SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rune
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE LEATHER FACTORY, INC.
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(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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THE LEATHER FACTORY, INC.
3847 East Loop 820 South
Fort Worth, Texas 76119
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held May 24, 2000
To the Holders of Common Stock of
THE LEATHER FACTORY, INC.:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
The Leather Factory, Inc., a Delaware corporation (the "Company"), will be held
in the Metropolitan Room at the Radisson Plaza Hotel, 815 Main Street, Fort
Worth, Texas, Wednesday, May 24, 2000 at 10:00 a.m., Central Daylight Time, for
the following purposes:
(1) To elect eight (8) persons to serve as directors until the Company's
2001 Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and
(2) To transact any other proper business brought before the meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed April 24, 2000, at the close of
business, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and any adjournment or postponement
thereof. Only holders of record of the Company's Common Stock, $0.0024 par value
("Common Stock"), on that date are entitled to vote on matters coming before the
meeting and any adjournment or postponement thereof. A complete list of
stockholders entitled to vote at the meeting will be maintained and available
for inspection in the Company's offices at 3847 East Loop 820 South, Fort Worth,
Texas 76119, for ten (10) days prior to the meeting. The list will also be
available for examination at the meeting.
Please advise the Company's transfer agent, Securities Transfer
Corporation, 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248, of any change
in your address.
Your vote is important. Whether or not you plan to attend the annual
meeting, please sign and date the enclosed proxy and return it in the envelope
provided, which requires no postage if mailed in the United States. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE SIGNED AND RETURNED
TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED. The proxy card should be signed
by all registered holders exactly as the shares are registered. Any person
giving a proxy has the power to revoke it at any time prior to its exercise and,
if present at the meeting, may withdraw it and vote in person. Attendance at the
annual meeting is limited to stockholders, their proxies and invited guests of
the Company.
By Order of the Board of Directors,
/s/ William M. Warren
------------------------------------
William M. Warren
General Counsel and Secretary
Fort Worth, Texas
April 24, 2000
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THE LEATHER FACTORY, INC.
3847 East Loop 820 South
Fort Worth, Texas 76119
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PROXY STATEMENT
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 24, 2000
The accompanying proxy, mailed together with this Proxy Statement, is
solicited by The Leather Factory, Inc. (the "Company") in connection with the
Annual Meeting of Stockholders to be held on May 24, 2000 (the "Annual
Meeting"), at 10:00 a.m., Central Daylight Time, in the Metropolitan Room of the
Radisson Plaza Hotel, 815 Main Street, Fort Worth, Texas, and any adjournments
or postponements thereof. This Proxy Statement and the accompanying Notice of
Annual Meeting of Stockholders and form of Proxy were first mailed to
stockholders of the Company (the "Stockholders") on or about April 24, 2000.
As indicated in the attached Notice, the purpose of the Meeting is: (1) to
elect eight (8) persons to serve as directors until the Company's 2001 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified; and (2) to transact any other proper business brought before the
meeting or any adjournments or postponements thereof.
All holders of record of shares of the Company's Common Stock at the close
of business on April 24, 2000 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. On the Record Date, the Company had outstanding
9,873,161 shares of Common Stock. Each share of Common Stock is entitled to one
vote for each director to be elected and upon all other matters to be brought to
vote by the Stockholders at the Annual Meeting. Cumulative voting for the
election of directors is not permitted. The presence, in person or by proxy, of
holders of a majority of the outstanding shares of Common Stock entitled to vote
as of the Record Date, exclusive of treasury shares, is necessary to constitute
a quorum at the Annual Meeting. If a quorum is present, the persons receiving a
plurality of the votes of the shares represented in person or by proxy and
entitled to vote on the election of directors, shall be elected directors. The
affirmative vote of holders of a majority of the shares of Common Stock
represented at the Annual Meeting is required on all other actions proposed.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions and broker non-votes have no effect on
determining plurality, except to the extent that they affect the total votes
that any particular nominee receives. Abstentions may be specified on all other
proposals and will be counted as present for purpose of the item on which the
abstention is noted. Under the rules of the American Stock Exchange, brokers who
hold shares in street name for customers have the authority to vote on only the
election of directors when they have not received instructions from beneficial
owners.
Any stockholder has the unconditional right to revoke his proxy at any time
before it is voted. Any proxy given may be revoked either by a written notice
duly signed and delivered to the Secretary of the Company prior to the exercise
of the proxy, by execution of a subsequent proxy or by voting in person at the
Annual Meeting (although attending the Annual Meeting without executing a ballot
or executing a subsequent proxy will not constitute revocation of a proxy).
Where a Stockholder's duly executed proxy specifies a choice with respect to a
voting matter, the shares will be voted accordingly. If no such specification is
made, the shares will be voted FOR the nominees for director identified below.
Certain officers and directors of the Company own in excess of two-thirds
of the outstanding shares of Common Stock that will be entitled to vote at the
meeting (see "Security Ownership of Certain Beneficial Owners and Management").
It is anticipated that these shares will be voted in favor of the nominees for
director as identified below. Thus, approval of the nominees for director
identified below is likely.
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ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall from
time to time be fixed and determined only by resolution of the Board of
Directors. By action of the Board of Directors, the number of directors
comprising the Board of Directors has been set at eight (8).
The nominees listed below will stand for election at this Annual Meeting
for a one-year term of office expiring at the 2001 Annual Meeting of
Stockholders or until their successors are duly elected and qualified. Proxies
cannot be voted for the election of more than eight (8) persons to the Board.
Unless otherwise directed on any duly executed and dated proxy, the persons
named in such proxy intend to nominate and to vote the shares represented by
such proxy for the election of the nominees listed in the table below for the
office of director of the Company to hold office until their respective
successors have been duly elected and qualified:
NAME AGE POSITION
Wray Thompson (1)(2) 68 Chairman of the Board, Chief Executive
Officer, President, and Director
Joseph R. Mannes (1)(3)(4) 41 Director
H.W. Markwardt (1)(3)(4) 64 Director
Robin L. Morgan (1)(2)(5) 49 Vice President - Administration and Director
Ronald C. Morgan (1)(2)(5) 52 Executive Vice President, Chief Operating
Officer and Director
Anthony C. Morton (3) 40 Director
John Tittle, Jr. (3)(4) 42 Director
William M. Warren 55 Secretary, General Counsel, and Director
- ---------------------
(1) Member of 1995 Stock Option Plan Committee
(2) Member of 1995 Director Non-Qualified Stock Option Plan Committee
(3) Member of Audit Committee
(4) Member of Compensation Committee
(5) Ronald C. Morgan and Robin L. Morgan are married.
The Company is informed that the nominees listed above are willing to serve
as directors. However, if any of these individuals should decline or become
unable to serve as a director for any reason, then votes will be cast instead
for a substitute nominee designated by the Board of Directors or, if none is so
designated, will be cast according to the judgment of the person or persons
voting the proxy.
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Business Experience of Directors
Wray Thompson, has served as the Chairman of the Board, President, and
Chief Executive Officer of the Company since June 1993. Mr. Thompson was a
co-founder of the Company's predecessor, The Leather Factory, Inc., a Texas
corporation ("TLF-Texas"). Mr. Thompson has served as the Chairman of the Board,
Chief Executive Officer and a Director of TLF-Texas since its inception in 1980.
Joseph R. Mannes has served as a Director of the Company since May 1998.
Currently, Mr. Mannes serves as Chief Financial Officer of E-Certify Corp. of
Dallas, Texas, a security-oriented information technologies consultancy focusing
on web applications. From October 1998 to January 2000, Mr. Mannes served as
Chief Financial Officer and Secretary of Clearwire Technologies, Inc. of
Arlington, Texas, a provider of wireless internet connectivity. From April 1997
to September 1998 Mr. Mannes was Vice President and General Manager of Imagic
Online, the online game subsidiary of Interactive Magic, a Cary, North Carolina,
computer game company. From February 1996 to April 1997 Mr. Mannes served as the
Chief Financial Officer, Secretary and Treasurer of Interactive Creations
Incorporated (ICI), a corporation offering real-time internet gaming services.
From 1987 until joining ICI, Mr. Mannes was First Vice President in the
Corporate Finance Department of Rauscher Pierce Refsnes, Inc., a Dallas, Texas
investment firm. Mr. Mannes is a Chartered Financial Analyst. He also serves on
the Board of Directors of Karts International, Inc. of Covington, Louisiana.
H.W. "Hub" Markwardt has served as a Director of the Company since May
1996. He was the founder of Encon Industries, L.P. ("Encon"), Fort Worth, Texas,
an importer of ceiling fans, and served as Encon's Chief Operating Officer from
1977 until 1995. He currently manages his personal investments.
Robin L. Morgan has served as Vice President of Administration and Director
of the Company since June 1993. Ms. Morgan is responsible for import, banking,
and procurement for the Company's import product lines and maintains all
inventory costs. She also administers special projects, employee benefit plans,
and insurance programs.
Ronald C. Morgan, has served since June 1993 as Chief Operating Officer,
Executive Vice President, and Director of the Company. A co-founder of
TLF-Texas, Mr. Morgan has served as Chief Operating Officer, Executive Vice
President, and a Director of TLF-Texas since its formation in 1980. He presently
serves on the Board of Directors of Karts International Inc. of Covington,
Louisiana.
Anthony C. Morton has served as a Director of the Company since January
1998. Currently, Mr. Morton serves as Vice President and Chief Financial Officer
of PYCO Industries, Inc. (formerly Plains Cooperative Oil Mill, Inc.) in
Lubbock, Texas, the largest farmer-owned cooperative cottonseed marketing
association in the United States. He served as Chief Financial Officer and
Treasurer of the Company from January 1998 through December 1998. Mr. Morton was
the Company's Controller from August 1993 to January 1998. Mr. Morton was
licensed as a Certified Public Accountant (CPA) in 1983.
John Tittle, Jr. has served as a Director of the Company since May 1998.
Since April 1998, Mr. Tittle has served as President of John Tittle, Jr., CPA,
PC, and Cascade International Capital Corporation ("Cascade"). Cascade provides
corporate finance advisory services. From November 1996 to March 1998, Price
Waterhouse LLP employed Mr. Tittle as a Senior Manager, then Director, in the
firm's Financial Advisory Services practice. Mr. Tittle served as Chief
Financial Officer, Treasurer and Director of the Company from April 1993 to
October 1996. Mr. Tittle became a CPA in Texas in 1980. He serves on the Board
of Directors of Cascade International Capital Corporation and John Tittle, Jr.,
CPA, PC.
William M. Warren has served as Secretary, General Counsel, and Director of
the Company since June 1993. Mr. Warren has been General Counsel of TLF-Texas
since its formation in 1980. Since 1979, Mr. Warren has been President of the
law firm known as Loe, Warren, Rosenfield, Kaitcer & Hibbs, P.C., Fort Worth,
Texas. Other directorships held by Mr. Warren include Loe, Warren, Rosenfield,
Kaitcer & Hibbs, P.C., Wichita, Tillman and Jackson Railroad Company, and Idaho
Northern & Pacific Railroad Company. Mr. Warren also serves as Trustee of the
James D. Burton Estate.
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<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 2000, by (i) each
director and nominee for director, (ii) the executive officers of the Company
named in the table under "Executive Compensation - Summary of Cash and Certain
Other Compensation", (iii) all executive officers and directors of the Company
as a group, and (iv) all persons who are known by the Company to be beneficial
owners of 5% or more of the Company's outstanding Common Stock. On March 31,
2000, there were 9,873,161 shares outstanding. Unless otherwise noted, the
persons listed below have sole voting and investment power with respect to such
shares.
Names of Directors, Officers and 5% Number of Right to Acquire Percent of
Stockholders(1) Shares Owned(2) (Stock Options)(3) Total Class
--------------- --------------- ------------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Wray Thompson 2,874,849 - 2,874,849 29.12
Ronald C. Morgan 3,296,264 - 3,296,264 (4) 33.39
Robin L. Morgan 3,296,264 - 3,296,264 (4) 33.39
The Leather Factory, Inc. Employees' Stock
Joseph R. Mannes - 4,000 4,000 *
H.W. "Hub" Markwardt 68,000 8,000 76,000 *
Anthony C. Morton 8,645 2,000 10,645 *
John Tittle, Jr. 19,419 4,000 23,419 *
William M. Warren 26,185 10,000 36,185 (6) *
All Executive Officers and Directors as a
group (8 persons) 6,293,362 28,000 6,321,362 64.03
</TABLE>
- --------------------
* Less than 1% of the class.
(1) The address of Wray Thompson, Ronald C. Morgan, Robin L. Morgan and the
ESOP (as defined below) is 3847 East Loop 820 South, Fort Worth, Texas
76119.
(2) The amounts shown for Executive Officers include the beneficial interests
in shares allocated to their individual ESOP accounts.
(3) Shares that Directors have right to acquire pursuant to exercise of options
granted under the 1995 Director Stock Option Plan.
(4) The shares beneficially owned by Mr. Morgan and Ms. Morgan are held as
community property. Therefore, the total number of shares held by them
(3,296,264) is shown as owned by each of them.
(5) The Trustee of the Employees' Stock Ownership Plan & Trust ("ESOP") votes
the shares held by the ESOP which are allocated to participant accounts, as
directed by the participants or beneficiaries of the ESOP. Except in
certain limited circumstances, the Trustee may acquire and dispose of the
assets of the ESOP only as the ESOP Committee directs. The ESOP Committee
is made up of officers and other employee participants of the Company and
presently consists of Ronald C. Morgan, Robin L. Morgan, and three other
employees. As members of this Committee, these persons may be deemed to
share investment power with respect to the allocated shares held by the
ESOP. Each of the members of the ESOP Committee disclaims any beneficial
ownership of the securities held by the ESOP except for those that have
been allocated to such member as a participant in the ESOP. The total
number of shares held by the ESOP includes 243,650 shares which are
beneficially owned by the above-named Executive Officers and are also
included in the table as being owned by such persons.
(6) Includes 13,300 shares held by Mr. Warren as the representative for Loe,
Warren, Rosenfield, Kaitcer & Hibbs, P.C. Mr. Warren claims sole voting and
investment power with respect to such shares.
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Committees and Meetings of the Board of Directors
During the fiscal year ending December 31, 1999, the Board of Directors
held three (3) meetings. Joseph R. Mannes attended one meeting of the Board of
Directors in 1999. No other Director attended fewer than 75% of the meetings of
the Board of Directors during the year.
Audit Committee
The Board of Directors established an Audit Committee in March 1994.
Presently, the members of this committee are Joseph R. Mannes, Anthony C.
Morton, John Tittle, Jr. and H. W. "Hub" Markwardt. Under the charter of the
Audit Committee, representative duties of the committee include: (i) reviewing
with the Company's management and independent accountants, the Company's general
policies and procedures to reasonably assure the adequacy of internal accounting
and financial reporting controls, (ii) reviewing prior to the annual audit, the
scope and general extent of the independent accountants' audit examination,
(iii) reviewing with management and the independent accountants, upon completion
of the independent audit, financial results for the year, prior to the release
of annual financial results to the public, (iv) discussing with Company
management the scope and quality of internal accounting and financial reporting
controls in effect, and (v) recommending to the Board of Directors as to the
retention or nonretention of the independent accountants. The Audit Committee
met two (2) times during 1999.
Compensation Committee
The Board of Directors established a Compensation Committee in September
1994. Presently, the members of this committee are Joseph R. Mannes, John
Tittle, Jr., and H. W. "Hub" Markwardt. The Compensation Committee did not meet
during 1999. See "Executive Compensation - Compensation Committee Report."
1995 Stock Option Plan Committee
The Board of Directors established the 1995 Stock Option Plan Committee in
September 1995. The members of this Committee are Chairman, Ronald C. Morgan, H.
W. "Hub" Markwardt, Joseph R. Mannes, Robin L. Morgan and Wray Thompson. The
1995 Stock Option Plan Committee has the general duty to review and approve the
granting of stock options pursuant to the 1995 Stock Option Plan. The 1995 Stock
Option Plan Committee did not meet during 1999.
1995 Director Non-Qualified Stock Option Plan Committee
The Board of Directors established the 1995 Director Non-Qualified Stock
Option Plan Committee (the "Director Plan Committee") in September 1995. The
Director Plan Committee was composed of Chairman, Ronald C. Morgan, Robin Morgan
and Wray Thompson. The Director Plan Committee reviews and approves granting of
stock options for the Board of Directors pursuant to the terms of the 1995
Director Plan. The 1995 Director Plan Committee met one (1) time during 1999
with all members in attendance.
Director Nominating Committee
The Board of Directors has no standing nominating committee. The entire board
selects nominees to serve as directors.
Directors' Compensation
A director who is also an officer and employee of the Company is not
compensated for service as a member of the Board of Directors or any committee
of the Board. For the fiscal year ended December 31, 1999, directors who were
not officers received $1,000 per attended meeting, with the non-employee members
of the Audit Committee and the Compensation Committee receiving $250 per
attended meeting, except in the case of Mr. Warren, who billed the Company at
his customary professional rate for time spent attending Board and committee
meetings.
During 1999, five (5) directors were granted options to purchase 2,000
shares each for a total of 10,000 shares under the Company's 1995 Director
Non-Qualified Stock Option Plan.
5
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EXECUTIVE OFFICERS OF THE COMPANY
Certain information is set forth below concerning the executive officers of
the Company.
NAME AGE POSITION
---- --- --------
Wray Thompson 68 Chairman of the Board, Chief Executive Officer,
President, and Director
Ronald C. Morgan 52 Executive Vice President, Chief Operating
Officer and Director
Robin L. Morgan 49 Vice President - Administration and Director
William M. Warren 55 Secretary, General Counsel, and Director
Business Experience of Executive Officers
See "Election of Directors - Business Experience of Directors."
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the compensation awarded by the Company to
its Chairman of the Board, President and Chief Executive Officer (CEO) and its
most highly compensated executive officer other than its CEO for services
rendered during the fiscal years ended December 31, 1997, 1998 and 1999. No
other person serving as an executive officer as of December 31, 1999 received
salary and bonus compensation in excess of $100,000 during fiscal 1999, or in
any of the prior two years.
Summary Compensation Table
Annual Compensation All Other Compensation
Name and Principal Position Year Salary ($) ($) (1)
--------------------------- ---- ------------------- ----------------------
Wray Thompson 1999 162,500 6,805
Chairman, President 1998 144,379 7,092
And CEO 1997 157,501 96
Ronald C. Morgan 1999 146,600 6,118
Executive VP, Chief 1998 129,801 6,376
Operating Officer 1997 141,601 65
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(1) The amounts in this column represent the amounts accrued on behalf of the
named individuals for the annual contribution to the Company's ESOP.
Compensation Committee Report
The Compensation Committee of the Company's Board of Directors consists
entirely of outside directors of the Company. In 1995, the Compensation
Committee adopted the following statement of overall executive compensation
policies:
The basic philosophy of the Company's executive compensation program is to
link the compensation of its executive officers to their contribution
toward increases in the size of the operations and income of the Company
and accordingly, increases in stockholder value. Consistent with that
philosophy, the executive compensation program is designed to meet the
following policy objectives:
1. Attracting and retaining qualified executives critical to the
long-term success of the Company;
2. Tying executive compensation to the Company's general performance and
specific attainment of long-term strategic goals;
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3. Rewarding executives for contributions to strategic management
designed to enhance long-term stockholder value; and
4. Providing incentives that align the executive's interest with those of
the Company's stockholders.
Based on these goals, the Compensation Committee determines the
compensation of Wray Thompson and Ronald C. Morgan (the "Named Executive
Officers"). The elements of compensation for the Named Executive Officers
consist of base salary, annual incentive bonuses, stock option awards and
participation in the Company's Employee Stock Ownership Plan and Trust (the
"ESOP").
Base Salary
There have been no Committee-initiated adjustments to Messrs. Thompson and
Morgan's compensation since 1996. Due to the financial performance of the
Company in 1997, both officers volunteered to reduce their 1996 salary levels
for 1997 by 10%. For 1998, they again volunteered to reduce their salaries by
one month's pay (approximately 8.33%). In 1999, the two executives ended their
voluntary reduction and deferral of a portion of their base salaries. Their base
salaries returned to the levels in 1997, and each received an additional $5,000
as payment of salary that had been deferred from prior periods. Messrs. Thompson
and Morgan claim no additional amounts as voluntarily deferred base salary from
years prior to 1999.
Annual Incentive Bonus
Historically, the Company has awarded discretionary bonuses to its
Executive Officers as well as certain other officers of the Company. These
bonuses were determined on a subjective basis, using historical bonus amounts,
the availability of cash, the need to provide bonuses to other officers and
employees, the business prospects for the upcoming year, and the increase in net
income for the year in question as general guidelines. No other quantitative
criteria were used in the determination of the discretionary bonuses. For the
fiscal year ended December 31, 1999, no bonuses were awarded to the Executive
Officers.
Stock Options
No grants of options were made during the year to Executive Officers
pursuant to the 1995 Stock Option Plan.
Employees' Stock Ownership Plan and Trust
The Employees' Stock Ownership Plan and Trust ("ESOP"), effective October 1,
1993 (including amendments and restatements) was established for employees with
at least one year of service (as defined by the ESOP) and who have reached their
21st birthday. The Executive Officers participated in the ESOP in keeping with
the terms and provisions of the ESOP, in the same manner as all other
participants of the ESOP.
As of December 31, 1999, 156 employees and former employees were
participants in and beneficiaries of the ESOP. Under the ESOP, the Company makes
annual cash or stock contributions to a trust for the benefit of eligible
employees. The trust invests in shares of the Company's Common Stock. The amount
of the Company's annual discretionary contribution for 1999 was $208,214.
Amounts contributed to the ESOP vest at three or greater years of service.
Shares of Common Stock vested in participants will be distributed upon the
participant's separation from service, retirement, death or permanent
disability.
For the fiscal years ended December 31, 1999, 1998, and 1997, the Company's
Board of Directors approved contributions of 5.6%, 11.6%, and 1.2%,
respectively, of annual compensation for the eligible employees. The Company
contributed $6,805 and $6,118, respectively, as contributions for Messrs. Wray
Thompson and Ron Morgan for the fiscal year ended December 31, 1999.
COMPENSATION COMMITTEE 1995 STOCK OPTION PLAN COMMITTEE
H. W. "Hub" Markwardt Ronald C. Morgan, Chairman
Joseph R. Mannes Robin Morgan Wray Thompson
John Tittle, Jr. H. W. "Hub" Markwardt Joseph R. Mannes
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STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative five-year total stockholder return with the Standard &
Poor's SmallCap 600 Index, and the common stock of a peer group of companies
(the "Peer Group") whose returns are weighted according to their respective
market capitalizations. The graph assumes that $100 was invested on December 31,
1994 in the Company's Common Stock, the Standard & Poor's SmallCap 600 Index,
and the Peer Group, and that all dividends were reinvested. The Peer Group
consists of companies with publicly-traded stock included in SIC 5190 -
Miscellaneous Non-Durable Goods Wholesale. The following graph is not, nor is it
intended to be, indicative of future performance of the Common Stock.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Company Name / Index Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99
- ---------------------- ------ ------ ------ ------ ------ ------
LEATHER FACTORY INC 100 57.34 19.11 11.76 5.88 19.11
- ---------------------- ------ ------ ------ ------ ------ ------
S&P SMALLCAP 600 INDEX 100 129.96 157.67 198.01 195.42 219.66
- ---------------------- ------ ------ ------ ------ ------ ------
PEER GROUP 100 122.49 126.07 137.72 90.45 47.40
- --------------------------------------------------------------------------------
Data Source: S&P Compustat Services
8
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CERTAIN TRANSACTIONS
During 1999 the law firm of Loe, Warren, Rosenfield, Kaitcer and Hibbs,
P.C., of which Mr. William M. Warren, Secretary, General Counsel, and Director
of the Company, is a shareholder, was compensated for rendering services to the
Company.
During 1999 Cascade International Capital Corporation, of which Mr. John
Tittle, Jr., a Director of the Company, is President, was compensated for
providing customary Chief Financial Officer services on an interim basis and for
rendering financial advisory services to the Company. Fees paid to Cascade in
1999 totaled $149,898.
During 1995, the Company loaned John Tittle, Jr., a Director of the
Company, the sum of $40,000. The loan bore interest at the rate of six percent
(6%) per annum. This loan, which was made while Mr. Tittle served as the
Company's Chief Financial Officer and Treasurer, was to mature (including
extentions) on December 31, 1997. During 1996, the Company purchased from a bank
loans to Mr. Tittle and other employees (including certain officers) that
related to stock purchased under the Company's 1993 Non-Qualified Incentive
Stock Option Plan (the "Stock Loans"). At December 31, 1997, Mr. Tittle's
$40,000 loan referred to above and the Stock Loans were placed on a three (3)
year payment schedule, including interest at six percent (6%) per year, with all
remaining principal and interest due December 31, 2000. The total principal
balance of the two loans to Mr. Tittle at January 1 and December 31, 1999 was
$91,069 and $0, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
United States Securities and Exchange Commission (the "SEC") and the American
Stock Exchange initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. These persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies of the
reports furnished to the Company and written representations from all of the
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities, no other reports were required to be filed, and
all Section 16(a) filing requirements applicable to these persons were complied
with during the fiscal year ended December 31, 1999.
AUDITORS
Representatives of the Company's auditors for the fiscal year ended December
31, 1999, Hein + Associates LLP, are expected to be present at the meeting with
the opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions.
The Audit Committee has not made a recommendation to the Board regarding the
retention or nonretention of Hein + Associates LLP for fiscal year 2000. The
Committee historically meets in the fall to discuss the election of auditors for
the current year.
STOCKHOLDER PROPOSALS
In order for any stockholder proposal to receive consideration for inclusion
in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders,
the proposal must be received at the Company's offices at 3847 East Loop 820
South, Fort Worth, Texas 76119, Attention: Secretary, by December 15, 2000.
9
<PAGE>
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of the
Company's Board of Directors. The Company will pay the expenses of this proxy
solicitation. In addition to the solicitation by mail, some of the officers and
regular employees of the Company may solicit proxies personally or by telephone,
if deemed necessary. The Company will request brokers and other fiduciaries to
forward proxy soliciting material to the beneficial owners of shares which are
held of record by the brokers and fiduciaries, and the Company may reimburse
them for reasonable out-of-pocket expenses incurred by them in connection
therewith.
OTHER MATTERS
The Board of Directors is not aware of any matter, other than the matters
described above, to be presented for action at the meeting. However, if any
other proper items of business should come before the meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.
The Annual Report to Stockholders for the fiscal year ended December 31,
1999, which includes the financial statements, is enclosed with the Proxy
Statement. The Annual Report does not form a part of the Proxy Statement or the
materials for the solicitation of proxies to be voted at the Annual Meeting.
Information contained in the Proxy Statement relating to the occupations and
security holdings of directors and officers of the Company is based upon
information received from the individual directors and officers.
COPIES OF THE COMPANY'S 1999 ANNUAL REPORT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K (WHICH IS INCLUDED IN THE COMPANY'S ANNUAL
REPORT) ARE AVAILABLE TO STOCKHOLDERS UPON RECEIPT OF A WRITTEN REQUEST OF SUCH
PERSON ADDRESSED TO CHERYL LANDRY, 3847 EAST LOOP 820 SOUTH, FORT WORTH, TEXAS,
76119. THE COMPANY WILL ALSO FURNISH A COPY OF THE ANNUAL REPORT TO ANY
"BENEFICIAL OWNER" OF THE COMPANY'S COMMON STOCK AT NO CHARGE UPON RECEIPT AT
THIS ADDRESS OF A WRITTEN REQUEST CONTAINING A GOOD FAITH REPRESENTATION THAT,
AT THE RECORD DATE, SUCH PERSON WAS A BENEFICIAL OWNER OF SECURITIES OF THE
COMPANY ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY
24, 2000. COPIES OF ANY EXHIBIT TO THE FORM 10-K WILL BE FURNISHED UPON THE
PAYMENT OF A REASONABLE FEE.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT
WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
/s/ William M. Warren
-----------------------------------
William M. Warren
General Counsel and Secretary
Fort Worth, Texas
April 24, 2000
10
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REVOCABLE PROXY
THE LEATHER FACTORY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Robin L. Morgan and William M.
Warren, or either of them, with full power of substitution, proxies of the
undersigned, with all the powers that the undersigned would possess if
personally present to cast all votes that the undersigned would be entitled to
vote at the Annual Meeting of Stockholders of The Leather Factory, Inc. (the
"Company") to be held on Wednesday, May 24, 2000, in the Metropolitan Room,
Raddison Plaza Hotel, 815 Main Street, Fort Worth, Texas at 10:00 a.m., Central
Daylight Time, and any and all adjournments or postponements thereof (the
"Annual Meeting"), including (without limiting the generality of the foregoing)
to vote and act as follows:
1. Election of eight directors.
[ ]FOR the nominees listed below [ ]WITHHOLD AUTHORITY
(except as indicated to the to vote for the nominees listed below.
contrary below).
Joseph R. Mannes Anthony C. Morton
H.W. "Hub" Markwardt John Tittle, Jr.
Ronald C. Morgan Wray Thompson
Robin L. Morgan William M. Warren
Instructions: To withhold authority to vote for any individual nominee or
nominees, write their name(s) here.
- --------------------------------------------------------------------------------
Your Board of Directors unanimously recommends a vote FOR the nominees set
forth above
(Continued and to be signed on the reverse side)
<PAGE>
(Continued from other side)
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting.
This Proxy will be voted at the Annual Meeting or any adjournments or
postponements thereof as specified. If no specifications are made, this Proxy
will be voted FOR the election of directors. This Proxy hereby revokes all prior
proxies given with respect to the shares of the undersigned.
Please complete, date, sign and mail this Proxy promptly in the enclosed
envelope. No postage is required for mailing in the United States.
Dated: , 2000
-----------------------------
-----------------------------------------
Signature(s)
-----------------------------------------
Signature(s)
IMPORTANT: Please date this Proxy and
sign exactly as your name appears to the
left. If shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give title
as such. If a corporation, please sign
in full corporate name by president or
other authorized representative. If a
partnership, please sign in partnership
name by authorized person.
