TANDY LEATHER FACTORY, INC.
SECOND AMENDMENT TO
2007 DIRECTOR NON-QUALIFIED STOCK OPTION PLAN

This Second Amendment (this “Amendment”), was adopted by the Board of Directors
(the “Board”) of Tandy Leather Factory, Inc., a Delaware corporation (the
“Company”), as of October 7, 2010 (the “Effective Date”) and amends the 2007
Director Non-qualified Stock Option Plan of the Company dated as of March 22,
2007 (the “Original Plan”), as amended by that certain Amendment to 2007
Director Non-Qualified Stock Option Plan dated as of May 3, 2010 (the
“Amendment” and, together with the Original Plan, the “Plan”).
 
Recitals
 
A.           The Company adopted the Original Plan as of March 22, 2007.
 
B.           On May 22, 2007, at a duly held meeting of the stockholders of the
Company, the stockholders ratified and affirmed the Original Plan.
 
C.           The Company adopted the Amendment as of May 3, 2010.
 
D.           On May 28, 2010, a Stock Option for 3,000 shares of Common Stock
was granted to each individual who was serving as an outside director of the
Company or any Subsidiary on such date pursuant to the Plan as then in
effect  (collectively, the “May 2010 Grants”).
 
E.           On August 10, 2010,  a Stock Option for 3,000 shares of Common
Stock was granted to one individual who became an outside director on that date
pursuant to the Plan as then in effect (the “August 2010 Grant”).
 
F.           Except with respect to the May 2010 Grants and the August 2010
Grant, as of the Effective Date, no other Options have been granted under the
Plan.
 
G.           The Board has deemed it to be in its best interest of the Company
to modify the Stock Option grant schedule set forth in Article 4 of the Plan.
 
H.           Article 10 of the Plan provides that the Plan may be amended by the
Board without the approval of the stockholders of the Company with certain
exceptions.
 
I.           The Plan is being amended to set forth a new Stock Option grant
schedule as more particularly set forth below.
 
Amendment
 
The Plan is hereby amended as follows:
 
1.           Definitions.  Unless otherwise defined herein, terms utilized
herein which are defined in the Plan shall have the meanings ascribed to them in
the Plan.
 
2. Amendment to Article 4 of the  Plan.  The first paragraph of Article 4 of the
Plan is hereby amended to read in its entirety as follows:
 
The Committee shall grant Stock Options as follows: (i) on October 8, 2010, a
Stock Option for 10,200 shares of Common Stock shall be granted to each
individual who has served as an outside director of the Company or any
Subsidiary for at least six months as of that date; (ii) On May 28, 2010, a
stock option for 3,000 shares of Common Stock shall be granted to each
individual who is serving as an outside director of the Compahy or any
subsidiary of the Company on that date; (iii) on March 22 of each calendar year
thereafter, a Stock Option for 3,000 shares of Common Stock shall be granted to
each individual who is serving as an outside director of the Company or any
Subsidiary on that date; and (iv) if an individual first becomes an outside
director of the Company or any Subsidiary within six months after March 22 of a
year, such individual shall be granted a Stock Option for 3,000 shares of Common
Stock immediately upon becoming an outside director.  Notwithstanding the
foregoing, the Committee may elect to delay any Stock Option grant date under
this Article 4 up to the end of any applicable calendar year (but not beyond
March 22, 2017) if the Committee deems such delay to be in the best interests of
the Company.  The Committee shall not grant Stock Options under any other
circumstances.
 
3.           Effective Date.  This Amendment shall become effective as of the
Effective Date.
 
4.           No Other Amendments.  Except as expressly amended hereby, the Plan
shall continue in full force and effect in accordance with the terms and
provisions thereof.
 
5.           Headings.  The headings of the various sections of this Amendment
are for convenience of reference only and do not constitute a part hereof and
shall not be interpreted or construed to affect the meanings or construction of
any provision hereof.
 
6.           Governing Law.  This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its
conflict-of-laws principles.
 

 
 

IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
Effective Date.

 
TANDY LEATHER FACTORY, INC.

By:          /s/ Shannon L. Greene
Shannon L. Greene,
Chief Financial Officer and Treasurer

ATTEST:

/s/ William M. Warren
William M. Warren,
General Counsel and Secretary