SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(A)
(Amendment No. 6)1
Tandycrafts, Inc.
--------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $1.00 PAR VALUE
--------------------------------------------------------------------------------
(Title of Class of Securities)
875386104
--------------------------------------------------------------------------------
(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 18, 2000
--------------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
NOTE. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-7 for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 55 Pages)
--------
1 The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, SEE the NOTES).
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 2 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
STEEL PARTNERS II, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,537,100
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,537,100
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,537,100
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 3 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
WARREN LICHTENSTEIN
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,537,100
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,537,100
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,537,100
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 4 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
MARK E. SCHWARZ
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 264,200
OWNED BY
EACH
REPORTING -----------------------------------------------------------------
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
264,200
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
264,200
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.2%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 5 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
NEWCASTLE PARTNERS, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
TEXAS
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 264,200
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
264,200
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
264,200
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.2%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 6 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
JAMES R. HENDERSON
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
- 0 -
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 7 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
GLEN KASSAN
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
- 0 -
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 8 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HAROLD SMITH
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
- 0 -
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 9 of 55 Pages
------------------------------- --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
STEVEN WOLOSKY
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
- 0 -
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 10 of 55 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
THE TANDYCRAFTS FULL VALUE COMMITTEE
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,801,300
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
- 0 -
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,801,300
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0 -
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,801,300
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 11 of 55 Pages
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The following constitutes Amendment No. 6 ("Amendment No. 6") to the
Schedule 13D filed by the undersigned (the "Schedule 13D"). Except as
specifically set forth by this Amendment No. 6, the Schedule 13D, as amended,
remains in full force and effect.
Item 2 is hereby amended and restated in its entirety to read as follows:
Item 2. Identity and Background.
-----------------------
(a) This Statement is filed on behalf of Steel Partners II,
L.P., a Delaware limited partnership ("Steel Partners II"), Warren G.
Lichtenstein, Newcastle Partners, L.P., a Texas limited partnership
("Newcastle"), Mark E. Schwarz, James R. Henderson, Glen Kassan, Harold Smith,
Steven Wolosky and The Tandycrafts Full Value Committee (the "Committee").
Steel Partners L.L.C., a Delaware limited liability company
("Partners LLC"), is the general partner of Steel Partners II. The sole
executive officer and managing member of Partners LLC is Warren G. Lichtenstein,
who is Chairman of the Board, Chief Executive Officer and Secretary.
Newcastle is a Texas limited partnership. Mark E. Schwarz is
the sole general partner of Newcastle. The principal business of Newcastle is
the purchase, sale, exchange, acquisition and holding of investment securities.
James R. Henderson and Glen Kassan are Vice Presidents of
Steel Partners Services, Ltd.
Harold Smith is a retired consultant.
Steven Wolosky is a partner in the law firm of Olshan Grundman
Frome Rosenzweig & Wolosky LLP.
The Tandycrafts Full Value Committee (the "Committee") is
composed of Warren G. Lichtenstein, Mark E. Schwarz, James R. Henderson, Glen
Kassan, Harold Smith and Steven Wolosky. The Committee is not a business entity
and has no place of organization.
Each of the foregoing is referred to as a "Reporting Person"
and collectively as the "Reporting Persons". By virtue of his position with
Steel Partners II, Mr. Lichtenstein has the power to vote and dispose of the
Issuer's Shares owned by Steel Partners II. By virtue of his position with
Newcastle, Mark E. Schwarz has the power to vote and dispose of the Issuer's
shares owned by
<PAGE>
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CUSIP No. 875386104 13D Page 12 of 55 Pages
------------------------------- --------------------------------
Newcastle. Each of the Reporting Persons is party to Amendment No. 2 to the
Joint Filing Agreement (the "Amended Joint Filing Agreement") as further
described in Item 6. Accordingly, the Reporting Persons are hereby filing a
joint Schedule 13D.
(b) The principal business address of the Committee, Steel
Partners II, Warren Lichtenstein, James R. Henderson and Glen Kassan is 150 East
52nd Street, 21st Floor, New York, New York 10022.
The principal business address of Mark Schwarz is 4514 Cole
Avenue, Suite 600, Dallas, Texas 75205.
The principal business address of Newcastle is 4514 Cole
Avenue, Suite 600, Dallas, Texas 75205.
The principal business address of Harold Smith is 4230 Deste
Court, Apartment 102, Lake Worth, Florida 33467.
The principal business address of Steven Wolosky is 505 Park
Avenue, New York, New York 10022.
(c) The principal business/occupation of Steel Partners II and
Messrs. Lichtenstein, Henderson and Kassan is investing in the securities of
small cap companies.
The principal business/occupation of Newcastle and Mr. Schwarz
is the purchase, sale, exchange, acquisition and holding of investment
securities.
Mr. Smith is a retired consultant.
Steven Wolosky is a partner in the law firm of Olshan Grundman
Frome Rosenzweig & Wolosky LLP.
(d) No Reporting Person has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) No Reporting Person has, during the last five years, been
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such law.
(f) Messrs. Lichtenstein, Schwarz, Henderson, Kassan,
Smith and Wolosky are citizens of the United States of America.
<PAGE>
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CUSIP No. 875386104 13D Page 13 of 55 Pages
------------------------------- --------------------------------
Item 4 is hereby amended and restated in its entirety to include the
following:
Item 4. Purpose of the Transaction.
--------------------------
The Reporting Persons have concluded that the value of the
Issuer has not been maximized by its Board of Directors and believe that the
election of Warren G. Lichtenstein, Mark E. Schwarz, James R. Henderson, Glen
Kassan, Harold Smith and Steven Wolosky (collectively, the "Nominees")
represents the best means for the Issuer to maximize the present value of its
outstanding shares of Common Stock for the Issuer's stockholders. On September
18, 2000, the Reporting Persons formed the Committee. The Reporting Persons have
engaged the services of Mackenzie Partners, Inc., a proxy solicitation firm, to
assist in such solicitation. The Committee was formed to solicit written proxies
to elect the Nominees to the Issuer's Board of Directors at the 2000 annual
meeting.
Steel Partners II delivered a letter dated September 18, 2000
to the Issuer, supplementing its letter dated June 5, 2000, to exercise its
right to nominate a sixth candidate to the Issuer's Board of Directors after the
Issuer purported to increase the size of the Board of Directors (the
"Supplemental Nomination Letter"). As set forth in the Supplemental Nomination
Letter, Steel Partners II nominated Steven Wolosky to the Issuer's Board of
Directors at the next annual meeting of stockholders of the Issuer.
Additionally, the Supplemental Nomination Letter served to reserve Steel
Partners II's right to nominate additional nominees to be elected to the
Issuer's Board at the next annual meeting to the extent there are in excess of
six (6) vacancies on the Issuer's Board to be filled by election at the annual
meeting or there are additional increases in the size of the Board. A copy of
each of the Supplemental Nomination Letter and the June 5, 2000 letter is filed
as an exhibit to this Schedule 13D and incorporated herein by reference.
On September 18, 2000, the Reporting Persons entered into the
Amended Joint Filing Agreement, reflecting their agreement to form the Committee
and to seek to elect the Nominees to the Board of Directors of the Issuer. On
September 18, 2000, the Committee filed a Preliminary Proxy Statement with the
Securities and Exchange Commission (the "Commission") in order to solicit
proxies from the stockholders of the Issuer to effectuate such actions. A copy
of each of the Amended Joint Filing Agreement and the Preliminary Proxy
Statement are filed as exhibits to this Schedule 13D and incorporated herein by
reference.
Upon final approval from the Commission of its proxy
materials, the Committee intends to commence its solicitation of
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 14 of 55 Pages
------------------------------- --------------------------------
proxies from the stockholders of the Issuer to elect the Nominees to the Board
of Directors of the Issuer at the 2000 annual meeting.
On September 18, 2000, Steel Partners II filed a complaint in
the Court of Chancery of the State of Delaware, New Castle County, which seeks a
declaratory judgment that Steel Partners II is not an "interested stockholder"
within the meaning of Section 203 of the Delaware General Corporation Law and
that Steel Partners II 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 Issuer from declaring a
"distribution date" under the Rights Agreement.
No Reporting Person has any present plan or proposal which
would relate to or result in any of the matters set forth in subparagraphs
(a)-(j) of Item 4 of Schedule 13D except as set forth herein or such as would
occur upon completion of any of the actions discussed above. Depending on
various factors including, without limitation, the Issuer's financial position
and investment strategy, the price levels of the Common Stock, conditions in the
securities markets and general economic and industry conditions, each of the
Reporting Persons may in the future take such actions with respect to its
investment in the Issuer as it deems appropriate including, without limitation,
purchasing additional Shares of Common Stock or selling some or all of its
Shares or to change its intention with respect to any and all matters referred
to in Item 4. Except as set forth above, the Reporting Persons have no
agreements or understandings between themselves with respect to the voting or
disposition of the Common Stock of the Issuer.
Item 6 is hereby amended and restated in its entirety to read as follows:
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer.
----------------------------------------
On September 18, 2000, the Reporting Persons entered into the
Amended Joint Filing Agreement, reflecting their agreement to form the Committee
and to seek to elect Warren G. Lichtenstein, Mark E. Schwarz, James R.
Henderson, Glen Kassan, Harold Smith and Steven Wolosky to the Board of
Directors of the Issuer. The Committee filed a Preliminary Proxy Statement with
the Commission in order to solicit proxies from the stockholders of the Issuer
to effectuate such actions. A copy of each of the Amended Joint Filing Agreement
and the Preliminary Proxy Statement are filed as exhibits to this Schedule 13D
and incorporated herein by reference.
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 15 of 55 Pages
------------------------------- --------------------------------
Other than as described herein, there are no contracts,
arrangements or understandings among the Reporting Persons, or between the
Reporting Persons and any other Person, with respect to the securities of the
Issuer.
Item 7 is hereby amended in its entirety to read as follows:
Item 7. Material to be Filed as Exhibits.
--------------------------------
1. Joint Filing Agreement between Steel Partners II and
Warren G. Lichtenstein, dated as of October 8, 1999
(previously filed).
2. Joint Filing Agreement between Steel Partners II,
L.P., Warren Lichtenstein, Newcastle Partners, L.P.
and Mark E. Schwarz, dated as of December 7, 1999
(previously filed).
3. Amendment No. 1 to Joint Filing Agreement between
Steel Partners II, L.P., Warren Lichtenstein,
Newcastle Partners, L.P., Mark Schwarz, James
Henderson, Glen Kassan and Harold Smith dated as of
May 31, 2000 (previously filed).
4. Director Nomination Letter from Steel Partners II to
Tandycrafts, Inc., dated June 5, 2000 (previously
filed).
5. Letter to the Board of Directors of Tandycrafts,
Inc., dated June 6, 2000 (previously filed).
6. Amendment No. 2 to Joint Filing Agreement between
Steel Partners II, L.P., Warren Lichtenstein,
Newcastle Partners, L.P., Mark Schwarz, James
Henderson, Glen Kassan, Harold Smith and Steven
Wolosky dated as of September 18, 2000.
7. Supplemental Director Nomination Letter from Steel
Partners II to Tandycrafts, Inc., dated September 18,
2000.
8. Preliminary Proxy Statement.
9. Declaratory Judgment Complaint.
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 16 of 55 Pages
------------------------------- --------------------------------
SIGNATURES
----------
After reasonable inquiry and to the best of his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 18, 2000 STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.
General Partner
By: /s/ Warren G. Lichtenstein
------------------------------
Warren G. Lichtenstein
Chief Executive Officer
/s/ Warren G. Lichtenstein
--------------------------------
Warren G. Lichtenstein
NEWCASTLE PARTNERS, L.P.
By: /s/ Mark E. Schwarz
-------------------------------
Mark E. Schwarz
General Partner
/s/ Mark E. Schwarz
-----------------------------------
Mark E. Schwarz
/s/ James R. Henderson
-----------------------------------
James R. Henderson
/s/ Glen Kassan
-----------------------------------
Glen Kassan
/s/ Harold Smith
-----------------------------------
Harold Smith
/s/ Steven Wolosky
-----------------------------------
Steven Wolosky
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 17 of 55 Pages
------------------------------- --------------------------------
EXHIBIT INDEX
-------------
Exhibit Page
------- ----
Joint Filing Agreement, October 8, 1999
(previously filed)
Joint Filing Agreement between Steel Partners
II, Warren Lichtenstein, Newcastle Partners,
L.P. and Mark E. Schwarz, dated as of December
7, 1999 (previously filed)
Amendment No. 1 to Joint Filing Agreement
(previously filed)
Director Nomination Letter from Steel Partners
II to Tandycrafts, Inc., dated June 5, 2000
(previously filed)
Letter to the Board of Directors of Tandycrafts,
Inc., dated June 6, 2000 (previously filed)
Amendment No. 2 to Joint Filing Agreement 18-19
between Steel Partners II, L.P., Warren
Lichtenstein, Newcastle Partners, L.P., Mark
Schwarz, James Henderson, Glen Kassan, Harold
Smith and Steven Wolosky dated as of September
18, 2000
Supplemental Director Nomination Letter from 20
Steel Partners II to Tandycrafts, Inc., dated
September 18, 2000
Preliminary Proxy Statement 21-39
Declaratory Judgement Complaint 40-55
<PAGE>
------------------------------- --------------------------------
CUSIP No. 875386104 13D Page 18 of 55 Pages
------------------------------- --------------------------------
AMENDMENT NO. 2 TO JOINT FILING AGREEMENT
WHEREAS, Steel Partners II, L.P., Newcastle Partners, L.P.,
Warren G. Lichtenstein and Mark E. Schwarz (the "Original Parties") entered into
a Joint Filing Agreement dated December 7, 1999 (the "Agreement");
WHEREAS, the Agreement was subsequently amended in order to
nominate a slate of five directors at Tandycrafts, Inc.'s ("Tandycrafts") next
annual meeting and to include James R. Henderson, Glen Kassan and Harold Smith
in the definition of "Group";
WHEREAS, the parties desire to further amend the Agreement in
order to nominate a sixth director at Tandycrafts' next annual meeting of
stockholders;
WHEREAS, the parties desire to form a committee solely for the
purpose of soliciting proxies from Tandycrafts' stockholders for the election of
the undersigned to Tandycrafts' Board of Directors at the next annual meeting.
NOW, THEREFORE, BE IT RESOLVED, the Agreement is hereby
amended as follows:
1. The definition of "Group" is hereby amended to include
Steven Wolosky.
2. Steven Wolosky agrees to serve as director of
Tandycrafts if elected at the next annual meeting of
stockholders.
3. The parties agree to form The Tandycrafts Full Value
Committee for the purpose of soliciting proxies for the
election of the undersigned to Tandycrafts' Board of
Directors at the next annual meeting.
4. Except as amended hereby, the Agreement, as previously
amended, remains in full force and effect.
<PAGE>
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CUSIP No. 875386104 13D Page 19 of 55 Pages
------------------------------- --------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be executed as of September 18, 2000.
STEEL PARTNERS II, L.P.
150 East 52nd Street
New York, NY 10022
By: Steel Partners, L.L.C.
General Partner
By:/s/ Warren G. Lichtenstein
-----------------------------------------
Warren G. Lichtenstein, Managing Member
/s/ Warren G. Lichtenstein
--------------------------------------------
Warren G. Lichtenstein
/s/ Mark E. Schwarz
--------------------------------------------
Mark E. Schwarz
NEWCASTLE PARTNERS, L.P.
4514 Cole Avenue
Suite 600
Dallas, TX 75205
By:/s/ Mark E. Schwarz
-----------------------------------------
Mark E. Schwarz, General Partner
/s/ James R. Henderson
--------------------------------------------
James R. Henderson
/s/ Glen Kassan
--------------------------------------------
Glen Kassan
/s/ Harold Smith
--------------------------------------------
Harold Smith
/s/ Steven Wolosky
--------------------------------------------
Steven Wolosky
<PAGE>
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CUSIP No. 875386104 13D Page 20 of 55 Pages
------------------------------- --------------------------------
STEEL PARTNERS II, L.P.
150 EAST 52ND STREET, 21ST FLOOR
NEW YORK, NEW YORK 10022
September 18, 2000
BY FACSIMILE AND FEDERAL EXPRESS
--------------------------------
Tandycrafts, Inc.
1400 Everman Parkway
Fort Worth, Texas 76140
Attention: Corporate Secretary
Re: Supplemental Notice of Intention to Nominate Individuals for
Election as Directors at the 2000 Annual Meeting of
Stockholders of Tandycrafts, Inc.
------------------------------------------------------------
Ladies and Gentlemen:
This letter shall serve as a supplement to our letter dated June 5,
2000 (the "Nomination Letter") and hereby incorporates herein by reference the
provisions and defined terms set forth in the Nomination Letter.
The Nomination Letter served to satisfy the advance notice requirements
of the Bylaws of Tandycrafts as to the nomination, by Steel, of five nominees
for election to the Tandycrafts Board at the Annual Meeting. Through the
Nomination Letter, Steel reserved the right to nominate additional nominees to
be elected to the Tandycrafts Board at the Annual Meeting, to the extent there
were in excess of five (5) vacancies on the Tandycrafts Board to be filled by
election at the Annual Meeting or Tandycrafts increased the size of the
Tandycrafts Board above its existing size. As the Tandycrafts Board has
purported to increase the size of the Tandycrafts Board from five to six
directors, Steel hereby nominates and notifies you of its intent to nominate
Steven Wolosky as its sixth nominee to be elected to the Board of Directors of
Tandycrafts at the Annual Meeting. In connection with such action, Steel hereby
requests that the Tandycrafts Board include the nomination of Mr. Wolosky in
Tandycrafts' proxy materials with respect to the Annual Meeting, in accordance
with applicable law. Additionally, the term "Nominees" as defined in the
Nomination Letter is hereby amended to include Mr. Wolosky.
To the extent that there are in excess of six (6) vacancies on the
Tandycrafts Board to be filled by election at the Annual Meeting or Tandycrafts
increases the size of the Tandycrafts Board above its existing size, Steel
continues to reserve the right to nominate additional nominees to be elected to
the Tandycrafts Board at the Annual Meeting.
The information required by the Bylaws follows:
(i) The information concerning Mr. Wolosky required by Article II,
Section 8(d) and 8(e) of the Bylaws is as follows:
STEVEN WOLOSKY (44) is one of the nominees for director. For more than
the past five years, Mr. Wolosky has been a partner of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, counsel to Steel. Mr. Wolosky is also a director of
CPX Corp. and Assistant Secretary of WHX Corporation. As of the date hereof, Mr.
Wolosky did not beneficially own any shares of Common Stock. The business
address of Mr. Wolosky is 505 Park Avenue, New York, New York 10022. Mr.
Wolosky's residential address is 161 Tekening Drive, Tenafly, New Jersey 07670.
Although Mr. Wolosky individually is not adverse to Tandycrafts or any of its
subsidiaries in any material pending legal proceedings, the law firm in which
Mr. Wolosky is a partner has been retained to defend Steel, Warren Lichtenstein,
Newcastle and Mark Schwarz (collectively, the "Defendants") against a complaint
filed by Tandycrafts on August 22, 2000 in the United States District Court,
Northern District of Texas. The Complaint alleges that the Defendants have
violated federal securities laws.
(ii) Mr. Wolosky has not purchased or sold any shares of the Common
Stock during the past two years.
(iii) On September 18, 2000, the Nominees, Steel and Newcastle
entered into Amendment No. 2 to the Joint Filing Agreement
("Amendment No. 2"). Amendment No. 2 is attached hereto as
Exhibit A and incorporated herein by reference and all
references contained herein are qualified in their entirety by
reference to such Amendment No. 2. Other than as stated above,
there are no arrangements or understandings between the
Nominees and each nominee or any other person or person
pursuant to which the nominations described herein are to be
made, other than the consent by Mr. Wolosky to serve as a
director of Tandycrafts if elected as such at the Annual
Meeting, attached hereto and incorporated herein by reference.
(iv) Mr. Wolosky has consented to serve as a director of
Tandycrafts if so elected. Such consent is set forth as
Exhibit B hereto.
Very truly yours,
STEEL PARTNERS II, L.P.
By: Steel Partners L.L.C., General Partner
/s/ Warren G. Lichtenstein
----------------------------------
Warren G. Lichtenstein
Managing Member
<PAGE>
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CUSIP No. 875386104 13D Page 21 of 55 Pages
------------------------------- --------------------------------
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TANDYCRAFTS, INC.
--------------------------------------------------------------------------------
(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
STEVEN WOLOSKY
--------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 875386104 13D Page 22 of 55 Pages
------------------------------- --------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
/ / 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:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
-2-
<PAGE>
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CUSIP No. 875386104 13D Page 23 of 55 Pages
------------------------------- --------------------------------
2000 ANNUAL MEETING OF STOCKHOLDERS
OF
TANDYCRAFTS, INC.
-------------------------
PROXY STATEMENT
OF
THE TANDYCRAFTS FULL VALUE COMMITTEE
-------------------------
PLEASE MAIL THE ENCLOSED GOLD PROXY CARD
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. 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.
This proxy statement (the "Proxy Statement") and the enclosed GOLD
proxy card are being furnished to stockholders of the Company by the Committee,
in connection with the solicitation of proxies from the Company's stockholders
to be used at the 2000 Annual Meeting of Stockholders of the Company, including
any adjournments or postponements thereof and any special meeting which may be
called in lieu thereof (the "Annual Meeting"), to elect the Committee's
nominees, Warren G. Lichtenstein, Mark E. Schwarz, James R. Henderson, Glen
Kassan, Harold Smith and Steven Wolosky (the "Nominees") to the Company Board.
As Nominees for director, Messrs. Lichtenstein, Schwarz, Henderson, Kassan,
Smith and Wolosky are deemed to be participants in this proxy solicitation. As
members of the soliciting group, Steel Partners II, L.P. and Newcastle Partners,
L.P. are also deemed to be participants in the proxy solicitation. The principal
executive offices of the Company are located at 1400 Everman Parkway, Fort
Worth, Texas 76140. This Proxy Statement and the GOLD proxy card are first being
furnished to the Company's stockholders on or about September __, 2000.
The Company has set the record date for determining stockholders
entitled to notice of and to vote at the Annual Meeting as of _______, 2000 (the
"Record Date") and has set ________, 2000 as the date of the Annual Meeting.
Stockholders of record at the close of business on the Record Date will be
entitled to one vote at the Annual Meeting for each Share (as defined herein)
held on the Record Date. According to the Company, as of the Record Date, there
were _________ shares of common stock, $1.00 par value per share (the "Shares"),
outstanding and entitled to vote at the Annual Meeting. The Committee, along
with all of the participants in this solicitation, are the beneficial owners of
an aggregate of 1,801,300 Shares which represents approximately 14.8% of the
Shares outstanding (based on information publicly disclosed by the Company). The
Committee intends to vote such Shares for the election of the Nominees.
THIS SOLICITATION IS BEING MADE BY THE COMMITTEE AND NOT ON BEHALF OF
THE BOARD OF DIRECTORS OR MANAGEMENT OF THE COMPANY.
The Committee is soliciting proxies for the election of the Nominees to
the Company Board. The Committee is not aware of any other proposals to be
brought before the Annual Meeting. However, should other proposals be brought
before the Annual Meeting, the persons named as proxies in the enclosed GOLD
proxy card will vote on such matters in their discretion.
<PAGE>
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CUSIP No. 875386104 13D Page 24 of 55 Pages
------------------------------- --------------------------------
IMPORTANT
Your vote is important, no matter how many or how few Shares you own.
The Committee urges you to sign, date, and return the enclosed GOLD proxy card
today to vote FOR the election of the Nominees.
The Nominees 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 Nominees 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 GOLD proxy 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 GOLD proxy 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 proxy statement, so that
we may be aware of all instructions and can attempt to ensure that such
instructions are followed.
If you have any questions regarding your proxy,
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
-2-
<PAGE>
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CUSIP No. 875386104 13D Page 25 of 55 Pages
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PROPOSAL I - ELECTION OF DIRECTORS
Why You Should Vote For Nominees
The Committee believes that the election of the Nominees 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 the maximization of 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 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 Company's 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 $2.13 per Share on September 14,
2000.
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 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
of the Company.
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. The Committee believes that
the sale of these businesses in such a short time period, and
without the assistance of an experienced nationally recognized
investment banking firm, was not the best strategy to maximize
shareholder value.
-3-
<PAGE>
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CUSIP No. 875386104 13D Page 26 of 55 Pages
------------------------------- --------------------------------
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. Additionally, the performance of the Company's
remaining business, as well as management's failure to
recognize that there is room for further divestitures of its
weaker businesses, is troubling.
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.
In the Management Proxy Statement, management states that the
Compensation Committee has developed and implemented a compensation program that
will reward and retain management talent required "to achieve the [Company's]
objectives and to increase stockholder value." Surprisingly, while the Company
has sustained significant losses over the past four years, compensation awarded
to certain officers of the Company has steadily increased. In particular,
Michael Walsh, President and Chief Executive Officer of the Company since April
1996, has reaped significant monetary benefits despite the Company's weak
performance. As provided in the Company's public filings, for the fiscal years
ended June 30, 1997, 1998 and 1999, Mr. Walsh received an aggregate of $583,750
in salary, $188,400 in bonuses, and $109,774 for all other compensation
including retirement benefits. During the comparable period, under the
management of Mr. Walsh, the Company suffered a staggering loss of approximately
$21 million. The Committee believes that the high levels of compensation awarded
to management despite significant losses incurred by the Company demonstrates
management's indifference to the interests of the stockholders as well as
management's inability to maximize 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 election of the
Nominees represents the best means for stockholders to maximize the present
value of their Shares. If elected, the Nominees will, subject to their fiduciary
duties, 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 Nominees will retain a nationally
recognized investment banking firm to assist in the review and implementation of
the alternatives that the Nominees believe will maximize stockholder value for
all of the Company's stockholders.
The Nominees
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 the Nominees. This
information has been furnished to the Committee by the Nominees. 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.
Warren G. Lichtenstein (35) is one of the nominees for director. Mr.
Lichtenstein 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., WebFinancial
Corporation, Puroflow, Incorporated, PLM International, Inc., CPX Corp.,
Tech-Sym Corporation. He is a former director of Saratoga Beverage Group, Inc.,
Alpha Technologies, Inc. and SL Industries, Inc. Mr. Lichtenstein also served as
Chairman of the Board of Aydin Corporation from October 5, 1998 until its sale
to L-3 Communications Corporation ("L-3") in April 1999 at a price of $13.50 per
-4-
<PAGE>
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CUSIP No. 875386104 13D Page 27 of 55 Pages
------------------------------- --------------------------------
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. ("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 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) is one of the nominees for director. Mr. Schwarz
has served as the sole general partner of Newcastle Partners, L.P.
("Newcastle"), a private investment firm, since 1993. 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. 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) is one of the nominees for director. Since
August 1999, Mr. Henderson has been a Vice-President of Steel Partners Services,
Ltd., an affiliate of Steel Partners. 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. Mr. Henderson is a director of the following publicly held
companies: Tech-Sym Corporation and ECC International Corp. 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) is one of the nominees for director. Since October
1999, Mr. Kassan has been a Vice- President of Steel Partners Services, Ltd., an
affiliate of Steel Partners. 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) is one of the nominees for director. Mr. Smith 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.
-5-
<PAGE>
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CUSIP No. 875386104 13D Page 28 of 55 Pages
------------------------------- --------------------------------
Steven Wolosky (44) is one of the nominees for director. For more than
the past five years, Mr. Wolosky has been a partner of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, counsel to Steel Partners. Mr. Wolosky is also a
director of CPX Corp. and Assistant Secretary of WHX Corporation. As of the date
hereof, Mr. Wolosky did not beneficially own any Shares of the Common Stock of
the Company. Mr. Wolosky has not purchased or sold any Shares of the Common
Stock of the Company in the past two years. The business address of Mr. Wolosky
is 505 Park Avenue, New York, New York 10022.
The Nominees 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 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 of the
nominees in the solicitation of written proxies or votes by Steel Partners.
Pursuant to an amendment to the Joint Filing Agreement, Messrs. Henderson,
Kassan and Smith 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 Nominee or any other person or persons pursuant
to which the nominations described herein are to be made, other than the consent
by each of the Nominees to serve as a director of the Company if elected as such
at the Annual Meeting. The Nominees have not 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, none of the
nominees 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.
The Committee does not expect that the Nominees will be unable to stand
for election, but, in the event that such persons are unable to do so, the
Shares represented by the enclosed GOLD proxy card will be voted for alternate
nominees. In addition, the Committee reserves the right to nominate substitute
or additional persons if the Company makes or announces any changes to its
Bylaws, including increasing the size of the Board, or takes or announces any
other action that has, or if consummated would have, the effect of disqualifying
the Nominees. In any such case, Shares represented by the enclosed GOLD proxy
card will be voted for such substitute or additional nominees.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED
GOLD PROXY CARD.
VOTING AND PROXY PROCEDURES
Only stockholders of record on the Record Date will be entitled to
notice of and to vote at the Annual Meeting. Each Share is entitled to one vote.
Stockholders who sell Shares before the Record Date (or acquire them without
voting rights after the Record Date) may not vote such Shares. Stockholders of
record on the Record Date will retain their voting rights in connection with the
Annual Meeting even if they sell such Shares after the Record Date. Based on
publicly available information, the Committee believes that the only outstanding
class of securities of the Company entitled to vote at the Annual Meeting are
the Shares.
Shares represented by properly executed GOLD proxy cards will be voted
at the Annual Meeting as marked and, in the absence of specific instructions,
will be voted FOR the election of the Nominees to the Board, and in the
discretion of the persons named as proxies on all other matters as may properly
come before the Annual Meeting. Election of the Nominees requires the
affirmative vote of a plurality of the Shares represented and entitled to vote
at the Annual Meeting. Shares for which proxies are marked "abstain" will be
treated as Shares present for purposes of determining the presence of a quorum
on all matters. Proxies relating to "street name" Shares that are voted by
brokers only on some of the proposals will nevertheless be treated as present
for purposes of determining the presence of a quorum on all matters but will not
be entitled to vote on any proposal which the broker does not have discretionary
voting power and has not received instructions from the beneficial owner
("broker non-votes"). Directors are elected
-6-
<PAGE>
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CUSIP No. 875386104 13D Page 29 of 55 Pages
------------------------------- --------------------------------
by a plurality and the nominees who receive the most votes will be elected.
Abstentions and broker non-votes will not be taken into account in determining
the outcome of the election.
Stockholders of the Company may revoke their proxies at any time prior
to its exercise by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy) or by delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to the
Committee in care of Mackenzie Partners, Inc. at the address set forth on the
back cover of this Proxy Statement or to the Company at 1400 Everman Parkway,
Fort Worth, Texas 76140 or any other address provided by the Company. Although a
revocation is effective if delivered to the Company, the Committee requests that
either the original or photostatic copies of all revocations be mailed to the
Committee in care of Mackenzie Partners, Inc. at the address set forth on the
back cover of this Proxy Statement so that the Committee will be aware of all
revocations and can more accurately determine if and when proxies have been
received from the holders of record on the Record Date of a majority of the
outstanding Shares.
IF YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE COMPANY
BOARD, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being
made by the Committee. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Solicitations may be made by certain
officers, employees or affiliates of the Committee, none of whom will receive
additional compensation for such solicitation.
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 proxies 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 25 persons
to solicit the Company's stockholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by the
Committee. If the Nominees are elected to the Company Board, 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 proxies are currently
estimated to be approximately $[ ]. The Committee estimates that through the
date hereof, its expenses in connection with this solicitation are approximately
$[ ].
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.
-7-
<PAGE>
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CUSIP No. 875386104 13D Page 30 of 55 Pages
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Harold Smith is a retired consultant. Mr. Smith does not beneficially
own any Shares.
Steven Wolosky is a partner of Olshan Grundman Frome Rosenzweig &
Wolosky LLP. Mr. Wolosky 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.
The Board of Directors of the Company has a single class of directors.
At each annual meeting of stockholders, the directors are elected to a one-year
term. The Nominees, if elected, would serve as directors for the term expiring
in 2001 or until the due election and qualification of their successors. The
Committee has no reason to believe any of the Nominees will be disqualified or
unable or unwilling to serve if elected.
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 Securities
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 were 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 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
General Corporation Law 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.
CERTAIN TRANSACTIONS BETWEEN THE COMMITTEE AND THE COMPANY
Except as set forth in this Proxy 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
-8-
<PAGE>
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CUSIP No. 875386104 13D Page 31 of 55 Pages
------------------------------- --------------------------------
Company since July 1, 1999 with respect to any Shares of the Company; 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 Proxy 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 Nominees are 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, 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.
OTHER MATTERS AND ADDITIONAL INFORMATION
The Committee is unaware of any other matters to be considered at the
Annual Meeting. However, the Committee has notified the Company of its intention
to bring before the Annual Meeting such proposals as it believes to be
appropriate. Should other proposals be brought before the Annual Meeting, the
persons named as proxies on the enclosed GOLD proxy card will vote on such
matters in their discretion.
-9-
<PAGE>
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CUSIP No. 875386104 13D Page 32 of 55 Pages
------------------------------- --------------------------------
The information concerning the Company contained in this Proxy
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
September 18, 2000
-10-
<PAGE>
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CUSIP No. 875386104 13D Page 33 of 55 Pages
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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
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<PAGE>
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CUSIP No. 875386104 13D Page 34 of 55 Pages
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Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
1,000 3.23750 8/24/99
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
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<PAGE>
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CUSIP No. 875386104 13D Page 35 of 55 Pages
------------------------------- --------------------------------
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
23,000 3.18320 10/22/99
4,200 3.16500 10/26/99
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
-13-
<PAGE>
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CUSIP No. 875386104 13D Page 36 of 55 Pages
------------------------------- --------------------------------
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
2,000 3.29500 11/29/99
1,900 3.29500 11/30/99
5,100 3.29088 12/01/99
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
STEVEN WOLOSKY
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.
-14-
<PAGE>
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CUSIP No. 875386104 13D Page 37 of 55 Pages
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IMPORTANT
Tell your Board what you think! Your vote is important. No matter how
many Shares you own, please give Steel Partners your proxy FOR the election of
the Nominees by taking three steps:
1. SIGNING the enclosed GOLD proxy card,
2. DATING the enclosed GOLD proxy card, and
3. MAILING the enclosed GOLD proxy card TODAY in the envelope
provided (no postage is required if mailed in the United
States).
If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, 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 the GOLD proxy
card representing your Shares. The Committee urges you to confirm in writing
your instructions to the Committee in care of at the address provided below so
that the Committee will be aware of all instructions given and can attempt to
ensure that such instructions are followed.
If you have any questions or require any additional information
concerning this Proxy Statement, please contact, Mackenzie Partners, Inc. at the
address set forth below.
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
E-mail: [email protected]
or
CALL TOLL FREE (800) 322-2885
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<PAGE>
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CUSIP No. 875386104 13D Page 38 of 55 Pages
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TANDYCRAFTS, INC. 2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE TANDYCRAFTS FULL VALUE COMMITTEE
The undersigned appoints Warren G. Lichenstein and Mark E. Schwarz and each of
them, attorneys and agents with full power of substitution to vote all shares of
common stock of Tandycrafts, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the 2000 Annual Meeting of
Stockholders of the Company, and including at any adjournments or postponements
thereof and at any special meeting called in lieu thereof, as follows:
THE TANDYCRAFTS FULL VALUE COMMITTEE RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED BELOW.
1. ELECTION OF DIRECTORS: FOR WITHHOLD FOR ALL
ALL ALL Except nominee(s)
Nominees: Warren Lichtenstein, Mark written below
Schwarz, James Henderson, Glen Kassan, [ ] [ ] [ ]
Harold Smith and Steven Wolosky
------------------------------------
2. In their discretion with respect to any other matters as may properly come
before the Annual Meeting.
<PAGE>
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CUSIP No. 875386104 13D Page 39 of 55 Pages
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The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to the Shares of Common Stock of the Company
held by the undersigned, and hereby ratifies and confirms all action the herein
named attorneys and proxies, their substitutes, or any of them may lawfully take
by virtue hereof. If properly executed, this proxy will be voted as directed
above. If no direction is indicated with respect to the above proposal, this
proxy will be voted FOR the election of the Nominees, or any substitutions or
additions thereto.
This proxy will be valid until the sooner of one year from the date
indicated below and the completion of the Annual Meeting.
DATED: _________________________________, 2000.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
-------------------------------------------------------
(Signature)
-------------------------------------------------------
(Signature, if held jointly)
-------------------------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
<PAGE>
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CUSIP No. 875386104 13D Page 40 of 55 Pages
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
STEEL PARTNERS II, L.P., )
)
Plaintiff, )
)
v. ) C.A. No. _____________
)
TANDYCRAFTS, INC., MICHAEL J. )
WALSH, R.E. COX III, JOE K. PACE, )
SHELDON STEIN, COLON )
WASHBURN and JACK KAHL, )
)
Defendants. )
COMPLAINT
Plaintiff Steel Partners II, L.P., by its undersigned counsel, alleges
upon knowledge as to its own status and acts, and on information and belief as
to all other matters, as follows:
Nature of the Action
--------------------
1. In December 1999, plaintiff Steel Partners II, L.P. ("Steel
Partners") amended its Schedule 13D to disclose that it and another shareholder
collectively owned approximately 14.9% of the outstanding shares of defendant
Tandycrafts, Inc. ("Tandycrafts"). In June 2000, acting pursuant to Tandycrafts'
advance notice bylaw, Steel Partners notified Tandycrafts that it would be
nominating a competing slate of directors at Tandycrafts' next annual meeting.
2. Tandycrafts responded to Steel Partners' nominations by
filing a Complaint in the United States District Court for the Northern District
of Texas alleging, among other things, that Steel Partners is part of a "group"
with undisclosed shareholders, and that the combined share ownership of this
alleged "group" exceeds 15%. Tandycrafts' groundless lawsuit represents a thinly
veiled threat on the part of incumbent management to "trigger" the
<PAGE>
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CUSIP No. 875386104 13D Page 41 of 55 Pages
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Tandycrafts poison pill Rights Plan by issuing a public announcement that Steel
Partners is an "Acquiring Person" under the Rights Plan by virtue of the alleged
"group" ownership of more than 15% of Tandycrafts common stock. Tandycrafts has
the unilateral power to make such an announcement, notwithstanding the fact that
Steel Partners, including its associates and affiliates, owns less than 15% of
the outstanding shares of Tandycrafts.
3. The fact that Tandycrafts' management filed suit only after
Steel Partners announced its intent to conduct a proxy contest reveals the
Board's true aim: to interfere with the proxy process and keep from being
unseated. The incumbent Board no doubt anticipates that its thinly veiled
threats of "triggering" the Rights Plan will both chill shareholders from
communicating with Steel Partners in the forthcoming proxy campaign, and also
deter those who might support Steel Partners' proposals from investing in
Tandycrafts for fear that they will become enmeshed in litigation. Given
Tandycrafts' dismal performance under the current Board, this desperate measure
is the only means by which they can hope to prevail at the upcoming annual
meeting. Injunctive and declaratory relief is necessary to protect Steel
Partners, and the rest of the public stockholders, from the abusive tactics of
Tandycrafts' incumbent management.
The Parties
-----------
4. Plaintiff Steel Partners is a limited partnership organized
under the laws of Delaware with its principal office in New York, New York.
Steel Partners is an investment fund whose principal activity is the purchase
and sale of securities of publicly traded companies, generally in the small cap
market. Mr. Warren Lichtenstein is the managing member of Steel Partners'
general partner, Steel Partners LLC, a Delaware limited liability company. Among
its investments, Steel Partners currently owns approximately 1.5 million shares
of Tandycrafts common stock, which represents approximately 12.8% of
Tandycrafts' outstanding shares.
<PAGE>
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CUSIP No. 875386104 13D Page 42 of 55 Pages
------------------------------- --------------------------------
5. Defendant Tandycrafts is a Delaware corporation whose
principal office is in Fort Worth, Texas. Tandycrafts is a maker and marketer of
picture frames, wall decor and other consumer products. Tandycrafts' common
stock is registered pursuant to Section 12 of the Securities Exchange Act. Its
shares trade on the New York Stock Exchange. As of March 31, 2000, Tandycrafts
had approximately 12,138,835 shares outstanding. At the close of trading on
September 15, 2000, its shares traded at $2 1/8.
6. Defendants Michael J. Walsh, R.E. Cox III, Joe K. Pace,
Sheldon Stein, Colon Washburn and Jack Kahl (collectively, the "Director
Defendants") are directors of defendant Tandycrafts. Defendant Michael J. Walsh
currently serves as President and Chief Executive Officer of Tandycrafts.
Defendant R.E. Cox, III is its Chairman. The Director Defendants own in the
aggregate approximately 215,000 shares of Tandycrafts common stock, representing
less than 2% of its outstanding shares. Their collective investment in
Tandycrafts is dwarfed by Steel Partners' multimillion-dollar position comprised
of approximately 1.5 million shares, or approximately 12.8% of Tandycrafts'
shares.
Tandycrafts' Dreadful Performance
---------------------------------
7. For its 1995 fiscal year, Tandycrafts enjoyed net sales of
approximately $256 million and net income of approximately $11.4 million. In
April 1996, the Company appointed Michael J. Walsh as President and Chief
Executive Officer.
8. In the years subsequent to Mr. Walsh's appointment,
Tandycrafts' financial performance has declined significantly, notwithstanding a
robust economy. Its net sales have declined from approximately $256 million in
1995 to $194 million in 1999. In each of fiscal years 1996, 1997, and 1999,
Tandycrafts suffered losses, including an approximately $23.8 million loss in
1999. From 1996 through 1999, Tandycrafts suffered, in the aggregate, more than
$30 million in total losses. For the fiscal year ended June 30, 2000,
Tandycrafts performed even
<PAGE>
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CUSIP No. 875386104 13D Page 43 of 55 Pages
------------------------------- --------------------------------
worse. Its net sales declined to $111 million and Tandcrafts suffered a net loss
of approximately $19.7 million. These latest figures bring Tandycrafts'
aggregate net losses under Michael Walsh's regime to approximately $51.5
million.
9. Tandycrafts' continued poor performance has been reflected
in its declining stock price. According to Tandycrafts' own public filings, a
$100 position in Tandycrafts in 1994 was worth only $27 by 1999. During these
same years, a similar investment in an index of small capitalization stocks
would have grown to $203.
Tandycrafts' "Poison Pill" Rights Plan
--------------------------------------
10. No doubt recognizing that its declining performance made a
challenge to management inevitable, on May 19, 1997, Tandycrafts' Board enacted
a Rights Agreement (the "Rights Plan"), which is a classic "poison pill."
11. Under the Rights Plan, one "Right" was issued for each
share of common stock, to be evidenced by the certificates of common stock
registered in the names of holders of common stock. Each Right entitles its
holder, upon the occurrence of a "Distribution Date," to exercise the Right to
acquire Tandycrafts common stock with a market value double the Right's exercise
price. Upon the "Distribution Date," the Rights separate from the common stock
and become freely tradeable and exercisable for all shareholders other than an
"Acquiring Person."
12. An "Acquiring Person" is defined in the Rights Plan as
"any Person, together with all Affiliates and Associates of such Person, [who]
is the beneficial owner of 15% or more of the shares of Common Stock then
outstanding. . ."
13. The Rights Plan defines the term "Distribution Date" as
"the tenth Business Day after the .... the Stock Acquisition Date." The Rights
Plan defines the "Stock Acquisition Date" as follows (with emphasis added):
"Stock Acquisition Date" means the first date of a public
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CUSIP No. 875386104 13D Page 44 of 55 Pages
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announcement. . . by the Company or an Acquiring Person that
an Acquiring Person has become an Acquiring Person.
14. In other words, under the Rights Plan, Tandycrafts'
management has the power to trigger the poison pill by making a "public
announcement" that one or more shareholders, such as Steel Partners, has become
an "Acquiring Person." Such an announcement, even if factually erroneous, would
have devastating consequences, both for the alleged "Acquiring Person" (which
includes all persons supposedly affiliated or associated), and for all
Tandycrafts shareholders who support the objectives of the alleged "Acquiring
Person."
Steel Partners' Investment Strategy and Reputation
--------------------------------------------------
15. Steel Partners was formed in October 1993 to invest in
undervalued securities of small cap companies. The term "small cap" generally
encompasses public companies with market capitalizations less than $250 million.
To date, Steel Partners has achieved excellent returns for its investors. From
its formation through year-end 1999, Steel Partners achieved gross returns of
approximately 450%, with the lion's share of these returns achieved since 1997.
The investment banking firm ING Barings acknowledged the achievements of Steel
Partners by designating it as one of the top 10 performing hedge funds over a
three-year period ending December 31, 1999.
16. As part of its investment strategy and due to the nature
of the small cap market, Steel Partners often takes positions in excess of 5% of
a company's outstanding shares, thereby requiring a filing with the SEC alerting
the marketplace to Steel Partners' investment. For this reason, Steel Partners'
strong track record is readily discernible to other investors -- and its
investment success is both easy to document and to emulate. As a result of Steel
Partners' successful track record, other investors in the small cap sector, from
time to time, monitor Steel Partners' activities so that they can ride its
coattails. Members of the investing public who
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CUSIP No. 875386104 13D Page 45 of 55 Pages
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emulate Steel Partners have the benefit of Steel Partners' research and
analysis, for which they pay nothing to Steel Partners.
17. In recent years, Steel Partners' major investments have
often yielded substantial profits. For example:
o Steel Partners took a major position in Aydin Corp. which traded for
approximately $7.375 per share when Steel Partners disclosed its stake.
Shortly thereafter, Aydin's directors permitted Steel Partners'
nominees to join the board and together, they worked on a sale of the
company. Less than a year later the company was sold for a $13.375 per
share, a return in excess of 80%.
o In July 1996, Steel Partners' filed a schedule 13D for an obscure New
York Stock Exchange listed company, Dynamics Corporation of America; at
the time Dynamics shares traded at approximately $25 per share.
Approximately one year later, Dynamics entered into a restructuring
which afforded its shareholders the opportunity to receive $56.25 per
share or alternatively, to receive shares in another New York Stock
Exchange Company, CTS Corporation. The CTS shares thereafter soared to
well above the all-cash price.
o In July 1999, Steel Partners filed a Schedule 13D for another New York
Stock Exchange company, General Housewares Corp., which then traded for
approximately $19.50 per share. Approximately three months later,
General Housewares was sold for $29 per share.
o In June 1999, Steel Partners filed a Schedule 13D for Tech-Sym
Corporation. In June 2000, Tech-Sym announced that it had entered into
a merger agreement at a substantial premium from its trading price a
year earlier.
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CUSIP No. 875386104 13D Page 46 of 55 Pages
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18. Steel Partners' successes are especially prominent because
the small cap and micro cap markets attract few institutional investors. As a
result, the activities of major participants, such as Steel Partners, are
quickly noticed. Because small cap companies are far less likely to attract
attention from the research departments at major investment houses, investors in
the market place are more likely to turn to Steel Partners for insight.
19. Like almost all participants in the financial markets,
Steel Partners also disseminates newsletters to actual and potential investors
in its fund. These newsletters often describe Steel Partners' success and, on
occasion, provide analyses and research regarding the companies in which Steel
Partners has invested. The newsletters are based on publicly available data and
discuss only those companies where Steel Partners has a public filing disclosing
its position.
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CUSIP No. 875386104 13D Page 47 of 55 Pages
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20. Individuals and institutions may well choose to utilize a
portion of Steel Partners' research, by investing in selected securities on
their own, independent of Steel Partners. By doing so, they avoid incurring fees
and expenses - and they retain total control over their funds. The conduct of
these investors is an inevitable consequence of Steel Partners' success. It is
also part of the ordinary operation of the financial markets, especially for
those companies in which Steel Partners has publicly filed a Schedule 13D
disclosing that it owns in excess of 5% of the company's outstanding shares.
Steel Partners' Acquisition of Tandycrafts Shares
-------------------------------------------------
21. In April 1999, Steel Partners began to acquire Tandycrafts
common stock on the open market. On October 8, 1999, Steel Partners filed its
Schedule 13D disclosing that it had acquired 688,300 shares of Tandycrafts
common stock, representing 5.7% of the outstanding common stock, for aggregate
consideration of approximately $2.2 million. On October 29, 1999 and November
18, 1999, Steel Partners amended its Schedule 13D to disclose additional
purchases of Tandycrafts common stock, increasing its position to 1.16 million
shares, representing approximately 9.7% of the outstanding common stock. On
December 13, 1999, Steel Partners again amended its Schedule 13D to disclose
additional
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CUSIP No. 875386104 13D Page 48 of 55 Pages
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purchases increasing its ownership to 1,537,100 shares, representing 12.8% of
the outstanding stock.
22. The December 1999 amendment also disclosed Steel Partners'
agreement with another shareholder, Newcastle Partners L.P. ("Newcastle"), a
Texas limited partnership. In the same 13D amendment, Newcastle disclosed its
ownership of 264,200 shares of Tandycrafts common stock, representing 2.2% of
the outstanding common stock. As disclosed in the amended Schedule 13D, Steel
Partners and Newcastle together owned approximately 14.9% of the outstanding
shares of Tandycrafts.
23. Newcastle, like Steel Partners, invests in undervalued
securities. Newcastle's principal, Mark E. Schwarz, was featured in a Wall
Street Journal report on September 7, 2000, reviewing the highly successful
outcome of his partnership's investment in the former Watkins Johnson Co. The
Wall Street Journal reported that Mr. Schwarz, through an earlier investment
partnership, led a proxy contest for control of Watkins Johnson Co., which
initially resisted his efforts and then later agreed to seek a buyer for the
entire business. The resulting sale yielded investors in Mr. Schwarz's fund an
86% return.
24. Steel Partners' newsletter dated, April 24, 2000, which is
available to actual and potential investors in Steel Partners' fund, gave the
following description of Tandycrafts:
This is a classic value situation that trades for a
substantial discount to its intrinsic value. The company has
four business segments: frames & mirrors, retail office
supplies, home furnishings and gifts.
Tandy has publicly announced they are going to sell off all of
the business except Frames and Mirrors and the Home
Furnishings business. When this is complete we should have an
entity that is nearly debt free, and has earnings power that
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CUSIP No. 875386104 13D Page 49 of 55 Pages
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could support a stock price at least two times the current
price. We believe that the pre-tax intrinsic value of this
entity is at least $5.50 per share and are the largest
shareholder of the company.
25. On June 8, 2000, Steel Partners filed another amendment to
its Schedule 13D disclosing that it and Newcastle had given advance notice,
pursuant to Tandycrafts' by-laws, of their nomination of five individuals for
election to the Board at Tandycrafts' next annual meeting. In other words, Steel
Partners disclosed the possibility of a proxy contest to take control of
Tandycrafts' board of directors. Given past practice, the annual meeting should
be held on November 8, 2000.
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CUSIP No. 875386104 13D Page 50 of 55 Pages
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26. Steel Partners is today filing preliminary proxy materials
with the Securities and Exchange Commission, as it is required to do in order to
pursue the nomination of its candidates.
Tandycrafts' Response to Steel Partners' Nominations
----------------------------------------------------
27. As set forth above, ever since December 1999, Steel
Partners has publicly disclosed its 14.9% stake in Tandycrafts. Over the
following six months, Tandycrafts did and said nothing to challenge the accuracy
of Steel Partners' Schedule 13D.
28. Once Steel Partners announced its intention to nominate a
competing slate of directors, and the date for the decisive annual meeting
approached, Tandycrafts changed course. On August 22, 2000, Tandycrafts
commenced an action in the United States District Court for the Northern
District of Texas against Steel Partners, Newcastle, and their respective
principals, Warren Lichtenstein and Mark E. Schwarz.
29. In its Complaint, Tandycrafts falsely asserted that Steel
Partners is part of a "group" with various persons and entities including
Dimensional Fund Advisors, Inc. (a mutual fund group with $20 billion under
management); Summit Capitol Management, LLC; First
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CUSIP No. 875386104 13D Page 51 of 55 Pages
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Carolina Investors, Inc. (a closed end investment company); James Benenson, Jr.;
Arrowhead Holdings; Keith Lane Zucker; Jack Howard; Pubco Corp.; and "other
undisclosed shareholders." According to Tandycrafts, each of these persons or
businesses owns shares of Tandycrafts common stock. If indeed one or more of
these persons or businesses owns shares of Tandycrafts, and if those shares are
aggregated with the shares of Steel Partners and Newcastle, then the combined
ownership of the alleged "group" may well exceed 15%.
30. In fact, there are no affiliates or associates of Steel
Partners and Newcastle who own shares in Tandycrafts. The allegations in
Tandycrafts' complaint represent a thinly disguised threat on the part of
Tandycrafts' incumbent Board to "trigger" the poison pill Rights Plan by issuing
a public announcement of their position that Steel Partners is an "Acquiring
Person" under the Rights Plan by virtue of its alleged ownership, with supposed
undisclosed affiliates and associates, of shares in excess of 15%.
31. In light of Tandycrafts' dismal financial results and the
continued poor performance of its stock, the Director Defendants no doubt
understood that the prospects of shareholder support for their re-election were
remote. Having consistently failed to deliver on promises of improvement, the
Director Defendants appreciated that they would soon face a day of reckoning
with Tandycrafts' shareholders.
32. The timing and content of Tandycrafts' claims of an
undisclosed "group" make the board's entrenchment purpose clear. First,
Tandycrafts did nothing to challenge Steel Partners' SEC filings until after
Steel Partners announced its intent to run a slate in opposition. Second, the
relief Tandycrafts seeks includes an injunction preventing Steel Partners from
soliciting any proxies or "taking or attempting to take any other steps in
furtherance of any plan to change or influence the control of Tandycrafts."
Third, the Director Defendants' response to Steel Partners' announcement
focuses, almost exclusively, on the issue whether plaintiff and
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CUSIP No. 875386104 13D Page 52 of 55 Pages
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other shareholders have formed a "group" of shareholders who own in excess of
15% of Tandycrafts' shares.
33. The Director Defendants no doubt appreciate that current
and potential shareholders will recognize the significance of 15%. That figure
is the threshold for triggering Tandycrafts' Rights Plan. The Director
Defendants allegations are a thinly veiled threat to shareholders who are
supportive of Steel Partners and/or anxious to see the Board pursue a sale or
similar transaction.
34. The Director Defendants similarly appreciate that the
successful track record of Steel Partners, coupled with Steel Partners' publicly
disclosed investment in Tandycrafts, encourages follow-on investors who are in
no way "affiliates" or "associates" of Steel Partners. Tandycrafts' false
allegations of a "group" are aimed at investors of this type, who are likely to
be supportive of Steel Partners and unsympathetic to the electoral appeals of
Tandycrafts management.
35. The Director's Defendants thus expect, and it is no doubt
likely, that such shareholders will be discouraged from investing in Tandycrafts
for fear of becoming enmeshed in costly litigation. For the same reason, the
Director Defendants expect, and it is likely, that their threats of invoking the
"poison pill" will chill communications between Steel Partners and other
shareholders in the upcoming proxy contest.
COUNT I
-------
36. Plaintiff repeats the allegations of the preceding
paragraphs as if stated here.
37. As directors of Tandycrafts, the Director Defendants owe
unremitting fiduciary duties of loyalty and care to Tandycrafts and its
stockholders. These duties include but are not limited to the obligation to
refrain from taking any action for the sole or primary purpose
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CUSIP No. 875386104 13D Page 53 of 55 Pages
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of impeding the effectiveness of shareholder action absent compelling
justification. These duties also includes the obligation to refrain from acting
for the sole or primary purpose of entrenchment and to refrain from taking any
defensive action that is not reasonable or proportionate to a cognizable threat
to a legitimate corporate interest.
38. By making groundless accusations against Steel Partners,
and a veiled threat to destroy the investment of anyone who supports Steel
Partners in its effort to turn around Tandycrafts through the electoral process,
the Director Defendants have breached their fiduciary duties to Tandycrafts and
its stockholders. Any further action to threaten the triggering of the Rights
Plan without foundation would similarly constitute a breach of fiduciary duty.
COUNT II
--------
39. Plaintiff repeats the allegations of the preceding
paragraphs as if stated here.
40. The Director Defendants and Tandycrafts may, at any time,
declare Steel Partners, along with certain unidentified other persons, an
"Acquiring Person" under the Rights Plan and then cause a "Distribution Date" to
occur under the Rights Plan.
41. The prospect of such a public declaration is damaging to
Steel Partners and to the value of its investment in Tandycrafts.
42. Accordingly, Steel Partners is entitled to a declaration
that none of the other persons identified by Tandycrafts is an "Affiliate" or
"Associate" of Steel Partners and as a result, Steel Partners is not an
"Acquiring Person" under the Rights Plan.
COUNT III
---------
43. Plaintiff repeats the allegations of the preceding
paragraphs as if stated here.
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CUSIP No. 875386104 13D Page 54 of 55 Pages
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44. The Director Defendants and Tandycrafts may at any moment
cause a "Distribution Date" to occur under the Rights Plan, in violation of the
terms of the Rights Plan.
45. The occurrence of a Distribution Date would cause Steel
Partners severe, irreparable harm. Steel Partners has no adequate remedy at law.
46. Accordingly, Steel Partners is entitled to a preliminary
and permanent injunction barring the Director Defendants and Tandycrafts from
declaring a "Distribution Date" under the Rights Plan.
COUNT IV
--------
47. Plaintiff repeats the allegations of the preceding
paragraphs as if stated here.
48. Defendants have taken the position that Steel Partners has
engaged in conduct that would render Steel Partners an "interested stockholder"
within the meaning of Section 203 of the Delaware General Corporation Law and
therefore subject to the restrictions on business combinations with interested
stockholders set forth in Section 203.
49. The prospect of being deemed an "interested stockholder"
is damaging to Steel Partners and to the value of its investment in Tandycrafts.
50. Plaintiff is entitled to a declaration that is not an
"interested stockholder" under Section 203 of the Delaware General Corporation
Law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring that Steel Partners, is not an "Acquiring
Person" under the Rights Plan of defendant
Tandycrafts;
B. Granting preliminary and permanent injunctive relief
prohibiting Tandycrafts from declaring a
"distribution date" under the Rights Plan;
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CUSIP No. 875386104 13D Page 55 of 55 Pages
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C. Declaring that plaintiff is not a " interested
stockholder" within the meaning of Section 203 of the
Delaware General Corporation Law;
D. Awarding damages based on the Director Defendants'
breaches of fiduciary duty;
E. Awarding plaintiff the costs and disbursements of
this action, including attorneys fees; and
F. Granting such other and further relief as may be just
and proper.
--------------------------------------------
Joel Friedlander
BOUCHARD MARGULES & FRIEDLANDER
222 Delaware Avenue, Suite 1102
Wilmington, DE 19801
(302) 573-3500
Attorneys for Plaintiff
OF COUNSEL:
Thomas J. Fleming
OLSHAN GRUNDMAN FROME
ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
DATED: September 18, 2000
