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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Cyrk, Inc.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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CYRK LOGO
3 POND ROAD
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-5800
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NOTICE OF ANNUAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
------------------------------
To the Stockholders of Cyrk, Inc.
Notice is hereby given that our 2000 Annual Meeting of Stockholders will be
held at the Four Seasons Hotel, 300 S. Doheny Drive, Los Angeles, California on
May 17, 2000, at 10:00 am (local time), to consider and act on the following
matters:
1. To elect two Class I directors to serve for a term of three years and
until their successors are elected and qualified.
2. To ratify the Board of Directors' appointment of PricewaterhouseCoopers
LLP as our independent auditors for the 2000 fiscal year; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on March 31, 2000 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
April 26, 2000 By Order of the Board of Directors
PATRICIA J. LANDGREN
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING YOU ARE URGED TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. THE EXECUTION OF YOUR
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE
MEETING.
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CYRK LOGO
3 POND ROAD
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-5800
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
This Proxy Statement is furnished to our stockholders in connection with
the solicitation of proxies by our Board of Directors for use at our Annual
Meeting of Stockholders to be held on May 17, 2000 at the Four Seasons Hotel,
300 S. Doheny Drive, Los Angeles, California and at any adjournment of the
meeting.
Proxies in the form enclosed will be voted at the meeting if they are
properly executed, dated and returned to us prior to the meeting and are not
revoked prior to the voting. In addition to the enclosed proxy card, this year
you may choose to vote your shares by using a toll-free telephone number or the
Internet, as further described on your proxy card. Votes submitted via the
Internet or via telephone must be received by 5:00 pm Eastern Standard Time on
May 15, 2000.
A proxy may be revoked at any time before it is voted by giving our
Secretary written notice of revocation executed by the stockholder of record, by
delivering a duly executed proxy bearing a later date, or by the stockholder
attending the meeting and voting his or her shares in person.
In this proxy statement, Overseas Toys, L.P., an affiliate of The Yucaipa
Companies and the holder of all of Cyrk's outstanding series A senior cumulative
participating convertible preferred stock, is usually referred to as Yucaipa.
Cyrk's series A senior cumulative participating convertible preferred stock is
usually referred to in this Proxy Statement as the series A preferred stock.
This Proxy Statement is being mailed to our Stockholders with a Notice of
Annual Meeting on or about April 26, 2000.
MATTERS TO BE CONSIDERED
The Annual Meeting has been called for the following purposes:
1. To elect two Class I directors to serve for a term of three years
and until their successors are elected and qualified;
2. To ratify the Board of Directors' appointment of
PricewaterhouseCoopers LLP as Cyrk's independent auditors for the 2000
fiscal year;
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
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RECORD DATE AND VOTING
Only stockholders of record at the close of business on March 31, 2000, the
record date, are entitled to notice of, and to vote at, the meeting or any
adjournment of the meeting. At the close of business on the record date, there
were 15,801,253 shares of our common stock and 25,000 shares of our series A
preferred stock so held. The shares represented by duly executed proxies in the
form solicited by the Board of Directors will be voted at the meeting in
accordance with the choices specified thereon. If a proxy is executed, but no
choice is specified, the shares will be voted as follows:
1. FOR the election of the nominees to the Board of Directors named
herein;
2. FOR the ratification of the Board of Directors' appointment of
PricewaterhouseCoopers LLP as our independent auditors for the 2000 fiscal
year; and
3. In the discretion of the proxy holders as to the transaction of
any other business that may properly come before the meeting. The directors
do not currently know of any such other matter or business to be brought
before the meeting.
QUORUM, ABSTENTIONS, NON-VOTES AND VOTE REQUIRED
The presence in person or representation by proxy of the holders of a
majority in interest of all of the shares of common stock and series A preferred
stock (calculated on an "as converted" basis) entitled to vote is necessary to
constitute a quorum for the matters to be voted upon. In the absence of a
quorum, the stockholders present may nevertheless adjourn the meeting.
A holder of record of our common stock is entitled to one vote for each
share so held on the record date. A holder of our series A preferred stock is
entitled to one vote for each share of common stock issuable upon conversion of
such preferred stock as of the record date. The holders of the series A
preferred stock and common stock shall vote as a single class on the matters to
be covered at the meeting. Abstentions and broker non-votes (i.e. the lack of a
vote on a matter as to which the holder has no voting authority) are counted for
the purpose of determining the presence or absence of a quorum for the
transaction of business at the meeting, but will not be treated as negative
votes and consequently will have no effect on the voting.
The affirmative vote of the holders of a plurality of the votes cast either
in person or by proxy is required to elect directors. Approval of each other
matter before the meeting requires the affirmative vote of the holders of a
majority of the aggregate number of votes voted "for" and "against" such matter.
PROXY SOLICITATION AND EXPENSES
The accompanying proxy is being solicited on behalf of our Board of
Directors, and all expenses for such solicitation will be borne by us. In
addition to the use of the mails, proxies may be solicited by our directors,
officers and employees and, if deemed necessary, through a third party
solicitation agent by means of personal interview, telephone, facsimile,
telegram or the Internet. We will request banks, brokerage houses and other
custodians, nominees and fiduciaries to solicit their customers who are
beneficial owners of our common stock and to forward solicitation materials to
such beneficial owners. We will reimburse them for their reasonable
out-of-pocket expenses incurred in such solicitation. Stockholders voting via
the Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that must be borne by such stockholders.
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PROPOSAL NUMBER ONE:
ELECTION OF DIRECTORS
Our certificate of incorporation provides that the number of directors
shall be determined from time to time by the Board of Directors (but shall be no
less than three and no more than fifteen) and that the Board shall be divided
into three classes. On September 1, 1999, Cyrk entered into a Securities
Purchase Agreement with Yucaipa, pursuant to which Cyrk agreed to fix the size
of the Board at seven members, of which Yucaipa currently has the right to
designate three individuals to be nominated to the Board of Directors. On
November 10, 1999, Ronald W. Burkle, George G. Golleher and Richard Wolpert were
the three Yucaipa nominees elected to our Board. Mr. Wolpert resigned from our
Board on February 7, 2000. Under the Securities Purchase Agreement, Yucaipa
currently has the right to designate a replacement director for Mr. Wolpert's
vacated position. The newly elected Class I directors will hold office until the
2003 Annual Meeting of Stockholders and until their successors are elected and
qualified. The nominees are currently directors and have expressed their
intention to serve if re-elected. Should either nominee be unable to serve when
elected, the proxy holders may vote each proxy (unless authority has been
withheld for such nominee) for the election of any other person the Board may
recommend. The proxy solicited by this Proxy Statement cannot be voted for a
greater number of persons than the nominees named in this Proxy Statement.
The following table sets forth the names and ages of the nominees and the
directors, the year in which each individual was first elected a director and
the year his term expires:
NAME AGE CLASS YEAR TERM EXPIRES DIRECTOR SINCE
---- --- ----- ----------------- --------------
Joseph W. Bartlett (nominee)................. 66 I 2003 1993
Patrick D. Brady............................. 44 III 2002 1990
Allan I. Brown (nominee)..................... 59 I 2003 1999
Ronald W. Burkle............................. 47 II 2001 1999
Joseph Anthony Kouba......................... 52 III 2002 1997
George G. Golleher........................... 52 II 2001 1999
BUSINESS HISTORY OF DIRECTORS AND THE NOMINEES
MR. BARTLETT has been a partner in the law firm of Morrison & Foerster LLP
since March 1996. He was a partner in the law firm of Mayer, Brown & Platt from
July 1991 until March 1996. From 1969 until November 1990, Mr. Bartlett was a
partner of, and from November 1990 until June 1991 he was of counsel to, the law
firm of Gaston & Snow. Mr. Bartlett served as under secretary of the United
States Department of Commerce from 1967 to 1968 and as law clerk to the Chief
Justice of the United States in 1960.
MR. BRADY is one of our founders and has served as one of our directors
since Cyrk's incorporation in 1990. Since November 1999, he has served as our
Co-Chief Executive Officer and Co-President, and since March 2000, Mr. Brady is
responsible for Cyrk's Internet-related operations. Mr. Brady was our Chief
Operating Officer and Treasurer from May 1990 until May 1993, and served as our
Chief Financial Officer from May 1993 to September 1994. Mr. Brady was our
President and Chief Operating Officer from May 1993 to November 1999 and our
Chief Executive Officer from December 1998 to November 1999. Mr. Brady is a
party to a Voting Agreement, dated September 1, 1999, with Yucaipa, Gregory P.
Shlopak, Allan I. Brown, the Shlopak Foundation, Cyrk International Foundation
and the Eric Stanton Self-
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Declaration of Revocable Trust, pursuant to which Mr. Brady and each of Messrs.
Shlopak, Brown and Stanton have agreed to vote all of the shares beneficially
held by them to elect Yucaipa's nominees to our Board.
MR. BROWN has been our Co-Chief Executive Officer and Co-President since
November 1999. Since March 2000, Mr. Brown is responsible for the global
operations of Cyrk's traditional businesses including our Simon Marketing, Inc.
subsidiary, Corporate Promotions Group and Custom Product and Licensing Group.
Since November of 1975, Mr. Brown has also served as the Chief Executive Officer
of Simon Marketing, Inc. Mr. Brown is party to a Voting Agreement with Yucaipa,
Mr. Brady, Mr. Shlopak, the Shlopak Foundation, Cyrk International Foundation
and the Eric Stanton Self-Declaration of Revocable Trust, pursuant to which Mr.
Brown and each of Messrs. Brady, Shlopak and Stanton have agreed to vote all of
the shares beneficially held by them to elect Yucaipa's nominees to our Board.
MR. BURKLE is the founder of Yucaipa. He is a member of the Board and
Chairman of the Executive Committee of The Kroger Company and a member of the
Boards of Kaufman & Broad and Occidental Petroleum Corporation. He also serves
as Chairman of the Board of D.A.R.E. (Drug Abuse Resistance Education) America;
member of the Executive Board for the Medical Sciences at UCLA; Co-Chairman of
the Center of International Relations at UCLA; trustee of the National Urban
League; and founder and Chairman of the Board of Trustees of the Ralphs/Food 4
Less Foundation. Pursuant to a Voting Agreement, dated September 1, 1999, among
Yucaipa, Mr. Brady, Mr. Brown, Mr. Shlopak, the Shlopak Foundation, Cyrk
International Foundation and the Eric Stanton Self- Declaration of Revocable
Trust, if Mr. Burkle is nominated for election as a director at Yucaipa's
request, each of Messrs. Brady, Brown, Shlopak and Stanton have agreed to vote
all of the shares beneficially held by them to elect him to the Board.
MR. GOLLEHER served as President and Chief Operating Officer of Fred Meyer,
Inc. from March 1998 to June 1999, and also served as a member of its Board of
Directors. Mr. Golleher served as Chief Executive Officer of Ralphs Grocery
Company from January 1996 to March 1998 and was Vice Chairman from June 1995 to
January 1996. He was a director of Food 4 Less Supermarkets since its inception
in 1989 and was the President and Chief Operating Officer of Food 4 Less
Supermarkets from January 1990 until its merger with Ralphs Grocery Company in
June 1995. Mr. Golleher also serves as a director of American Restaurant Group
and Prandium, Inc. Pursuant to a Voting Agreement, dated September 1, 1999,
among Yucaipa, Mr. Brady, Mr. Brown, Mr. Shlopak, the Shlopak Foundation, Cyrk
International Foundation and the Eric Stanton Self-Declaration of Revocable
Trust, if Mr. Golleher is nominated for election as a director at Yucaipa's
request, each of Messrs. Brady, Brown, Shlopak and Stanton have agreed to vote
all of the shares beneficially held by them to elect him to the Board.
MR. KOUBA has served since 1980 as the President and a director of Highwood
Properties, Inc., a company which is engaged in the real estate investment
business. Additionally, since 1998, Mr. Kouba has been a principal of Summit
Media LLC, a provider of outdoor advertising services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR.
MEETINGS OF THE BOARD AND ITS COMMITTEES
During 1999, the Board of Directors held meetings in March, April, June and
August, all of which were attended by each director. In addition, the Board
transacted certain business through
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written consents. The only standing committees of the Board are the Audit
Committee and the Compensation Committee.
THE AUDIT COMMITTEE
The Audit Committee (comprised of Messrs. Bartlett and Kouba during 1999;
and since February 2000, comprised of Messrs. Burkle, Bartlett and Kouba) is
responsible for our internal control environment so as to insure the
effectiveness and efficiency of our operating and financial controls, corporate
governance, the reliability of our financial reporting and our compliance with
applicable law. The committee also recommends our independent auditors, and
periodically reviews their services. The Audit Committee did not hold any
meetings during 1999.
THE COMPENSATION COMMITTEE
The Compensation Committee (comprised of Messrs. Bartlett and Kouba during
1999; and since February 2000, comprised of Messrs. Burkle, Bartlett and Kouba)
reviews and determines compensation payable to our Co-Chief Executive Officers
and administers our stock plans. The Committee and the Co-Chief Executive
Officers determine the compensation payable to the other executive officers.
There was one meeting held by the Compensation Committee during 1999, which was
attended by each director. In addition, the Committee transacted certain
business through written consents.
DIRECTORS' COMPENSATION
Directors who are also employees (or are affiliated with Yucaipa) receive
no compensation for their services on the Board. Directors who are not employees
(and are not affiliated with Yucaipa) are reimbursed for reasonable
out-of-pocket expenses incurred in attending any meetings. In addition, on March
31 of each year, such non-employee directors (who are not affiliated with
Yucaipa) are granted a stock option covering 5,000 shares of our common stock
that vests in two equal installments on each of the first and second
anniversaries of the date of grant. Grants to non-employee directors are made
pursuant to our 1993 Omnibus Stock Option Plan.
We may also provide additional compensation to our non-employee directors
for special assignments performed from time to time. In February 1999, we
granted stock options for 30,000 and 20,000 shares, respectively, to Joseph W.
Bartlett and Joseph Anthony Kouba for special assignments performed by them in
1998. The options vest in two equal installments on each of the first and second
anniversaries of the date of grant. Additionally, in consideration for their
services as members of a special committee of outside directors formed solely
for the purpose to negotiate the investment by Yucaipa into Cyrk, we agreed to
pay each of Messrs. Bartlett and Kouba $400 per hour for their time spent
working in such capacity. These payments totaled $26,700 and $44,700 to Mr.
Bartlett and Mr. Kouba, respectively.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Based solely on our review of copies of reports filed by reporting persons
of Cyrk pursuant to Section 16(a) of the Securities Exchange Act of 1934, Cyrk
believes that all filings required to be made by reporting persons of Cyrk were
timely made in accordance with the requirements of that Act, except that each of
Messrs. Brown and Stanton failed to file a Form 4 on a timely basis to report
(1) in February 1999, their respective contributions to the capital of Cyrk of
10,000 shares of common stock, (2) in September 1999, their grant of options to
employees of
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Simon Marketing to purchase an aggregate amount of 40,818 and 81,637 shares of
our common stock beneficially held by Messrs. Brown and Stanton, respectively
and (3) in October 1999, their respective transfers of 25,000 shares of our
common stock to a third party service provider of Simon Marketing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of our common stock at March 31, 2000. Except as otherwise indicated
in the footnotes, we believe that the beneficial owners of our common stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to the shares of our common stock shown
as beneficially owned by them.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person known by us (other than
directors, nominees and executive officers) to own beneficially 5% or more of
the outstanding common stock.
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS(2)
---------------------- ------------------ -----------
Yucaipa and affiliates:
Overseas Toys, L.P.(3)
OA3, LLC(3)........................................ 4,696,969 22.9%
Multi-Accounts, LLC(3)
Ronald W. Burkle(3)
Dimensional Fund Advisors, Inc.(4)................. 1,115,400 7.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Franklin Resources, Inc.(5)........................ 1,115,000 7.0%
777 Mariners Island Boulevard,
6th Floor
San Marco, CA 94404
H. Ty Warner(6).................................... 1,075,610 6.8%
P.O. Box 5377
Oak Brook, IL 60522
Eric Stanton(7).................................... 1,041,386 6.6%
c/o Simon Marketing, Inc.
Evergo House
38 Gloucester Road
Wanchai
Hong Kong
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NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS(2)
---------------------- ------------------ -----------
Gregory P. Shlopak(8).............................. 1,064,900 6.7%
63 Main Street
Gloucester, MA 01930
Heartland Advisors, Inc.(9)........................ 972,500 6.2%
790 North Milwaukee Street
Milwaukee, WI 53202
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(1) The number of shares beneficially owned by each stockholder is determined in
accordance with the rules of the Securities and Exchange Commission and is
not necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes those shares of common
stock that the stockholder has sole or shared voting or investment power and
any shares of common stock that the stockholder has a right to acquire
within sixty (60) days after March 31, 2000 through the exercise of any
option, warrant or other right (including the conversion of the series A
preferred stock). The percentage ownership of the outstanding common stock,
however, is based on the assumption, expressly required by the rules of the
Securities and Exchange Commission, that only the person or entity whose
ownership is being reported has converted options, warrants or other rights
into shares of common stock (including the conversion of the series A
preferred stock).
(2) Based on 15,801,253 shares of common stock outstanding as of March 31, 2000.
(3) Represents 3,030,303 shares of common stock issuable upon conversion of
25,000 shares of outstanding series A preferred stock and 1,666,666 shares
of common stock issuable upon conversion of 15,000 shares of series A
preferred stock issuable pursuant to a warrant which is currently
exercisable. Overseas Toys, L.P. is an affiliate of Yucaipa and is the
record holder of all of the outstanding shares of series A preferred stock
and the warrant to acquire the shares of series A preferred stock.
Multi-Accounts, LLC is the sole general partner of Overseas Toys, L.P., and
OA3, LLC is the sole managing member of Multi-Accounts, LLC. Ronald W.
Burkle is the sole managing member of OA3, LLC. The address of each of
Overseas Toys, L.P., Multi-Accounts, LLC, OA3, LLC, and Ronald W. Burkle is
9130 West Sunset Boulevard, Los Angeles, California 90069.
Overseas Toys, L.P. is party to a Voting Agreement, dated September 1,
1999, with Patrick D. Brady, Allan I. Brown, Gregory P. Shlopak, the
Shlopak Foundation, Cyrk International Foundation and the Eric Stanton
Self-Declaration of Revocable Trust, pursuant to which Overseas Toys, L.P.,
Multi-Accounts, LLC, OA3, LLC, and Ronald W. Burkle may be deemed to have
shared voting power over 9,383,282 shares for the purpose of election of
certain nominees of Yucaipa to our board, and may be deemed to be members
of a "group" for the purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended. Overseas Toys, L.P., Multi-Accounts, LLC,
OA3, LLC and Ronald W. Burkle disclaim beneficial ownership of any shares,
except for the shares as to which they possess sole dispositive and voting
power.
(4) The information concerning this holder is based solely on information
contained in filings it has made with the Securities and Exchange Commission
pursuant to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934,
as amended. Dimensional Fund Advisors Inc., or Dimensional, is a registered
investment advisor for four investment companies and
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also serves as investment manager to certain other investment vehicles. In
its roles as investment advisor and investment manager, Dimensional has
indicated that it has the sole power to vote, or to direct the vote of, and
the sole power to dispose, or direct the disposition of, all of the shares.
Dimensional disclaims beneficial ownership of all of the shares.
(5) The information concerning this holder is based solely on information
contained in filings it has made with the Securities and Exchange Commission
pursuant to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934.
The shares are beneficially owned by one or more investment companies or
other managed accounts which are advised by investment advisor subsidiaries
of Franklin Resources, Inc. and grant the Franklin Resources, Inc.
subsidiaries sole voting power and sole dispositive power as to all of the
shares. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of
10% of the outstanding common stock of Franklin Resources, Inc. and are the
principal stockholders of Franklin Resources.
(6) Includes 100,000 shares issuable pursuant to a warrant which is currently
exercisable.
(7) Eric Stanton, as trustee of the Eric Stanton Self-Declaration of Revocable
Trust, has the sole power to vote, or to direct the vote of, and the sole
power to dispose, or to direct the disposition of, 1,041,386 shares. Mr.
Stanton, as trustee of the Eric Stanton Self-Declaration of Revocable Trust,
is a party to a Voting Agreement, dated September 1, 1999, with Yucaipa and
Messrs. Brown, Brady and Shlopak, and the Shlopak Foundation Trust and the
Cyrk International Foundation Trust pursuant to which Messrs. Brady, Brown,
Shlopak and Stanton and the trusts have agreed to vote in favor of certain
nominees of Yucaipa to our board. Mr. Stanton expressly disclaims beneficial
ownership of any shares except for the 1,041,386 shares as to which he
possesses sole voting and dispositive power.
(8) Includes 84,401 shares held by a private charitable foundation as to which
Mr. Shlopak, as trustee, has sole voting and dispositive power. Mr. Shlopak
is a party to a Voting Agreement, dated September 1, 1999, with Yucaipa,
Patrick D. Brady, Allan I. Brown, the Shlopak Foundation, Cyrk International
Foundation and the Eric Stanton Self-Declaration of Revocable Trust,
pursuant to which he may be deemed to have shared voting power over
9,383,282 shares for the purpose of and the election of certain nominees of
Yucaipa to our board, and he may be deemed to be a member of a "group" for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended. Mr. Shlopak disclaims beneficial ownership of any shares except for
the 1,064,900 shares as to which he possesses sole dispositive and voting
power.
(9) The information concerning this holder is based solely on information
contained in filings it has made with the Securities and Exchange Commission
pursuant to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934,
as amended. Heartland Advisors, Inc. is a registered investment advisor, and
has indicated that it has the sole power to dispose, or to direct the
disposition of, all of the shares.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information at March 31, 2000 regarding the
beneficial ownership of our common stock (including common stock issuable upon
the exercise of stock options exercisable within 60 days of March 31, 2000) by
each director and nominee, each executive officer named in the Summary
Compensation Table, and by all of our directors, nominees and executive officers
as a group.
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS(2)
---------------------- ------------------ -----------
Ronald W. Burkle(3).................................. 4,696,969 22.9%
Patrick D. Brady(4).................................. 1,507,822 9.5%
Allan I. Brown(5).................................... 1,072,205 6.8%
Terry B. Angstadt(6)................................. 79,603 *
Ted L. Axelrod(7).................................... 49,786 *
Dominic F. Mammola(8)................................ 58,065 *
Joseph W. Bartlett(9)................................ 52,500 *
Joseph Anthony Kouba(10)............................. 17,500 *
George G. Golleher................................... -- *
All directors, nominees and executive officers as a
group (nine persons)(11)........................... 7,534,450 42.0%
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* Represents less than 1%.
(1) The address of each of the directors and executive officers is c/o Cyrk,
Inc., 3 Pond Road, Gloucester, Massachusetts 01930. The number of shares
beneficially owned by each stockholder is determined in accordance with the
rules of the Securities and Exchange Commission and is not necessarily
indicative of beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes those shares of common stock that the
stockholder has sole or shared voting or investment power and any shares of
common stock that the stockholder has a right to acquire within sixty (60)
days after March 31, 2000 through the exercise of any option, warrant or
other right (including the conversion of the series A preferred stock). The
percentage ownership of the outstanding common stock, however, is based on
the assumption, expressly required by the rules of the Securities and
Exchange Commission, that only the person or entity whose ownership is
being reported has converted options, warrants or other rights (including
the conversion of the series A preferred stock) into shares of common
stock.
(2) Based on 15,801,253 shares of common stock outstanding as of March 31,
2000.
(3) Represents 3,030,303 shares of common stock issuable upon conversion of
25,000 shares of outstanding series A preferred stock and 1,666,666 shares
of common stock issuable upon conversion of 15,000 shares of series A
preferred stock issuable pursuant to a warrant which is currently
exercisable. Overseas Toys, L.P. is an affiliate of Yucaipa and is the
record holder of all of the outstanding shares of series A preferred stock
and the warrant to acquire the shares of series A preferred stock.
Multi-Accounts, LLC is the sole general partner of Overseas Toys, L.P. OA3,
LLC is the sole managing member of Multi-Accounts, LLC. Ronald W. Burkle is
the sole managing member of OA3, LLC. The address for each of Overseas
Toys, L.P., Multi-Accounts, LLC, OA3, LLC and Ronald W. Burkle is 9130 West
Sunset Boulevard, Los Angeles, California 90069.
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Overseas Toys, L.P. is party to a Voting Agreement, dated September 1,
1999, with Patrick D. Brady, Allan I. Brown, Gregory P. Shlopak, the
Shlopak Foundation, Cyrk International Foundation and the Eric Stanton
Self-Declaration of Revocable Trust, pursuant to which Overseas Toys,
L.P., Multi-Accounts, LLC, OA3, LLC, and Ronald W. Burkle may be deemed to
have shared voting power over 9,383,282 shares for the purpose of election
of certain nominees of Yucaipa to our board, and may be deemed to be
members of a "group" for the purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended. Overseas Toys, L.P.,
Multi-Accounts, LLC, OA3, LLC and Ronald W. Burkle disclaim beneficial
ownership of any shares, except for the shares as to which they possess
sole dispositive and voting power.
(4) Includes (1) 90,408 shares held by a private charitable foundation as to
which Mr. Brady, as trustee, has sole voting and dispositive power and (2)
230,000 shares issuable pursuant to stock options exercisable within 60
days of March 31, 2000. Mr. Brady is party to a Voting Agreement, dated
September 1, 1999, with Yucaipa, Mr. Brown, Mr. Shlopak, the Shlopak
Foundation, Cyrk International Foundation and the Eric Stanton
Self-Declaration of Revocable Trust, pursuant to which he may be deemed to
have shared voting power over 9,383,282 shares for the purpose of the
election of certain nominees of Yucaipa to our board, and may be deemed to
be a member of a "group" for the purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended. Mr. Brady expressly disclaims
beneficial ownership of any shares except for the 1,507,822 shares as to
which he possesses sole dispositive and voting power.
(5) Allan Brown has the sole power to vote, or to direct the vote of, and the
sole power to dispose, or to direct the disposition of, 1,072,205 shares.
Mr. Brown is party to a Voting Agreement, dated September 1, 1999, with
Yucaipa, Mr. Brady, Mr. Shlopak, the Shlopak Foundation, Cyrk International
Foundation and the Eric Stanton Self-Declaration of Revocable Trust,
pursuant to Messrs. Brady, Brown, Shlopak and Stanton and the trusts have
agreed to vote in favor of certain nominees of Yucaipa to our board. Mr.
Brown expressly disclaims beneficial ownership of any shares except for the
1,072,205 shares as to which he possesses sole voting and dispositive
power.
(6) Includes 75,215 shares issuable pursuant to stock options exercisable
within 60 days of March 31, 2000.
(7) The 49,786 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2000.
(8) Includes 57,312 shares issuable pursuant to stock options exercisable
within 60 days of March 31, 2000.
(9) The 52,500 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2000.
(10) The 17,500 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2000.
(11) Includes (1) 90,408 shares held by a private charitable foundation as to
which Mr. Brady, as trustee, has sole voting and dispositive power, (2) a
total of 482,313 shares issuable pursuant to stock options exercisable
within 60 days of March 31, 2000 and (3) 3,030,303 shares of common stock
issuable upon conversion of 25,000 shares of outstanding series A preferred
stock and 1,666,666 shares of common stock issuable upon conversion of
15,000 shares of series A preferred stock issuable pursuant to a warrant
which is currently exercisable.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation we paid or accrued for
services rendered in 1999, 1998 and 1997, respectively, by our Co-Chief
Executive Officers and our other three executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION
-------------------------------------- --------------------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- -------- ---------- ------------ ---------- ------------
Allan I. Brown(2)...................... 1999 $300,000 $2,850,000(3) -- -- $994,428(4)
Co-Chief Executive Officer
and Co-President
Patrick D. Brady....................... 1999 $300,000 $ 500,000 -- -- $287,114(5)
Co-Chief Executive 1998 $300,000 $ 250,000 -- -- $252,153
Officer and Co-President 1997 $300,000 -- -- 230,000 $253,647
Terry B. Angstadt...................... 1999 $190,000 $ 100,000 -- -- $ 25,029(6)
Executive Vice President 1998 $189,999 $ 48,450 -- 15,000 $ 23,124
1997 $185,096 $ 50,000 -- 55,000 $ 27,129
Dominic F. Mammola..................... 1999 $250,000 $ 250,000 -- -- $ 26,443(7)
Executive Vice President 1998 $206,346 $ 125,000 -- 15,000 $ 22,308
and Chief Financial Officer 1997 $185,096 $ 50,000 -- 70,000 $ 25,750
Ted L. Axelrod......................... 1999 $250,000 $ 250,000 -- -- $ 16,123(8)
Executive Vice President 1998 $200,000 $ 125,000 -- 15,000 $ 15,095
1997 $200,000 $ 155,000 -- 27,500 $ 17,652
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(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
have been omitted for all of the executive officers, except for Mr. Brown,
because the aggregate amount of such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonuses for such executive officers for 1999, 1998 and 1997.
(2) Mr. Brown joined us in June 1997 and became an executive officer on November
10, 1999.
(3) Includes a $2,250,000 signing bonus payable pursuant to an employment
agreement between Mr. Brown and Cyrk which took effect in connection with
Yucaipa's investment into Cyrk on November 10, 1999. Pursuant to the terms
of the employment agreement, Mr. Brown may be obligated to return a portion
of the signing bonus if he ceases to be employed with Cyrk before November
10, 2004. See "Employment, Severance and Change of Control Agreements."
(4) Represents (1) $4,800 contributed by us to our 401(k) plan on behalf of Mr.
Brown, (2) $613,340 of other compensation paid directly by us to Mr. Brown
or on his behalf and (3) $376,288, the benefit to Mr. Brown of the payment
in 1999 with respect to a split dollar life insurance policy, calculated as
the present value of an interest free loan of the premiums to Mr. Brown over
his present actuarial life expectancy. See "Insurance Arrangements."
(5) Represents (1) $4,800 contributed by us to our 401(k) plan on behalf of Mr.
Brady, (2) $18,340 in premiums paid for by us for term life insurance
policies for the benefit of Mr. Brady's estate, (3) $25,296 in premiums paid
by us with respect to the cash surrender value benefit payable to Mr.
Brady's estate under certain reverse split-dollar life insurance policies
and (4) $238,678, such amount representing the benefit to Mr. Brady of the
payment by us in 1999 of premiums with respect to certain split-dollar life
insurance
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policies, calculated as the present value of an interest-free loan of the
premiums to Mr. Brady over his present actuarial life expectancy. See
"Insurance Arrangements."
(6) Represents (1) $4,800 contributed by us to our 401(k) plan on behalf of Mr.
Angstadt and (2) $20,229, the benefit to Mr. Angstadt of the payment by us
in 1999 with respect to a split-dollar life insurance policy, calculated as
the present value of an interest-free loan of the premiums to Mr. Angstadt
over his present actuarial life expectancy. See "Insurance Arrangements."
(7) Represents (1) $4,000 contributed by us to our 401(k) plan on behalf of Mr.
Mammola, (2) $3,185 in premiums paid for by us for a term life insurance
policy for the benefit of Mr. Mammola's estate and (3) $19,258, the benefit
to Mr. Mammola of the payment by us in 1999 of premiums with respect to a
split- dollar life insurance policy, calculated as the present value of an
interest-free loan of the premium to Mr. Mammola over his present actuarial
life expectancy. See "Insurance Arrangements."
(8) Represents (1) $4,800 contributed by us to our 401(k) plan on behalf of Mr.
Axelrod and (2) $11,323, the benefit to Mr. Axelrod of the payment by us in
1999 of premiums with respect to a split-dollar life insurance policy,
calculated as the present value of an interest-free loan of the premium to
Mr. Axelrod over his present actuarial life expectancy. See "Insurance
Arrangements."
OPTION GRANTS IN THE LAST FISCAL YEAR
Cyrk did not grant stock options to any of its executive officers during
1999.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for each of our executive officers certain
information regarding exercises of stock options during 1999 and stock options
held at the end of 1999.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED UNEXERCISED OPTIONS OPTIONS AT
ON VALUE AT FISCAL YEAR-END FISCAL YEAR-END(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ------------------------- -------------------------
Allan I. Brown..................... -- -- -- --
Patrick D. Brady................... -- -- 153,334/76,666 $153,334/$76,666
Terry B. Angstadt.................. -- -- 56,882/28,333 $ 80,035/$32,703
Dominic F. Mammola................. -- -- 33,979/33,333 $ 39,692/$37,703
Ted L. Axelrod..................... -- -- 40,620/19,166 $ 75,580/$23,536
- ---------------
(1) This "value" is the difference between the market price of our common stock
subject to the options on December 31, 1999 ($11.875 per share) and the
option exercise (purchase) price, assuming the options were exercised and
the shares sold on that date.
INSURANCE ARRANGEMENTS
We provide split-dollar life insurance benefits to Messrs. Brady and Brown.
We have also agreed to pay the premiums for two whole life policies on the life
of Mr. Brady. We have certain rights to borrow against these policies insuring
the life of Mr. Brady and the right to receive an amount equal to all premiums
paid by us not later than upon the death of the insured executive. The
irrevocable trusts established by Mr. Brady and Mr. Brown which own the
foregoing policies
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are entitled to borrow against these policies, subject to certain limitations,
while we have an interest in these policies. The trusts are also entitled to
receive the death benefits under the policies net of the cumulative premiums
paid by us. The aggregate annual premium amount payable by us in 1999 in respect
of the split-dollar policies insuring the lives of Mr. Brady and Mr. Brown are
$257,462 and $449,664, respectively.
We also provide Mr. Brady with a reverse split-dollar life insurance policy
pursuant to which we pay the premiums on universal life insurance policies on
the life of Mr. Brady. Upon the death of Mr. Brady, assuming the policies are
still in force, we are entitled to receive the death benefit ($4,250,000 on the
life) and Mr. Brady's estate is entitled to receive the cash surrender value of
the policy. Pursuant to an employment agreement between Cyrk and Mr. Brady which
took effect on November 10, 1999, Cyrk will be obligated to pay no more than
$80,000 per year in annual premiums under his split-dollar insurance policies.
We also provide split-dollar life insurance benefits to our three other
executive officers, Messrs. Angstadt, Axelrod and Mammola, and have agreed to
pay the premiums for a whole life policy on the life of Mr. Mammola. However, we
can terminate our obligations in accordance with the respective severance or
change of control agreements between us and Messrs. Angstadt, Axelrod and
Mammola. See "Employment, Severance and Change of Control Agreements." We have
certain rights to borrow against these policies and the right to receive upon
the death of the insured executive an amount equal to the lesser of (1) the cash
surrender value of the policy and (2) the aggregate amount of premiums paid by
us at such date. The aggregate annual premium amount payable by us for the
split-dollar policies insuring the lives of Messrs. Angstadt, Axelrod and
Mammola is $27,938, $14,954 and $25,442, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth certain transactions, or series of similar
transactions, between us and any director, nominee for director, executive
officer or beneficial owner of more than 5% of our outstanding shares of common
stock or series A preferred stock.
REAL ESTATE MATTERS
Pursuant to a lease entered into in 1989, we lease our principal executive
and certain sales and administrative offices located in Gloucester,
Massachusetts from PG Realty Trust, of which Mr. Shlopak, a founder and former
Chief Executive Officer and director of Cyrk, is a trustee and beneficiary. The
aggregate annual rent under these leases is approximately $583,000. Each lease
is a triple net lease. The term of each lease expires on April 30, 2000. We do
not intend to renew the respective terms of any of these leases.
We lease a warehouse and distribution facility in Danvers, Massachusetts
under the terms of a lease agreement which expires December 2011 from a limited
liability company which is owned by Messrs. Brady and Shlopak. The lease is
triple net and the aggregate annual rent under the lease is approximately
$460,000.
TRANSACTIONS WITH CERTAIN STOCKHOLDERS
In December 1999, we made a strategic $10 million investment in Alliance
Entertainment Corporation, an affiliate of Yucaipa, in connection with
Alliance's acquisition of Digital On-Demand, a leading supplier of digital
entertainment into retail environments. Alliance is one of the nation's largest
distributors of music, video, DVD and games and is an emerging developer of both
e-commerce-enabling databases and proprietary websites.
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Pursuant to a Management Agreement with The Yucaipa Companies L.L.C.,
Yucaipa provides us with management and financial consultation services in
exchange for an annual fee of $500,000 per year. In addition, under the
Management Agreement, we will pay Yucaipa a consulting fee equal to one percent
(1%) of the total purchase price for any acquisition or disposition transaction
by us in which Yucaipa provides consultation to us. We will also reimburse
Yucaipa up to $500,000 per year for all of its reasonable out-of-pocket expenses
incurred in connection with the performance of its duties under the Management
Agreement. The term of the Management Agreement is for five years, with
automatic renewals for successive five year terms at the end of each year unless
either we or Yucaipa elect not to renew. Upon a change of control of Cyrk, or a
termination of the Management Agreement by Cyrk other than for cause, Yucaipa
shall be entitled to receive a lump sum payment equal to amounts payable under
the Management Agreement for the remainder of the term, discounted to present
value.
In 1998 and 1999, in collaboration with Ty Inc., the world's largest
manufacturer and marketer of plush toys (sold under the name Beanie Babies(R)),
we created, developed and marketed certain licensed Beanie Babies products to
retailers. Ty Warner is the sole shareholder of Ty Inc. and beneficially owns
more than 5% of our shares. In 1999, net sales of Beanie Babies related products
by us were approximately $107,878,000, for which Ty, Inc. and Ty related parties
received an estimated aggregate amount of royalty fees of $20,157,000.
Pursuant to a consulting agreement among Eric Stanton, Cyrk and Simon
Marketing, Mr. Stanton provided consulting services to Simon Marketing in 1999
in exchange for $391,546. Mr. Stanton is the beneficial owner of more than 5% of
our shares.
Mr. Stanton's wife, Vivian Foo, is an employee of our Simon Marketing (Hong
Kong), Limited subsidiary. We entered into an agreement with Ms. Foo in
connection with our acquisition of Simon Marketing. Pursuant to the agreement,
Ms. Foo receives annual payments of cash and our common stock (based on the
average closing price of our common stock for the 20 trading days immediately
preceding each June 9) in the aggregate amount of $600,000. Accordingly, we
issued 42,402 of our shares of common stock to Ms. Foo in 1999 as the common
stock portion of such payment. In 1999, Ms. Foo's annual base salary and bonus
was $739,781 in the aggregate. In addition, pursuant to Ms. Foo's agreement, she
is entitled to certain employee benefits in connection with her expatriate
status. In 1999, these benefits had an aggregate value of $759,600. The term of
Ms. Foo's agreement is for five years. At the end of the term of the agreement,
we may be obligated to make an additional payment to Ms. Foo to the extent that
the aggregate value of the shares of common stock issued to her under the
agreement plus the gross proceeds she received upon any sale of such shares is
below a certain threshold.
INDEBTEDNESS OF MANAGEMENT
During fiscal 1999, Ted L. Axelrod, an Executive Vice President, was
indebted to us for the principal amount of $100,000. Mr. Axelrod incurred this
sum of indebtedness because of an advance made to him by us. His largest
aggregate amount of indebtedness outstanding at any time during fiscal 1999 was
$100,000. The rate of interest charged on the indebtedness is the federal
statutory rate.
During fiscal 1999, Patrick D. Brady, our Co-Chief Executive Officer and
Co-President, was indebted to us for the principal amount of $75,715. Mr. Brady
incurred this sum of indebtedness because of advances made to him by us. His
largest indebtedness at any time during fiscal 1999 was $79,050. The rate of
interest charged on the indebtedness is the federal statutory rate.
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Pursuant to Mr. Brady's employment agreement, the indebtedness will be forgiven
unless Mr. Brady's employment is terminated by us for cause or by Mr. Brady
without good reason. See "Employment, Severance and Change of Control
Agreements."
During fiscal 1999, Allan I. Brown, our Co-Chief Executive Officer and
Co-President, was indebted to us under a promissory note and pledge agreement
for the principal amount of $575,000. Mr. Brown incurred this sum of
indebtedness because of an advance made to him by us. The indebtedness is
secured by 52,904 shares of our common stock held by Mr. Brown and accrues
interest at a rate of 7% per annum. Pursuant to Mr. Brown's employment
agreement, the indebtedness will be forgiven unless Mr. Brown's employment is
terminated by us for cause or by Mr. Brown without good reason. See "Employment,
Severance and Change of Control Agreements." The largest amount of indebtedness
of Mr. Brown to us during fiscal 1999 was $671,872.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
In order to induce Yucaipa to invest in Cyrk, we entered into employment
agreements with Allan Brown and Patrick Brady, pursuant to which Messrs. Brown
and Brady now serve as Cyrk's Co-Chief Executive Officers and Co-Presidents. The
term of Mr. Brady's agreement is for three years and the term of Mr. Brown's
agreement is also for three years with a two year extension option at the
election of Mr. Brown.
Under Mr. Brady's employment agreement, he receives a base salary of
$600,000 per annum plus an annual bonus equal to $26,666.66 for each percentage
point by which Cyrk's actual earnings before interest, taxes, depreciation and
amortization, or EBITDA, for a given fiscal year exceeds 85% of our targeted or
projected EBITDA for such fiscal year. The maximum annual bonus Mr. Brady may
earn under the agreement is $480,000. Mr. Brady shall also be entitled to
receive from us all fringe benefits eligible to our executive officers,
reimbursement of reasonable business-related and certain other expenses and a $2
million line of credit to be secured by a portion of his shares of common stock.
In addition, we agreed to maintain his split dollar insurance policies as
currently in effect, but shall not be obligated to pay annual premiums under
these insurance policies of more than $80,000 per year. See "Insurance
Arrangements." So long as Mr. Brady's employment is not terminated by us for
cause or by him without good reason, we also agreed to forgive a loan to him
with an outstanding balance of $79,050 at the end of the term of his employment
agreement.
Under Mr. Brown's employment agreement, he receives a base salary of
$750,000 per annum plus an annual bonus equal to 2.133% of his annual salary, or
$15,997, for each percentage point by which Cyrk's actual EBITDA for a given
fiscal year exceeds 85% of our targeted or projected EBITDA for such year. The
maximum annual bonus Mr. Brown may earn under the agreement is equal to 32% of
his base salary, or $240,000. Mr. Brown also received a signing bonus equal to
$2.25 million which shall be proportionately reimbursed to us if his employment
terminates prior to November 10, 2004 for any reason other than termination by
us without cause or by Mr. Brown for good reason. Mr. Brown shall also be
entitled to receive from us all fringe benefits eligible to our executive
officers, reimbursement of reasonable business-related and certain other
expenses and a $2 million line of credit to be secured by a portion of his
shares of common stock. In addition, we agreed to maintain his split dollar
insurance policies as currently in effect and, so long as his employment is not
terminated by us for cause or by Mr. Brown without good reason to forgive a loan
to him with an outstanding balance of $671,872 at the end of the term of his
employment agreement.
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Pursuant to these employment agreements, upon a change of control of Cyrk,
Messrs. Brady and Brown will be entitled to severance benefits and termination
rights at least as favorable as those that we have provided any of our executive
officers during the term of their employment agreements. In addition, if the
employment of Messrs. Brady or Brown is terminated by us without cause or by one
of them for good reason, then Messrs. Brady or Brown, as the case may be, is
entitled to receive an amount equal to the present value of his base salary and
bonus (assuming an average of his bonus for the previous two years) for, in the
case of Mr. Brady, the remainder of his employment term plus two years, or in
the case of Mr. Brown, the greater of the remainder of his employment term or
one year. Both agreements with Messrs. Brady and Brown contain customary
non-competition and non-solicitation provisions.
We have entered into severance agreements with Messrs. Axelrod and Mammola.
Pursuant to these agreements, upon termination of their employment with us
(other than for cause or disability or by them without good reason), Messrs.
Axelrod and Mammola will each be entitled to receive a lump sum payment equal to
three times their annual compensation (including without limitation, salary,
bonus, and 401(k) matching contributions), certain insurance coverages would
continue to be maintained for them by us until the second anniversary of
termination of employment, and all of their stock options would become
immediately exercisable.
Mr. Angstadt has entered into a change of control agreement with us that
has substantially the same terms and conditions as Messrs. Axelrod's and
Mammola's severance agreements, except that the termination of Mr. Angstadt's
employment with us must occur within two years of a change of control of Cyrk.
Upon a change of control of Cyrk, The Yucaipa Companies L.L.C. may be
entitled to certain payments pursuant to its management agreement with Cyrk. See
"Transactions with Certain Stockholders."
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The Performance Graph and the Report of the Compensation Committee on
Executive Compensation in this Proxy Statement are not and shall not be deemed
incorporated by reference into any of our filings with the Securities and
Exchange Commission by implication or by any reference in any such filings to
this Proxy Statement.
STOCK PERFORMANCE GRAPH
The following graph assumes an investment of $100 on December 31, 1994 and
compares changes thereafter (through December 31, 1999) in the market price of
our common stock with (1) the Nasdaq Market Index (a broad market index) and (2)
the Marketing Services Group (a published industry index).
In past years Cyrk has compared itself to the Advertising Agency Group (a
published industry index); however, we decided to switch indices and instead
compare our stock price with the Marketing Services Group (a published industry
index). We decided to make this change because more of our competitors are
included in the Marketing Services Group index than in the Advertising Agency
Group index. For comparison purposes, the Advertising Agency Group index is also
included on the graph.
The Nasdaq Market Index includes both U.S. and foreign companies listed on
The Nasdaq Stock Market and The Nasdaq SmallCap Market. The Advertising Agency
Group (MG Industry Group 720) consists of all companies listed on the New York
and American stock exchanges, and The Nasdaq Stock and SmallCap Markets that
derive a majority of their revenues (as shown in their annual reports) from
advertising. The Marketing Services Group (MG Industry Group 721) consists of
all companies listed on the New York and American Stock Exchanges, and the
Nasdaq Stock and Small Cap Markets that derive a majority of their revenues (as
shown in their annual reports) from marketing services. UPON THE REQUEST OF ANY
STOCKHOLDER, WE WILL FURNISH A LIST OF THE COMPANIES COMPRISING THE ADVERTISING
AGENCY GROUP OR THE MARKETING SERVICES GROUP.
The performance of the indices is shown on a total return (dividend
reinvestment) basis; however, we paid no dividends during the period shown. The
graph lines merely connect the beginning and end of the measuring periods and do
not reflect fluctuations between those dates.
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COMPARISON OF ANNUAL CUMULATIVE RETURN
CYRK, INC., THE ADVERTISING AGENCY GROUP & THE NASDAQ MARKET INDEX
THE ADVERTISING THE MARKETING
CYRK, INC. AGENCY GROUP NASDAQ MARKET INDEX SERVICES GROUP
---------- --------------- ------------------- --------------
1994 100.00 100.00 100.00 100.00
1995 23.57 128.41 129.71 164.90
1996 31.42 168.68 161.18 162.96
1997 23.41 245.61 197.16 255.44
1998 18.13 350.36 278.08 377.79
1999 28.70 653.64 490.46 344.23
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report has been prepared by our Compensation Committee of the Board of
Directors and addresses our compensation policies with respect to our Co-Chief
Executive Officers and executive officers in general. Our Compensation Committee
reviews and determines the compensation payable to our Co-Chief Executive
Officers and administers our stock plans. Our Compensation Committee and
Co-Chief Executive Officers determine and review the compensation for our other
executive officers. Each member of the Committee is a non-employee director.
Our overall policy for compensating executive officers is to establish
aggregate compensation levels sufficient to retain and attract executive
officers capable of leading us to achieve our business objectives. The principal
components of executive compensation are salary, bonus and stock option grants.
We also provide supplemental life insurance benefits to our executive officers.
In addition, executives are eligible to participate, on a nondiscriminatory
basis, in benefit programs provided to employees generally, including group
medical and life insurance programs and our 401(k) plan. From time to time, we
retain independent consultants to benchmark certain compensation practices for
our executives and key employees.
Our compensation policy with respect to our Co-Chief Executive Officers is
the same as our policy for executives generally. The Committee considers various
factors in determining the amount of each component of compensation including,
without limitation, our profitability, the performance of our stock price, and
the completion by such executive officers of projects critical to our long term
success; these factors, however, are not assigned individual mathematical
weights when the Committee makes such determinations, and therefore, such
determinations are based, in part, on the Committee's judgment as to what is
reasonable and appropriate.
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SALARY
The salaries of Messrs. Brady and Brown were established pursuant to
employment agreements which took effect upon the closing of Yucaipa's investment
in Cyrk on November 10, 1999. The salaries of our other three executive officers
are established at the beginning of each year consistent with our overall
compensation policy and based on the Committee's qualitative assessment of their
contributions to us.
BONUS
Annual bonuses are made at the discretion of the Committee and reflect the
Committee's qualitative assessment of the relative contributions of the
executive officers during a given year including, without limitation, the
closure of certain projects critical to our long term prospects, our
profitability and the performance of our stock price. For 1999, we paid a
$500,000 bonus to Mr. Brady and a $600,000 bonus to Mr. Brown. In connection
with the consummation of Yucaipa's investment into Cyrk, we also paid Mr. Brown
a $2,250,000 signing bonus. If Mr. Brown ceases to be employed with us before
November 10, 2004, he may be obligated to reimburse us a portion of the signing
bonus. See "Employment, Severance and Change of Control Agreements." We also
paid a $250,000 bonus to each of Mr. Mammola and Mr. Axelrod, and we paid a
$100,000 bonus to Mr. Angstadt.
STOCK OPTIONS
The Committee believes that stock ownership by executive officers is
important in aligning management's and stockholders' interests in the
enhancement of stockholder value over the long term. Stock options are awarded
based upon the market price of our common stock on the date of grant and are
linked to future performance to our common stock because the options do not
become valuable to the holder unless the price of our common stock increases
above the price as of the date of grant. The number of stock options granted to
an executive as a form of compensation is determined by taking into
consideration factors such as the number of options previously granted to an
executive, the executive's remaining options which are exercisable and the value
of those stock options. The Company did not grant stock options to our executive
officers in 1999.
INSURANCE
The split-dollar life insurance program for Mr. Brady was implemented by
the Committee in 1994 in recognition of the substantial contributions made by
him in 1994 and in prior years. The split dollar life insurance program for Mr.
Brown was implemented by Simon Marketing prior to Cyrk's acquisition of Simon
Marketing, and was made available by Simon Marketing in recognition of
substantial contributions made by Mr. Brown to Simon Marketing. In 1995, the
Committee implemented split-dollar life insurance programs for its other
executive officers. Messrs. Angstadt, Axelrod and Mammola participate in this
program. The Committee's decision to make this insurance available was based on
the Committee's evaluation of competitive compensation programs required to
attract and retain executive officers in our industry.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to its chief executive officer and its four other most highly compensated
executives. Qualifying, performance-based
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compensation will not be subject to the deduction limit if certain requirements
are met. The Committee currently intends to structure stock option grants to
executive officers in a manner that complies with the performance-based
requirements of the statute. However, the Committee otherwise anticipates that
the statute will not alter our policy of establishing executive compensation at
levels sufficient to retain and attract executive officers, regardless of
deductibility.
The Compensation Committee:
Ronald W. Burkle Joseph W. Bartlett Joseph Anthony Kouba
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions concerning executive compensation are made by the Compensation
Committee of the Board of Directors, which during 1999 consisted of Mr. Bartlett
and Mr. Kouba. Neither Mr. Bartlett nor Mr. Kouba is or was an officer or
employee of us or any of our subsidiaries. In 1999, none of our executive
officers served as an executive officer, or on the board of directors, of any
entity of which Mr. Bartlett or Mr. Kouba also served as an executive officer or
as a member of its board of directors.
PROPOSAL NUMBER TWO:
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The firm of PricewaterhouseCoopers LLP, certified public accountants,
served as our independent auditors for the fiscal year ended December 31, 1999
and, subject to stockholder approval, has been appointed by the Board of
Directors as our independent auditors for the fiscal year ending December 31,
2000.
Although there is no legal requirement that this matter be submitted to a
vote of the stockholders, the Board of Directors believes that the selection of
independent auditors is of sufficient importance to seek stockholder
ratification. In the event that the appointment of PricewaterhouseCoopers LLP is
not ratified by stockholders, the Board will reconsider its appointment.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting to make a statement if he wishes to do so and to respond to
appropriate questions.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Any stockholder who wishes to present a proposal for action at the 2001
Annual Meeting of Stockholders and who wishes to have it set forth in the proxy
statement and identified in the form of proxy prepared by us, must deliver such
proposal to us at our principal executive offices no later than December 14,
2000 and must meet the other requirements for inclusion set forth in Rule 14a-8
under the Securities Exchange Act of 1934, as amended.
April 26, 2000 By Order of the Board of Directors
PATRICIA J. LANDGREN
Secretary
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1201-PS-00
25
CYRK, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MAY 17, 2000
P The undersigned stockholder of Cyrk, Inc. hereby acknowledges receipt
R of the Notice of Annual Meeting of Stockholders and related Proxy
O Statement, revokes any prior proxies, and appoints Patrick D. Brady, Allan
X I. Brown and Patricia J. Landgren, or any of them, each with full power to
Y act alone, the attorney and proxy for the undersigned with power of
substitution in each to act for and to vote, as designated below, with the
same force and effect as the undersigned, all shares of Cyrk, Inc. common
stock standing in the name of the undersigned at the Annual Meeting of
Stockholders of Cyrk, Inc. to be held at the Four Seasons Hotel, 300 S.
Doheny Drive, Los Angeles, California on May 17, 2000 at 10:00 a.m.,
local time, and any adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY CARD WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND "FOR" THE
OTHER PROPOSAL. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE HOLDER'S
BEST JUDGMENT AS TO ANY OTHER MATTERS.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT
MARK ANY BOXES.
---------------
SEE REVERSE
SIDE
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26
[X] Please mark
votes as in
this example
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF THE MEETING.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
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1. Election of Directors.
INSTRUCTIONS: IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES,
MARK THE "WITHHOLD" BOX. IF YOU WISH TO WITHHOLD AUTHORITY WITH RESPECT TO
CERTAIN NOMINEE(S), MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH
THE PARTICULAR NAME(S).
WITHHOLD
FOR BOTH FOR BOTH FOR ALL
NOMINEES NOMINEES EXCEPT
[ ] [ ] [ ]
NOMINEES:
ALLAN I. BROWN
JOSEPH W. BARTLETT
2. Ratify the selection of PricewaterhouseCoopers LLP as independent
auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
MARK HERE ---------------------
FOR ADDRESS
CHANGE AND
NOTE AT LEFT ---------------------
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as an attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature:________________________________ Date_____________________
Signature:________________________________ Date_____________________
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE