TANDYCRAFTS, INC.
1400 EVERMAN PARKWAY
FORT WORTH, TEXAS 76140
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 11, 1998
To the Stockholders of Tandycrafts, Inc.:
The Annual Meeting of Stockholders of Tandycrafts, Inc. will be held on
Wednesday, November 11, 1998 at 9:30 a.m., Central Standard Time, at the Green
Oaks Park Hotel located at 6901 West Freeway, Fort Worth, Texas 76116, for the
following purposes:
(1) To elect directors to serve for the ensuing year and until their
successors are elected; and
(2) To transact such other business as may properly come before the
meeting or any adjournment(s) of the meeting.
By resolution of the Board of Directors, only stockholders of record as of
the close of business on September 15, 1998 are entitled to notice of and to
vote at the Annual Meeting. The transfer books will not be closed.
By order of the Board of Directors,
Russell L. Price
Vice President, Secretary and General Counsel
Fort Worth, Texas
October 1, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY AND MAIL IT AS SOON AS POSSIBLE IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
TANDYCRAFTS, INC.
1400 EVERMAN PARKWAY
FORT WORTH, TEXAS 76140
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF TANDYCRAFTS, INC.
This Proxy Statement is furnished to the stockholders of Tandycrafts, Inc.,
a Delaware corporation (the "Corporation"), in connection with the solicitation
by the Board of Directors of the Corporation (the "Board") of proxies for use at
the Annual Meeting of Stockholders for the fiscal year ended June 30, 1998, to
be held on November 11, 1998, (the "Annual Meeting") or any adjournment thereof.
This Proxy Statement and the enclosed proxy card were first sent to the
stockholders of the Corporation on or about October 3, 1998.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of the Corporation's Common Stock of record as of the close of
business on September 15, 1998 ("Record Date") will be entitled to notice of,
and to vote at, the Annual Meeting. The holders of the Corporation's Common
Stock are entitled to one vote per share on any matter which may properly come
before the Annual Meeting. As of the close of business on September 15, 1998,
there were outstanding 12,507,710 shares of Common Stock entitled to vote.
The presence, either in person or by properly executed proxy, of the
holders of a majority of the Common Stock as of the Record Date is necessary to
constitute a quorum at the Annual Meeting. If a quorum is not present, the
Annual Meeting may be adjourned from time to time without further notice, if the
time and place of the adjourned meeting are announced at the Annual Meeting,
until a quorum is obtained. Any stockholder present (including a holder whose
shares are deemed present by a broker non-vote) at the Annual Meeting, but who
abstains from voting, will be counted as present for purposes of determining
whether a quorum exists. The affirmative vote of a plurality of the Common
Stock voted at the Annual Meeting is required to approve the election of each of
the Corporation's nominees for election as a director. The affirmative vote of
a majority of the shares represented at the Annual Meeting, in person or by
proxy, will be necessary to approve any other matter which may properly come
before the Annual Meeting.
A proxy in the accompanying form which is properly signed, dated, returned
and not revoked will be voted in accordance with the instructions contained
therein. Unless authority to vote for the election of directors (or any one or
more nominees) is withheld, proxies will be voted for the slate of directors
proposed by the Board and, if no contrary instructions are given, proxies will
be voted "For" each of the proposals before the Annual Meeting. If any other
matters are properly presented at the Annual Meeting for action, which is not
presently anticipated, the proxy holders will vote the proxies (which confer
discretionary authority upon the holder to vote on such matters) in accordance
with their judgment and discretion. With respect to all matters other than the
election of directors, an abstention (or broker non-vote) has the same effect as
a vote against the proposal.
Giving the proxy will not affect a stockholder's right to attend the Annual
Meeting and to vote in person. A proxy may be revoked at any time before it is
exercised by: (1) filing with the Corporation, at or before the Annual Meeting,
a written notice of revocation bearing a later date than the proxy; (2) duly
executing a subsequent proxy relating to the same voting securities and
delivering it to the Corporation at or before the Annual Meeting; or (3)
attending the Annual Meeting, filing a written revocation of proxy and voting in
person (attendance at the Annual Meeting and voting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation delivered
in advance of the Annual Meeting should be mailed or hand delivered to
Tandycrafts, Inc., Attention: Mr. Russell Price, Secretary, 1400 Everman
Parkway, Fort Worth, Texas 76140.
The Corporation pays the cost of preparing, assembling and mailing this
solicitation. In addition to the solicitation of proxies by mail, the
Corporation may utilize the services of some of its officers and regular
employees (who will receive no compensation therefor in addition to their
regular salaries) to solicit proxies personally and by telephone, mail,
facsimile or other means of communication. The Corporation may request banks,
brokers and other custodians, nominees and fiduciaries to forward copies of the
proxy materials to their principals, and will reimburse such persons for their
reasonable expenses in so doing. To the extent necessary in order to assure
sufficient representation, a commercial proxy solicitation firm may be engaged
to assist in the solicitation of proxies at the expense of the Corporation.
Whether such a measure will be necessary depends upon how promptly proxies are
received. No outside proxy solicitation firm has been selected or employed with
respect to the Annual Meeting as of the date of this Proxy Statement, and the
costs of any such services cannot be estimated at this time.
PROPOSAL 1: ELECTION OF DIRECTORS
Five directors are to be elected at this Annual Meeting to hold office
until the next Annual Meeting of Stockholders and until their successors are
elected and have qualified. The Board of Directors recommends a vote FOR the
election of the listed director nominees. It is the intention of the persons
named in the accompanying proxy to vote for the nominees listed below unless
authority to do so is withheld. All nominees have indicated their willingness
to serve for the ensuing term, but if any nominee is unable to or should decline
to serve as a director at the date of the Annual Meeting, it is the intention of
the persons named in the Proxy to vote for such other person or persons as they
in their discretion shall determine.
<TABLE><S><C>
NOMINEES AGE DIRECTOR SINCE
-------- --- --------------
R.E. Cox, III..................................... 65 1985
Joe K. Pace....................................... 53 1986
Robert Schutts.................................... 76 1975
Sheldon Stein..................................... 45 1995
Michael J. Walsh.................................. 57 1992
</TABLE>
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
MR. COX has served as Chairman of the Corporation since February, 1992.
For more than the past five years, Mr. Cox has served as President of R.E. Cox
Realty Company, Fort Worth, Texas; the General Partner of Sav-On Development
Company, Fort Worth; and has been the Co-Owner of Ofco, Inc. d/b/a Ofco Office
Furniture, Fort Worth. From 1983 to 1995, Mr. Cox was President of Germany's, a
wholesale nursery business. From 1977 to 1982, Mr. Cox served as Chairman of
the Board of R.E. Cox and Company Department Stores, Fort Worth. Mr. Cox is
also a director of Inspire Insurance Solutions, Inc. and KBK Capital
Corporation.
MR. PACE has been the President of J.C. Pace Holding Company and J.C. Pace
& Company, both of Fort Worth, Texas, for more than five years and President of
Kimbell, Inc. since December, 1995. Other business interests include Traders
Village, Ltd. in Dallas/Fort Worth; Trader Village Houston, Inc.; Anderson
International Corp., Cleveland, Ohio; W.C. Cantrell Co., Fort Worth; Automatic
Laundry Co., Denver, Colorado; M/System Super Markets, West Texas; TA Ranch,
Saratoga, Wyoming.
MR. SCHUTTS has been Vice President of Royer & Schutts Inc., an office
furniture company, Fort Worth, Texas for more than five years.
MR. STEIN has been a Senior Managing Director and Head of the Southwestern
Corporate Finance Department for Bear, Stearns & Co. Inc. since 1989. Mr. Stein
joined Bear Stearns in 1986 and prior to that was a partner with the law firm of
Hughes & Luce, LLP. Mr. Stein is also a director of The Men's Wearhouse, Inc.,
Fresh America Corporation, CellStar Corporation, Precept Business Services,
Inc., Home Interiors & Gifts, Inc. and First Plus Financial Group, Inc.
MR. WALSH has served as President and Chief Executive Officer of the
Corporation since April 1996. Previously, he served as Executive Vice President
and Chief Financial Officer of the Corporation from August 1992 until July 1996
and as General Counsel and Secretary from 1983 to 1996. He also served as Vice
President from 1986 to 1992.
BOARD COMMITTEES
The Board of Directors of the Corporation met eight (8) times during fiscal
year 1998. All Directors were present at each meeting of the Board and each
Committee on which he or she served.
The Board of Directors has an Audit Committee currently composed of Messrs.
Cox, Pace, Schutts and Stein. The Audit Committee is primarily concerned with
the effectiveness of the Corporation's accounting policies and practices,
financial reporting and internal controls. The Audit Committee reviews and
approves the scope of the annual examination of the books and records of the
Corporation and reviews the findings and recommendations of the outside auditors
on completion of the audit; considers the organization, scope and adequacy of
the Corporation's internal controls function; monitors the extent to which the
Corporation has implemented changes recommended by the independent auditors or
the Audit Committee; and provides over-sight with respect to accounting
principles employed in the Corporation's financial reporting. The Audit
Committee, comprised entirely of non-employee Directors, met two (2) times
during the past fiscal year.
The Board of Directors has a Compensation Committee currently composed of
Messrs. Cox, Pace, Schutts, Stein and Walsh. The principal functions of the
Compensation Committee are to review and make recommendations to the Board of
Directors concerning compensation plans for officers and appointments and
promotions to executive positions at the corporate level. The Compensation
Committee met one (1) time during fiscal year 1998.
The Board of Directors has a Nominating Committee currently composed of
Messrs. Cox, Schutts and Walsh. The Nominating Committee reviews and makes
recommendations to the Board of Directors with respect to candidates for
directors of the Corporation, compensation of directors and assignments of
directors to committees of the Board. The Nominating Committee met one (1) time
during fiscal year 1998. Stockholders who wish to suggest nominees for election
at the 1999 Annual Meeting should submit their suggestion in writing, in
accordance with Article II, Section 8 of the Corporation's Bylaws, no earlier
than May 5, 1999 and no later than June 4, 1999 to the Secretary of the
Corporation at the address on the cover page of this Proxy Statement. Such
notice shall contain the proposed director's name, age, business and residential
addresses, principal occupation, class and number of shares of the Corporation's
stock beneficially owned by such person, written consent of such person, a
description of all arrangements or understanding between such person and the
stockholder suggesting such person pursuant to which the suggestion was made and
any other information relating to such person that is required to be disclosed
under any applicable rules and regulations.
The Board of Directors also has a temporary Progress Committee which is
currently composed of Messrs. Cox, Pace, Schutts, Stein and Walsh. The
principal functions of the Progress Committee are to discuss strategic and
operational issues and to monitor the progress of the Company's restructuring
program. The Progress Committee met four (4) times during fiscal year 1998.
DIRECTOR COMPENSATION
For fiscal year 1998, all directors who were not full time employees of the
Corporation or its subsidiaries were paid an annual retainer of $25,000. The
Chairman was paid an additional retainer of $60,000. Each director receives a
fee of $1,000 for each Board meeting and each committee meeting attended ($1,500
per meeting for Chairperson). Employees of Tandycrafts who are also directors
do not receive additional compensation for their services as directors or
committee members. Pursuant to the Tandycrafts, Inc. 1992 Director Stock Option
Plan, which was approved on November 10, 1993, each non-employee director
(Messrs. Cox, Pace, Stein and Schutts) received a stock option grant of 60,000
shares. No stock options were granted to directors in fiscal year 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information based upon the records of the
Corporation and filings with the Securities and Exchange Commission as of
September 15, 1998, with respect to the ownership of the Corporation's Common
Stock by each person known to be the beneficial owner of more than five percent
(5%) of the outstanding Common Stock of the Corporation, each director and
nominee, each executive officer named in the Summary Compensation Table and the
total shares owned by all directors and executive officers as a group.
<TABLE><S><C>
AMOUNT AND
NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
---------------- ------------ -----
R.E. Cox, III............................................... 48,700(2) *
Joe K. Pace................................................. 41,300(2) *
Robert Schutts.............................................. 166,636(2) 1.33%
Sheldon Stein............................................... 30,000(2) *
Michael J. Walsh............................................ 193,425(3) 1.55%
James D. Allen.............................................. 71,805(4) *
Leo C. Taylor............................................... 19,692(5) *
Russell L. Price............................................ 15,510(6) *
All Executive Officers and Directors as a group (8 persons). 587,068(7) 4.69%
Tandycrafts, Inc. Retirement Savings Plan (TRSP)............ 2,958,411(8) 23.65%
The T.C.W. Group, Inc....................................... 891,200(9) 7.13%
Dimensional Fund Advisors, Inc.............................. 808,000(10) 6.46%
Loomis, Sayles & Company, L.P............................... 687,700(11) 5.50%
</TABLE>
(1) Shares are deemed to be "beneficially owned" by a person if such person,
directly or indirectly, has or shares (i) the power to vote or direct the
voting of such shares, or (ii) the power to dispose or direct the
disposition of such shares. In addition, a person is deemed to
beneficially own any shares for which voting or investment power may be
acquired within 60 days pursuant to options or other rights.
(2) Includes 30,000 exercisable shares under options granted pursuant to
Tandycrafts, Inc. 1992 Director Stock Option Plan.
(3) Includes 49,486 shares held by the Corporation's Tandycrafts Retirement
Savings Plan ("TRSP"), formerly known as the Tandycrafts Employee Stock
Ownership Plan, over which Mr. Walsh has voting but not investment power,
58,333.33 exercisable shares under options granted pursuant to Tandycrafts,
Inc. 1992 Stock Option Plan (the "1992 Plan") and 7,886 shares held in the
TRSP Benefit Restoration Plan for the benefit of Mr. Walsh. Excludes an
aggregate of 48,618 shares owned by the Tandycrafts Investment Plan of
which Mr. Walsh shares investment power and voting power as a member of the
Administrative Committee of the Plan.
(4) Includes 12,741 shares held by the Corporation's TRSP, over which Mr. Allen
has voting but not investment power, 50,000 exercisable shares under
options granted pursuant to the 1992 Plan and 464 shares held in the TRSP
Benefit Restoration Plan for the benefit of Mr. Allen. Excludes an
aggregate of 48,618 shares owned by the Tandycrafts Investment Plan of
which Mr. Allen shares investment power and voting power as a member of the
Administrative Committee of the Plan.
(5) Includes 7,892 shares held by the Corporation's TRSP, over which Mr. Taylor
has voting but not investment power and 7,200 exercisable shares under
options granted pursuant to the 1992 Plan. Excludes an aggregate of 48,618
shares owned by Tandycrafts Investment Plan of which Mr. Taylor shares
investment power and voting power as a member of the Administrative
Committee of the Plan.
(6) Includes 6,710 shares held by the Corporation's TRSP, over which Mr. Price
has voting but not investment power and 8,800 exercisable shares under
options granted pursuant to Tandycrafts, Inc. 1992 Stock Option Plan.
Excludes an aggregate of 48,618 shares owned by the Tandycrafts Investment
Plan of which Mr. Price shares investment power and voting power as a
member of the Administrative Committee of the Plan.
(7) Excludes an aggregate of 48,618 shares owned by Tandycrafts Investment Plan
of which Messrs. Allen, Price, Taylor and Walsh share investment power and
voting power as members of the Administrative Committee of the Plan.
(8) As of September 15, 1998, a total of 2,958,411 shares of Tandycrafts, Inc.
Common Stock were held in the Corporation's TRSP. 48,618 shares were held
in the Tandycrafts Investment Plan (which was merged into the TRSP) account
and 2,909,823 shares are held in the TRSP account. Except for the
Tandycrafts Investment Plan account, each participant in the TRSP is
entitled to direct the Trustee with respect to the voting of the Common
Stock allocated to his or her account. If a participant does not direct
the Trustee with respect to the voting of the shares of his or her account,
such shares will be voted in the discretion of the Trustee.
(9) Based on a Schedule 13G, dated February 12, 1998, the T.C.W. Group, Inc., a
Nevada Corporation, located at 865 South Figueroa St., Los Angeles, CA
90017, and Robert Day, located at 200 Park Avenue, Suite 2200, New York, NY
10166, hold sole voting and investment power over 891,200 shares of the
Corporation's Common Stock.
(10) Based on a Schedule 13G, dated February 9, 1998, Dimensional Fund Advisors,
Inc., a Delaware corporation, located at 1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401, holds sole voting power over 512,800 shares of the
Corporation's Common Stock and sole investment power over 808,000 shares of
the Corporation's Common Stock.
(11) Based on a Schedule 13G, dated February 12, 1998, Loomis, Sayles & Company,
L.P., a Delaware partnership, holds located at One Financial Center,
Boston, MA 02111, holds sole voting power over 487,400 shares of the
Corporation's Common Stock and sole investment power over 687,700 shares of
the Corporation's Common Stock.
* Less than 1%.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's directors, executive officers, and persons who own more than
10% of the Corporation's Common Stock, to file with the Securities and Exchange
Commission ("SEC") reports of ownership and changes of ownership of the
Corporation's Common Stock. Directors, executive officers, and greater-than-10%
stockholders are required by SEC regulations to furnish the Corporation with
copies of all such Section 16(a) reports. Based solely on review of the copies
of such reports furnished to the Corporation or written representations, the
Corporation believes that all filing requirements applicable to the
Corporation's directors, executive officers and greater-than-10% stockholders
were complied with.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, their respective ages, positions
held and tenure as officers are as follows:
<TABLE><S><C>
Position and Business Experience Served as
Name and Age During the Past Five Years Officer Since
- -------------------- --------------------------------------------------- -------------
Michael J. Walsh, 57 President and Chief Executive Officer since April 1983
1996. Executive Vice President and Chief Financial
Officer from August 1992 to April 1996. Vice
President from 1986 to August 1992. General Counsel
and Secretary from 1983 to 1996.
James D. Allen, 38 Executive Vice President and Chief Financial Officer 1993
since July 1996. Vice President from November 1993
to July 1996. Director of Special Projects from May
1993 to November 1993. Prior to May 1993, Mr. Allen
was a Senior Manager in the accounting firm of Price
Waterhouse, LLP.
Leo C. Taylor, 36 Vice President - Taxation, Risk Management and 1996
Benefits since November 1996. Director of Tax
Administration from February 1994 to November 1996.
Prior to February 1994, Mr. Taylor was a manager in
the accounting firm of Price Waterhouse, LLP.
Russell L. Price, 33 Vice President, General Counsel and Secretary since 1996
November 1996. Corporate Counsel from March 1994 to
November 1996. Prior to March 1994, Mr. Price was
an associate at the law firm of Hughes & Luce, LLP.
</TABLE>
None of the above officers are related by birth, adoption or marriage, and
there are no arrangements or understandings between any officer and any other
person pursuant to which that officer was selected. All officers are elected
annually by the Board of Directors to serve for the ensuing year.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid during
the past three fiscal years for services in all capacities to the Corporation
and its subsidiaries of those persons who at June 30, 1998 were the
Corporation's chief executive officer and the three other most highly paid
executive officers of the Corporation whose salary and bonus exceeded $100,000
for the year ended June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE><S><C>
LONG-
TERM
COMPEN-
ANNUAL COMPENSATION SATION
--------------------------------------- ---------
NUMBER OF
NAME AND OTHER SECURITIES ALL
PRINCIPAL FISCAL ANNUAL UNDERLYING OTHER
POSITION YEAR SALARY BONUS(5) COMPENSATION(6) OPTIONS COMPENSATION(7)
-------- ----------------------------------------------------------------------------------
Michael J. Walsh(1)......... 1998 $183,750 $ 78,400 - -0- $ 14,062
President and Chief 1997 $165,000 $ 110,000 - 175,000 $ 81,542
Executive Officer 1996 $137,813 $ 89,450 - -0- $ 20,791
James D. Allen(2)........... 1998 $153,750 $ 68,800 - -0- $ 8,332
Executive Vice President and 1997 $135,000 $ 90,000 - 150,000 $ 20,741
Chief Financial Officer 1996 $ 92,610 $ 17,890 - -0- $ 10,348
Leo C. Taylor(3)............ 1998 $ 97,500 $ 40,000 - -0- $ 6,875
Vice President of Taxation, 1997 $ 90,000 $ 40,000 - 20,000 $ 8,453
Benefits and Risk Management 1996 $ 82,500 $ 12,000 - -0- $ 9,750
Russell L. Price(4)......... 1998 $ 97,500 $ 40,000 - -0- $ 6,820
Vice President, Secretary and 1997 $ 90,000 $ 40,000 - 20,000 $ 6,792
General Counsel 1996 $ 70,000 $ 12,000 - -0- $ 8,000
</TABLE>
(1) Mr. Walsh was named Acting President and Chief Executive Officer effective
April 12, 1996. Effective July 9, 1996, Mr. Walsh was appointed as
President and Chief Executive Officer.
(2) Mr. Allen became an executive officer on November 10, 1993. Effective July
9, 1996, Mr. Allen was named Executive Vice President and Chief Financial
Officer.
(3) Mr. Taylor became an executive officer on November 13, 1996.
(4) Mr. Price became an executive officer on November 13, 1996.
(5) Bonus figures reflect the bonus earned during the represented fiscal year,
although such bonus is paid during the next fiscal year.
(6) None of the named executive officers received Other Annual Compensation in
excess of the lesser of $50,000 or 10% of combined salary and bonus for
each fiscal year.
(7) The amounts listed in the "All Other Compensation" column consist of: a)
contributions to the TRSP made by the Corporation on behalf of Messrs.
Walsh, Allen, Taylor and Price in the amounts of $8,000, $6,270, $6,875 and
$6,820, respectively; and b) contributions to the Tandycrafts Benefit
Restoration Plan made by the Corporation on behalf of Mr. Walsh and Mr.
Allen in the amounts of $6,062 and $2,062, respectively.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee is responsible for developing and implementing a
compensation program that is designed to attract, motivate, reward and retain
the broad-based management talent required to achieve the Corporation's
objectives and to increase stockholder value. The Committee believes that
corporate performance and, in turn, stockholder value will be enhanced by a
compensation system which supports and reinforces the Corporation's key
operating and strategic goals while aligning the financial interests of the
Corporation's executive officers with those of the stockholders. For executive
officers, the Corporation relies on an annual incentive program and a stock
option program to align the executives' financial interests with those of
stockholders.
The Corporation's compensation program for executive officers consists of a
base salary, an annual incentive bonus program and a stock option program. The
base salary and annual incentive bonus program components of the compensation
program in effect for fiscal year 1998 were approved by the Compensation
Committee at the beginning of the fiscal year. The stock option component of the
compensation program was adopted by the Board of Directors in November 1992 and
approved by the stockholders at the November 10, 1993 Annual Meeting.
The annual incentive bonus program for executive officers is the principal
short-term incentive compensation program of the Corporation. Cash bonuses are
paid following the conclusion of the Corporation's fiscal year. These cash bonus
awards are based upon the extent to which the Corporation meets or exceeds
certain financial and strategic objectives, including the Company's earnings per
share. Based on the Company's performance for fiscal year 1998 and the
achievement of its strategic objectives, the bonus amounts included in the
Summary Compensation Table for fiscal year 1998 were approximately 66% of the
target bonus that could be earned under the plan.
The Corporation's long-term incentive program is a stock option program
under which the Committee reviews and recommends proposed grants of long-term
incentive compensation in the form of stock options. The Committee considers
stock options to be an important means of ensuring that executive officers
maintain their incentive to increase the profitability of the Corporation and
the value of its Common Stock. Because the value of stock options is entirely a
function of the value of the Corporation's Common Stock, the Committee believes
that this component of the Corporation's compensation policy aligns the
interests of executive officers with those of the Corporation's stockholders
and will enhance the value of the Common Stock for all stockholders.
The Committee determined the compensation of Michael J. Walsh, Chief
Executive Officer, for the fiscal year ended June 30, 1998 in a manner
consistent with the guidelines described above. Mr. Walsh abstains from any
vote involving his compensation.
Compensation Committee R.E. Cox, III
Joe K. Pace
Robert Schutts
Sheldon Stein
Michael J. Walsh
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Michael J. Walsh, President and Chief Executive Officer, serves on the
Compensation Committee. Messrs. Cox and Schutts, who serve on the Compensation
Committee, are beneficiaries of certain leases with Sav-On, Inc. and The
Development Association, Inc. d/b/a Joshua's Christian Stores ("Joshua's"). Mr.
Cox and Mr. Schutts, individually and as Trustee for his children, are indirect
beneficiaries of two leases between Sav-On, Inc. and Sav-On Development Company
(a Texas Partnership). Mr. Cox owns a 50% partnership interest and Mr. Schutts,
individually and as Trustee for his children, owns a 16.67% partnership interest
in Sav-On Development Company. The total rents paid on such leases for the
period of July 1, 1997 through June 30, 1998 were $137,843.52. In addition, Mr.
Cox, as a minority stockholder of the Berry Street Realty Company, was an
indirect beneficiary of one lease with Sav-On, Inc. and of one lease with
Joshua's. The total rent paid on the Sav-On lease for the period of July 1,
1997 through June 30, 1998 was $66,600. The total paid on the Joshua's lease
during fiscal year 1998 was $21,025.60. Management believes that rents paid
under such leases were at least as favorable to the Corporation as could have
been obtained from unrelated parties.
TANDYCRAFTS RETIREMENT SAVINGS PLAN
Under the Tandycrafts, Inc. Retirement Savings Plan (the "TRSP"), an
eligible employee may elect to defer from 3% to 15% of his or her wages as a
salary reduction contribution. Employee contributions are invested in various
mutual funds and other investments selected by each employee. The Corporation
makes a matching contribution of up to 100% of the first 5% of the employee
contributions. The Corporation's contributions are invested in the Common Stock
of the Corporation. Generally, all contributions by the Corporation become 100%
vested and nonforfeitable upon the completion of five (5) years of credited
service. Participation in the Tandycrafts Employee Deferred Salary and
Investment Plan (the "Prior Plan"), which was discontinued in 1986, is counted
in determining years of service under the TRSP. Generally, upon retirement,
death or termination of employment, the value of the employee's account may be
paid out in a lump sum, in installments payable generally over a period of five
(5) years or may be deferred until retirement age in a combination of cash or
securities. Officers and directors who are employees participate in the TRSP on
the same terms as other employees.
TANDYCRAFTS, INC. BENEFIT RESTORATION PLAN
In 1993, the Board approved the Tandycrafts, Inc. Benefit Restoration Plan
(the "Benefit Restoration Plan"), which covers a select group of the
Corporation's management or highly compensated employees (the "Plan
Participants"). The Benefit Restoration Plan restores to certain plan
participants benefits lost under the TRSP because of certain limitations imposed
by the Internal Revenue Code. The contributions made by the Corporation under
the Benefit Restoration Plan during the fiscal year ended June 30, 1998 for Mr.
Walsh and Allen were $6,062 and $2,062, respectively, and for all present plan
participants as a group were $14,329. No contributions were made by the
Corporation for Messrs. Price and Taylor under the Benefit Restoration Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
No options were granted during the fiscal year ending June 30, 1998 to the
Chief Executive Officer or the four other most highly compensated executive
officers. During the fiscal year 1998, there were no stock options granted to
employees under the 1992 Plan.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information relating to the exercise of stock
options during the last fiscal year by the Chief Executive Officer and the other
named executive officers in the Summary Compensation Table, and the number and
value of exercisable and unexercisable stock options held by such officers at
June 30, 1998.
<TABLE><S><C>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED VALUE ----------------------------- ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(2)
- ---- ----------- -------- ----------- --------------- ----------- ---------------
Michael J. Walsh.... -0- -0- 58,333 116,667 $ 7,437.46 $ 14,874.92
James D. Allen...... -0- -0- 50,000 100,000 $ 6,375.00 $ 12,750.00
Leo C. Taylor....... -0- -0- 7,200 12,800 $ 510.00 $ 1,020.00
Russell L. Price.... -0- -0- 8,800 13,200 $ 510.00 $ 1,020.00
</TABLE>
(1) All options were granted on one of the following dates: April 20, 1994,
July 9, 1996 and April 14, 1997 and vest ratably over either a five-year
period or a three-year period from the date of grant.
(2) Computed as the difference between the option exercise price and $4.6875
(the closing price of the Common Stock at fiscal year-end) as reported on
the New York Stock Exchange.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Mr. Cox and Mr. Schutts, individually and as Trustee for his children, are
indirect beneficiaries of two leases between Sav-On, Inc. and Sav-On Development
Company (a Texas Partnership). Mr. Cox owns a 50% partnership interest and Mr.
Schutts, individually and as Trustee for his children, owns a 16.67% partnership
interest in Sav-On Development Company. The total rents paid on such leases for
the period of July 1, 1997 through June 30, 1998 were $137,843.52. In addition,
Mr. Cox, as a minority stockholder of the Berry Street Realty Company, was an
indirect beneficiary of one lease with Sav-On, Inc. and of one lease with
Joshua's. The total rent paid on the Sav-On lease for the period of July 1,
1997 through June 30, 1998 was $66,600. The total paid on the Joshua's lease
during fiscal year 1998 was $21,025.60. Management believes that rents paid
under such leases were at least as favorable to the Corporation as could have
been obtained from unrelated parties.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return over a
five-year period, assuming $100 invested at June 30, 1993 in each of (i)
Tandycrafts, Inc. Common Stock, (ii) the NYSE Market Value Index, an index of
all companies listed on the New York Stock Exchange and (iii) a peer group
consisting of 40 similarly classified retail companies based on standardized SIC
codes. Total stockholder return is based on the increase in the price of the
Common Stock with dividends reinvested. Total return of the SIC Code Index is
weighted according to market capitalization of each company. The performance
shown in the graph is not necessarily indicative of future performance. The
graph will not be deemed to be incorporated by reference in any filing by the
Corporation under the Securities Act or the Exchange Act.
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Tandycrafts, Inc. $100 $ 75 $ 43 $ 35 $ 26 $ 26
SIC Code Index $100 $ 92 $ 90 $ 98 $104 $ 93
NYSE Market Value Index $100 $103 $124 $155 $202 $257
INDEPENDENT ACCOUNTANTS
The firm of Pricewaterhouse Coopers, LLP, which served as independent
accountants for the fiscal year ended June 30, 1998, has been selected by the
Board of Directors to continue as the Corporation's independent accountants for
fiscal year 1999. Representatives are expected to be present at the meeting with
an opportunity to make a statement and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
A proper proposal submitted by a stockholder in accordance with applicable
rules and regulations for presentation at the Corporation's 1999 Annual Meeting
of Stockholders that is received at the Corporation's principal executive office
by June 4, 1999 will be included in the Corporation's proxy statement and form
of proxy for that meeting.
Stockholders wanting to present proper proposals for action at the 1999
Annual Meeting must give written notice by certified mail, in accordance with
Article II, Section 8 of the Corporation's Bylaws, to the Secretary of the
Corporation at the address set forth in the address set forth in the cover page
of this Proxy Statement (a) not less than 120 days nor more than 150 days before
the first anniversary date of the Corporation's proxy statement in connection
with the previous annual meeting of stockholders or (b) with respect to a
special meeting of stockholders, not later than the seventh day following the
day on which notice of a special meeting was first mailed or otherwise given to
stockholders. In accordance with the Bylaws of the Corporation, any such notice
shall include the name and address of the shareholder, the class and number of
shares held by the shareholder, a representation that the shareholder intends to
appear at the meeting in person or by proxy to submit the proposal, a disclosure
of any material interest that the shareholder has in the proposal, and a brief
description of the proposal. The Corporation may in its sole discretion refuse
to allow any proposal to be presented which the Corporation would not be
required to include in a proxy statement pursuant to any rule promulgated by the
Securities and Exchange Commission. The holders of the proxies solicited by the
Corporation will have discretionary authority to vote on any matter which was
not submitted to the Corporation within the time frame specified in Article II,
Section 8 of the Corporation's Bylaws referenced above.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matter to be presented for action other than the matters set forth
herein. Should any other matter requiring a vote of stockholders arise, the
proxies in the enclosed form confer upon the person or persons entitled to vote
the shares represented by such proxies discretionary authority to vote the same
in accordance with their best judgment in the interest of the Corporation.
FINANCIAL STATEMENTS
A copy of the 1998 Annual Report of the Corporation containing the audited
financial statements accompanies this Proxy Statement. The Annual Report does
not constitute a part of the proxy solicitation material.
The Company will provide, without charge, to each person to whom a copy of
this proxy statement is delivered, upon the written or oral request of such
person and by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of the annual report on Form 10-K of the
Corporation. Requests should be directed to Shareholder Services, c/o
Tandycrafts, Inc., 1400 Everman Parkway, Fort Worth, Texas 76140.
By Order of the Board of Directors,
RUSSELL L. PRICE
Vice President, General Counsel and Secretary
TANDYCRAFTS, INC.
Fort Worth, Texas
October 1, 1998
