SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) OF the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant/X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TANDYCRAFTS, INC.
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(Name of Registrant as Specified In Its Charter)
THE TANDYCRAFTS FULL VALUE COMMITTEE
STEEL PARTNERS II, L.P.
WARREN G. LICHTENSTEIN
MARK E. SCHWARZ
NEWCASTLE PARTNERS, L.P.
JAMES R. HENDERSON
GLEN KASSAN
HAROLD SMITH
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(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE TANDYCRAFTS FULL VALUE COMMITTEE
150 East 52nd Street, 21st Floor
New York, NY 10022
October 31, 2000
Dear Tandycrafts Stockholder:
Through the attached Consent Solicitation Statement, The Tandycrafts
Full Value Committee (the "Committee") is providing you with an opportunity to
remove and replace the members of the Board of Directors of Tandycrafts, Inc.
("Tandycrafts") with the Committee's slate of nominees (the "Slate"). All
Tandycrafts stockholders are being asked to express their consent to our
proposals by marking, signing and dating the enclosed BLUE Consent Card and
returning it in the enclosed, postage-paid envelope, to our solicitor, Mackenzie
Partners, as set forth in the Consent Solicitation Statement.
If you elect the members of our Slate, they, subject to their fiduciary
duties, will explore alternatives to maximize stockholder value. Additionally,
if elected, the Slate will retain a nationally recognized investment banking
firm to assist in the review and implementation of the alternatives that the
Slate believes will maximize stockholder value for all of Tandycrafts'
stockholders.
OUR GOAL IS TO MAXIMIZE THE PRESENT VALUE OF YOUR SHARES
The Committee believes that the current Board of Directors has failed
to provide the management that is necessary to maximize stockholder value. The
Committee believes that Tandycrafts' stock price over the past several years,
during one of the greatest bull markets in history, demonstrates the Board of
Directors' failure to create value for its stockholders. According to
information contained in management's Proxy Statement for the 1999 Annual
Meeting of Stockholders, during the period from June 30, 1994 through June 30,
1999, Tandycrafts' stock price performance has trailed the Russell 2000 Index
and a peer group index selected by Tandycrafts by a significant margin. During
this period, the cumulative total returns for the Russell 2000 Index was
approximately 103%, Tandycrafts' peer group index lost approximately 18% of its
value, and Tandycrafts' stock lost approximately 73% of its value. On October
19, 2000, Tandycrafts' stock price closed at $1.375 per share.
The Committee beneficially owns approximately 14.8% of Tandycrafts'
issued and outstanding shares of common stock (the "Shares"). As Tandycrafts'
largest stockholder, the Committee has a vested interest in maximizing the value
of the Shares. In considering who is best capable of maximizing value, the
Committee shares the frustration of Tandycrafts' stockholders in the inability
of the Board of Directors to maximize stockholder value. The Committee believes
that the removal of the existing Board of Directors, without cause, and the
election of the Slate represents the best means for Tandycrafts' stockholders to
maximize the value of their Shares.
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THE COMMITTEE CAN ONLY IMPLEMENT ITS PLAN WITH YOUR HELP
The Committee believes it can increase stockholder value by providing
better management of the Tandycrafts businesses. The Committee is asking you to
replace current directors R.E. Cox, III, Jack Kahl, Sheldon Stein, Michael J.
Walsh, Colon Washburn, and any person or persons elected to the Board of
Directors by the Directors to fill any vacancy arising since the last annual
meeting of stockholders, or newly created directorship, with Warren G.
Lichtenstein, Mark E. Schwarz, James R. Henderson, Glen Kassan and Harold Smith.
A biographical sketch of each member of the Slate is included in the Consent
Solicitation Statement for your review.
The Committee urges you to take advantage of this opportunity to make
these changes in the Board of Directors for the betterment of Tandycrafts. If we
fail in this effort, there may not be another opportunity.
Please mark, sign, date and return your BLUE Consent Card today.
Sincerely,
THE TANDYCRAFTS FULL VALUE COMMITTEE
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CONSENT SOLICITATION STATEMENT
OF
THE TANDYCRAFTS FULL VALUE COMMITTEE
Steel Partners II, L.P. is the largest stockholder of Tandycrafts,
Inc., a Delaware corporation (the "Company"), and a member of The Tandycrafts
Full Value Committee (the "Committee"). The Committee is writing to you in
connection with the election of directors to the Company's Board of Directors at
the next annual meeting of stockholders. As disclosed in preliminary proxy
material filed by the Committee with the Securities and Exchange Commission (the
"SEC") on October 5, 2000, the Committee has nominated its slate of directors in
opposition to the incumbent Board of Directors (the "Company Board"). The
Committee believes that recent actions of the Company Board are not in the best
interests of the Company's stockholders. The Committee is convinced that a more
thorough investigation of strategic alternatives, and a greater dedication to
maximizing stockholder value, will only be achieved through the election of the
Committee's slate.
Although it is the Committee's preference to elect its slate of
directors at the 2000 Annual Meeting of Stockholders of the Company (the "Annual
Meeting"), the Committee is concerned that the Company Board may postpone the
date of the Annual Meeting as well as the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting.
Additionally, the Company has not yet filed with the SEC its 2000 Annual Report,
containing audited financial statements, which is required to be furnished to
all stockholders of the Company prior to the Annual Meeting. Accordingly, in
order to, among other things, prevent delay by management, the Committee is
soliciting written consents of the stockholders to remove the Company Board and
to elect its slate of directors.
This Consent Solicitation Statement (the "Consent Statement") and the
accompanying form of written consent are furnished by the Committee in
connection with the solicitation by the Committee of written consents from the
holders of common stock, $1.00 par value per share (the "Common Stock"), of the
Company, to take the following actions (collectively, the "Proposal"), without a
meeting of stockholders, as permitted by Delaware law:
(1) Remove all of the incumbent members of the Company's Board
of Directors without cause, including the removal of R.E. Cox,
III, Jack Kahl, Sheldon Stein, Michael J. Walsh, Colon
Washburn, and any person or persons elected to the Board of
Directors by the Directors to fill any vacancy arising since
the last annual meeting of stockholders, or newly created
directorship; and
(2) Fix the number of members of the Board of Directors of the
Company at five (5); and
(3) Elect the Committee's slate of nominees, Warren G.
Lichtenstein, Mark E. Schwarz, James R. Henderson, Glen Kassan
and Harold Smith (the "Slate"), to the Company's Board of
Directors to fill the newly created
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vacancies on the Board of Directors, and to serve until their
respective successors are duly elected and qualified.
Approval of the Proposal requires the written consent of a majority of
the holders of Common Stock as of October 20, 2000 (the "Record Date").
Stockholders of record as of close of business on the Record Date will be
entitled to one vote for each share of Common Stock (the "Shares"). The
Committee has set November 22, 2000 as the goal for the submission of written
consents; however, the last day for the submission of written consents to the
Company under Delaware law will be December 19, 2000. Based on publicly
available information filed by the Company with the SEC as of October 19, 2000,
there were 12,280,897 Shares issued and outstanding.
On the Record Date, the Committee was the beneficial owner of an
aggregate of 1,801,300 Shares which represented approximately 14.8% of the
issued and outstanding Shares.
THE COMMITTEE BELIEVES THAT THE PLAN DESCRIBED FURTHER HEREIN WILL
DELIVER MAXIMUM VALUE FOR YOUR SHARES OF COMMON STOCK, ALTHOUGH THERE CAN BE NO
ASSURANCES THAT THE PLAN WILL RESULT IN MAXIMUM VALUE; TO CARRY OUT THE PLAN THE
COMMITTEE'S SLATE BELIEVES THAT THE INCUMBENT MEMBERS OF THE COMPANY'S BOARD OF
DIRECTORS MUST BE REPLACED. REPRESENTATION BY THE SLATE CAN BE ACHIEVED ONLY IF
THE PROPOSED CORPORATE ACTIONS ARE ADOPTED. ACCORDINGLY YOU ARE URGED TO CONSENT
TO THE REMOVAL OF THE INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS AND TO THE
ELECTION OF THE SLATE BY MARKING, SIGNING, DATING AND RETURNING PROMPTLY THE
ENCLOSED BLUE CONSENT CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
Because a consent to corporate action is effective only if executed by
holders of record of a majority of the total number of Shares outstanding on the
Record Date, the failure to execute a consent has the same effect as a
withholding of consent for any proposal.
The principal executive offices of the Company are located at 1400
Everman Parkway, Fort Worth, Texas 76140 and its telephone number is (817)
551-9600.
This Consent Statement, the accompanying letter to stockholders and the
BLUE Consent Card are first being furnished to stockholders on or about November
1, 2000.
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IMPORTANT
---------
YOUR CONSENT IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN. THE COMMITTEE URGES YOU TO SIGN, DATE, AND RETURN THE ENCLOSED BLUE CONSENT
CARD TODAY TO VOTE FOR THE ELECTION OF THE SLATE.
The members of the Slate are committed, subject to their fiduciary duty
to the Company's stockholders, to giving all the Company's stockholders the
opportunity to receive the maximum value for their Shares. A vote FOR the Slate
will enable you - as the owners of the Company - to send a message to the
Company's Board that you are committed to maximizing the value of your Shares.
o If your Shares are registered in your own name, please sign and date
the enclosed BLUE Consent Card and return it to the Committee, c/o
Mackenzie Partners, Inc., in the enclosed envelope today.
o If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the record date, only it can vote
such Shares and only upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and
instruct that person to execute on your behalf the BLUE Consent Card.
The Committee urges you to confirm your instructions in writing to the
person responsible for your account and to provide a copy of such
instructions to the Committee, c/o Mackenzie Partners, Inc., who is
assisting in this solicitation, at the address and telephone numbers
set forth below, and on the back cover of this Consent Solicitation
Statement, so that we may be aware of all instructions and can attempt
to ensure that such instructions are followed.
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IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR CONSENT,
OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE CALL:
[MACKENZIE PARTNERS, INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
E-MAIL: [email protected]
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
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The Committee believes that the removal of the existing Board of
Directors, without cause, and the election of the Slate represents the best
means for the Company's stockholders to maximize the value of their Shares. The
Committee, as the largest stockholder of the Company, has a vested interest in
maximizing the value of the Shares. In considering who is best capable of
maximizing value, the Committee shares the frustration of the Company's
stockholders in the Board's inability to maximize stockholder value.
The Committee believes that the Company's stock price over the past
several years, during one of the greatest bull markets in history, demonstrates
the Board's failure to create value for its stockholders.
o According to information contained in management's Proxy
Statement for the 1999 Annual Meeting of Stockholders (the
"Management Proxy Statement"), during the period from June 30,
1994 through June 30, 1999, the Company's share price
performance has trailed the Russell 2000 Index and a peer
group index selected by the Company by a significant margin.
o According to the Management Proxy Statement, during this
period the cumulative total returns for the Russell 2000 Index
was approximately 103%, the Company's peer group index lost
approximately 18% of its value, and the Shares actually lost
approximately 73% of their value.
o At June 30, 2000, the Company's stock price was $2.813 per
Share. Since then, the stock price has been languishing below
$3.00 per share and closed at $1.375 per share on October 19,
2000.
It is the Committee's opinion that the Company's lackluster stock price
performance is reflective of the Company's losses from continued and
discontinued operations. Upon consummation of the Company's divestiture of 121
leather and crafts retail stores and related manufacturing operations during the
quarter ended December 31, 1998, the Company's public filings reflect that it
recorded a loss of approximately $11.1 million. Shortly thereafter, the Company
suffered a significant loss in connection with the sale and subsequent
reacquisition of Cargo Furnitures, Inc. ("Cargo"). After the sale of Cargo, the
former subsidiary determined that it required additional capital in order to
complete its restructuring program. In January 1999, Cargo defaulted on its bank
term note agreement which was guaranteed by the Company. After complying with
its obligations under the guaranty, the Company determined that recovery of the
approximately $2.5 million note balance as well as certain receivables from
Cargo was not probable. As a result, loss provisions of approximately $3.5
million were recorded for the quarter ended December 31, 1998. After making the
guaranty payment, the Company acquired 100% ownership of Cargo, resulting in an
additional $602,000 operating loss for the fiscal year ended June 30, 1999.
After reporting a net loss of over $23 million for the fiscal year ended June
30, 1999, the Company formulated a plan to dispose of the gifts and office
supplies divisions in order to concentrate on the frames and wall decor
divisions which management believed were the Company's "core" businesses. In a
press release
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issued by the Company on February 15, 2000, management announced that it had
already begun to implement this strategy and, going forward, intended to divest
the non-core businesses.
o The Committee believes that management's efforts to implement
this strategy was too late to maximize the value of the
Shares.
o The sales of the Rivertown Button, Licensed Lifestyles, J-Mar
and Sav-On Office Supplies businesses were consummated in a
period of less than six months.
o Ultimately, the sale of the gifts and office supplies units
resulted in a loss of $7.3 million for the fiscal year ended
June 30, 2000.
o The Committee believes that the Company has performed poorly
since the sale of the gifts and office supplies units and that
management has failed to recognize that there is room for
further divestitures of its weaker businesses.
o As announced in a recent press release, the Company had a net
loss for continuing operations of approximately $10.7 million,
or $0.88 per share, and $12.4 million, or $1.02 per share, for
the fourth quarter and fiscal year ended June 30, 2000,
respectively.
In the Committee's opinion, the Company's poor performance and the
shortsighted implementation of the divestiture strategy demonstrates the Company
Board's lack of dedication to pursuing the best interests of the stockholders
and maximizing stockholder value.
For these reasons, the Committee believes that the value of the Company
has not been maximized by the Board and believes that the removal of the
existing Board of Directors and the election of the Slate represents the best
means for stockholders to maximize the present value of their Shares. If
elected, the members of the Slate, subject to their fiduciary duties, will
explore alternatives to maximize stockholder value including, but not limited to
(i) selling the Company by means of a merger, tender offer or otherwise; (ii)
expanding the Company's frame business through acquisitions; (iii) divesting the
non-core assets of the Company utilizing a nationally recognized investment
banking firm; and (iv) adopting a stock repurchase program. Additionally, if
elected, the Slate will retain a nationally recognized investment banking firm
to assist in the review and implementation of the alternatives that the Slate
believes will maximize stockholder value for all of the Company's stockholders.
THE SLATE
The following information sets forth the name, business address,
present principal occupation, and employment and material occupations,
positions, offices, or employments for the past five years of each member of the
Slate. This information has been furnished to the Committee by the Slate. Where
no date is given for the commencement of the indicated office or position, such
office or position was assumed prior to September 1, 1995. Each person listed
below is a citizen of the United States.
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WARREN G. LICHTENSTEIN (35) has been the Chairman of the Board,
Secretary and the Managing Member of Steel Partners, L.L.C. ("Steel LLC"), the
general partner of Steel Partners II, L.P. ("Steel Partners"), since January 1,
1996. Prior to such time, Mr. Lichtenstein was the Chairman and a director of
Steel Partners, Ltd. ("Former General Partner"), the general partner of Steel
Partners Associates, L.P. ("Associates"), which was the general partner of Steel
Partners from 1993 and prior to January 1, 1996. For information regarding Steel
Partners and Steel LLC, see below under "Participant Information." Mr.
Lichtenstein was the acquisition/risk arbitrage analyst at Ballantrae Partners,
L.P., a private investment partnership formed to invest in risk arbitrage,
special situations and undervalued companies, from 1988 to 1990. Mr.
Lichtenstein is a director of the following publicly held companies: Gateway
Industries, Inc., a provider of database development and website design and
development services, WebFinancial Corporation, a commercial and consumer
lender, Puroflow, Incorporated, a designer and manufacturer of precision
filtration devices, PLM International, Inc., an equipment leasing company,
Tech-Sym Corporation, an electronics engineering and manufacturing company, CPX
Corp., a company with no significant operating business. He is a former director
of Saratoga Beverage Group, Inc., a beverage manufacturer and distributor, Alpha
Technologies, Inc., an electronics components manufacturer, SL Industries, Inc.,
a designer and manufacturer of data quality systems. Mr. Lichtenstein also
served as Chairman of the Board of Aydin Corporation, a provider of products and
systems for the acquisition and distribution of information over electronic
communications media, from October 5, 1998 until its sale to L-3 Communications
Corporation ("L-3") in April 1999 at a price of $13.50 per share, which
represents a premium of approximately 39% over the reported closing price of
$9.69 per share the day preceding the announced transaction with L-3. As of the
Record Date, Mr. Lichtenstein beneficially owned 1,537,100 Shares, all of which
were owned by Steel Partners. The business address of Mr. Lichtenstein is 150 E.
52nd Street, 21st Floor, New York, New York 10022. For information regarding Mr.
Lichtenstein's purchases and sales of Shares during the past two years, see
Schedule I.
In late 1995, Steel Partners commenced a proxy solicitation to replace
the incumbent directors of Medical Imaging Centers of America, Inc., a provider
of outpatient services and medical equipment rentals ("MICA"). MICA was
ultimately sold for $11.75 per share, a 42% increase over the price of $8.25 per
share, representing the closing price on the day prior to the initiation of
Steel Partners' proxy solicitation. In connection with this contest, MICA
initiated an action against Steel Partners, Warren Lichtenstein, and others in
the United States District Court for the Southern District of California,
Medical Imaging Centers of America, Inc. v. Lichtenstein, et al., Case No.
96-0039B. On February 29, 1996, the Court issued an Order granting, in part,
MICA's motion for a preliminary injunction on the grounds that plaintiff had
demonstrated a probability of success on the merits of its assertion that
defendants had violated Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Under the Court's preliminary injunction,
defendants in the action were enjoined from voting certain of their shares at
MICA's annual meeting of shareholders, except pursuant to a formula under which
they would be voted in the same proportion as other votes cast at the meeting.
The Court declined to adjourn the annual meeting of shareholders. At the
meeting, Steel Partners received sufficient votes to elect its nominees to the
Board of MICA, after giving effect to the Court's preliminary injunction. The
parties thereafter settled their differences pursuant to an agreement under
which MICA agreed to initiate an auction process which, if not concluded within
a certain time period, would end and thereafter the designees of Steel Partners
would assume
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control of the Board of MICA. The Steel Partners designees did not assume
control because MICA was sold at a substantial premium to its market price.
MARK E. SCHWARZ (39) has served as the sole general partner of
Newcastle Partners, L.P. ("Newcastle"), a private investment firm, since 1993.
For information regarding Newcastle, see below under "Participant Information."
Mr. Schwarz was also Vice President and Manager of Sandera Capital, L.L.C. a
private investment firm affiliated with Hunt Financial Group, L.L.C., a
Dallas-based investment firm associated with the Lamar Hunt family ("Hunt"),
from 1995 to September 1999 and a securities analyst and portfolio Manager for
SCM Advisors, L.L.C., a Hunt-affiliated registered investment advisor from May
1993 to 1996. Mr. Schwarz is a director of Bell Industries, Inc., a computer
systems integrator. As of the Record Date, Mr. Schwarz beneficially owned
264,200 Shares, all of which were owned by Newcastle. The business address of
Mr. Schwarz is c/o Newcastle, 4514 Cole Avenue, Suite 600, Dallas, Texas 75205.
For information regarding Mr. Schwarz's purchases and sales of Shares during the
past two years, see Schedule I.
JAMES R. HENDERSON (42) has been a Vice-President of Steel Partners
Services, Ltd., an affiliate of Steel Partners, since August 1999. From 1996 to
July 1999, Mr. Henderson was employed in various positions with Aydin
Corporation, which included a tenure as President and Chief Operating Officer
from October 1998 to June 1999. Prior to his employment with Aydin, Mr.
Henderson was employed as an executive with UNISYS Corporation, an e-business
solutions company. Mr. Henderson is a director of the following publicly held
companies: Tech-Sym Corporation, an information services and technology company,
and ECC International Corp, a designer and manufacturer of computer-controlled
simulators. As of the date hereof, Mr. Henderson did not beneficially own any
Shares. The business address of Mr. Henderson is 150 East 52nd Street, 21st
Floor, New York, New York 10022.
GLEN KASSAN (57) has been a Vice-President of Steel Partners Services,
Ltd., an affiliate of Steel Partners, since October 1999. From 1997 to 1998, Mr.
Kassan served as Chairman and Chief Executive Officer of Long Term Care
Services, Inc., a privately owned healthcare services company which he
co-founded in 1994, and which he initially served as Vice Chairman and Chief
Financial Officer. As of the date hereof, Mr. Kassan did not beneficially own
any Shares. The business address of Mr. Kassan is 150 East 52nd Street, 21st
Floor, New York, New York 10022.
HAROLD SMITH (76) has been retired since 1999. From 1982 to 1999, Mr.
Smith served as President of Funding Merchandising Resources Corporation
(F.M.R.C.), a firm specializing in consulting distressed retail companies. Prior
to his employment with F.M.R.C., Mr. Smith was the President and Chief Operating
Officer of Woolco, a division of F.W. Woolworth. As of the date hereof, Mr.
Smith did not beneficially own any Shares. Mr. Smith's business address is 4230
Deste Court, Apartment 102, Lake Worth, Florida 33467.
The Slate will not receive any compensation from the Committee for
their services as a director of the Company. On December 7, 1999, Steel
Partners, Newcastle and Messrs. Lichtenstein and Schwarz entered into a Joint
Filing Agreement, in which, among other things, (i) they agreed to the joint
filing on behalf of each of them of statements on Schedule 13D with respect to
the
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Shares, (ii) they formed a group in order to evaluate whether to nominate a
slate of directors to the Board and solicit written consents or votes at the
Annual Meeting for their slate of directors for the Board and (iii) Steel
Partners agreed to bear all expenses incurred in connection with the nomination
of persons to the Board, including approved expenses incurred by any member of
the Slate in the solicitation of written proxies or votes by Steel Partners.
Pursuant to an amendment to the Joint Filing Agreement, Messrs. Henderson,
Kassan, Smith and Steven Wolosky agreed to be included as members of the group
formed by Steel Partners, Newcastle and Messrs. Lichtenstein and Schwarz, and
each of the parties agreed to serve as a director of the Company if elected at
the Annual Meeting. Other than as stated above, there are no arrangements or
understandings between the Committee and each member of the Slate or any other
person or persons pursuant to which the nominations described herein are to be
made, other than the consent by each member of the Slate to serve as a director
of the Company if elected as such at the Annual Meeting. No member of the Slate
has been convicted in any criminal proceedings (excluding traffic violations or
similar misdemeanors) over the past ten years. Except as provided for under
"Legal Proceedings" herein, no member of the Slate is a party adverse to the
Company or any of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries in any material pending legal proceedings.
CONSENT PROCEDURES
GENERAL EFFECTIVENESS OF CONSENTS
The Company is a Delaware corporation and is, therefore, subject to the
Delaware General Corporate Law (the "Delaware GCL"). Section 228 of the Delaware
GCL provides that, unless otherwise provided in the certificate of incorporation
of a corporation, any action required to be or that may be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if written consents, setting forth the action so taken, are signed and
delivered to the corporation by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. The Charter does not prohibit stockholder action by written consent.
The Proposal will become effective when the Committee submits to the
Company properly completed, unrevoked and effective BLUE Consent Cards (or other
forms of consent) indicating consent to the Proposal, signed by the holders of
record on the Record Date of a majority of the Shares outstanding as of the
Record Date. Under Section 228 of the Delaware GCL, such consents must be
delivered within 60 days of the earliest dated consent delivered to the Company,
which was October 20, 2000. Accordingly, this consent solicitation must be
completed by December 19, 2000. However, the Committee has established November
22, 2000 as the goal for the submission of written consents to the Committee. If
the Proposal is adopted pursuant to this consent solicitation, prompt notice
will be given pursuant to Section 228(d) of the Delaware GCL to stockholders who
have not executed and returned a BLUE Consent Card.
Because the Proposal will become effective only if executed Consents
representing a majority of the Shares outstanding as of the Record Date are
returned by holders of record on the Record Date, the following actions will
have the same effect as withholding consent to the Proposal: (a) failing to
execute and return a BLUE Consent Card or (b) executing and returning a written
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consent marked consent "WITHOUT CONSENT" or "ABSTAINS" as to each Proposal. If
returned BLUE Consent Cards are executed and dated but not marked with respect
to the Proposal, the stockholder returning such card will be deemed to have
consented to the Proposal.
PROCEDURAL INSTRUCTIONS
If a stockholder is a record holder of Shares as of the close of
business on the Record Date, such stockholder may elect to consent to, withhold
consent to or abstain with respect to a Proposal by marking the "CONSENTS",
"WITHHOLDS CONSENT" or "ABSTAINS" box, as applicable, underneath the Proposal on
the accompanying BLUE Consent Card and signing, dating and returning it promptly
in the enclosed postage-paid envelope.
UNDER THE DELAWARE GCL, ONLY STOCKHOLDERS OF RECORD ON THE RECORD DATE
ARE ELIGIBLE TO GIVE THEIR CONSENT TO THE PROPOSAL. THEREFORE, EACH STOCKHOLDER
IS URGED, EVEN IF SUCH STOCKHOLDER HAS SOLD ITS SHARES SUBSEQUENT TO THE RECORD
DATE, TO GRANT ITS CONSENT PURSUANT TO THE ENCLOSED BLUE CONSENT CARD WITH
RESPECT TO ALL SHARES HELD AS OF THE RECORD DATE. A STOCKHOLDER'S FAILURE TO
CONSENT MAY ADVERSELY AFFECT THOSE WHO CONTINUE TO BE STOCKHOLDERS. IN ADDITION,
ANY STOCKHOLDER OWNING SHARES BENEFICIALLY (BUT NOT OF RECORD), SUCH AS A PERSON
WHOSE OWNERSHIP OF SHARES IS THROUGH A BROKER, BANK OR OTHER FINANCIAL
INSTITUTION, SHOULD CONTACT THAT BROKER, BANK OR FINANCIAL INSTITUTION WITH
INSTRUCTIONS TO EXECUTE THE BLUE CONSENT CARD ON SUCH STOCKHOLDER'S BEHALF OR TO
HAVE THE BROKER, BANK OR FINANCIAL INSTITUTION'S NOMINEE EXECUTE THE CONSENT.
EACH STOCKHOLDER IS URGED TO ENSURE THAT THE RECORD HOLDER OF SUCH STOCKHOLDER'S
SHARES MARKS, SIGNS, DATES AND RETURNS THE ENCLOSED BLUE CONSENT CARD AS SOON AS
POSSIBLE. EACH STOCKHOLDER IS FURTHER URGED TO CONFIRM IN WRITING ANY
INSTRUCTIONS GIVEN AND PROVIDE A COPY OF SUCH INSTRUCTIONS TO THE COMMITTEE IN
CARE OF MACKENZIE PARTNERS, INC., SO THAT THE COMMITTEE MAY ALSO ATTEMPT TO
ENSURE SUCH INSTRUCTIONS ARE FOLLOWED.
REVOCATION OF CONSENTS
Executed written consents may be revoked at any time, provided that a
written, dated revocation which clearly identifies the consent being revoked is
executed and delivered either to (a) the Committee in care of MacKenzie
Partners, Inc., 156 Fifth Avenue, New York, NY 10010, or (b) the principal
executive offices of the Company at 1400 Everman Parkway, Fort Worth, Texas
76140 prior to the time that the Proposal becomes effective. A revocation may be
in any written form validly signed by the record holder as of the Record Date as
long as it clearly states that the written consent previously given is no longer
effective. The Committee requests that a copy of any revocation sent to the
Company also be given to MacKenzie Partners, Inc. at the above address so that
the Committee may more accurately determine if and when written consent to each
Proposal has been received from the holders of record on the Record Date of a
majority of the Shares then outstanding. THE COMMITTEE URGES YOU NOT TO SIGN ANY
REVOCATION OF CONSENT CARD WHICH MAY BE SENT TO YOU BY THE COMPANY. IF YOU HAVE
DONE SO, YOU MAY REVOKE THAT REVOCATION OF CONSENT BY DELIVERING A LATER DATED
BLUE CONSENT CARD TO THE COMMITTEE, C/O MACKENZIE PARTNERS, INC., OR TO THE
SECRETARY OF THE COMPANY.
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<PAGE>
SOLICITATION OF CONSENTS
The solicitation of consents pursuant to this Consent Solicitation
Statement is being made by the Committee. Consents may be solicited by mail,
facsimile, telephone, telegraph, Internet, in person and by advertisements.
The Committee has retained Mackenzie Partners, Inc. for solicitation
and advisory services in connection with this solicitation, for which Mackenzie
Partners will receive a fee not to exceed $75,000, together with reimbursement
for its reasonable out-of-pocket expenses, and will be indemnified against
certain liabilities and expenses, including certain liabilities under the
federal securities laws. Mackenzie Partners, Inc. will solicit consents from
individuals, brokers, banks, bank nominees and other institutional holders. The
Committee has requested banks, brokerage houses and other custodians, nominees
and fiduciaries to forward all solicitation materials to the beneficial owners
of the Shares they hold of record. The Committee will reimburse these record
holders for their reasonable out-of-pocket expenses in so doing. It is
anticipated that Mackenzie Partners, Inc. will employ approximately 35 persons
to solicit the Company's stockholders.
The entire expense of soliciting consents is being borne by the
Committee. If the Slate is elected to the Company's Board of Directors, the
Committee intends to seek reimbursement of the costs of this solicitation from
the Company. Unless otherwise required by law, the Committee does not currently
intend to submit the question of reimbursement of the costs of this solicitation
to a stockholder vote. Costs of this solicitation of consents are currently
estimated to be approximately $250,000. The Committee estimates that through the
date hereof, its expenses in connection with this solicitation are approximately
$125,000.
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<PAGE>
PARTICIPANT INFORMATION
The general partner of Steel Partners is Steel LLC, a Delaware limited
liability company. The principal business of Steel Partners is investing in the
securities of micro-cap companies. The principal business address of Steel
Partners and Steel LLC is 150 East 52nd Street, 21st Floor, New York, New York
10022. Warren G. Lichtenstein is Chairman of the Board, Secretary and the
Managing Member of Steel LLC. Glen Kassan and James Henderson are Vice
Presidents of Steel Partners Services, Ltd., an affiliate of Steel Partners. As
of the date hereof, Steel Partners is the beneficial owner of 1,537,100 Shares.
Steel LLC does not beneficially own any Shares on the date hereof, except by
virtue of its role in Steel Partners. For information regarding Steel Partners
purchases and sales of Shares during the past two years, see Schedule I.
Harold Smith is a retired consultant. Mr. Smith does not beneficially
own any Shares.
Newcastle is a Texas limited partnership. The principal business of
Newcastle is the purchase, sale, exchange, acquisition and holding of investment
securities. The principal business address of Newcastle is 4514 Cole Avenue,
Suite 600, Dallas, Texas 75205. Mark E. Schwarz is the sole general partner of
Newcastle. As of the date hereof, Newcastle was the beneficial owner of 264,200
Shares. For information regarding the purchases and sales of Shares during the
past two years by Newcastle, see Schedule I.
See Schedule II for information regarding persons who beneficially own
more than 5% of the Common Stock and the ownership of the Common Stock by the
management of the Company.
LEGAL PROCEEDINGS
On August 22, 2000, the Company filed a complaint in the United States
District Court, Northern District of Texas, naming Steel Partners, Newcastle and
Messrs. Lichtenstein and Schwarz as defendants (the "Defendants"). The complaint
alleges that the Defendants have violated Section 13(d) of the Exchange Act,
Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder. The
complaint states that the Schedule 13D, as amended, filed by the Defendants was
materially false and misleading in that, among other things, they did not
disclose on a timely basis, or at all, that: (i) Defendants intended to seek
control of the Company through a proxy contest or consent solicitation with the
objective of forcing a sale of the Company; (ii) Defendants had a history of
taking positions in target companies and replacing incumbent directors; (iii)
Defendants had agreements, arrangements and understandings with other
stockholders in connection with the acquisition of Shares of the Company; and
(iv) Defendants were acting in concert with each other or as a "group" with
other persons or entities who, in concert with them, acquired Shares for the
purposes of effecting a change in control of the Company. In its pleadings, the
Company requests, among other things, that the Court enjoin the Defendants from
engaging in any further activities with respect to the Shares until they have
made adequate disclosures, soliciting and delivering any proxy, consent or
authorization with respect to the Shares, acquiring or attempting to acquire
additional Shares, voting any Shares acquired after the filing of Defendants'
initial Schedule 13D, otherwise controlling or influencing or attempting to
control or influence in any manner the management or business policies and
decisions of the Company, or taking or attempting to take any other steps in
-12-
<PAGE>
furtherance of any plan to change or influence the control of the Company. The
Company has also requested that the Court enter an order requiring Defendants to
divest themselves of all Shares acquired after the filing of the initial
Schedule 13D filing and declaring that the Company is entitled to refuse to
recognize any votes cast with respect to the Shares on behalf of any Defendants.
The Defendants believe that these claims are without merit and will vigorously
defend these allegations.
On September 18, 2000, Steel Partners filed a complaint in the Court of
Chancery of the State of Delaware, New Castle County, naming as defendants the
Company Board and the Company. The complaint alleges that the Company Board has
breached its fiduciary duties by falsely suggesting that Steel Partners is part
of a "group" holding in excess of 15% of the Company's Shares. Among other
things, the complaint seeks a declaratory judgment that Steel Partners is not an
"interested stockholder" within the meaning of Section 203 of the Delaware GCL
and that Steel Partners is not an acquiring person under the Company's Rights
Agreement dated May 19, 1997 (the "Rights Agreement"). The complaint also seeks
a preliminary and permanent injunction prohibiting the Company from declaring a
"distribution date" under the Rights Agreement. The defendants have moved to
dismiss this complaint.
CERTAIN TRANSACTIONS BETWEEN THE COMMITTEE AND THE COMPANY
Except as set forth in this Consent Solicitation Statement (including
the Schedules hereto), neither the Committee nor any of the other participants
in this solicitation, or any of their respective associates: (i) directly or
indirectly beneficially owns any Shares or any securities of the Company; (ii)
has had any relationship with the Company in any capacity other than as a
stockholder, or is or has been a party to any transactions, or series of similar
transactions, or is indebted to the Company since July 1, 1999 with respect to
any Shares; or (iii) knows of any transactions since July 1, 1999, currently
proposed transactions, or series of similar transactions, to which the Company
or any of its subsidiaries was or is to be a party, in which the amount involved
exceeds $60,000 and in which any of them or their respective affiliates had, or
will have, a direct or indirect material interest. In addition, other than as
set forth herein, there are no contracts, arrangements or understandings entered
into by the Committee or any other participant in this solicitation or any of
their respective associates within the past year with any person with respect to
any of the Company's securities, including, but not limited to, joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies.
Except as set forth in this Consent Solicitation Statement (including
the Schedules hereto), neither the Committee nor any of the other participants
in this solicitation, or any of their respective associates, has entered into
any agreement or understanding with any person with respect to (i) any future
employment by the Company or its affiliates or (ii) any future transactions to
which the Company or any of its affiliates will or may be a party. However, the
Committee has reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that it might
consider in the event that the Slate is elected to the Board. In addition, if
and to the extent that the Committee acquires control of the Company, the
Committee intends to conduct a detailed review of the Company and its assets,
financial projections, corporate structure, dividend policy,
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<PAGE>
capitalization, operations, properties, policies, management and personnel and
consider and determine what, if any, changes would be desirable in light of the
circumstances which then exist.
-14-
<PAGE>
The information concerning the Company contained in this Consent
Solicitation Statement and the Schedules attached hereto has been taken from, or
is based upon, publicly available information. To date, the Committee has not
had access to the books and records of the Company.
THE TANDYCRAFTS FULL VALUE COMMITTEE
October 31, 2000
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<PAGE>
SCHEDULE I
TRANSACTIONS IN THE SHARES FOR THE LAST TWO YEARS
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
STEEL PARTNERS II, L.P.
1,000 2.40500 4/15/99
5,500 2.40500 4/15/99
13,200 2.38133 4/16/99
10,000 2.40500 4/19/99
2,700 2.34250 4/20/99
500 2.85000 5/03/99
5,000 2.79000 5/06/99
1,400 2.78000 5/07/99
5,000 2.79000 5/10/99
1,000 3.09750 7/26/99
18,100 3.22466 7/27/99
2,000 3.22750 7/30/99
9,300 3.22750 8/02/99
38,200 3.24680 8/03/99
2,600 3.16500 8/05/99
200 3.36250 8/06/99
10,400 3.28399 8/09/99
5,000 3.22750 8/10/99
7,900 3.16500 8/16/00
38,000 3.18934 8/17/99
11,800 3.10250 8/19/99
7,700 3.10250 8/20/99
26,900 3.20403 8/23/99
1,000 3.23750 8/24/99
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<PAGE>
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
70,000 3.31000 8/25/99
1,800 3.23750 8/26/99
7,300 3.23750 8/27/99
1,700 3.23750 8/30/99
26,500 3.23750 8/31/99
2,000 3.23750 9/02/99
400 3.23750 9/03/99
14,400 3.23750 9/10/99
21,000 3.32000 9/15/99
12,600 3.21680 9/20/99
50,000 3.19500 9/22/99
13,100 3.21890 9/23/99
6,000 3.23710 9/24/99
15,000 3.22750 9/27/99
15,000 3.24750 9/28/99
45,100 3.20190 9/29/99
15,600 3.17500 9/30/99
70,000 3.19500 9/30/99
8,000 3.23750 10/04/99
60,400 3.16090 10/06/99
8,000 3.16720 10/07/99
5,000 3.23750 10/12/99
3,700 3.17500 10/15/99
4,100 3.17500 10/18/99
18,300 3.27750 10/20/99
15,000 3.09170 10/21/99
7,000 3.16500 10/22/99
23,000 3.18320 10/22/99
4,200 3.16500 10/26/99
-17-
<PAGE>
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
10,000 3.17500 10/27/99
212,700 3.13273 10/27/99
3,000 3.22750 10/28/99
25,000 3.26750 10/28/99
1,200 3.29000 11/05/99
10,000 3.29000 11/08/99
28,000 3.30000 11/08/99
2,400 3.28000 11/09/99
13,100 3.27237 11/11/99
2,700 3.28000 11/12/99
7,500 3.30000 11/12/99
5,000 3.23750 11/15/99
5,000 3.30000 11/16/99
65,900 3.39500 11/16/99
7,000 3.30000 11/23/99
15,000 3.34250 11/24/99
355,000 3.27000 12/07/99
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
NEWCASTLE PARTNERS, L.P.
------------------------
1,000 3.31000 11/15/99
6,000 3.31000 11/16/99
3,200 3.29500 11/24/99
2,000 3.29500 11/26/99
2,000 3.29500 11/29/99
1,900 3.29500 11/30/99
5,100 3.29088 12/01/99
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<PAGE>
2,000 3.29000 12/02/99
15,000 3.30630 12/03/99
21,000 3.29000 12/06/99
205,000 3.27049 12/07/99
WARREN G. LICHTENSTEIN
----------------------
NONE(1)
MARK E. SCHWARZ
---------------
NONE(2)
JAMES R. HENDERSON.
-------------------
NONE
GLEN KASSAN
-----------
NONE
HAROLD SMITH
------------
NONE
--------
1 By virtue of his position with Steel Partners II, L.P., Mr.
Lichtenstein has the power to vote and dispose of the Company's Shares
owned by Steel Partners II, L.P. Accordingly, Mr. Lichtenstein is
considered the beneficial owner of the Shares of the Company owned by
Steel Partners II, L.P.
2 By virtue of his position with Newcastle Partners, L.P., Mr. Schwarz
has the power to vote and dispose of the Company's Shares owned by
Newcastle Partners, L.P. Accordingly, Mr. Schwarz is considered the
beneficial owner of the Shares of the Company owned by Newcastle
Partners, L.P.
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<PAGE>
SCHEDULE II
SHARES OF COMMON STOCK HELD BY COMPANY'S MANAGEMENT
AND 5% OR GREATER HOLDERS
As of October 5, 2000, the directors and executive officers of the
Company beneficially owned (within the meaning of the rules under Section 13(d)
of the Exchange Act), as a group, 1,013,910 Shares (or approximately 8.3% of the
Shares reported as outstanding on such date). The Tandycrafts Retirement Savings
Plan beneficially owns 1,769,178 Shares (or approximately 14.4% of the Shares
reported as outstanding on such date). The foregoing information has been
obtained from the Company's preliminary proxy statement filed October 19, 2000.
Based on information obtained from the Company's preliminary proxy
statement filed October 19, 2000, and more recent Schedule 13D and Schedule 13G
filings, the following table shows the only entities, other than as set forth in
the preceding paragraph, that owned more than 5% of the outstanding Shares as of
the dates indicated.
<TABLE>
<CAPTION>
Number of Shares
Owned Percentage of
Name and Address of Beneficially and of Outstanding
Beneficial Owner Record Shares(1)
------------------ -------- ----------
<S> <C> <C>
The Tandycrafts Full Value Committee 1,801,300(2) 14.8%
150 East 52nd Street, 21st Floor
New York, New York 10022
Steel Partners II, L.P. 1,537,100 12.8%
150 East 52nd Street, 21st Floor
New York, New York 10022
Summit Capital Management, LLC 879,000(3) 7.2%
601 Union Street, Suite 3900
Seattle, Washington 98101
Dimensional Fund Advisors, Inc. 858,000(4) 7.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
_______________
(1) Based on information furnished by the stockholder except as otherwise
provided.
(2) Based on Schedule 13D, dated October 5, 2000, The Tandycrafts Full
Value Committee is deemed to have beneficial ownership of 1,801,300
Shares, 1,537,100 of which are held by Steel Partners II, L.P., and
264,200 of which are held by Newcastle Partners, L.P.
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<PAGE>
(3) Based on Schedule 13G, dated February 11, 2000.
(4) Based on Schedule 13G, dated February 4, 2000.
Other than as set forth in this schedule, although the Committee does
not have any information that would indicate that any information contained in
this Consent Statement that has been taken from the Company's preliminary proxy
statement filed October 19, 2000 or any other document on file with the
Securities and Exchange Commission is inaccurate or incomplete, the Committee
does not take any responsibility for the accuracy or completeness of such
information.
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<PAGE>
IMPORTANT
1. If your Shares are kept at your brokerage firm or bank, and they are
registered in your brokerage firm's or your bank's name, please send back only
the enclosed BLUE Consent Card in the special envelope provided.
2. If your Shares are registered in your own name, please sign, date
and return the enclosed BLUE Card to MacKenzie Partners, Inc.
3. Time is critically short. Only your latest dated BLUE Consent Card
will count.
4. If your Shares are held in the name of a brokerage firm, bank
nominee or other institution, only it can sign a BLUE Consent Card with respect
to your Shares. Accordingly, please contact the person responsible for your
account and give instructions for a BLUE Consent Card to be signed representing
your Shares.
If you have any questions about giving your consent or require
assistance in voting your Shares, please call:
[MACKENZIE PARTNERS, INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
E-MAIL: [email protected]
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
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<PAGE>
CONSENT CARD
Consent by Stockholders of Tandycrafts, Inc.
To Action Without a Meeting
THIS CONSENT IS SOLICITED BY THE TANDYCRAFTS FULL VALUE COMMITTEE
The undersigned, a stockholder of record of Tandycrafts, Inc. (the
"Company") hereby consents, pursuant to Section 228 of the Delaware General
Corporation Law, with respect to all shares of Common Stock, par value $1.00 per
share, of the Company which the undersigned is entitled to vote in all
capacities, to the following action without a meeting, without prior notice and
without a vote:
RESOLVED, that, in the best interests of the
Company, the removal of all of the incumbent members
of the Company's Board of Directors, without cause,
including the removal of R.E. Cox, III, Jack Kahl,
Sheldon Stein, Michael J. Walsh, Colon Washburn, and
any person or persons elected to the Board of
Directors by the Directors to fill any vacancy
arising since the last annual meeting of
stockholders, or newly created directorship, is
hereby approved.
CONSENT CONSENT WITHHELD ABSTAINS
----- ------ ------
RESOLVED, that the number of members of the Board of
Directors of the Company be fixed at five (5).
CONSENT CONSENT WITHHELD ABSTAINS
----- ------ ------
RESOLVED, that the slate of nominees of the
Tandycrafts Full Value Committee, Warren G.
Lichtenstein, Mark E. Schwarz, James R. Henderson,
Glen Kassan and Harold Smith (the "Nominees"), are
hereby elected to the Board of Directors of the
Company to fill the newly created vacancies on the
Board of Directors, and to serve until their
respective successors are duly elected and
qualified.
CONSENT CONSENT WITHHELD ABSTAINS
----- ------ ------
To withhold consent to a proposed Nominee, specify the Nominee in the
following space:
____________________________________________________
INSTRUCTIONS: Check the appropriate box above to consent or withhold consent to,
or abstain from, the foregoing resolutions.
____________________________
If no box is marked with respect to either or each of the above
resolutions, the undersigned will be deemed to consent to such resolution or
resolutions.
(This Consent card is continued on the reverse side. Please mark, sign and date
this Consent card on the reverse side before returning the Consent card in the
enclosed envelope.)
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
shareholder action on the date set forth below.
Date:___________________________________________
________________________________________________
Signature of Stockholder
________________________________________________
Signature (if held jointly)
_______________________________________________
Name and Title of Representative (if applicable)
IMPORTANT NOTE TO STOCKHOLDERS:
Please sign exactly as your shares are
registered. Joint owners should both sign. When
signing as executor, trustee, administrator,
guardian, officer of a corporation,
attorney-in-fact or in any other fiduciary or
representative capacity, please give your full
name. This consent, when executed, will vote all
shares held in all capacities. Be sure to date
this Consent Card.
**THIS IS YOUR CONSENT CARD**
