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. 1)
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
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(Name of Registrant as Specified In Its Charter)
THE TANDYCRAFTS FULL VALUE COMMITTEE
STEEL PARTNERS II, L.P.
WARREN G. LICHTENSTEIN
MARK E. SCHWARZ
NEWCASTLE PARTNERS, L.P.
JAMES R. HENDERSON
GLEN KASSAN
HAROLD SMITH
STEVEN WOLOSKY
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(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED OCTOBER 5, 2000
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 October __, 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>
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
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<PAGE>
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 Committee believes that the Company's stock price over the past
several years, during one of the greatest bull markets in history, demonstrates
the Board's failure to create value for its stockholders.
o According to information contained in management's Proxy
Statement for the 1999 Annual Meeting of Stockholders (the
"Management Proxy Statement"), during the period from June 30,
1994 through June 30, 1999, the Company's share price
performance has trailed the Russell 2000 Index and a peer
group index selected by the Company by a significant margin.
o According to the Management Proxy Statement, during this
period the cumulative total returns for the Russell 2000 Index
was approximately 103%, the Company's peer group index lost
approximately 18% of its value, and the 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.
It is the Committee's opinion that the Company's lackluster stock price
performance is reflective of the Company's losses from continued and
discontinued operations. Upon consummation of the Company's divestiture of 121
leather and crafts retail stores and related manufacturing operations during the
quarter ended December 31, 1998, the Company's public filings reflect that it
recorded a loss of approximately $11.1 million. Shortly thereafter, the Company
suffered a significant loss in connection with the sale and subsequent
reacquisition of Cargo Furnitures, Inc. ("Cargo"). After the sale of Cargo, the
former subsidiary determined that it required additional capital in order to
complete its restructuring program. In January 1999, Cargo defaulted on its bank
term note agreement which was guaranteed by the Company. After complying with
its obligations under the guaranty, the Company determined that recovery of the
approximately $2.5 million note balance as well as certain receivables from
Cargo was not probable. As a result, loss provisions of approximately $3.5
million were recorded for the quarter ended December 31, 1998. After making the
guaranty payment, the Company acquired 100% ownership of Cargo, resulting in an
additional $602,000 operating loss for the fiscal year ended June 30, 1999^.
After reporting a net loss of over $23 million for the fiscal year ended June
30, 1999, the Company formulated a plan to dispose of the gifts and office
supplies divisions in order to concentrate on the frames and wall decor
divisions which management believed were the Company's "core" businesses. In a
press release 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.
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.
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o The Committee believes that the Company has performed poorly
since the sale of the gifts and office supplies units and that
management has failed to recognize that there is room for
further divestitures of its weaker businesses.
o As announced in a recent press release, the Company had a net
loss for continuing operations of approximately $10.7 million,
or $0.88 per share, and $12.4 million, or $1.02 per share, for
the fourth quarter and fiscal year ended June 30, 2000,
respectively.
In the Committee's opinion, the Company's poor performance and the
shortsighted implementation of the divestiture strategy demonstrates the Company
Board's lack of dedication to pursuing the best interests of the stockholders
and maximizing stockholder value.
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 aggregate 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., a provider of
database development and website design and development services, WebFinancial
Corporation, a commercial and consumer lender, Puroflow, Incorporated, a
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<PAGE>
designer and manufacturer of precision filtration devices, PLM International,
Inc., an equipment leasing company, Tech- Sym Corporation, an electronics
engineering and manufacturing company, CPX Corp., a company with no significant
operating business. He is a former director of Saratoga Beverage Group, Inc., a
beverage manufacturer and distributor, Alpha Technologies, Inc., an electronics
components manufacturer,and SL Industries, Inc., a designer and manufacturer of
data quality systems. Mr. Lichtenstein also served as Chairman of the Board of
Aydin Corporation, a provider of products and systems for the acquisition and
distribution of information over electronic communications media, from October
5, 1998 until its sale to L-3 Communications Corporation ("L-3") in April 1999
at a price of $13.50 per share, which represents a premium of approximately 39%
over the reported closing price of $9.69 per share the day preceding the
announced transaction with L-3. As of the Record Date, Mr. Lichtenstein
beneficially owned 1,537,100 Shares, all of which were owned by Steel Partners.
The business address of Mr. Lichtenstein is 150 E. 52nd Street, 21st Floor, New
York, New York 10022. For information regarding Mr. Lichtenstein's purchases and
sales of Shares during the past two years, see Schedule I.
In late 1995, Steel Partners commenced a proxy solicitation to replace
the incumbent directors of Medical Imaging Centers of America, Inc., a provider
of outpatient services and medical equipment rentals ("MICA"). MICA was
ultimately sold for $11.75 per share, a 42% increase over the price of $8.25 per
share, representing the closing price on the day prior to the initiation of
Steel Partners' proxy solicitation. In connection with this contest, MICA
initiated an action against Steel Partners, Warren Lichtenstein, and others in
the United States District Court for the Southern District of California,
Medical Imaging Centers of America, Inc. v. Lichtenstein, et al., Case No.
96-0039B. On February 29, 1996, the Court issued an Order granting, in part,
MICA's motion for a preliminary injunction on the grounds that plaintiff had
demonstrated a probability of success on the merits of its assertion that
defendants had violated Section 13 of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). Under the Court's preliminary injunction,
defendants in the action were enjoined from voting certain of their shares at
MICA's annual meeting of shareholders, except pursuant to a formula under which
they would be voted in the same proportion as other votes cast at the meeting.
The Court declined to adjourn the annual meeting of shareholders. At the
meeting, Steel Partners received sufficient votes to elect its nominees to the
Board of MICA, after giving effect to the Court's preliminary injunction. The
parties thereafter settled their differences pursuant to an agreement under
which MICA agreed to initiate an auction process which, if not concluded within
a certain time period, would end and thereafter the designees of Steel Partners
would assume 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. For information regarding
Newcastle, see below under "Participant Information." Mr. Schwarz was also Vice
President and Manager of Sandera Capital, L.L.C, a private investment firm
affiliated with Hunt Financial Group, L.L.C., a Dallas-based investment firm
associated with the Lamar Hunt family ("Hunt"), from 1995 to September 1999 and
a securities analyst and portfolio Manager for SCM Advisors, L.L.C., a
Hunt-affiliated registered investment advisor from May 1993 to 1996. Mr. Schwarz
is a director of Bell Industries, Inc., a computer systems integrator. As of the
Record Date, Mr. Schwarz beneficially owned 264,200 Shares, all of which were
owned by Newcastle. The business address of Mr. Schwarz is c/o Newcastle, 4514
Cole Avenue, Suite 600, Dallas, Texas 75205. For information regarding Mr.
Schwarz's purchases and sales of Shares during the past two years, see Schedule
I.
James R. Henderson (42) 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, an e-business solutions company. Mr. Henderson is a director
of the following publicly held companies: Tech-Sym Corporation, an information
services and technology company, and ECC International Corp, a designer and
manufacturer of computer-controlled simulators. As of the date hereof, Mr.
Henderson did not beneficially own any Shares. The business address of Mr.
Henderson is 150 East 52nd Street, 21st Floor, New York, New York 10022.
Glen Kassan (57) 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
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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.
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, a holding
company principally operating steel manufacturing businesses. 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
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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 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, Internet, in person and by advertisements.
The Committee has retained Mackenzie Partners, Inc. for solicitation
and advisory services in connection with this solicitation, for which Mackenzie
Partners will receive a fee not to exceed $75,000, together with reimbursement
for its reasonable out-of-pocket expenses, and will be indemnified against
certain liabilities and expenses, including certain liabilities under the
federal securities laws. Mackenzie Partners, Inc. will solicit 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
$[ ].
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PARTICIPANT INFORMATION
The general partner of Steel Partners is Steel LLC, a Delaware limited
liability company. The principal business of Steel Partners is investing in the
securities of micro-cap companies. The principal business address of Steel
Partners and Steel LLC is 150 East 52nd Street, 21st Floor, New York, New York
10022. Warren G. Lichtenstein is Chairman of the Board, Secretary and the
Managing Member of Steel LLC. Glen Kassan and James Henderson are Vice
Presidents of Steel Partners Services, Ltd., an affiliate of Steel Partners. As
of the date hereof, Steel Partners is the beneficial owner of 1,537,100 Shares.
Steel LLC does not beneficially own any Shares on the date hereof, except by
virtue of its role in Steel Partners. For information regarding Steel Partners
purchases and sales of Shares during the past two years, see Schedule I.
Harold Smith is a retired consultant. Mr. Smith does not beneficially
own any Shares.
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"
-8-
<PAGE>
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 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>
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
October 5, 2000
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<PAGE>
Schedule I
----------
Transactions in the Shares for the Last Two Years
-------------------------------------------------
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
STEEL PARTNERS II, L.P.
-----------------------
1,000 2.40500 4/15/99
5,500 2.40500 4/15/99
13,200 2.38133 4/16/99
10,000 2.40500 4/19/99
2,700 2.34250 4/20/99
500 2.85000 5/03/99
5,000 2.79000 5/06/99
1,400 2.78000 5/07/99
5,000 2.79000 5/10/99
1,000 3.09750 7/26/99
18,100 3.22466 7/27/99
2,000 3.22750 7/30/99
9,300 3.22750 8/02/99
38,200 3.24680 8/03/99
2,600 3.16500 8/05/99
200 3.36250 8/06/99
10,400 3.28399 8/09/99
5,000 3.22750 8/10/99
7,900 3.16500 8/16/00
38,000 3.18934 8/17/99
11,800 3.10250 8/19/99
7,700 3.10250 8/20/99
26,900 3.20403 8/23/99
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<PAGE>
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
23,000 3.18320 10/22/99
4,200 3.16500 10/26/99
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<PAGE>
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
10,000 3.17500 10/27/99
212,700 3.13273 10/27/99
3,000 3.22750 10/28/99
25,000 3.26750 10/28/99
1,200 3.29000 11/05/99
10,000 3.29000 11/08/99
28,000 3.30000 11/08/99
2,400 3.28000 11/09/99
13,100 3.27237 11/11/99
2,700 3.28000 11/12/99
7,500 3.30000 11/12/99
5,000 3.23750 11/15/99
5,000 3.30000 11/16/99
65,900 3.39500 11/16/99
7,000 3.30000 11/23/99
15,000 3.34250 11/24/99
355,000 3.27000 12/07/99
Shares of Common Stock Price Per Date of
Purchased Share Purchase
--------- ----- --------
NEWCASTLE PARTNERS, L.P.
------------------------
1,000 3.31000 11/15/99
6,000 3.31000 11/16/99
3,200 3.29500 11/24/99
2,000 3.29500 11/26/99
2,000 3.29500 11/29/99
1,900 3.29500 11/30/99
5,100 3.29088 12/01/99
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<PAGE>
2,000 3.29000 12/02/99
15,000 3.30630 12/03/99
21,000 3.29000 12/06/99
205,000 3.27049 12/07/99
WARREN G. LICHTENSTEIN
----------------------
NONE
MARK E. SCHWARZ
---------------
NONE
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.
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<PAGE>
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>
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED OCTOBER 5, 2000
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:
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>
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!
