3K Discusses Opportunity at Calloway’s Nursery

3K Limited Partnership, the family investment vehicle of Peter H. Kamin and the largest shareholder of Calloway’s Nursery, Inc. (OTC Pink: CLWY), holding approximately 19.9% of the outstanding shares, wishes to again state its optimistic view of the opportunity available at CLWY under a new direction led by experienced and independent directors. As discussed in 3K’s proxy statement provided to shareholders, if 3K is successful in obtaining control of the CLWY board, we plan to take the following actions:

1. Elect a new chairman of the board and implement best corporate governance practices for the operation of the board going forward. As just one of many examples, 3K would immediately terminate the generously subsidized stock purchase plan for insiders, under which CLWY has issued almost 20% of its equity to insiders in only the past four years, significantly diluting outside shareholders.

2. Undertake performance reviews for each senior manager of the company and review their performance against industry benchmarks; attract new talent to the company where necessary. 3K believes the insiders at the top are long overdue to be subject to true performance reviews led by independent directors. However, 3K does not plan to undertake drastic changes in CLWY’s retail operations, employees, suppliers or other business partners. We think there are many people at CLWY currently making extremely valuable contributions to the company.

3. Review and adjust compensation arrangements for senior managers so that their incentives are clearly aligned with the interests of shareholders. 3K believes the current CLWY executives cannot be objective in measuring their own performance and compensation since they are, in effect, reporting to themselves as the individuals who control the board. The result we believe is bloated salaries and benefits for top executives and an insider stock purchase plan that benefits these same executives at an excessive cost to outside shareholders.

4. Consider the strategic value of each asset of the company; analyze direct store profitability and results for each location; consider strategic alternatives for underperforming retail locations. 3K believes that CLWY should not only evaluate the performance and strategic location of each retail operation, but that the company should consider the market value of each retail location to determine whether some operations should be repurposed to a more valuable use. 3K believes that CLWY should not sit idly on its assets, but that the strategic value of each retail location should be maximized.

5. Review and develop the growth pipeline for potential new retail locations in the core Dallas-Fort Worth market. 3K believes CLWY should consider growing its retail locations within its core market as opposed to the prior failed ventures into the Houston, San Antonio and Austin retail markets and multiple wholesale operations, which CLWY has been forced to exit at significant losses to the company.

6. Undertake a best practices study to set goals for the organization against benchmarks developed for leading operators in the industry. 3K believes that CLWY has operated for far too long under a non-independent board of directors with a significant lack of focus on profitability and returns for shareholders. We appreciate the focus that the company places on the customer experience. We believe the company can also achieve fair results for its shareholders by implementing appropriate operational and financial performance standards. We believe that by being a more successful and profitable company, CLWY will be a greater benefit to its customers, employees and other constituencies as well.

Despite a long track record of poor results at CLWY—over 22 years of cumulative losses and a stock price languishing around or below $1.00 per share—we see great opportunity at CLWY under a new and independent board of directors with a renewed focused on returns for shareholders. 3K believes that a change in direction is long overdue at CLWY and that this change should be led by a majority of experienced outside directors who will act in the best interests of all shareholders. Peter Kamin has been a highly successful investor and has a tremendous track record in improving the profitability of underperforming businesses for the benefit of shareholders. 3K’s director candidates have been highly successful business operators at many public companies.

Despite the shameless and empty scare tactics and endless entrenchment devices coming from CLWY’s insiders, shareholders should not fear 3K’s slate of highly successful director candidates. We believe that CLWY’s shareholders should see great opportunity at CLWY with 3K’s involvement. We urge shareholders to review our proxy statement and other materials in detail. If you have any questions, please contact us.

3K would like to thank the many CLWY shareholders who have returned our BLUE proxy card. Every vote is important, and we ask for your support by returning our BLUE proxy card today. Based on voting results to date, victory is within reach for 3K, and we currently expect that we will be successful in our efforts to replace the current CLWY board. If you have any questions, or need any assistance voting our BLUE proxy card, please contact Alliance Advisors, 3K’s proxy advisor, toll-free at 888-991-1296.

Alliance AdvisorsPeter Casey: 973-873-7710Toll-free number: 888-991-1296

Calloways Nursery (CE) (USOTC:CLWY)
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