July 24, 1998
Mr. Evert I. Schlinger
1944 Edison Street
Santa Ynez, CA 93460
Re: Consulting Agreement
Dear Mr. Schlinger:
The Leather Factory, a Delaware corporation (the "Company"), desires to
retain your services during the following eighteen (18) months for the purpose
of (a) assisting the Company in analyzing financing alternatives available to
the Company, and (b) assisting the Company in evaluating locations for the
Company's distribution units in Portland, Oregon and other locations about which
you have personal knowledge. These services will be performed as and when
required by the Company. These services shall be performed by you as an
independent contractor, and you shall not be an employee of the Company. The
Company acknowledges that it shall not require you to render services under this
agreement at such times that prevent you from performing your other business
activities.
As the sole consideration for the services required hereunder, the
Company agrees to execute and deliver a Stock Purchase Warrant (the "Warrant")
in the form attached as Exhibit "A" contemporaneously with your acceptance of
this letter agreement. You represent and warrant to the Company: (a) you have
received copies of the Company's most recent Annual Report including the annual
report on Form 10-K, the Company's Proxy Statement for the annual meeting of
stockholders held May 21, 1998, and the Company's Form 10-Q for the first
quarter of 1998, (b) you have had the opportunity to meet with representatives
of the Company to ask questions and receive information regarding the Company
and its prospects, (c) you are aware that neither the Warrant nor the shares of
the Company's common stock issuable upon exercise of the Warrant will be
registered under the Securities Act of 1933, as amended, or any applicable
securities laws, and transfer of these securities will be limited as stated in
the Warrant, including the limitations on transfer of restricted securities
contained in Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, (d) you are acquiring the Warrant
and any common stock issued upon its exercise for your own account and not with
a view to the distribution thereof, (e) you are capable of evaluating the merits
of this investment and bearing the risks of the investment, and (f) you are not
relying on the Company or any of its officers, directors, or advisors with
respect to determining the federal and state tax consequences of this Consulting
Agreement, the delivery of the Warrant to you, any subsequent exercise of the
Warrant, or the disposition of any common stock acquired upon exercise of the
Warrant.
Notwithstanding anything herein to the contrary, you agree the (v) you
shall be an independent contractor of the Company and not an employee, (w) you
shall not have the authority to bind the Company in any capacity, (x) you shall
not be entitled to any compensation or other benefits for your services under
this agreement, other than the rights evidenced by the Warrant, (y) you shall be
responsible for the payment of all taxes related to the services to be rendered
and the Company shall not have any obligation to withhold any taxes for which
you may be liable, and (z) you agree that all services to be performed shall be
consistent with the terms hereof.
If the foregoing is acceptable to you, please indicate your acceptance
in the space provided below.
Sincerely yours,
THE LEATHER FACTORY, INC.
By: /s/ Wray Thompson
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Wray Thompson, Chairman, President
and Chief Executive Officer
ACCEPTED:
/s/ Evert I. Schlinger
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Evert I. Schlinger