c) maintain all property,
casualty and liability insurance on the Property maintained by Seller as of the Effective Date.
9.3.2 Other Agreements. Between the Effective Date and the Closing Date and except as required by law or by any of the Permitted Exceptions or as otherwise permitted under this Agreement, Seller shall
not become party to agreements granting an easement or right-of-way on, under or about the Property, and Seller shall not become party to any agreements granting easements or rights-of-way in favor of the Property.
If Purchaser discovers before Closing that any of Seller’s representations, warranties, or covenants are inaccurate in any material respect or that
Seller has failed to perform any of the covenants contained in this Agreement in any material respect, Purchaser shall promptly notify Seller in writing and Seller may attempt to correct or remedy such misrepresentation or default. If the
misrepresentation or default is not remedied by Seller before Closing, Purchaser may, as its sole and exclusive remedy, by written notice to Seller within thirty (30) days following the notice from Purchaser to Seller of such misrepresentation or
default elect to: (a) proceed to Closing, whereby any claim for such misrepresentation or default shall be deemed waived, or (b) terminate this Agreement and receive an immediate return of all of the Earnest Money, in which event the Earnest Money
will be released to Seller and the parties shall have no further rights or obligations hereunder, except for those that expressly survive the termination of this Agreement. If Purchaser does not elect by written notice to Seller either of the
options above, Purchaser shall be deemed to have elected option (a). Closing shall be automatically extended, as necessary, to accommodate the above-described Seller notice and cure period for any material inaccuracies regarding any of Seller’s
representations, warranties, or covenants set forth herein.
9.4 Purchaser’s Representations and Warranties. Subject to Section 9.5 below, Purchaser represents and warrants that:
9.4.1 Organization and Authority. Purchaser is duly organized and is in existence and good standing under the laws of the State of New Jersey. Purchaser has the power and authority under its
organizational documents to perform its obligations hereunder, and all action and approvals required have been duly taken and obtained.
9.4.2 No Conflict. The execution and delivery of this Agreement, the consummation of the transactions provided for herein and the fulfillment of the terms hereof will not result in a breach of any of
the terms or provisions of, or constitute a default under, any provision of Purchaser’s organizational documents.
9.4.3 No Bankruptcy Purchaser has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by
Purchaser’s creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Purchaser’s assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Purchaser’s
assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.
9.4.4 Inspection. By the end of the Inspection Period, Purchaser shall have inspected the Property and shall have reviewed the Service Contracts, expenses, and other matters relating to the Property
and, based upon its own investigations, inspections, tests, and studies, determined whether to purchase the Property and assume Seller’s rights and obligations under the Service Contracts and otherwise with respect to the Property, fully and
completely at its expense and shall have ascertained to its satisfaction the extent to which the Property complies with applicable zoning, building, environmental, health and safety and all other laws, codes and regulations.
9.4.5 OFAC. Neither Purchaser nor to Purchaser’s knowledge any beneficial owner of Purchaser: (i) is listed on OFAC, the Order and/or on any other list of terrorists or terrorist organizations
maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable orders; (ii) is a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii)
to Purchaser’s knowledge, is owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the
Order, or (iv) is or has engaged in any dealings or transactions, or is otherwise associated, with any Forbidden Entity. The foregoing does not apply to any person or entity to the extent that such person’s interest in Purchaser is through a US
publicly traded entity.
9.5 Survival and Limitation of Liability. Purchaser’s right to enforce the representations and warranties set forth in Section 9.1,
subject to modifications thereto as a result of any Pre-Closing Disclosure, shall survive the Closing for a period of one (1) year from the date of Closing, but only as to claims of which Purchaser notifies Seller in writing no later than
forty-five (45) days following the expiration of such 1-year period, and not otherwise. Notwithstanding anything in this Agreement to the contrary, the liability of Seller arising under or in connection with Seller’s covenants, representations
and warranties contained in this Agreement, and any other agreements of Seller which are expressly provided in this Agreement to survive Closing, is limited to an aggregate of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) and Seller
shall not be liable for any claim hereunder unless, until, and only if such claim exceeds an aggregate amount equal to at least Twenty-Five Thousand and No/100 Dollars ($25,000.00).
10. DISCLAIMERS AND WAIVERS.
10.1 No Reliance on Documents. Except as expressly stated herein, Seller makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by
Seller to Purchaser in connection with the transaction contemplated hereby including, without limitation, the Due Diligence Materials delivered or made available by Seller to Purchaser. Purchaser acknowledges and agrees that all materials, data
and information delivered by Seller to Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be
at the sole risk of Purchaser, except as otherwise expressly stated herein. Without limiting the generality of the foregoing provisions, Purchaser acknowledges and agrees that (a) any Due Diligence Materials, data, information, environmental
studies or other reports with respect to the Property which is delivered by Seller to Purchaser (the “Deliveries”) shall be for general informational
purposes only, (b) Purchaser shall not have any right to rely on any such report delivered by Seller to Purchaser, but rather shall rely on its own inspections and investigations of the Property and any reports commissioned by Purchaser with
respect thereto, and (c) neither Seller, any affiliate of Seller nor the person or entity which prepared any such report delivered by Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from any such
report.
10.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE DOCUMENTS TO BE DELIVERED AT CLOSING PURSUANT TO SECTIONS 4.1
AND 4.2 HEREOF (the “Closing Documents”), IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER
THAN SELLER’S LIMITED WARRANTY OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE
OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE DELIVERIES OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES
AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY “AS IS, WHERE IS, WITH ALL FAULTS”, EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT AND THE CLOSING DOCUMENTS. PURCHASER HAS NOT RELIED AND SHALL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR
INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, THE DELIVERIES) MADE OR FURNISHED BY SELLER OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER
MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS.
PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR SHALL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT
NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR
TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND SHALL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH REPRESENTATIONS, WARRANTIES AND
COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT
HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED SELLER (AND SELLER’S AND ITS PARTNERS’ RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SHAREHOLDERS,
EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR
CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER’S AND ITS PARTNERS’ RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING
OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE TEXAS ARCHITECTURAL BARRIERS ACT, OR ANY ENVIRONMENTAL LAWS)
AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY.
10.3 Waiver and Release. As a material inducement to Seller to enter into the Agreement, and with the exception of those remedies expressly provided in this Agreement with respect to a breach by
Seller of its express representations and warranties set forth herein, effective as of the Closing, Purchaser, for itself and on behalf of its successors and assigns, hereby irrevocably and unconditionally waives, releases, acquits, compromises
with and forever discharges the Seller and each of the Seller’s predecessors, successors, assigns, agents, partners, directors, officers, employees, insurance companies, representatives, attorneys, divisions, subsidiaries, affiliates (and
partners, agents, directors, officers, employees, representatives and attorneys of such parent companies, divisions, subsidiaries and affiliates), and all persons acting by, through, under or in concert with any of them (collectively “Released Parties”), from and for all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including attorney’s fees and costs actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, arising in connection with the Property, whether prior
to or after the Closing, including, but not limited to claims under any federal, state or local laws, including, without limitation, Environmental Laws (as defined below), which Purchaser now has, owns or holds, or claims to have, own or hold, or
claimed to have, own or hold against any of the Released Parties. As used herein, the term “Environmental Laws” means any federal, state or local statute,
law, rule, regulation, ordinance or code in effect and applicable to the Property on the Effective Date, and any judicial or administrative order, consent decree, judgment or directive in effect and applicable to the Property on the Effective
Date, relating to the protection of environment or natural resources, or hazardous materials, including without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et. seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. §§ 9601 et. seq., the
Federal Toxic Substances Control Act, 15 U.S.C. §§ 2601 et. seq., the Federal Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et. seq., the Federal Hazardous Material Transportation Act, 49 U.S.C. §§ 1801 et. seq., the Federal Clean Air Act, 42
U.S.C. § 7401 et. seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et. seq,
and the regulations promulgated pursuant thereto. The provisions of this section shall survive the Closing, but shall be subject to the terms and provisions of the Leases.
10.4 Survival. The provisions of this Article 10 shall survive Closing or any termination of this Agreement.
11. MISCELLANEOUS.
11.1 Entire Agreement. All understandings and agreements heretofore had between Seller and Purchaser with respect to the Property are merged in this Agreement, which alone fully and completely
expresses the agreement of the parties.
11.2 Assignment. Except as provided in Section 11.10 below, neither this Agreement nor any interest hereunder shall be
assigned or transferred by Purchaser without Seller’s consent; provided, however, that no such consent shall be required with respect to Purchaser’s assignment to an entity owned and controlled by or under common control with Purchaser as long as
Purchaser has provided written notice to Seller of such assignment at least five (5) days prior to the Closing Date; and provided further that upon any such assignment permitted hereunder, the Purchaser named herein shall remain liable to Seller
for the performance of “Purchaser’s” obligations hereunder.
11.3 Modifications. This Agreement shall not be modified or amended except in a written document signed by Seller and Purchaser.
11.4 Time of Essence. Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement or by law, the day of the act or event from which the period of
time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or
legal holiday.
11.5 Governing Law and Venue. This Agreement shall be governed and interpreted in accordance with the laws of the state in which the Property is located and the venue of any legal action filed in
connection herewith shall be in Fort Worth, Tarrant County, Texas.
11.6 Notices. All notices, demands, designations, certificates, requests, offers, consents, approvals, appointments and other instruments given pursuant to this Agreement shall be in writing and given
by (a) hand delivery; (b) express overnight delivery service; (c) certified or registered mail, return receipt requested; or (d) e-mail transmission (with no accompanying “delivery failure” notice), and shall be deemed to have been delivered upon
(i) receipt, if hand delivered; (ii) the next business day, if delivered by a reputable express overnight delivery service; (iii) the third (3rd) business day following the day of deposit of such notice with the United States Postal Service, if
sent by certified or registered mail, return receipt requested; or (iv) the date of transmission, if delivered by e-mail pursuant to the requirements of Section 11.6(d)
above. Notices shall be provided to the parties and addresses specified below:
If to Seller:
The Leather Factory, L.P.
1900 SE Loop 820
Fort Worth, Texas 76140
Attention: Daniel Ross
Telephone: 817-457-7908
Email: Daniel.Ross@tandyleather.com
With a copy to:
Bourland, Wall & Wenzel, P.C.
301 Commerce Street, Suite 2500
Fort Worth, Texas 76102
Attention: Sadie Harrison-Fincher, Esq.
Telephone: (817) 877-1088
Email: sharrisonfincher@bwwlaw.com
If to Purchaser:
Colonna Brothers, Inc.
4102 Bergen Turnpike
North Bergen, New Jersey 07047-2510
Attention: Dylan Tighe, Chief Operating Officer
Telephone: (908) 642-5992
Email: dylantighe@colonnabrothers.com
With a copy to:
Fox Rothschild LLP
Saint Ann Court
2501 N. Harwood Street, Suite 1800
Dallas, Texas 75201
Attention: Christopher I. Clark, Esq.
Telephone: (214) 231-5748
Email: ciclark@foxrothschild.com
11.7 Confidentiality. Prior to Closing, Seller and Purchaser and its representatives shall hold in strictest confidence all data and information obtained with respect to the other party or its
business, whether obtained before or after the execution and delivery of this Agreement, and shall not disclose the same to others; provided, however, that it is understood and agreed that Purchaser may disclose such data and information to the
employees, consultants, accountants and attorneys of Purchaser provided that such persons agree in writing to treat such data and information confidentially. If this Agreement is terminated or Purchaser fails to perform hereunder, Purchaser shall
promptly return to Seller any statements, documents, schedules, exhibits or other written information obtained from Seller in connection with this Agreement or the transaction contemplated herein. In the event of a breach or threatened breach by
Purchaser or its agents or representatives of this section, Seller shall be entitled to an injunction restraining Purchaser or its agents or representatives from disclosing, in whole or in part, such confidential information. Nothing herein shall
be construed as prohibiting Seller from pursuing any other available remedy at law or in equity for such breach or threatened breach. The provisions of this section shall survive Closing or any termination of this Agreement.
11.8 Reports. If for any reason Purchaser does not consummate the Closing, then Purchaser shall assign and transfer to Seller all of its right, title and interest in and to any and all studies, reports,
surveys and other information, data and/or documents relating to the Property or any part thereof prepared by or at the request of Purchaser, its employees and agents (each, a “Report”), and shall deliver to Seller copies of all of the foregoing; provided, however, that Purchaser shall not have an obligation to assign its right, title, and interest in any Report to the extent (i) assignment
is not permitted by the preparer of such Report, or (ii) a transfer fee or other similar fee is required to be paid in connection with the assignment and Seller does not agree in writing to pay such transfer fee or other similar fee charged by
the preparer of a Report in connection with such assignment (if any).
11.9 Binding Effect. This Agreement shall be binding upon and inure to the benefit of Seller and Purchaser, and their respective heirs, personal representatives, successors and assigns. Except as
expressly provided herein, nothing in this Agreement is intended to confer on any person, other than the parties hereto and their respective heirs, personal representatives, successors and assigns, any rights or remedies under or by reason of
this Agreement.
11.10 Reporting Person. Seller and Purchaser hereby designate Escrow Agent to act as and perform the duties and obligations of the “reporting person” with respect to the transaction contemplated by this
Agreement for purposes of 26 C.F.R. Section 1.6045‑4(e)(5) relating to the requirements for information reporting on real estate transactions closed on or after January 1, 1991. In this regard, Seller and Purchaser each agree to execute at
Closing, and to cause Escrow Agent to execute at Closing, a Designation Agreement, designating Escrow Agent as the reporting person with respect to the transaction contemplated by this Agreement.
11.11 Section 1031 Exchange. Either party may structure the disposition or acquisition of the Property, as the case may be, as a like-kind exchange under Internal Revenue Code Section 1031 at the
exchanging party’s sole cost and expense. The other party shall reasonably cooperate therein, provided that such other party shall incur no material costs, expenses or liabilities in connection with the exchanging party’s exchange. If either
party uses a qualified intermediary to effectuate an exchange, any assignment of the rights or obligations of such party hereunder shall not relieve, release or absolve such party of its obligations to the other party. The exchanging party shall
indemnify, defend and hold harmless the other party from all liability in connection with the indemnifying party’s exchange, and the indemnified party shall not be required to take title to or contract for the purchase of any other property. The
provisions of this section shall survive the Closing.
11.12 Press Releases. The parties hereto shall not issue any press releases with respect to the transactions contemplated hereby or consummated in accordance with the terms hereof except as required by
law or upon the mutual agreement of the parties as to the form and content of such press release (with consent not to be unreasonably withheld or delayed by either party).
11.13 Multiple Counterparts/Electronic Transmission. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which, when taken together, shall
constitute one and the same instrument. To facilitate execution of this Agreement (and/or any amendments hereof or modifications hereto), the parties may execute and exchange facsimile or scanned electronic (e.g., so-called “PDF” or “portable
document format”) counterparts of the signature pages. A facsimile or electronic (e.g., so-called “PDF” or “portable document format”) copy of this Agreement (or any amendments hereof or modifications hereto) shall constitute and be deemed to be
an original.
11.14 Construction. This Agreement shall not be construed more strictly against Seller merely by virtue of the fact that the same has been prepared by Seller or its counsel, it being recognized both of
the parties hereto have contributed substantially and materially to the preparation of this Agreement.
11.15 Attorneys’ Fees. In the event of litigation between the parties with respect to this Agreement or the transaction contemplated hereby, the prevailing party therein shall be entitled to recover
from the losing party all of its costs of enforcement and litigation, including, but not limited to, its reasonable attorneys’ and paralegal fees, witness fees, court reporters’ fees and other costs of suit.
11.16 Conflicting Terms. The terms of this Agreement shall
control over any conflicts between the terms hereof and the terms of the Access Agreement.
11.17 Further Acts. In addition to the acts recited in this
Agreement to be performed by Seller and Purchaser, Seller and Purchaser agree to perform or cause to be performed at the Closing or after the Closing any and all such further acts as may be reasonably necessary to consummate the transactions
contemplated hereby.
11.18 Exhibits. All references to Exhibits contained herein are
references to Exhibits attached hereto, all of which are made a part hereof for all purposes the same as if set forth herein verbatim, it being expressly understood that if any Exhibit attached hereto which is to be executed and delivered at
Closing contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained herein and as contemplated herein prior to or at the time of execution and delivery thereof.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed by their duly authorized representatives effective as of the date first above written.
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SELLER:
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The Leather Factory, L.P.,
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a Texas limited partnership
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By:
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The Leather Factory Inc.,
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a Nevada corporation,
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its General Partner
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By:
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Name:
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Title:
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PURCHASER:
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Colonna Brothers, Inc.,
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a New Jersey corporation
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By:
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Dylan Tighe, Chief Operating Officer
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LIST OF EXHIBITS:
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1
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Legal Description
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1-A
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Depiction of the Property
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4.1(a)
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Form of Special Warranty Deed
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4.1(b)
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Form of Bill of Sale
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8.4-A
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Form of Main Building and Auxiliary Warehouse Lease
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8.4-B
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Form of Retail Building Lease
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Schedule 1 – Personal Property Inventory
EXHIBIT 1
LEGAL DESCRIPTION
TRACT I
Being Block 1 of Campus Industrial Park, an addition to the City of
Fort Worth, Tarrant County, Texas, according to the plat thereof recorded in Volume 388-49, Page 61 of the Real Property Records of Tarrant County, Texas.
TRACT II
BEING a 5.9500 acre (259,181 square foot) tract of land situated in the Samuel Woody Survey, Abstract No. 1638, City of Fort Worth, Tarrant County, Texas; said tract
being that tract of land described in Special Warranty Deed to The Leather Factory, L.P. recorded in Instrument Number D207267563 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows;
BEGINNING at a 5/8” iron rod found in the northeast line of that tract of land described in Deed to Texas Electric Service Company recorded in Volume 2574, Page 545 of
the Deed Records of Tarrant County, Texas, said point being the south corner of Block 1 of Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-49, Page 61 of the Plat Records of Tarrant County,
Texas;
THENCE North 27°38'01” East, along the southeast line of said Block 1, a distance of 697.28 feet to a 5/8” iron rod found for corner, said point being the west corner
of Lot 1, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-92, Page 6 of said Plat Records;
THENCE South 62°20'18” East, along the southwest line of said Lot 1, Block 1, a distance of 329.88 feet to a 5/8” iron rod with cap stamped “KHA” set for corner; said
point being in the northeast line of Lot 2, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Instrument Number D223091702 of said Official Public Records;
THENCE South 27°38'01” West, along the said northeast line of Lot 2, Block 1 a distance of 780.11 feet to a 5/8” iron rod found for corner in the north terminus of
South Campus Court (a 60-foot wide right-of-way); said point also being the beginning of a non-tangent curve to the left with a radius of 60.00 feet, a central angle of 158°06'00”, and a chord bearing and distance of South 50°41'18” West, 117.82
feet;
THENCE in a southwesterly direction, along the said north terminus of South Campus Court and with said non-tangent curve to the left, an arc distance of 165.56 feet to
a 5/8” iron rod with cap stamped “KHA” set for corner in the said northeast line of the Texas Electric Service Company tract;
THENCE North 28°21'56” West, along the said northeast line of the Texas Electric Service Company tract, a distance of 342.26 feet to the POINT OF BEGINNING and
containing 259,181 square feet or 5.9500 acres of land, more or less.
EXHIBIT 1
DEPICTION OF PROPERTY
EXHIBIT 4.1(a)
FORM OF SPECIAL WARRANTY DEED
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT
BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.
SPECIAL WARRANTY DEED
| THE STATE OF TEXAS | § | |
| § | ||
| COUNTY OF TARRANT | § |
The Leather Factory, L.P., a Texas limited partnership (“Grantor”), whose address is 1900 SE Loop 820, Fort Worth, Texas 76140, for and in consideration of the Sum of Ten and No/100 Dollars ($10.00), and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and confessed, has GRANTED, BARGAINED, SOLD and CONVEYED, and by these presents does hereby GRANT, BARGAIN, SELL and CONVEY, unto ________________________, a ___________________ (“Grantee”), having an address c/o _____________, _____________, ______________, the real property
located in Tarrant County, Texas, which is more particularly described on Exhibit “A” attached hereto and made a part hereof for all purposes (the “Land”), together with
all right, title and interest of Grantor in and to: (i) all and singular, all rights, benefits, privileges, easements, tenements, and appurtenances thereon and pertaining to the Land, including, without limitation, any right, title and interest of
Grantor in and to adjacent public roadways or public alleys, rights of ingress and egress and any reversionary interests thereto, (ii) all strips and gores between the Land and abutting properties, (iii) any and all improvements and buildings
located on such Land (the “Improvements”), (iv) all rights in and to easements, air rights, and water rights pertaining to the Land, (v) any and all fixtures affixed or attached to the Land or the Improvements (collectively, the “Property”).
This Special Warranty Deed (this “Deed”) is made and accepted subject to only to the matters set forth on Exhibit “B” attached hereto and
incorporated herein by this reference (said matters being referred to herein collectively as the “Permitted Encumbrances”).
TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereunto in anywise belonging, unto Grantee, its
successors and assigns forever, and Grantor does hereby bind itself and its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the title to the Property unto Grantee, its successors and assigns against every person whomsoever
lawfully claiming or to claim the same or any part thereof by, through, or under Grantor but not otherwise, subject to the Permitted Encumbrances.
Ad valorem taxes for the year of this Deed have been prorated; accordingly, by its acceptance of this Deed, Grantee assumes responsibility to pay
all ad valorem taxes on the Property for such year and all subsequent years.
Executed to be effective _______________, 2024.
[Signature on following page]
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Grantor:
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The Leather Factory, L.P.,
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a Texas limited partnership
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By:
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The Leather Factory Inc.,
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a Nevada corporation,
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its General Partner
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By:
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Name:
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Title:
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THE STATE OF TEXAS
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§
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§
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COUNTY OF TARRANT
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§
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This instrument was acknowledged before me on _______________, 2024, by _______________, ________________, in his/her capacity as ____________ of
The Leather Factory Inc., a Nevada corporation, in its capacity as General Partner of The Leather Factory, L.P., a Texas limited partnership, on behalf of said corporation and limited partnership.
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Notary Public, State of Texas
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||
After Recording, Please Return To:
Bourland, Wall & Wenzel, P.C.
301 Commerce Street, Suite 2500
Fort Worth, Texas 76102
Attn: Sadie Harrison-Fincher
EXHIBIT 4.1(b)
FORM OF BILL OF SALE
BILL OF SALE
For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, The Leather Factory, L.P., a Texas limited partnership (the
“Seller”), hereby conveys to , a (the “Purchaser”), all of Seller’s right,
title and interest in and to: (i) all furniture, furnishings, fixtures, equipment, and other tangible personal property owned by Seller and listed in the inventory attached hereto as Schedule 1 (the “Personal Property”) and that is located at that certain real property located at 1900 SE Loop 820 and 2300 S. Campus Ct., Fort Worth, Texas (the “Real
Property”) and used solely in connection with said Real Property; and (ii) to the extent any of the following exists and is assignable, any and all as-built drawings, engineering studies, site plans, renderings, specifications, floor
plans, water, wastewater, and other utility rights, certificates of occupancy, claims, warranties, guarantees, sureties, and all other rights related to the ownership, development, construction, design, or use of the Real Property.
The “Personal Property” expressly excludes all rights with respect to any refund of taxes applicable to any period prior to the date hereof, all
rights to any insurance proceeds or settlements for events occurring prior to the date hereof, and all cash on hand, checks, money orders, prepaid postage in postage meters, and accounts receivable applicable to periods on or prior to the date
hereof.
Seller has not made and does not make any express or implied warranty or representation of any kind whatsoever with respect to the Personal
Property, including but not limited to any warranty of: title; merchantability of the Personal Property or its fitness for any particular purpose; the design or condition of the Personal Property; the quality or capacity of the Personal Property;
workmanship or compliance of the Personal Property with the requirements of any law, rule, specification or contract pertaining thereto; patent infringement or latent defects. Purchaser accepts the Personal Property on an “AS IS, WHERE IS, WITH
ALL FAULTS” basis.
IN WITNESS WHEREOF, Seller has caused this instrument to be
executed and delivered as of this ___ day of ____________, 2024.
[Signature on following page]
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SELLER:
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The Leather Factory, L.P.,
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a Texas limited partnership
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By:
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The Leather Factory Inc.,
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a Nevada corporation,
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its General Partner
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By:
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Name:
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Title:
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| PURCHASER:, | ||
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By:
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Name:
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Title:
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SCHEDULE 1
PERSONAL PROPERTY INVENTORY
[To be attached by Seller at Closing.]
EXHIBIT 8.4-A
FORM OF MAIN BUILDING AND AUXILIARY WAREHOUSE LEASE
SHORT-TERM LEASE AGREEMENT
This Short-Term Lease Agreement (this “Lease”) is made and entered into effective as of the Closing Date (as such term is defined in Section 4 of
the PSA (as defined below)) (the “Effective Date”), by and between COLONNA BROTHERS, INC., a New Jersey corporation (“LESSOR”), and THE LEATHER FACTORY, L.P., a Texas limited partnership (“LESSEE”). “PSA” is defined herein as that certain Purchase
and Sale Agreement dated November 26, 2024, entered into by and between LESSEE, as Seller, and LESSOR, as Purchaser, relating to Lessor’s purchase of (among other things) the Building (as hereinafter defined).
1. PREMISES.
(a) LESSOR hereby leases to LESSEE and
LESSEE leases from LESSOR, for the Term and upon the terms and conditions hereinafter set forth, those two (2) certain buildings, one (1) such building being intended for use as the main headquarters for LESSEE’s (and its affiliates’) business
operations and containing up to approximately 190,000 square feet of space (outlined in yellow in the depiction of the Property (as defined below) attached hereto as Schedule “A”
and incorporated herein for all purposes) (the “Main Building”), and the other such building being intended for use as factory and warehouse storage space for LESSEE’s business operations and containing up to approximately 15,000 square feet of
space (outlined in orange and south of the Main Building in the depiction attached as Schedule “A”) (the “Warehouse Building” and together with the Main Building, the “Buildings”)
located on the real property having an address of 1900 SE Loop 820, Fort Worth, Texas and being more particularly described on Schedule “B” attached hereto and incorporated herein
for all purposes (the “Property” and together with the Buildings, the “Premises”), together with the right to use all common areas, adjoining parking areas, driveways, sidewalks, roads,
alleys and means of ingress and egress that are a part of or located on the Property. LESSEE acknowledges to LESSOR that LESSEE has inspected the Premises and does acknowledge to LESSOR that that (i) LESSEE has previously (i.e., prior to the
Term) and continuously occupied the Premises, (ii) the Premises are suitable for LESSEE’s needs and (iii) LESSEE does accept such Premises in “AS IS, WHERE IS” condition without warranty, expressed or implied, as to the condition or suitability
of same by LESSOR.
(b) The
parties hereto acknowledge and agree that the Premises under this Lease is being used as a transition space for LESSEE until such time LESSEE is able to vacate the Buildings. Accordingly, the parties intend that the area of the Premises in the
Main Building leased by LESSEE hereunder shall be reduced in increments according to the following schedule:
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Adjustment Date
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Relinquished Space
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Adjusted Square Footage of the Main Building
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No later than July 1, 2025
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20,000 square feet (more or less) comprising of the factory area
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170,000 square feet
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On the Adjustment Date, (i) the 20,000 square foot portion of the Main Building described above and shown outlined and shaded in orange on Schedule
“C” attached hereto and incorporated herein by reference that was removed from the Premises hereunder and relinquished to LESSOR (such portion, a “Relinquished Space”) shall be fully vacated by LESSEE and relinquished to the LESSOR free from
occupancy of LESSEE, broom clean, in good condition and repair and in the condition existing on the Effective Date hereof (excepting only ordinary wear and tear), (ii) the Premises hereunder shall be deemed to be automatically amended such that it
is reduced by the Relinquished Space, and LESSEE shall accept and continue to lease and occupy the balance of the Premises in its “AS IS, WHERE IS” condition without warranty, expressed or implied, and without relying upon any as to the condition
of same by LESSOR, and (iii) the Base Rent (as defined below) will be reduced to $99,268.00 per month for the remainder of the Term in consideration of LESSEE surrendering the Relinquished Space to Landlord.
2. TERM. The term of this Lease shall commence on the Effective Date and shall continue for the period ending at 5:00 p.m. Central time on September 30, 2025 (such period,
the “Term”), unless sooner terminated as hereinafter provided. If the Effective Date does not occur on the first (1st) day of a calendar month, then the first month during the Term shall be extended to end on the last day of the
first (1st) full calendar month following the Effective Date.
3. RENT. Subject to the rental adjustment described in Section 1(b) above, LESSEE covenants and agrees to pay LESSOR in advance on the first day of each month during the
Term as base rent an amount equal to One Hundred Ten Thousand and No/100 Dollars ($110,000.00) per month (the “Base Rent”) at LESSOR’s address provided below in Section 22 (unless such payment address is changed by written notice from LESSOR).
Except as otherwise expressly provided herein, LESSEE shall pay the NNN Obligations defined below directly to the appropriate party as and when the same become due and payable.
4. TRIPLE NET LEASE. This Lease is a “Triple Net Lease” with LESSEE being responsible during the Term for paying directly the appropriate parties all costs and expenses
(as they become due and payable) incurred with respect to, and associated with the Premises and the business operated by LESSEE thereon and therein, including, without limitation, all real estate taxes (but expressly excluding all of LESSOR’s
income taxes, transfer taxes, franchise taxes, and other taxes based on income which are LESSOR’s responsibility to pay), insurance as required by Sections 10 and 12 below, utilities consumed by LESSEE, all fees and assessments of any type
required to be paid by LESSEE by parties other than LESSOR as provided herein regardless of whether such fees or assessments relate to use or occupation of the Premises or LESSEE’s business operations thereon, and all maintenance, repairs, and
replacements required of LESSEE as provided in Section 7 below (“NNN Obligations”). For the avoidance of doubt, the NNN Obligations shall not include the costs of any structural alterations to the Buildings or any capital improvements to the
Property to the extent such costs are LESSOR’s responsibility to pay pursuant to Section 7 below.
5. EARLY TERMINATION. The parties hereby acknowledge and agree that LESSEE may terminate this Lease prior to the expiration of the Term at any time and for any reason upon
providing LESSOR with not less than ninety (90) days’ advance written notice of LESSEE’s intent to terminate the Lease. In the event LESSEE exercises its right to terminate this Lease prior to the expiration of the Term pursuant to this Section
5, LESSEE shall not be required to pay LESSOR any early termination fee or any other similar penalties, charges, or fees in connection with such early termination of this Lease; provided, that LESSEE shall continue to responsible for all Base
Rent, NNN Obligations and other expenses due under this Lease through and including the date of termination.
6. USE. The Premises may be used for general office, and distribution and manufacturing purposes, and ancillary uses related thereto, all substantially as currently
conducted on the Effective Date of this Lease, unless the LESSOR shall give LESSEE prior written consent (in LESSOR’s sole and absolute discretion) for an additional and/or different use(s). LESSEE and its employees, contractors, and customers
may use the parking areas on the Property as reasonably contemplated with LESSEE’s use of the Premises.
7. MAINTENANCE. LESSEE agrees, at LESSEE’s sole cost and expense, to maintain in good repair all of the interior portions of the Buildings, provided, however, that LESSEE
shall not be responsible for the replacement (as compared to general maintenance) of the heating and air conditioning (“HVAC”) system(s) servicing all or any portion of the Buildings, such replacement being LESSOR’s responsibility. The LESSOR shall, at LESSOR’s sole cost and expense, be responsible for the maintenance, repair and replacement of the common areas of and the utility systems servicing the Property, the roof,
structural elements of the Buildings, as well as the replacement of all HVAC and other mechanical, electrical, and plumbing systems servicing all or any portion of the Buildings. Notwithstanding the foregoing, if any maintenance, repair or
replacement is necessitated by an act, omission or the negligence of LESSEE, its agents, employees, invitees or those for whom LESSEE is responsible, such maintenance, repair or replacement shall be promptly performed and completed at the sole
cost and expense of LESSEE.
8. ALTERATIONS, ADDITIONS, OR IMPROVEMENTS. LESSEE shall not have the right to make any alterations, additions, and improvements to the Premises without the prior written
consent of LESSOR. All alterations, additions, and improvements (other than LESSEE’s moveable furniture, trade fixtures, inventory, and equipment) which may be made or installed by either party upon the Premises shall remain upon and be
surrendered with the Premises and become the property of LESSOR at the termination of this Lease. Upon termination of this Lease, LESSEE shall leave in the Main Building certain computer equipment and other items described on Schedule “D”.
Such items will become the property of LESSOR at such time; LESSEE makes no warranties to LESSOR regarding the functioning or continued operations of any such items.
9. CASUALTY DAMAGE.
(a) If the Premises are rendered
substantially unfit for LESSEE’s occupancy or use contemplated herein by any casualty or peril insured against in a standard fire and extended coverage insurance policy (such a casualty or peril being hereinafter referred to as an “insurable
casualty or peril”) or if the Premises are rendered substantially unfit for LESSEE’s occupancy or use contemplated herein by a casualty or peril that is not insured against by LESSEE’s hazard insurance, either LESSOR or LESSEE may elect to
either terminate the Lease effective as of the date of the occurrence of the casualty or peril. If neither party elects to terminate the Lease within thirty (30) days following the occurrence, LESSOR shall repair or replace the Premises at a
cost not to exceed the cash funds received by LESSOR as insurance proceeds or otherwise made available for such purpose to LESSEE out of the hazard insurance proceeds, LESSEE hereby agreeing to promptly pay over to LESSOR upon receipt any and
all insurance proceeds received by LESSEE for such occurrence allocable to the Warehouse Building and/or the Main Building and any other improvements on the Property and not any proceeds allocable to LESSEE’s personal property, furniture, trade
fixtures, and equipment on the Property.
(b) If said insurable casualty or peril
occurs on the Premises and the Premises are not thereby rendered substantially unfit for the occupancy or use herein contemplated, LESSOR shall promptly and diligently restore the Premises, at LESSOR’s expense, at a cost not to exceed the cash
funds received by LESSOR as insurance proceeds or otherwise made available by LESSEE to LESSOR for such purpose to the LESSOR out of the hazard insurance proceeds, to the condition of the Premises existing prior to the occurrence of the insured
casualty or peril, LESSEE hereby agreeing to promptly pay over to LESSOR upon receipt any and all insurance proceeds received by LESSEE for such occurrence allocable to the Premises and any other improvements on the Property.
10. INSURANCE.
(a) LESSEE shall at all times during the
Term of this Lease maintain a policy or policies of insurance insuring the Buildings against loss or damage by fire, explosion or other hazards and contingencies for the full insurable value. In addition, LESSEE shall, at its own expense, at
all times during the Term of this Lease maintain a policy or policies of insurance insuring all of LESSEE’s property at the Premises against loss or damage by fire, explosion or other hazards and contingencies for the full insurable value
thereof. LESSEE accepts responsibility for keeping the Buildings and all personal property and equipment in the Premises adequately insured. LESSOR will not be liable to LESSEE, its employees, agents, licensees, invitees or insurers for
bodily injury, death or property damage occasioned by the acts or omissions of any other lessee of the Buildings or of other lessee, agents, employees, licensees, or invitees within the Buildings. Further, LESSOR will not be liable to LESSEE
for any property damage, bodily injury or inconvenience caused by the condition, maintenance, repair or alteration of the Buildings, or the failure to provide maintenance or repairs, except the extent caused by LESSOR’s material breach of the
terms of this Lease or LESSOR’s negligence or willful misconduct. LESSOR shall be named an additional insured and LESSEE shall provide LESSOR with proof of coverage (i.e., a certificate of such insurance and/or a copy(ies) of the applicable
policy(ies)) within ten (10) days of receiving a written request for the same from LESSOR.
11. INSURANCE HAZARDS. LESSEE shall not use, or permit the use of, the Premises in any manner that will cause a cancellation of, or an increase in, the existing rates for
fire, liability, or other insurance policies insuring the Premises or any improvements on the Premises, or insuring LESSOR for any liability in connection with ownership of the Premises.
12. LIABILITY INSURANCE; WAIVER OF SUBROGATION. LESSEE agrees, at LESSEE’s expense, to maintain in force continuously throughout the Term of this Lease and any extension
hereof, a commercial liability insurance policy (including blanket contractual liability coverage), which shall cover any claims for bodily injury, death and/or property damage occurring in or resulting from any occurrence in or about the
Premises, including injury, death and/or damage caused by the condition of or any defect in the Premises, with limits of not less than $1,000,000 per occurrence and a $2,000,000 yearly aggregate. LESSOR shall be named an additional insured and
LESSEE shall provide LESSOR with proof of coverage within ten (10) days of receiving a written request for the same from LESSOR.
All insurance required and maintained by LESSEE pursuant to this Lease (including Sections 10 and 12) shall be with deductibles of no more than
$10,000, with policy limits and with insurers reasonably acceptable to LESSOR. The amounts of the insurance will not limit LESSEE's liability or relieve LESSEE of any obligation
under this Lease. The policies must contain cross-liability endorsements and must insure LESSEE's performance of the indemnity provisions of this Lease. The policies must contain a provision that prohibits cancellation or modification of the
policy except upon 30 days' prior written notice to LESSOR. If LESSEE fails to maintain the policy, LESSOR may elect to maintain the insurance at LESSEE's expense.
Each party to this Lease waives any and every claim that arises or may arise in its favor against the other party during the
Term of this Lease for any and all loss of, or damage to, any of its property located within or upon, or constituting a part of, the Premises, to the extent the loss or damage is covered by and recoverable under valid and collectible insurance
policies. These mutual waivers are in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss of, or damage to, property of the parties. Inasmuch as these mutual waivers will
preclude the assignment of any such claim by way of subrogation to an insurance company (or any other person), each party agrees to immediately give to each insurance company that has issued an insurance policy to such party written notice of the
terms of such mutual waivers, and to cause the policies to be endorsed to prevent the invalidation of the insurance coverage by reason of these waivers.
13. COMPLIANCE WITH LAWS. LESSEE will promptly comply with all applicable laws, ordinances and regulations of Federal, State, County, Municipal or other lawful authorities
pertaining to the use and occupancy of the Premises, except that LESSEE shall not be responsible for any structural alterations to the Buildings or any other capital improvements to the Property necessary to bring the Premises into compliance
with applicable law, including any building or fire codes, unless due to LESSEE’s use of or alterations or improvements to the Premises. LESSEE shall procure at its sole expense any permits and licenses required for the transaction of business
on the Premises.
14. ASSIGNMENT AND SUBLETTING. LESSEE shall not have the right to assign or sublease the whole or any part of the Premises other than to an affiliate of LESSEE without the
prior written consent of LESSOR, which consent may be withheld in LESSOR’S sole discretion. No assignment or subletting shall release LESSEE from its obligations hereunder.
15. EMINENT DOMAIN. If all of the Premises is taken under the power of eminent domain or conveyed under threat of condemnation proceedings, or if only a part of such
Premises is so taken or conveyed and LESSEE shall determine that the remainder is inadequate or unsatisfactory for its purposes, then, in either event, this Lease shall terminate effective as of the date LESSEE is required to give up the right
to occupy or use any part of the Premises.
16. ATTORNEY’S FEES. If suit is brought to enforce any covenant of this Lease or for the breach of any covenant or condition herein contained, the parties hereto agree that
the losing party shall pay to the prevailing party its reasonable attorneys’ fees and expenses, which shall be fixed by the court, and court costs.
17. SIGNS. LESSEE shall not place any signs at, on or about the Premises, without obtaining the prior written consent of LESSOR. For the avoidance of doubt, all existing
signage located on or about the Premises as of the Effective Date shall be deemed approved by LESSOR.
18. DEFAULT. In the event LESSEE shall fail to perform any of the terms or provisions of this Lease, LESSOR shall promptly so notify LESSEE in writing. If LESSEE shall
fail to cure a failure to pay Base Rent, NNN Expenses or any other amount due and owing under this Lease to the appropriate party, and such failure continues for ten (10) days after LESSEE’s receipt of such notice from LESSOR, then LESSOR may
terminate this Lease upon written notice to LESSEE, in addition to any and all other rights LESSOR may have hereunder, at law and/or in equity. If LESSEE shall fail to cure a failure to perform an obligation or covenant under this Lease other
than to pay Base Rent, NNN Expenses or any other amount due and owing under this Lease, and such failure continues for thirty (30) days after LESSEE’s receipt of such notice from LESSOR, then LESSOR may cure such failure and such expense shall
be due and payable by LESSEE within ten (10) days of LESSEE receiving written demand for payment and LESSOR may terminate this Lease upon written notice to LESSEE, in addition to any and all other rights LESSOR may have hereunder, at law and/or
in equity.
19. QUIET ENJOYMENT. LESSEE, upon performing the covenants and agreements of this Lease, shall have quiet possession of the Premises during the Term thereof.
20. HOLD HARMLESS. LESSOR shall not be liable to LESSEE or LESSEE’s employees, patrons, or visitors for any damage to person or property caused by any action, omission or
negligence of LESSEE, its servants or employees, and LESSEE agrees to indemnify and hold LESSOR harmless from all claims for any such damage, except claims arising out of LESSOR’s negligence or misconduct. LESSEE shall not be liable to LESSOR
or LESSOR’s employees, patrons, or visitors for any damage to person or property caused by LESSOR’s material breach of the terms of this Lease or the negligence or misconduct of LESSOR, its servants or employees and LESSOR agrees to hold LESSEE
harmless from all claims for any such damage, except claims arising out of LESSEE’s (or its agents’ or employees’) acts or omissions (including negligence or willful misconduct).
21. SUBORDINATION. LESSEE hereby agrees that its leasehold interest hereunder is subordinate to any mortgages now on, or hereafter to be placed on, the Premises leased
hereunder. This subordination shall be self-operative and no further instrument or certificate of subordination shall be required by LESSEE.
22. NOTICES. All notices, requests, approvals, consents, and other communications required or permitted hereunder (“Notices”) must be in writing and are effective: (a) on
the business day sent, if sent by e-mail, and the sender receives evidence of sending, via copy of the message in its “sent” file or other similar electronic storage; and (b) on the date received or rejected if deposited with a nationally
recognized overnight courier service. In each instance, the Notice must be addressed to LESSOR or LESSEE, as the case may be, at the following addresses:
LESSEE:
The Leather Factory, L.P.
1900 SE Loop 820
Fort Worth, Texas 76140
Attention: General Counsel
Email: daniel.ross@tandyleather.com
and
leaseadmin@tandyleather.com
With a copy to:
Bourland, Wall & Wenzel, P.C.
301 Commerce Street, Suite 2500
Fort Worth, Texas 76102-4125
Attention: Sadie Harrison-Fincher, Esq.
Email: sharrisonfincher@bwwlaw.com
LESSOR:
Colonna Brothers, Inc.
4102 Bergen Turnpike
North Bergen, New Jersey 07047-2510
Attention: Dylan Tighe, Chief Operating Officer
Email: dylantighe@colonnabrothers.com
With a copy to:
Fox Rothschild LLP
Saint Ann Court
2501 N. Harwood Street, Suite 1800
Dallas, Texas 75201
Attention: Christopher I. Clark, Esq.
Email: ciclark@foxrothschild.com
23. RELOCATION.
LESSOR shall have no right to relocate LESSEE from the Premises at any time during the Term of this Lease.
24. HOLDING
OVER
In the event of holding over by LESSEE in any portion of the Premises after the expiration or termination of this Lease, such continued occupancy of
the Premises by LESSEE shall be a tenancy at sufferance and shall be subject to all of the terms and provisions of this Lease, except that LESSEE shall pay LESSOR 150% of the Base Rent amount that would have been payable by LESSEE had the holdover
period been a part of the original Term of this Lease on the first day of each month during the period of such holdover, plus 100% of all additional rents and other sums owed by LESSEE to LESSOR pursuant to the terms hereof. Additionally LESSEE
shall be liable to LESSOR for any damage caused to LESSOR by such holdover. LESSEE agrees to vacate and deliver the Premises to LESSOR upon LESSEE’s receipt of notice from LESSOR to vacate following the expiration or termination of the Lease. The
rent payable during the holdover period shall be payable to LESSOR on demand. No holding over by LESSEE, whether with or without consent of LESSOR, shall operate to extend this Lease except as otherwise expressly provided.
25. SERVICE CONTRACTS. The parties hereby acknowledge and agree that, prior to the Effective Date, LESSEE occupied the Property as the owner of such Property and entered
into certain maintenance, service, and other like contracts and agreements in connection with LESSEE’s occupancy, use, and ownership of the Property (collectively, the “Service Contracts”). LESSEE may cause any or all such Service Contracts to
continue in full force and effect during the Term of this Lease. Upon the earlier expiration or termination of this Lease, LESSEE shall deliver to LESSOR written notices to vendors under all Service Contracts terminating such Service Contracts;
provided, however, that any Service Contracts that LESSOR notifies LESSEE in writing no later than fifteen (15) days prior to the expiration of Term of this Lease that LESSOR elects assume and are assignable at no cost to LESSEE (such Service
Contracts, the “Assignable Service Contracts”) shall be assigned to LESSOR effective as of the last day of the Term in substantially the form attached hereto as Schedule “E”. Amounts due and prepayments under the Assignable Service Contracts
shall be prorated between LESSOR and LESSEE as of the close of business on the last day of the Term, it being understood that for purposes of proration, LESSEE shall receive all prepayments and be charged all amounts due under the Assignable
Service Contracts through the day prior to the last day of the Term and LESSOR shall receive all prepayments and charged all amounts due under the Assignable Service Contracts as of the last day of the Term and thereafter.
26. COMPLETE AGREEMENT. This Lease contains a complete expression of the agreement between the parties and there are no promises, representations or inducements except such
as are herein provided. This Lease Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representative, successors and assigns.
27. MISCELLANEOUS. LESSOR and LESSEE represent and warrant to each other respectively that they have the requisite power and authority to enter into this Lease; that all
necessary and appropriate approvals, authorizations and other steps have been taken to effect the legality of this Lease; that the signatories executing this Lease are authorized to do so on behalf of LESSOR and LESSEE; and that this Lease is
valid and binding upon and enforceable against LESSOR and LESSEE and their respective successors and assigns. This Lease may be executed in one or more counterparts, each of which are deemed an original for all purposes, and all such
counterparts together constitute one and the same instrument. In making proof of this Lease, it shall not be necessary to produce or account for more than one such counterpart with each party’s signature. It is expressly understood and agreed
by all parties hereto that executed counterparts of this Lease transmitted by email, or other electronic means shall be effective as originals.
(Signature Page Follows.)
IN WITNESS WHEREOF, LESSOR and LESSEE have executed this Short-Term Lease Agreement as of the day and year first above written.
| LESSOR: | ||
| Colonna Brothers, Inc., | ||
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By:
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Name:
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Title:
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| LESSEE: | ||
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The Leather Factory, L.P.,
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a Texas limited partnership
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By:
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The Leather Factory Inc.,
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a Nevada corporation,
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its General Partner
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By:
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Name:
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Title:
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SCHEDULE “A”
SCHEDULE “B”
LEGAL DESCRIPTION
TRACT I
Being Block 1 of Campus Industrial Park, an addition to the City of
Fort Worth, Tarrant County, Texas, according to the plat thereof recorded in Volume 388-49, Page 61 of the Real Property Records of Tarrant County, Texas.
TRACT II
BEING a 5.9500 acre (259,181 square foot) tract of land situated in the Samuel Woody Survey, Abstract No. 1638, City of Fort Worth, Tarrant County, Texas; said tract
being that tract of land described in Special Warranty Deed to The Leather Factory, L.P. recorded in Instrument Number D207267563 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows;
BEGINNING at a 5/8” iron rod found in the northeast line of that tract of land described in Deed to Texas Electric Service Company recorded in Volume 2574, Page 545 of
the Deed Records of Tarrant County, Texas, said point being the south corner of Block 1 of Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-49, Page 61 of the Plat Records of Tarrant County,
Texas;
THENCE North 27°38'01” East, along the southeast line of said Block 1, a distance of 697.28 feet to a 5/8” iron rod found for corner, said point being the west corner
of Lot 1, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-92, Page 6 of said Plat Records;
THENCE South 62°20'18” East, along the southwest line of said Lot 1, Block 1, a distance of 329.88 feet to a 5/8” iron rod with cap stamped “KHA” set for corner; said
point being in the northeast line of Lot 2, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Instrument Number D223091702 of said Official Public Records;
THENCE South 27°38'01” West, along the said northeast line of Lot 2, Block 1 a distance of 780.11 feet to a 5/8” iron rod found for corner in the north terminus of
South Campus Court (a 60-foot wide right-of-way); said point also being the beginning of a non-tangent curve to the left with a radius of 60.00 feet, a central angle of 158°06'00”, and a chord bearing and distance of South 50°41'18” West, 117.82
feet;
THENCE in a southwesterly direction, along the said north terminus of South Campus Court and with said non-tangent curve to the left, an arc distance of 165.56 feet to
a 5/8” iron rod with cap stamped “KHA” set for corner in the said northeast line of the Texas Electric Service Company tract;
THENCE North 28°21'56” West, along the said northeast line of the Texas Electric Service Company tract, a distance of 342.26 feet to the POINT OF BEGINNING and
containing 259,181 square feet or 5.9500 acres of land, more or less.
SCHEDULE “C”
RELINQUISHED SPACE
SCHEDULE “D”: PROPERTY TO BE LEFT BY LESSEE TO LESSOR
[To be added.]
SCHEDULE “E”
FORM OF ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS
In consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, The
Leather Factory, L.P., a Texas limited partnership (the “Assignor”), with an office and place of business at 1900 SE Loop 820, Fort Worth, TX 76140, hereby
assigns, transfers and delegates to Colonna Brothers, Inc., a New Jersey corporation (the “Assignee”), with an office and place of business at ______________,
_________, __________, and Assignee hereby assumes and accepts the assignment and delegation, of all of Assignor’s right, title and interest in and to the contracts and agreements described on Exhibit A attached hereto (the “Contracts”) relating to certain real property and located at 1900 SE Loop 820 and
2300 S. Campus Ct., Fort Worth, Texas.
Assignor hereby agrees to indemnify Assignee against and hold Assignee harmless from any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys’ fees, originating before the date of closing and arising out of the Assignor’s obligations under the Contracts.
Assignee hereby agrees to indemnify Assignor against and hold Assignor harmless from any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys’ fees, originating on or after the date of closing and arising out of the Assignee’s obligations under the Contracts.
If any litigation between Assignor and Assignee arises out of the obligations of the parties under this Assignment or concerning the meaning or
interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such litigation including, without limitation, reasonable attorneys’ fees.
This Assignment may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument.
[remainder of page intentionally left blank;
signature page immediately follows]
IN WITNESS WHEREOF, Assignor and Assignee have executed
this Assignment effective as of this ____ day of ___________________, 2025.
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The Leather Factory, L.P.,
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a Texas limited partnership
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By:
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The Leather Factory Inc.,
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a Nevada corporation,
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its General Partner
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By:
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Name:
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Title:
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ASSIGNEE:
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Colonna Brothers, Inc.,
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a New Jersey corporation
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By:
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Name:
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Title:
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EXHIBIT 8.4-B
FORM OF RETAIL BUILDING LEASE
SHORT-TERM LEASE AGREEMENT
This Short-Term Lease Agreement (this “Lease”) is made and entered into effective as of the Closing Date (as such term is defined in Section 4 of
the PSA (as defined below)) (the “Effective Date”), by and between COLONNA BROTHERS, INC., a New Jersey corporation (“LESSOR”), and THE LEATHER FACTORY, L.P., a Texas limited partnership (“LESSEE”). “PSA” is defined herein as that certain Purchase
and Sale Agreement dated November 26, 2024, entered into by and between LESSEE, as Seller, and LESSOR, as Purchaser, relating to Lessor’s purchase of (among other things) the Building (as hereinafter defined).
1. RETAIL PREMISES.
(a) LESSOR hereby leases to LESSEE and
LESSEE leases from LESSOR, for the Term (as hereinafter defined) and upon the terms and conditions hereinafter set forth, that certain building containing up to approximately 20,000 square feet of space and outlined in orange in the depiction
of the Property (as defined below) attached hereto as Schedule “A” and incorporated herein for all purposes (the “Building”), such Building being located on the real property having
an address of 1900 SE Loop 820, Fort Worth, Texas and being more particularly described on Schedule “B” attached hereto and incorporated herein for all purposes (the “Property” and
together with the Building, the “Retail Premises”), together with the right to use all common areas, adjoining parking areas, driveways, sidewalks, roads, alleys and means of ingress and
egress that are a part of or located on the Property. LESSEE acknowledges to LESSOR that LESSEE has inspected the Retail Premises and does acknowledge to LESSOR that (i) LESSEE has previously (i.e., prior to the Term) and continuously occupied
the Retail Premises, (ii) the Retail Premises are suitable for LESSEE’s needs, and (iii) LESSEE does accept such Retail Premises in “AS IS, WHERE IS” condition without warranty, expressed or implied, as to the condition or suitability of same
by LESSOR.
(b) The parties hereto acknowledge and
agree that the Retail Premises under this Lease is being used as a transition space for LESSEE until such time LESSEE is able to vacate the Building.
2. TERM. The term of this Lease shall commence on the Effective Date and shall continue for the period ending on December 31, 2025 (such period, the “Term”), unless sooner
terminated or extended as hereinafter provided. If the Effective Date does not occur on the first (1st) day of a calendar month, then the first month during the Term shall be extended to end on the last day of the first (1st)
full calendar month following the Effective Date. LESSEE may extend the initial Term for an additional period of up to six (6) full calendar months by providing written notice of LESSEE’s desire to extend the initial Term no less than thirty
(30) days prior to the expiration of the initial Term (such extended Term, the “Renewal Term”).
3. RENT. LESSEE shall not be required to pay any base rent for the Retail Premises for the initial Term of this Lease. Except as otherwise expressly provided herein,
LESSEE shall pay the NNN Obligations defined below directly to the appropriate party as and when the same become due and payable. Notwithstanding the foregoing, if LESSEE exercises its option to extend the Term pursuant to Section 2 above, on
the first day of each month during the Renewal Term, LESSEE shall pay LESSOR as base rent an amount equal to Twenty-Five Thousand and No/100 Dollars ($25,000.00) per month (the “Base Rent”).
4. TRIPLE NET LEASE. This Lease is a “Triple Net Lease” with LESSEE responsible during the Term for paying directly the appropriate parties all costs and expenses (as they
become due and payable) incurred with respect to, and associated with the Retail Premises and the business operated by LESSEE thereon and therein, including, without limitation, all real estate taxes (but expressly excluding all of LESSOR’s
income taxes, transfer taxes, franchise taxes, and other taxes based on income which are LESSOR’s responsibility to pay), insurance as required by Sections 10 and 12 below, utilities consumed by LESSEE, all fees and assessments of any type
required to be paid by LESSEE by parties other than LESSOR as provided herein regardless of whether such fees or assessments relate to use or occupation of the Retail Premises or LESSEE’s business operations thereon, and all maintenance,
repairs, and replacements required of LESSEE as provided in Section 7 below (“NNN Obligations” or “NNN Expenses”). For the avoidance of doubt, the NNN Obligations shall not include the costs of any structural alterations to the Building or any
capital improvements to the Property to the extent such costs are LESSOR’s responsibility to pay pursuant to Section 7 below.
5. EARLY TERMINATION. The parties hereby acknowledge and agree that LESSEE may terminate this Lease prior to the expiration of the Term at any time and for any reason upon
providing LESSOR with not less than ninety (90) days’ advance written notice of LESSEE’s intent to terminate the Lease. In the event LESSEE exercises its right to terminate this Lease prior to the expiration of the Term pursuant to this Section
5, LESSEE shall not be required to pay LESSOR any early termination fee or any other similar penalties, charges, or fees in connection with such early termination of this Lease; provided, that LESSEE shall continue to responsible for all Base
Rent, NNN Obligations and other expenses due under this Lease through and including the date of termination.
6. USE. The Retail Premises may be used for general office, showroom, and retail purposes, and ancillary uses related thereto, all substantially as currently conducted on
the Effective Date of this Lease, unless the LESSOR shall give LESSEE prior written consent (in LESSOR’s sole and absolute discretion) for an additional and/or different use(s). LESSEE and its employees, contractors, and customers may use the
parking areas on the Property as reasonably contemplated with LESSEE’s use of the Retail Premises.
7. MAINTENANCE. LESSEE agrees, at LESSEE’s sole cost and expense, to maintain in good repair all of the interior portions of the Building, provided, however, that LESSEE
shall not be responsible for the replacement (as compared to general maintenance) of the heating and air conditioning (“HVAC”) system(s) servicing all or any portion of the Building, such replacement being LESSOR’s responsibility. The LESSOR shall, at LESSOR’s sole cost and expense, be responsible for the maintenance, repair and replacement of the common areas of and the utility systems servicing the Property, the roof,
structural elements of the Building, as well as the replacement of all HVAC and other mechanical, electrical, and plumbing systems servicing all or any portion of the Building. Notwithstanding the foregoing, if any maintenance, repair or
replacement is necessitated by an act, omission or the negligence of LESSEE, its agents, employees, invitees or those for whom LESSEE is responsible, such maintenance, repair or replacement shall be promptly performed and completed at the sole
cost and expense of LESSEE.
8. ALTERATIONS, ADDITIONS, OR IMPROVEMENTS. LESSEE shall not have the right to make any alterations, additions, and improvements to the Retail Premises without the prior
written consent of LESSOR. All alterations, additions, and improvements (other than LESSEE’s moveable furniture, trade fixtures, inventory, and equipment) which may be made or installed by either party upon the Retail Premises shall remain upon
and be surrendered with the Retail Premises and become the property of LESSOR at the termination of this Lease.
9. CASUALTY DAMAGE.
(a) If the Retail Premises are rendered
substantially unfit for LESSEE’s occupancy or use contemplated herein by any casualty or peril insured against in a standard fire and extended coverage insurance policy (such a casualty or peril being hereinafter referred to as an “insurable
casualty or peril”) or if the Retail Premises are rendered substantially unfit for LESSEE’s occupancy or use contemplated herein by a casualty or peril that is not insured against by LESSEE’s hazard insurance, either LESSOR or LESSEE may elect
to either terminate the Lease effective as of the date of the occurrence of the casualty or peril. If neither party elects to terminate the Lease within thirty (30) days following the occurrence, LESSOR shall repair or replace the Retail
Premises at a cost not to exceed the cash funds received by LESSOR as insurance proceeds or otherwise made available for such purpose to LESSEE out of the hazard insurance proceeds, LESSEE hereby agreeing to promptly pay over to LESSOR upon
receipt any and all insurance proceeds received by LESSEE for such occurrence allocable to the Building and any other improvements on the Property and not any proceeds allocable to LESSEE’s personal property, furniture, trade fixtures, and
equipment on the Property.
(b) If said insurable casualty or peril
occurs on the Retail Premises and the Retail Premises are not thereby rendered substantially unfit for the occupancy or use herein contemplated, LESSOR shall promptly and diligently restore the Retail Premises, at LESSOR’s expense, at a cost
not to exceed the cash funds received by LESSOR as insurance proceeds or otherwise made available by LESSEE to LESSOR for such purpose to the LESSOR out of the hazard insurance proceeds, to the condition of the Retail Premises existing prior to
the occurrence of the insured casualty or peril, LESSEE hereby agreeing to promptly pay over to LESSOR upon receipt any and all insurance proceeds received by LESSEE for such occurrence allocable to the Retail Premises and any other
improvements on the Property
10. INSURANCE.
(a) LESSEE shall at all times during the
Term of this Lease maintain a policy or policies of insurance insuring the Building against loss or damage by fire, explosion or other hazards and contingencies for the full insurable value. In addition, LESSEE shall, at its own expense, at all
times during the Term of this Lease maintain a policy or policies of insurance insuring all of LESSEE’s property at the Retail Premises against loss or damage by fire, explosion or other hazards and contingencies for the full insurable value
thereof. LESSEE accepts responsibility for keeping the Building and all personal property and equipment in the Retail Premises adequately insured. LESSOR will not be liable to LESSEE, its employees, agents, licensees, invitees or insurers for
bodily injury, death or property damage occasioned by the acts or omissions of any other lessee of the Building or of other lessee, agents, employees, licensees, or invitees within the Building. Further, LESSOR will not be liable to LESSEE for
any property damage, bodily injury or inconvenience caused by the condition, maintenance, repair or alteration of the Building, or the failure to provide maintenance or repairs, except the extent caused by LESSOR’s material breach of the terms
of this Lease or LESSOR’s gross negligence or willful misconduct. LESSOR shall be named an additional insured and LESSEE shall provide LESSOR with proof of coverage (i.e., a certificate of such insurance and/or a copy(ies) of the applicable
policy(ies)) within ten (10) days of receiving a written request for the same from LESSOR.
11. INSURANCE HAZARDS. LESSEE shall not use, or permit the use of, the Retail Premises in any manner that will cause a cancellation of, or an increase in, the existing
rates for fire, liability, or other insurance policies insuring the Retail Premises or any improvements on the Retail Premises, or insuring LESSOR for any liability in connection with ownership of the Retail Premises.
12. LIABILITY INSURANCE; WAIVER OF SUBROGATION. LESSEE agrees, at LESSEE’s expense, to maintain in force continuously throughout the Term of this Lease and any extension
hereof, a commercial liability insurance policy (including blanket contractual liability coverage), which shall cover any claims for bodily injury, death and/or property damage occurring in or resulting from any occurrence in or about the
Retail Premises, including injury, death and/or damage caused by the condition of or any defect in the Retail Premises, with limits of not less than $1,000,000 per occurrence and a $2,000,000 yearly aggregate. LESSOR shall be named an
additional insured and LESSEE shall provide LESSOR with proof of coverage within ten (10) days of receiving a written request for the same from LESSOR.
All insurance required and maintained by LESSEE pursuant to this Lease (including Sections 10 and 12) shall be with
deductibles of no more than $10,000, with policy limits and with insurers reasonably acceptable to LESSOR. The amounts of the insurance will not limit LESSEE's liability or
relieve LESSEE of any obligation under this Lease. The policies must contain cross-liability endorsements and must insure LESSEE's performance of the indemnity provisions of this Lease. The policies must contain a provision that prohibits
cancellation or modification of the policy except upon 30 days' prior written notice to LESSOR. If LESSEE fails to maintain the policy, LESSOR may elect to maintain the insurance at LESSEE's expense.
Each party to this Lease waives any and every claim that arises
or may arise in its favor against the other party during the Term of this Lease for any and all loss of, or damage to, any of its property located within or upon, or constituting a part of, the Retail Premises, to the extent the loss or damage is
covered by and recoverable under valid and collectible insurance policies. These mutual waivers are in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss of, or damage
to, property of the parties. Inasmuch as these mutual waivers will preclude the assignment of any such claim by way of subrogation to an insurance company (or any other person), each party agrees to immediately give to each insurance company that
has issued an insurance policy to such party written notice of the terms of such mutual waivers, and to cause the policies to be endorsed to prevent the invalidation of the insurance coverage by reason of these waivers.
13. COMPLIANCE WITH LAWS. LESSEE will promptly comply with all applicable laws, ordinances and regulations of Federal, State, County, Municipal or other lawful authorities
pertaining to the use and occupancy of the Retail Premises, except that LESSEE shall not be responsible for any structural alterations to the Building or any other capital improvements to the Property necessary to bring the Retail Premises into
compliance with applicable law, including any building or fire codes, unless due to LESSEE’s use of or alterations or improvements to the Retail Premises. LESSEE shall procure at its sole expense any permits and licenses required for the
transaction of business on the Retail Premises.
14. ASSIGNMENT AND SUBLETTING. LESSEE shall not have the right to assign or sublease the whole or any part of the Retail Premises other than to an affiliate of LESSEE
without the prior written consent of LESSOR, which consent may be withheld in LESSOR’S sole discretion. No assignment or subletting shall release LESSEE from its obligations hereunder.
15. EMINENT DOMAIN. If all of the Retail Premises is taken under the power of eminent domain or conveyed under threat of condemnation proceedings, or if only a part of such
Retail Premises is so taken or conveyed and LESSEE shall determine that the remainder is inadequate or unsatisfactory for its purposes, then, in either event, this Lease shall terminate effective as of the date LESSEE is required to give up the
right to occupy or use any part of the Retail Premises.
16. ATTORNEY’S FEES. If suit is brought to enforce any covenant of this Lease or for the breach of any covenant or condition herein contained, the parties hereto agree that
the losing party shall pay to the prevailing party its reasonable attorneys’ fees and expenses, which shall be fixed by the court, and court costs.
17. SIGNS. LESSEE shall not place any signs at, on or about the Retail Premises, without obtaining the prior written consent of LESSOR. For the avoidance of doubt, all
existing signage located on or about the Retail Premises as of the Effective Date shall be deemed approved by LESSOR.
18. DEFAULT. In the event LESSEE shall fail to perform any of the terms or provisions of this Lease, LESSOR shall promptly so notify LESSEE in writing. If LESSEE shall
fail to cure a failure to pay Base Rent (if applicable), NNN Expenses or any other amount due and owing under this Lease to the appropriate party, and such failure continues for ten (10) days after LESSEE’s receipt of such notice from LESSOR,
then LESSOR may terminate this Lease upon written notice to LESSEE, in addition to any and all other rights LESSOR may have hereunder, at law and/or in equity. If LESSEE shall fail to cure a failure to perform an obligation or covenant under
this Lease other than to pay Base Rent, NNN Expenses or any other amount due and owing under this Lease, and such failure continues for thirty (30) days after LESSEE’s receipt of such notice from LESSOR, then LESSOR may cure such failure and
such expense shall be due and payable by LESSEE within ten (10) days of LESSEE receiving written demand for payment and LESSOR may terminate this Lease upon written notice to LESSEE, in addition to any and all other rights LESSOR may have
hereunder, at law and/or in equity.
19. QUIET ENJOYMENT. LESSEE, upon performing the covenants and agreements of this Lease, shall have quiet possession of the Retail Premises during the Term thereof.
20. HOLD HARMLESS. LESSOR shall not be liable to LESSEE or LESSEE’s employees, patrons, or visitors for any damage to person or property caused by any action, omission or
negligence of LESSEE, its servants or employees, and LESSEE agrees to indemnify and hold LESSOR harmless from all claims for any such damage, except claims arising out of LESSOR’s negligence or misconduct. LESSEE shall not be liable to LESSOR
or LESSOR’s employees, patrons, or visitors for any damage to person or property caused by LESSOR’s material breach of the terms of this Lease or the negligence or misconduct of LESSOR, its servants or employees and LESSOR agrees to hold LESSEE
harmless from all claims for any such damage, except claims arising out of LESSEE’s (or its agents’ or employees’) acts or omissions (including negligence or willful misconduct).
21. SUBORDINATION. LESSEE hereby agrees that its leasehold interest hereunder is subordinate to any mortgages now on, or hereafter to be placed on, the Retail Premises
leased hereunder. This subordination shall be self-operative and no further instrument or certificate of subordination shall be required by LESSEE.
22. NOTICES. All notices, requests, approvals, consents, and other communications required or permitted hereunder (“Notices”) must be in writing and are effective: (a) on
the business day sent, if sent by e-mail, and the sender receives evidence of sending, via copy of the message in its “sent” file or other similar electronic storage; and (b) on the date received or rejected if deposited with a nationally
recognized overnight courier service. In each instance, the Notice must be addressed to LESSOR or LESSEE, as the case may be, at the following addresses:
LESSEE:
The Leather Factory, L.P.
1900 SE Loop 820
Fort Worth, Texas 76140
Attention: General Counsel
Email: daniel.ross@tandyleather.com and
leaseadmin@tandyleather.com
With a copy to:
Bourland, Wall & Wenzel, P.C.
301 Commerce Street, Suite 2500
Fort Worth, Texas 76102-4125
Attention: Sadie Harrison-Fincher, Esq.
Email: sharrisonfincher@bwwlaw.com
LESSOR:
Colonna Brothers, Inc.
4102 Bergen Turnpike
North Bergen, New Jersey 07047-2510
Attention: Dylan Tighe, Chief Operating Officer
Email: dylantighe@colonnabrothers.com
With a copy to:
Fox Rothschild LLP
Saint Ann Court
2501 N. Harwood Street, Suite 1800
Dallas, Texas 75201
Attention: Christopher I. Clark, Esq.
Email: ciclark@foxrothschild.com
23. RELOCATION.
LESSOR shall have no right to relocate LESSEE from the Retail Premises at any time during the Term of this Lease.
24. HOLDING
OVER
In the event of holding over by LESSEE in any portion of the Retail Premises after the expiration or termination of this Lease, such continued
occupancy of the Retail Premises by LESSEE shall be a tenancy at sufferance and shall be subject to all of the terms and provisions of this Lease, except that LESSEE shall pay LESSOR 150% of the Base Rent amount that would have been payable by
LESSEE had the holdover period been a part of the original Term of this Lease on the first day of each month during the period of such holdover, plus 100% of all additional rents and other sums owed by LESSEE to LESSOR pursuant to the terms hereof.
Additionally LESSEE shall be liable to LESSOR for any damage caused to LESSOR by such holdover. LESSEE agrees to vacate and deliver the Retail Premises to LESSOR upon LESSEE’s receipt of notice from LESSOR to vacate following the expiration or
termination of the Lease. The rent payable during the holdover period shall be payable to LESSOR on demand. No holding over by LESSEE, whether with or without consent of LESSOR, shall operate to extend this Lease except as otherwise expressly
provided.
25. SERVICE CONTRACTS. The parties hereby acknowledge and agree that, prior to the Effective Date, LESSEE occupied the Property as the owner of such Property and entered
into certain maintenance, service, and other like contracts and agreements in connection with LESSEE’s occupancy, use, and ownership of the Property (collectively, the “Service Contracts”). LESSEE may cause any or all such Service Contracts to
continue in full force and effect during the Term of this Lease. Upon the earlier expiration or termination of this Lease, LESSEE shall deliver to LESSOR written notices to vendors under all Service Contracts terminating such Service Contracts;
provided, however, that any Service Contracts that LESSOR notifies LESSEE in writing no later than fifteen (15) days prior to the expiration of Term of this Lease that LESSOR elects assume and are assignable at no cost to LESSEE (such Service
Contracts, the “Assignable Service Contracts”) shall be assigned to LESSOR effective as of the last day of the Term in substantially the form attached hereto as Schedule “C”. Amounts due and prepayments under the Assignable Service Contracts
shall be prorated between LESSOR and LESSEE as of the close of business on the last day of the Term, it being understood that for purposes of proration, LESSEE shall receive all prepayments and be charged all amounts due under the Assignable
Service Contracts through the day prior to the last day of the Term and LESSOR shall receive all prepayments and charged all amounts due under the Assignable Service Contracts as of the last day of the Term and thereafter.
26. COMPLETE AGREEMENT. This Lease contains a complete expression of the agreement between the parties and there are no promises, representations or inducements except such
as are herein provided. This Lease Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representative, successors and assigns.
27. MISCELLANEOUS. LESSOR and LESSEE represent and warrant to each other respectively that they have the
requisite power and authority to enter into this Lease; that all necessary and appropriate approvals, authorizations and other steps have been taken to effect the legality of this Lease; that the signatories executing this Lease are authorized
to do so on behalf of LESSOR and LESSEE; and that this Lease is valid and binding upon and enforceable against LESSOR and LESSEE and their respective successors and assigns. This Lease may be executed in one or more counterparts, each of which
are deemed an original for all purposes, and all such counterparts together constitute one and the same instrument. In making proof of this Lease, it shall not be necessary to produce or account for more than one such counterpart with each
party’s signature. It is expressly understood and agreed by all parties hereto that executed counterparts of this Lease transmitted by email, or other electronic means shall be effective as originals.
(Signature Page Follows.)
IN WITNESS WHEREOF, LESSOR and LESSEE have executed this Short-Term Lease Agreement as of the day and year first above written.
|
LESSOR:
|
|||
|
Colonna Brothers, Inc.,
|
|||
|
a New Jersey corporation
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
| LESSEE: | |||
| The Leather Factory, L.P., | |||
| a Texas limited partnership | |||
|
By:
|
The Leather Factory Inc.,
|
||
|
a Nevada corporation,
|
|||
|
its General Partner
|
|||
| By: | |||
| Name: | |||
| Title: | |||
SCHEDULE “A”
DEPICTION OF THE PROPERTY
SCHEDULE “B”
LEGAL DESCRIPTION
TRACT I
Being Block 1 of Campus Industrial Park, an addition to the City of
Fort Worth, Tarrant County, Texas, according to the plat thereof recorded in Volume 388-49, Page 61 of the Real Property Records of Tarrant County, Texas.
TRACT II
BEING a 5.9500 acre (259,181 square foot) tract of land situated in the Samuel Woody Survey, Abstract No. 1638, City of Fort Worth, Tarrant County, Texas; said tract
being that tract of land described in Special Warranty Deed to The Leather Factory, L.P. recorded in Instrument Number D207267563 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows;
BEGINNING at a 5/8” iron rod found in the northeast line of that tract of land described in Deed to Texas Electric Service Company recorded in Volume 2574, Page 545 of
the Deed Records of Tarrant County, Texas, said point being the south corner of Block 1 of Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-49, Page 61 of the Plat Records of Tarrant County,
Texas;
THENCE North 27°38'01” East, along the southeast line of said Block 1, a distance of 697.28 feet to a 5/8” iron rod found for corner, said point being the west corner
of Lot 1, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Volume 388-92, Page 6 of said Plat Records;
THENCE South 62°20'18” East, along the southwest line of said Lot 1, Block 1, a distance of 329.88 feet to a 5/8” iron rod with cap stamped “KHA” set for corner; said
point being in the northeast line of Lot 2, Block 1, Campus Industrial Park, an addition to the City of Fort Worth according to the plat recorded in Instrument Number D223091702 of said Official Public Records;
THENCE South 27°38'01” West, along the said northeast line of Lot 2, Block 1 a distance of 780.11 feet to a 5/8” iron rod found for corner in the north terminus of
South Campus Court (a 60-foot wide right-of-way); said point also being the beginning of a non-tangent curve to the left with a radius of 60.00 feet, a central angle of 158°06'00”, and a chord bearing and distance of South 50°41'18” West, 117.82
feet;
THENCE in a southwesterly direction, along the said north terminus of South Campus Court and with said non-tangent curve to the left, an arc distance of 165.56 feet to
a 5/8” iron rod with cap stamped “KHA” set for corner in the said northeast line of the Texas Electric Service Company tract;
THENCE North 28°21'56” West, along the said northeast line of the Texas Electric Service Company tract, a distance of 342.26 feet to the POINT OF BEGINNING and
containing 259,181 square feet or 5.9500 acres of land, more or less.
SCHEDULE “C”
FORM OF ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS
ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS
In consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, The
Leather Factory, L.P., a Texas limited partnership (the “Assignor”), with an office and place of business at 1900 SE Loop 820, Fort Worth, TX 76140, hereby
assigns, transfers and delegates to Colonna Brothers, Inc., a New Jersey corporation (the “Assignee”), with an office and place of business at ______________,
_________, __________, and Assignee hereby assumes and accepts the assignment and delegation, of all of Assignor’s right, title and interest in and to the contracts and agreements described on Exhibit A attached hereto (the “Contracts”) relating to certain real property and located at 1900 SE Loop 820 and
2300 S. Campus Ct., Fort Worth, Texas.
Assignor hereby agrees to indemnify Assignee against and hold Assignee harmless from any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys’ fees, originating before the date of closing and arising out of the Assignor’s obligations under the Contracts.
Assignee hereby agrees to indemnify Assignor against and hold Assignor harmless from any and all cost, liability, loss, damage or expense,
including, without limitation, reasonable attorneys’ fees, originating on or after the date of closing and arising out of the Assignee’s obligations under the Contracts.
If any litigation between Assignor and Assignee arises out of the obligations of the parties under this Assignment or concerning the meaning or
interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such litigation including, without limitation, reasonable attorneys’ fees.
This Assignment may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument.
[remainder of page intentionally left blank;
signature page immediately follows]
IN WITNESS WHEREOF, Assignor and Assignee have executed
this Assignment effective as of this ____ day of ___________________, 2025.
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ASSIGNOR:
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||
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The Leather Factory, L.P.,
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||
|
a Texas limited partnership
|
||
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By:
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The Leather Factory Inc.,
|
|
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a Nevada corporation,
|
||
|
its General Partner
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
| ASSIGNEE: | |||
| Colonna Brothers, Inc., | |||
| a New Jersey corporation | |||
|
By:
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|||
|
Name:
|
|||
|
Title:
|
|||
SCHEDULE 1
PERSONAL PROPERTY INVENTORY
[To be attached by Seller at Closing.]
Exhibit 10.11
COMMERCIAL LEASE AGREEMENT
1. Lease Summary.
|
Landlord:
|
JACKSON-SHAW / BENBROOK NORTH, LP, a Texas limited partnership
|
||
|
Landlord's Address:
|
4890 Alpha Road, Suite 100, Dallas, Texas 75244
|
||
| |
Contact Person: | John Stone | |
|
Phone:
|
972-628-7450 | ||
|
Fax:
|
972-628-7444
|
||
|
Email:
|
jstone@jacksonshaw.com
|
||
|
With a copy to:
|
Andrews & Barth, PC
|
||
| |
4851 LBJ Freeway, Suite 500 | ||
| |
Dallas, Texas 75244 | ||
|
Contact Person:
|
Justin Tonick
|
||
|
Phone:
|
214-346-1185
|
||
|
Email:
|
jtonick@andrews-barth.com
|
||
|
Tenant:
|
TANDY LEATHER FACTORY, INC., a Delaware corporation
|
||
|
Tenant's Address:
|
Before the Commencement Date:
|
||
|
Contact Person:
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Johan Hedberg/CEO
|
||
|
Phone:
|
817-872-3200
|
||
|
Fax:
|
|||
|
Email:
|
johan.hedberg@tandyleather.com; c/o leaseadmin@tandyleather.com
|
||
| |
From and after the Commencement Date:
|
||
| 7602 SW Loop 820 Benbrook, Texas 76126 | |||
|
Contact Person:
|
Johan Hedberg/CEO
|
||
|
Phone:
|
817-872-3200
|
||
|
Fax:
|
|||
|
Email:
|
johan.hedberg@tandyleather.com; c/o leaseadmin@tandyleather.com
|
||
|
Landlord's Broker:
|
CBRE, INC. (Stephen Koldyke, Kacy Jones, and Brian Gilchrist)
|
||
|
Tenant's Broker:
|
Cushman & Wakefield (Jay Benner)
|
||
|
Leased Premises:
|
approximately 133,564 square feet of space, being Suite 101 located in the Building with an address of 7602 SW Loop 820 Benbrook, Texas 76126, as outlined on Exhibit "A-1" attached hereto
|
||
|
Project:
|
Chisholm 20 Commerce Park (containing approximately 917,374 square feet)
|
||
|
Building:
|
No. 2 (containing approximately 377,884 square feet)
|
||
Landlord and Tenant stipulate that the number of rentable square feet in the Project and the Building set forth above is conclusive and shall be binding upon them. The
number of rentable square feet in the Leased Premises is subject to re-measurement as set forth in Exhibit "B" attached hereto.
|
Tenant's Proportionate Share of Project:
|
14.56%
|
|
Tenant's Proportionate Share of Building:
|
35.35%
|
|
Term:
|
123 Months
|
|
Commencement Date:
|
The earlier of (a) July 1, 2025, (b) subject to Section 8(b), the date
of Substantial Completion of the Tenant Improvements, and (c) the date Tenant opens for business at the Leased Premises.
|
|
Termination Date:
|
The last day of the 123rd month following the Commencement Date
|
Base Rent:
|
Months
|
Annual Rate Per Sq. Ft.
|
Monthly Base Rent
|
|
1 – 12*
|
$7.55*
|
$84,034.02*
|
|
13 - 24
|
$7.84
|
$87,269.33
|
|
25 - 36
|
$8.14
|
$90,629.20
|
|
37 - 48
|
$8.46
|
$94,118.42
|
|
49 - 60
|
$8.78
|
$97,741.98
|
|
61 - 72
|
$9.12
|
$101,505.04
|
|
73 - 84
|
$9.47
|
$105,412.99
|
|
85 - 96
|
$9.84
|
$109,471.39
|
|
97 - 108
|
$10.21
|
$113,686.04
|
|
109 - 120
|
$10.61
|
$118,062.95
|
|
121 - 123
|
$11.02
|
$122,608.37
|
*Conditioned upon there being no Event of Default by Tenant under this Lease, Base Rent shall be abated (the "Abated Rent") during the first ninety
(90) days of the Term (the "Abatement Period"), e.g., if the Commencement Date is July 1, 2025, Base Rent shall be abated until and including September 29, 2025. Commencing with the first day after the end of the Abatement Period, Tenant shall make
Base Rent payments for any remaining partial calendar month and on the first day of the first full calendar month thereafter shall make Base Rent payments as otherwise provided in this Lease. Notwithstanding such Abated Rent, all other sums due
under this Lease, including Additional Rent, shall be payable as provided in this Lease. If an Event of Default by Tenant occurs under this Lease, in addition to such remedies as may be provided to Landlord in this Lease or at law or in equity,
Tenant must immediately pay to Landlord the entire amount of all Abated Rent, and Tenant will not be entitled to any further abatement of Base Rent under this paragraph.
| Initial Estimated Additional Rent Payments | 1. Common Area | $ |
0.50 |
||
| (expressed per square foot/year): |
2. Taxes
|
$ | 1.80 |
||
| (estimates only and subject to |
3. Insurance
|
$ | 0.13 |
||
|
adjustment to actual costs and
|
Total:
|
$ | 2.43 |
||
|
expenses according to the
|
|||||
|
provisions of this Lease)
|
|
Total Initial Estimated Monthly Additional Rent Payments:
|
$
|
27,046.71
|
||
|
Total Initial Monthly Base Rent and Estimated Monthly Additional Rent Payments:
|
$
|
111,080.73
|
||
|
Security Deposit:
|
$ |
149,655.08
|
2. Defined Terms. The following terms used herein and denoted by their initial capitalization shall have the meanings set forth below:
"Additional Rent" shall mean the Tax and Insurance Costs,
the Common Area Maintenance Expenses and all sums of money, other than Base Rent, which become due by Tenant under this Lease.
"Adjacent Buildings" shall mean any building or buildings,
other than the Building, located, from time to time, upon the Land or within the Project.
"Applicable Laws" shall mean any and all ordinances, orders,
directives, codes, permits and other rules and regulations of state, federal, municipal, or other agencies or bodies having jurisdiction with respect to the Project.
"Base Rent" shall mean the annualized amounts computed for
the applicable period using the Monthly Base Rent shown in Section 1, above and payable as provided herein.
"Building" shall have the meaning given in Section 1, above.
"Commencement Date" shall have the meaning given in Section 1, above.
"Common Areas" means all areas, spaces, facilities and
equipment (whether or not located within the Building) made available by Landlord for the common and joint use of Landlord, Tenant and others designated by Landlord using or occupying space in the Building or the Project, including, but not limited
to, walkways, sidewalks and driveways necessary for access to the Building, parking areas, building lobbies, atriums, landscaped areas, public corridors, public restrooms, Building stairs, drinking fountains and any such other areas and facilities
within the Project, if any, as are designated by Landlord from time to time as Common Areas.
"Common Area Maintenance Expenses" shall mean any and all
expenses for the maintenance, repair, replacement and operation of the Common Areas and any portions of the Project for which Landlord is responsible hereunder, including, but not limited to, management fees (not to exceed three percent 3% of gross
revenue for the Project), utility expenses (if furnished by Landlord), wages and fringe benefits payable to employees of Landlord responsible for the management of the Project and amounts paid to contractors for work performed in connection with the
Project. The term "Common Area Maintenance Expenses" shall not include any capital improvements or capital expenditures other than the amortized cost of capital improvements, capital expenditures or costs of a capital nature, as determined in
accordance with generally accepted accounting principles, consistently applied which are: (1) necessary capital repairs or replacements made in the ordinary course of business, (2) performed primarily to reduce current or future operating expense
costs or otherwise improve the operating efficiency of the Building or (3) required to comply with any Applicable Laws that are enacted, or first interpreted to apply to the Building, after the date of this Lease (collectively, the "Permitted Capital
Expenditures"). The cost of the Permitted Capital Expenditures shall be amortized on a straight-line basis (including reasonable interest) by Landlord over the useful life of the capital improvements or replacement as reasonably determined by
Landlord. The term "Common Area Maintenance Expenses" shall also not include any capital improvement to the Project other than replacements required for normal maintenance and repair, nor shall it include repairs, restoration or other work occasioned
by fire, windstorm or other insured casualty, expenses incurred in leasing or procuring tenants, leasing commissions, advertising expenses, expenses for renovating space for new tenants, legal expenses incident to enforcement by Landlord of the terms
of any lease, interest or principal payments on any mortgage or other indebtedness of Landlord, compensation paid to any employee of Landlord above the grade of property manager, depreciation allowance or expense.
Commencing on the twenty-fifth (25th) month following the Commencement Date, Tenant's Proportionate Share of actual "controllable Common
Area Maintenance Expenses" (as defined below) per square foot may be increased by no more than eight percent (8%) over Tenant's Proportionate Share of actual "controllable Common Area Maintenance Expenses" for the previous year of the Term,
determined on a cumulative, compounding basis. With regard to any renewal options granted herein, Tenant's Proportionate Share of "controllable Common Area Maintenance Expenses" shall be adjusted for the initial year of each such renewal option
based upon the actual amount of such "controllable Common Area Maintenance Expenses" for the year in question. Commencing in the subsequent year of each such renewal option, Tenant's Proportionate Share of actual "controllable Common Area
Maintenance Expenses" per square foot shall not be increased by more than eight percent (8%) over Tenant's Proportionate Share of actual "controllable Common Area Maintenance Expenses" for the previous year, determined on a cumulative, compounding
basis. For the purposes hereof, the percentage interest being determined on a cumulative basis provides that if the average increase for all expired years of the Term is less than eight percent (8%), then the percentage increase for the next year of
the Term may exceed eight percent (8%) so long as the average increase for all expired years and the next year do not exceed eight percent (8%). For the purposes hereof, the term "controllable Common Area Maintenance Expenses" shall be limited to
those Common Area Maintenance Expenses which are within the direct control and discretion of Landlord, but shall not include, without limitation, utility charges, management fees, the cost of effecting compliance with any Applicable Laws, any Common
Area Maintenance Expense required for normal maintenance and repair, nor shall it include repairs, restoration or other work occasioned by fire, windstorm or other insured casualty.
"Default Rate" shall mean the lesser of (i) maximum rate of
interest permitted by Applicable Law or (ii) the Prime Rate plus five percent (5%).
"Effective Date" shall mean the date of execution of this
Lease.
"Event of Default" shall have the meaning given in this
Lease, below.
"Hazardous Material" shall mean any substance, material,
waste, pollutant, or contaminant that is or could be regulated under any statute, regulations, ordinance, rule, code, judgment, permit, or other similar requirement of any governmental authority, agency or court or that may adversely affect human
health or the environment.
"Land" shall mean the land upon which the Building is
located, as described in the attached Exhibit "A".
"Landlord" shall have the meaning given in Section 1, above.
"Lease" shall mean this Commercial Lease Agreement.
"Leased Premises" shall have the meaning given in Section 1, above.
"Mortgage" shall mean any mortgage, deed to secure debt or
security deed and any other instrument creating a lien in connection with any method of financing or refinancing.
"Mortgagee" shall mean the holder(s) of the indebtedness
secured by a Mortgage.
"Permitted Exceptions" shall mean any encumbrances,
easements, covenants, conditions, restrictions and other matters of record.
"Prime Rate" shall mean the prime interest rate as announced
or published in The Wall Street Journal, or its successor, from time to time, or, in the event The Wall Street Journal does not announce or publish a prime interest rate, the prime interest rate announced or published from time to time by such national publication as may be selected by Landlord.
"Project" shall mean the Land, the Building and the Adjacent
Buildings, landscaping, parking and driveway areas, sidewalks and other improvements thereon; however, Landlord shall have the right to modify the definition of "Project" by eliminating or adding any Adjacent Building, together with the allocable
share of the Land, landscaping, parking and driveway areas, sidewalks and other improvements relating thereto, in which event the term "Project" shall be limited to the Land, the Building, the Adjacent Buildings which have not been eliminated and the
allocable share of the landscaping, parking and driveway areas, sidewalks and other improvements thereon.
"Punchlist Items" shall mean details of construction,
decoration or adjustment which individually or in the aggregate do not materially impair Tenant's use of the Leased Premises.
"Rent" shall mean the Base Rent, the Additional Rent, and
other sums of money becoming due and payable to Landlord hereunder. Base Rent shall be payable in monthly installments in advance, the first monthly installment of which (being the first month following the period of abatement), together with the
Initial Estimated Monthly Additional Rent Payments, being payable concurrently with the execution of this Lease and thereafter on or before the first day of each month of the Term in the amount set forth above.
"Security Deposit" shall mean the deposit held by Landlord in
the amount set forth in Section 1, above.
"Substantial Completion" shall have the meaning set forth in
Section 8(b).
"Tangible Net Worth" shall mean the excess of total assets
over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied ("GAAP"), excluding, however,
from the determination of total assets all assets which would be classified as intangible assets under GAAP including goodwill, licenses, patents, trademarks, trade names, copyrights, and franchises.
"Tax and Insurance Cost" shall mean all of the following paid
or payable by Landlord with respect to the Project or any portion thereof: (a) all federal, state and local sales, use, ad valorem, rental, value added or other taxes and special assessments and other governmental charges; private assessments
(including but not limited to those payable to any association or relating to any off-site or on-site common areas or facilities) and all taxes on the rent or other revenue from the Project, including any business, gross margins, or similar tax
payable by Landlord (including without limitation the Texas margin tax imposed pursuant to the provisions of Chapter 171 of the Texas Property Tax Code, as the same be amended or supplemented) which is attributable to rent or other revenue derived
from the Project; together with all costs, fees and expenses incurred by Landlord in monitoring or contesting the aforementioned (collectively, "Taxes"), and (b) all insurance premiums.
"Tenant" shall have the meaning given in Section 1, above.
"Tenant Delay" shall mean any delay caused or contributed to
by act or neglect of Tenant, or those acting for or under Tenant.
"Tenant Improvements" shall mean those improvements to the
Leased Premises described in Exhibit "B".
"Tenant's Proportionate Share" shall mean the percentage set
forth in Section 1 above, determined by dividing the area of the Leased Premises by the area of the Building or the aggregate area within the Building and the
Adjacent Buildings, as applicable. Tenant's Proportionate Share shall be adjusted if the size of the Leased Premises is modified or as Land or Adjacent Buildings are added to or eliminated from the Project. Notwithstanding the foregoing, Tenant's
Proportionate Share of the Taxes may be determined with respect to the tax parcel in which the Building is located and not as to the balance of the Project.
"Termination Date" shall have the meaning given in Section 1 above.
3. Grant of Lease; Use. Subject to and upon the terms herein set forth, this Lease is entered into by and between Landlord and Tenant, to be effective as of the Effective Date. In consideration of the
rents, terms and covenants of this Lease, Landlord leases Tenant the Leased Premises during the Term and any extension thereto pursuant to this Lease, all as is more particularly described herein. Subject to Tenant's compliance with local zoning
restrictions and ordinances and any and all Permitted Exceptions, the Leased Premises shall be used solely for general warehousing, distribution, light manufacturing and office use relating thereto and for no other purpose. Tenant hereby accepts
this Lease and the Leased Premises upon the covenants and conditions set forth herein and subject to any and all Permitted Exceptions, and Tenant agrees to comply with such Permitted Exceptions. Tenant will not use, nor permit others to use, the
Leased Premises for any purpose other than the purposes stated hereinabove, nor will Tenant commit, nor allow others to commit, any waste upon the Leased Premises. Prior to the Commencement Date and without payment of Base Rent, Common Area
Maintenance Expenses or Tax and Insurance Costs (so long as Tenant has not commenced business operations within the Leased Premises, Tenant shall be allowed, following two (2) days prior written notice to Landlord and subject to Landlord's
reasonable approval, early occupancy of the Leased Premises for the sole purpose of the installation of Tenant's fixtures (including racking systems), furniture and other equipment, and "dead storage" provided that (i) Tenant has received all
approvals required by Applicable Laws; and (ii) Tenant has furnished to Landlord certificates of insurance evidencing the issuance of insurance as required by Tenant under this Lease. For any such entry, Tenant does hereby assume all risk of loss
or damage to such machinery, equipment, fixtures and other personal property, and to indemnify, defend and hold harmless Landlord and its agents and representatives from any loss or damage to such machinery, equipment, fixtures and personal
property, and all liability, loss or damage arising from any injury to the property of Landlord, or its contractors, subcontractors or materialmen, and any death or personal injury to any person or persons. Further, any such entry of the Leased
Premises is also subject to, and Tenant must comply with and observe, all Applicable Laws and all other terms and conditions of this Lease. In no event may Tenant conduct business in the Leased Premises during such early access period.
4. Term. This Lease shall continue in force during a period beginning on the Commencement Date and continuing until the Termination Date, unless this Lease is sooner terminated or extended under any other
term or provision hereof. Tenant shall be responsible for any cost or other loss incurred by Landlord, including but not limited to loss of Rent, if any, arising out of any event of Tenant Delay, which cost or loss shall be deemed Additional
Rent. If Tenant remains in possession after expiration or termination of this Lease with or without Landlord's written consent, there shall be no renewal of this Lease by operation of law. During the period of any such holding over, all
provisions of this Lease shall be and remain in effect except that the Base Rent shall equal an amount equal to 150% the amount of the Base Rent set forth in Section
1 above. In addition to the foregoing, if the Leased Premises are not surrendered at the end of the Term or sooner termination thereof, Tenant shall indemnify Landlord and its agents and representatives against loss or liability resulting
from delay by Tenant in so surrendering the Leased Premises, including, without limitation, claims made by any succeeding tenants founded on such delay and any attorneys' fees resulting therefrom. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend the Term.
5. Rent. Tenant shall timely pay to Landlord Rent, without notice, demand, deduction or set-off (except as otherwise expressly provided herein), by good and sufficient check drawn on a national banking
association or, at either party's election, by electronic or wire transfer, at Landlord's address provided for in this Lease or such other address as may be specified in writing by Landlord and shall be accompanied by all applicable state and local
sales or use taxes; provided, that following any default by Tenant, Landlord shall be permitted to require alternative methods of payment, in Landlord's sole discretion. Notwithstanding anything to the contrary contained in this Lease, if Landlord
elects to implement a system of automated electronic payments, Automated Clearing House, or Credit and Debit Card transactions ("ACH Transfers") for the payment of any all amounts due under this Lease by providing written notice to Tenant, within
fifteen (15) days after receipt of such notice, Tenant shall provide Landlord with all information and documentation reasonably required by Landlord to implement and keep in effect the ACH Transfers. The Base Rent shall be due and payable on the
first day of each calendar month, commencing on the Commencement Date and continuing thereafter throughout the Term. Tenant hereby agrees to pay the Rent to Landlord at Landlord's address as provided herein (or such other address as may be
designated by Landlord from time to time) monthly in advance. If the date upon which the payment of Base Rent commences, is other than the first day of a calendar month or if this Lease terminates on a day other than the last day of a calendar
month, then the installments of the Base Rent for such month or months shall be prorated on a daily basis and the installment or installments so prorated shall be paid in advance. Notwithstanding the foregoing, however, if the Commencement Date is
delayed due to any Tenant Delay, Tenant shall be obligated to pay Rent commencing on the date which would have been the Commencement Date but for any Tenant Delay.
If any Base Rent payment required to be paid or which becomes due under this Lease is not paid by the tenth (10th) day following the day on which it
is due, a service charge of five percent (5%) of such amounts due shall become due and payable in addition to the amounts due. Said service charge is for the purpose of reimbursing Landlord for the extra costs and expenses in connection with the
handling and processing of late payments. In addition to such service charge, if any Base Rent payment is not paid by the tenth (10th) day following the day on which it becomes due, Tenant shall pay to Landlord, in addition to such Base Rent payment
and the service charge, interest on such Base Rent payment calculated at the Default Rate from the date such Base Rent payment was due until paid by Tenant. If any Additional Rent required to be paid or which becomes due under this Lease is not paid
when due, Tenant shall pay to Landlord, in addition to such amounts, interest on such amounts at the Default Rate from the date such amounts were due until paid by Tenant. Notwithstanding the foregoing, the late charge and interest referenced above
shall not be charged with respect to the first late payment during any twelve (12) month period, unless Tenant shall fail to cure such late payment within five (5) business days after receipt of Landlord's written notice. Such service charge and
interest shall be cumulative of any other remedies Landlord may have for nonpayment of Rent and other sums payable under this Lease. If three (3) consecutive monthly Base Rent payments or any ten (10) [in total, cumulative from the beginning of the
Term] monthly Base Rent payments during the Term (or any renewal or extension thereof) are not received by Landlord within ten (10) days of the due date, the Base Rent hereunder shall automatically become due and payable by Tenant in advance in
quarterly installments equal to three (3) months' Base Rent each. Landlord shall notify Tenant of such change in the time for payment of Base Rent and, thereafter, the first of such quarterly Base Rent payments shall be due and payable on the first
day of the next succeeding month and on the first day of every third (3rd) month thereafter. This remedy shall be cumulative of any other remedies of Landlord under this Lease for nonpayment of Rent.
6. Security Deposit. Tenant shall deposit with Landlord on the date of execution of this Lease, the Security Deposit. If Tenant defaults under this Lease, Landlord may use any part of the Security Deposit
to make any defaulted payment, to pay for Landlord's cure of any defaulted obligation, or to compensate Landlord for any loss or damage resulting from any default. To the extent any portion of the deposit is used, Tenant shall within five (5) days
after demand from Landlord restore the deposit to its full amount. Tenant's failure to do so shall be an Event of Default under this Lease. Landlord may keep the Security Deposit in its general funds and shall not be required to pay interest to
Tenant on the deposit amount. If Tenant shall perform all of its obligations under this Lease and return the Leased Premises to Landlord at the end of the Term in the same good order and condition as existed at the Commencement Date, ordinary wear
and tear excepted, Landlord shall return all of the remaining Security Deposit to Tenant within thirty (30) days after the end of the Term. The Security Deposit shall not serve as an advance payment of Rent or a measure of Landlord's damages for
any default under this Lease. If Landlord transfers its interest in the Project or this Lease, Landlord may transfer the Security Deposit to its transferee. Upon such transfer, Landlord shall have no further obligation to return the Security
Deposit to Tenant, and Tenant's right to the return of the Security Deposit shall apply solely against Landlord's transferee.
7. Common Area Maintenance and Taxes and Insurance.
(a) Common Area Maintenance. Tenant agrees to pay as Additional Rent Tenant's Proportionate Share of the Common Area Maintenance Expenses. Along with the Base Rent, Tenant shall pay one-twelfth of Tenant's Proportionate Share
of the annualized Common Area Maintenance Expenses as estimated from time to time by Landlord during the Term. As soon as available after the expiration of each calendar year, Landlord shall submit a statement (the "Annual Cost Statement") to
Tenant setting forth Tenant's Proportionate Share of the Common Area Maintenance Expenses due from Tenant for the preceding year and the amount, if any, remaining due from Tenant to Landlord. Within ten (10) days after receipt of the Annual Cost
Statement, Tenant shall remit to Landlord the amount the Annual Cost Statement shows to be due from Tenant. If the Annual Cost Statement reflects an overpayment by Tenant, then the amount of such overpayment shall be credited to Tenant's next
installment of Rent or, if no further Rent is due, refund such overpayment within thirty (30) days of determination. Notwithstanding the foregoing, Tenant shall pay the full cost of any repair, replacement or service which benefits only the Leased
Premises or is the result of Tenant's use or occupancy of the Leased Premises other than normal wear and tear.
(b) Taxes and Insurance. Tenant shall pay to Landlord as Additional Rent Tenant's Proportionate Share of the Tax and Insurance Cost. If the present method of taxation changes so that in lieu of or in addition to
the whole or any part of any Tax, there is levied on Landlord a capital tax, assessment, or charge as a result of Landlord's ownership or operation of the Building or Project regardless whether explicitly identified as a tax on rents, then all such
taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term "Taxes" for purposes hereof. Tenant shall not be permitted
to receive the benefit of any incentives of any kind negotiated with state and local officials pertaining to the construction of the Project or Leased Premises, property tax abatements, sales tax rebates, and/or any other incentives secured by
the Landlord in connection with the Project or Leased Premises, including, without limitation, any tax increment financing benefits or any similar incentives based upon (i) real estate taxes generated or expected to be generated by the Leased
Premises and/or the Project, or (ii) jobs created by Tenant relative to its operation of the Leased Premises. Notwithstanding the foregoing, in the event Landlord obtains any incentives directly related to Tenant leasing the Leased Premises, then
such amounts shall be reduced from the amount of Additional Rent related to Tax and Insurance Costs. Notwithstanding anything to the contrary herein, Taxes shall include the Texas franchise tax and/or any other business tax imposed under
Texas Property Tax Code Chapter 171 and/or any successor statutory provision for reports due under any such provision. If any use of the Leased Premises by Tenant causes an increase in insurance costs, Tenant shall pay as Additional Rent the
entire amount of any such increase. Along with the Base Rent, Tenant shall pay, monthly, one-twelfth of Tenant's Proportionate Share of the annualized Tax and Insurance Costs as estimated from time to time by Landlord during the Term. As soon as
available after the expiration of each calendar year, Landlord shall submit a reconciliation statement to Tenant setting forth Tenant's Proportionate Share of the Tax and Insurance Costs due from Tenant for the preceding calendar year and the
amount, if any, remaining due from Tenant to Landlord. If the reconciliation statement reflects an overpayment by Tenant, then the amount of such overpayment shall be credited to Tenant's next installment of Rent or, if such overpayment was made
by Tenant during the last year of the Term, paid to Tenant within sixty (60) days following such determination. If the reconciliation statement reflects an underpayment by Tenant, then, within ten (10) days after receipt of such statement, Tenant
shall pay Landlord the amount said statement shows to be due from Tenant. Tenant shall be responsible for paying all taxes upon Tenant's furniture, machinery, fixtures and other property on the Project.
(c) Right to Audit. Within ninety (90) days after Landlord furnishes its Annual Cost Statement for any calendar year to Tenant (the "Audit Election Period"), Tenant may, at Tenant's expense during Landlord's normal business
hours, elect to audit Landlord's Common Area Maintenance Expenses for such calendar year only, subject to the following conditions: (1) there is no uncured Event of Default under this Lease; (2) the audit shall be prepared by an independent
certified public accounting firm; (3) in no event shall any audit be performed by a firm retained on a "contingency fee" basis; (4) the audit shall commence within thirty (30) days after Landlord makes Landlord's books and records available to
Tenant's auditor and shall conclude (and Tenant shall provide to Landlord a certified copy thereof) within forty-five (45) days after commencement but by no later than November 1 of the year in which the audit is conducted; (5) the audit shall be
conducted where Landlord maintains its books and records (provided such books and records are kept in the Dallas/Ft. Worth metropolitan area) and shall not unreasonably interfere with the conduct of Landlord's business; (6) Tenant and its
accounting firm shall treat any audit in a confidential manner and shall each execute Landlord's confidentiality agreement for Landlord's benefit prior to commencing the audit (subject to the requirements of litigation and to exception for
information which is generally known to the public); and (7) the accounting firm's audit report shall, at no charge to Landlord, be submitted in draft form for Landlord's review and comments before the final approved audit report. Notwithstanding
the foregoing, Tenant shall have no right to conduct an audit if Landlord furnishes to Tenant an audit report for the calendar year in question prepared by an independent certified accounting firm of recognized national standing (whether originally
prepared for Landlord or another party). This paragraph shall not be construed to limit, suspend, or abate Tenant's obligation to pay Rent when due, including estimated Common Area Maintenance Expenses. Unless Landlord disputes such audit, Landlord
shall credit any Tenant overpayment determined by the final approved audit report against the next sums due and owing by Tenant or, if no further Rent is due, refund overpayment determined by the final approved audit report within thirty (30) days
of determination. If Landlord disputes such audit, there shall be no credit to Tenant until such time as all audit issues are resolved. The foregoing obligations shall survive the expiration date of this Lease. If Tenant does not provide written
notice to Landlord within the Audit Election Period of Tenant's election to audit Landlord's Common Area Maintenance Expenses, it shall be conclusively deemed that Tenant shall have forever waived any right to contest the amount of Tenant's
Proportionate Share of Common Area Maintenance Expenses arising prior to the commencement of the Audit Election Period.
(d) Contest of Taxes by Landlord. Landlord shall have the right to employ a tax consulting firm to attempt to assure a fair tax burden on the Project (or any portion thereof) within the applicable taxing jurisdiction. Tenant
shall pay to Landlord upon demand from time to time, as Additional Rent, Tenant's Proportionate Share of the fees, expenses and costs incurred by Landlord of such service. Tenant acknowledges that any filing of a protest of appraised value by
Tenant will give the appraisal district discretion to increase or decrease the appraised value, that an increase in the appraised value will affect Landlord and the other tenants, if any, of the Project, and that an increase in the appraised value
may increase the taxes not only for the year in question but for future years, potentially beyond expiration of the Term. Accordingly, to the extent permitted by Applicable Law, Tenant hereby waives the provisions of Sections 41.413 and 42.015 of
the Texas Property Tax Code (or successor thereto) to protest the appraised value of the Project or any portion thereof. In the alternative, if Section 41.413 or Section 42.015 of the Texas Property Tax Code may not be waived, Tenant agrees not to
protest any valuation unless Tenant notifies Landlord in writing of Tenant's intent to protest and Landlord fails to file a protest of the valuation within thirty (30) days after Landlord receives Tenant's written notice. If Tenant files a protest
without giving written notice required by the preceding sentence, such filing shall be an Event of Default under this Lease without the necessity of any notice from Landlord. Furthermore, if Tenant exercises the right of protest granted by Section
41.413 or Section 42.015 of the Texas Property Tax Code, Tenant shall be solely responsible for, and shall pay, all costs of such protest. If as a result of any protest filed by Tenant, the appraised value of the Building or Project is increased,
Tenant shall be solely responsible for, and shall pay upon demand by Landlord, all taxes (not only Tenant's Proportionate Share) assessed against the Building or Project in excess of the taxes which would have been payable in the absence of the
protest. Tenant shall continue to pay such excess taxes, regardless of whether the increased taxes are incurred during the Term or thereafter. Landlord agrees, upon written request by Tenant, to provide to Tenant a copy of the determination of
appraised value for any year. Tenant agrees that if Landlord, in Landlord's sole discretion, elects to protest a determination of the appraised value of the Project or any portion thereof, Tenant shall pay to Landlord Tenant's Proportionate Share
of the fees, expenses and costs of such protest whether or not such protest is successful. The provisions of this Section 7 pertaining to Sections 41.413 and 42.015 of the Texas Property Tax Code expressly shall survive the expiration or other termination of this Lease.
8. Condition of Leased Premises; Tenant Improvements; Common Areas; Maintenance; Alterations.
(a) Condition of Leased Premises. Tenant acknowledges that it accepts the Leased Premises as suitable for Tenant's purposes subject only to Section
8(b) below, if applicable, and to all Applicable Laws. Notwithstanding any other provision of this Lease to the contrary, if this Lease is executed before the Leased Premises become available for occupancy, or if Landlord cannot acquire
possession of the Leased Premises prior to the Commencement Date stated above, Tenant agrees to accept possession of the Leased Premises at such time as Landlord is able to tender the same, which date shall then be the Commencement Date of the
Term. TENANT WAIVES ANY IMPLIED WARRANTY THAT THE LEASED PREMISES ARE SUITABLE FOR TENANT'S INTENDED PURPOSES. TENANT ACKNOWLEDGES THAT (1) TENANT HAS INSPECTED AND ACCEPTS THE LEASED PREMISES IN AN "AS IS, WHERE IS" CONDITION (EXCEPT AS MAY BE
PROVIDED IN SECTION 8(b), BELOW), (2) THE BUILDING AND THE LEASED PREMISES ARE SUITABLE FOR THE PURPOSE FOR WHICH THE LEASED PREMISES ARE LEASED, AND LANDLORD
HAS MADE NO WARRANTY, REPRESENTATION, COVENANT, OR AGREEMENT WITH RESPECT TO THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE LEASED PREMISES, (3) THE LEASED PREMISES ARE IN GOOD AND SATISFACTORY CONDITION, (4) NO REPRESENTATIONS AS
TO THE REPAIR OF THE LEASED PREMISES, NOR PROMISES TO ALTER, REMODEL OR IMPROVE THE LEASED PREMISES HAVE BEEN MADE BY LANDLORD (EXCEPT AS MAY BE PROVIDED IN SECTION
8(b), BELOW), (5) THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND BEYOND THE DESCRIPTION OF THE LEASED PREMISES (AND TENANT HAS RELIED UPON NO REPRESENTATION, PROMISE OR WARRANTY MADE BY LANDLORD OR
ITS AGENTS, EMPLOYEES OR CONTRACTORS) AND (6) TENANT'S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE LEASED PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER.
(b) Tenant Improvements. Tenant agrees to install the Tenant Improvements in accordance with Exhibit "B" attached hereto. Tenant
agrees to install, at Tenant's cost and expense (subject to Landlord's obligation to pay to Tenant up to the amount of the "Tenant Improvement Allowance" (as defined in Exhibit "B" attached hereto) the Tenant Improvements. The Tenant Improvements shall be considered "Substantially Completed", upon the issuance of a conditional or unconditional certificate of occupancy permitting Tenant to occupy
the Leased Premises (or the taking of such other action as may be customary to permit occupancy or use thereof). By occupying the Leased Premises or any part thereof, Tenant shall be deemed to have accepted the same as suitable for the purposes
herein intended.
(c) Maintenance of the Common Areas. Landlord shall perform the work which gives rise to Common Area Maintenance Expenses, subject to payment therefor by Tenant pursuant to the provisions of Section 7 above. If the need for any such work shall come to the attention of Tenant, Tenant will promptly so notify Landlord in writing.
(d) Maintenance of the Leased Premises.
(i) Landlord's Obligations. Landlord warrants that as of the Lease Date, the Leased Premises are (1) in good working order and condition (including but not limited to all structural, electrical, HVAC, suppression, and
mechanical systems, warehouse floors, truck courts/curbing, fencing, dock equipment, and lighting) and (2) in compliance with all applicable governmental rules and regulations, including (but not limited to) the Americans with Disabilities Act
specifically related to ingress and egress and restrooms. Landlord agrees to cooperate with Tenant in the enforcement by Tenant, at Tenant's sole cost and expense, of any manufacturer's warranties or express warranties or guaranties of workmanship
or materials given by subcontractors or materialmen that guarantee or warrant against defective workmanship or materials which benefit the Leased Premises. Landlord shall maintain (except in the event of casualty or other damage contemplated in Section 16 hereof, in which event the terms of Section 16 will control
and except for any damage caused by the negligence or default hereunder of or by Tenant, its employees, agents or invitees) only the roof, foundation, the structural soundness of the exterior walls of the Building (excluding all windows, window
glass, plate glass, and all doors) and fire suppression system in good repair and condition, except for reasonable wear and tear; however, Landlord shall have no obligation to undertake any such maintenance until after Tenant has provided Landlord
written notice thereof. Landlord's maintenance and repair costs under this Section 8(d) shall be included as a Common Area Maintenance Expense, except as
expressly excluded from the definition of "Common Area Maintenance Expenses" above. Tenant shall give immediate written notice to Landlord of the need for repairs or corrections and Landlord shall proceed within a reasonable time after receiving
such notice to make such repairs or corrections. Landlord's liability hereunder shall be limited to the cost of such repairs or corrections.
(ii) Tenant's Obligations. Tenant shall repair and pay for any damage caused by the negligence or default hereunder of or by Tenant, its employees, agents or invitees; the cost of any such damage which is paid by Landlord shall
be deemed Additional Rent which is immediately due and owing from Tenant. Subject to the provisions of item (i) above, Tenant shall, during the Term, at Tenant's expense, keep the Leased Premises (including the glass, signs, ceilings, interior
walls, interior side of perimeter walls, floor, floor coverings, plumbing, electric, heating and air conditioning, sprinklers and lighting fixtures) in as good order, condition and repair as they were at the time Tenant took possession of the same,
reasonable wear and tear and damage from fire and other casualties excepted. Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor for servicing all hot
water, heating and air conditioning systems and equipment within or serving the Leased Premises, satisfying the scope set forth in Exhibit "H". The
maintenance contractor and the contract must be approved by Landlord. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes possession of the Leased Premises. Tenant shall keep the Leased Premises in a neat and sanitary condition, and Tenant shall not commit any nuisance or waste on the Leased
Premises or in, on, or about the Project, throw foreign substances in the plumbing facilities, or waste any of the utilities furnished by Landlord. All uninsured damage or injury to the Leased Premises, or to the Project caused by Tenant moving
furniture, fixtures, equipment, or other devices in or out of the Leased Premises or the Building or by installation or removal of furniture, fixtures, equipment, devices or other property of Tenant or its agents, contractors, servants or
employees, due to carelessness, omission, neglect, improper conduct, or other cause of Tenant or its servants, employees, agents, visitors, or licensees, shall be repaired, restored and replaced promptly by Tenant at its sole cost and expense to
the satisfaction of Landlord. All repairs, restorations and replacements shall be in quality and class equal to the original work and shall comply with all requirements of this Lease.
(e) Alterations; Signs. No improvements, alterations, additions or other changes shall be made to the Leased Premises without Landlord's prior written consent. Tenant may not construct any mezzanine space in the Leased
Premises without Landlord's prior, written approval. All property of Tenant installed upon the Leased Premises pursuant to the terms of this Lease shall be at the sole risk of Tenant, and Landlord shall not be liable for any loss, damage or theft
of such property (INCLUDING THE LOSSES, DAMAGES OR THEFTS STEMMING FROM THE STRICT LIABILITY, NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR INVITEES) except for those losses,
damages or thefts stemming from the willful misconduct or gross negligence of Landlord. Subject to Landlord's approval which approval shall not be unreasonably withheld so long as in compliance with Landlord's then existing sign criteria (a copy
of which is attached hereto as Exhibit "C"), Tenant shall be allowed to install, at Tenant's cost and expense, Tenant's sign on the exterior of the Building
above the front entrance to the Leased Premises. After the earlier of the end of the Term or after Tenant's right to possess the Leased Premises has been terminated, Tenant shall remove Tenant's sign, repair all damage caused thereby, and restore
the Building façade to its condition before the installation of the sign within ten days after Landlord's request therefor. If Tenant fails to timely do so, Landlord may, without compensation to Tenant and at Tenant's expense, remove the sign,
perform the related restoration and repair work and dispose of the sign in any manner Landlord deems appropriate. Otherwise, no sign, door plaques or notices shall be
displayed, painted or affixed by Tenant on any part of the Project, Building or Leased Premises without the prior written consent of Landlord. Landlord shall be entitled to a construction management fee equal to five percent (5%) of the total
cost of all alterations and improvements made pursuant to this Section 8(e) should Landlord determine that it is in Landlord's best interest to oversee the construction or installation of the same.
(f) Surrender of Leased Premises. On the last day of the Term, or on the sooner termination thereof, Tenant shall peaceably surrender the Leased Premises in good condition and repair
consistent with Tenant's duty to make repairs as herein provided. On or before the last day of the Term, or the date of sooner termination thereof, Tenant shall, at its sole cost and expense, remove all of its property and trade fixtures and
equipment from the Leased Premises and all of Tenant's equipment or other property that may be located on or about the Project (other than inside the Leased Premises). If Tenant shall not do so within such period, all property not removed shall be
deemed abandoned and the same shall become the property of Landlord for Landlord to use, remove destroy or otherwise dispose of at its discretion and without responsibility for accounting to Tenant therefor. Tenant shall repair all damage caused
by such removal. Tenant hereby appoints Landlord its agent to remove all property of Tenant from the Leased Premises upon termination of this Lease and to cause its transportation and storage for Tenant's benefit, all at the sole cost and risk of
Tenant, and Landlord shall not be liable for damage, theft, misappropriation or loss thereof and Landlord shall not be liable in any manner in respect thereto. Tenant shall pay all costs and expenses of such removal, transportation and storage.
Tenant shall leave the Leased Premises in good order, condition and repair, reasonable wear and tear and damage from fire and other casualty not caused by Tenant excepted. Tenant shall reimburse Landlord upon demand for any expenses incurred by
Landlord with respect to removal, transportation or storage of abandoned property and with respect to restoring the Leased Premises to good order, condition and repair. All improvements, alterations, additions, installations and fixtures, other
than Tenant's trade fixtures and equipment, which have been made or installed by either Landlord or Tenant upon the Leased Premises shall remain the property of Landlord and shall be surrendered with the Leased Premises as a part thereof, unless
Landlord has required Tenant to remove same, in which event Tenant shall cause such removal to be completed prior to the termination of this Lease. Tenant shall promptly surrender all keys for the Leased Premises to Landlord at the place then
fixed for the payment of Rent and shall inform Landlord of the combinations of any vaults, locks and safes left on the Leased Premises.
9. Insurance.
(a) Landlord Policies. Landlord shall at all times during the Term maintain a policy or policies of insurance insuring the Building (exclusive of the foundation) for loss or damage by fire, explosion, and other customary
hazards, subject to commercially reasonable deductible amounts, and Landlord may at any time during the Term maintain a policy or policies of rental interruption insurance. Such policies will not insure any personal property (including, but not
limited to any furniture, machinery, goods, or supplies) of Tenant or which Tenant may have in the Leased Premises or any fixtures installed by or paid for by Tenant upon or within the Leased Premises or any alterations or other improvements which
Tenant may construct or install on the Leased Premises, insurance for all of which shall be Tenant's responsibility.
(b) Effect of Tenant's Use. Tenant shall not permit the Leased Premises to be used in any way which would be hazardous or which would in any way increase the cost of or render void any insurance on the Project, and Tenant
shall immediately, on demand, cease any use which violates the foregoing or to which Landlord's insurer or any governmental or regulatory authority objects. If, at any time during the Term, Tenant's use or occupancy (or an abandonment by Tenant)
shall cause an increase in premiums, and in particular, but without limitation, if the State Board of Insurance or other insurance authority disallows any of Landlord's sprinkler credits or imposes an additional penalty or surcharge in Landlord's
insurance premiums because of Tenant's original or subsequent placement or use of storage racks or bins or method of storage or because of the nature of Tenant's inventory or any other act of Tenant, Tenant agrees to pay as Additional Rent the
increase in Landlord's insurance premiums.
(c) Tenant Insurance. Tenant, at its sole cost and expense, shall procure and maintain throughout the Term a policy or policies of insurance from insurance companies satisfactory to Landlord, insuring (i) Landlord; (ii)
Landlord's management company; (iii) Jackson-Shaw Company; (iv) Landlord's lender, if any; and (v) Tenant against all claims for property damages, personal injury or death of others occurring on or in connection with: (i) the Leased Premises; (ii)
the condition of the Leased Premises; (iii) Tenant's operations in and maintenance and use of the Leased Premises; (iv) Tenant's use of the Common Areas of the Project, and (v) Tenant's liability assumed under this Lease. The limits of such policy
or policies shall be not less than $5,000,000.00 combined single limit coverage per occurrence for injury to persons (including death) and/or property damage or destruction, including loss of use. Any such coverage shall be deemed primary and
non-contributory to any liability coverage secured by Landlord. Certified copies of such policies, together with receipt for payment of premiums, shall be delivered to Landlord prior to the Commencement Date. Not less than fifteen (15) days prior
to the expiration date of any such policies, certified copies of renewal policies and evidence of the payment of renewal premiums shall be delivered to Landlord. All such original and renewal policies shall provide for at least thirty (30) days
written notice to Landlord before such policy may be canceled or changed to reduce insurance coverage provided thereby.
(d) Waiver of Subrogation. Notwithstanding anything in this Lease to the contrary, to the extent that and so long as the same is permitted under the laws and regulations governing the writing of insurance within the State of
Texas, all insurance carried by either Landlord or Tenant shall provide for a waiver of rights of subrogation against Landlord and Tenant on the part of the insurance carrier. Except as expressly otherwise provided herein, Landlord and Tenant each
hereby waive any and all rights of recovery, claims, actions or causes of action against the other, its agents, officers, or employees, for any loss or damage to property or any injuries to or death of any person which is covered or would have been
covered under the insurance policies required under this Lease (REGARDLESS OF WHETHER SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR TENANT OR THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR INVITEES). The foregoing release shall not apply to losses or damages in excess of actual or required policy limits (whichever is greater) nor to any deductible (up to a maximum of $10,000) applicable under any policy obtained
by the waiving party. The failure of either party (as used in this paragraph, the "defaulting party") to take out or maintain any insurance policy required under this Lease shall be a defense to any claim asserted by the defaulting party against
the other party hereto by reason of any loss sustained by the defaulting party that would have been covered by any such required policy. The waivers set forth in this Section 9(d) shall be in addition to, and not in substitution for, any other waivers, indemnities, or exclusions of liabilities set forth in this Lease.
10. Utility Services. Tenant shall pay the cost of all utility services respecting the Leased Premises including, but not limited to, initial connection charges and deposits and charges for gas, water, trash
disposal, sewer, telephone and electricity respecting the Leased Premises. Landlord shall in no event be liable for any interruption or failure of utility services on the Leased Premises. Tenant shall pay for all utilities or services at the
Leased Premises used by it or its agents, employees or contractors. Tenant hereby acknowledges and agrees that the electricity provider chosen by Landlord may not necessarily be the least expensive provider of electricity, but Landlord shall have
the sole and absolute discretion to choose such electricity providers. Notwithstanding the foregoing, if (i) any essential utility service to be provided as set forth in this paragraph is interrupted or curtailed for a period of two (2) business
days from the time Tenant notifies Landlord in writing, (ii) as a result thereof, Tenant's use of the Leased Premises is materially, adversely affected (including failure of HVAC system), and (iii) such interruption is caused by Landlord or lies
within Landlord's direct control, then the Monthly Base Rent for the Leased Premises shall equitably abate from the expiration of said two (2) business day period until such services are restored.
11. Assignment; Subletting. Except for a "Permitted Transfer" (as hereinafter defined), Tenant shall not, without the prior consent of Landlord, which shall not unreasonably be withheld, in each case, (i)
make or allow any assignment or transfer, by operation of law or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance, by operation of law or otherwise, upon any part of Tenant's interest in this
Lease, (iii) sublet the Leased Premises or permit anyone other than Tenant and its employees to occupy any part of the Leased Premises. Tenant shall seek such written consent of Landlord by a written request therefor, setting forth such
information as Landlord may deem necessary. Tenant shall, by notice in writing, advise Landlord of Tenant's intention from, on and after a stated date (which shall not be less than thirty 30 days after the date of Tenant's notice), to assign this
Lease or to sublet any part or all of the Leased Premises for the balance or any part of the Term. Tenant's notice shall include all of the terms of the proposed assignment or sublease and shall state the consideration therefor. Tenant's notice
shall state the name and address of the proposed assignee or subtenant and a true and complete copy of the proposed assignment or sublease shall be delivered to Landlord with Tenant's notice. No consent granted by Landlord shall be deemed to be a
consent to any subsequent assignment or transfer, lien or encumbrance, sublease or occupancy. Any assignment or transfer, grant of lien or encumbrance, or occupancy without Landlord's prior written consent shall be void. Landlord shall be
reimbursed by Tenant for any costs or expenses incurred as a result of Tenant's request for consent to any such assignment or subletting, including reasonable legal costs. Except for a Permitted Transfer, in the event Tenant subleases the Leased
Premises, or any portion thereof, or assigns this Lease with the consent of Landlord at an annual Base Rent exceeding that stated herein, fifty percent (50%) of such excess shall be paid by Tenant to Landlord as Additional Rent hereunder within ten
(10) days after receipt by Tenant. Upon the occurrence of an Event of Default by Tenant under this Lease, if all or any part of the Leased Premises is then assigned or sublet, Landlord may, in addition to any other remedies provided by this Lease
or provided by law, collect directly from the assignee or subtenant all rents due to Tenant. Any collection directly by Landlord from the assignee or subtenant shall not be construed, however, to constitute a novation or a release of Tenant from
the further performance of its obligations under this Lease. For the purpose of this Section 11, a "transfer" shall include the transfer, assignment or
encumbrance of any controlling interest in Tenant. Notwithstanding the above prohibitions, Tenant may, upon thirty (30) days prior written notice to Landlord, assign this Lease or sublet all or part of the Premises, without the prior consent of
Landlord, to (a) a surviving entity following Tenant's merger therein (so long as the surviving entity has a financial, Tangible Net Worth equal to or greater than the aggregate sum of Tenant's and any guarantor's Tangible Net Worth immediately
prior to such merger), (b) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Tenant's assets if such entity's Tangible Net Worth after such
acquisition is not less than the Tangible Net Worth of Tenant as of the date hereof, (c) to an "affiliate" if such affiliates' Tangible Net Worth is not less than the Tangible Net Worth of Tenant and any guarantor's as of the Effective Date. Any
assignment or sublease effected pursuant to the preceding sentence is hereinafter referred to as a "Permitted Transfer". As used herein, an "affiliate" is an entity that "controls", "is controlled by" or "is under common control with" the Tenant.
No assignment or subletting, including a Permitted Transfer, shall relieve Tenant or any guarantor of this Lease of its respective obligations under this Lease or any guaranty, and Tenant shall continue to be liable as a principal (and not as a
guarantor or surety) to the same extent as though no assignment or subletting had been made.
12. Landlord's Right of Entry. Landlord shall have the right, at its option, at Tenant's own cost and expense, to repair or replace any damage done to the Building, or any part thereof, caused by
Tenant or Tenant's agents, employees, invitees, or visitors, and Tenant shall pay the reasonable cost thereof to Landlord on demand as Additional Rent. Landlord shall retain duplicate keys to all doors of the Leased Premises and Landlord and its
agents, employees and independent contractors shall have the right to enter the Leased Premises at reasonable hours to inspect and examine same, to make repairs, additions, alterations and improvements, to exhibit the Leased Premises to Mortgagees,
prospective Mortgagees, purchasers or tenants, and to inspect the Leased Premises upon 24-hour prior notice, except in cases of emergency or when an Event of Default has occurred in which case Landlord may enter at any time and without notice.
During such time as such work is being carried on, in or about the Leased Premises, the Rent provided herein shall not abate.
13. Applicable Laws. Tenant agrees to comply with all Applicable Laws with respect to the Building. Tenant will comply with the rules and regulations of the Building as adopted and altered by Landlord from
time to time (including those attached hereto as Exhibit "D") and will cause all of its employees, agents, invitees and visitors to do so. Tenant shall not
permit or cause any party to bring any Hazardous Material upon the Leased Premises or transport, store, use, generate, manufacture, dispose or release any Hazardous Material on or from the Leased Premises. Tenant shall indemnify, defend and hold
Landlord and its agents and representatives harmless from and against any losses, claims, demands, actions, suits, damages, expenses and costs which are brought or recoverable against Landlord as a result of any release of Hazardous Material by
Tenant, its agents, employees, contractors, subtenants, assignees or invitees.
14. Default.
(a) The following events shall be deemed to be Events of
Default by Tenant under this Lease: (i) Tenant shall fail to pay any Rent pursuant to the terms hereof within five (5) days after the due date thereof; or (ii) Tenant shall fail to comply with any term, provision, covenant or warranty made under
this Lease by Tenant, other than the payment of Rent payable by Tenant, and shall not cure such failure within thirty (30) days after notice thereof to Tenant; or (iii) any affirmative act of insolvency by Tenant (for the purposes of Sections
14(a)(iii) and 14(a)(iv), "Tenant" shall include any guarantor or obligor of Tenant's obligations hereunder), or the filing by Tenant of any petition or action under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors, or Tenant's transfer in fraud of creditors or assignment for the benefit of creditors of all or substantially all of Tenant's assets; or (iv) the filing of any involuntary petition under any
bankruptcy statute against Tenant (that fails to be dismissed within thirty (30) days of filing), or the appointment of any receiver or trustee to take possession of the properties of Tenant; or (v) Tenant's abandonment or vacation of any part of
the Leased Premises, whether or not Tenant is in default of the Rent due under this Lease; or (vi) Tenant doing or permitting to be done any act which results in a lien being filed against the Leased Premises and the same is not removed within
sixty (60) days. It is agreed that if at any time a dispute shall arise as to any amount of money to be paid by one party to the other, the party against whom the obligation to pay the money is asserted (the "Obligor") shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of the Obligor to institute
suit for the recovery of such sum.
(b) Upon the occurrence of an Event of Default, Landlord
shall have the option to pursue any one or more of the following remedies without any further notice or demand whatsoever: (i) terminate this Lease, in which event (A) Tenant shall pay to Landlord (x) all Rent and other amounts accrued hereunder
to the date of termination of possession and (y) all Rent and other net sums required hereunder to be paid by Tenant during the remainder of the Term, discounted to present value at a per annum rate equal to the Prime Rate, minus the then present fair rental value of the Leased Premises for such period, similarly discounted; provided, however, in no event shall Landlord be responsible to Tenant for
any amount in the event the present fair rental value of the Leased Premises exceeds the present value of the total Rent Tenant would have been required to pay for the remainder of the Term and (B) Tenant shall immediately surrender the Leased
Premises to Landlord and if Tenant fails to do so, Landlord may without prejudice to any other remedy which it may have, enter upon and take possession of the Leased Premises and expel or remove Tenant, by force, if necessary, without being liable
for prosecution or any claim of damages therefor; (ii) enter upon the Leased Premises by force, if necessary, without being liable for prosecution or any claim of damages therefor, and do whatever Tenant is obligated to do under the terms of this
Lease; (iii) without terminating this Lease unless Landlord so notifies Tenant in writing, enter upon the Leased Premises, and, without court order or other process of law, take possession of and remove the equipment and personal property of
Tenant; (iv) exercise any other remedy permitted by law or at equity or by statute or otherwise; or (v) without terminating this Lease, enter upon the Leased Premises, expel or remove Tenant and relet the Leased Premises on behalf of Tenant and
receive directly the rent from the reletting and Tenant agrees to pay Landlord on demand any deficiency that may result from the reletting. Tenant agrees that Landlord shall not be liable for any damages resulting to Tenant from Landlord's
enforcement of this Lease, whether caused by negligence of Landlord or otherwise (INCLUDING THE FAULT, NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF LANDLORD OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR INVITEES). Additionally,
with or without notice, Landlord may alter locks or other security devices at the Leased Premises to deprive Tenant of access thereto, and Landlord shall not be required to provide a new key or right of access to Tenant. Pursuit of any of the
foregoing remedies shall not preclude pursuit of any other remedy herein provided or any other remedy provided by law or at equity, nor shall pursuit of any remedy herein provided constitute an election of remedies thereby excluding the later
election of an alternate remedy, or a forfeiture or waiver of any Rent payable by Tenant and due to Landlord hereunder or of any damages accruing to Landlord by reason of violation of any of the terms, covenants, warranties and provisions herein
contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an Event of Default shall not be deemed or construed to constitute a waiver of such default. Tenant agrees to pay to Landlord all costs and expenses
incurred by Landlord in the enforcement of this Lease or which Landlord may incur or suffer by reason of Tenant's default or the termination of this Lease, including without limitation, the fees of Landlord's attorneys, reasonable reconfiguration
expenses, rental concessions and other inducements to new tenants, advertising expenses and broker's commissions. No waiver of any breach of the covenants, warranties, agreements, provisions, or conditions contained in this Lease shall be
construed as a waiver of said covenant, warranty, provision, agreement or condition or of any subsequent breach thereof. All rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative to, but not restrictive of,
or in lieu of those conferred by law.
15. Subordination and Estoppel Certificates. Tenant agrees that this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to any ground or underlying lease which may now or
hereafter be in effect regarding the Leased Premises or any component thereof, to any Mortgage now or hereafter encumbering the Leased Premises or any component thereof, to all advances made or hereafter to be made upon the security of such
Mortgage, to all amendments, modifications, renewals, consolidations, extensions and restatements of such Mortgage, and to any replacements and substitutions for such Mortgage. The terms of this provision shall be self-operative and no further
instrument of subordination shall be required. Tenant, however, upon request of any party in interest, shall execute and deliver within ten (10) days after request such instrument or certificates as may be reasonably required to carry out the
intent hereof. If the interests of Landlord under this Lease shall be transferred to any purchaser by reason of foreclosure or other proceedings for enforcement of any Mortgage, at the election of the purchaser, Tenant shall be bound to the
purchaser under the terms and conditions of this Lease for the balance of the remaining Term. Tenant shall execute and deliver within ten (10) days after request a statement certifying that the Tenant is in possession of the Leased Premises, the
Leased Premises are acceptable, this Lease is in full force and effect and is unmodified, and such other matters as requested by Landlord or Landlord's Mortgagee. Further, should there be any guaranty of Tenant's obligations under this Lease,
Tenant shall cause such guarantor to execute and deliver within ten (10) days after request a statement certifying that such guaranty is in full force and effect and is unmodified, and such other matters as requested by Landlord or Landlord's
Mortgagee. Contemporaneous with the execution of this Lease, Tenant shall execute a Subordination, Nondisturbance and Attornment Agreement, using the form attached hereto as Exhibit "E".
16. Destruction; Condemnation. In no event shall Landlord be liable for any loss or damage sustained by Tenant by reason of casualty. If a fire or other casualty causes damage to the Building or the Leased
Premises, such that the time needed to rebuild or repair exceeds six (6) months from the beginning of the restoration (as estimated by Landlord's contractor), then either Landlord or Tenant may terminate this Lease by notice to the other party by
no later than thirty (30) days after the date Landlord notifies Tenant in writing of the estimated time needed to rebuild or repair the casualty damage. If the Lease is not terminable pursuant to the preceding sentence or, if it is so terminable
and is not terminated within such thirty (30) day period, then Landlord shall proceed with diligence, subject to reasonable delays for insurance adjustment and other matters beyond Landlord's reasonable control, to restore the condition of the
Leased Premises to the condition as required under Exhibit "B", specifically excluding, however, any alterations made by Tenant. Upon notice from Landlord,
Tenant shall assign or endorse over to Landlord (or to any party designated by Landlord) all property insurance proceeds payable to Tenant under any insurance policies carried by Tenant with respect to any Tenant Improvements performed by or for
the benefit of Tenant; provided, if the estimated cost to repair such Tenant Improvements exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, the excess cost of such repairs shall be paid by Tenant to
Landlord prior to Landlord's commencement of repairs. Within fifteen (15) days of demand from Landlord, Tenant shall also pay Landlord for any additional excess costs that are determined or incurred during the performance of the repairs. In no
event shall Landlord be required to spend more for the restoration than the total proceeds received by Landlord. Tenant agrees that if the Leased Premises or the Building are damaged by fire or other casualty caused by the fault or negligence of
Tenant or Tenant's subtenants, assignees, employees, contractors or agents, Tenant shall have no option to terminate this Lease and the Rent shall not be abated during the repair period. In addition, Landlord, by notice to Tenant within ninety
(90) days after the date of any casualty event, shall have the right to terminate this Lease if: (i) the Leased Premises have been materially damaged and there is less than two (2) years of the Term remaining on the date of the casualty event; (2)
any Mortgagee requires that the insurance proceeds be applied to the payment of the debt secured by a Mortgage; or (3) a material uninsured loss to the Building or Leased Premises occurs. If all or part of the Leased Premises shall be taken for
any public or quasi-public use by virtue of the exercise of the power of eminent domain or by private purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking, and all compensation awarded or paid to
Landlord upon a total or partial taking of the Building or any portion thereof shall belong to and be the property of Landlord without any participation by Tenant.
17. Notices. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been fully given, whether actually received or not, when delivered in person, or deposited
with an overnight commercial courier, or deposited, postage prepaid, in the United States Mail, certified, return receipt requested, and addressed to Landlord or Tenant at their respective address set forth in Section 1 or at such other address as either party shall have theretofore given to the other by notice as provided above.
18. Transfers by Landlord. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Building, and Leased Premises, referred to herein,
and in such event and upon such transfer Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations and to attorn to such
successor.
19. Landlord's Liability. Landlord shall have no personal liability under this Lease; its liability shall be limited to its interest in the Building, and shall not extend to any other property or assets of
Landlord. In no event shall any officer, director, employee, agent, shareholder, partner, member, manager or beneficiary of Landlord be personally liable for any of Landlord's obligations hereunder.
20. Mechanic's Liens. Tenant will not permit any mechanic's liens or other liens to be placed upon the Building, Land or the Leased Premises and nothing in this Lease shall be deemed or construed in any way
as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Building, Land or to the Leased Premises or any portion
thereof, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanic's or other liens against the Building, Land or the Leased
Premises. In the event any such lien is attached to the Building, Land or to the Leased Premises, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same. Any amount paid by
Landlord for any of the aforesaid purposes shall be paid by Tenant to Landlord on demand as Additional Rent.
21. Miscellaneous. Landlord and Tenant each represents to the other that it has full power and authority to execute and perform this Lease. This Lease shall be effective only upon execution hereof by
Landlord and Tenant. Time is of the essence of this Lease and whenever a certain day is stated for payment or performance of any obligation of Tenant or Landlord, the same enters into and becomes a part of the consideration hereof. If any clause
or provision of this Lease is illegal, invalid or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby, and in lieu of each clause or provision of this Lease which is illegal, invalid or
unenforceable, there shall be added as a part of this Lease a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable. This Lease contains the entire agreement of the parties and no
representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. No failure of Landlord to exercise any power given Landlord hereunder, or to insist upon strict
compliance by Tenant with any obligation of Tenant hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Landlord's right to demand exact compliance with the terms hereof. This Lease
may not be altered, waived, amended or extended except by an instrument in writing signed by Landlord and Tenant. The laws of the State of Texas shall govern the validity, performance and enforcement of this Lease. The rights and interest of
Tenant hereunder are and shall continue at all times to be subject, subordinate and junior in all respects to any conditional sale contract or security agreement, whether heretofore or hereinafter executed by Landlord. The obligations of Tenant
under this Lease shall survive the termination of this Lease.
22. Commissions. Landlord and Tenant each represent to the other that no brokers, other than Landlord's Broker and Tenant's Broker have been or will be involved in the negotiation of this Lease. Landlord
will be responsible to pay the commission, if any, owed to Landlord's Broker and Tenant's Broker pursuant to the terms of separate agreements. Landlord and Tenant hereby indemnify each other from any claims, losses, damages (including attorneys'
fees) resulting from a breach of the above representation.
23. Landlord's Lien. On the condition that Tenant obtains third-party financing secured by a lien on Tenant's movable furniture, furnishings, trade fixtures, inventory and equipment at the Leased
Premises (the "On-Site Equipment") and for so long as any such lien is in effect, Tenant hereby grants to Landlord a continuing security interest for all Rent
and other sums of money becoming due under this Lease upon all On-Site Equipment; provided Landlord agrees to subordinate, or execute a customary landlord lien waiver or subordination agreement if requested by Tenant's lender for, the lien retained
herein (if any) to the lien on any On-Site Equipment securing financing obtained by Tenant. However, as a condition to such subordination, a form of subordination of Landlord's lien agreement shall be used that is in substantially the same form as
the one attached hereto as Exhibit "F". Unless and until Tenant obtains third-party financing secured by the On-Site Equipment, this section shall be of no
force or effect.
24. General Indemnification; Indemnification Parameters. TENANT AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS LANDLORD, AND LANDLORD'S AGENTS, EMPLOYEES AND CONTRACTORS (THE "INDEMNIFIED PARTIES"), FROM AND
AGAINST ANY AND ALL CLAIMS, DEMANDS, LOSSES, LIABILITIES, CAUSES OF ACTION, SUITS, JUDGMENTS, DAMAGES, COSTS AND EXPENSES TO THE EXTENT ARISING FROM ANY OCCURRENCE ON THE LEASED PREMISES, THE USE AND OCCUPANCY OF THE LEASED PREMISES, OR FROM ANY
ACTIVITY DONE, PERMITTED OR SUFFERED BY TENANT IN OR ABOUT THE LEASED PREMISES. TENANT ACKNOWLEDGES THAT THIS LEASE CONTAINS PROVISIONS RELEASING EACH INDEMNIFIED PARTY FROM LIABILITY AND/OR INDEMNIFYING AND HOLDING HARMLESS EACH INDEMNIFIED PARTY
FOR, AMONG OTHER THINGS, INDEMNIFIED PARTY'S STRICT LIABILITY AND ITS OWN NEGLIGENCE. TENANT AGREES THAT THE RELEASE AND/OR INDEMNITY PROVISIONS CONTAINED IN THIS LEASE ARE CAPTIONED TO CLEARLY IDENTIFY THE RELEASE AND/OR INDEMNITY PROVISIONS AND,
THEREFORE, ARE SO CONSPICUOUS THAT TENANT HAS FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH PROVISIONS. NOTWITHSTANDING THE FOREGOING, TENANT SHALL NOT BE OBLIGATED UNDER THIS PARAGRAPH TO INDEMNIFY ANY INDEMNIFIED PARTY FOR ANY AMOUNT(S)
FOUND TO HAVE RESULTED FROM AN INDEMNIFIED PARTY'S OWN NEGLGIENCE OR WILLFUL MISCONDUCT.
25. Financial Statements. Within fifteen (15) days following Landlord's written request, Tenant will provide to Landlord current, unaudited financial statements of Tenant, Tenant's general partner (if
applicable) and any guarantor of this Lease. Any unaudited financial statements shall be prepared in accordance with generally accepted accounting principles consistently applied and certified to be true and correct by the chief financial officer
of the entity providing such financial statements. Within fifteen (15) days following Tenant's receipt of the final, annual audited financial statements from Tenant's (or Tenant's general partner or any guarantor of this Lease) auditors, Tenant
shall upon request provide Landlord a copy of such audited financial statements. Landlord may disclose and share such financial statements with Landlord's advisors; attorneys; consultants; and lenders, investors and purchasers (as well as
prospective lenders, investors and purchasers). Notwithstanding anything to the contrary contained above, if Tenant is a publicly traded corporation, Tenant may satisfy its obligations hereunder if Tenant's most recent annual and quarterly reports
are publicly available.
26. Parking. Landlord shall license vehicle parking spaces to Tenant and Tenant's business on the terms and conditions set forth in this Section 26. Landlord shall provide Tenant with vehicular parking spaces on an unreserved basis for Tenant and its employees on the surface parking facilities on the Property in an amount equal to Tenant's Proportionate
Share multiplied by the total number of vehicular parking spaces allocated to the Building. In no event will Tenant, its employees, agents, invitees or guests use any
parking spaces beyond the amount allocated herein, and Tenant shall be responsible to ensure the compliance of this restriction. This license is for parking spaces in the general parking area to be designated and redesignated from time to
time by Landlord; provided, however, Landlord may require Tenant to park in a specific location. Landlord shall not be liable to Tenant for the failure of any of Landlord's tenants, invitees, employees, agents or customers or any third parties to
comply with the designation of the parking spaces. This license is for parking only and does not include the rights to any additional services, which services may be made available by Landlord from time to time at an additional charge. No trailer
parking is permitted in the Project, except by prior written approval of Landlord, such approval to be in Landlord's sole discretion.
27. Attorneys' Fees. If there is any legal or arbitration action or proceeding between Landlord and Tenant to enforce any provision of this Lease or to protect or establish any right or remedy of either
Landlord or Tenant hereunder, the unsuccessful party to such action or proceeding will pay to the prevailing party all reasonable, actual out-of-pocket costs and expenses paid or payable to third parties, including reasonable attorneys' fees
incurred by such prevailing party in such action or proceeding and in any appeal in connection therewith, and if such prevailing party recovers a judgment in any such action, proceeding or appeal, such costs, expenses and attorneys' fees will be
determined by the court or arbitration panel handling the proceeding and will be included in and as a part of such judgment.
28. Expansion Right. Provided (i) Tenant has not committed any Event of Default under this Lease; (ii) Tenant is occupying the entire Leased Premises at the time it notifies Landlord in writing of its
intention to expand its operations in the greater Dallas/Fort Worth industrial market; and (iii) Landlord then currently has available leasable space in the Project, Tenant may lease the space in an area reasonably determined by Landlord within
the Project (the "Expansion Space"), by delivering to Landlord, on or before the expiration of the twelfth (12th) month of the Term, written notice (the "Expansion Notice") of Tenant's election to include the Expansion Space in the Leased Premises. If Tenant timely exercises its option, then (a) possession of the
Expansion Space shall be delivered to Tenant in an "AS IS" condition on the earlier of the date the Expansion Space is delivered by Landlord to Tenant or the date on which Tenant occupies the Expansion Space and (b) Tenant and Landlord shall
execute an amendment to this Lease including the Expansion Space in the Leased Premises on the same terms as this Lease, except: (1) the rentable square feet of the Leased Premises shall be increased by the rentable square feet in the Expansion
Space and (2) the Base Rent for the Expansion Space shall be as mutually agreed by Landlord and Tenant in the amendment to this Lease. If Landlord and Tenant are unable within ten (10) calendar days following Landlord's receipt of the Expansion
Notice to execute a lease or modification to lease upon mutually acceptable lease terms, including (but not limited to) rental rates, Tenant shall have no further rights or privileges under this Section 28.
29. Texas Property Code Section 93.012. Landlord and Tenant agree that each provision of this Lease for determining charges, amounts and Additional Rent payable by Tenant is commercially reasonable and, as
to each such charge or amount, constitutes a "method by which the charge is to be computed" for purposes of Section 93.012 of the Texas Property Code (as same may be amended).
30. Texas Property Code Section 91.004. Tenant hereby waives any statutory lien provided under Section 91.004 of the Texas Property Code (as same may be amended).
31. Force Majeure. Whenever a period of time is herein prescribed for the taking of any action by Landlord or Tenant, the party responsible for taking such action will not be liable or responsible for any
delays due to a major unforeseeable act or event that: (i) materially and adversely affects the affected party's ability to timely perform its obligation(s) under this Lease; (ii) is beyond the reasonable control of the affected party; (iii) is not
caused by any act or omission on the part of the affected party or the affected party's officers, partners, employees, agents, servants, contractors, subcontractors; and (iv) could not have been prevented or avoided by the party who suffers it by
the exercise of commercially reasonable efforts. "Force Majeure" must satisfy each of the above requirements and shall include (but not be limited to): (a)
natural phenomena and acts of God such as lightning, floods, hurricanes, tornadoes, earthquakes; (b) explosions; (c) fires; (d) wars, civil disturbances and terrorism; (e) strikes, labor shortages, or shortage or delays of materials or equipment,
that delay construction; (f) pandemics, epidemics, public health crises, or other uncontrollable circumstances in which a federal, state or municipal governmental order prevents or materially impedes commercial construction within the Property; (g)
abnormal weather; (h) municipal delays including, without limitation, the platting of the Project, change in zoning, and issuance of a building permit, except for delays caused in whole or in part by any act or omission of Landlord; and (i) changes
in Applicable Law that materially impact the design or construction of the Project. The period of time for taking action will be extended by the number of days of delay resulting from Force Majeure. However, the provisions of this Section 31 will never be construed as allowing an extension of time with respect to either party's obligation to pay monetary amounts when and as due under this
Lease.
32. Prohibited Persons and Transactions. Tenant represents and warrants that neither Tenant nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and
none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset
Control ("OFAC") of the Department of the Treasury (including those named on OFAC's Specially Designated and Blocked Persons List) or under any statute,
executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not Transfer this
Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities.
33. Waiver of Jury Trial. Landlord and Tenant hereby waive any right to trial by jury in any claim, action, proceeding or counterclaim by either Landlord or Tenant (or any guarantor of Tenant's obligations
hereunder) against the other(s) pertaining to any matters arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, or Tenant's use of the Leased Premises. In the event that Tenant (and/or any guarantor of
Tenant's obligations hereunder) demands a jury trial in connection with any of the foregoing matters, then Tenant shall be liable to Landlord for an amount equal to One Hundred Dollars ($100.00) per day (on account of the delay caused by such
demand) for each day that trial of any such matter is delayed by such jury trial demand.
34. Counterparts. This Lease may be executed in multiple counterparts, each of which shall constitute an original instrument, but all of which shall constitute one and the same agreement.
EXHIBITS:
| Exhibit "A" – Legal Description of the Land |
| Exhibit "A-1" – Floor Plan of Leased Premises |
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Exhibit "B" – Tenant Improvement Agreement
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| Exhibit "C" – Sign Criteria |
| Exhibit "D" – Rules and Regulations |
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Exhibit "E" – Subordination, Nondisturbance and Attornment Agreement
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| Exhibit "F" – Form of Subordination of Landlord's Lien |
| Exhibit "G" – Renewal Option |
| Exhibit "H" – HVAC Maintenance Contract |
| Exhibit "I" – Form of Commencement Date Agreement |
(SIGNATURES ON FOLLOWING PAGE)
IN WITNESS WHEREOF, Landlord and Tenant have caused this
Lease to be duly authorized, executed, sealed and delivered as of the ___________ day of January, 2025.
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"Landlord":
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"Tenant":
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JACKSON-SHAW / BENBROOK NORTH, LP,
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TANDY LEATHER FACTORY, INC.,
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a Texas limited partnership
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a Delaware corporation
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By:
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JSC / BENBROOK NORTH GP, LLC,
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a Texas limited liability company,
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its General Partner
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By:
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By:
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Name:
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Name: | |||
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Title:
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Title: |
EXHIBIT "A"
LEGAL DESCRIPTION OF THE LAND
LEGAL DESCRIPTION - PHASE 1 NORTH
TRACT 1
BEING a 5.0819 acre (221,367 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362 & John Laneri Survey, Abstract No. 1964, City of Benbrook, Tarrant County, Texas; said tract being all of Lot 1, Block 1, Northeast Winscott Addition, an addition to the City of Benbrook according to the plat
recorded in Cabinet A, Slide 7983 of the Plat Records of Tarrant County, Texas; said tract being part of that tract of land described in General Warranty Deed to Cassco Land Co., Inc. recorded in Instrument No. D202291480 of the Official Public
Records of Tarrant County, Texas.
TRACT 2
BEING a 13.3387 acre (581,033 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described as Exhibit "A", Tract No 1 in Special Warranty Deed with Mineral and Water Assumption to EG Benbrook Ltd. recorded in
Instrument No. D212318325 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron rod with "KHA" cap set in the north line of that
tract of land described in Warranty Deed to Texas Electric Service Company recorded in Volume 5435, Page 242 of the Deed Records of Tarrant County, Texas; said point being the northwest corner of a Street or Road Right of Way Easement recorded in
Instrument No. D213239849 of said Official Public Records;
THENCE South 89°14'44" West, along the said north line of said Texas Electric
Service Company tract, a distance of 1220.74 feet to a 1/2-inch iron rod found for corner; said point being the southeast corner of Lot 2, Block 1, Northeast Winscott Addition, an addition to the City of Benbrook according to the plat recorded in
Cabinet A, Slide 7983 of the Plat Records of Tarrant County, Texas;
THENCE North 0°47'59" West, departing the said north line of the Texas Electric
Service Company tract and along the east line of said Lot 2, a distance of 476.48 feet to a 5/8-inch iron rod found for corner in the south line of Lot 1R, Block 1, Benbrook Industrial Park, an addition to the City of Benbrook according to the plat
recorded in Cabinet A, Slide 7498 of the Plat Records of Tarrant County, Texas;
THENCE North 89°18'02" East, along the said south line of Lot 1R, to and along
the south line of Lot 2R-1, Benbrook Industrial Park, Phase II, an addition to the City of Benbrook according to the plat recorded in Instrument No. D216095828 of said Official Public Records, a distance of 1221.12 feet to a 5/8-inch iron rod with
"KHA" cap set for corner in the west right-of-way line of Benbrook Parkway (a 70-foot right-of-way);
THENCE South 0°45'16" East, along the said west line of Benbrook Parkway, a
distance of 475.31 feet to the POINT OF BEGINNING and containing 13.3387 acres or 581,033 square feet of land, more or less.
TRACT 3
BEING a 44.5837 acre (1,942,067 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362 & John Laneri Survey, Abstract No. 1964, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described as Exhibit "A", Tract No 2 in Special Warranty Deed with Mineral and Water
Assumption to EG Benbrook Ltd. recorded in Instrument No. D212318325 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron rod with "KHA" cap set at the west end of a
right-of-way corner clip at the intersection of the north right-of-way line of Southwest Loop 820 (a variable width right-of-way) and the west right-of-way line of Benbrook Parkway (a 70-foot wide right-of-way);
THENCE along the said north line of Southwest Loop 820, the following six (6)
calls:
South 89°31'13" West, a distance of 885.50 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the right
having a central angle of 14°16'52", a radius of 1402.40 feet, a chord bearing and distance of North 83°20'21" West, 348.65 feet;
In a northwesterly direction, with said curve to the right, an arc distance of 349.55 feet to a concrete monument found for corner;
North 76°12'58" West, a distance of 776.18 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the left
having a central angle of 14°16'51", a radius of 1462.40 feet, a chord bearing and distance of North 83°21'24" West, 363.56 feet;
In a northwesterly direction, with said curve to the left, an arc distance of 364.50 feet to a concrete monument found for corner;
South 89°25'02" West, a distance of 89.56 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the right
having a central angle of 90°00'00", a radius of 120.00 feet, a chord bearing and distance of North 45°34'58" West, 169.71 feet; said point being the east end of a circular right-of-way corner clip at the intersection of the said north line of
Southwest Loop 820 and the east right-of-way line of Winscott Road (a variable width right-of-way);
In a northwesterly direction, along said corner clip and with said curve to the right, an arc distance of 188.50 feet to a 5/8-inch iron rod in
concrete found for corner;
THENCE along the said east line of Winscott Road, the following four (4) calls:
North 16°26'55" West, a distance of 72.80 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the beginning of a non-tangent curve to the
right having a central angle of 7°36'33", a radius of 1293.77 feet, a chord bearing and distance of North 1°19'59" East, 171.69 feet;
In a northeasterly direction, with said curve to the right, an arc distance of 171.82 feet to a 5/8-inch iron rod found for corner at the beginning of
a non-tangent curve to the left having a central angle of 6°05'50", a radius of 1082.74 feet, a chord bearing and distance of North 2°28'24" East, 115.17 feet;
In a northeasterly direction, with said curve to the left, an arc distance of 115.22 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the
beginning of a non-tangent curve to the right having a central angle of 89°50'46", a radius of 90.00 feet, a chord bearing and distance of North 44°19'20" East, 127.11 feet; said point being the south end of a circular right-of-way corner clip at the
intersection of the said east line of Winscott Road and the south right-of-way line of Winbrook Drive (a 60-foot wide right-of-way);
In a northeasterly direction, along said corner clip and with said curve to the right, an arc distance of 141.13 feet to a 5/8-inch iron rod found for
corner;
THENCE along the said south line of Winbrook Drive, the following three (3)
calls:
North 89°14'46" East, a distance of 38.00 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
North 86°57'19" East, a distance of 100.08 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
North 89°14'44" East, a distance of 2331.37 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the west end of a right-of-way corner clip at
the intersection of the said south line of Winbrook Drive and the said west line of Benbrook Parkway;
THENCE South 45°45'16" East, along said corner clip, a distance of 35.36 feet to
a 5/8-inch iron rod with "KHA" cap set for corner;
THENCE South 0°45'16" East, along the said west line of Benbrook Parkway, a
distance of 811.90 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
THENCE South 44°23'02" West, a distance of 35.47 feet to the POINT OF BEGINNING and containing 44.5837 acres or 1,942,067 square feet of land, more or less.
TRACT 4
BEING a 6.3403 acre (276,184 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described in Special Warranty Deed with Mineral and Water Reservation to EG Benbrook, Ltd recorded in Instrument No. D212318325,
Official Public Records, Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron with cap stamped "KHA" set at the north end of a
right-of-way corner clip at the intersection of the north right-of-way line of Southwest Loop 820 (a variable width right-of-way) and the east right-of-way line of Benbrook Parkway (a 70-foot wide right-of-way);
THENCE North 0°45'16" West, along the said east right-of-way line of Benbrook
Parkway, a distance of 812.24 feet to a 5/8-inch iron rod with cap stamped "KHA" set at the south end of a right-of-way corner clip at the intersection of the said east right-of-way line of Benbrook Parkway and the south right-of-way line of Winbrook
Drive (a 60-foot wide right-of-way);
THENCE North 44°14'44" East, along said corner clip, a distance of 35.36 feet to
a 5/8-inch iron rod with cap stamped "KHA" set for corner;
THENCE North 89°14'44" East, along the said south right-of-way line of Winbrook
Drive, a distance of 297.58 feet to a 5/8-inch iron rod with cap stamped "KHA" set for corner;
THENCE South 0°30'16" East, departing the said south right-of-way line of
Winbrook Drive, a distance of 863.92 feet to a 5/8-incih iron rod with cap stamped "KHA" set for corner in the north right-of-way line of Southwest Loop 820;
THENCE South 89°31'13" West, along the said north right-of-way line of Southwest
Loop 820, a distance of 293.68 feet to a 1/2-inch iron rod with cap stamped "BRITTAIN & CRAWFORD" found at the south end of said right-of-way corner clip at the intersection of the said north right-of-way line of Southwest Loop 820, and the said
east right-of-way line of Benbrook Parkway;
THENCE North 45°36'58" West, along said corner clip, a distance of 35.64 feet to
the POINT OF BEGINNING and containing 6.3403 acres or 276,184 square feet of land, more or less.
EXHIBIT "A-1"
FLOOR PLAN OF LEASED PREMISES
EXHIBIT "B"
TENANT IMPROVEMENT AGREEMENT
1. Plans.
1.1 Space Plan. Landlord and Tenant hereby acknowledge that a preliminary space plan upon which the Tenant Improvements shall be based ("Space
Plan") shall be submitted to Landlord for approval. Other than the installation of signage in accordance with Section 8(e), Tenant is not permitted to make any changes to the exterior appearance of the Building.
1.2 Compliance With Laws. Tenant shall be solely responsible to insure the Tenant Improvements are constructed in accordance with all federal, state, and local codes, laws, rules, regulations, ordinances, zoning requirements
and matters of record (collectively, the "Codes") and shall indemnify, defend and hold harmless Landlord from and against any and all claims, liabilities and
expenses (including, without limitation reasonable attorneys' fees and expenses) incurred by or asserted against Tenant by reason of or in connection with any violation of the Codes resulting from construction of the Tenant Improvements. Tenant
assumes sole responsibility to insure all of the Tenant Improvements are constructed in compliance with the most recent edition of the American's with Disabilities Act ("ADA") and applicable Accessibility Standards of applicable Architectural Barriers ("Accessibility Standards"). Tenant shall submit for and
obtain all approvals required by Accessibility Standards. Further, Tenant shall insure that Tenant's architect, who shall be Licensed and Registered by the State of Texas prior to commencement of construction. All review and inspection fees
necessary to comply with ADA / Accessibility Standards, or construction costs necessary to bring the Tenant Improvements into compliance, shall be solely at Tenant's expense.
1.3 Construction Plans. Tenant acknowledges having received a copy of the "Jackson-Shaw Company General Specifications and Requirements for Interior Finishout Construction" for incorporation into all Tenant Improvement
construction plans, record drawings of the shell building as necessary to assist Tenant in the design and construction of the Tenant Improvements. Tenant and Tenant's architect are solely responsible for field verification of all "As-Built" shell
conditions. Tenant shall engage an architect reasonably acceptable to Landlord (which architect may be the approved space planner if the space planner is a licensed architect, certified to practice in the State of Texas), to prepare construction
plans and specifications based on the Space Plan (such plans and specifications, when approved by Landlord and Tenant, as provided below, and all changes and amendments thereto agreed to by Landlord and Tenant in writing, are herein called the "Construction Plans") which shall consist of architectural plans, structural plans (if required) and building standard engineered mechanical, electrical, and
plumbing plans for all of the Tenant Improvements (all improvements required by the Construction Plans are herein called "Tenant's Improvements"). All
architectural drawings shall be sealed and signed by the architect of record, and all engineered mechanical, electrical, and plumbing ("MEP") drawings shall be
sealed and signed by the consulting engineer(s) of record. Within seven (7) business days after construction plans and specifications are delivered to Landlord, Landlord shall approve or disapprove same in writing and if disapproved, Landlord
shall provide Tenant's architect specific reasons for disapproval. Landlord and Tenant hereby agree that Landlord shall not be entitled to disapprove construction plans except for the following reasons: (i) the construction plans do not conform
to applicable laws, rules and regulations, (ii) the construction plans do not conform to the building standard mechanical, electrical or plumbing specifications defined in the "Jackson-Shaw Company Specifications and Requirements for Interior
Finishout Construction", (iii) the construction plans vary from the approved Space Plan in other than minor detail, (iv) the work required by the construction plans could, in Landlord's reasonable judgment, adversely affect the Building Systems,
structural integrity or any structural member of the Building or any part thereof, (v) the work required by the construction plans adversely affects, in Landlord's reasonable judgment, the exterior of the Leased Premises or the Building, or (vi)
the construction plans are incomplete or contain material errors or omissions (collectively, "Permitted Objections"). Landlord's approval shall not be deemed
to imply any approval as to municipal or other building codes or regulations and shall not give rise to any liability of Landlord.
1.4 Changes to Approved Plans. If any re-drawing or re-drafting of either the approved Space Plan or the approved Construction Plans is necessitated by changes (all of which shall be subject to Landlord's written approval)
requested by Tenant after approval by Landlord and Tenant, the expense of any such re-drawing, re-drafting or re-reviewing by Landlord's or Tenant's architectural, MEP, or structural consultants required in connection therewith, and the expense of
any work and improvements necessitated by such re-drawing or re-drafting, will be paid by Tenant.
1.5 Coordination of Planners and Designers. Tenant is responsible to insure all necessary coordination of its agents' efforts with Landlord's agents to ensure that no material delays are caused to either the planning or
construction of the Tenant's Improvements.
2. Construction and Costs of Tenant's Improvements.
2.1 Construction Obligation. Landlord agrees Tenant shall, subject to the terms and provisions herein, perform the Tenant Improvements to the Leased Premises. Tenant shall engage a contractor approved in writing by Landlord,
such approval not to be unreasonably withheld, conditioned or delayed (the "Contractor") to construct, at Tenant's sole cost and expense, Tenant's
Improvements; provided, however, Landlord shall provide Tenant with the "Tenant Improvement Allowance" as defined below. The Contactor shall be insured with a Comprehensive Commercial General Umbrella Liability policy with commercially reasonable
limits.
Upon approval of the plans and specifications, Landlord shall grant Tenant access to the Leased Premises for the purposes of construction of the
Tenant Improvements. Such access shall include limited access through the space of other tenant(s) as may be required for initial installation of Tenant's utilities. Such limited access shall be reciprocal with other tenants of the premises, and
shall be contingent upon coordination and scheduling of said access by Landlord or Landlord's Property Manager.
In performing construction of Tenant's Improvements under this Section 2.1, Tenant shall, with regard to the construction of Tenant's Improvements, be
bound by each and every term of the Lease. Without in any way limiting the foregoing provisions of this Section 2.1, the following provisions shall be applicable to Tenant's obligation to construct Tenant's Improvements:
(i) Tenant shall submit for permit to
commence construction of the Tenant's Improvements within ten (10) days after bids for such work have been approved.
(ii) Tenant, Contractor and each of
Tenant's or Contractor's subcontractors, employees, mechanics, engineers, space planners, and other agents (collectively, "Tenant's Contractors") shall comply
with all Rules and Regulations for the Building. For any work by Tenant related to the roof, mechanical, electrical and plumbing systems, fire safety, fire alarm and sprinkler systems (collectively, the "Building Systems"), Landlord, at Landlord's sole option, may require that Tenant use certain subcontractors that have performed scopes of work related to such roof, mechanical, electrical and plumbing
systems, fire safety, fire alarm and sprinkler systems, so as not to negatively impact or void any warranties.
(iii) Tenant shall cause the Contractor
to deliver Landlord sufficient evidence (which shall include, without limitation, certificates of insurance naming Landlord and Property Manager as additional insureds) that such Contractor is covered under such Workers' Compensation (statutory
limits), public liability and property damage insurance in commercially reasonably amounts for Landlord's protection. All such evidence of insurance must be submitted to and approved by Landlord prior to commencement of construction of Tenant's
Improvements. The General Contractor shall be responsible for requiring that subcontractors be adequately insured.
(iv) Prior to the execution of the
construction contract for the construction of Tenant's Improvements, Tenant shall submit the proposed form thereof to Landlord for Landlord's review and acceptance. Landlord does not anticipate objections to a standard AIA Form, and Landlord's
approval shall be deemed approved unless objections are provided to Tenant within three (3) business days following Landlord's actual receipt thereof. Such contract shall, without in any way limiting Landlord's right to approve the form of such
contract, (1) require the Contractor to waive all contractual, statutory and constitutional liens against the Leased Premises and the Building as a condition to receipt of any payments thereunder, (2) require the Contractor to conform to the Rules
and Regulations and any Building rules applicable to contractors performing work in the Building, (3) require the Contractor to deliver the certificates of insurance (and such other evidence of insurance as is required by Landlord) referred to in
clause (iv) above, (4) recognize that Landlord is a third party beneficiary with respect to all warranties (implied or expressed) under the contract or otherwise applicable to Tenant's Improvements at law or in equity, and as a third party
beneficiary, Landlord shall have the absolute right (but not the obligation) to enforce each and every such warranty, (5) require the Contractor to agree to assign and transfer all project warranties to subsequent owners at Landlord's request, (6)
require the Contractor to provide a set of Closeout Documents (as defined below) and record set of Construction Plans reflecting the actual "as-built" conditions and construction of Tenant's Improvements (the "Record Drawings"), and (7) require the Contractor to work in harmony and cooperate with each other contractor performing work at the Leased Premises, whether engaged by Landlord or
Tenant.
(v) Prior to commencement of
construction of Tenant's Improvements (including, without limitation, demolition of any existing improvements to allow for the construction of Tenant's Improvements), the Construction Plans will, if required by applicable laws, be approved by the
appropriate governmental agency and all notices required to be given to any governmental agency shall have been given in a timely manner.
(vi) Upon completion of Tenant's
Improvements, Landlord may inspect the Leased Premises and prepare a punch list of those portions of the Tenant Improvements on or involving the roof and shell building to insure that all work has been completed in accordance with the Construction
Plans.
(vii) Landlord shall not be liable for
any injury, loss or damage to any of Tenant's Improvements or other installations (INCLUDING LANDLORD'S NEGLIGENCE) unless caused by Landlord's gross negligence or willful misconduct.
(viii) Tenant shall indemnify and hold
harmless Landlord from and against any and all costs, expenses, claims, liabilities and causes of action to the extent caused by defective work performed by or on behalf of Tenant or the Contractor, except to the extent caused by Landlord's or its
contractor's, agent's, or employee's negligence or willful misconduct or their violation of Applicable Laws or Codes then existing as of the Effective Date.
(ix) Notwithstanding the fact that
Landlord shall be a third-party beneficiary of any and all warranties under the contract for construction of the Tenant Improvements and any and all warranties applicable to Tenant Improvements at law or in equity; however, except as expressly
provided in the Lease, Landlord shall in no way be responsible for the function and/or maintenance of the Tenant Improvements.
(x) In order to preserve Landlord's
roof warranty, Tenant's General Contractor shall utilize Landlord's bonded roofer for all roof work associated with tenant improvement construction. Landlord shall provide Tenant with roof subcontractor's contact information for use during the bid
process. All such roof work shall be solely at Tenant's expense. In order to preserve Landlord's fire sprinkler and fire alarm warranty, Tenant's General Contractor shall utilize Landlord's bonded contractor for all work affecting the fire
sprinkler and fire alarm which is associated with tenant improvement construction. Landlord shall provide Tenant with such contractor's contact information for use during the bid process. All such fire sprinkler and fire alarm work shall be
solely at Tenant's expense.
(xi) Closeout Documents shall consist
of the following:
1. Certificate of Substantial
Completion, standard AIA G704 document, signed by the General Contractor, Tenant's architect and Landlord.
2. Copy of the Certificate of
Occupancy or local equivalent.
3. All Approved Building Department
Trade Inspection Slips and/or Building Department Inspection Log.
4. Complete list of subcontractors
with contact name, address, and phone numbers.
5. Project punchlist, signed-off by
Tenant, Landlord, and General Contractor as completed, with the date of final completion noted thereon.
6. One (1) complete set of
Architectural and MEP "As-Builts" marked as such, with all field changes shown clearly and neatly in red ink. All Architectural "As-Built" drawings shall bear original registered Architect's stamp and signature. All MEP "As-Built" drawings shall
bear original registered Engineer's stamp and signature. One (1) CAD CD and PDF CD of As-Builts.
7. Fire Sprinkler Hydrostatic Test
Report, Materials Certificate, and Fire Sprinkler Plans approved and stamped by the local authority having jurisdiction.
8. Independent Laboratory Slab
moisture test reports per JSC General Specifications.
9. Copy of the Interior Finish
Schedule.
10. HVAC roof load structural analysis by
shell structural engineer per JSC General Specifications if required by mechanical design.
11. All MEP equipment, fixture, or
device cut sheets, users / operations manuals, and service instructions, including but not limited to: HVAC ops and service manuals, programmable thermostat ops manuals, exhaust fans, humidifiers, etc., electrical switch-gear, breaker panels,
transformers, dimmer switches, lighting fixture cut sheets, etc., plumbing fixtures, faucets, valves, pumps, water cooler and water heater ops and service manuals, kitchen appliance ops manuals, etc.
12. All miscellaneous equipment or
product cut sheets, users / operations manuals, service / care / or maintenance instructions, including but not limited to: projection screens, marker boards, dock equipment manuals, vinyl flooring, carpet, or specialty floor coatings, toilet
partitions, toilet accessories, etc.
13. All MEP manufacturers' equipment
warranties. All HVAC manufacturers' equipment warranty forms to be delivered to Owner filled out with Owner's name, unit model numbers, date of installation, address of installation, unit serial numbers, and name of installing contractor.
14. MSD sheets for all materials or
products used in the construction of the tenant improvement.
15. General Contractor and
subcontractor warranty letters on a form provided by Landlord.
16. Subcontractor Final Unconditional
Lien Releases.
17. General Contractor Final
Unconditional Lien Release.
ALL CLOSEOUT DOCUMENTS SHALL BE DELIVERED TO OWNER IN DUPLICATE (UNLESS SPECIFICALLY NOTED OTHERWISE ABOVE), NEATLY BOUND IN TWO (2) INDIVIDUAL EIGHT (8) TAB THREE (3)
RING BINDERS, WITH WHITE JACKET AND CLEAR VINYL OUTER SLEEVES.
2.2 Supervision of Construction. Landlord shall have the right to approve and supervise all portions of the construction of the Tenant's Improvements related to the Building mechanical, electrical and plumbing systems and
structural elements, and to observe all other aspects of the construction of the Tenant's Improvements, but any such approval, supervision or observation shall be strictly for Landlord's own purposes and shall not impose upon Landlord any express
or implied duty to Tenant or any third party with respect to the Tenant's Improvements. In consideration for Landlord's construction supervision services, Tenant shall pay to Landlord a construction supervision fee equal to one and one-half
percent (1.5%) of the Total Construction Costs.
2.3 Disbursement of the Tenant Improvement Allowance. Landlord will provide to Tenant a construction allowance (the "Tenant Improvement
Allowance") not to exceed $2,003,460.00 ($15.00 psf) to be used toward the payment of the "Total Construction Costs" (as hereinafter defined) relating to the Tenant Improvements. "Total Construction Costs" shall include, without limitation, design and completion of the Tenant Improvements and preparation of the Construction Plans, any building permit fees or other governmental fees or
charges, costs of construction labor and materials, electrical and other utility usage during construction, additional janitorial services, general tenant signage, the construction supervision fee referenced in Section 2.2 above, and related taxes and insurance costs. Landlord shall pay to Tenant the Tenant Improvement Allowance within thirty (30) days following the receipt by Landlord of
written request for payment accompanied by the following items: (1) Tenant's occupancy of the Leased Premises, (2) the Closeout Documents; and (3) an estoppel certificate confirming such factual matters as Landlord or Landlord's mortgagee may
reasonably request. Notwithstanding anything to the contrary contained in this Exhibit, Landlord shall not be obligated to make any disbursement of the Tenant Improvement Allowance during the pendency of any of the following: (A) Landlord has
received written notice of any unpaid claims relating to any portion of the Tenant Improvements or materials in connection therewith, other than claims which will be paid in full from such disbursement, (B) there is an unbonded lien outstanding
against the Building or the Leased Premises or Tenant's interest therein by reason of work done, or claimed to have been done, or materials supplied or specifically fabricated, claimed to have been supplied or specifically fabricated, to or for
Tenant or the Leased Premises, (C) the conditions to the advance of the Tenant Improvement Allowance are not satisfied, or (D) an Event of Default by Tenant exists. The Tenant Improvement Allowance must be used (that is, the Tenant Improvements
must be fully complete and the Tenant Improvement Allowance disbursed) within three hundred sixty five (365) days following the Effective Date or shall be deemed forfeited with no further obligation by Landlord with respect thereto, time being of
the essence with respect thereto.
2.4 Liens Arising from Tenant's Improvements. Tenant agrees to keep the Leased Premises free from any liens arising out of nonpayment of costs to construct Tenant's Improvements whether filed by Contractor, any subcontractor,
Tenant's architect, or any other person or entity supplying services or goods for Tenant's Improvements. In the event that any such lien is filed and Tenant, within ten (10) days following such filing fails to cause same to be released of record
by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it in its sole discretion deems proper,
including payment of or defense against the claim giving rise to such lien. All sums paid by Landlord in connection therewith shall constitute Rent under the Lease and a demand obligation of Tenant to Landlord.
3. Construction Representatives. Landlord's and Tenant's representatives for coordination of construction and approval of change orders in excess of $10,000 or which affect the structure or the Building Systems, will be as
follows, provided that either party may change its representative upon written notice to the other:
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LANDLORD'S REPRESENTATIVE:
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TENANT'S REPRESENTATIVE: |
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NAME:
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Miles Terry
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NAME:
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Johan Hedberg
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ADDRESS:
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4890 Alpha Road, Suite 100
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ADDRESS: | 1900 SE Loop 820 | |
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Dallas, Texas 75244
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Fort Worth, TX 76140
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PHONE:
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(405) 570-8713
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PHONE: |
817-872-3200
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4. Defaults. This Exhibit is hereby made a part of this Lease for all purposes and any default hereunder by Tenant shall entitle Landlord to the exercise of any and all remedies set forth in the Lease.
5. Conflicts. With respect to the subject matter of this Exhibit, if there is any irreconcilable conflict between provisions of this Exhibit and any other provision of this Lease, the Lease shall control.
EXHIBIT "C"
SIGN CRITERIA
The purpose of this sign criteria is to create a graphic environment which is individual and distinctive in identity for the Tenant and also compatible with other signs
in the center. The total concept should give an impression of quality and professionalism and instill a good business image. Lettering and spacing shall be well proportioned, and legible.
SIGN PLACEMENT:
| 1. |
Tenant shall be encouraged to identify its premises by erecting one (1) facia sign which shall be attached directly to the building fascia as described hereinafter. Subject to the
restrictions under "Type and Size of Sign: below, for buildings and leaseholds with one (1) front façade, (front façade being defined as the building surface directly facing a dedicated street, or where street frontage does not exist, it
shall be defined as the width of the lease space which contains the main entry).
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| 2. |
Tenant signage shall be as close to tenant's main entrance as possible, subject to allowance for corner positioning.
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TYPE AND SIZE OF SIGN:
| 1. |
Attached signs located at a height of 40 feet or less are permitted a maximum aggregate effective area equal to one-square foot per lineal foot of leasehold frontage, as applicable,
or 300 square feet, whichever is less.
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| 2. |
Illuminated or reverse lighted individually pin mounted channel letters
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| 3. |
Depth – 2" minimum, 5 ½"; maximum height – not-to-exceed 36". Multiple Rows – not-to-exceed 48" in total height including spaces between rows. Minimum Letter Size – 10". Letters
are to be pin mounted 1" off building fascia.
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| 4. |
Matte finishes required.
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| 5. |
Colors are subject to approval by Landlord or its representative
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| 6. |
Returns and Fronts - aluminum .063 gauge (minimum) or channel formed acrylic 3/16" minimum.
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| 7. |
All fasteners used are to be non-corrosive stainless steel.
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ILLUMINATION AND WIRING
| 1. |
If illuminated individual letters are to be backlit with neon tubing, such tubing must be concealed in the letter and project the light source back on the building fascia. All
transformers and secondary wiring are to be concealed behind parapets or within soffits.
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PERMITS
All city permits and approvals from the City of Benbrook are required prior to sign fabrication.
THE FOLLOWING ARE NOT PERMITTED
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Roof signs or box type signs
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| 2. |
Exposed seam tubing
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| 3. |
Animated or moving components
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EXHIBIT "D"
RULES AND REGULATIONS
The following Rules and Regulations are prescribed by Landlord in order to provide and maintain, to the best of Landlord's ability, orderly, clean and
desirable Leased Premises, building and parking facilities for the tenants therein and to regulate conduct in and use of the Leased Premises, the Building and parking facilities in such a manner as to minimize interference by others in the proper use
of the Leased Premises by Tenant. All references to Tenant include not only the Tenant, but also Tenant's agents, employees, invitees, licensees, visitors, assignees, and/or sublessees:
1. Tenant shall not block or obstruct any of the entries,
passages, or doors of the Building or parking area, or place, empty, or throw rubbish, litter, trash, or material of any nature into such areas, or permit such areas to be used at any time except for ingress or egress of Tenant.
2. Landlord will not be responsible for lost or stolen
personal property, equipment, money, or any article taken from the Leased Premises, Building, or parking facilities regardless of how or when loss occurs.
3. The plumbing facilities shall not be used for any
other purpose than that of which they are constructed, and no foreign substance of any kind shall be placed therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision by Tenant or its employees shall
be borne by Tenant.
4. Any additional keys or locks required by Tenant during
the term of the Lease shall be the Tenant's responsibility.
5. The common parking facilities are available for use by
any and all tenants. Landlord reserves the right, in Landlord's sole discretion, to assign or allocate parking in the event of conflicts, abuse, or improper use. It is generally understood that any tenant should utilize only those parking spaces
immediately adjacent to the tenant's leased premises.
6. Vehicles that are abandoned, disabled, have expired
registration stickers, obstructing any means of ingress or egress to any leased premises, or in any way a general nuisance or hazard are subject to removal without notice by Landlord. All costs associated with such removal shall be at the
Tenant's/vehicle owner's expense.
EXHIBIT "E"
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
After Recording, Return To:
Jackson Walker L.L.P.
2323 Ross Ave., Suite 600
Dallas, Texas 75201
Attn: Kelly Hodge
SUBORDINATION, NON-DISTURBANCE, AND
ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT AGREEMENT (this "Agreement")
dated as of the ______ day of January, 2025 (the "Effective Date"), is made by and among VERITEX COMMUNITY BANK having an address at 8214 Westchester Drive, Dallas, Texas
75225, Attn: Craig Davis ("Lender"), TANDY LEATHER FACTORY, INC., a Delaware corporation, having an address at 7602 SW Loop 820, Suite 101, Benbrook, Texas 76126 ("Tenant"), and JACKSON-SHAW / BENBROOK NORTH, LP, a Texas limited partnership, having an address at 4890 Alpha Road, Suite 100, Dallas, Texas 75244 ("Landlord"), collectively referred to herein as the "Parties", or individually as a "Party").
RECITALS:
A. Landlord is the owner
of the land and the buildings and other improvements thereon located at 7602 SW Loop 820 Benbrook, Texas, and legally described on Exhibit A attached hereto
(collectively, the "Property").
B. Lender has agreed to
make a loan to Landlord (the "Loan"), is or will be secured by a first priority Deed of Trust, Security Agreement Financing Statement and Assignment of Rents on the
Property (the "Deed of Trust") which will be recorded in the Real Property Records of Harris County, Texas. Landlord's interest in the Lease will be assigned to Lender as
additional security for the Loan. The Deed of Trust, and all other documents and instruments evidencing or securing the Loan and any amendments, extensions, supplements, consolidations, replacements, renewals, and advances or re-advances are
collectively referred to herein as the "Loan Documents".
C. Landlord and Tenant
have entered into that certain Lease Agreement dated _______________ (the "Lease"), under which Landlord leased to Tenant all or a portion of the Property.
D. Lender and Tenant
desire to confirm their understanding with respect to, among other things, the subordination of the Lease to the Deed of Trust and Lender's agreement not to disturb Tenant's possession of the Property, subject to and in accordance with the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [and to induce Lender to make the Loan,] Lender, Landlord, and Tenant agree as follows:
1. Subordination. The
Lease and Tenant's leasehold interest under the Lease shall be and shall remain, at all times, and in each and every respect, subject and subordinate to the Deed of Trust and other Loan Documents, and to any and all renewals, amendments,
modifications, supplements, extensions, consolidations, and replacements thereof, including without limitation, amendments which increase the amount of the indebtedness secured by the Loan Documents.
2. Non-Disturbance.
Lender covenants that the leasehold estate granted by the Lease, and Tenant's right to quiet enjoyment, possession, and any other rights under the Lease, shall not be disturbed or terminated by any transfer of Landlord's interest in the Property by
foreclosure, deed-in-lieu of foreclosure, sale, or other action or proceeding initiated to enforce the Loan Documents (individually and collectively referred to as an "Enforcement Event") provided that: (i) the Lease is in full force and effect;
and (ii) there exist no defaults by Tenant under the Lease.
3. Attornment.
(a) If any
Enforcement Event occurs, Tenant hereby attorns to any transferee, including Lender, and its designees, successors, and assigns (individually and collectively, "Successor"),
as the landlord under the Lease. Tenant shall be bound to Successor under all the executory terms, covenants, and conditions of the Lease for the balance of the Lease term with the same force and effect as if Successor had been the original
landlord under the Lease. This attornment shall be effective and self-operative without the execution of any further instruments evidencing Successor's succession to the interest of Landlord under the Lease. From and after the occurrence of
any Enforcement Event, Tenant shall make all payments under the Lease directly to Successor. Tenant hereby waives the provisions of any statute or rule of law, now or hereafter in effect, which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect the Lease and the obligations of Tenant thereunder as a result of such Enforcement Event.
(b) Notwithstanding the
foregoing, Successor shall not be:
(i) liable
for any act, omission, or default of Landlord or any prior landlord;
(ii) liable for any damage for a breach of any representation or warranty or other obligation contained in the Lease by Landlord or any prior landlord under the Lease;
(iii) subject
to any offsets, counterclaims or defenses which Tenant might have against Landlord or any prior landlord;
(iv) bound by any prepayment of rent or additional rent which Tenant might have paid more than one month in advance to Landlord or any prior landlord. Successor shall not be obligated for:
(A) the
return of any security deposit, unless the same is received by Successor; or
(B) a
credit or refund to Tenant of any prepayment of rent or other charges made pursuant to the express terms of the Lease, unless such prepayment is received by Successor;
(v) bound
by any amendment, modification, cancellation, or surrender of the Lease, or by any waiver or forbearance on the part of Landlord or any prior landlord made or given without Lender's written consent;
(vi) Liable for the construction of any improvements required of Landlord under the Lease;
(vii) bound
to make any payment to Tenant, including any obligation to pay for any construction, repair or other allowances or contributions required to be made by Landlord pursuant to the terms of the Lease; or
(viii) bound
by any responsibility to repair or restore the Property after damage or destruction of the Property, or any part thereof, due to fire or other casualty occurring prior to the date that Successor obtains title to the Property, or because of
condemnation occurring prior to the date that Successor obtains title to the Property. Successor shall have no obligation to repair or restore the Property unless Successor shall have received insurance proceeds or cash condemnation awards in
an amount (that when aggregated with the applicable insurance deductible in the case of an insured casualty) is sufficient to complete such repairs.
4. Default by Landlord.
(a) The Deed of Trust provides that, under certain conditions, Lender shall be entitled to collect, receive and demand payment of any and all rents and other amounts due on and under the Lease without Lender's taking possession of
the Property or otherwise assuming any of Landlord's obligations under the Lease. Starting on the date Lender gives written notice to Tenant that Landlord is in default under the Loan Documents, Landlord authorizes and directs Tenant to, and
Tenant agrees to, pay to Lender, as assignee, all rents and other amounts due under the Lease in accordance with Lender's written instructions. Tenant shall have no obligation or responsibility to ascertain whether such demand by Lender is
permitted under the Deed of Trust. Landlord, its successor and/or assigns hereby agree to indemnify and hold harmless Tenant against any expenses, claims, losses, or damages incurred by Tenant resulting from or arising out of claims by
Landlord, or it successors or assigns, that such payments should not have been, or cannot be, made to Lender. Rent payments made by Tenant to Lender pursuant to this Agreement shall continue until the earlier of:
(i) no
further rent or other amounts are due or payable under the Lease;
(ii) Lender gives Tenant written notice that Landlord is no longer in default under the Loan Documents and instructs Tenant that all amounts due under the Lease shall thereafter be payable to Landlord; or
(iii) Lender
sends Tenant notice that an Enforcement Event has occurred. Subject to Section 3 hereof, upon such notice Successor shall succeed to Landlord's interest as the landlord
under the Lease, after which all rent and other income due under the Lease shall become payable to Successor.
(b) If Landlord defaults under the Lease, Tenant agrees to deliver a copy of any notice of such default to Lender. If the default by Landlord gives rise to the right of termination by Tenant, Tenant agrees to give Lender the right to cure
the default in accordance with the terms and conditions contained in Section 6 hereof. All notices from Tenant to Lender sent under this Section 4(b) shall be delivered in accordance with the notice provisions of Section 10 hereof.
5. Limitation on Lender's
Performance. Nothing in this Agreement shall be deemed or construed to be an agreement by Lender to perform any obligation of Landlord as the landlord under the Lease unless and until Lender or any Successor, obtains title to the Property and, in
such event, Section 3 shall control.
6. Lender's Right to
Cure.
(a) Tenant shall not terminate the Lease, nor exercise any other right or remedy granted to Tenant under the Lease or applicable law, including, without limitation, any setoff rights, because of a default of Landlord under the Lease
or the occurrence of any other event, without first giving Lender prior written notice of such default or event. Thereafter, Tenant shall take no action to terminate the Lease, nor exercise any other right or remedy if:
(i) within thirty (30) days following the end of the period in which Landlord is entitled to cure the default, Lender cures such default or event, if the same can be cured by the payment of money; or
(ii) Lender diligently starts either:
(A) to cure the default or event if the same cannot, with diligence, be cured within said thirty (30) days, and thereafter diligently pursues the cure; or
(B) an action to obtain possession of the Property (including possession by receiver) and to cure such default or event which cannot be cured by Lender without Lender having obtained possession.
(b) Nothing in this Agreement shall be construed as a promise or undertaking by Lender to cure any default on the part of Landlord under the Lease.
7. Exculpation.
Notwithstanding anything to the contrary contained in the Lease or this Agreement, Tenant hereby agrees that if Successor acquires Landlord's ownership interest in the Property by an Enforcement Event, Tenant shall look only to Successor's equity
interests in the Property for satisfaction of any monetary judgment obtained against Successor, and no other property or assets of Successor shall be subject to levy, execution, or other enforcement action or proceeding for satisfaction of the
judgment.
8. Right to Enter. Lender
shall have and is granted by Tenant and Landlord the right to enter upon the Property to cause any action permitted under this Agreement.
9. Tenant's Covenants.
Tenant agrees for the benefit of Lender that, so long as the lien of the Deed of Trust continues to encumber the Property, Tenant shall not without Lender's prior written consent:
(a) pay
any rent or additional rent to Landlord, or any other landlord under the Lease, by more than thirty (30) days in advance;
(b) terminate
or surrender the Lease;
(c) enter
into any amendment or other agreement relating to the Lease; or
(d) consent
to any voluntary termination of the Lease by Landlord.
10. Notices. All notices,
requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given:
(a) when delivered by
hand, with written confirmation of receipt;
(b) when received by
the addressee, if sent by a nationally recognized overnight courier; or
(c) on the third (3rd)
day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall
be specified in a notice given in accordance with this Section):
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If to Lender:
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Veritex Community Bank |
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8214 Westchester Drive
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| Dallas, Texas 75225 | |
| Attn: Craig Davis | |
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with a copy to:
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Jackson Walker L.L.P.
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2323 Ross Ave., Suite 600
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| Dallas, Texas 75201 | |
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Attn: Kelly Hodge
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If to Tenant:
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Tandy Leather Factory, INC.
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| 7602 SW Loop 820, Suite 101 | |
| Benbrook, Texas 76126 | |
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Attn: Johan Hedberg/CEO
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If to Landlord:
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Jackson-Shaw / Benbrook North, LP
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| 4890 Alpha Road, Suite 100 | |
| Dallas, Texas 75244 | |
| Attn: John Stone | |
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Email: jstone@jacksonshaw.com
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with a copy to:
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Andrews & Barth, PC
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4851 LBJ Freeway, Suite 500
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| Dallas, Texas 75244 | |
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Attn: Justin Tonick
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Email: jtonick@andrews-barth.com
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11. Costs and Fees of the
Prevailing Party. In the event that any Party institutes any legal suit, action, or proceeding, including arbitration, against the other Party, arising out of this Agreement, the prevailing Party in the suit, action, or proceeding shall be
entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such Party in conducting the suit, action, or proceeding, including attorneys' fees, expenses, and court costs.
12. Entire Agreement. This
Agreement constitutes the entire agreement between the Parties regarding the subordination of the Lease, the leasehold estate created by the Lease, and all rights of Tenant under the Lease to the lien of the Deed of Trust and other Loan Documents,
and as to the rights and obligations of the Parties regarding the subject matter of this Agreement. This Agreement supersedes and cancels all oral negotiations and prior and other writings with respect to the subject matter hereof. If there is
any conflict between the provisions of this Agreement and those of the Lease, the provisions of this Agreement shall prevail.
13. Amendments and
Termination. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the Parties hereto or their respective successors in interest.
14. Waiver. No waiver by
any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach, or default
not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from
this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right,
remedy, power, or privilege.
15. Governing Law. This
Agreement shall be governed by and construed in accordance with the law of the State of Texas, without regard to the choice of law rules of that State.
16. Severability. In the
event any one or more of the provisions in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any of the other provisions of this
Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provision was not contained herein.
17. Successors and
Assigns. This Agreement shall be binding upon the Parties hereto and their respective successors and assigns and shall inure to the benefit of the Parties hereto and their respective permitted successors and assigns.
18. Counterparts and
Original Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile or
email shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date set forth above.
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LANDLORD:
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JACKSON-SHAW / BENBROOK NORTH, LP,
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a Texas limited partnership
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By:
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JSC / BENBROOK NORTH GP, LLC,
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a Texas limited liability company,
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its General Partner
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By:
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Name:
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Title:
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STATE OF TEXAS
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§
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§
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COUNTY OF DALLAS
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§
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This instrument was acknowledged before me on the _____ day of _______, 2025, by ____________________, as ___________________ of JSC / Benbrook North GP, LLC, a Texas limited liability company, general partner of Jackson-Shaw / Benbrook North, LP, a Texas limited partnership, on behalf of said limited partnership.
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Notary Public, State of Texas
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TENANT:
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TANDY LEATHER FACTORY, INC.,
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a Delaware corporation
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By:
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Name:
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Jeff Gramm |
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Title:
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Chairman |
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THE STATE OF
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COUNTY OF
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§
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This instrument was acknowledged before me on _______________, 202_, by __________________, __________________ of Tandy Leather Factory, Inc., a
Delaware corporation, on behalf of such corporation.
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Notary Public in and for the State of Texas
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| LENDER: | ||
| VERITEX COMMUNITY BANK | ||
| By: |
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| Name: |
| Title: |
| THE STATE OF TEXAS | § |
| § | |
| COUNTY OF DALLAS | § |
This instrument was acknowledged before me on _______________, 202_, by , of Veritex Community Bank, on behalf of such bank.
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Notary Public in and for the State of Texas
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EXHIBIT A (to Exhibit E)
THE PROPERTY
LEGAL DESCRIPTION - PHASE 1 NORTH
TRACT 1
BEING a 5.0819 acre (221,367 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362 & John Laneri Survey, Abstract No. 1964, City of Benbrook, Tarrant County, Texas; said tract being all of Lot 1, Block 1, Northeast Winscott Addition, an addition to the City of Benbrook according to the plat
recorded in Cabinet A, Slide 7983 of the Plat Records of Tarrant County, Texas; said tract being part of that tract of land described in General Warranty Deed to Cassco Land Co., Inc. recorded in Instrument No. D202291480 of the Official Public
Records of Tarrant County, Texas.
TRACT 2
BEING a 13.3387 acre (581,033 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described as Exhibit "A", Tract No 1 in Special Warranty Deed with Mineral and Water Assumption to EG Benbrook Ltd. recorded in
Instrument No. D212318325 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron rod with "KHA" cap set in the north line of that
tract of land described in Warranty Deed to Texas Electric Service Company recorded in Volume 5435, Page 242 of the Deed Records of Tarrant County, Texas; said point being the northwest corner of a Street or Road Right of Way Easement recorded in
Instrument No. D213239849 of said Official Public Records;
THENCE South 89°14'44" West, along the said north line of said Texas Electric
Service Company tract, a distance of 1220.74 feet to a 1/2-inch iron rod found for corner; said point being the southeast corner of Lot 2, Block 1, Northeast Winscott Addition, an addition to the City of Benbrook according to the plat recorded in
Cabinet A, Slide 7983 of the Plat Records of Tarrant County, Texas;
THENCE North 0°47'59" West, departing the said north line of the Texas Electric
Service Company tract and along the east line of said Lot 2, a distance of 476.48 feet to a 5/8-inch iron rod found for corner in the south line of Lot 1R, Block 1, Benbrook Industrial Park, an addition to the City of Benbrook according to the plat
recorded in Cabinet A, Slide 7498 of the Plat Records of Tarrant County, Texas;
THENCE North 89°18'02" East, along the said south line of Lot 1R, to and along
the south line of Lot 2R-1, Benbrook Industrial Park, Phase II, an addition to the City of Benbrook according to the plat recorded in Instrument No. D216095828 of said Official Public Records, a distance of 1221.12 feet to a 5/8-inch iron rod with
"KHA" cap set for corner in the west right-of-way line of Benbrook Parkway (a 70-foot right-of-way);
THENCE South 0°45'16" East, along the said west line of Benbrook Parkway, a
distance of 475.31 feet to the POINT OF BEGINNING and containing 13.3387 acres or 581,033 square feet of land, more or less.
TRACT 3
BEING a 44.5837 acre (1,942,067 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362 & John Laneri Survey, Abstract No. 1964, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described as Exhibit "A", Tract No 2 in Special Warranty Deed with Mineral and Water
Assumption to EG Benbrook Ltd. recorded in Instrument No. D212318325 of the Official Public Records of Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron rod with "KHA" cap set at the west end of a
right-of-way corner clip at the intersection of the north right-of-way line of Southwest Loop 820 (a variable width right-of-way) and the west right-of-way line of Benbrook Parkway (a 70-foot wide right-of-way);
THENCE along the said north line of Southwest Loop 820, the following six (6)
calls:
South 89°31'13" West, a distance of 885.50 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the right
having a central angle of 14°16'52", a radius of 1402.40 feet, a chord bearing and distance of North 83°20'21" West, 348.65 feet;
In a northwesterly direction, with said curve to the right, an arc distance of 349.55 feet to a concrete monument found for corner;
North 76°12'58" West, a distance of 776.18 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the left
having a central angle of 14°16'51", a radius of 1462.40 feet, a chord bearing and distance of North 83°21'24" West, 363.56 feet;
In a northwesterly direction, with said curve to the left, an arc distance of 364.50 feet to a concrete monument found for corner;
South 89°25'02" West, a distance of 89.56 feet to a brass disc stamped "TXDOT" found for corner at the beginning of a tangent curve to the right
having a central angle of 90°00'00", a radius of 120.00 feet, a chord bearing and distance of North 45°34'58" West, 169.71 feet; said point being the east end of a circular right-of-way corner clip at the intersection of the said north line of
Southwest Loop 820 and the east right-of-way line of Winscott Road (a variable width right-of-way);
In a northwesterly direction, along said corner clip and with said curve to the right, an arc distance of 188.50 feet to a 5/8-inch iron rod in
concrete found for corner;
THENCE along the said east line of Winscott Road, the following four (4) calls:
North 16°26'55" West, a distance of 72.80 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the beginning of a non-tangent curve to the
right having a central angle of 7°36'33", a radius of 1293.77 feet, a chord bearing and distance of North 1°19'59" East, 171.69 feet;
In a northeasterly direction, with said curve to the right, an arc distance of 171.82 feet to a 5/8-inch iron rod found for corner at the beginning of
a non-tangent curve to the left having a central angle of 6°05'50", a radius of 1082.74 feet, a chord bearing and distance of North 2°28'24" East, 115.17 feet;
In a northeasterly direction, with said curve to the left, an arc distance of 115.22 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the
beginning of a non-tangent curve to the right having a central angle of 89°50'46", a radius of 90.00 feet, a chord bearing and distance of North 44°19'20" East, 127.11 feet; said point being the south end of a circular right-of-way corner clip at the
intersection of the said east line of Winscott Road and the south right-of-way line of Winbrook Drive (a 60-foot wide right-of-way);
In a northeasterly direction, along said corner clip and with said curve to the right, an arc distance of 141.13 feet to a 5/8-inch iron rod found for
corner;
THENCE along the said south line of Winbrook Drive, the following three (3)
calls:
North 89°14'46" East, a distance of 38.00 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
North 86°57'19" East, a distance of 100.08 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
North 89°14'44" East, a distance of 2331.37 feet to a 5/8-inch iron rod with "KHA" cap set for corner at the west end of a right-of-way corner clip at
the intersection of the said south line of Winbrook Drive and the said west line of Benbrook Parkway;
THENCE South 45°45'16" East, along said corner clip, a distance of 35.36 feet to
a 5/8-inch iron rod with "KHA" cap set for corner;
THENCE South 0°45'16" East, along the said west line of Benbrook Parkway, a
distance of 811.90 feet to a 5/8-inch iron rod with "KHA" cap set for corner;
THENCE South 44°23'02" West, a distance of 35.47 feet to the POINT OF BEGINNING and containing 44.5837 acres or 1,942,067 square feet of land, more or less.
TRACT 4
BEING a 6.3403 acre (276,184 square foot) tract of land situated in the James
Cambo Survey, Abstract No. 362, City of Benbrook, Tarrant County, Texas; said tract being part of that tract of land described in Special Warranty Deed with Mineral and Water Reservation to EG Benbrook, Ltd recorded in Instrument No. D212318325,
Official Public Records, Tarrant County, Texas; said tract being more particularly described as follows:
BEGINNING at a 5/8-inch iron with cap stamped "KHA" set at the north end of a
right-of-way corner clip at the intersection of the north right-of-way line of Southwest Loop 820 (a variable width right-of-way) and the east right-of-way line of Benbrook Parkway (a 70-foot wide right-of-way);
THENCE North 0°45'16" West, along the said east right-of-way line of Benbrook
Parkway, a distance of 812.24 feet to a 5/8-inch iron rod with cap stamped "KHA" set at the south end of a right-of-way corner clip at the intersection of the said east right-of-way line of Benbrook Parkway and the south right-of-way line of Winbrook
Drive (a 60-foot wide right-of-way);
THENCE North 44°14'44" East, along said corner clip, a distance of 35.36 feet to
a 5/8-inch iron rod with cap stamped "KHA" set for corner;
THENCE North 89°14'44" East, along the said south right-of-way line of Winbrook
Drive, a distance of 297.58 feet to a 5/8-inch iron rod with cap stamped "KHA" set for corner;
THENCE South 0°30'16" East, departing the said south right-of-way line of
Winbrook Drive, a distance of 863.92 feet to a 5/8-incih iron rod with cap stamped "KHA" set for corner in the north right-of-way line of Southwest Loop 820;
THENCE South 89°31'13" West, along the said north right-of-way line of Southwest
Loop 820, a distance of 293.68 feet to a 1/2-inch iron rod with cap stamped "BRITTAIN & CRAWFORD" found at the south end of said right-of-way corner clip at the intersection of the said north right-of-way line of Southwest Loop 820, and the said
east right-of-way line of Benbrook Parkway;
THENCE North 45°36'58" West, along said corner clip, a distance of 35.64 feet to
the POINT OF BEGINNING and containing 6.3403 acres or 276,184 square feet of land, more or less.
EXHIBIT "F"
FORM OF SUBORDINATION OF LANDLORD'S LIEN
LANDLORD'S SUBORDINATION AGREEMENT
THIS LANDLORD'S SUBORDINATION AGREEMENT (the "Agreement") is entered into by and among JACKSON-SHAW / BENBROOK NORTH, LP, a Texas limited partnership ("Landlord"), TANDY LEATHER FACTORY, INC., a Delaware corporation
("Tenant") and ___________________, a ___________________ ("Secured Party").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have entered into a certain Commercial Lease Agreement (the "Lease") dated ____________, 2025 regarding certain "Leased
Premises" (as defined in the Lease) situated in Chisholm 20 Commerce Park (the "Project") situated in the City of Benbrook, Tarrant County, Texas; and
WHEREAS, Tenant has entered into or will enter into agreements under which Secured Party has acquired or may hereafter acquire a security interest in
all of the now-owned and hereafter acquired assets and tangible and intangible personal property of Tenant, some of which may be located within the Leased Premises (all of Tenant's assets and personal property, the "Collateral"); and
WHEREAS, the Secured Party has required Landlord subordinate Landlord's lien in and to the Collateral to the Secured Party's lien in and to the
Collateral.
NOW THEREFORE, the parties hereto agree as follows:
1. Subordination. Landlord subordinates to the security interest of Secured Party any and all landlord's liens, which Landlord may have in or to the Collateral by virtue of the Lease or which may arise by operation of law,
equity, or otherwise. The subordination by Landlord of its landlord's lien rights shall not (a) prevent Landlord from exercising any and all rights under the Lease so long as Secured Party's prior rights in the Collateral are recognized or (b) be
deemed to waive (i) Landlord's right to receive rent or other payments due under the Lease, whether such rights arise under the Lease, at law, in equity or pursuant to the United States Bankruptcy Code or any other laws affecting creditors rights
or (ii) Landlord's rights to pursue other assets of Tenant other than the furniture, fixtures, equipment and inventory contained in the definition of "Collateral". This subordination relates only to the Collateral and it is specifically understood
and agreed that Landlord does not hereby subordinate, waive or disclaim any right or interest which Landlord now has or may hereafter acquire in and to any other properties of Tenant. Secured Party hereby agrees that it has no lien rights on the
Leased Premises, the fixtures therein or the underlying real estate.
2. Entry Notice. Secured Party may, upon not less than ten (10) days advance written notice to Landlord and Tenant (the "Entry Notice") and after default by Tenant pursuant to any provision of any note and/or security
agreement executed by Tenant in favor of Secured Party, enter the Leased Premises for the sole purpose of removing the Collateral therefrom. Secured Party agrees to remove all of the Collateral within thirty (30) days following the Entry Notice.
3. Removal Notice. Should Tenant vacate the Leased Premises or be dispossessed from the Leased Premises by Landlord, Landlord may (but shall not be obligated to) provide Secured Party written notice thereof (the "Removal
Notice"). Secured Party agrees to remove all of the Collateral described herein within thirty (30) days following Secured Party's receipt of the Removal Notice.
4. Conditions to this Agreement. Landlord's execution and delivery of this Agreement (and the effectiveness of Landlord's subordination contained herein) is expressly subject to and contingent upon each of the following terms
and conditions, each to which Tenant and Secured Party agree:
(a) Nothing herein shall in any way limit Landlord's
rights under the Lease or pursuant to law or equity except as specifically set forth herein;
(b) Secured Party shall remove all of the Collateral
within thirty (30) days following the date of the Entry Notice and thirty (30) days following the Removal Notice, as the case may be (it being understood and agreed that all the Collateral must be removed by Secured Party and not just a portion
thereof).
(c) Should Secured Party fail to remove all the
Collateral within the time required by this Agreement, (i) such Collateral may be disposed of by Landlord in such a manner as Landlord deems appropriate without any obligation or liability to Tenant or Secured Party, in which event Tenant and
Secured Party shall be jointly and severally liable of all reasonable costs incurred by Landlord in removing and storing the Collateral; and (ii) at Landlord's option, title to the Collateral shall be immediately vested in Landlord, Tenant and
Secured Party hereby waiving any and all interests they may have to the Collateral should the Collateral not be removed in a timely manner, and Tenant and Secured Party hereby agreeing the execute any documents or instruments as Landlord may
reasonably request in order to evidence title to the Collateral being vested in Landlord.
(d) Secured Party and Tenant hereby jointly and severally
agree to promptly restore and/or repair any damage to the Leased Premises, the building in which the Leased Premises are located and the Project caused by the removal by Secured Party (or its agents or contractors) of any Collateral installed or to
be installed or kept at the Leased Premises and shall indemnify, defend and save harmless Landlord, Landlord's asset manager, Landlord's property manager and any of their respective successors, assigns, employees, officers, directors, partners,
lenders, agents and affiliates from and against any damage, claim or cause of action arising in connection with the use, installation or removal of the Collateral by Secured Party (or its agents or contractors) on, about or from the Leased
Premises; provided the indemnification shall not be made with respect to any claim or cause of action arising out of Landlord's willful misconduct or gross negligence.
(e) No alterations or structural work of any kind may be
undertaken by Secured Party within the Leased Premises without Landlord's prior written consent, which consent Landlord may withhold in its sole and absolute discretion.
(f) Except as provided in this Agreement, nothing in this
Agreement shall permit Secured Party or any other foreclosing party to occupy the Leased Premises for or during any time that Tenant is not entitled to occupy the Leased Premises pursuant to the terms and conditions of the Lease.
(g) Neither Secured Party nor any other foreclosing party
under the Tenant's financing agreements may conduct any liquidation or other sale (including public or private sales or sales via the internet or other means) in or from the Leased Premises.
(h) Secured Party shall furnish proof to Landlord of its
right to remove specific Collateral and shall indemnify, defend and save harmless Landlord in the event of unauthorized removal of property or wrongful conversion or any other claim made in connection with the foreclosing party's exercise of its
right with respect to such Collateral.
(i) Any entry of Secured Party within the Leased
Premises shall be subject to Secured Party's compliance with all reasonable rules and regulations of the Project (including, without limitation, providing certificates of required insurance). Any removal of the Collateral shall be accomplished
during normal working hours; and as between Landlord and Tenant, if there is any conflict between the terms of the Lease and this Agreement, the terms of the Lease shall govern and prevail.
6. Notices. Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery, or (b) expedited delivery service with proof of delivery, or (c) United States mail, postage
prepaid, registered or certified mail, addressed as follows:
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To Secured Party:
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Attention:
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To Tenant:
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Tandy Leather Factory, INC.
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7602 SW Loop 820, Suite 101
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Benbrook, Texas 76126
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Attn: CEO
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To Landlord:
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Jackson-Shaw / Benbrook North, LP
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4890 Alpha Road, Suite 100
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Dallas, Texas 75244
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Attn: John Stone
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with a copy to:
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Andrews & Barth, PC
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4851 LBJ Freeway, Suite 500
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Dallas, Texas 75244
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Attention: Justin Tonick
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or to such other address or to the attention of such other person as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any
such notice or communication shall be deemed to have been given and received either at the time of personal delivery or, in the case of delivery service or mail, as of the date of the deposit of same.
7. Binding Effect; Governing Law. This Agreement may not be modified orally or in any manner other than by a written agreement signed by the parties hereto. This Agreement shall inure to the benefit of and be binding upon
the parties hereto, their successors and assigns. This Agreement shall be governed by the laws of the state in which the Leased Premises are located.
8. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document.
9. Final Agreement. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT
OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS AMONG THE PARTIES.
[signatures on following page(s)]
This Agreement has been executed to be effective as of the ______ day of _________________, 20__.
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LANDLORD:
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JACKSON-SHAW / BENBROOK NORTH, LP,
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a Texas limited partnership
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By:
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JSC / BENBROOK NORTH GP, LLC,
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a Texas limited liability company,
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its General Partner
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By: |
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Printed Name: |
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Title:
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TENANT:
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TANDY LEATHER FACTORY, INC.,
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a Delaware corporation
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By:
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Printed Name:
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Title:
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SECURED PARTY:
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By:
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Printed Name:
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Title:
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EXHIBIT "G"
RENEWAL OPTION
Subject to the terms and conditions of this Exhibit, Tenant may at its option extend the Term for the entire Leased Premises for two (2) periods of
five (5) years each (each a "Renewal Term" and collectively the "Renewal Term") upon the same
terms contained in this Lease. Tenant shall have no additional Renewal Options.
A. The Base Rent during the Renewal Term shall be the
greater of (i) the Base Rent at the end of the existing Term or (ii) the then prevailing market rate for a comparable term commencing on the first day of the applicable Renewal Term for tenants of comparable size and creditworthiness for comparable
space in the Building and other first class buildings of comparable use in the general vicinity of the Building as reasonably determined by Landlord, and Tenant shall not be entitled to any rental abatement or other concessions.
B. To exercise its option, Tenant must deliver an
initial non-binding notice to Landlord not less than nine (9) months prior to the proposed commencement of the applicable Renewal Term and not more than twelve (12) months prior to the proposed commencement of the applicable Renewal Term. Within
thirty (30) days after Landlord's receipt of Tenant's initial non-binding notice, Landlord shall calculate and inform Tenant of the Base Rent for the Leased Premises for the Renewal Term. Landlord and Tenant shall work together in good faith to
agree upon the Base Rent. Within fifteen (15) days after the date on which Landlord advises Tenant of the applicable Base Rent, Tenant shall either (i) give Landlord final binding written notice ("Binding Notice") of Tenant's exercise of its
Renewal Term at the Base Rent determined by Landlord or (ii) if Tenant disagrees with Landlord's determination, provide Landlord with written notice of rejection (the "Rejection Notice"). If Tenant fails to provide Landlord with either a Binding
Notice or a Rejection Notice, within such fifteen (15) day period, Tenant will be deemed to have waived its option to extend. If Tenant provides Landlord with a Rejection Notice, Tenant will be deemed to have waived its option to extend.
C. Tenant's option to extend this Lease is subject to
the conditions that: (i) on the date that Tenant delivers the Binding Notice, Tenant is not in material default under this Lease after the expiration of any applicable notice and cure periods, and (ii) other than Permitted Transfers, Tenant shall
not have assigned this Lease, or sublet any portion of the Leased Premises under a sublease which is in effect at any time during the final twelve (12) months prior to the applicable Renewal Term.
D. Tenant agrees to provide Landlord with financial
statements evidencing Tenant's (and any guarantor's) financial condition and to provide additional security if reasonably requested by Landlord.
EXHIBIT "H"
HVAC MAINTENANCE CONTRACT
The service contract Tenant is required to maintain under Section 8(d)(ii) of the Lease must become effective within 30 days after occupancy, and a copy of the service
contract must be provided to Landlord during the same period of time. Service visits should be performed on at least a quarterly basis. The following items must be included in the maintenance contract:
1. Adjust belt tension;
2. Lubricate all moving parts, as necessary;
3. Inspect and adjust all temperature and safety controls;
4. Check refrigeration system for leaks and operation;
5. Check refrigeration system for moisture;
6. Inspect compressor oil level and crank case heaters;
7. Check head pressure, suction pressure and oil pressure;
8. Inspect air filters and replace when necessary;
9. Check space conditions;
10. Check condensate drains and drain pans and clean, if necessary;
11. Inspect and adjust all valves;
12. Check and adjust dampers; and
13. Run machine through complete cycle.
EXHIBIT "I"
FORM COMMENCEMENT DATE AGREEMENT
LEASE COMMENCEMENT DATE AGREEMENT
THIS LEASE COMMENCEMENT DATE AGREEMENT is entered into this ____ day of ____________, 202___, by and between ______________, a________________ ("Landlord"), and _______________, a_______________, with its principal office and place of business in ___________ ("Tenant").
Reference is made to the lease between Landlord and Tenant dated _________________, for the Leased Premises located in ____________, _______________
County, Texas (the "Lease"). The parties wish to memorialize their understanding as to the Commencement Date of the Lease. Accordingly, the parties hereby agree as follows:
| 1. |
Tenant has accepted possession of the Leased Premises pursuant to the Lease. Any improvements required by the terms of the Lease to be made by Landlord have been completed to the
full and complete satisfaction of Tenant in all respects and Landlord has fulfilled all of its duties under the Lease with respect to such Tenant Improvements.
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| 2. |
The Commencement Date as referred to in the Lease is established as ______________, and the expiration date of the initial Lease term is established as _______________.
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| 3. |
The first Lease Year as referred to in the Lease is established as _____________, ending___________.
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All other terms and conditions of the Lease remain unchanged. The provisions of this Lease Commencement Agreement shall bind and inure to the benefit
of the parties hereto, their heirs, executors, administrators, successors and assigns.
Acknowledged and agreed to by:
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LANDLORD:
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,
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a
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By:
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Name:
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Title:
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TENANT:
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, |
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By:
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Name:
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Title:
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Exhibit 10.12
January 2, 2025
Ms. Janet Carr
c/o Tandy Leather Factory, Inc.
1900 SE Loop 820
Fort Worth, TX 76140
Re: Ongoing Service to Tandy
Dear Janet:
With your pending resignation as CEO of Tandy Leather Factory, Inc.
(“Tandy” or the “Company”), we appreciate your agreement to remain with the Company through March 31, 2025, as described in this letter agreement (this “Agreement”).
1. Ongoing Duties. You have submitted to the Company your resignation as Chief Executive Officer and a Director, effective as of the close of business on January 3, 2025. Beginning January 6 your ongoing
duties will focus primarily on transition, working with Finance on the Company’s 2024 year-end financial reporting and Form 10-K, and preparing for the Company’s upcoming headquarters facility move.
2. Compensation and Retention Bonus. In addition to receiving your current base salary, if you satisfy the “Eligibility Factors” set forth below, Tandy will pay you a one-time retention bonus payment of
$310,000, less applicable taxes and withholdings (the “Retention Bonus”), as of March 31, 2025. In order to be eligible for the bonus:
| a. |
You must not resign from your employment with Tandy or be terminated for “Cause” (as defined in your employment agreement) before that date. If you are terminated without Cause,
you will remain eligible for the bonus if you satisfy the other eligibility factors below;
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| b. |
You will continue to perform your duties in good faith and consistent with the Company’s best interests, and to sustain an acceptable level of performance, work quality and
attendance, as determined by the Board; and
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| c. |
If requested, you must sign and timely deliver to the Company, and not revoke, a release agreement provided by the Company which will contain confidentiality and non-disparagement
provisions and a release of claims or additional compensation in favor of the Company, in a form acceptable to the Company (“Release”).
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3. At-Will Employment. This Agreement is not intended to create, and does not create, any contractual rights, promises or obligations on the part of Tandy or you with respect to the terms and conditions
of employment, other than as expressly provided above, and nothing in this Agreement is intended to alter the at-will nature of your employment or the terms of your existing employment agreement. It is understood and acknowledged that you have
informed the Company of your voluntary resignation from your employment without Good Reason (as defined in your employment agreement).
4. No Tax Advice. You acknowledge and agree that Tandy has not given you any financial planning, tax or similar advice with regard to the payments or benefits provided under this Agreement. You
acknowledge and further agree that you should obtain advice from your own financial or tax adviser, and that Tandy is responsible for, or obligated in any way with respect to, the financial, tax or any other consequences of your decision to
accept this Agreement.
5. Entire Agreement / Miscellaneous. This Agreement sets forth the entire agreement and understanding between you and the Company concerning the subject matter of this Agreement and may be changed only
with the written consent of both parties and only if both parties make express reference to this Agreement. Any modifications to this Agreement must be in writing and signed by you and an authorized employee or agent of the Company. The parties
have not relied on any oral statements that are not included in this Agreement. You have the right to review this Agreement with your own counsel prior to accepting it. By signing below, you agree you have read and understand this Agreement,
and that you enter into it knowingly and voluntarily, without coercion or duress.
6. Successors and Assigns. This Agreement shall inure to the benefit of, may be enforced by, and shall be binding on the parties and their heirs, executors, administrators, personal representatives,
successors and assigns.
7. Applicable Law. The construction, validity and administration of this Agreement shall be governed by the laws of the State of Texas, without regard to conflict of laws principles, and the
parties in any action arising out of this Agreement shall be subject to the personal jurisdiction and venue of the federal and state courts, as applicable, in the County of Tarrant.
I have read this Agreement and I understand all of its terms. I enter into and sign this Agreement knowingly and voluntarily,
with full knowledge of what it means, as of the date shown above.
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TANDY LEATHER FACTORY, INC.
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By:
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Janet Carr
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Jefferson Gramm
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Chairman of the Board of Directors
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2
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is made and
entered into as of January 2, 2025, by and between Tandy Leather Factory, Inc., a Delaware corporation (the “Company”), and Johan Hedberg, an individual (“Executive”).
RECITALS
WHEREAS, Executive and the Company desire and agree to formalize the employment relationship between Executive and the Company, and Executive
desires to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the terms, covenants, and conditions contained herein, the Company and Executive
agree as follows:
1.1 General. The Company hereby agrees to employ Executive in the position of Chief Executive Officer of the Company, upon the terms and subject to the conditions set forth herein. Executive will report directly to the
Board of Directors (the “Board”). Subject to the direction and control of the Board, Executive will have all the responsibilities and powers normally
associated with such position, and Executive will perform such other duties and responsibilities as may be designated from time to time by the Board.
1.2 Exclusive Services. Executive shall undertake to perform all of his duties and responsibilities for the Company in good faith and on a full-time basis and shall act in the best interest of the Company provided,
however, that Executive may serve on corporate, civic, educational, or charitable boards or committees, if such service does not materially conflict with or impair Executive’s ability to discharge his fiduciary and other responsibilities to the
Company under this Agreement and applicable law.
2. TERM.
Subject to the provisions for termination provided in Section 5, the term of
Executive’s employment under this Agreement will commence as of January 6, 2025 (the “Effective Date”) and will terminate on January 5, 2027 (the “Initial Period”); provided, however, that unless either party gives written notice to the other party of an election not to extend or renew Executive’s
employment hereunder at least ninety (90) days prior to the end of the Initial Period, or any anniversary thereof, the term of this Agreement will automatically be extended by successive one-year periods (each an “Extension”). The term of this Agreement, including the Initial Period and any Extension, is hereinafter referred to as the “Employment Term.”
3. COMPENSATION.
3.1 Base Salary. As compensation for services rendered under this Agreement, the Company will pay to Executive a base salary (the “Base
Salary”) at an initial annualized rate of $425,000, payable in accordance with the normal payroll procedures of the Company. The term “Base Salary”
as used herein means and refers to the then current base salary, as adjusted from time to time by the Board. The Company may deduct from the Base Salary amounts sufficient to cover applicable federal, state, and/or local income tax withholdings
and any other amounts which the Company is required to withhold by applicable law.
3.2.1 Annual Performance Bonus. Executive shall be eligible to participate in the Company’s Executive Bonus Program, pursuant to which Company Executives may be awarded bonuses (in cash or securities representing Company
stock) based on Company achieving annual financial performance targets or metrics predetermined by the Board. To be eligible to receive such bonus Executive, must be employed by the Company on the date any such bonus is paid. Executive’s
annual bonus for the Company achieving “target” levels of performance on all such metrics would equal 50% of the base salary paid to Executive during the performance year; the Board, in its discretion, may determine levels of performance for
which bonus would be paid at more or less than “target” amounts; Executive’s maximum potential bonus under this plan would equal 100% of the base salary paid to Executive during the performance year.
3.2.2 Equity Awards. During Executive’s employment hereunder, Executive may, as determined by the Board (or a committee thereof), in its sole discretion, periodically receive grants of restricted stock units, stock options, or
other equity or non-equity related awards (“Equity Awards”). Within 30 days following the later of Effective Date and the closing of the sale of the
Company’s Fort Worth headquarters facilities (the “Headquarters Sale”), the Company will provide Executive with grants of the following Equity Awards, each on the terms and conditions agreed to by Executive and the Company concurrently with the
execution of this Agreement:
a. a time-based equity grant of 100,000
restricted stock units, vesting on the first anniversary of the grant date (to be granted no later than February 28, 2025);
b. performance-based equity grants
totalling 900,000 restricted stock units, of which 150,000 units will vest when the Company achieves each of the following performance goals:
| • |
Company EBITDA from operations in any calendar year of $5 million;
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| • |
Company EBITDA from operations in any calendar year of $7 million;
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| • |
Company EBITDA from operations in any calendar year of $9 million;
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| • |
The Company’s common stock trading on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $5.50 or more;
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| • |
The Company’s common stock trading on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $6.50 or more; and
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| • |
The Company’s common stock trading on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $7.50 or more.
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2
For avoidance of doubt, for purposes of the targets above, EBITDA excludes non-operating earnings such as the expected gain on the Company’s sale of
its headquarters buildings. The foregoing performance-based restricted stock unit terms are based on the assumption that (1) the Headquarters Sale closes as agreed-upon within the month of January 2025, and (2) following such closing but before
the grant of such performance-based restricted stock units, the Company declares and pays to its stockholders a dividend of $1.50 per outstanding share. In the event that either or both of such conditions is not met, the Company’s Board of
Directors will work with the executive to agree upon appropriate adjustments to the performance targets described above; if the parties cannot agree, then the determination of the Board of Directors shall be final.
The Equity Awards contemplated by the parties, and any other Equity Awards provided to Executive, will be governed by and subject to the terms of (1) the Company’s
2023 Incentive Stock Plan, or such other plan the Board may adopt to supplement or replace such plan, and (2) the form of written Equity Award agreement(s) as may be customarily entered into by the Company and its executives, as amended from time
to time. Any Equity Awards granted to Executive, any proceeds of any Equity Awards that previously have been sold, transferred or otherwise disposed of, and any incentive bonus award will be subject to clawback, to the extent required under any
clawback policy adopted or maintained by the Company, now or in the future, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes–Oxley Act of 2002, each as amended, and rules, regulations, and binding,
published guidance thereunder. If the Company would not be eligible for continued listing, if applicable, under Section 10D(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), unless it adopted policies consistent with Section 10D(b) of the Exchange Act, then, in accordance with those policies that are so required, any incentive-based compensation payable to Executive will be
subject to clawback in the circumstances, to the extent, and in the manner, required by Section 10D(b)(2) of the Exchange Act, as interpreted by rules of the Securities Exchange Commission. By accepting an Equity Award or incentive bonus award
under this Agreement or any plan sponsored by the Company, Executive hereby consents to any such clawback.
3.3 Benefits.
3.3.1 Vacation. Executive will be entitled to paid vacation for each calendar year during Executive’s employment in accordance with the Company’s established vacation pay policies; provided, however, that vacation will
only be taken at such times as not to interfere with the necessary performance of Executive’s duties and obligations under this Agreement.
3.3.2 Other Benefits; Insurance. During the term of Executive’s employment under this Agreement, if and to the extent eligible, Executive will be entitled to participate in all Company Group Health Plans, group life,
disability, and accidental death and dismemberment insurance or plan, then in effect, including, without limitation, any supplemental disability coverage available to similarly situated executive employees (“Company Welfare Benefit Plans”). For purposes of this Agreement, “Company Group Health Plans”
means all operative medical, dental, and vision plans. Coverage under the Company Welfare Benefit Plans will be provided on the same basis generally applicable to similarly situated employees of the Company; provided, however, that nothing
contained in this Agreement will, in any manner whatsoever, directly or indirectly, require or otherwise prohibit the Company from amending, modifying, curtailing, discontinuing, or otherwise terminating any Company Welfare Benefit Plan at any
time (whether before or after the date of Executive’s termination).
3
3.3.3 Retirement Plans. During the term of Executive’s employment under this Agreement, if and to the extent eligible, Executive will be entitled to participate in all Company Retirement Plans then in effect. For
purposes of this Agreement, “Company Retirement Plans” means the Company’s 401(k) Savings Plan and all operative employee pension benefit plans
(tax-qualified and non-qualified plans) that may in the future be sponsored or maintained by the Company, all on the same basis generally applicable to similarly situated employees of the Company; provided, however, that nothing contained in
this Agreement will, in any manner whatsoever, directly or indirectly, require or otherwise prohibit the Company from amending, modifying, curtailing, discontinuing, or otherwise terminating any Company Retirement Plan at any time (whether
before or after the date of Executive’s termination).
3.3.4 Business Expense Reimbursement. Executive will be entitled to reimbursement from the Company for the reasonable costs and expenses incurred in connection with the performance of the duties and obligations provided for
in this Agreement. Reimbursement will be paid upon prompt presentation of expense statements or vouchers and such other supporting information as the Company may from time to time require in accordance with the Company’s policies.
3.3.5 Moving and Legal Expenses. The Company will reimburse Executive up to $60,000 for expenses related to: (1) moving Executive’s and his family’s belongings from Wisconsin to Texas by no later than _____, 2025
and (2) Executive’s travel for Company-related purposes prior to such move date between Fort Worth and Wisconsin. If during the Initial Period Executive terminates his employment without Good Reason, or the Company terminates Executive’s
employment for Cause, Executive shall reimburse the Company for the moving expenses. In addition, the Company will reimburse Executive for his reasonable and documented legal expenses incurred in connection with the signing of this Agreement,
up to a maximum of $5,000.
4.1 Trade Secrets. During the course of Executive’s employment, Executive will have access to various trade secrets, confidential information, and inventions of the Company and its affiliates as defined below.
4.1.1 “Confidential Information” means all information and material which is proprietary to the Company, whether or not marked as “confidential” or “proprietary” and which is disclosed to or
obtained from the Company or its affiliates by Executive, which relates to the Company’s past, present, or future research, development, or business activities. Confidential Information is all information or materials prepared by or for the
Company and includes, without limitation, all of the following: designs, drawings, specifications, techniques, models, data, source code, object code, documentation, diagrams, flow charts, research, development, processes, systems, methods,
machinery, procedures, “know-how,” new product or new technology information, formulas, patents, patent applications, product prototypes, product copies, cost of production, manufacturing, developing or marketing techniques and materials, cost
of production, development or marketing time tables, customer lists, strategies related to customers, suppliers or personnel, contract forms, pricing policies and financial information, volumes of sales, and other information of similar nature,
whether or not reduced to writing or other tangible form, and any other Trade Secrets, as defined by Section 4.1.3, or non-public business information.
4
4.1.2 “Inventions” means all discoveries, concepts, and ideas, whether patentable or not, including but not limited to, processes, methods, formulas, compositions, techniques, articles and
machines, as well as improvements thereof or “know-how” related thereto, relating at the time of conception or reduction to practice to the business engaged in by the Company, or any actual or anticipated research or development by the Company.
4.1.3 “Trade Secrets” means any scientific or technical data, information, design, process, procedure, formula, or improvement that is commercially available to the Company and is not generally
known in the industry.
This Section includes not only information belonging to the Company which existed before the date of this Agreement, but also information developed
by Executive for the Company or its employees during his employment and thereafter.
4.2 Restriction on Use of Confidential Information. Executive agrees that his use of Trade Secrets and other Confidential Information is subject to the following restrictions during the term of the Agreement and for an
indefinite period thereafter so long as the Trade Secrets and other Confidential Information have not become generally known to the public.
4.2.1 Non-Disclosure. Except as required by the performance of Executive’s services to the Company under the terms of this Agreement, Executive will not, directly or indirectly disclose, or permit others to disclose the
Company’s Trade Secrets, Confidential Information, and/or Inventions as defined above.
4.2.2 Return of Company Information. Upon termination of Executive’s employment with Company for any reason, Executive will surrender and return to the Company all documents and materials in his possession or control
which contain Trade Secrets, Inventions, and other Confidential Information. Executive will immediately return to the Company all lists, books, records, materials, and documents, together with all copies thereof, and all other Company property
in his possession or under his control, relating to or used in connection with the business of the Company. Executive acknowledges and agrees that all such lists, books, records, materials, and documents are the sole and exclusive property of
the Company.
4.2.3 Prohibition Against Unfair Competition. At any time after the termination of his employment with Company for any reason, Executive will not engage in competition with Company while making use of the Trade Secrets
of Company.
5
4.3 Patents and Inventions. Executive agrees that any Inventions made, conceived, or completed by Executive during the term of Executive’s service, solely or jointly with others, which are made with the Company’s
equipment, supplies, facilities, or Confidential Information, or which relate at the time of conception or reduction to purpose of the Invention, to the business of the Company, or the Company’s actual or demonstrably anticipated research and
development, or which result from any work performed by Executive for the Company, will be the sole and exclusive property of the Company, and all Trade Secrets, Confidential Information, copyrightable works, works of authorship, and all
patents, registrations, or applications related thereto, all other intellectual property or proprietary information and all similar or related information (whether or not patentable and copyrightable and whether or not reduced to tangible form
or practice) which relate to the business, research and development, or existing or future products or services of the Company and/or its subsidiaries and which are conceived, developed, or made by Executive during Executive’s employment with
the Company (“Work Product”) will be deemed to be “work made for hire” (as defined in the Copyright Act, 17 U.S.C. §101 et seq., as amended) and owned
exclusively by the Company. To the extent that any Work Product is not deemed to be a “work made for hire” under applicable law, and all right, title, and interest in and to such Work Product have not automatically vested in the Company,
Executive hereby (a) irrevocably assigns, transfers, and conveys, and will assign, transfer, and convey, to the fullest extent permitted by applicable law, all right, title, and interest in and to the Work Product on a worldwide basis to the
Company (or such other person or entity as the Company may designate), without further consideration; and (b) waives all moral rights in or to all Work Product, and to the extent such rights may not be waived, agrees not to assert such rights
against the Company or its respective licensees, successors, or assigns. In order to permit the Company to claim rights to which it may be entitled, Executive agrees to promptly disclose to the Company in confidence all Work Product which
Executive makes arising out of Executive’s employment with the Company. Executive will assist the Company in obtaining patents on all Work Product patentable by the Company in the United States and in all foreign countries, and will execute
all documents and do all things reasonably necessary to obtain letters patent, to vest the Company with full and extensive title thereto, and to protect the same against infringement by others.
5.1 Termination by Reason of Death or Disability. Executive’s employment hereunder will terminate immediately upon the death of Executive. The Company may terminate this Agreement upon written
notice to Executive if Executive suffers any physical or mental impairment or incapacity that results in Executive being unable to perform Executive’s essential duties, responsibilities, and the functions of Executive’s position with the Company
for periods aggregating one-twenty (120) days within any 12-month period (“Disability”).
5.2 Termination by Company for Cause. The Company may terminate Executive for cause at any time if any of the following events (“Cause”) have occurred:
a. The willful or negligent failure,
refusal, or inability (other than as a result of death or disability) to perform Executive’s duties or adhere to the policies of the Company;
b. Executive has been indicted, convicted
of, or has pleaded guilty or nolo contendere to any felony or to any crime involving moral turpitude;
c. Executive has perpetrated a fraud,
theft, or otherwise misappropriates any property or funds of the Company;
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d. Executive has violated any applicable
federal or state law or regulation and, as a result of such violation, has become, or has caused the Company to become, the subject of any legal action or administrative proceeding or a suspension of any right or privilege, which action,
proceeding, or suspension could have a materially adverse effect on the reputation, prospects, condition, or operations of the Company;
e. Executive has committed any act that
causes, or shall knowingly or recklessly fail to take reasonable and appropriate action to prevent, any material adverse effect to the reputation, prospects, condition, or operations of the Company;
f. Executive has violated any of the
material provisions of this Agreement or any provisions of the Company’s Code of Conduct.
5.3 Termination by the Company without Cause. The employment of Executive hereunder will terminate immediately upon delivery to Executive of written notice of termination by the Company, which
will be deemed to be “without cause” unless termination is expressly stated to be for Disability or Cause pursuant to Section 5.1 or Section
5.2. For the avoidance of doubt, any non-renewal of this Agreement at the election of the Company shall constitute a termination by the Company without Cause.
5.4 Termination by Executive for Good Reason. Unless cured as provided below, the employment of Executive hereunder will terminate 30 days following the date on which Executive gives the Company notice of termination for
Good Reason (as hereinafter defined), or such earlier date as may be determined by the Board. For purposes of this Agreement, “Good Reason” means,
without Executive’s consent: (i) a material diminution in the duties, authority, or responsibilities of Executive or a material breach of this Agreement by the Company; (ii) a reduction in Executive’s base salary not agreed to by Executive; or
(ii) requiring Executive to relocate his principal place of employment to a location that is more than fifty (50) miles from the location of the Company’s principal office in Fort Worth as of the Effective Date, provided that the Company fails
to cure such material diminution, breach, or relocation within 30 days of receipt of a written notice from Executive of such Good Reason event (which notice will be provided by Executive to the Company within 90 days following the initial
occurrence of such event).
6.1 Termination Without Cause or for Good Reason. If during the Employment Term, Executive’s employment with the Company is terminated by the Company without Cause, or
by Executive for Good Reason, Executive shall be entitled to receive (i) a lump sum payment equal to Executive’s accrued and unpaid salary as of the Termination Date (collectively the “Accrued Benefits”) and (ii) a cash amount equivalent to the gross amount of Executive’s monthly COBRA premiums for health insurance, based on Executive’s current elections, for a period of twelve (12) months
payable in a lump sum payment on the sixtieth (60th) day following the Termination Date. It will be Executive’s responsibility to timely elect COBRA and to make any and all required payments to maintain coverage under COBRA (the “COBRA Payment”). In addition to the COBRA Payment, Executive’s outstanding Equity Awards shall vest as may be provided in the terms of the applicable Equity
Award grant agreements, and Executive shall be entitled to a cash severance payment, payable in a lump sum payment on the sixtieth (60th) day following the Termination Date, which will be determined as follows (the “Severance Payment”):
7
a. If the Executive is terminated by the
Company without Cause or by Executive for Good Reason during the Initial Period, the Severance Payment will be equal to Executive’s annual Base Compensation for greater of (1) the remainer of the Initial Period or (2) six (6) months.
b. If the Executive is terminated by the
Company without Cause or by Executive for Good Reason on or after the last day of the Initial Period (including as a result of non-renewal by either party), the Severance Payment will be equal to six (6) months of Executive’s annual Base
Compensation.
6.2 Termination by the Company for Cause, by Executive Without Good Reason or Upon Death or Disability. If Executive’s employment with the Company is terminated (i) by the Company for Cause,
(ii) by Executive without Good Reason, or (iii) on account of Executive’s death or Disability, Executive will be entitled to receive the Accrued Benefits payable in a lump sum payment within 10 days of the Termination Date.
6.3 Termination Date. “Termination Date” means (i) if Executive’s employment is terminated for Cause, the date of receipt of the
Notice of Termination or any later date specified therein; (ii) if Executive’s employment is terminated by the Company without Cause, the date on which the Company notifies Executive of such termination in the notice of termination or any later
date specified therein; (iii) if Executive’s employment is terminated by reason of death or Disability, the date of death of Executive or the Disability determination, as the case may be; (iv) if Executive’s employment is terminated by reason of
non-renewal of this Agreement, the date of such expiration; (v) if Executive resigns employment with Good Reason or without Good Reason the date provided by Executive in the Notice of Termination (which date shall not be less than thirty (30)
days after the giving of such notice by Executive).
6.4 General Release Requirement. Notwithstanding anything herein to the contrary, it will be a condition to Executive’s right to receive the amounts provided for in Section
6.1, Section 6.2 and Section 7.1, that Executive timely execute and deliver to the Company, a general
release provided by and acceptable to the Company within twenty-one (21) days of its delivery to Executive (or such longer period as may be required under the Age Discrimination in Employment Act of 1967, as amended), without subsequent
revocation of the general release. Upon satisfaction of the general release condition, the payment of the severance benefits will commence as provided in Section 6.1, Section 6.2 and Section 7.1 or as applicable as provided in this Agreement.
6.5 Timing of Payment. Notwithstanding anything to the contrary in this Agreement, to the extent required to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if Executive is deemed by the Board, in its sole discretion, to be a “specified employee” for purposes of Section 409A(a)(2)(B) of the Code, Executive agrees that any
non-qualified deferred compensation payments due to Executive under this Agreement in connection with a termination of Executive’s employment that would otherwise have been payable at any time during the six-month period immediately following
such termination of employment will be paid as soon as practicable in accordance with Section 7.10.
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7.1 Entire Agreement. This Agreement contains the entire agreement of the parties regarding the employment of Executive by the Company and supersedes any prior agreement, arrangement, or understanding, whether oral or
written, between the Company and Executive concerning Executive’s employment hereunder.
7.2 Notices. All notices, requests, and other communications (collectively, “Notices”) given pursuant to this Agreement will be in
writing, and will be delivered by e-mail to the recipient’s Company address or (to Executive, if no longer employed by the Company) last known personal address with a copy delivered by personal service or by United States first class,
registered, or certified mail (return receipt requested), postage prepaid, addressed to the party at the address set forth below:
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If to the Company:
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Tandy Leather Factory, Inc.
c/o General Counsel
1900 SE Loop 820
Fort Worth, Texas 76140
or, after a Company move from such location, to such subsequent address at which the Company maintains its principal offices
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If to Executive:
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Johan Hedbeg
Executive’s address in the Company’s personnel records
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Any Notice will be deemed duly given when received by the addressee thereof, provided
that any Notice sent by registered or certified mail will be deemed to have been duly given three days from date of deposit in the United States mail, unless sooner received. Either party may from time to time change its address for further
Notices hereunder by giving notice to the other party in the manner prescribed in this Section 7.2.
7.3 Governing Law and Forum Selection. This Agreement has been made and entered into in the state of Texas and will be construed in accordance with the laws of the state of Texas without regard to the conflict of laws
principles thereof. The parties agree that the exclusive venue for the dispute resolution concerning this Agreement shall be the state or federal courts located in Texas.
7.4 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.
7.5 Interpretation. The Board will make all determinations under this Agreement and will have the exclusive authority to interpret its terms and conditions. All determinations and interpretations made by the Board will be
final for all purposes and binding on the parties.
7.6 Severable Provisions. The provisions of this Agreement are severable, and if any one or more provisions are determined to be judicially unenforceable, in whole or in part, the remaining provisions will nevertheless be
binding and enforceable.
9
7.7 Successors and Assigns. This Agreement and all obligations and benefits of Executive and the Company hereunder will bind and inure to the benefit of Executive and the Company, their respective affiliates, and their
respective successors and assigns.
7.8 Amendments and Waivers. No amendment or waiver of any term or provision of this Agreement will be effective unless made in writing. Any written amendment or waiver will be effective only in the instance given and then
only with respect to the specific term or provision (or portion thereof) of this Agreement to which it expressly relates, and will not be deemed or construed to constitute a waiver of any other term or provision (or portion thereof) waived in
any other instance.
7.9 Title and Headings. The titles and headings contained in this Agreement are included for convenience only and form no part of the agreement between the parties.
7.10 Compliance with Tax Rules for Non-qualified Deferred Compensation Plans. This Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and will be administered, interpreted, and construed in a manner that does not result in the imposition on Executive of any additional tax, penalty, or interest under Section 409A of the Code.
7.10.1 For purposes of Section 409A of
the Code, the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments.
7.10.2 Payment dates provided for in this
Agreement will be deemed to incorporate grace periods that are treated as made upon a designated payment date as provided by Treasury Regulation §1.409A-3(d).
7.10.3 If the Company determines in good
faith that any provision of this Agreement would cause Executive to incur an additional tax, penalty, or interest under Section 409A of the Code, the Company and Executive will use reasonable efforts to reform such provision, if possible, in a
mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code. The preceding provisions, however, will not be construed as
a guarantee or warranty by the Company of any particular tax effect to Executive under this Agreement. The Company will not be liable to Executive for any payment made under this Agreement, at the direction or with the consent of Executive,
that is determined to result in an additional tax, penalty, or interest under Section 409A of the Code, nor for reporting in good faith any payment made under this Agreement as an amount includible in gross income under Section 409A of the
Code.
7.10.4 “Termination of employment,” “Termination Date,” “date of termination” or words of similar import, as used in this Agreement mean, for purposes of any payments under this Agreement that are payments of deferred compensation subject to Section 409A
of the Code, Executive’s “separation from service” as defined in Treasury Regulation § 1.409A-1(h).
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7.10.5 Payments under Section 6 and elsewhere in this Agreement will be administered and interpreted to maximize the exceptions to Code Section 409A for short-term deferrals and for separation pay due to
involuntary separation from service. Any payment under this Agreement that is payable during the short-term deferral period (as described in Treasury Regulations §1.409A-1(b)(4)) or that is paid within the involuntary separation pay safe harbor
(as described in Treasury Regulations §1.409A-1(b)(9)(iii)) will be treated as not providing for a deferral of compensation and will not be aggregated with any non-qualified deferred compensation plans or payments. Executive may not, directly or
indirectly, designate the calendar year of the commencement of any payment hereunder. Notwithstanding the foregoing, amounts payable hereunder which are not non-qualified deferred compensation, or which may be accelerated pursuant to Section
409A, such as distributions for applicable tax payments, may be accelerated, but not deferred, at the sole discretion of the Company.
7.10.6 Notwithstanding anything to the
contrary in this Agreement, to the extent required to comply with Section 409A of the Code, if Executive is deemed by the Board (or its delegate), in its sole discretion, to be a “specified employee” for purposes of Section 409A(a)(2)(B) of the
Code, Executive agrees that any non-qualified deferred compensation payments due to Executive under this Agreement in connection with a termination of Executive’s employment that would otherwise have been payable at any time during the period
immediately following such termination of employment and ending on the date that is six months after the Termination Date (or if earlier, Executive’s date of death) will not be paid prior to, and will instead be payable in a lump sum on the
first business day following the end of such non-payment period.
7.11 Survival. Notwithstanding anything to the contrary contained herein, the provisions of Section 4 and Section
7 will survive the termination of this Agreement.
[Signatures on following page]
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IN WITNESS WHEREOF, each of the parties has signed this Agreement on the date opposite their signature below.
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THE “COMPANY”
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||
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Tandy Leather Factory, Inc.
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||
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Date: January 2, 2025
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By:
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Name:
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||
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Title:
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||
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THE “EXECUTIVE”
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Date: January 2, 2025
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Johan Hedberg
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12
Exhibit 10.14
RESTRICTED STOCK UNIT AGREEMENT
Pursuant to the Tandy Leather Factory, Inc. 2023 Incentive Stock Plan
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GRANTED TO (“Participant”):
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Johan Hedberg
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||
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GRANT DATE:
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February 19, 2025
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||
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NUMBER OF RSUs:
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100,000
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||
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VESTING DATE(S):
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February 19, 2026
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1. Restricted Stock Unit Agreement. This Restricted Stock Unit Agreement (this “Agreement”) is made and entered into as
of the date of grant shown above (the “Grant Date”) between Tandy Leather Factory, Inc., a Delaware corporation (the “Company”),
and the Participant named above, pursuant to the Tandy Leather Factory, Inc. 2023 Incentive Stock Plan (the “Plan”). Capitalized terms not defined herein shall have the meanings
ascribed thereto in the Plan.
2. Grant of Restricted Stock Units. The Participant is granted the number of restricted stock units (“RSUs”) shown above. Upon vesting as described below, each RSU shall convert
into one share of Common Stock of the Company (“Common Stock”). The RSUs are granted as provided for by the Plan and are subject to the terms and conditions set forth in the Plan and
this Agreement.
3. Vesting. Subject to the provisions of Section 5 of this Agreement, during the term of Participant’s employment, the
RSUs shall vest (i.e., each vesting RSU shall convert into one share of Common Stock, without payment or other action by the Participant) on each of the vesting dates
shown above (each, a “Vesting Date”). Upon vesting of RSUs, shares of Common Stock shall be promptly issued to the Participant and evidenced by a certificate for such shares issued in
the Participant’s name or by book entry at the Company’s option. Notwithstanding anything contained in this Agreement to the contrary, if there is a Change in Control (as defined in the Plan) of the Company, all unvested RSUs granted under
this Agreement shall become fully vested immediately upon the occurrence of the Change in Control, and such vested RSUs shall be paid out or settled, as applicable, within 60 days after the occurrence of the Change in Control, subject to
requirements of applicable laws and regulations.
4. No Transfer. Unvested RSUs may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except by will or the laws of descent and distribution. Any
attempt by the Participant to dispose of any unvested RSUs in violation of this section shall result in the immediate forfeiture of such RSUs.
5. Termination of Service.
a. Death or Disability. If the Participant’s employment is terminated due to death or Disability, all unvested RSUs held by the Participant on the date of the Participant’s death or
the date of the termination of his or her employment related to Disability, as the case may be, shall immediately become vested as of such date.
b. Other Termination. If the Participant’s employment is terminated for any reason, including, without limitation, retirement, other than due to death or Disability, all unvested
RSUs held by the Participant on the date of the termination of his or her employment shall immediately be forfeited by such Participant as of such date.
c. Discretionary Accelerated Vesting. Notwithstanding anything contained in this Agreement to the contrary, the Company’s Board of Directors (the “Board”) may, in its discretion,
provide that any or all unvested RSUs held by the Participant on the date of the termination of the Participant’s employment shall immediately become vested as of such date of as of such other date as the Board may determine.
6. Tax Withholding. All payments or distributions of an Award made pursuant to this Agreement shall be net of any amounts required to be withheld pursuant to applicable federal,
state and local tax withholding requirements. If the Company proposes or is required to distribute Common Stock pursuant to this Agreement, it may require the Participant receiving such Common Stock to remit to it or to the Affiliate that
employs such Participant an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the Affiliate employing the Participant shall have the
right to withhold the amount of such taxes from any other sums due or to become due from the Company or the Affiliate, as the case may be, to the Participant receiving Common Stock, as the Board shall prescribe. The Board may, in its
discretion, and subject to such rules as the Board may adopt (including any as may be required to satisfy applicable tax and/or non-tax regulatory requirements), permit a Participant to pay all or a portion of the federal, state and local
withholding taxes arising in connection with this Award consisting of shares of Common Stock by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax
calculated at rates required by statute or regulation.
7. Legend. If the Company, in its sole discretion, shall determine that it is necessary to comply with applicable securities laws, the certificate or certificates representing any
shares of Common Stock delivered to the Participant upon vesting under this Agreement shall bear an appropriate legend in form and substance, as determined by the Company, giving notice of applicable restrictions on transfer under or with
respect to such laws. Unless and until the shares of Common Stock delivered to the Participant upon vesting under this Agreement are registered under the Securities Act of 1933, as amended (the “Securities
Act”), all certificates representing such shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend
or other similar capital event shall bear legends in substantially the following form:
2
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
Appropriate stop transfer instructions with respect to such shares have been placed with the Company’s transfer agent.
8. Securities Act. The Participant covenants and agrees with the Company that if, with respect to any shares of Common Stock delivered to the Participant pursuant to this Agreement,
there does not exist an effective registration statement on an appropriate form under the Securities Act, which registration statement shall have become effective and shall include, or shall be accompanied by, as applicable, a prospectus that
is current with respect to the shares of Common Stock subject to this Agreement, (i) he or she takes the shares of Common Stock for his or her own account and not with a view to the resale or distribution thereof, (ii) any subsequent offer for
sale or sale of any such shares shall be made either pursuant to (x) a registration statement on an appropriate form under the Securities Act, which registration statement shall have become effective and shall be current with respect to the
shares being offered and sold, or (y) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, the Participant shall, prior to any offer for sale or sale of such shares, may be required to
obtain a favorable written opinion from counsel for or approved by the Company as to the applicability of such exemption and (iii) the certificate or certificates evidencing such shares shall bear a legend to the effect of the foregoing.
9. Conflicts. This Agreement is subject to all terms, conditions, limitations and restrictions contained in the Plan, which shall be controlling in the event of any conflicting or
inconsistent provisions. In the event, however, of any conflict between the provisions of this Agreement or the Plan and the provisions of an employment or change-in-control agreement between the Company and the Participant, as applicable, the
provisions of the latter shall prevail.
10. No Employment Contract. This Agreement is not a contract of employment, as applicable, and the terms of the Participant’s employment shall not be affected hereby or by any
agreement referred to herein except to the extent specifically so provided herein or therein. Nothing herein shall be construed to impose any obligation on the Company to continue the Participant’s employment, and it shall not impose any
obligation on the Participant’s part to remain in the employ of the Company or any of its Affiliates.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORD WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING PRINCIPLES OF CONFLICTS OF LAW.
12. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
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13. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts will be
construed together and constitute the same instrument.
4
IN WITNESS WHEREOF, the undersigned have executed this Restricted Stock Unit Agreement as of the date first written above.
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TANDY LEATHER FACTORY, INC.
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By:
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 |
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Name: Leann Day
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Title: VP Human Resources
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ACCEPTED:
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By:
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Johan Hedbeg
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5
Exhibit 10.15
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
Pursuant to the Tandy Leather Factory, Inc. 2023 Incentive Stock Plan
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GRANTED TO (“Participant”):
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Johan Hedberg
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||
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GRANT DATE:
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February 19, 2025
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||
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NUMBER OF PRSUs:
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900,000
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||
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VESTING DATE(S):
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See Section 3 Below
|
||
1. Performance-Based Restricted Stock Unit Agreement. This Performance-Based Restricted Stock Unit Agreement (this “Agreement”)
is made and entered into as of the date of grant shown above (the “Grant Date”) between Tandy Leather Factory, Inc., a Delaware corporation (the “Company”), and the Participant named above, pursuant to the Tandy Leather Factory, Inc. 2023 Incentive Stock Plan (the “Plan”). Capitalized terms not defined
herein shall have the meanings ascribed thereto in the Plan.
2. Grant of Performance-Based Restricted Stock Units. The Participant is granted the number of performance-based restricted stock units (“PRSUs”) shown above. Upon vesting as
described below, each PRSU shall convert into one share of Common Stock of the Company (“Common Stock”). The PRSUs are granted as provided for by the Plan and are subject to the terms
and conditions set forth in the Plan and this Agreement.
3. Vesting. Subject to the provisions of Section 5 of this Agreement, during the term of Participant’s employment,
150,000 PRSUs shall vest (i.e., each vesting PRSU shall convert into one share of Common Stock, without payment or other action by the Participant) upon the satisfaction
of each of the following conditions:
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The Company achieves EBITDA from operations in any calendar year of $5 million;
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The Company achieves EBITDA from operations in any calendar year of $7 million;
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The Company achieves EBITDA from operations in any calendar year of $9 million;
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The Company’s common stock trades on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $5.50 or more;
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The Company’s common stock trades on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $6.50 or more; and
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The Company’s common stock trades on its principal stock market/exchange for 15 consecutive trading days with a daily closing price of $7.50 or more.
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For avoidance of doubt, for purposes of the targets above, EBITDA excludes non-operating earnings such as the expected gain on the Company’s sale of
its headquarters buildings.
Each of the dates on which any one or more of the conditions shown above is met is referred to herein as a “Vesting Date”). The Vesting Date of any EBITDA-based PRSUs described above shall be deemed to occur with respect to any calendar year on the date that the Company’s independent auditor issues
its signed report with respect to such calendar year or (if the Company is not subject to an independent audit) the date on which the Company’s principal accounting officer signs or certifies as complete the Company’s financial statements for such
year. The Vesting Date of any price-based PRSUs described above shall be deemed to occur on business day after the trading date on which the condition(s) described above are met.
Upon vesting of PRSUs, shares of Common Stock shall be promptly
issued to the Participant and evidenced by a certificate for such shares issued in the Participant’s name or by book entry at the Company’s option. Notwithstanding anything contained in the Plan to the contrary, if there is a Change in Control
(as defined in the Plan) of the Company, unvested PRSUs granted under this Agreement shall not become fully vested upon the occurrence of the Change in Control but may become vested immediately prior to the Change in Control in accordance with
the following: For purposes of the vesting conditions shown above, the Company’s common stock price shall be deemed to have traded for 15 consecutive days at the amount of the consideration per share of
common stock received by the Company’s stockholders in such Change in Control transaction. For example, in the event of a Change in Control transaction in which stockholders are
paid $7.00 per share of the Company’s common stock, immediately prior to the consummation of such transaction, 300,000 unvested RSUs (representing the common stock trading at prices above $5.50 and 6.50 per share if RSUs had not vested
previously as a result of trading at such prices) would become vested.
4. No Transfer. Unvested PRSUs may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except by will or the laws of descent and distribution. Any
attempt by the Participant to dispose of any unvested PRSUs in violation of this section shall result in the immediate forfeiture of such PRSUs.
5. Termination of Service.
a. Termination of Employment. If the Participant’s employment is terminated for any reason, including, without limitation, retirement, death or Disability, all unvested PRSUs held
by the Participant on the date of the termination of his or her employment shall immediately be forfeited by such Participant as of such date.
b. Discretionary Accelerated Vesting. Notwithstanding anything contained in this Agreement to the contrary, the Company’s Board of Directors (the “Board”) may, in its discretion,
provide that any or all unvested PRSUs held by the Participant on the date of the termination of the Participant’s employment shall immediately become vested as of such date of as of such other date as the Board may determine.
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6. Tax Withholding. All payments or distributions of an Award made pursuant to this Agreement shall be net of any amounts required to be withheld pursuant to applicable federal,
state and local tax withholding requirements. If the Company proposes or is required to distribute Common Stock pursuant to this Agreement, it may require the Participant receiving such Common Stock to remit to it or to the Affiliate that
employs such Participant an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the Affiliate employing the Participant shall have the
right to withhold the amount of such taxes from any other sums due or to become due from the Company or the Affiliate, as the case may be, to the Participant receiving Common Stock, as the Board shall prescribe. The Board may, in its
discretion, and subject to such rules as the Board may adopt (including any as may be required to satisfy applicable tax and/or non-tax regulatory requirements), permit a Participant to pay all or a portion of the federal, state and local
withholding taxes arising in connection with this Award consisting of shares of Common Stock by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax
calculated at rates required by statute or regulation.
7. Legend. If the Company, in its sole discretion, shall determine that it is necessary to comply with applicable securities laws, the certificate or certificates representing any
shares of Common Stock delivered to the Participant upon vesting under this Agreement shall bear an appropriate legend in form and substance, as determined by the Company, giving notice of applicable restrictions on transfer under or with
respect to such laws. Unless and until the shares of Common Stock delivered to the Participant upon vesting under this Agreement are registered under the Securities Act of 1933, as amended (the “Securities
Act”), all certificates representing such shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend
or other similar capital event shall bear legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
Appropriate stop transfer instructions with respect to such shares have been placed with the Company’s transfer agent.
8. Securities Act. The Participant covenants and agrees with the Company that if, with respect to any shares of Common Stock delivered to the Participant pursuant to this Agreement,
there does not exist an effective registration statement on an appropriate form under the Securities Act, which registration statement shall have become effective and shall include, or shall be accompanied by, as applicable, a prospectus that
is current with respect to the shares of Common Stock subject to this Agreement, (i) he or she takes the shares of Common Stock for his or her own account and not with a view to the resale or distribution thereof, (ii) any subsequent offer for
sale or sale of any such shares shall be made either pursuant to (x) a registration statement on an appropriate form under the Securities Act, which registration statement shall have become effective and shall be current with respect to the
shares being offered and sold, or (y) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, the Participant shall, prior to any offer for sale or sale of such shares, may be required to
obtain a favorable written opinion from counsel for or approved by the Company as to the applicability of such exemption and (iii) the certificate or certificates evidencing such shares shall bear a legend to the effect of the foregoing.
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9. Conflicts. This Agreement is subject to all terms, conditions, limitations and restrictions contained in the Plan, which shall be controlling in the event of any conflicting or
inconsistent provisions. In the event, however, of any conflict between the provisions of this Agreement or the Plan and the provisions of an employment or change-in-control agreement between the Company and the Participant, as applicable, the
provisions of the latter shall prevail.
10. No Employment Contract. This Agreement is not a contract of employment, as applicable, and the terms of the Participant’s employment shall not be affected hereby or by any
agreement referred to herein except to the extent specifically so provided herein or therein. Nothing herein shall be construed to impose any obligation on the Company to continue the Participant’s employment, and it shall not impose any
obligation on the Participant’s part to remain in the employ of the Company or any of its Affiliates.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORD WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING PRINCIPLES OF CONFLICTS OF LAW.
12. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts will be
construed together and constitute the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Restricted Stock Unit Agreement as of the date first written above.
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TANDY LEATHER FACTORY, INC.
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By:
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Name: Leann Day
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Title: VP Human Resources
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ACCEPTED:
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By:
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Johan Hedbeg
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EXHIBIT 21.1
The Leather Factory, Inc., a Nevada corporation
The Leather Factory of Nevada Investments, Inc., a Nevada corporation
The Leather Factory, LP, a Texas limited partnership
The Leather Factory, Inc., an Arizona corporation
Hi-Line Leather & Manufacturing Company, a California corporation
Roberts, Cushman & Company, Inc., a New York corporation
The Leather Factory of Canada Ltd., an Ontario domiciled Canadian corporation
Tandy Leather Company, Inc., a Nevada corporation
Tandy Leather Company Investments, Inc. a Nevada corporation
Tandy Leather Company, LP, a Texas limited partnership
Tandy Leather Factory Espana, S.L., a Spanish limited liability company
Certification of Chief Executive Officer and Principal Financial Officer
Section 302 Certification
I, Johan Hedberg, certify that:
I have reviewed this annual report on Form 10-K of Tandy Leather Factory, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 26, 2025 |
/s/ Johan Hedberg
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Johan Hedberg
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| Chief Executive Officer | |
| (principal executive officer and principal financial officer) |
In connection with the annual report on Form 10-K of Tandy Leather Factory, Inc. (the “Company”) for the fiscal year ended December 31, 2023 as filed with the United States Securities and Exchange
Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: February 26, 2025 | By: /s/ Johan Hedberg |
| Johan Hedberg | |
| Chief Executive Officer | |
| (principal executive officer and principal financial officer) |