LEATHER FACTORY INC
AMEDNED AND RESTATED SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>tlf8kex104032002.txt
<DESCRIPTION>AMEDNED AND RESTATED SECURITY AGREEMENT
<TEXT>

                              AMENDED AND RESTATED
                               SECURITY AGREEMENT

         This Agreement,  dated as of March 20, 2002, is made by and between The
Leather Factory of Canada,  Ltd., a Manitoba  corporation  (the  "Debtor"),  and
Wells Fargo Bank Minnesota, National Association, a national banking association
(the "Secured Party").

         Pursuant to an Amended and Restated  Credit and  Security  Agreement of
even date  herewith (as the same may be amended,  supplemented  or restated from
time to time,  the  "Credit  Agreement"),  the Secured  Party may extend  credit
accommodations to THE LEATHER FACTORY,  INC., a Delaware  corporation;  ROBERTS,
CUSHMAN & COMPANY,  INC., a New York corporation;  THE LEATHER FACTORY,  INC., a
Nevada  corporation;  THE LEATHER FACTORY OF NEVADA  INVESTMENTS  INC., a Nevada
corporation;  TANDY LEATHER COMPANY,  INC., a Nevada corporation;  TANDY LEATHER
COMPANY INVESTMENTS,  INC., a Nevada corporation;  THE LEATHER FACTORY,  L.P., a
Texas  limited  partnership;  TANDY  LEATHER  COMPANY,  L.P.,  a  Texas  limited
partnership;  HI-LINE LEATHER & MANUFACTURING COMPANY, a California corporation;
and THE  LEATHER  FACTORY,  INC.,  an  Arizona  corporation  (collectively,  the
"Borrowers" and each a "Borrower").

         As a condition to extending credit to the Borrowers,  the Secured Party
has required the  execution  and delivery of the Debtor's  Guaranty of even date
herewith,  guaranteeing  the payment and  performance of all  obligations of the
Borrowers arising under or pursuant to the Credit Agreement (the "Guaranty").

         As a further  condition to extending  credit to the Borrowers under the
Credit  Agreement,  the Secured Party has required the execution and delivery of
this Agreement by the Debtor.

         ACCORDINGLY, in consideration of the mutual covenants
contained in the Credit Agreement and herein, the parties hereby agree as
follows:

         1. Definitions. All terms defined in the recitals hereto and the Credit
Agreement  that are not otherwise  defined  herein shall have the meanings given
them in the recitals and the Credit Agreement.  All terms defined in the UCC and
not otherwise  defined herein have the meanings  assigned to them in the UCC. In
addition,  the  following  terms  have the  meanings  set forth  below or in the
referenced Section of this Agreement:

                  "Accounts" means all of the Debtor's accounts, as such term is
         defined in the UCC, including each and every right of the Debtor to the
         payment of money, whether such right to payment now exists or hereafter
         arises,  whether such right to payment  arises out of a sale,  lease or
         other  disposition  of goods or other  property,  out of a rendering of
         services,  out of a loan,  out of the  overpayment  of  taxes  or other
         liabilities,  or  otherwise  arises  under any  contract or  agreement,
         whether  such right to payment is created,  generated  or earned by the
         Debtor or by some other person who subsequently transfers such person's

<PAGE>

         interest  to the  Debtor,  whether  such  right to payment is or is not
         already earned by performance,  and howsoever such right to payment may
         be evidenced,  together with all other rights and interests  (including
         all Liens)  which the  Debtor may at any time have by law or  agreement
         against any account debtor or other obligor  obligated to make any such
         payment  or  against  any  property  of such  account  debtor  or other
         obligor;  all  including  but not  limited  to all  present  and future
         accounts,  contract rights, loans and obligations  receivable,  chattel
         papers, bonds, notes and other debt instruments, tax refunds and rights
         to payment in the nature of general intangibles.

                  "Collateral"  means  all of  the  Debtor's  Accounts,  chattel
         paper,  deposit accounts,  documents,  Equipment,  General Intangibles,
         goods, instruments,  Inventory,  Investment Property,  letter-of-credit
         rights,  letters  of  credit,  all sums on  deposit  in any  Collateral
         Account,  and  any  items  in  any  Lockbox;   together  with  (i)  all
         substitutions   and  replacements  for  and  products  of  any  of  the
         foregoing;  (ii) in the case of all goods,  all  accessions;  (iii) all
         accessories, attachments, parts, equipment and repairs now or hereafter
         attached or affixed to or used in connection  with any goods;  (iv) all
         warehouse receipts, bills of lading and other documents of title now or
         hereafter  covering such goods;  (v) any money,  or other assets of the
         Debtor that now or  hereafter  come into the  possession,  custody,  or
         control  of  the  Lender;  and  (vi)  proceeds  of any  and  all of the
         foregoing.

                  "Equipment" means all of the Debtor's equipment,  as such term
         is  defined  in the  UCC,  whether  now  owned or  hereafter  acquired,
         including  but  not  limited  to  all  present  and  future  machinery,
         vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
         office  and  recordkeeping  equipment,   parts,  tools,  supplies,  and
         including specifically the goods described in any equipment schedule or
         list herewith or hereafter furnished to the Lender by the Debtor.

                  "Event of Default" has the meaning given in Section 6.

                  "General  Intangibles"  means  all  of  the  Debtor's  general
         intangibles,  as such term is defined in the UCC,  whether now owned or
         hereafter  acquired,  including  all  present  and future  Intellectual
         Property  Rights,  customer or supplier lists and  contracts,  manuals,
         operating  instructions,  permits,  franchises,  the  right  to use the
         Debtor's name, and the goodwill of the Debtor's business.

                  "Intellectual Property Rights" means all actual or prospective
         rights arising in connection  with any  intellectual  property or other
         proprietary  rights,  including all rights  arising in connection  with
         copyrights,   patents,  service  marks,  trade  dress,  trade  secrets,
         trademarks, trade names or mask works.

                  "Inventory" means all of the Debtor's inventory,  as such term
         is defined in the UCC, whether now owned or hereafter acquired, whether
         consisting  of whole  goods,  spare  parts or  components,  supplies or

                                      -2-
<PAGE>

         materials,  whether acquired,  held or furnished for sale, for lease or
         under service contracts or for manufacture or processing,  and wherever
         located.

                  "Investment  Property"  means all of the  Debtor's  investment
         property,  as such term is  defined  in the UCC,  whether  now owned or
         hereafter  acquired,  including  but  not  limited  to all  securities,
         security  entitlements,   securities  accounts,   commodity  contracts,
         commodity accounts,  stocks,  bonds,  mutual fund shares,  money market
         shares and U.S. Government securities.

                  "Lien" means any security interest,  mortgage,  deed of trust,
         pledge,  lien,  charge,  encumbrance,   title  retention  agreement  or
         analogous  instrument or device,  including the interest of each lessor
         under any capitalized  lease and the interest of any bondsman under any
         payment or performance bond, in, of or on any assets or properties of a
         person,  whether now owned or hereafter acquired and whether arising by
         agreement or operation of law.

                  "Obligations"  means  each  and  every  debt,   liability  and
         obligation of every type and description which the Debtor may now or at
         any  time  hereafter  owe to the  Secured  Party,  whether  such  debt,
         liability or obligation now exists or is hereafter  created or incurred
         and whether it is or may be direct or  indirect,  due or to become due,
         or absolute or contingent, including without limitation all obligations
         under the Guaranty.

                  "Permitted  Liens"  means  (i)  the  Security  Interest,  (ii)
         covenants,  restrictions, rights, easements and minor irregularities in
         title which do not materially  interfere with the Debtor's  business or
         operations as presently conducted,  and (iii) Liens in existence on the
         date hereof and described on Exhibit C hereto.

                  "Security Interest" has the meaning given in Section 2.

                  "UCC" means Uniform  Commercial Code as in effect from time to
         time (including after July 1, 2001) in the Province of Manitoba.

         2.  Security  Interest.  The Debtor  hereby  grants the Secured Party a
security interest (the "Security  Interest") in the Collateral to secure payment
of the Obligations.

         3.  Representations,  Warranties  and  Agreements.  The  Debtor  hereby
represents, warrants and agrees as follows:

                  (a)      Title. The Debtor (i) has absolute title to each item
         of  Collateral  in existence on the date hereof,  free and clear of all
         Liens except  Permitted  Liens,  (ii) will have, at the time the Debtor
         acquires any rights in Collateral hereafter arising,  absolute title to
         each  such  item of  Collateral  free  and  clear of all  Liens  except
         Permitted  Liens,  (iii) will keep all Collateral free and clear of all
         Liens  except  Permitted  Liens,  and (iv) will  defend the  Collateral
         against  all claims or demands of all  persons  other than the  Secured

                                      -3-
<PAGE>

         Party. The Debtor will not sell or otherwise  dispose of the Collateral
         or any  interest  therein,  outside the  ordinary  course of  business,
         without the prior written consent of the Secured Party.

                  (b) Chief Executive Office; Identification Numbers. The
         Debtor's chief executive office and principal place of business is
         located at the address set forth under its signature below. The
         Debtor's federal employer identification number and organizational
         identification number are correctly set forth under its signature
         below.

                  (c)      Location of  Collateral.  As of the date hereof,  the
         tangible  Collateral  is located only in the states and at the address,
         as identified on Exhibit A attached hereto.  The Debtor will not permit
         any  tangible  Collateral  to be located in any state  (and,  if county
         filing is  required,  in any  county)  in which a  financing  statement
         covering  such  Collateral is required to be, but has not in fact been,
         filed in order to perfect the Security Interest.

                  (d)      Changes in Name, Constituent Documents, Location. The
         Debtor will not change its name,  articles of  incorporation or bylaws,
         or jurisdiction of  organization,  without the prior written consent of
         the Secured  Party.  The Debtor will not change its  business  address,
         without prior written notice to the Secured Party.

                  (e)      Fixtures.  The Debtor  will not  permit any  tangible
         Collateral  to become  part of or to be  affixed  to any real  property
         without first  assuring to the reasonable  satisfaction  of the Secured
         Party that the Security  Interest  will be prior and senior to any Lien
         then held or thereafter acquired by any mortgagee of such real property
         or the owner or purchaser of any interest  therein.  If any part or all
         of the  tangible  Collateral  is now  or  will  become  so  related  to
         particular  real estate as to be a fixture,  the real estate  concerned
         and the name of the record owner are  accurately set forth in Exhibit B
         hereto.

                  (f)      Rights to  Payment.  Each right to  payment  and each
         instrument, document, chattel paper and other agreement constituting or
         evidencing  Collateral is (or will be when arising,  issued or assigned
         to the  Secured  Party)  the valid,  genuine  and  legally  enforceable
         obligation,  subject to no defense,  setoff or counterclaim (other than
         those  arising in the  ordinary  course of  business),  of the  account
         debtor  or other  obligor  named  therein  or in the  Debtor's  records
         pertaining  thereto  as being  obligated  to pay such  obligation.  The
         Debtor will neither agree to any material modification or amendment nor
         agree  to  any  forbearance,   release  or  cancellation  of  any  such
         obligation,  and will not  subordinate  any such  right to  payment  to
         claims of other creditors of such account debtor or other obligor.

                  (g)      Commercial  Tort  Claims.   Promptly  upon  knowledge
         thereof,  the Debtor will  deliver to the Secured  Party  notice of any
         commercial  tort claims it may bring against any person,  including the
         name and address of each defendant, a summary of the facts, an estimate
         of the  Debtor's  damages,  copies of any  complaint  or demand  letter
         submitted by the Debtor,  and such other  information as the Lender may
         request.  Upon request by the Secured Party,  the Debtor will grant the
         Secured Party a security  interest in all commercial tort claims it may
         have against any person.

                                       -4-
<PAGE>


                  (h)      Miscellaneous Covenants. The Debtor will:

                  (i)      keep all tangible Collateral in good repair,  working
         order and condition,  normal depreciation excepted, and will, from time
         to time, replace any worn, broken or defective parts thereof;

                  (ii)     promptly pay all taxes and other governmental charges
         levied or assessed  upon or against any  Collateral  or upon or against
         the creation, perfection or continuance of the Security Interest;

                  (iii)    at all reasonable times,  permit the Secured Party or
         its  representatives  to examine or inspect  any  Collateral,  wherever
         located,  and to  examine,  inspect  and copy the  Debtor's  books  and
         records  pertaining  to the  Collateral  and its business and financial
         condition  and to send and  discuss  with  account  debtors  and  other
         obligors requests for verifications of amounts owed to the Debtor;

                  (iv)     keep accurate and complete records  pertaining to the
         Collateral  and  pertaining  to the  Debtor's  business  and  financial
         condition  and  submit  to the  Secured  Party  such  periodic  reports
         concerning  the  Collateral  and the Debtor's  business  and  financial
         condition  as the  Secured  Party  may  from  time to  time  reasonably
         request;

                  (v)      promptly  notify the Secured  Party of any loss of or
         material  damage to any Collateral or of any adverse  change,  known to
         the Debtor,  in the prospect of payment of any sums due on or under any
         instrument, chattel paper, or account constituting Collateral;

                  (vi)     if the Secured  Party at any time so requests  (after
         the occurrence of an Event of Default), promptly deliver to the Secured
         Party  any   instrument,   document  or  chattel   paper   constituting
         Collateral, duly endorsed or assigned by the Debtor;

                  (vii)    at all times  keep all  tangible  Collateral  insured
         against risks of fire (including  so-called extended coverage),  theft,
         collision (in case of Collateral consisting of motor vehicles) and such
         other  risks and in such  amounts as the Secured  Party may  reasonably
         request,  with any such  policies  containing  a  lender  loss  payable
         endorsement acceptable to the Secured Party;

                  (viii)   from time to time execute such  financing  statements
         as the  Secured  Party may  reasonably  require in order to perfect the
         Security  Interest and, if any Collateral  consists of a motor vehicle,
         execute such documents as may be required to have the Security Interest
         properly noted on a certificate of title;

                  (ix)     pay when due or reimburse the Secured Party on demand
         for all costs of  collection  of any of the  Obligations  and all other
         out-of-pocket   expenses   (including  in  each  case  all   reasonable
         attorneys'  fees) incurred by the Secured Party in connection  with the

                                      -5-
<PAGE>

         creation, perfection, satisfaction,  protection, defense or enforcement
         of the  Security  Interest or the  creation,  continuance,  protection,
         defense  or  enforcement  of  this  Agreement  or  any  or  all  of the
         Obligations,   including   expenses   incurred  in  any  litigation  or
         bankruptcy or insolvency proceedings;

                  (x)      execute,  deliver or endorse any and all instruments,
         documents,  assignments,  security  agreements and other agreements and
         writings which the Secured Party may at any time reasonably  request in
         order to secure, protect,  perfect or enforce the Security Interest and
         the Secured Party's rights under this Agreement; and

                  (xi)     not use or keep any  Collateral,  or  permit it to be
         used or kept, for any unlawful  purpose or in violation of any federal,
         state or local law, statute or ordinance.

         (i) Secured  Party's Right to Take Action.  The Debtor  authorizes  the
Secured Party to file from time to time where  permitted by law, such  financing
statements against collateral described as "all personal property" or describing
specific  items of collateral  including  commercial  tort claims as the Secured
Party deems  necessary  or useful to perfect the Security  Interest.  The Debtor
will not amend any financing  statements in favor of the Secured Party except as
permitted by law. Further, if the Debtor at any time fails to perform or observe
any  agreement  contained in Section 3(h),  and if such failure  continues for a
period of ten (10) days after the Secured Party gives the Debtor  written notice
thereof (or, in the case of the agreements contained in clauses (vii) and (viii)
of Section 3(h), immediately upon the occurrence of such failure, without notice
or lapse of time),  the Secured Party may (but need not) perform or observe such
agreement  on behalf and in the name,  place and stead of the Debtor (or, at the
Secured Party's option,  in the Secured Party's own name) and may (but need not)
take any and all other  actions  which the  Secured  Party may  reasonably  deem
necessary to cure or correct such failure  (including,  without  limitation  the
payment  of  taxes,   the   satisfaction  of  security   interests,   liens,  or
encumbrances,  the performance of obligations under contracts or agreements with
account debtors or other obligors, the procurement and maintenance of insurance,
the execution of financing statements,  the endorsement of instruments,  and the
procurement of repairs or  transportation);  and,  except to the extent that the
effect of such  payment  would be to  render  any loan or  forbearance  of money
usurious  or  otherwise  illegal  under any  applicable  law,  the Debtor  shall
thereupon pay the Secured Party on demand the amount of all moneys  expended and
all costs and expenses  (including  reasonable  attorneys' fees) incurred by the
Secured  Party  in  connection  with  or as a  result  of  the  Secured  Party's
performing or observing  such  agreements or taking such actions,  together with
interest  thereon from the date expended or incurred by the Secured Party at the
highest  rate then  applicable  to any of the  Obligations.  To  facilitate  the
performance or observance by the Secured Party of such agreements of the Debtor,
the Debtor hereby  irrevocably  appoints  (which  appointment is coupled with an
interest) the Secured Party,  or its delegate,  as the  attorney-in-fact  of the
Debtor  with the right (but not the duty) from time to time to create,  prepare,

                                      -6-
<PAGE>

complete,  execute,  deliver,  endorse or file, in the name and on behalf of the
Debtor, any and all instruments,  documents, financing statements,  applications
for  insurance  and other  agreements  and  writings  required  to be  obtained,
executed,  delivered  or endorsed by the Debtor under this Section 3 and Section
4.

         4. Rights of Secured Party. At any time and from time to time,  whether
before or after an Event of Default,  the  Secured  Party may take any or all of
the following actions:

                  (a)      Account  Verification.  The Secured  Party may at any
         time and from time to time send or require the Debtor to send  requests
         for  verification  of  accounts  or  notices of  assignment  to account
         debtors and other obligors.  The Secured Party may also at any time and
         from time to time  telephone  account  debtors  and other  obligors  to
         verify accounts.

         (b)      Collateral   Account.   The  Secured  Party  may  establish  a
         collateral account for the deposit of checks,  drafts and cash payments
         made by the Debtor's  account  debtors.  If a collateral  account is so
         established,  the Debtor shall  promptly  deliver to the Secured Party,
         for deposit into said collateral account,  all payments on Accounts and
         chattel paper  received by it. All such payments  shall be delivered to
         the  Secured  Party  in the  form  received  (except  for the  Debtor's
         endorsement  where  necessary).  Until so  deposited,  all  payments on
         Accounts  and chattel  paper  received  by the Debtor  shall be held in
         trust by the Debtor for and as the  property of the  Secured  Party and
         shall not be commingled  with any funds or property of the Debtor.  All
         deposits  in said  collateral  account  shall  constitute  proceeds  of
         Collateral and shall not constitute  payment of any Obligation.  Unless
         otherwise agreed in writing, the Debtor shall have no right to withdraw
         amounts on deposit in any collateral account.

         (c)      Lockbox.  The  Secured  Party  may,  by notice to the  Debtor,
         require  the  Debtor  to direct  each of its  account  debtors  to make
         payment  directly  to a special  lockbox to be under the control of the
         Secured  Party.  The Debtor hereby  authorizes  and directs the Secured
         Party to deposit all checks,  drafts and cash payments received in said
         lockbox into the collateral account established as set forth above.

         (d)      Direct  Collection.  The Secured  Party may notify any account
         debtor,  or any other person obligated to pay any amount due, that such
         chattel paper,  Account, or other right to payment has been assigned or
         transferred  to the  Secured  Party  for  security  and  shall  be paid
         directly to the Secured  Party.  At any time after the Secured Party or
         the Debtor gives such notice to an account debtor or other obligor, the
         Secured  Party may (but need not),  in its own name or in the  Debtor's
         name,  demand, sue for, collect or receive any money or property at any
         time payable or receivable on account of, or securing, any such chattel
         paper,  Account,  or other right to payment, or grant any extension to,
         make any  compromise  or settlement  with or otherwise  agree to waive,
         modify,   amend  or  change  the  obligations   (including   collateral
         obligations) of any such account debtor or other obligor.

         5.  Assignment of Insurance.  The Debtor hereby  assigns to the Secured
Party, as additional  security for the payment of the  Obligations,  any and all
moneys  (including  but not  limited to  proceeds  of  insurance  and refunds of

                                      -7-
<PAGE>

unearned  premiums)  due or to become  due  under,  and all other  rights of the
Debtor under or with respect to, any and all policies of insurance  covering the
Collateral,  and the Debtor hereby  directs the issuer of any such policy to pay
any such moneys directly to the Secured Party.  After the occurrence of an Event
of  Default,  the  Secured  Party may (but need not),  in its own name or in the
Debtor's  name,  execute and deliver  proofs of claim,  receive all such moneys,
endorse checks and other instruments  representing  payment of such moneys,  and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.

         6.  Events  of  Default.   Each  of  the  following  occurrences  shall
constitute an event of default  under this  Agreement  (herein  called "Event of
Default"):  (i) an Event of Default shall occur under the Credit  Agreement;  or
(ii) the Debtor shall fail to pay any or all of the Obligations  when due or (if
payable  on demand)  on  demand;  or (iii) the  Debtor  shall fail to observe or
perform any covenant or agreement herein binding on it.

         7. Remedies upon Event of Default.  Upon the  occurrence of an Event of
Default and at any time  thereafter,  the Secured  Party may exercise any one or
more of the following rights and remedies: (i) declare all unmatured Obligations
to be immediately  due and payable,  and the same shall thereupon be immediately
due and payable,  without  presentment or other notice or demand;  (ii) exercise
and enforce any or all rights and remedies  available  upon default to a secured
party under the UCC,  including but not limited to the right to take  possession
of any Collateral,  proceeding  without  judicial process or by judicial process
(without a prior hearing or notice  thereof,  which the Debtor hereby  expressly
waives),  and the right to sell, lease or otherwise dispose of any or all of the
Collateral,  and in  connection  therewith,  the  Secured  Party may require the
Debtor to make the  Collateral  available to the Secured  Party at a place to be
designated by the Secured Party which is reasonably  convenient to both parties,
and if notice to the Debtor of any intended  disposition  of  Collateral  or any
other intended action is required by law in a particular  instance,  such notice
shall be deemed  commercially  reasonable  if given (in the manner  specified in
Section 9) at least ten (10) days prior to the date of intended  disposition  or
other  action;  (iii)  exercise or enforce  any or all other  rights or remedies
available  to the Secured  Party by law or  agreement  against  the  Collateral,
against the Debtor or against any other person or property. The Secured Party is
hereby  granted a  nonexclusive,  worldwide and  royalty-free  license to use or
otherwise  exploit all Intellectual  Property Rights owned by or licensed to the
Debtor that the Secured Party deems  necessary or appropriate to the disposition
of any Collateral.

         8. Other Personal Property.  Unless at the time the Secured Party takes
possession  of any tangible  Collateral,  or within seven days  thereafter,  the
Debtor gives written  notice to the Secured Party of the existence of any goods,
papers or other property of the Debtor, not affixed to or constituting a part of
such Collateral,  but which are located or found upon or within such Collateral,
describing  such property,  the Secured Party shall not be responsible or liable
to the  Debtor for any  action  taken or omitted by or on behalf of the  Secured
Party with respect to such property.

                                      -8-
<PAGE>

         9.   Notices;   Requests   for   Accounting.   All  notices  and  other
communications  hereunder  shall  be in  writing  and  shall  be (a)  personally
delivered,  (b) sent by first class United  States  mail,  (c) sent by overnight
courier of national  reputation,  or (d)  transmitted by telecopy,  in each case
addressed  or  telecopied  to the  party to whom  notice  is being  given at its
address or  telecopier  number as set forth below its  signature  or, as to each
party, at such other address or telecopier number as may hereafter be designated
by such party in a written  notice to the other party  complying  as to delivery
with the terms of this Section.  All such notices,  requests,  demands and other
communications  shall be deemed to have been given on (i) the date  received  if
personally  delivered,  (ii) when  deposited  in the mail if  delivered by mail,
(iii)  the  date  sent  if sent  by  overnight  courier,  or  (iv)  the  date of
transmission  if delivered by telecopy.  All requests under Section 9-210 of the
UCC (i) shall be made in a writing signed by an authorized person, (ii) shall be
personally  delivered,  sent by registered  or certified  mail,  return  receipt
requested,  or by overnight courier of national reputation (iii) shall be deemed
to be sent when  received by the Secured Party and (iv) shall  otherwise  comply
with the  requirements  of Section 9-210.  The Debtor  requests that the Secured
Party  respond to all such  requests  which on their face appear to come from an
authorized  individual  and releases the Secured Party from any liability for so
responding. The Debtor shall pay Secured Party the maximum amount allowed by law
for responding to such requests.

         10. Miscellaneous.  This Agreement has been duly and validly authorized
by all necessary corporate action. This Agreement does not contemplate a sale of
accounts,  or chattel paper.  This Agreement can be waived,  modified,  amended,
terminated  or  discharged,  and the Security  Interest  can be  released,  only
explicitly  in a  writing  signed  by the  Secured  Party,  and,  in the case of
amendment or modification, in a writing signed by the Debtor. A waiver signed by
the Secured Party shall be effective  only in the specific  instance and for the
specific  purpose  given.  Mere delay or failure to act shall not  preclude  the
exercise or  enforcement of any of the Secured  Party's rights or remedies.  All
rights  and  remedies  of the  Secured  Party  shall  be  cumulative  and may be
exercised  singularly or  concurrently,  at the Secured Party's option,  and the
exercise  or  enforcement  of any one such  right or remedy  shall  neither be a
condition  to nor bar the  exercise  or  enforcement  of any other.  The Secured
Party's duty of care with respect to Collateral in its possession (as imposed by
law) shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically  safekeeping  such  Collateral  or, in the case of  Collateral in the
custody or possession of a bailee or other third  person,  exercises  reasonable
care in the selection of the bailee or other third person, and the Secured Party
need not otherwise  preserve,  protect,  insure or care for any Collateral.  The
Secured  Party shall not be obligated to preserve any rights the Debtor may have
against prior parties,  to realize on the Collateral at all or in any particular
manner or order,  or to apply any cash proceeds of Collateral in any  particular
order of  application.  This  Agreement  shall be binding  upon and inure to the
benefit of the Debtor and the Secured Party and their respective  successors and
assigns and shall take effect  when  signed by the Debtor and  delivered  to the

                                      -9-
<PAGE>

Secured Party,  and the Debtor waives notice of the Secured  Party's  acceptance
hereof.  The Secured  Party may execute this  Agreement if  appropriate  for the
purpose  of  filing,  but the  failure  of the  Secured  Party to  execute  this
Agreement  shall not  affect or impair the  validity  or  effectiveness  of this
Agreement. A carbon,  photographic or other reproduction of this Agreement or of
any  financing  statement  signed by the  Debtor  shall  have the same force and
effect as the original for all purposes of a financing statement. This Agreement
shall be governed by and  construed  in  accordance  with the  substantive  laws
(other  than  conflict  laws) of the State of  Minnesota.  If any  provision  or
application of this Agreement is held unlawful or  unenforceable in any respect,
such  illegality  or  unenforceability  shall not  affect  other  provisions  or
applications  which can be given effect and this Agreement shall be construed as
if the  unlawful  or  unenforceable  provision  or  application  had never  been
contained  herein or  prescribed  hereby.  All  representations  and  warranties
contained  in  this  Agreement   shall  survive  the  execution,   delivery  and
performance of this  Agreement and the creation and payment of the  Obligations.
The parties hereto hereby (i) consent to the personal  jurisdiction of the state
and federal  courts  located in the State of  Minnesota in  connection  with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient,  (iii) agree that any litigation  initiated by the
Secured Party or the Debtor in connection  with this Agreement or the other Loan
Documents  may be venued  in  either  the state or  federal  courts  located  in
Hennepin  County,  Minnesota;  and (iv) agree that a final  judgment in any such
suit,  action or  proceeding  shall be  conclusive  and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR  PROCEEDING  BASED
ON OR PERTAINING TO THIS AGREEMENT.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date and year first above written.

WELLS FARGO BANK MINNESOTA,                     THE LEATHER FACTORY OF CANADA,
NATIONAL ASSOCIATION                            LTD.


By /s/ Thomas W. Tosney                         By /s/ Wray Thompson
  ---------------------                           ------------------
     Thomas W. Tosney                             Wray Thompson
     Its Senior Vice President                    Its Chief Executive Officer

4975 Preston Park Blvd., Suite 280              3825 E. Loop 820 South
Plano, Texas  75093                             P.O. Box 50429
                                                Ft. Worth, Texas 76105
                                                Employer Identification
                                                No. 89-1051054

                                      -10-
<PAGE>


                                                                       EXHIBIT A



                             LOCATION OF COLLATERAL
                             ----------------------

                           104 King Edward Street East
                              Winnipeg, MB R3H 0N8

                                5562 Tomken Road
                             Mississuga, ON L4W 1P4



<PAGE>

                                                                       EXHIBIT B



                                LEGAL DESCRIPTION
                                -----------------





<PAGE>

                                                                       EXHIBIT C

                                 PERMITTED LIENS
                                 ---------------

                                      NONE





</TEXT>
</DOCUMENT>
