TANDYCRAFTS, INC.
1400 EVERMAN PARKWAY
FORT WORTH, TEXAS 76140
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 10, 1999
To the Stockholders of Tandycrafts, Inc.:
The Annual Meeting of Stockholders of Tandycrafts, Inc. will be held on
Wednesday, November 10, 1999 at 9:30 a.m., Central Standard Time, at the
Randolph County Development Center (Black River Technical College campus)
located at 1410 Highway 304 East, Pocahontas, Arkansas, 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 13, 1999 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 5, 1999
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, 1999, to
be held on November 10, 1999, (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 7, 1999.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of the Corporation's Common Stock of record as of the close of
business on September 13, 1999 ("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 13, 1999,
there were outstanding 12,083,618 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.
NOMINEES AGE DIRECTOR SINCE
-------- --- --------------
R.E. Cox, III...................... 66 1985
Joe K. Pace........................ 54 1986
Sheldon Stein...................... 46 1995
Michael J. Walsh................... 58 1992
Colon Washburn..................... 53 1999
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; and TA Ranch,
Saratoga, Wyoming.
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., and Home Interiors & Gifts, 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.
MR. WASHBURN has been a partner with Bentonville Associates Ventures, LLC
since 1996 and President and Owner of Beau Terre Farms, Inc., a real estate
development company, since 1993. Previously, he served as a merchant consultant
with C.P. Group, which is located in Thailand, from 1994 to 1998. From 1971
until January 1993, he was employed by Wal*Mart Stores, Inc., where he served
most recently as an Executive Vice President for Sam's Club and as a Senior Vice
President for Wal*Mart Stores, Inc. He currently serves on the Board of
Directors of Fresh America Corporation, Kaua Technology, Ltd. and Bank of
Rogers, Arkansas.
BOARD COMMITTEES
The Board of Directors of the Corporation met sixteen (16) times during
fiscal year 1999. All Directors were present at each meeting of the Board and
each Committee on which he or she served except Mr. Cox and Mr. Schutts, who
missed one meeting each.
The Board of Directors has an Audit Committee, which is comprised of at
least three directors who are neither officers nor employees of the Company or
its subsidiaries. The Audit committee is currently composed of Messrs. Cox,
Pace, Stein and Washburn. 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 met two (2) times during the past fiscal year.
The Board of Directors has a Compensation Committee currently composed of
Messrs. Cox, Pace, Stein, Walsh and Washburn. The principal functions of the
Compensation Committee are to review and make recommendations to the Board of
Directors concerning compensation plans for certain executive officers and
appointments and promotions to executive positions at the corporate level. The
Compensation Committee met one (1) time during fiscal year 1999.
The Board of Directors has a Nominating Committee currently composed of
Messrs. Cox and Walsh. The Nominating Committee reviews and makes
recommendations to the Board of Directors with respect to candidates for
directors of the Corporation and assignments of directors to committees of the
Board. The Nominating Committee met one (1) time during fiscal year 1999.
Stockholders who wish to suggest nominees for election at the 2000 Annual
Meeting should submit their suggestion in writing, in accordance with Article
II, Section 8 of the Corporation's Bylaws, no earlier than May 8, 2000 and no
later than June 7, 2000 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, Stein, Walsh and Washburn. The
principal functions of the Progress Committee are to discuss strategic and
operational issues. The Progress Committee met two (2) times during fiscal year
1999.
DIRECTOR COMPENSATION
For fiscal year 1999, 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, Messrs. Cox, Pace, and Stein had
previously received a stock option grant of 60,000 shares. No stock options
were granted to directors in fiscal year 1999.
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 13, 1999, 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............................................... 72,700(2) *
Joe K. Pace................................................. 51,300(2) *
Sheldon Stein............................................... 51,000(2) *
Colon Washburn.............................................. 18,350 *
Michael J. Walsh............................................ 328,152(3) 2.72%
James D. Allen.............................................. 135,219(4) 1.12%
Leo C. Taylor............................................... 30,735(5) *
Russell L. Price............................................ 25,128(6) *
Michael Murray.............................................. 11,229(7) *
All Executive Officers and Directors as a group (9 persons). 723,813(8) 5.99%
Tandycrafts, Inc. Retirement Savings Plan (TRSP)............ 2,158,164(9) 17.86%
The TCW Group, Inc.......................................... 818,800(10) 6.78%
Dimensional Fund Advisors, Inc.............................. 794,200(11) 6.57%
First Carolina Investors, Inc............................... 636,011(12) 5.26%
</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 disposi-
tion 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 40,000 exercisable shares under options granted pursuant to the
Tandycrafts, Inc. 1992 Director Stock Option Plan.
(3) Includes 50,464 shares held by the Tandycrafts Retirement Savings Plan
("TRSP"), formerly known as the Tandycrafts Employee Stock Ownership Plan,
over which Mr. Walsh has voting but not investment power, 126,667 exercis-
able shares under options granted pursuant to the Tandycrafts, Inc. 1992
Stock Option Plan (the "1992 Plan") and 9,301 shares held in the TRSP
Benefit Restoration Plan for the benefit of Mr. Walsh. Excludes an
aggregate of 14,746 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 13,915 shares held by the TRSP, over which Mr. Allen has voting
but not investment power, 108,333 exercisable shares under options granted
pursuant to the 1992 Plan and 1,371 shares held in the TRSP Benefit
Restoration Plan for the benefit of Mr. Allen. Excludes an aggregate of
14,746 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 9,510 shares held by the TRSP, over which Mr. Taylor has voting
but not investment power and 14,800 exercisable shares under options
granted pursuant to the 1992 Plan. Excludes an aggregate of 14,746 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 8,328 shares held by the TRSP, over which Mr. Price has voting but
not investment power and 16,800 exercisable shares under options granted
pursuant to the 1992 Plan. Excludes an aggregate of 14,746 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) Includes 3,262 shares held by the TRSP, over which Mr. Murray has voting
but not investment power and 7,667 exercisable shares under options granted
pursuant to the 1992 Plan.
(8) Excludes an aggregate of 14,746 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.
(9) As of September 13, 1999, a total of 2,158,164 shares of the Corporation's
Common Stock were held in the Corporation's TRSP, located at 1400 Everman
Parkway, Fort Worth, Texas 76140, c/o Tandycrafts Retirement Savings Plan
Committee, with 14,746 shares held in the Tandycrafts Investment Plan
(which was merged into the TRSP) account and 2,143,418 shares 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.
(10) Based on a Schedule 13G, dated February 12, 1999, the TCW 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 818,800 shares of the
Corporation's Common Stock.
(11) Based on a Schedule 13G, dated February 11, 1999, Dimensional Fund
Advisors, Inc., a Delaware corporation, located at 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401, holds sole voting and investment power over
794,200 shares of the Corporation's Common Stock.
(12) Based on a Schedule 13D, dated July 20, 1999, First Carolina Investors,
Inc., a Delaware corporation, located at P.O. Box 33607, Charlotte, NC
28233-3607, holds sole voting and investment power over 601,011 shares of
the Corporation's Common Stock. Additionally, based on this Schedule 13D,
Aries Hill Corporation (of which Brent D. Baird is an executive officer and
director), a New York corporation, located at 1350 One M&T Plaza, Buffalo,
NY 14203, holds sole voting and investment power over 15,000 shares and
Brent D. Baird (an executive officer and director of First Carolina
Investors, Inc.), located at 17 Tudor Place, Buffalo, NY 14222, holds sole
voting and investment power over 20,000 shares.
* 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 current executive officers of the Company, their respective ages,
positions held and tenure as officers are as follows:
Position and Business Experience Served as
Name and Age During the Past Five Years Officer Since
- -------------------- ----------------------------------- ---------------
Michael J. Walsh, 58 President and Chief Executive 1983
Officer since April 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, 39 Chief Operating Officer since May 1993
1999. Executive Vice President and
Chief Financial Officer 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, 37 Vice President of Taxation, Risk 1996
Management and Human Resources 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, 34 Vice President, General Counsel and 1996
Secretary since 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.
Troy A. Huseman, 31 Controller since December 1998. 1998
Director of Financial Reporting and
Planning from June 1996 to December
1998. Prior to June 1996, Mr.
Huseman was with the accounting firm
of Price Waterhouse, LLP.
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 elected. 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, 1999 were the
Corporation's chief executive officer and the four other most highly paid
executive officers of the Corporation whose salary and bonus exceeded $100,000
for the year ended June 30, 1999.
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(6) COMPENSATION(7) OPTIONS COMPENSATION(8)
--------- -------------------------------------------------------------------------
Michael J. Walsh(1).... 1999 $235,000 $ 0 - 30,000 $ 14,170
President and Chief Executive 1998 $183,750 $ 78,400 - -0- $ 14,062
Officer 1997 $165,000 $110,000 - 175,000 $ 81,542
James D. Allen(2)...... 1999 $205,000 $ 0 - 25,000 $ 12,190
Executive Vice President, 1998 $153,750 $ 68,800 - -0- $ 8,332
Chief Operating Officer and 1997 $135,000 $ 90,000 - 150,000 $ 20,741
Chief Financial Officer
Leo C. Taylor(3)....... 1999 $107,500 $ 50,000 - 6,000 $ 7,375
Vice President of Taxation, Risk 1998 $ 97,500 $ 40,000 - -0- $ 6,875
Mgmt. and Human Resources 1997 $ 90,000 $ 40,000 - 20,000 $ 8,453
Russell L. Price(4).... 1999 $107,500 $ 50,000 - 6,000 $ 7,375
Vice President, Secretary and 1998 $ 97,500 $ 40,000 - -0- $ 6,820
General Counsel 1997 $ 90,000 $ 40,000 - 20,000 $ 6,792
Mike Murray(5)......... 1999 $ 98,752 $ 30,000 - 5,000 $ 4,937
Treasurer 1998 $ 95,004 $ 0 - -0- $ 5,938
1997 $ 92,614 $ 23,750 - 10,000 $ 1,979
</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 was named Chief Operating Officer on April 20, 1999. Effective
July 9, 1996, Mr. Allen was named Executive Vice President and Chief
Financial Officer. Mr. Allen became an executive officer on November 10,
1993.
(3) Mr. Taylor became an executive officer on November 13, 1996.
(4) Mr. Price became an executive officer on November 13, 1996.
(5) Mr. Murray became an executive officer on April 21, 1999 and resigned
effective September 15, 1999.
(6) Bonus figures reflect the bonus earned during the represented fiscal year,
although such bonus is paid during the next fiscal year.
(7) 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.
(8) 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, Price and Murray in the amounts of $8,000, $8,000,
$7,375, $7,375, and $4,937 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 $6,170 and $4,190, respectively.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee has developed and implemented a compensation
program that it believes will 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 for Messrs. Walsh and Allen are reviewed and set by the Compensation
Committee on an annual basis and are based upon respective responsibilities,
comparative data and performance. The base salary for the other executive
officers are set by the Company based upon similar criteria.
The annual incentive bonus program for executive officers is the principal
short-term incentive compensation program of the Corporation. The annual
incentive bonus program is based upon the extent to which the Corporation meets
or exceeds financial and strategic objectives, including the Company's earnings
per share. The annual incentive bonus program is approved in the beginning of
each fiscal year. The Compensation Committee approves the bonus program for
Messrs. Walsh and Allen and the Company approves that bonus program for the
other executive officers. The bonus program approved for fiscal year 1999 for
Messrs. Walsh and Allen did not anticipate the impact of taking a restructuring
charge during the fiscal year. Based on the bonus program and the Company's
performance for fiscal year 1999, Messrs. Walsh and Allen did not receive a
bonus for fiscal year 1999.
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 stock option component
of the compensation program was adopted by the Board of Directors in 1992 and
approved by the stockholders at the 1993 Annual Meeting. The Committee granted
stock options to the named executives in the Summary Compensation Table as set
forth in the Stock Option Grants In the Last Fiscal Year Table. 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, 1999 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
Sheldon Stein
Michael J. Walsh
Colon Washburn
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Michael J. Walsh, President and Chief Executive Officer, serves on the
Compensation Committee. Mr. Cox, who serves on the Compensation Committee, is a
beneficiary of certain leases with Sav-On, Inc. Mr. Cox and Mr. Schutts (prior
to his death), 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 in Sav-On
Development Company. Mr. Schutts (prior to his death), individually and as
Trustee for his children, owned a 16.67% partnership interest in Sav-On
Development Company. The total rents paid on such leases for the period of July
1, 1998 through June 30, 1999 were $138,599.36. 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. The total rent paid on the Sav-On
lease for the period of July 1, 1998 through June 30, 1999 was $66,600.
Management believes that rents paid under such leases were at least as favorable
to the Corporation as could have been obtained from unrelated parties. The
Corporation began a consulting arrangement with Bentonville Associates Ventures,
LLC ("BAV") in March 1999, prior to Mr. Washburn's appointment as a director of
the Corporation. Mr. Colon Washburn is a part-owner and principal in BAV.
Pursuant to the arrangement, BAV provides certain consulting services to
Tandycrafts including the development and training of integrated account teams,
the assessment of certain merchandising and integrated account team functions,
the development of strategic business plans and budgets for integrated account
teams, the development of project plans for merchandising and integrated account
team initiatives, the creation of performance benchmarks and scorecards for
integrated account teams, the development of category management plans, and the
analysis of product location, point of sale, cross-merchandising and strategic
partnership opportunities. The Corporation pays BAV a monthly retainer of
$4,167 for twenty-four months, a monthly consulting fee of $14,000 through
August 1999 and $3,500 through February 2000, and certain expenses incurred by
BAV, unless earlier terminated by the Corporation. Although the Corporation
paid BAV less than $60,000 in fiscal year 1999, it is expected that payments to
BAV in fiscal year 2000 will exceed $60,000. Management believes that the fees
paid under such arrangement 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, 1999 for Mr.
Walsh and Mr. Allen were $6,170 and $4,190, respectively, and for all present
plan participants as a group were $13,860. No contributions were made by the
Corporation for Messrs. Murray, Price and Taylor under the Benefit Restoration
Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to individual
grants under the Tandycrafts, Inc. 1992 Stock Option Plan (the "1992 Plan"),
during fiscal year ended June 30, 1999 to the Chief Executive Officer and the
other named executives in the Summary Compensation Table.
<TABLE><S><C>
NUMBER OF POTENTIAL REALIZABLE
SHARES VALUE AT ASSUMED
UNDERLYING PERCENT OF TOTAL OPTIONS ANNUAL RATES(3)
OPTIONS GRANTED TO EMPLOYEES EXERCISE OR EXPIRATION --------------------
NAME GRANTED(1) DURING THE YEAR BASE PRICE(2) DATE 5% 10%
- ---- ---------- --------------- ------------- ---- -- ---
Michael J. Walsh. 30,000 22.6% 3.47 8-11-08 $65,468 $165,909
James D. Allen... 25,000 18.9% 3.47 8-11-08 $54,557 $138,257
Leo C. Taylor.... 6,000 4.5% 3.47 8-11-08 $13,094 $ 33,182
Russell L. Price. 6,000 4.5% 3.47 8-11-08 $13,094 $ 33,182
Michael Murray... 5,000 3.8% 3.47 8-11-08 $10,911 $ 27,651
</TABLE>
- ---------------
(1) Grants of options to purchase shares under the 1992 Plan generally vest at
a rate of either 33 1/3% per year for three years or 20% per year over five
years, and expire on the tenth anniversary of the date of grant. The 1992
Plan provides that, in the event of a change of control, death or total
disability, as defined therein, all options granted under the 1992 Plan
immediately vest and become exercisable.
(2) The Exercise or Base price is equal to the average of the high and low
trading price of the Common Stock on the New York Stock Exchange on the
date of grant.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised. There is no assurance the value realized by an executive officer
will be at or near the assumed 5% or 10% levels.
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, 1999.
<TABLE><S><C>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
SHARES -------------------------- ---------------------------
ACQUIRED VALUE
NAME ON REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(2)
- ---- ---- -------- ----------- -------------- ----------- --------------
EXERCISE
--------
Michael J. Walsh. -0- -0- 116,333 88,667 $0 $ 4,650
James D. Allen... -0- -0- 100,000 75,000 $0 $ 3,875
Leo C. Taylor.... -0- -0- 11,200 14,800 $0 $ 970
Russell L. Price. -0- -0- 13,200 14,800 $0 $ 970
Michael Murray... -0- -0- 4,000 11,000(3) $0 $ 775(3)
</TABLE>
- ---------------
(1) All options were granted on one of the following dates: April 20, 1994,
July 9, 1996, April 14, 1997, and August 11, 1998, 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 $3.625
(the closing price of the Common Stock at fiscal year-end) as reported on
the New York Stock Exchange.
(3) Mr. Murray's unexercisable options were forfeited upon his resignation.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Mr. Cox and Mr. Schutts (prior to his death), 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 (prior to his death), individually and as
Trustee for his children, owned a 16.67% partnership interest in Sav-On
Development Company. The total rents paid on such leases for the period of July
1, 1998 through June 30, 1999 were $138,599.36. 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. The total rent paid on the Sav-On
lease for the period of July 1, 1998 through June 30, 1999 was $66,600.
Management believes that rents paid under such leases were at least as favorable
to the Corporation as could have been obtained from unrelated parties. The
Corporation began a consulting arrangement with Bentonville Associates Ventures,
LLC ("BAV") in March 1999, prior to Mr. Washburn's appointment as a director of
the Corporation. Mr. Colon Washburn is a part-owner and principal in BAV.
Pursuant to the arrangement, BAV provides certain consulting services to
Tandycrafts including the development and training of integrated account teams,
the assessment of certain merchandising and integrated account team functions,
the development of strategic business plans and budgets for integrated account
teams, the development of project plans for merchandising and integrated account
team initiatives, the creation of performance benchmarks and scorecards for
integrated account teams, the development of category management plans, and the
analysis of product location, point of sale, cross-merchandising and strategic
partnership opportunities. The Corporation pays BAV a monthly retainer of
$4,167 for twenty-four months, a monthly consulting fee of $14,000 through
August 1999 and $3,500 through February 2000, and certain expenses incurred by
BAV, unless earlier terminated by the Corporation. Although the Corporation
paid BAV less than $60,000 in fiscal year 1999, it is expected that payments to
BAV in fiscal year 2000 will exceed $60,000. Management believes that the fees
paid under this arrangement were at least as favorable to the Corporation as
could have been obtained from unrelated parties.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
The Corporation has entered into Severance Agreements ("Severance
Agreements") and Special Termination Agreements ("Change in Control Agreements")
with Messrs. Price, Taylor and Walsh and into a Change of Control Agreement with
Mr. Allen, all effective as of July 1, 1999. The Severance Agreements are
intended to provide non-competition protection to the Corporation for a one-year
period after the Corporation terminates the executive's employment. The
Severance Agreements prohibit the executive from soliciting employees of the
Corporation for employment and from soliciting customers or suppliers of the
Corporation from ceasing to do business with the Corporation or decreasing their
business with the Corporation for a period of one year after the Corporation
terminates the executive's employment. In exchange, in the event that the
executive's employment was terminated for reasons other than death, disability
or "cause", as defined in the Severance Agreements, the executive is entitled to
certain severance benefits, provided that the executive signs a release of
employment related claims against the Corporation. The severance benefits are
continuation of health care benefits for one year and a payment in the amount of
the executive's annual salary and bonus, based on the average salary and bonus
for the preceding two years. The Severance Agreements have initial terms of two
years. The terms of the Severance Agreements are automatically extended for
one-year terms but the Corporation may terminate the Severance Agreements by
providing written notice of non-renewal to the executive not later than 90 days
prior to the expiration of the current term. The Change in Control Agreements
provide for certain severance benefits if the Corporation terminates (other than
as a result of death, disability or "cause") the employment of the executive
within two years after a "Change in Control", as defined in the Change in
Control Agreements, or in certain other instances in connection with a Change of
Control. The severance benefits include continuation of certain fringe benefits
(including health care, life and disability insurance) for up to two years and a
payment in the amount of 150% of the highest annual salary of the executive
immediately prior to or after a Change of Control and of the bonus in the fiscal
year preceding the Change of Control or in the fiscal year before such executive
is terminated, whichever is larger. The Change of Control Agreements have a
term of two years (or, if there is a Change of Control, two years after such
Change of Control). The Change of Control Agreements terminate upon the
executive's death or voluntary retirement. The term of the Change of Control
Agreements is automatically extended for an additional year upon each
anniversary date of the Agreements unless the Corporation provides written
notice of non-renewal not later than 90 days prior to such anniversary date. In
addition, the Corporation will pay the legal fees of the executive if the
Corporation breaches the Change of Control Agreement or declares them void or
unenforceable.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return over a
five-year period, assuming $100 invested at June 30, 1994 in each of (i)
Tandycrafts, Inc. Common Stock, (ii) the Russell 2000 Index, an index consisting
of primarily small capitalization stocks, and (iii) a peer group consisting of
40 similarly classified retail companies based on standardized SIC codes. The
Corporation has switched from the NYSE Market Value Index to the Russell 2000
Index as the Corporation believes that the Russell 2000 Index is a more
appropriate index and is reflective of the Corporation's peer group of small
capitalization stocks. 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.
Five Year Cumulative Total Shareholder Return
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Tandycrafts, Inc. $100 $ 57 $ 47 $ 35 $ 35 $ 27
SIC Code Index $100 $ 98 $106 $113 $101 $ 82
NYSE Market Value Index $100 $119 $149 $195 $249 $282
Russell 2000 Index $100 $120 $149 $173 $202 $203
INDEPENDENT ACCOUNTANTS
The firm of Pricewaterhouse Coopers, LLP, which served as independent
accountants for the fiscal year ended June 30, 1999, has been selected by the
Board of Directors to continue as the Corporation's independent accountants for
fiscal year 2000. 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 2000 Annual Meeting
of Stockholders that is received at the Corporation's principal executive office
by June 7, 2000 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 2000
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 stockholder, the class and number of
shares held by the stockholder, a representation that the stockholder intends to
appear at the meeting in person or by proxy to submit the proposal, a disclosure
of any material interest that the stockholder 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 1999 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 5, 1999
