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
Filed
by
the registrant o
Filed
by
a party other than the registrant x
Check
the
appropriate box:
o Preliminary
proxy
statement.
o
Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2)).
o
Definitive proxy statement.
x
Definitive additional
materials.
o
Soliciting material under Rule
14a-12.
CROWN
CRAFTS, INC.
(Name
of
Registrant as Specified in its Charter)
WYNNEFIELD
PARTNERS SMALL CAP VALUE, L.P.
WYNNEFIELD
PARTNERS SMALL CAP VALUE, L.P. I
WYNNEFIELD
SMALL CAP VALUE OFFSHORE FUND, LTD.
WYNNEFIELD
CAPITAL MANAGEMENT, LLC
WYNNEFIELD
CAPITAL, INC.
CHANNEL
PARTNERSHIP II, L.P.
NELSON
OBUS
JOSHUA
H.
LANDES
(Name
of
Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment
of filing fee (check the appropriate box):
x
No fee required.
o
Fee computed on table below per Exchange
Act Rules 14a-6(i)(1) and 0-11.
(1)
Title
of each class of securities to which transaction applies:
(2)
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(3)
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calculated and state how it was determined):
(4)
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(5)
Total
fee paid:
o
Fee paid previously with preliminary
materials.
o
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)
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(2)
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Schedule or Registration Statement No.:
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Filing Party:
(4)
Date
Filed:
WYNNEFIELD
GROUP
450
Seventh Avenue, Suite 509
New
York,
NY 10123
July
31,
2007
VOTE
THE GOLD PROXY CARD TODAY
TO
ELECT TRULY INDEPENDENT DIRECTORS
COMMITTED
TO ENHANCING VALUE FOR ALL SHAREHOLDERS!
Dear
Fellow Crown Crafts Stockholder:
By
this
point, we suspect that you might have tired of hearing from us. However, we
owe
it to you to set the record straight.
As
Crown Crafts’ largest stockholder, we have been meeting with other outside
stockholders to discuss our campaign to elect two independent and highly
qualified nominees to the Company’s Board who will work to enhance shareholder
value.
Listening to other stockholders, we sense a growing recognition that the Company
has reached a critical crossroads and a building momentum behind support for
our
nominees - Frederick G. Wasserman and Nelson Obus.
The
current Board must be sensing the same thing because they are now resorting
to
desperate mischaracterizations of us, our objective and our commitment to create
shareholder value.
Let’s
address these “red herrings,” so we can all focus our attention on the real
issues - overcoming an earnings quagmire and properly positioning the company
for future growth.
Red
Herring #1:
The
current Board claims that we are determined to sell the Company. Nothing
could be further from the truth.
We
are
long-term investors.
We have
been invested in this Company for more than eight years. Our nominees will
be
only two of seven directors. We’re
here to participate - not liquidate.
We
believe this Company has great upside potential.
But we
can’t get there the way the Board is constituted today. Not without significant
business and governance changes to enhance shareholder value.
Messrs.
Obus and Wasserman seek the best alternative to provide all stockholders greater
value. We are recommending that the Company engage a recognized financial
advisor to help identify and analyze appropriate strategic
options.
We
have
no pre-conceived notions on how to accomplish that…
except
that an independent third party expert should be retained immediately to conduct
a thorough and fair examination of the best alternatives, and the Board must
act
quickly in stockholders’ best interests.
Let’s
be very clear: Wynnefield’s nominees are committed to support the alternative
that provides the best value to all stockholders. We believe this should be
determined by an orderly and objective process. Period.
We would
support the sale of the Company, or another alternative - such as meaningful
share buybacks or an intelligent acquisition strategy with a real succession
plan only
if the
process supports that conclusion.
Red
Herring #2:
The
current Board claims that we seek to control the Board. That is mathematically
impossible.
Here’s
the truth: we seek two seats on a seven-member Board of
Directors.
Not a
majority. You cannot “control” the Board with two seats out of seven.
Even
if
they
vote together, our nominees will not be able to adopt any measures without
the
support of the other directors of the current Board. To
form a
majority of directors, Obus
and Wasserman look forward to working constructively with the other
directors.
They
will urge the Board to fulfill its fiduciary duty to act to enhance value for
all shareholders, including an examination of all options open to the Company
and implementing best practices in corporate governance.
Red
Herring #3:
The
current Board claims that we will seek reimbursement for the costs of the proxy
campaign to elect two independent directors to the Board. That
is true, but as the rules provide,
and in accordance with custom and practice, we will be entitled to seek
reimbursement
ONLY IF our nominees are elected to the Board, in evidence that you, the
shareholders, have recognized the value that we will have brought to the
Company.
In
fact,
right
now the Company is paying all of the solicitation costs of Messrs. Fox, Deyo
and
Chestnut. As
shareholders, we are all paying the cost of Mr. Fox and Mr. Deyo’s efforts to
entrench themselves. As
Crown Crafts’ largest shareholder, we are picking up 15% of the solicitation
costs for the management nominees, as well as our own.
Will
Messrs. Deyo and Fox reimburse the Company for the costs of their own proxy
solicitation campaign if they lose?
The
Company’s red herrings are meant to divert attention from the Company’s failure
to address the substantive points raised by our proxy solicitation.
CAN
THIS BOARD OBJECTIVELY CONSIDER BEST ALTERNATIVES TO ENHANCING STOCKHOLDER
VALUE
WHEN THEY BENEFIT FROM THE STATUS QUO?
Wynnefield
believes that the Board as presently comprised is not aligned with stockholders’
interests.
Other
than Chairman and CEO Randall Chestnut (who received at least 40% of his shares
for free), no other directors have material stock holdings. In fact,
directors
receive 98% of their compensation in cash - and only 2% in Company shares.
Moreover,
Steven Fox, a director on the current Compensation Committee and one of the
Board’s nominees, is a Partner in Rogers & Hardin - a law firm that receives
an undisclosed amount of legal fees from the Company. The Company protests
that
Mr. Fox’s firm receives less than 1% of its revenues from this arrangement, but
that could still represent hundreds of thousands of dollars. Perhaps more to
the
point: how much do these fees represent of Mr. Fox’s value to Rogers &
Hardin? How does it affect his standing within his own law firm… and his
compensation there?
In
turn,
Mr. Fox’s Compensation Committee has awarded Randall Chestnut substantial salary
and bonuses… while
Mr.
Chestnut, as CEO and Chairman of the Board, has engaged Mr. Fox’s law firm as
outside counsel. A cozy relationship.
Considering
what Crown Crafts means to Mr. Fox, can
he
really be expected to objectively consider strategic
alternatives that would benefit stockholders but turn off the faucet pouring
out
his law firm’s legal fees and director compensation?
In
fact,
in response to Wynnefield’s criticism, the Company has belatedly offered to have
Mr. Fox leave the Compensation Committee if he is re-elected to the Board -
an
implicit admission of at least the appearance of a conflict-of-interest.
But
if Mr. Fox’s dual role as the Company-paid lawyer and a director determining
executive compensation is inappropriate, why hasn’t he resigned
already? If
continuing in these conflicted dual roles would be wrong if he is re-elected,
certainly it is wrong for Mr. Fox to do so today.
Apparently,
members of the current Board - nearly all of whom live in the Atlanta area
- are
a tight-knit group. This
kind of arrangement creates a clubbiness that limits professional skepticism,
which harms outside shareholders and benefits an entrenched management and
Board.
As of
today, the Board has:
| · |
No
announced succession plan for senior management;
|
| · |
No
proven track record in successful
acquisitions;
|
| · |
No
national expertise; and
|
| · |
No
governance or nominating committee.
|
AS
FURTHER EVIDENCE OF OUR COMMITMENT TO WORK CONSTRUCTIVELY FOR STOCKHOLDER VALUE
AND
IN AN EFFORT TO EFFECTUATE MODERN GOVERNANCE PRACTICES, WE HAVE OFFERED TO
WITHDRAW
OUR
PROXY CONTEST TO RESOLVE THESE ISSUES IN AN AMICABLE WAY.
This
is a
proxy campaign that we undertook reluctantly as a last resort because the
current Board had steadfastly refused to permit us to participate in the
Company’s governance - even though we are the Company’s largest stockholder and
long-term investors in Crown Crafts.
Like
you,
as fellow stockholders, we have a lot riding on the Company’s future. And we
remain concerned that without a strategic plan, or an announced succession
plan,
or implementation any of several important business and governance changes
we
have advocated, Crown Crafts’ growth potential is at risk.
Because
our
goal remains - as it always has been - constructive participation in the
Company’s governance,
we have
offered the Company an alternative proposal in accordance with today’s best
practices of good governance and director compensation. Under that proposal,
we
have offered to withdraw our proxy campaign to replace two of the incumbent
directors under the conditions that the Company:
| · |
Expand
the Board from seven members to nine
members;
|
| · |
Elect
Messrs. Wasserman and Obus to fill the two new
seats;
|
| · |
Pay
non-employee directors half of their current cash compensation, which
averages more than $40,000 per director, in restricted
stock;
|
| · |
Form
a nominating and governance committee immediately, with one of our
nominees as a member;
|
| · |
Form
a strategic planning committee immediately, with E. Randall Chestnut
as
one of its members and one of our nominees as another member, with
the
intent to hire a qualified independent consultant to assist management
and
the Board in determining a future strategic plan and aligning future
capital allocations to fulfill the agreed upon strategic plan; and
|
| · |
Commit
to putting to a stockholder vote at the 2008 Annual Meeting, and
supporting a binding resolution to de-classify the Board.
|
We
believe that these changes reflect the current best practice in the area of
corporate governance. Furthermore, amending the nature of the cash portion
of
director compensation will
not only more than offset
the cash cost of two additional directors,
it will
more closely align the financial interests of directors with those of the
stockholders
in accordance with best practice in director compensation.
Our nominees have accepted and are committed to implementing this compensation
arrangement, if elected
to the Board.
We
have
urged the Company to accept our proposal. However,
in the event that the Company declines our offer, we intend to
continue
the fight for your rights as shareholders to its conclusion in order to permit
you
to determine the outcome.
OUR
DIRECTOR NOMINEES ARE COMMITTED TO EXAMINING HOW BEST TO ENHANCE SHAREHOLDER
VALUE,
IMPLEMENTING
BEST PRACTICES IN CORPORATE GOVERNANCE, AND BEING TRULY INDEPENDENT MEMBERS
OF
THE BOARD.
We
believe that it
is time for new thinking.
If
the Company rejects our compromise offer, we are seeking,
at the
Company’s upcoming Annual Meeting of Shareholders, your support for two
independent and highly qualified candidates for election to Crown Crafts’ Board
of Directors. Messrs. Obus and Wasserman will work constructively with the
Board
and urge them to fulfill the Board’s fiduciary duty to explore the
Company’s
options for
maximizing shareholder value and to implement best practices in corporate
governance. We need your support to bring about these changes for the benefit
of
all shareholders.
UNLESS
AND UNTIL THE COMPANY ACCEPTS OUR NEW PROPOSAL, WE URGE STOCKHOLDERS TO VOTE
FOR
THE
ELECTION OF NELSON OBUS AND
FREDERICK G. WASSERMAN BY USING THE GOLD PROXY CARD.
FOR
YOUR CONVENIENCE, WE HAVE MADE ARRANGEMENTS FOR TELEPHONE AND INTERNET VOTING.
SIMPLY FOLLOW THE INSTRUCTIONS ON THE GOLD PROXY CARD.
Remember
that you can vote the GOLD
card
at any point in this process - even if you previously voted a white proxy card,
you can still change your vote.
Help us
to win a voice for outside stockholders. If
you have already voted a white proxy card and wish to change your vote, you
have
every legal right to do so. Simply vote the GOLD proxy promptly by telephone,
internet or mail. Only the last dated vote will count.
We
urge
you to read our proxy material carefully. If you have any questions or if you
require assistance in voting your proxy, please call:
MacKenzie
Partners, Inc.
(800)
322-2885 (Toll Free)
(212)
929-5500 (Call Collect)
Thank
you
for your continued support.
| |
Very
truly yours,
/s/
Nelson Obus
Nelson
Obus
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