SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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. 9)1
Tandycrafts, Inc.
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(Name of Issuer)
COMMON STOCK, $1.00 PAR VALUE
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(Title of Class of Securities)
875386104
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(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 21, 2000
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(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 that 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 25 Pages)
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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>
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CUSIP No. 875386104 13D Page 2 of 25 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
STEEL PARTNERS II, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,537,100
OWNED BY ---------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 123,000**
---------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,537,100
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
123,000**
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,660,100
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.4%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
** Pursuant to the terms of the Settlement Agreement dated November 21, 2000,
the Issuer is obligated to issue an aggregate of 123,000 Shares of Common Stock
to Steel Partners II, L.P. and Newcastle Partners, L.P.
<PAGE>
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CUSIP No. 875386104 13D Page 3 of 25 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WARREN LICHTENSTEIN
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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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 OF ORGANIZATION
USA
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,537,100
OWNED BY
EACH --------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
123,000**
---------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,537,100
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
123,000**
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,660,100
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.4%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
** Pursuant to the terms of the Settlement Agreement dated November 21, 2000,
the Issuer is obligated to issue an aggregate of 123,000 Shares of Common Stock
to Steel Partners II, L.P. and Newcastle Partners, L.P.
<PAGE>
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CUSIP No. 875386104 13D Page 4 of 25 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
MARK E. SCHWARZ
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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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 OF ORGANIZATION
USA
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 264,200
OWNED BY ------------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 123,000**
------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
264,200
------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
123,000**
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
387,200
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.1%
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14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
** Pursuant to the terms of the Settlement Agreement dated November 21, 2000,
the Issuer is obligated to issue an aggregate of 123,000 Shares of Common Stock
to Steel Partners II, L.P. and Newcastle Partners, L.P.
<PAGE>
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CUSIP No. 875386104 13D Page 5 of 25 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
NEWCASTLE PARTNERS, L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 264,200
OWNED BY
EACH --------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
123,000**
--------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
264,200
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
123,000**
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
387,200
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.1%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
** Pursuant to the terms of the Settlement Agreement dated November 21, 2000,
the Issuer is obligated to issue an aggregate of 123,000 Shares of Common Stock
to Steel Partners II, L.P. and Newcastle Partners, L.P.
<PAGE>
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CUSIP No. 875386104 13D Page 6 of 25 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GLEN KASSAN
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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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 OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY --------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH - 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>
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CUSIP No. 875386104 13D Page 7 of 25 Pages
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The following constitutes Amendment No. 9 ("Amendment No. 9") to the
Schedule 13D filed by the undersigned (the "Schedule 13D"). Except as
specifically set forth by this Amendment No. 9, the Schedule 13D, as amended,
remains in full force and effect.
Item 2 is amended to add the following paragraph:
In connection with the Settlement Agreement (as defined in Item 4), the
Reporting Persons, the Issuer and the members of the Issuer's Board of Directors
have agreed that three members of The Tandycrafts Full Value Committee, Warren
G. Lichtenstein, Mark E. Schwarz and Glen Kassan, will be appointed to the
Issuer's Board of Directors, and Jack Kahl and R.E. Cox, III will resign from
the Issuer's Board of Directors. Accordingly, on November 21, 2000, The
Tandycrafts Full Value Committee was disbanded, and therefore The Tandycrafts
Full Value Committee, James R. Henderson, Harold Smith and Steven Wolosky are no
longer Reporting Persons.
Item 3 is amended to add the following paragraph:
In consideration of the execution of the Settlement Agreement, the
Issuer is obligated to issue an aggregate of 123,000 Shares of Common Stock to
Steel Partners II and Newcastle.
Item 4 is amended to add the following paragraphs:
On November 21, 2000, the Reporting Persons entered into a Settlement
Agreement with the Issuer and the members of the Issuer's Board of Directors
(the "Settlement Agreement"), a copy of which is attached hereto as Exhibit 12.
The Settlement Agreement provides, among other things, for the Reporting
Persons, James R. Henderson, Harold Smith and Steven Wolosky to refrain from
soliciting proxies or consents from the Issuer's stockholders, forming a group
or pursuing transactions with or including the Issuer or its securities, other
than those approved by the Issuer's Board of Directors, until May 21, 2000. The
parties have also agreed to take all steps necessary to dismiss certain lawsuits
filed by the Issuer against certain of the Reporting Persons in the State of
Texas, and by Steel Partners II against the Issuer and members of the Issuer's
Board of Directors in the State of Delaware. In addition, the number of
directors on the Issuer's Board of Directors will be reduced to six, and Warren
G. Lichtenstein, Mark E. Schwarz and Glen Kassan will be elected as directors of
the Issuer to replace Jack Kahl and R.E. Cox, III, who shall resign. The Board
of Directors will then create an Advisory Committee of ex-officio directors to
serve for such term as determined by a vote of four members of the Board of
Directors. The Advisory Committee will consist of Messrs. Kahl and Cox, and
their activities will be limited to client relationship issues. The Issuer has
also agreed to issue an aggregate of 123,000 Shares of Common Stock to Steel
Partners II and Newcastle in consideration of the execution of the Settlement
Agreement.
<PAGE>
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CUSIP No. 875386104 13D Page 8 of 25 Pages
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On November 22, 2000, the Issuer and the Reporting Persons issued a
joint press release announcing the execution of the Settlement Agreement (the
"Joint Press Release"), a copy of which is attached hereto as Exhibit 13.
Reference is made to Exhibit 13 for the complete text of the Joint Press
Release.
Item 5 is hereby amended and restated in its entirety to read as follows:
Item 5. Interest in Securities of the Issuer.
-------------------------------------
(a) and (b) The aggregate percentage of Shares of Common Stock reported
owned by each person named herein is based upon 12,280,897 Shares outstanding,
which is the total number of Shares of Common Stock outstanding as reported in
the Issuer's preliminary proxy statement dated October 19, 2000.
As of the close of business on November 21, 2000, Steel Partners II
beneficially owns 1,660,100 Shares of Common Stock, including the 123,000 Shares
of Common Stock issuable under the Settlement Agreement, constituting
approximately 13.4% of the Shares outstanding. Mr. Lichtenstein beneficially
owns 1,660,100 Shares, including the 123,000 Shares of Common Stock issuable
under the Settlement Agreement, representing approximately 13.4% of the Shares
outstanding. Mr. Lichtenstein has sole voting and dispositive power with respect
to 1,537,100 of the Shares owned by Steel Partners II by virtue of his authority
to vote and dispose of such Shares. All of such Shares were acquired in
open-market transactions.
As of the close of business on November 21, 2000, Newcastle
beneficially owns 387,200 Shares of Common Stock, including the 123,000 Shares
of Common Stock issuable under the Settlement Agreement, constituting
approximately 3.1% of the Shares outstanding. Mr. Schwarz beneficially owns
387,200 Shares, including the 123,000 Shares of Common Stock issuable under the
Settlement Agreement, representing approximately 3.1% of the Shares outstanding.
Mr. Schwarz has sole voting and dispositive power with respect to 264,200 of the
Shares owned by Newcastle by virtue of his authority to vote and dispose of such
Shares. All of such Shares were acquired in open-market transactions.
<PAGE>
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CUSIP No. 875386104 13D Page 9 of 25 Pages
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In consideration of the execution of the Settlement Agreement, the Issuer is
obligated to issue an aggregate of 123,000 Shares of Common Stock to Steel
Partners II and Newcastle. The distribution of such 123,000 Shares between Steel
Partners II and Newcastle has not yet been determined. Accordingly, Steel
Partners II, Newcastle and Messrs. Lichtenstein and Schwarz may be deemed to
share voting and dispositive power with respect to the 123,000 Shares.
As of the close of business on November 21, 2000, Mr. Kassan
beneficially owns no Shares of Common Stock.
(c) Since the filing of Amendment No. 8, the Reporting Persons have not
engaged in any transactions involving Shares of Common Stock of the Issuer other
than the Settlement Agreement pursuant to which the Issuer is obligated to issue
an aggregate of 123,000 Shares of Common Stock to Steel Partners II and
Newcastle.
(d) No person other than the Reporting Persons is known to have the
right to receive, or the power to direct the receipt of dividends from, or
proceeds from the sale of, such Shares of the Common Stock.
(e) Not applicable.
Item 6 is amended to add the following paragraph:
On November 21, 2000, the Reporting Persons entered into the Settlement
Agreement, a copy of which is attached hereto as Exhibit 12. See Item 4 for a
brief description of the Settlement Agreement.
Item 7 is hereby amended to add the following items as exhibits to the
Schedule 13D:
12. Settlement Agreement dated as of November 21, 2000 by and
among Tandycrafts, Inc., R.E. Cox, III, Sheldon Stein, Michael
J. Walsh, Jack Kahl, Colon Washburn, Joe K. Pace, Steel
Partners II, L.P., Warren G. Lichtenstein, Steven Wolosky,
Mark E. Schwarz, James R. Henderson, Glen Kassan, Harold
Smith, Newcastle Partners, L.P. and The Tandycrafts Full Value
Committee.
13. Joint Press Release dated November 22, 2000.
<PAGE>
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CUSIP No. 875386104 13D Page 10 of 25 Pages
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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: November 29, 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/ Glen Kassan
------------------------------------
Glen Kassan
<PAGE>
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CUSIP No. 875386104 13D Page 11 of 25 Pages
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EXHIBIT INDEX
-------------
Exhibit Page
------- ----
Settlement Agreement dated as of November 21, 2000 12-23
by and among Tandycrafts, Inc., R.E. Cox, III,
Sheldon Stein, Michael J. Walsh, Jack Kahl, Colon
Washburn, Joe K. Pace, Steel Partners II, L.P.,
Warren G. Lichtenstein, Steven Wolosky, Mark E.
Schwarz, James R. Henderson, Glen Kassan, Harold
Smith, Newcastle Partners, L.P. and The
Tandycrafts Full Value Committee.
Joint Press Release dated November 22, 2000. 24-25
<PAGE>
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CUSIP No. 875386104 13D Page 12 of 25 Pages
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SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated as of November 21, 2000, by and among
Tandycrafts, Inc., a Delaware corporation ("Tandycrafts" or the "Company"), R.E.
Cox, III ("Cox"), Sheldon Stein ("Stein"), Michael J. Walsh ("Walsh"), Jack Kahl
("Kahl"), Colon Washburn ("Washburn") and Joe K. Pace ("Pace") (collectively,
Tandycrafts, Cox, Stein, Walsh, Kahl, Washburn and Pace, are referred to herein
as the "Tandycrafts Parties"), Steel Partners II, L.P., a Delaware limited
partnership ("Steel"), Warren G. Lichtenstein ("Lichtenstein"), Steven Wolosky
("Wolosky"), Mark E. Schwarz ("Schwarz"), James R. Henderson ("Henderson"), Glen
Kassan ("Kassan"), Harold Smith ("Smith"), Newcastle Partners, L.P., a Texas
limited partnership ("Newcastle"), and The Tandycrafts Full Value Committee
(collectively, Steel, Lichtenstein, Wolosky, Schwarz, Henderson, Kassan, Smith,
Newcastle and the Full Value Committee are referred to herein as the "Steel
Parties").
WHEREAS, Steel beneficially owns an aggregate of 1,537,100 shares and
Newcastle beneficially owns an aggregate of 264,200 shares of common stock of
Tandycrafts, $1.00 par value ("Common Stock");
WHEREAS, the Steel Parties have (i) notified Tandycrafts, in letters
dated June 5, 2000 and September 18, 2000, of their intention to nominate and
solicit proxies in support of six candidates to stand for election to the
Tandycrafts Board of Directors ("Board") at Tandycrafts's 2000 Annual
Stockholders Meeting (the "Nomination Notice") and (ii) filed materials with the
Securities and Exchange Commission ("SEC") in order to solicit proxies to vote
at the Tandycrafts' 2000 Annual Stockholders Meeting ("Annual Meeting") in order
to elect a slate of nominees pursuant to the Nomination Notice (the "Steel Proxy
Solicitation");
WHEREAS, the Steel Parties have (i) purported to deliver consents to
the Company with respect to the removal of the existing members of the
Tandycrafts Board of Directors and elect directors in their place without a
meeting of the Tandycrafts stockholders and (ii) filed materials with the SEC in
order to solicit consents to remove and replace directors of the Company without
a meeting of Tandycrafts Stockholders (the "Steel Consent Solicitation");
WHEREAS, Tandycrafts has filed a lawsuit against certain of the Steel
Parties in the United States District Court in the Northern District of Texas
entitled TANDYCRAFTS, INC. V. STEEL PARTNERS II, L.P., WARREN G. LICHTENSTEIN,
NEWCASTLE PARTNERS AND MARK E. SCHWARZ, C.A. CV1838-L, alleging violations of
certain securities laws and other allegations (the "Tandycrafts Litigation"),
and Steel has filed a lawsuit against the Tandycrafts Parties in the New Castle
County Court of Chancery of the State of Delaware, entitled STEEL PARTNERS II,
L.P., V. TANDYCRAFTS, INC., MICHAEL J. WALSH, R.E. COX III, JOE K. PACE, SHELDON
STEIN, COLON WASHBURN AND JACK KAHL, C.A. No. 18326NC, amended November 1, 2000,
in response thereto and relating to other issues (the "Steel Litigation");
WHEREAS, the Tandycrafts Parties and the Steel Parties have determined
that the interests of Tandycrafts and its shareholders, and the interests of the
Steel Parties, would best
<PAGE>
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CUSIP No. 875386104 13D Page 13 of 25 Pages
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be served by (i) avoiding the substantial expense and disruption that could be
expected to result from the Steel Proxy and Consent Solicitations, the Steel
Litigation and the Tandycrafts Litigation, (ii) nominating the persons as set
forth herein for election as directors of Tandycrafts, (iii) terminating the
Steel Litigation and the Tandycrafts Litigation and (iv) the receipt of other
agreements, covenants, rights and benefits as provided herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
Section 1. Representations, Warranties and Covenants of the Tandycrafts
Parties. Each of the Tandycrafts Parties hereby represents, warrants and agrees
that (a) each of the Tandycrafts Parties has full legal right, power and
authority to execute, deliver and perform this Agreement, and consummate the
transactions contemplated hereby, (b) the execution and delivery of this
Agreement, and the consummation by Tandycrafts of the transactions contemplated
hereby have been duly authorized by all necessary corporate actions, and (c)
this Agreement constitutes valid, legal and binding obligations of each of the
Tandycrafts Parties, enforceable against each such party in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other laws now or
hereafter in effect.
Section 2. Representations, Warranties and Covenants of the Steel
Parties. Each of the Steel Parties hereby represents, warrants and agrees that
(a) each of the Steel Parties has full legal right, power and authority to
execute, deliver and perform this Agreement, and consummate the transactions
contemplated hereby, (b) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate actions, and (c) this Agreement constitutes valid,
legal and binding obligations of each of the Steel Parties, enforceable against
each such party in accordance with its terms, except that such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium (whether
general or specific) or other laws now or hereafter in effect.
Section 3. Board Composition; Related Matters.
3.1 On the date of this Settlement Agreement, (a) the Tandycrafts
Parties shall cause the number of directors on the Tandycrafts Board of
Directors to be fixed at six (6) directors, (b) Messrs. Kahl and Cox shall
resign from the Tandycrafts Board of Directors and (c) the Tandycrafts Parties
who remain as members of the Tandycrafts Board of Directors shall elect Messrs.
Lichtenstein, Schwarz and Kassan to the Tandycrafts Board of Directors to
replace the resigning directors. The Tandycrafts Board of Directors shall also
create an Advisory Committee of ex-officio directors to serve for such term as
determined by a vote of four members of the Tandycrafts Board of Directors. The
Advisory Committee shall consist of Messrs. Cox and Kahl, and their activities
shall be limited to client relationship issues. Copies of the minutes of the
Advisory Committee shall be made available to all members of the Board. The
Tandycrafts Parties and the Steel Parties agree that except with respect to the
actions contemplated by Section 3.2 of this Agreement, no action of the Board
may be taken without the
-2-
<PAGE>
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CUSIP No. 875386104 13D Page 14 of 25 Pages
----------------------------- ------------------------------
affirmative vote of four (4) directors. The composition of any other Committee
of the Board shall require the affirmative vote of four (4) directors.
3.2 On the date of this Settlement Agreement or as soon as practicable
thereafter, the Tandycrafts Parties agree that they shall cause the Company to
issue to Steel and Newcastle an aggregate of 123,000 shares of Tandycrafts
common stock. Steel and Newcastle shall designate the number of shares each
shall be issued simultaneously with the execution of this Settlement Agreement,
which shares shall be deemed fully paid and non-assessable. Simultaneously with
the execution of this Settlement Agreement, the Tandycrafts Parties shall have
caused the Board to amend the Company's Shareholder Rights Plan (the "Rights
Plan") to permit the issuance of such shares without any Steel Parties being
considered "Acquiring Persons" under the Rights Plan as a result of such
issuance (but that the acquisition of beneficial ownership by the Steel Parties
of any additional shares of the Company's common stock shall result in the Steel
Parties being considered "Acquiring Persons" as provided for under the
provisions of the Plan). Except for such amendment, the Rights Plan has not been
amended since March 1, 2000 and the By-laws of the Company have not been amended
since March 16, 1997. In addition, simultaneously with the execution of this
Settlement Agreement, the Tandycrafts Parties shall have caused the Board to
pass a resolution providing that the issuance of the Company's shares to Steel
and Newcastle as contemplated hereunder shall not have caused the Steel Parties
to become an "interested stockholder" for purposes of Delaware General
Corporation Law ("DGCL") Section 203. In consideration for the issuance of such
shares, the Steel Parties agree that (a) at least two (2) members of the Board
shall be independent of the Steel Parties (the "Independent Directors") and (b)
in the event the Steel Parties acquire beneficial ownership of any additional
share or shares of the Company without the prior approval of the Independent
Directors, they will be bound by and subject to the provisions of DGCL Section
203 as if they had otherwise become an "interested stockholder" for purposes of
DGCL Section 203 by virtue of such acquisition.
3.3 The Tandycrafts Parties shall cause Tandycrafts to (a) set December
11, 2000 as the record date for the Annual Meeting, (b) set January 17, 2001 as
the date of the Annual Meeting and (c) nominate a new slate of six directors for
election by the stockholders to the Board at the Annual Meeting. Such slate
shall consist of three persons selected by the Tandycrafts Parties, who shall be
Messrs. Washburn, Stein and Walsh (the "Tandycrafts Nominees") and three persons
selected by the Steel Parties, who shall be Messrs. Lichtenstein, Schwarz and
Kassan (the "Steel Nominees"). The parties hereto agree that none of Messrs.
Kahl, Cox, Pace, Henderson, Smith or Wolosky shall stand for election as a
director at the Annual Meeting.
3.4 If any Tandycrafts Nominee or Steel Nominee elects not to stand for
election to the Board at the Annual Meeting, then the party hereto that selected
such nominee shall have the right to select a new person at the Annual Meeting
to be that party's nominee. In addition, if a Tandycrafts Nominee or a Steel
Nominee ceases to serve as a member of the Board by reason of death,
resignation, removal, disqualification or for any other reason, prior to
expiration of the Standstill Period (as defined below), then such vacancy on the
Board shall be filled by the party hereto that originally selected such nominee.
A director selected by either the Tandycrafts Parties or the Steel Parties to
fill such a vacancy shall hold office until such director's successor shall have
been duly elected and qualified.
-3-
<PAGE>
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CUSIP No. 875386104 13D Page 15 of 25 Pages
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3.5 The Steel Parties and their Affiliates and Associates (as such
terms are defined in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), and the Tandycrafts Parties, shall publicly
support and recommend that Tandycrafts shareholders vote for the election of
each of the Steel Nominees and Tandycrafts Nominees at the Annual Meeting, and
each of the Steel Parties and the Tandycrafts Parties shall vote, and shall
cause their Affiliates and Associates to vote, all shares of Common Stock which
they are entitled to vote at the Annual Meeting (including as proxies) in favor
of the election of each of the Steel Nominees and the Tandycrafts Nominees and
such votes shall not be revoked in any manner. The Company agrees that it shall
publicly support and recommend that Tandycrafts shareholders vote for the
election of each of the Steel Nominees and Tandycrafts Nominees at the Annual
Meeting, and shall cause its designated proxy holders to vote in favor of the
election of each of the Steel Nominees and the Tandycrafts Nominees with respect
to any valid proxy received by the Company and such votes shall not be revoked
for the Annual Meeting for which no contrary voting instructions are
specifically provided by the holders of such shares.
3.6 At the first meeting of the Board following the expiration of the
Standstill Period (as hereinafter defined), unless the Tandycrafts Board of
Directors by an affirmative vote of four (4) directors determines to do so at an
earlier date, the Board shall retain a nationally recognized investment banking
firm to explore all strategic alternatives relating to Tandycrafts.
3.7 The Tandycrafts Parties and the Steel Parties agree that (a) the
Company shall be bound by and honor all agreements, contracts and commitments
with the officers listed on Schedule I hereto (the "Officers") and shall not
contest the validity or enforceability of any such agreement, contract or
commitment, but shall be entitled to enforce the provisions thereof in
accordance with their terms and (b) in the event the Company does not honor such
agreements, contracts or commitments, the Company shall be required to pay the
legal fees and expenses incurred by the Officers to enforce such agreements,
contracts or commitments.
Section 4. Settlement of Litigation.
4.1 As promptly as practicable after the execution of this Agreement
(a) Tandycrafts Parties shall take all steps necessary to dismiss, as to those
members of the Steel Parties who are defendants therein, the Tandycrafts
Litigation, without prejudice, and without costs or expenses and (b) Steel
Parties shall take all steps necessary to dismiss, as to those members of the
Tandycrafts Parties who are defendants therein, the Steel Litigation without
prejudice, and without costs or expenses.
4.2 The Steel Parties and the Tandycrafts Parties agree that during the
Standstill Period neither party will commence against the other party any
litigation or any other action or proceeding relating in any way to Tandycrafts,
except with respect to any breach of this Agreement.
4.3 Effective upon execution of this Agreement, the Steel Parties
irrevocably withdraw their Nomination Notice and agree to terminate the Steel
Proxy Solicitation and Consent Solicitation.
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CUSIP No. 875386104 13D Page 16 of 25 Pages
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Section 5. Standstill Period.
5.1 Each of the Steel Parties, on the one hand, and each of the
Tandycrafts Parties, on the other hand, agree that, without the prior written
consent of four (4) members of the Board or as otherwise contemplated by
Sections 3.2, 3.3, 3.4 and 3.5 of this Settlement Agreement, it shall not during
the period from the date hereof until six months from the date of this Agreement
(the "Standstill Period"), directly or indirectly:
(a) acquire or agree, offer, seek or propose to acquire, or cause to be
acquired, ownership (including, but not limited to, beneficial ownership
as defined in Rule 13d-3 under the Exchange Act) of any of the assets or
businesses of Tandycrafts or its subsidiaries or any securities of
Tandycrafts or its subsidiaries (including, without limitation, any debt,
equity or convertible securities) or any rights or options to acquire any
such ownership from any Person (as defined below);
(b) make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are used in the proxy rules of the SEC) to vote or consent,
or seek to advise or influence in any manner whatsoever any Person with
respect to the voting of any securities of Tandycrafts or seek to call or
hold any meeting of the shareholders;
(c) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than with the
Steel Parties) or enter into any voting trust agreement with respect to
any voting securities of Tandycrafts;
(d) arrange, or in any way participate in, any financing for the
purchase of any voting securities or securities convertible or
exchangeable into exercisable for any voting securities or assets of
Tandycrafts;
(e) otherwise act, whether alone or in concert with others, to seek to
propose to Tandycrafts, or any of its stockholders, any merger, business
combination, restructuring, recapitalization or similar transaction to or
with Tandycrafts or otherwise act, whether alone or in concert with
others, to seek to control, change or influence the stockholders, Board,
management or policies of Tandycrafts, or nominate any Person as a
director or officer of Tandycrafts, or seek to call or hold any meeting of
Tandycrafts stockholders;
(f) solicit, negotiate with, or provide any information to, any Person
with respect to a merger, business combination, exchange offer or
liquidation of Tandycrafts or any other acquisition of Tandycrafts, any
acquisition of securities of or all or any portion of the assets of
Tandycrafts or any other similar transaction;
(g) make any proposal to be considered and/or voted upon at any meeting
the stockholders of Tandycrafts, discuss or communicate with respect to
any matter related to the business and affairs of Tandycrafts with the
stockholders of Tandycrafts;
(h) announce an intention to, or enter into any discussion,
negotiations, arrangements or understandings with any third party with
respect to, any of the foregoing matters;
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CUSIP No. 875386104 13D Page 17 of 25 Pages
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(i) disclose any intention, plan or arrangement inconsistent with any
of the foregoing provisions; or
(j) advise, assist, encourage or participate with any other Person in
connection with action inconsistent with any of the foregoing provisions.
"Person" shall mean any natural person, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, government or any agency or political subdivision thereof, or
any other legal entity or organization. Section 6. Miscellaneous.
6.1 Severability. If any provision of this Settlement Agreement shall
be held invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner render invalid or
unenforceable any other provisions of this Settlement Agreement.
6.2 Governing Law. This Settlement Agreement and the rights and duties
of the parties hereto shall be governed by and construed in accordance with the
internal laws of the State of Delaware without regard to principles of conflicts
of law.
6.3 Entire Agreement. This Settlement Agreement and any and all other
documents delivered in connection herewith set forth the entire understanding of
the parties in respect to the transactions contemplated herein and supersede all
prior agreements, arrangements and understandings, written or oral, relating to
the subject matter hereof. Each party hereto has retained independent counsel
and such counsel has advised each party with respect to the subject matter of
this Settlement Agreement, and except as set forth herein, no party is relying
upon any representations or statements of any other party.
6.4 Equitable Relief. The parties hereto agree that irreparable damage
would occur in the event any provision of this Settlement Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
6.5 Amendments and Waivers to be in Writing. This Settlement Agreement
may not be amended, modified or changed, and none of the terms, covenants,
representations, warranties or conditions hereof may be waived, except by a
written instrument signed by the party against whom enforcement of any
amendment, change or modification is sought, or in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce same.
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CUSIP No. 875386104 13D Page 18 of 25 Pages
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6.6 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) when
personally delivered or delivered by telecopy (with confirmation of
transmission) on a business day during normal business hours at the address or
number designated below or (b) on the business day following the date of mailing
by overnight courier, fully prepaid, addressed to such address, whichever shall
first occur. The addresses for such communications shall be:
If to Tandycrafts or any of the Tandycrafts Parties:
Tandycrafts, Inc.
1400 Everman Parkway
Fort Worth, Texas 76140
Attention: Russell L. Price
Telecopy: (817) 551-9795
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Dennis J. Block, Esq.
Telecopy: (212) 504-6666
If to The Steel Parties:
Warren Lichtenstein
Steel Partners II, L.P.
150 East 52nd Street, 21st Floor
New York, New York 10022
Telecopy: (212) 813-2198
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Steve Wolosky, Esq.
Telecopy: (212) 980-7177
Any party hereto may from time to time change its address for notices under this
Section 6.6 by giving at least 10 days' written notice of such changed address
to the other parties hereto in accordance with the notice provisions set forth
in this Section 6.6.
6.7 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement, and shall not be deemed to limit or affect
any of the provisions hereof.
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CUSIP No. 875386104 13D Page 19 of 25 Pages
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6.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
6.9 Further Assurances. The parties hereto shall execute and deliver
such further documents and do such further acts as any party hereto shall
reasonably require in order to assure and confirm to the parties hereto the
rights hereby created or to facilitate the full performance of the terms of this
Agreement.
6.10 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all of which such counterparts shall constitute but
one and the same agreement. A facsimile signature shall be deemed an original.
6.11 Assignment. Neither this Agreement nor any rights hereunder may be
assigned by any party in whole or in part, without the prior written consent of
the other parties hereto.
6.12 Expenses. Except for the issuance of the shares as set forth in
Section 3.2, each party shall pay its own costs incident to any matters relating
to (a) this Agreement, (b) the Tandycrafts Litigation, (c) the Steel Litigation,
(d) any of the Steel Parties' investment in Tandycrafts, (e) any expenses
relating to election of directors to the Board (except with respect to the
election of directors as contemplated by Section 3 of this Agreement) or (f) any
other matter relating to Tandycrafts. Notwithstanding the foregoing, in the
event of a dispute regarding the performance of this Agreement, the
non-prevailing party shall reimburse the prevailing party the amount the
prevailing party's reasonable attorney's fees, cost and expenses, in addition to
any other relief to which the prevailing party may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be duly executed by their respective authorized
officers as of the date hereof.
TANDYCRAFTS, INC.
By: /s/ Michael J. Walsh
-----------------------------------
Name:
Title:
R.E. COX, III
/s/ R.E. Cox, III
--------------------------------------
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CUSIP No. 875386104 13D Page 20 of 25 Pages
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SHELDON STEIN
/s/ Sheldon Stein
--------------------------------------
MICHAEL J. WALSH
/s/ Michael J. Walsh
--------------------------------------
JACK KAHL
/s/ Jack Kahl
--------------------------------------
COLON WASHBURN
/s/ Colon Washburn
--------------------------------------
JOE K. PACE
/s/ Joe K. Pace
--------------------------------------
THE STEEL PARTIES
STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C.,
General Partner
By: /s/ Warren G. Lichtenstein
-----------------------------------
Name: Warren Lichtenstein
Title: Chairman
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CUSIP No. 875386104 13D Page 21 of 25 Pages
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THE TANDYCRAFTS FULL VALUE COMMITTEE
/s/ Warren Lichtenstein
--------------------------------------
By: Warren Lichtenstein
WARREN G. LICHTENSTEIN
/s/ Warren G. Lichtenstein
--------------------------------------
NEWCASTLE PARTNERS, L.P.
/s/ Mark E. Schwarz
--------------------------------------
By: Mark E. Schwarz
MARK E. SCHWARZ
/s/ Mark E. Schwarz
--------------------------------------
STEVEN WOLOSKY
/s/ Steven Wolosky
--------------------------------------
JAMES R. HENDERSON
/s/ James R. Henderson
--------------------------------------
GLEN KASSAN
/s/ Glen Kassan
--------------------------------------
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CUSIP No. 875386104 13D Page 22 of 25 Pages
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HAROLD SMITH
/s/ Harold Smith
--------------------------------------
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CUSIP No. 875386104 13D Page 23 of 25 Pages
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SCHEDULE 1
Michael Walsh
James Allen
Leo Taylor
Russell Price
Phillip Greene
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CUSIP No. 875386104 13D Page 24 of 25 Pages
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Press Release
SOURCE: Tandycrafts, Inc.
TANDYCRAFTS REACHES SETTLEMENT AGREEMENT WITH SHAREHOLDERS GROUP
FORT WORTH, Texas, Nov. 22 -- Tandycrafts, Inc. (NYSE: TAC - news) announced
today that it has entered into a settlement agreement with the Tandycrafts Full
Value Committee, New York City-based Steel Partners II, L.P. and Newcastle
Partners, L.P.
The Fort Worth, Texas-based wall decor and home furnishings company said the
settlement calls for a six month standstill agreement in which the Tandycrafts
Full Value Committee agreed to terminate its pending proxy contest and consent
solicitation in exchange for Board representation. In addition, all parties have
agreed to dismiss their respective lawsuits.
Under terms of the agreement, Tandycrafts will grant the Tandycrafts Full Value
Committee three seats on its six-seat board. The new board will consist of
incumbent directors Michael Walsh, Sheldon Stein and Colon Washburn and three
new representatives from the Tandycrafts Full Value Committee; Warren
Lichtenstein, Mark Schwarz and Glen Kassan. Current Tandycrafts directors Earl
Cox and Jack Kahl will no longer serve on the board of directors, but will sit
on a newly formed advisory board.
"We are glad to have reached some middle ground with Steel Partners and
Newcastle Partners so we can get back to business at Tandycrafts," said Michael
Walsh, chairman and chief executive officer of Tandycrafts. "We have made
considerable investment and progress in our core frames and home furnishings
business and are beginning to see the benefits of these efforts. We look forward
to continuing our pace and maximizing the value of Tandycrafts for all
shareholders." Warren Lichtenstein of Steel Partners added: "The standstill
agreement should facilitate our efforts to assist management in enhancing
shareholder value. At the end of the six month standstill period, the Company
has committed to retain a nationally recognized investment banking firm to
explore all strategic alternatives."
Tandycrafts announced that it has set its record date for December 11, 2000 and
has scheduled its annual meeting to be held on or around January 17, 2001.
Tandycrafts also announced that it expects to file its annual report on Form
10-K in approximately early December. The Company said its annual meeting and
proxy filing were delayed while it sought to amend its credit terms with its
banks and find replacement and additional financing. Tandycrafts announced last
month that it has reached agreement with its senior lenders to amend the
Company's revolving credit facility and is continuing discussions with other
parties to secure additional capital to fund long-term growth.
Walsh continued: "While we have an amended credit facility in place, we will
continue to negotiate with other potential financing sources to provide
financing and capital to Tandycrafts."
Tandycrafts, Inc. (www.tandycrafts.com) is a leading maker and marketer of
consumer products, including frames and wall decor sold under the Pinnacle Art &
Frame brand and home furnishings sold through its Cargo Furniture subsidiary.
The Company's products are sold nationwide through wholesale distribution
channels, including mass merchandisers and specialty retailers, and
direct-to-consumer channels through the Company's retail stores, mail order and
the Internet.
Statements in this news release which are not purely historical facts are
forward looking statements, including statements containing the words "believe",
"estimate", "project", "expect" or similar expressions. These statements are
made pursuant to the safe harbor provisions of Section 21E of the
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CUSIP No. 875386104 13D Page 25 of 25 Pages
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Securities Exchange Act of 1934, as amended. All forward looking statements are
based upon information available to Tandycrafts on the date of this release. Any
forward looking statement inherently involves risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but are not
limited to, continued acceptance of the Company's products in the marketplace,
successful implementation of its strategic plan, the extension or refinancing of
its existing bank facility and the restrictions any such extension or
refinancing could place on the Company, the ability to obtain new financing from
other financing sources, the ability to generate positive cash flow from
operations and asset sales, competitive factors, dependence upon third-party
vendors, and other risks detailed in the Company's periodic report filings with
the Securities and Exchange Commission. By making these forward-looking
statements, the Company undertakes no obligation to update these statements for
revisions or changes after the date of this release. Readers are cautioned not
to place undue reliance on forward looking statements.
