Document:

Exhibit10.1-AmendmenttoRedMountainNDAandStandstillAgreement

[AIR TRANSPORT SERVICES GROUP, INC. LETTERHEAD]

February 2, 2009

J. Christopher Teets
Partner
Red Mountain Capital Partners LLC
10100 Santa Monica Boulevard, Suite 925
Los Angeles, CA  90067

		
	Re:
	Confidentiality and Standstill Agreement

Dear Mr. Teets:
As you know, that certain letter agreement by and between Red Mountain Capital Partners LLC, a Delaware limited liability company (“Red Mountain”) and Air Transport Services Group, Inc., a Delaware corporation (formerly ABX Holdings, Inc., “ATSG”), dated February 6, 2008, terminated automatically pursuant to its terms on December 31, 2008.  In response to Red Mountain's renewed request, ATSG has agreed to and expects to deliver to Red Mountain, following the execution and delivery of this letter agreement by Red Mountain, certain information about its properties, employees, finances, businesses and operations (including monthly financial information and all information and materials provided or made available to the full board of directors of ATSG (the “Board of Directors”) or otherwise to a majority of the members of the Board of Directors) that is currently available or becomes available during the duration of this letter agreement; provided, however, that nothing in this letter agreement obligates ATSG to disclose any information if such disclosure would be unlawful or result in a breach by ATSG or one of its subsidiaries of a confidentiality agreement with a third party.
All information about ATSG or any third party that is furnished by ATSG or its Representatives (as defined below) to Red Mountain on or after the date hereof, and regardless of the manner in which it is furnished, is referred to in this letter agreement as “Proprietary Information.”  Proprietary Information shall not include, however, information which (i) is or becomes generally available to the public other than as a result of a disclosure by Red Mountain, the Affiliates (as defined below) or any of their respective Representatives in violation of this letter agreement; (ii) was available to Red Mountain on a nonconfidential basis prior to its disclosure by ATSG or its Representatives; (iii) becomes available to Red Mountain on a nonconfidential basis from a person other than ATSG or its Representatives who is not otherwise bound by a confidentiality agreement with ATSG or any or its Representatives, or is otherwise not under an obligation to ATSG or any of its Representatives not to transmit the information 

 to Red Mountain; or (iv) was independently developed by Red Mountain without reference to or use of the Proprietary Information.  For purposes of this letter agreement, (i) “Affiliates” shall mean, collectively, Red Mountain Capital Partners II, L.P., a Delaware limited partnership, Red Mountain Capital Partners III, L.P., a Delaware limited partnership, RMCP GP LLC, a Delaware limited liability company, Red Mountain Capital Management, Inc., a Delaware corporation, and Willem Mesdag, a natural person; (ii) “Representative” shall mean, as to any person, its directors, officers, employees, agents and advisors (including, without limitation, financial advisors, attorneys and accountants); and (iii) “person” shall be broadly interpreted to include, without limitation, any corporation, company, partnership, other entity or individual.
Subject to the immediately succeeding paragraph, unless otherwise agreed to in writing by ATSG, Red Mountain shall, (i) except as required by law, keep all Proprietary Information confidential and not disclose or reveal any Proprietary Information to any person (other than to its Affiliates, Representatives and Representatives of the Affiliates who have a need to know such information for purposes of assisting in Red Mountain's evaluation of ATSG, provided that each such Affiliate and Representative shall keep confidential all Proprietary Information that is so disclosed or revealed to him or her in accordance with Red Mountain's confidentiality obligations hereunder with respect to such Proprietary Information); (ii) not use Proprietary Information for any purpose other than in connection with the evaluation of ATSG; and (iii) except as required by law or legal process, not disclose to any person the fact that Proprietary Information has been disclosed to Red Mountain; provided that, for the avoidance of doubt, the disclosure of the existence of this letter agreement and the filing of this letter agreement as an exhibit to any Schedule 13D or amendment thereto shall not be deemed to be a breach of the foregoing clause (iii).  The obligations of Red Mountain contained in this paragraph to keep Proprietary Information confidential shall survive any termination or expiration of this agreement for a period of nine months from and after the termination or expiration of this agreement.
In the event that Red Mountain or any Affiliate is requested pursuant to, or required by, applicable law or regulation (including, without limitation, any rule, regulation or policy statement of any national securities exchange, market or automated quotation system on which any of Red Mountain's securities are listed or quoted) or by legal process to disclose any Proprietary Information, Red Mountain shall provide ATSG with prompt notice of such request or requirement in order to enable ATSG (i) to seek an appropriate protective order or other remedy, (ii) to consult with Red Mountain with respect to ATSG's taking steps to resist or narrow the scope of such request or legal process or (iii) to waive compliance, in whole or in part, with the terms of this letter agreement.  In the event that such protective order or other remedy is not timely sought or obtained, or ATSG waives compliance, in whole or in part, with the terms of this letter agreement, Red Mountain shall use commercially reasonable efforts to disclose only that 

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portion of the Proprietary Information which is legally required to be disclosed and to ensure that all Proprietary Information that is so disclosed will be accorded confidential treatment.  In the event that Red Mountain shall have complied, in all material respects, with the provisions of this paragraph, such disclosure may be made by Red Mountain without any liability hereunder.
For a period commencing with the date of this letter agreement and ending on the later to occur of December 31, 2009, or the date upon which no persons affiliated with Red Mountain are serving on the Board of Directors, neither Red Mountain nor its Affiliates nor any other person affiliated with Red Mountain shall, without the prior written consent of ATSG or the Board of Directors, directly or indirectly: 
(a)    acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, (i) any additional common stock or direct or indirect rights to acquire any common stock of ATSG or any subsidiary thereof, or of any successor to or person in control of ATSG such that Red Mountain, the Affiliates and any other person affiliated with Red Mountain, collectively, beneficially own, directly or indirectly, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 13d-3 thereunder (or any comparable or successor law or regulation) in excess of 14.9% of the amount of the issued and outstanding common stock of ATSG, or (ii) any assets of ATSG or any subsidiary or division thereof or of any such successor or controlling person;
(b)    make, or in any way participate, directly or indirectly, in any “solicitation” of “proxies” to vote (as such terms are used in the rules of the Securities and Exchange Commission), or seek to advise or influence any person or entity with respect to the voting of any voting securities of ATSG; 
(c)    nominate or seek to nominate, directly or indirectly, any person to the Board of Directors; 
(d)    make any public announcement with respect to, or submit a proposal for, or offer of (with or without conditions) any extraordinary transaction involving ATSG or any of its securities or assets; 
(e)    form, join or in any way participate in a “group” as defined in Section 13(d)(3) of the Exchange Act in connection with any of the foregoing;

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(f)    otherwise act or seek to control or influence the Board of Directors or the management or policies of ATSG; 
(g)    take any action that could reasonably be expected to require ATSG to make a public announcement regarding the possibility of any of the events described in clauses (a) through (e) above; or 
(h)    request ATSG or any of its Representatives, directly or indirectly, to amend or waive any provision of this paragraph.
The foregoing paragraph is sometimes referenced in this letter agreement as the “standstill provision.”  For the avoidance of doubt, if any person affiliated with Red Mountain serves on the Board of Directors, the standstill provisions are not intended to be construed to apply to actions taken by such person in his capacity as a member of the Board of Directors.
To the extent that any Proprietary Information may include material subject to the attorney-client privilege, work product doctrine or any other applicable privilege concerning pending or threatened legal proceedings or governmental investigations, the parties understand and agree that they have a commonality of interest with respect to such matters and it is their desire, intention and mutual understanding that the sharing of such material is not intended to, and shall not, waive or diminish in any way the confidentiality of such material or its continued protection under the attorney-client privilege, work product doctrine or other applicable privilege.  All Proprietary Information provided by ATSG that is entitled to protection under the attorney-client privilege, work product doctrine or other applicable privilege shall remain entitled to such protection under these privileges, this letter agreement, and under the joint defense doctrine.  Nothing in this letter agreement obligates ATSG to reveal material subject to the attorney-client privilege, work product doctrine or any other applicable privilege.
Red Mountain acknowledges that neither ATSG nor any of its Representatives makes any express or implied representation or warranty as to the accuracy or completeness of any Proprietary Information, and Red Mountain agrees that none of such persons shall have any liability to Red Mountain or any of its Affiliates or Representatives relating to or arising from the use of any Proprietary Information.
In the event that ATSG, in its sole discretion, requests, Red Mountain shall, upon ATSG's written request, promptly deliver to ATSG or destroy (provided that any such destruction shall be certified by Red Mountain) all Proprietary Information and all copies, reproductions, summaries, analyses or extracts thereof or based thereon (whether in hard-copy form or on intangible media, such as electronic mail or computer files)

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in Red Mountain's possession or in the possession of any Representative of Red Mountain or any Affiliate.
Red Mountain is aware of the restrictions imposed by the United States securities laws on the purchase or sale of securities by any person who has received material, non-public information from the issuer of such securities and on the communication of such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information.
Without prejudice to the rights and remedies otherwise available to either party hereto, ATSG shall be entitled to equitable relief by way of injunction or otherwise if Red Mountain or any of the Affiliates breaches or threatens to breach any of the provisions of this letter agreement. 
No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.
This letter agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without giving effect to its principles or rules regarding conflicts of laws, other than such principles directing application of Ohio law.  Each party hereby consents to the institution and resolution of any action or proceeding of any kind or nature with respect to or arising out of this agreement brought by any party hereto in the federal or state courts located within the State of Ohio.
This letter agreement contains the entire agreement between the parties hereto concerning confidentiality of the Proprietary Information, and no modification of this letter agreement or waiver of the terms and conditions hereof shall be binding upon any party hereto, unless approved in writing by each such party.
This letter agreement shall terminate automatically on the later to occur of December 31, 2009, or the date upon which no persons affiliated with Red Mountain are serving on the Board of Directors (or on such later date agreed upon in writing by the parties); provided that Red Mountain may, in its sole discretion, terminate this letter agreement (including the standstill provision) by delivering written notice of such termination to ATSG at any time after the approval by the Board of Directors of:
		
	(i)
	any sale of more than 20% of the assets of ATSG and its subsidiaries, taken as a whole;

5

		
	(ii)
	the beneficial ownership (as defined by Rule 13d-3 under the Exchange Act) by any person of more than 20% of any class of outstanding equity securities of ATSG, including any equity issuance, tender offer, exchange offer or other transaction or series of transactions that, if consummated, would result in any person beneficially owning more than 20% of any class of outstanding equity securities of ATSG; or

		
	(iii)
	any merger, consolidation or other business combination involving ATSG or any of its subsidiaries and a third party.

In addition, if the Board of Directors undertakes a formal process to solicit proposals with respect to any of the foregoing or, with respect to unsolicited proposals, determines that any proposal relating to any of the foregoing is reasonably likely to be approved, ATSG shall notify Red Mountain that subparagraph (h) of the standstill provision has been waived by ATSG.
For the avoidance of doubt, neither Red Mountain nor any other person shall have any obligation hereunder (and Red Mountain shall not be prohibited by this letter agreement from taking, directly and indirectly, any or all of the actions described in subparagraphs (a) through (h) of the standstill provision) from and after the termination of this letter agreement.
Please confirm your agreement with the foregoing by signing and returning to the undersigned the duplicate copy of this letter agreement enclosed herewith.

[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Very truly yours,
AIR TRANSPORT SERVICES GROUP, INC.

By:     /S/   W. JOSEPH PAYNE                                           
W. Joseph Payne
Sr. Vice President
Corporate General Counsel & Secretary

ACCEPTED AND AGREED as of the date first written above:

RED MOUNTAIN CAPITAL PARTNERS LLC

By:   /S/   J. CHRISTOPHER TEETS                       
J. Christopher Teets

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[AIR TRANSPORT SERVICES GROUP, INC. LETTERHEAD]

June 11, 2012

Red Mountain Capital Partners LLC
10100 Santa Monica Boulevard, Suite 925
Los Angeles, California  90067

Re:    First Amendment to Confidentiality and Standstill Agreement

Gentlemen:
Reference is made to that certain Confidentiality and Standstill Agreement, dated as of February 2, 2009 (as amended hereby and as may be further amended, modified, supplemented or restated from time to time, the “Confidentiality and Standstill Agreement”), by and between Red Mountain Capital Partners LLC, a Delaware limited liability company (“Red Mountain”), and Air Transport Services Group, Inc., a Delaware corporation (“ATSG”).  Capitalized terms that are not defined in this letter agreement shall have the meanings ascribed to them in the Confidentiality and Standstill Agreement.
As you are aware, subparagraph (a) of the standstill provisions of the Confidentiality and Standstill Agreement provides that, for the period commencing on February 2, 2009 and ending on the later to occur of December 31, 2009, or the date upon which no persons affiliated with Red Mountain are serving on the board of directors of ATSG (the “Board of Directors”), neither Red Mountain nor its Affiliates nor any other person affiliated with Red Mountain shall, without the prior written consent of ATSG or the Board of Directors, directly or indirectly acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, (i) any additional common stock or direct or indirect rights to acquire any common stock of ATSG or any subsidiary thereof, or of any successor to or person in control of ATSG such that Red Mountain, the Affiliates and any other person affiliated with Red Mountain, collectively, beneficially own, directly or indirectly, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 13d-3 thereunder (or any comparable or successor law or regulation) in excess of 14.9% of the amount of the issued and outstanding common stock of ATSG, or (ii) any assets of ATSG or any subsidiary or division thereof or of any such successor or controlling person.
By this letter agreement, clause (i) of such subparagraph (a) is hereby amended such that the 14.9% percentage limitation set forth therein is increased to 17.49%.  In addition, Red Mountain and ATSG hereby agree that, for so long as (i) the standstill provisions in the Confidentiality and

Red Mountain Capital Partners LLC
June 11, 2012
Page 2

Standstill Agreement are in effect and (ii) Red Mountain beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or successor law or regulation) in excess of 14.9% of the amount of the issued and outstanding common stock of ATSG, Red Mountain shall, except with the prior written consent of ATSG or the Board of Directors, cause the shares of common stock of ATSG representing the portion of Red Mountain’s beneficial ownership in excess of 14.9% (the “Excess Shares”) to be voted, on all matters submitted by ATSG for a vote of the holders of common stock of ATSG, in accordance with the Board of Directors’ publicly stated recommendations for voting on such matters.  For the avoidance of doubt, Red Mountain (x) is free to vote all shares that are not Excess Shares, and (y) in the event the Board of Directors does not publicly state a recommendation for voting on a matter, is free to vote the Excess Shares on such matter, in each case, as Red Mountain determines in its sole discretion.
This letter agreement shall constitute an amendment to, and constitute a part of, the Confidentiality and Standstill Agreement.  Accordingly, this letter agreement shall terminate concurrently with the termination of the standstill provisions of the Confidentiality and Standstill Agreement.  Except to the extent expressly set forth in this letter agreement, all provisions of the Confidentiality and Standstill Agreement shall remain unchanged and in full force and effect in accordance with the terms thereof.
Please confirm your agreement with the foregoing by signing and returning to the undersigned the duplicate copy of this letter agreement enclosed herewith.

[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Red Mountain Capital Partners LLC
June 11, 2012
Page 3

Very truly yours,
AIR TRANSPORT SERVICES GROUP, INC.

By:       /S/ W. JOSEPH PAYNE       
W. Joseph Payne
Sr. Vice President
Corporate General Counsel & Secretary

ACCEPTED AND AGREED as of the date first written above:

RED MOUNTAIN CAPITAL PARTNERS LLC

By:  /S/   J. CHRISTOPHER TEETS  6/15/2012               
J. Christopher Teets
Authorized Signatoryexhibit10-1.htm

Exhibit 10.1

 

CONSULTATION AGREEMENT

This Consultation Agreement, dated as of June 1, 2012 (the “Agreement”) between TANDY LEATHER FACTORY, INC., a Delaware corporation (and any successor entity thereto, the “Company” or “TLF”) and J. WRAY THOMPSON (the “Consultant”).

WHEREAS the Company desires to retain the Consultant as Chairman of the Board and as a Consultant and the Consultant desires to serve in those positions.

NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1.           EFFECTIVENESS OF AGREEMENT

This Agreement shall become effective as of June 1, 2012.

2.           SERVICE AND DUTIES

2.1           General.  The Company hereby retains the Consultant, and the Consultant agrees to serve as Chairman of the Board of the Company, upon the terms and conditions herein contained.  The Consultant shall have all of the responsibilities and powers normally associated with such office.  The Consultant shall perform such other duties and services for the Company, commensurate with the Consultant’s position, as may be designated from time to time by the Board of Directors of the Company (the “Board”).  The Consultant agrees to serve the Company faithfully and to the best of his ability under the direction of the Board.  It is understood and agreed that the Consultant not be an employee of the Company despite any title assigned to the Consultant.

2.2           Services.  Except as may otherwise be approved in advance by the Board and except during vacation periods and reasonable periods of absence due to sickness, personal injury, or other disability, the Consultant shall be available by telephone, fax, or in person at all reasonable times for consultation throughout the Term (as defined in Section 2.3).  The Consultant shall render his services to the Company during the Term and shall use his best efforts, judgment and energy to improve and advance the business and interest of the Company in a manner consistent with the duties of his position.  However, this Consultation Agreement will be non-exclusive and the Consultant may engage in other business or employment, not inconsistent with the terms of Section 7 herein.

2.3           Term of Service.  The Consultant’s service under this Agreement shall commence as of June 1, 2012 and shall terminate on the earlier of May 31, 2013 or termination of the Consultant’s service pursuant to this Agreement.  The period commencing as of June 1, 2012 and ending on May 31, 2013 is hereinafter referred to as the “Term”.

2.4           Automatic Renewal.                                                       [deleted]

2.5           Company Credit Card/Expenses.                                  [deleted]

3.           SALARY

3.1           Base Salary.  The Consultant shall be entitled to receive a base salary (“Base Salary”) at a rate of $25,000 per annum, payable in arrears in equal installments not less frequently than monthly.  Any increases will be in accordance with the terms hereof.  Once increased, such higher shall constitute the Consultant’s annual Base Salary.

3.2           Annual Review.  The Consultant’s Base Salary shall be reviewed by the Board and its Compensation Committee, based upon the Consultant’s performance, not less often than annually.  In addition to any increases effected as a result of such review, the Board at any time may in its sole discretion increase the Consultant’s Base Salary if, in the Board’s opinion, it is in the best interest of the Company to do so.

4.           BENEFITS

The Consultant will, during the Term of this Agreement, be included to the extent eligible in all Company medical, dental and vision insurance which shall be established by the Company for, or made available to Consultant.  The Company’s medical plan, dental plan and vision plan shall provide benefits substantially similar to those provided to the Company’s existing plans provided for other employees.  During the Term, the benefits described in this Section 4 may only be reduced as a result of a general reduction for Senior Consultants, where the Base Salary is increased to offset benefits lost.  In the event is it necessary to purchase a separate health insurance policy for the Consultant, then the cost of medical, dental or vision insurance will be deducted from the Consultant’s Salary as defined in Section 3.

5.           TERMINATION OF SERVICE

5.1           General.  If, prior to the expiration of the Term, the Consultant’s service is terminated by the Company, the Company shall continue to pay the Consultant the Base Salary (at the rate in effect on the date of such termination) for the remainder of the Term (such period being referred to hereinafter as the “Severance Period”), at such intervals as the same would have been paid had the Consultant remained in the active service of the Company.  In addition, the Consultant shall be entitled to continue to participate during the Severance Period in any benefit plans set forth herein.  The Consultant shall have no further right to receive any other compensation or benefits after such termination or resignation of service except as determined in accordance with the terms of the employee benefits plans or programs of the Company established for Consultant under the terms of this Agreement.

5.2           Death During Term or Severance Period.  In the event of the Consultant’s death during the Term or the Severance Period, payments of the Base Salary under this Section 5 shall terminate.

5.3           Date of Termination.  The date of termination of service shall be the date specified in a written notice of termination to the Consultant.  The date of resignation shall be the date specified in the written notice of resignation from the Consultant to the Company.

6.           DISABILITY

In the event of termination of service by reason of Permanent Disability (as hereinafter defined), the Consultant (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 hereof through the date of disability.  Other benefits shall be determined in accordance with the benefits plans maintained by the Company applicable to the Consultant, and the Company shall have no further obligation hereunder.  For purposes of this Agreement, “Permanent Disability” means a physical or mental disability or infirmity of the Consultant that prevents the normal performance of substantially all his duties as a consultant of the Company, which disability or infirmity shall exist for any continuous period of 60 days.  The presumption of disability will arise if the Consultant is unable to attend two (2) consecutive Board meetings.

 7.           NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION

7.1           Nonsolicitation.  For so long as the Consultant serves the Company and continuing for two years thereafter, the Consultant shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, office or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company:

	
a)

	
1)

	
solicit or endeavor to entice away from the Company, or any of its subsidiaries or

 

	  	
2)

	
solicit any person or entity who during the then most recent twelve-month period, was employed by or served as an agent or key consultant of the Company or any of its Subsidiaries, or

 

	
b)

	  	
solicit or endeavor to entice away from the Company, or any of its subsidiaries, any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated [to the general knowledge of the Consultant or the public] to become a customer or client) of the Company, or any of its subsidiaries.

  

  

  

7.2           Confidentiality.  The Consultant covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company, or any of its subsidiaries and affiliates.  The term “confidential information” includes information not previously disclosed to the public or to the trade by the Company’s management, or otherwise in the public domain, with respect to the Company’s, or any of its affiliates’ or subsidiaries’, products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, cost or profits associated with any of the Company’s products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is general known in the industry or industries in which the Company operates other than as a result of disclosure by any employee of the Company, including, but not limited to, the Consultant’s agreement under this Section 7.2 or (ii) the Consultant is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law.

7.3           Non Compete.  For so long as the Consultant serves the Company (or, if the Consultant is entitled to a continuation of his Base Salary, the period during which such Base Salary is continued) and continuing for two years thereafter, the Consultant shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder, investor, officer or director of a corporation, or as an employee, associate, consult or agent of any person, partnership, corporation or other business organization or entity other than the Company, or any of its subsidiaries, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated [to the general knowledge of the Consultant or the public] to become a competitor) of the Company, or any of its subsidiaries.  Further purposes of this Section 7.3, ownership of securities having no more than one percent of the outstanding voting power of any competitor which is listed on any national securities exchange or traded actively in the national over-the-counter market shall not be deemed to be in violation of this Section so long as Consultant has no other connection or relationship with such competitor.

7.4           Exclusive Property.  The Consultant confirms that all confidential information is and shall remain the exclusive property of the Company.  All business records, papers and documents kept or made by the Consultant relating to the business of the Company shall be and remain the property of the Company.

7.5           Injunctive Relief. Without intending to limit the remedies available to the Company, the Consultant acknowledges that a breach of any of the covenants contained in this Section 7 may result in material and irreparable injury to the Company, or its affiliates or subsidiaries, for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Consultant from engaging in activities prohibited by this Section 7 or such other relief as may be required specifically to enforce any of the covenants in this Section 7.  If for any reason it is held that the restrictions under this Section 7 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 7 as will render such restrictions valid and enforceable.

8.           MISCELLANEOUS

8.1           Notices.  All notices or communications hereunder shall be in writing, addressed as follows:

	  	
To the Company:

	
Tandy Leather Factory, Inc.

	  	  	
1900 Southeast Loop 820

	  	  	
Fort Worth, Texas 76140

	  	
Telecopier No:

	
817-872-3120

	  	
Attention:

	
Jon Thompson

	  	  	  
	  	
With a copy to:

	
William M. Warren

	  	  	
Loe, Warren, Rosenfield, Kaitcer, Hibbs & Windsor, PC

	  	  	
4420 W. Vickery Blvd

	  	  	
Fort Worth, Texas  76107

	  	
Telecopier No:

	
817-377-1120

	  	  	  
	  	
To the Consultant:

	
J. Wray Thompson

	  	  	
3200 Penny Lane

	  	  	
Mansfield, Texas  76063

All such notices shall be conclusively deemed to be received and shall be effective (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed.

8.2           Severability.  Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

8.3           Assignment.  The Company’s rights and obligations under this Agreement shall not be assignable by the Company except as incident to a reorganization, merger or consolidation, or transfer of all or substantially all of the Company’s business and properties.   Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Consultant.

8.4           Entire Agreement.  This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Consultant, including, without limitation, the Prior Agreement.  This Agreement may be amended at any time by mutual written agreement of the parties hereto.  In the case of any conflict between any express term of this Agreement and any statement contained in any employment manual, memo or rule of general applicability of the Company, this Agreement shall control.

8.5           Withholding.  The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company’s employee benefit plans, if any.

8.6           Governing Law.  This Agreement shall be construed, interpreted and governed in accordance with the laws of Texas without reference to rules relating to conflict of law.  The venue for any dispute will be in the Court of applicable jurisdiction in Tarrant County, Texas.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Consultant has hereunto set his hand, as of the day and year first above written.

	  	  	
TANDY LEATHER FACTORY, INC.

	  	  	  
	  	  	
By:  /s/ Jon Thompson

	  	  	
Chief Executive Officer and President

	  	  	  
	  	  	
Consultant

	  	  	  
	  	  	
/s/ J. Wray Thompson

	  	  	
J. Wray Thompson

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