As filed with the Securities and Exchange Commission on July 15, 2004
Registration No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_____________________________
THE LEATHER FACTORY, INC.
(Exact Name of Registrant as Specified in its Charter)
_____________________________
DELAWARE 75-2543540
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
3847 EAST LOOP 820 SOUTH
FORT WORTH, TEXAS 76119
(817) 496-4414
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
_____________________________
WRAY THOMPSON
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
THE LEATHER FACTORY, INC.
3847 EAST LOOP 820 SOUTH
FORT WORTH, TEXAS 76119
(817) 496-4414
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
_____________________________
COPY TO:
-------
PATRICK A. REARDON
ATTORNEY-AT-LAW
210 WEST 6TH STREET, SUITE 401
FORT WORTH, TEXAS
(817) 348-8801
FAX: (817) 348-8804
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM OFFERING
TITLE OF CLASS OF SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED(1) PRICE PER SHARE(2)
Common Stock, $.0024 par value 350,000 $ 4.19
--------------------------------------------- -------------------------- -------------------
Total Registration Fee 350,000 $ 4.19
--------------------------------------------- -------------------------- -------------------
TITLE OF CLASS OF SECURITIES TO BE REGISTERED PROPOSED MAXIMUM AGGREGATE OFFERING PRICE AMOUNT OF REGISTRATION FEE
------------------------------------------ ---------------------------
Common Stock, $.0024 par value $ 1,466,500.00 $ 185.81
--------------------------------------------- ------------------------------------------ ---------------------------
Total Registration Fee $ 1,466,500.00 $ 185.81
--------------------------------------------- ------------------------------------------ ---------------------------
(1) In the event of a stock split, stock dividend or similar transaction
involving the Common Stock, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover the additional shares in
accordance with Rule 416(a) under the Securities Act of 1933.
(2) Estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act and computed pursuant to Rule
457(c) under the Securities Act based upon the average ($4.19) of the high
($4.20) and low ($4.18) prices of the common stock on July 13, 2004, as quoted
on the American Stock Exchange. It is not known how may shares will be purchased
under this registration statement or at what price shares will be purchased.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND THE SELLING STOCKHOLDERS
ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 15, 2004
PROSPECTUS
THE LEATHER FACTORY, INC.
350,000 Shares of Common Stock
___________________________
This prospectus may be used only for the resale of up to 350,000 shares already
issued or to be issued of our Common Stock, $0.0024 par value, by the selling
stockholders listed in this prospectus under the section "Selling Stockholders".
These shares include 200,000 shares held by certain stockholders and 150,000
shares issued by us to affiliates of Westminster Securities Corporation upon
exercise of warrants. The selling stockholders will receive all of the proceeds
from the sale of shares of Common Stock hereunder and will pay all underwriting
discounts and selling commissions, if any, applicable to the sale of such
shares. We will pay the expenses incurred in registering the shares, including
legal and accounting fees.
The prices at which the selling stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of shares
by the selling stockholders.
Our common stock is quoted on the American Stock Exchange under the symbol
"TLF." On July 13, 2004, the last reported sale price for our common stock on
the American Stock Exchange was $4.18 per share.
____________________________
THE SECURITIES OFFERED INVOLVE A DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU SHOULD CONSIDER BEFORE
BUYING ANY SHARES OF OUR COMMON STOCK.
_____________________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is _____________, 2004
TABLE OF CONTENTS
PAGE
----
Summary 3
Risk Factors 5
Forward-Looking Statements 7
Use of Proceeds 7
Selling Stockholders 8
Plan of Distribution 9
Legal Matters 12
Experts 12
Where You Can Find More Information 12
Incorporation of Certain Documents by Reference 13
You should rely only on the information we have provided or incorporated by
reference in this prospectus. Neither we nor the selling stockholders have
authorized anyone to provide you with additional or different information. The
selling stockholders are not making an offer of these securities in any
jurisdiction where the offer is not permitted. You should assume that the
information in this prospectus is accurate only as of the date on the front of
the document and that any information we have incorporated by reference is
accurate only as of the date of the document incorporated by reference. In this
prospectus, unless otherwise indicated, "TLF", "Leather Factory", "we", "us" or
"our" refer to The Leather Factory, Inc. and its subsidiaries.
SUMMARY
This Summary highlights important features of this offering and the
information included or incorporated by reference into this prospectus. This
summary does not contain all of the information that you should consider before
investing in our Common Stock. You should read the entire prospectus carefully,
especially the risks of investing in our Common Stock discussed under the
section titled "Risk Factors."
References in this prospectus to "us," "we," the "Company" or "Leather Factory"
shall mean The Leather Factory, Inc. and our consolidated subsidiaries, unless
the context indicates otherwise.
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, the selling stockholders may, from time to time, sell
their shares of our Common Stock in one or more offerings. This prospectus
provides you with a general description of the Common Stock being offered. You
should read this prospectus, including any documents incorporated herein by
reference, together with additional information described under the heading
"Where You Can Find More Information."
The registration statement that contains this prospectus, including the exhibits
to the registration statement, contains additional information about us and the
securities offered under this prospectus. That registration statement can be
read at the Securities and Exchange Commission's offices mentioned under the
heading "Where You Can Find More Information."
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and in any accompanying supplement
to this prospectus. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of Common Stock.
THE LEATHER FACTORY, INC.
We are a retailer and wholesale distributor of a broad line of leather and
related products, including leather, leatherworking tools, buckles and
adornments for belts, leather dyes and finishes, saddle and tack hardware, and
do-it-yourself kits. We also manufacture leather lacing and kits. During 2003,
our consolidated sales totaled $41.7 million of which approximately 6.6% were
export sales. Our Common Stock trades on the American Stock Exchange under the
symbol "TLF".
At June 30, 2004, we operated 30 Leather Factory wholesale distribution
centers and 32 Tandy Leather retail stores. We also own and operate Roberts,
Cushman and Company, Inc., a manufacturer of custom hat trims.
Our three segments can be summarized as shown below:
1. THE LEATHER FACTORY sells to a mixture of customers that include
resellers, national accounts, institutional and retail customers and
manufacturers. The Leather Factory's products are leather and related products,
including leatherworking tools, buckles and adornments for belts, leather dyes
and finishes, saddle and tack hardware, and do-it-yourself kits. We have a
chain of 30 outlet stores located in the United States and Canada.
2. TANDY LEATHER COMPANY sells primarily to retail customers through a chain
of retail stores located in the United States. Products include quality tools,
leather, accessories, kits and teaching materials. Tandy Leather is the oldest
and best-known supplier of leather and related supplies used in the leathercraft
industry. From its founding in 1919, Tandy has been the primary leathercraft
resource worldwide. We acquired the assets of Tandy Leather in late 2000, and
in early 2002, we initiated a plan to expand Tandy Leather by opening or
acquiring retail stores. As of April 15, 2004, we have added 30 Tandy Leather
retail stores located in the United States and Canada.
3. ROBERTS, CUSHMAN & COMPANY manufactures decorative hat trims that are
sold directly to hat manufacturers and distributors. Its operations are not
material to our financial results.
Our growth, measured both by our net sales and net income, occurs as a
result of the increase in the number of stores we operate and the increase from
year to year of the sales in our existing stores. The following tables provide
summary information concerning the additions of facilities for our Leather
Factory wholesale centers and Tandy Leather retail stores in each of our fiscal
years from 1999 to 2003.
STORE COUNT
YEARS ENDED DECEMBER 31, 1999 THROUGH MAY 31, 2004
--------------------------------------------------
LEATHER FACTORY WHOLESALE CENTERS TANDY LEATHER RETAIL STORES
--------------------------------- ---------------------------
YEAR ENDED DEC. 31, OPENED CONVERSIONS(1) TOTAL OPENED(2) CLOSED TOTAL
------------------- ------ -------------- ----- --------- ------ -----
Balance Fwd 22 N/A
1999 4 0 26 N/A N/A N/A
2000 2 0 28 1* 0 1
2001 2 0 30 0 0 1
2002 1 1 30 14 1* 14
2003 0 0 30 12 0 26
2004 (thru May 31) 0 0 30 6 0 32
(1) Leather Factory wholesale center converted to a Tandy Leather retail store.
(2) Includes conversions of Leather Factory wholesale centers to Tandy Leather retail stores.
(*) The Tandy Leather operation began as a central mail-order fulfillment center in 2000 that we closed in 2002.
Our company was founded in 1980 as Midas Leathercraft Tool Company ("Midas"), a
Texas corporation. Midas' original business activity focused on the
distribution of certain leathercraft tools. In addition, the founders of Midas
entered into a consulting agreement with Brown Group, Inc., a major footwear
retailer, as a result of their proposal to develop a multi-location chain of
wholesale distribution centers known as "The Leather Factory." In 1985, Midas
purchased the assets of The Leather Factory from Brown Shoe Group, which then
consisted of six distribution centers.
In 1993, Midas changed its name to "The Leather Factory, Inc.", and then
reincorporated in the state of Delaware in 1994.
Our expansion of the wholesale chain occurred via the opening of new centers as
well as numerous acquisitions of small businesses in strategic geographic
locations including the acquisition of our Canadian distributor, The Leather
Factory of Canada, Ltd., in 1996. By 2000, we had grown to twenty-seven Leather
Factory centers located in the United States and two Leather Factory centers in
Canada. In November 2000, we acquired the operating assets of two subsidiaries
of Tandycrafts, Inc. to form Tandy Leather Company. In 2002, we began opening
retail stores under the "Tandy Leather" name.
Our corporate headquarters are located at 3847 East Loop 820, South, Fort
Worth, Texas 76119, and our telephone number is (817) 496-4414.
RISK FACTORS
Investing in our Common Stock involves some risk. You should carefully
consider the following risk factors, in addition to the other information set
forth in this prospectus and incorporated in this prospectus by reference to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and our
other filings with the SEC before deciding to purchase our Common Stock.
RISKS RELATED TO OUR BUSINESS
WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE OPENING OF TANDY LEATHER
RETAIL STORES OR WE MAY BE UNABLE TO OBTAIN SUFFICIENT NEW LOCATIONS ON
ACCEPTABLE TERMS TO MEET OUR GROWTH PLANS. ALSO, OTHER RETAIL INITIATIVES MAY
NOT BE SUCCESSFUL.
When we acquired the assets of Tandy Leather in late 2000, there was only a
single Tandy Leather distribution center and no retail outlets. In 2002, we
began a program of developing Tandy Leather retail stores, and through June 30,
2004, we had added 32 Tandy Leather stores and closed the distribution center.
We believe that these store openings and acquisitions have been successful, but
there can be no assurance that this success will continue or that we will be
able to find additional locations for new stores or existing leathercraft stores
to acquire on economically viable terms. Because, in recent years, the
expansion of Tandy Leather has produced much of the increase in our profits,
disruption of this expansion would likely slow or stop this increase in profits.
Also, both our Leather Factory and Tandy Leather segments depend on marketing
efforts to support sales. Recently we conducted an advertising campaign at the
Leather Factory that failed to generate anticipated sales. While we believe
this was caused by a change in the format of our advertising, there can be no
assurance that future advertising will be successful.
POLITICAL CONSIDERATIONS HERE AND ABROAD COULD DISRUPT OUR SOURCES OF SUPPLIES
FROM ABROAD OR AFFECT THE PRICES WE PAY FOR GOODS. CONTINUED INVOLVEMENT BY THE
UNITED STATES IN WAR AND OTHER MILITARY OPERATIONS IN THE MIDDLE EAST AND OTHER
AREAS ABROAD COULD DISRUPT INTERNATIONAL TRADE AND AFFECT THE COMPANY'S
INVENTORY SOURCES.
Recent political discussions have suggested that the United States impose
barriers on the importation of certain goods. We rely heavily on imported goods
as sources of the inventory we sell. Tariffs, taxes and limits on these imports
could affect our ability to obtain inventory or increase the price we pay for
inventory. If these disruptions occur, our operations could be adversely
affected.
Also, the involvement of the United States in the war in Iraq and the
anti-terrorist activities in Afghanistan have produced political uncertainty
and, in certain countries, resentment against the United States and its citizens
and companies. These issues may also affect our ability to obtain products from
abroad.
IF, FOR WHATEVER REASON, THE COSTS OF OUR RAW MATERIALS AND INVENTORY INCREASE,
WE MAY NOT BE ABLE TO PASS THOSE COSTS ON TO OUR CUSTOMERS, PARTICULARLY IF THE
ECONOMY HAS NOT RECOVERED FROM ITS DOWNTURN.
The prices of hides and leathers fluctuate in normal times, and these
fluctuations can affect the Company. Livestock diseases such as mad cow could
reduce the availability of hides and leathers or increase their cost.
WE BELIEVE THAT THE RECENT RISE IN OIL AND NATURAL GAS PRICES WILL INCREASE THE
COSTS OF THE GOODS THAT WE SELL, INCLUDING THE COSTS OF SHIPPING THOSE GOODS
FROM THE MANUFACTURER TO OUR STORES AND CUSTOMERS.
Various fuels used to manufacture certain leather and leathercrafts are derived
from oil and natural gas. Also, the carriers who transport our goods rely on
oil-based fuels to power their ships, trucks and trains. They are likely to
pass their increased costs on to us. We are unsure how much of this increase we
will be able to pass on to our customers.
THE RECENT SLUMP IN THE ECONOMY IN THE UNITED STATES, AS WELL AS ABROAD, MAY
CAUSE OUR SALES TO DECREASE OR NOT TO INCREASE OR ADVERSELY AFFECT THE PRICES
CHARGED FOR OUR PRODUCTS. ALSO, HOSTILITIES, TERRORISM OR OTHER EVENTS COULD
WORSEN THIS CONDITION.
We believe that we sell more products and are more profitable when there is a
strong economy in the United States and Canada. Recently, the world economy has
shown signs of recovering from an economic slump. However, this recovery is not
yet complete, and there can be no assurance that increased oil and gas prices,
terrorism, or other factors will not impede this recovery. Continuation or
worsening of the economic slump is likely to limit or decrease our profits.
In addition, terrorism or the threat of terrorist attacks in the United States
or against U.S. interests abroad could cause consumer buying habits to change
and decrease our sales. We believe that major disruptions (such as terrorist
attacks) could reduce consumer spending, particularly purchases of non-essential
products such as ours.
Other factors could cause either fluctuations in buying patterns or possible
negative trends in the craft and western retail markets. In addition, our
customers may change their preferences to products other than ours, or they may
not accept new products as we introduce them.
FINANCIAL RISKS
THE NUMBER OF SHARES OF OUR COMMON STOCK IN THE HANDS OF OUTSIDE INVESTORS IS
LIMITED, AND THIS RESTRICTS THE VOLUME OF OUR COMMON STOCK THAT REGULARLY
TRADES. AN INFLUX OF SHARES INTO THIS MARKET COULD CAUSE THE PRICE TO FALL
UNEXPECTEDLY.
Our founders hold 52.2% of the total shares of our Common Stock. Their shares
do not trade on the market and there are restrictions that prevent a large
number of these shares from being sold without registering the sale with the
Securities and Exchange Commission.
During the four weeks indicated, the weekly trading volume of our Common Stock
on the American Stock Exchange was as shown below:
WEEK WEEKLY VOLUME
-------------
July 5-9, 2004 16,000
June 28-July 2, 2004 17,000
June 21-25, 2004 18,900
June 14-18, 2004 23,400
TAX OR INTEREST RATES MAY INCREASE. IN PARTICULAR, INTEREST RATES ARE LIKELY TO
INCREASE AT SOME POINT FROM THEIR PRESENT LOW LEVELS. THESE INCREASES WILL
INCREASE OUR COSTS OF BORROWING FUNDS AS NEEDED IN OUR BUSINESS.
In recent years, we have enjoyed a favorable environment of low interest rates
and stable income tax rates. If either interest or tax rates increase, our net
profits are likely to be affected. While we have steadily decreased our
borrowings in recent years, it may become necessary to increase borrowings to
fund our growth and operations. If we increase our borrowing, this may decrease
our profits.
Likewise, any change in the commercial banking environment or in our ability to
borrow money on favorable terms may affect us.
____________________________
THERE ARE OTHER UNCERTAINTIES THAT ARE DIFFICULT TO PREDICT AND ARE OFTEN BEYOND
THE CONTROL OF THE COMPANY. IF THESE OCCUR, THEY MAY HAVE A NEGATIVE IMPACT ON
US.
FORWARD-LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements,
which are based on assumptions and describe our future plans, strategies and
expectations, are generally identifiable by the use of the words "anticipate",
"believe", "estimate", "expect", "intend", "project", or other similar
expressions. These forward-looking statements are subject to risks,
uncertainties and assumptions about us. Important factors that could cause
actual results to differ materially from the forward-looking statements we make
in this prospectus are set forth above under the caption "Risk Factors" and
elsewhere in this prospectus and the documents incorporated by reference in this
prospectus. If one or more of these risks or uncertainties materialize, or if
any underlying assumptions prove incorrect, our actual results, performance or
achievements may vary materially from any future results, performance or
achievements expressed or implied by these forward-looking statements. All
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements in this
paragraph.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
Common Stock by the selling stockholders pursuant to this prospectus. Proceeds
received by us in connection with the exercise of the warrants described below
will be used for general corporate purposes. See "Selling Stockholders".
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock by the selling stockholders as of July 8, 2004.
NUMBER OF SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY
PRIOR TO THE OWNED AFTER
OFFERING OFFERING
(ASSUMING ALL
SHARES BEING
OFFERED ARE SOLD
E---------------------- ------------------ -------------------- ---------------
NAME OF
SELLING STOCKHOLDER NUMBER PERCENT SHARES BEING OFFERED NUMBER PERCENT
------- ------- -------------------- ------ -------
Herbert Arnold and
Leslie C. Duke 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
Scott C. Bowman (1) 4,000 * 4,000 0 *
------- ------- -------------------- ------ -------
Andrew Chase 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
The Chase Family Trust (1) 70,800 * 70,800 0 *
------- ------- -------------------- ------ -------
Jonathan B. Dangar (1) 11,200 * 11,200 0 *
------- ------- -------------------- ------ -------
Sanford E. Davis, Jr 10,000 * 10,000 0 *
------- ------- -------------------- ------ -------
Robert N. and Gunilla
H. Fink 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
Grinspan-Ernst PSP 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
Growth Properties, LLC 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
James C. Harper (1) 20,000 * 20,000 0 *
------- ------- -------------------- ------ -------
Michael and Lyn Harvey 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
James Wayne and Ruth
C. Hill 10,000 * 10,000 0 *
------- ------- -------------------- ------ -------
Joseph J. Jillson 25,000 * 25,000 0 *
------- ------- -------------------- ------ -------
Henry S. Krauss (1) 7,500 * 7,500 0 *
------- ------- -------------------- ------ -------
Richard Louise (1) 14,000 * 14,000 0 *
------- ------- -------------------- ------ -------
Daniel Luskind (1) 7,500 * 7,500 0 *
------- ------- -------------------- ------ -------
Meadowbrook Opportunity
Fund, LLC 130,000 * 65,000 65,000 *
------- ------- -------------------- ------ -------
Arthur J. Niebauer (1) 7,500 * 7,500 0 *
------- ------- -------------------- ------ -------
John O'Shea (1) 7,500 * 7,500 0 *
------- ------- -------------------- ------ -------
Alexander Purdie, Jr. 10,000 * 10,000 0 *
------- ------- -------------------- ------ -------
Allan C. Purdie 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
Sems Diversified Value
Fund LP 10,000 * 10,000 0 *
------- ------- -------------------- ------ -------
Ronald L. Warnken 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
Frederick G. Wedell 25,000 * 25,000 0 *
------- ------- -------------------- ------ -------
Harold E. Zell 5,000 * 5,000 0 *
------- ------- -------------------- ------ -------
* Less than 1.0%.
(1) Shares shown as held will be acquired upon exercise of warrants originally
issued to Westminster Securities Corporation or its designees in connect with
certain agreements to provide financial services. The warrants are immediately
exercisable. See below.
MATERIAL RELATIONSHIPS AND TRANSACTIONS
All shares of our common stock offered for resale were acquired in the
transactions described below.
Effective August 3, 2003, The Schlinger Foundation acquired 200,000 shares
of our common stock pursuant to the exercise of a warrant that had been issued
five years earlier. On May 12, 2004, The Schlinger Foundation and Westminster
Securities Corporation entered into an Engagement Agreement pursuant to which
the Westminster agreed to seek purchasers of the 200,000 shares held by The
Schlinger Foundation in a transaction that would be exempt from the registration
requirements of the Securities Act of 1933. Westminster is a member firm of the
New York Stock Exchange and a registered securities broker-dealer. We joined in
that agreement for the purpose of agreeing to register the resale of the 200,000
shares by the purchasers from The Schlinger Foundation under the Securities Act
of 1933. The selling stockholders listed above who acquired these shares are
Andrew Chase, Sanford E. Davis, Jr., Herbert Arnold and Leslie C. Duke, Robert
N. and Gunilla H. Fink, Grinspan-Ernst PSP, Growth Properties, LLC, Michael and
Lyn Harvey, Joseph J. Jillson, Meadowbrook Opportunity Fund, LLC, Alexander
Purdie Allan C. Purdie, Jr., Sems Diversified Value Fund LP, Ronald L. Warnken,
James Wayne and Ruth C. Hill, Frederick G. Wedell, and Harold E. Zell.
On February 12, 2003, we entered into a Capital Markets Service Agreement
with Westminster, along with a Financial Advisor's Warrant Agreement that
provided for the issuance of warrants to purchase up to 100,000 shares of our
common stock to affiliates of Westminster. These warrants provided for an
exercise price of $3.10 per share and expired five years after their issuance.
The stockholders listed above who will sell shares pursuant to these warrants
are The Chase Family Trust (50,000 Shares), James C. Harper (20,000 shares),
Henry S. Kraus (5,000 shares), Daniel Luskind (5,000 shares), Richard Louise
(10,000 shares), John O'Shea (5,000 shares) and Arthur J. Niebauer (5,000
shares). These selling stockholders may be deemed to be affiliates of
Westminster.
Following the expiration of the first Capital Markets Services Engagement
Agreement, we and Westminster entered into a second such agreement, dated
February 24, 2004. The second agreement was also accompanied by the execution
of another Financial Advisor's Warrant Agreement. This agreement proved for the
issuance to Westminster of a warrant to purchase up to 50,000 shares of our
common stock at an exercise price of $5.00 per share. The warrant provided for
a five-year term. Holders who may be deemed affiliates of Westminster who will
sell shares pursuant to this warrant are Scott C. Bowman (4,000), The Chase
Family Trust (20,800 shares), Jonathan B. Danger (11,200), Henry S. Kraus (2,500
shares), Daniel Luskind (2,500 shares), Richard Louise (4,000 shares), John
O'Shea (2,500 shares) and Arthur J. Niebauer (2,500 shares).
Both of the Financial Advisor's Warrant Agreements we entered into with
Westminster provide registration rights to the holders of our common stock
issued pursuant to exercise of those warrants. Also, those agreements provide
that we will indemnify the selling stockholders who register their shares
pursuant to the agreements from certain liabilities that might arise in
connection with this offering.
None of the persons who will offer shares for resale pursuant to this
prospectus is a registered securities broker-dealer. Many of the selling
stockholders identified above as acquiring warrants pursuant to the Financial
Advisor's Warrant Agreement are persons associated with Westminster, however.
PLAN OF DISTRIBUTION
We are registering for resale 350,000 shares of Common Stock under this
prospectus on behalf of the selling stockholders. All or a portion of the
shares offered hereby by the selling stockholders may be delivered and/or sold
in transactions from time to time on the American Stock Exchange, on the
over-the-counter market, in privately-negotiated transactions, or a combination
of such methods of sale, at market prices prevailing at the time, at prices
related to such prevailing prices or at negotiated prices. Our Common Stock is
listed for trading on the American Stock Exchange under the symbol "TLF".
The selling stockholders may effect such transactions by selling to or through
one or more broker-dealers, and these broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the selling
stockholders. Westminster may be deemed an "underwriter" within the meaning of
the Securities Act. We believe that certain selling stockholders are likely to
effect resales of our common stock through Westminster.
Any broker-dealer participating in these transactions as an agent may receive
commissions from the selling stockholders (and, if they act as agent for the
purchaser of such shares, from the purchaser). Broker-dealers may agree with the
selling stockholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling stockholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the selling
stockholders. Broker-dealers who acquire shares as a principal may thereafter
resell those shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) on the
American Stock Exchange, on the over-the-counter market, in privately-negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
To the extent required under the Securities Act, a supplemental prospectus
will be filed, disclosing:
- the name of any such broker-dealers;
- the number of shares involved;
- the price at which such shares are to be sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable;
- that such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented; and
- other facts material to the transaction.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to the applicable provisions of the
Securities Exchange Act of 1934 and the rules and regulations under that Act,
including, without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of, purchases by the selling
stockholder or other persons or entities. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited from
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the
shares.
The selling stockholders, including their transferees, pledgees or donees
or their successors, may sell the Common Stock directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling stockholders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The common stock may be sold in one or more transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- prices related to the prevailing market prices;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which our
Common Stock may be listed or quoted at the time of sale, including the American
Stock Exchange;
- in the over-the-counter market;
- off of these markets in other places;
- through the writing of options, whether the options are listed on an
options exchange or otherwise; or
- through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the Common Stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions. These broker-dealers or financial institutions may in
turn engage in short sales of the Common Stock in the course of hedging the
positions they assume with the selling stockholders. The selling stockholders
may also sell the Common Stock short and deliver these securities to close out
such short positions, or loan or pledge the Common Stock to broker-dealers that
in turn may sell these securities.
The aggregate proceeds to the selling stockholders from the sale of the Common
Stock offered by them hereby will be the purchase price of the Common Stock less
discounts and commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of Common Stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
In order to comply with the securities laws of some states, if applicable, the
Common Stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain jurisdictions, the Common
Stock may not be offered or sold unless they have been registered or qualified
for sale or an exemption is available and complied with.
Broker-dealers or agents that participate in the sale of the Common Stock
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Selling stockholders that participate in the sale of the Common
Stock may also be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act. Profits on the sale of the Common Stock by selling
stockholders and any discounts, commissions or concessions received by any
broker-dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act. Selling stockholders who are deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act. To the
extent the selling stockholders may be deemed to be "underwriters," they may be
subject to statutory liabilities, including, but not limited to, Sections 11, 12
and 17 of the Securities Act.
The selling stockholders and any other person participating in a distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder. Regulation M of the Exchange Act may limit the timing
of purchases and sales of any of the securities by the selling stockholders and
any other person. In addition, Regulation M may restrict the ability of any
person engaged in the distribution of the securities to engage in market-making
activities with respect to the particular securities being distributed for a
period of up to five business days before the distribution. To our knowledge,
there are currently no plans, arrangements or understandings between any selling
stockholder and any underwriter, broker-dealer or agent regarding the sale of
the common stock by the selling stockholders.
A selling stockholder may decide not to sell any Common Stock described in this
prospectus. We cannot assure holders that any selling stockholder will use this
prospectus to sell any or all of the Common Stock. Any securities covered by
this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A of the
Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to
this prospectus. In addition, a selling stockholder may transfer, devise or gift
the Common Stock by other means not described in this prospectus.
With respect to a particular offering of the Common Stock, to the extent
required, an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part will be prepared and will set forth the following information:
- the specific Common Stock to be offered and sold;
- the names of the selling stockholders;
- the respective purchase prices and public offering prices and other
material terms of the offering;
- the names of any participating agents, broker-dealers or underwriters; and
- any applicable commissions, discounts, concessions and other items
constituting, compensation from the selling stockholders.
As described above, we have signed agreements for the benefit of holders of our
Common Stock to register their shares under applicable federal and state
securities laws under certain circumstances and at certain times. See "Selling
Stockholders". In certain instances, these agreements provide that the selling
stockholders and the Leather Factory will indemnify each other and their
respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the Common Stock, including
liabilities under the Securities Act, or will be entitled to contribution in
connection with those liabilities. We will pay all of our expenses related to
the registration of the shares of our Common Stock for resale to the public, but
each selling stockholder will be responsible for payment of commissions,
concessions, fees and discounts of underwriters, broker-dealers and agents.
LEGAL MATTERS
Certain legal matters relating to the offering will be passed upon for the
Leather Factory by Patrick A. Reardon, Attorney-at-Law, Fort Worth, Texas.
Certain legal matters will be passed upon for any agents or underwriters by
counsel for such agents or underwriters identified in the applicable prospectus
supplement.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the years ended December 31, 2003 have been
so incorporated in reliance on the report of Weaver & Tidwell, LLP, and Hein +
Associates LLP, independent accountants, given on the authority of these firms
as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended. Accordingly, we file annual, quarterly and periodic
reports, proxy statements and other information with the SEC relating to our
business, financial statements and other matters. You may read and copy any
documents we have filed with the SEC at prescribed rates at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. You can obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to you free of charge at the
SEC's web site at http://www.sec.gov and at our web site at
http://www.leatherfactory.com. Information contained in our web site is not part
of this prospectus.
This prospectus is only part of a registration statement on Form S-3 that we
have filed with the SEC under the Securities Act, and therefore omits certain
information contained in the registration statement. We have also filed
exhibits with the registration statement that are not included in this
prospectus, and you should refer to the applicable exhibit for a complete
description of any statement referring to any contract or other document. A
copy of the registration statement, including the exhibits thereto, may be
inspected without charge at the Public Reference Room of the SEC described
above, and copies of such material may be obtained from such office upon payment
of the fees prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have elected to "incorporate by reference" certain information into this
prospectus. By incorporating by reference, we can disclose important
information to you by referring you to another document we have filed with the
SEC. The information incorporated by reference is deemed to be part of this
prospectus, except for information incorporated by reference that is superseded
by information contained in this prospectus. This prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC:
- Our Annual Report on Form 10-K (including information specifically
incorporated by reference into our Form 10-K from our Proxy Statement for our
2004 Annual Meeting of Stockholders)
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004
- Our Current Reports on Form 8-K filed on March 9, 2004, April 28, 2004,
April 29, 2004 and July 14, 2004.
- The description of our Common Stock and the associated rights, contained
in our registration statement on Form 8-2 filed on August 16, 1994, as updated
by our current report on Form 8-K filed on July 14, 2004, updating and fully
restating the description of our capital stock.
- All reports and other documents filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus
and prior to the termination of the offering.
All documents that we file with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act from the date of this prospectus to the end of
the offering of the Common Stock under this prospectus shall also be deemed to
be incorporated in this prospectus by reference.
You may obtain copies of these documents from us without charge (other than
exhibits to these documents, unless those exhibits are specifically incorporated
by reference into the documents) by writing to us at The Leather Factory, Inc.,
Attn. Chief Financial Officer, 3847 East Loop 820 South, Fort Worth, Texas 76119
or calling us at (817) 496-4414.
350,000 SHARES OF COMMON STOCK
THE LEATHER FACTORY, INC.
PROSPECTUS
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and any applicable supplement to
this prospectus. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or any applicable
supplement to this prospectus. Neither this prospectus nor any applicable
supplement to this prospectus constitutes an offer to sell or the solicitation
of an offer to buy any securities other than the registered Common Stock to
which it relates, nor does this prospectus or any supplement to this prospectus
constitute an offer to sell or the solicitation of an offer to buy securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. You should not assume that the information
contained in this prospectus or any supplement to this prospectus is accurate on
any date subsequent to the date set forth on the front of this prospectus or any
supplement to this prospectus or that any information we have incorporated by
reference is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus and any applicable
supplement to this prospectus is delivered or securities are issued on a later
date.
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
registrant in connection with the registration for resale of our Common Stock.
All of the amounts shown are estimates except the Securities and Exchange
Commission (the "Commission") registration fee.
Amount
Commission Registration Fee $ 185.81
*Costs of Printing 500.00
*Legal Fees and Expenses 17,500.00
*Accounting Fees and Expenses 5,800.00
*Miscellaneous Expenses -0-
----------
*Total $23,985.81
*= Estimated
ITEM 15. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are a Delaware corporation. Subsection (b)(7) of Section 102 of the
Delaware General Corporation Law (the "DGCL"), enables a corporation in its
original certificate of incorporation or an amendment thereto to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of the director's fiduciary duty,
except (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions), or (iv) for
any transaction from which the director derived an improper personal benefit.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any present or former director, officer, employee or agent of the
corporation, or any individual serving at the corporation's request as a
director, officer, employee or agent of another organization, who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding provided that such director, officer, employee
or agent acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, provided further that such director, officer,
employee or agent had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
present or former director, officer, employee or agent who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit provided that such director, officer, employee or agent acted in
good faith and in a manner reasonably believed to be in, or not opposed to, the
best interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such director, officer,
employee or agent shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such director or officer is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall deem
proper.
Section 145 further provides that to the extent a director, officer,
employee or agent has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification and advancement of expenses provided
for, by, or granted pursuant to, Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and empowers
the corporation to purchase and maintain insurance on behalf of a present or
former director, officer, employee or agent of the corporation, or any
individual serving at the corporation's request as a director, officer or
employee of another organization, against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Our Certificate of Incorporation provides that to the fullest extent
permitted by the Delaware General Corporation Law ("DGCL"), a director of The
Leather Factory, Inc. shall not be liable to The Leather Factory, Inc. or its
stockholders for monetary damages for breach of fiduciary duty as a director.
ITEM 16. INDEX TO EXHIBITS.
NUMBER EXHIBIT
------ ----------------------------------------------------------------------
4.1 Engagement Agreement, dated May 12, 2004, among The Schlinger
Foundation, Westminster Securities Corporation and The Leather
Factory, Inc.*
------ ----------------------------------------------------------------------
4.2 Capital Markets Services Engagement Agreement, dated February 12,
2003, between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2003)
------ ----------------------------------------------------------------------
4.3 Financial Advisor's Warrant Agreement, dated February 12, 2003,
between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2003)
------ ----------------------------------------------------------------------
4.4 Form of Warrant Certificate issued pursuant to the Financial
Advisor's Warrant Agreement, dated February 12, 2003 (incorporated
Herein by reference to the Registrant's Form 10-Q filed on May 14,
2003)
------ ----------------------------------------------------------------------
4.5 Capital Markets Services Engagement Agreement, dated February 24,
2004, between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2004)
------ ----------------------------------------------------------------------
4.6 Financial Advisor's Warrant Agreement, dated February 24, 2004,
between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2004)
------ ----------------------------------------------------------------------
4.7 Form of Warrant Certificate issued pursuant to the Financial
Advisor's Warrant Agreement, dated February 24, 2004 (incorporated
Herein by reference to the Registrant's Form 10-Q filed on May 14,
2004)
------ ----------------------------------------------------------------------
5.1 Form of Opinion of Patrick A. Reardon, Attorney-at-Law.*
(Final version to be filed by amendment)
------ ----------------------------------------------------------------------
23.1 Consent of Patrick A. Reardon, Attorney-at-Law
(included in Exhibit 5.1)*
------ ----------------------------------------------------------------------
23.2 Consent of Weaver & Tidwell, LLP, Independent Accountants*
------ ----------------------------------------------------------------------
23.3 Consent of Hein + Associates LLP, Independent Accountants*
------ ----------------------------------------------------------------------
24.1 Power of Attorney (included in signature page)*
------ ----------------------------------------------------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high of the estimated
maximum offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period for any subscription rights, to
set forth the results of the subscription offer, the transactions by the
underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any subsequent
reoffering thereof. If any public offering by the underwriters is to be made on
terms differing from those set forth on the cover page of the prospectus with
respect to a subscription rights offering, a post-effective amendment will be
filed to set forth the terms of such offering.
D. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth, State of Texas, on this 13th day of July,
2004.
THE LEATHER FACTORY, INC.
By s/Wray Thompson
Wray Thompson
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Wray Thompson and Shannon L. Greene, and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their, or his or her
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated below.
SIGNATURE DATE TITLE
------------- ---------------------------------------------------
s/ Wray Thompson July 13, 2004 Chairman of the Board & Chief Executive Officer
Wray Thompson (Principal Executive Officer)
s/ Shannon L. Greene July 13, 2004 Treasurer, Chief Financial Officer & Director
Shannon L. Greene (Principal Financial and Accounting Officer)
s/ Ronald C. Morgan July 13, 2004 President, Chief Operating Officer & Director
Ronald C. Morgan
s/T. Field Lange July 14, 2004 Director
T. Field Lange
s/ Joseph R. Mannes July 9, 2004 Director
Joseph R. Mannes
s/ H. W. Markwardt July 12, 2004 Director
H. W. Markwardt
s/ Michael A. Markwardt July 8, 2004 Director
Michael A. Markwardt
s/Michael A. Nery July 8, 2004 Director
Michael A. Nery
EXHIBITS
NUMBER EXHIBIT
------ ----------------------------------------------------------------------
4.1 Engagement Agreement, dated May 12, 2004, among The Schlinger
Foundation, Westminster Securities Corporation and The Leather
Factory, Inc.*
------ ----------------------------------------------------------------------
4.2 Capital Markets Services Engagement Agreement, dated February 12,
2003, between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2003)
------ ----------------------------------------------------------------------
4.3 Financial Advisor's Warrant Agreement, dated February 12, 2003,
between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2003)
------ ----------------------------------------------------------------------
4.4 Form of Warrant Certificate issued pursuant to the Financial
Advisor's Warrant Agreement, dated February 12, 2003 (incorporated
Herein by reference to the Registrant's Form 10-Q filed on May 14,
2003)
------ ----------------------------------------------------------------------
4.5 Capital Markets Services Engagement Agreement, dated February 24,
2004, between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2004)
------ ----------------------------------------------------------------------
4.6 Financial Advisor's Warrant Agreement, dated February 24, 2004,
between The Leather Factory, Inc. and Westminster Securities
Corporation (incorporated herein by reference to the Registrant's
Form 10-Q filed on May 14, 2004)
------ ----------------------------------------------------------------------
4.7 Form of Warrant Certificate issued pursuant to the Financial
Advisor's Warrant Agreement, dated February 24, 2004 (incorporated
Herein by reference to the Registrant's Form 10-Q filed on May 14,
2004)
------ ----------------------------------------------------------------------
5.1 Form of Opinion of Patrick A. Reardon, Attorney-at-Law.*
(Final version to be filed by amendment)
------ ----------------------------------------------------------------------
23.1 Consent of Patrick A. Reardon, Attorney-at-Law
(included in Exhibit 5.1)*
------ ----------------------------------------------------------------------
23.2 Consent of Weaver & Tidwell, LLP, Independent Accountants*
------ ----------------------------------------------------------------------
23.3 Consent of Hein + Associates LLP, Independent Accountants*
------ ----------------------------------------------------------------------
24.1 Power of Attorney (included in signature page)*
------ ----------------------------------------------------------------------
* Filed herewith.
EXHIBIT 4.1
WESTMINSTER SECURITIES CORPORATION
MEMBER NEW YORK STOCK EXCHANGE
May 12, 2004
Dr. Evert Schlinger
President
The Schlinger Foundation
P. O. Box 1869
Santa Ynez, California 93460
RE: ENGAGEMENT AGREEMENT
Dear Dr. Schlinger:
This agreement ("Agreement") is made and entered into this 12th day of May, 2004
between The Schlinger Foundation ("Seller"), The Leather Factory, Inc.
("Company") and Westminster Securities Corporation, a registered broker/dealer
("Westminster"). Pursuant to this Agreement, Westminster will provide services
to the Seller as set forth below:
1. PURPOSE
-----------
Based on the terms set forth in this Agreement, the Seller hereby retains
Westminster on an exclusive basis during the Engagement Period (as defined
herein) to sell 200,000 shares of restricted common stock ("Shares") of The
Leather Factory, Inc. ("TLF") held by the Seller for an aggregate price to
Seller of not less than $3.50 per share.
2. ENGAGEMENT PERIOD
----------------------
This Agreement shall commence on May 12, 2004 and terminate on December 31, 2004
(the "Engagement Period") unless extended by mutual written agreement of
Westminster, the Seller and the Company.
3. SERVICES
------------
Westminster will represent the Seller as agent in a private placement ("Private
Placement" or a "Placement") of 200,000 Shares, with the Seller to receive 80%
of the ten day average of the closing prices prior to the closing of the Private
Placement or such other price as agreed by Seller; additionally, the Seller is
responsible for paying any expenses associated with the Placement pursuant to
Section 5. Under the terms of the Private Placement, Seller shall establish an
Escrow account at Feldman, Weinstein, LLP ("Escrow Agent") where the Seller's
shares shall reside until sold and where funds will be placed from purchasers
("Purchaser(s)"). The Escrow Agent will be responsible for transferring shares
to the purchasers and the proceeds due the Seller will be distributed to the
Seller in one more closings ("Closings") until all shares and proceeds to the
Seller has been distributed ("Final Closing"). Upon the Final Closing of the
Private Placement, the Company shall file within 15 business days of the Final
Closing an S-3 registration statement on behalf of the Purchaser(s), Westminster
and any other selling shareholders unrelated to the Private Placement set forth
herein. Westminster will assist the Company in the preparation of a Private
Placement Memorandum ("Memorandum") for sale of the Seller's common stock in the
Private Placement, including conducting customary due diligence of the Company.
In performance of these duties, Westminster shall provide the Seller with the
benefits of its commercially reasonable judgment and efforts. The Company is a
party to this Agreement solely for the purpose of its agreement to file the S-3
registration statement upon Final Closing and to assist Westminster in the due
diligence and preparation of the Memorandum for sale of the Seller's shares,
which the Company acknowledges will be of benefit to the Company.
4. COMPENSATION
----------------
At closing of each Placement, the Seller shall pay Westminster investment
banking and transaction fees for sales and trading services and advice equal to
the difference between the negotiated aggregate proceeds received from
purchasers of the Shares and 80% of the ten day average of the closing prices
prior to the closing of each Private Placement. Westminster shall be responsible
for providing the Escrow Agent a schedule of fees and other costs for payment
including the balance payable to the Seller in New York Clearinghouse Funds.
The Funds will be distributed by the Escrow Agent.
5. EXPENSES.
-------------
The Seller shall reimburse Westminster for any and all reasonable out-of-pocket
expenses incurred in connection with services provided to the Seller under this
Agreement including, but not limited to escrow fees, travel, legal fees, S-3
registration and legal costs, printing, and other expenses, incurred in
connection with Westminster's providing the services stated or contemplated
herein. Westminster will not bear any of the Seller's legal, accounting,
printing or other expenses in connection with any transaction considered or
consummated hereby. It also is understood that neither Westminster, nor the
directors, employees and agents of Westminster, will be responsible for any fees
or commissions payable to any finder or to any other financial or other advisor
utilized or retained by the Seller. With the exception of out of pocket
expenses, Westminster shall obtain prior approval from the Seller. All expenses
billed by Westminster to the Seller will be invoice to the Seller and reimbursed
on a monthly basis within ten days of receipt. Costs to Seller pursuant to this
paragraph 5 shall not exceed $7,000.
6. LIMITATION OF LIABILITY.
------------------------------
In the absence of gross negligence or willful misconduct on the part of
Westminster, Westminster shall not be liable to the Seller or the Company for
any action or omission of Westminster or any of its officers, directors,
employees, agents, representatives or stockholders in the course of, or in
connection with, rendering or performing any services contemplated hereby.
7. INDEMNIFICATION.
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This section has been intentionally left blank.
8. SEVERABILITY.
-----------------
Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
9. MISCELLANEOUS.
------------------
Any notice or communication between parties hereto shall be sufficiently given
if sent by certified or registered mail, postage prepaid, or faxed and confirmed
if to the Seller, addressed to Seller at The Schlinger Foundation, P. O. Box
1869, Santa Ynez, California 93460 with copy to William K Rogers, P.O. Box
22257, Santa Barbara, California 93121; if to the Company, addressed to Company
at 3847 East Loop 820 South; or if to Westminster, addressed to it at
Westminster Securities Corporation, 100 Wall Street, 7th Floor, New York, NY
10005. Such notice or other communication shall be deemed to be given on the
date of receipt.
If Westminster shall cease to do business, the provisions hereof relating to
duties of Westminster and compensation by the Seller as it applies to
Westminster shall thereupon cease to be in effect, except for the Seller's
obligation of payment for services rendered prior thereto. This Agreement shall
survive any merger of, acquisition of, or acquisition by Westminster and after
any such merger or acquisition shall be binding upon the Seller and the entity
surviving such merger, acquisition or similar transaction.
This Agreement embodies the entire agreement and understanding between the
Seller and Westminster and supersedes any and all negotiations, prior
discussions and preliminary and prior agreements and understandings related to
the subject matter hereof, and may be modified only by a written instrument duly
executed by each party.
This Agreement has been duly authorized, executed and delivered by and on behalf
of the Seller and Westminster.
This Agreement shall be deemed made in New York. This Agreement and all
controversies arising from or relating to performance under this Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without giving effect to such state's rules concerning conflicts of law.
The Seller and Westminster each hereby irrevocably consents to personal
jurisdiction and venue in any court of the State of New York or any Federal
court sitting in the County of New York for the purposes of any suit, action or
other proceeding arising our of this Agreement or any of the agreements or
transactions contemplated hereby, which is brought by or against the Seller, and
hereby agrees that all claims in respect of any such suit, action or proceeding
shall be heard and determined in any such court. The Seller and Westminster
each hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Seller
or Westminster at its address set forth above, such service to become effective
ten (10) days after such mailing. Each of the Seller and Westminster hereby
waive any right to trial by jury with respect to any claim, proceeding,
counterclaim or action arising out of this Agreement then the prevailing party
in such action or proceeding, whether or not the action or proceeding proceeds
to final judgment.
There is no relationship of partnership, agency, employment, franchise or joint
venture between the parties. Neither party has the authority to bind the other
or incur any obligation on its behalf.
The Seller hereby acknowledges that Westminster is not a fiduciary of the Seller
and that Westminster makes no representations or warranties regarding Seller's
ability to sell the shares of TLF, whether now or in the future.
This Agreement and the rights hereunder may not be assigned by either party
(except by operation of law) and shall be binding upon and inure to the benefit
of the parties and their respective permitted successors, assigns and legal
representatives.
No waiver, amendment or other modification of this Agreement shall be effective
unless in writing and signed by both parties. This Agreement may be executed in
counterparts, each of which together shall be considered a single document.
All amounts payable to Westminster by the Seller hereunder which are not paid
with thirty (30) days of the dates payable shall accrue interest at a rate of
twelve (12%) per annum from the date due until paid.
If you are in agreement with the foregoing, please execute and return one copy
of this Engagement Agreement to Westminster.
Sincerely,
WESTMINSTER SECURITIES CORPORATION
By: /s/ John O'Shea
-----------------
Name: John O'Shea
Title: President
By: /s/ Jonathan B. Dangar
-------------------------
Name: Jonathan B Dangar
Title: Managing Director
Agreed to and accepted this 12th day of May 2004.
THE SCHLINGER FOUNDATION
By: /s/ Evert I. Schlinger
-------------------------
Name: Evert I. Schlinger, President
THE LEATHER FACTORY, INC.
Agreed to and accepted this 22nd day of May 2004.
By: /s/ Shannon L. Greene
------------------------
Name: Ms. Shannon Greene, CFO
ANNEX A
INDEMNIFICATION
Seller hereby agrees to indemnify and hold harmless Westminster and its
affiliates, their respective directors, officers, agents, employees and
controlling persons, and each of their respective successors and assigns
(collectively, the "Indemnified Persons"), to the full extent lawful, from and
against any and all losses, claims, damages, judgments, assessments, costs,
expenses and other liabilities ("Liabilities") and shall periodically and
promptly reimburse each Indemnified Person for all fees (including attorney's
fees and costs) and expenses (collectively "Expenses") as they are incurred by
them in investigating, preparing, pursuing, or defending any claim, action,
proceeding or investigation, whether or not in connection with pending or
threatened litigation, action, suit, proceeding or arbitration and whether or
not brought by the Seller or any affiliate thereof or any third party and
whether or not any Indemnified Person is a party (collectively, "Actions") which
(A) are related to or arise out of actions or alleged actions taken or omitted
to be taken (including without limitation any untrue statements or alleged
untrue statements made or any statements omitted to be made) by the Seller or
(B) are otherwise related to or arise out of Westminster's activities on the
Seller's behalf or the advice or services rendered or to be rendered by any
Indemnified Person hereunder; provided, however, the Seller shall not be
responsible for any Liabilities pursuant to clause (B) or this sentence which
are determined by a court of competent jurisdiction in a final judgment which is
no longer subject to appeal or further review to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Person, and provided
further, that the aggregate liability of the Indemnified Person, if any,
hereunder, shall in no event exceed the total fees paid by the Seller to
Westminster under this Agreement. If the foregoing indemnification is
unavailable to an Indemnified Person for any reason or insufficient to hold it
harmless, the Seller shall contribute to the Liabilities and Expenses for which
such indemnification is held unavailable, (i) in such proportion as is
appropriate to reflect the relative benefits to the Seller and its stockholders,
on the one hand, and Westminster, on the other hand, in connection with
Westminster's engagement hereunder or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, then in such proportion as is
appropriate to reflect the relative benefits referred to in clause (i) and also
the relative fault of the Seller and Westminster with respect to such
Liabilities, and any other relevant equitable considerations; provided, however,
that in no event shall the Seller contribute less than the amount necessary to
ensure that all Indemnified Persons, in the aggregate, are not liable for any
Liabilities and Expenses in excess of the fees actually paid Westminster
hereunder. These reimbursement, indemnity and contribution obligations shall be
in addition to any liability which the Seller may otherwise have, and shall be
binding upon and inure to the benefit of any of its successors, assigns, heirs
and representatives. The Seller also agrees that no Indemnified Person shall
have any liability to the Seller, its stockholders or any person asserting
claims on behalf of the Seller for or in connection with any advice or services
rendered or to be rendered by any Indemnified Person pursuant to this Agreement,
the transactions contemplated hereby or any action or inaction by an Indemnified
Person in connection therewith except, with respect to Westminster, for
Liabilities (and related Expenses) of the Seller that are determined by a court
of competent jurisdiction in a final judgment no longer subject to appeal or
further review to have resulted solely from Westminster's gross negligence or
willful misconduct in performing its services hereunder, provided that the
aggregate liability of Westminster, if any, hereunder shall be limited to the
total fees paid by the Seller to Westminster under this Agreement.
The indemnity, reimbursement and contribution provisions set forth herein shall
remain operative and in full force and effect regardless of (i) any withdrawal,
termination or consummation of or failure to initiate or consummate any Action
referred to herein, (ii) any investigation made by or on behalf of any party
hereto or any person controlling (within the meaning of Section 15 of the
Securities Act of 1933 as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended) any party hereto, (iii) any termination or the completion
or expiration of this letter of Westminster's engagement and (iv) whether or not
Westminster shall, or shall not be called upon to, render any formal or informal
advice in the course of such engagement.
EXHIBIT 5.1
PATRICK A. REARDON
Attorney-at-Law
201 WEST SIXTH STREET TELEPHONE: (817) 348-8801
SUITE 401 FAX: (817) 348-8804
FORT WORTH, TEXAS 76102 E-MAIL: PATRICK.REARDON@PARFWLAW.COM
WEB PAGE: WWW.PARFWLAW.COM
[Form of Legal Opinion]
_______, 2004
The Leather Factory, Inc.
3847 East Loop 820 South
Fort Worth, Texas 76119
Ladies and Gentlemen:
I have acted as counsel to The Leather Factory, Inc., a Delaware
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933 (the
"Securities Act"), covering the offer and sale by certain stockholders (the
"Selling Stockholders") of 350,000 shares of common stock, par value $0.0024 per
share, of the Company (the "Shares").
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of (i) the Registration Statement, (ii) a Consulting Agreement,
dated July 24, 1998, between the Company and Evert I. Schlinger, (iii) The
Leather Factory, Inc. Stock Purchase Warrant 200,000 Shares of Common Stock,
$0.0024 Par Value, dated August 3, 1998, and executed by the Company and issued
to Evert I. Schlinger, (iv) a Capital Markets Services Engagement Agreement,
dated February 12, 2003, between The Company and Westminster Securities
Corporation, (v) a Financial Advisor's Warrant Agreement, dated February 12,
2003, between The Company and Westminster Securities Corporation, (vi) a Form
of Warrant Certificate issued pursuant to the Financial Advisor's Warrant
Agreement, dated February 12, 2003, (vii) a Capital Markets Services Engagement
Agreement, dated February 24, 2004, between The Company and Westminster
Securities Corporation, (viii) a Financial Advisor's Warrant Agreement, dated
February 24, 2004, between The Company and Westminster Securities Corporation,
(ix) a Form of Warrant Certificate issued pursuant to the Financial Advisor's
Warrant Agreement, dated February 24, 2004, (x) an Engagement Agreement, dated
May 12, 2004, among The Schlinger Foundation, Westminster Securities Corporation
and The Company, (xi) the Company's minute book, and (xii) such other
certificates, statutes and other instruments and documents as I considered
appropriate for purposes of the opinion hereafter expressed.
In making our examination, I have assumed that the signatures on all
documents examined by me are genuine, all documents submitted to me as originals
are authentic and all documents submitted as certified or photostatic copies
conform to the originals thereof.
Based upon the foregoing, and subject to the qualifications, assumptions
and limitations set forth herein, I am of the opinion that the Shares have been
duly authorized and validly issued and are fully paid and nonassessable.
The opinion set forth above is limited in all respects to the laws of the
State of Texas, the General Corporation Law of the State of Delaware and the
applicable federal laws of the United States. I express no opinion as to, and
for the purposes of the opinion set forth herein I have conducted no
investigation of, any other laws.
The opinion expressed herein is given as of the date hereof, and I do not
undertake to advise you of any events occurring subsequent to the date hereof
that might affect the matters covered by such opinion.
I hereby consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the use of my name in the prospectus forming a
part of the Registration Statement under the caption "Legal Matters." By giving
this consent, I do not admit that I am within the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission issued thereunder.
Sincerely yours,
Patrick A. Reardon
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the registration statement of The Leather Factory, Inc.
on Form S-3 filed with the Securities and Exchange Commission on July 15, 2004
of our report dated February 17, 2004, of our audit of the consolidated
financial statements of The Leather Factory, Inc. as of December 31, 2003, and
for the year then ended, which report is included in the Annual Report on Form
10-K of The Leather Factory, Inc. for the year ended December 31, 2003. We also
consent to the reference to our firm under the caption "Experts."
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
July 15, 2004
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in the Form S-3 Registration of The
Leather Factory, Inc. of our report dated February 6, 2003, with respect to the
consolidated financial statements and schedule of The Leather Factory, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 2002.
We also consent to the reference to our firm under the caption "Experts."
Hein + Associates LLP
Dallas, Texas
July 13, 2004