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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, Inc. Logo]
101 EDGEWATER DRIVE
WAKEFIELD, MASSACHUSETTS 01880
(781) 876-5800
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders of CYRK, Inc.
Notice is hereby given that our 2001 Annual Meeting of Stockholders will be
held at The Four Seasons Hotel, 300 S. Doheny Drive, Los Angeles, California on
May 22, 2001, at 10:00 a.m. (local time), to consider and act on the following
matters:
1. To elect three Class II 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 2001 fiscal year;
3. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to change the name of the Company from
Cyrk, Inc. to Simon Worldwide, Inc.; and
4. 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 April 2, 2001 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
April 24, 2001 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, Inc. Logo]
101 EDGEWATER DRIVE
WAKEFIELD, MASSACHUSETTS 01880
(781) 876-5800
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 22, 2001 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, 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 p.m. Eastern Standard Time on
May 20, 2001.
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 24, 2001.
MATTERS TO BE CONSIDERED
The Annual Meeting has been called for the following purposes:
1. To elect three Class II 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 2001 fiscal year;
3. To approve an amendment to the Company's Certificate of Incorporation to
change the name of the Company from Cyrk, Inc. to Simon Worldwide, Inc.;
and
4. 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 April 2, 2001, 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 16,112,791 shares of our common stock and 25,757.53 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 2001
fiscal year; and
3. FOR the amendment to the Certificate of Incorporation changing the name
of the Company to Simon Worldwide, Inc.
4. 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 (i.e. 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.
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 the amendment
to the Certificate of Incorporation requires the affirmative vote "for" such
amendment of the holders of a majority of the outstanding stock of the Company.
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. 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. Thereafter, Yucaipa requested that Erika Paulson be named as its third
designee to the Board and on May 25, 2000 the Board elected Ms. Paulson to fill
the vacancy created by Mr. Wolpert's resignation. The newly elected Class II
directors will hold office until the 2004 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 any
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/her term expires:
YEAR TERM DIRECTOR
NAME AGE CLASS EXPIRES SINCE
- ---- --- ----- --------- --------
Joseph W. Bartlett................................... 67 I 2003 1993
Patrick D. Brady..................................... 45 III 2002 1990
Allan I. Brown....................................... 60 I 2003 1999
Ronald W. Burkle (nominee)........................... 48 II 2001 1999
Joseph Anthony Kouba................................. 53 III 2002 1997
George G. Golleher (nominee)......................... 53 II 2001 1999
Erika Paulson (nominee).............................. 27 II 2001 2000
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
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September 1, 1999, with Yucaipa, Gregory P. Shlopak, Allan I. Brown, the Shlopak
Foundation, Cyrk International Foundation and the Eric Stanton Self-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. 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 and managing partner of The Yucaipa Companies. He
is a member of the Boards of KB Home Corporation and Occidental Petroleum
Corporation. He also serves as member of the Executive Board for the Medical
Sciences at UCLA; Co-Chairman of the Center of International Relations at UCLA;
trustee of the J. Paul Getty Trust; Member of the Board of the Carter Center;
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 serves as Chairman of the Board of American Restaurant
Group and also as Chairman of the Board of Furr's Supermarkets, Inc. in New
Mexico. 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.
MS. PAULSON is a partner of Yucaipa, which she joined in 1997. Prior to
joining Yucaipa, Ms. Paulson served from August 1995 to June 1997 as a member of
the corporate finance division at Bear, Stearns & Co., 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 Ms. Paulson 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 her to the Board.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR.
MEETINGS OF THE BOARD AND ITS COMMITTEES
During 2000, the Board of Directors held a total of 10 meetings in 2000.
All directors attended at least 75% of the meetings of the Board of Directors.
In addition, the Board transacted certain business through written consents. The
only standing committees of the Board are the Audit Committee, the Compensation
Committee and the Executive Committee.
THE AUDIT COMMITTEE
The Audit Committee (comprised of Messrs. Bartlett and Kouba until February
2000; and since February 2000, comprised of Messrs. Golleher, 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 held one meeting during
2000, which was attended by each director serving on the committee.
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 were three meetings held by the Compensation Committee during 2000 which
were attended by each director serving on the committee except that Mr. Burkle
did not attend one of the Compensation Committee meetings.
THE EXECUTIVE COMMITTEE
The Executive Committee (comprised of Messrs. Brady, Brown and Burkle)
exercises the power and authority of the Board, other than the powers and
authority delegated to the Audit Committee and the Compensation Committee, as
may be necessary during the intervals between meetings of the Board, subject to
such limitations as are provided by law or by resolution of the Board. There
were three meetings held by the Executive Committee during 2000, which were
attended by each director serving on the committee.
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, such
non-employee directors (who are not affiliated with Yucaipa) are entitled to
receive an annual payment of $25,000, a payment of $2,000 for each Board of
Directors meeting that such non-employee director attends in person, and 5,000
options each year.
We may also provide additional compensation to our non-employee directors
for special assignments performed from time to time.
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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, 2001. 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
OF COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED CLASS(2)
- --------------------------------------- ------------------ -------------
YUCAIPA AND AFFILIATES:
Overseas Toys, L.P.(3)................................... 4,788,791 22.9%
OA3, LLC(3)
Multi-Accounts, LLC(3)
Ronald W. Burkle(3)
Dimensional Fund Advisors, Inc.(4)....................... 1,299,300 8.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Franklin Resources, Inc.(5).............................. 1,085,000 6.7%
777 Mariners Island Boulevard,
6th Floor
San Marco, CA 94404
H. Ty Warner(6).......................................... 1,075,610 6.6%
P.O. Box 5377
Oak Brook, IL 60522
Eric Stanton(7).......................................... 1,041,386 6.5%
c/o Simon Marketing, Inc.
Evergo House
38 Gloucester Road
Wanchai
Hong Kong
Gregory P. Shlopak(8).................................... 1,064,900 6.6%
63 Main Street
Gloucester, MA 01930
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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, 2001 through the exercise of any
option, warrant or other right
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(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 16,112,791 shares of common stock outstanding as of March 31, 2001.
(3) Represents approximately 3,122,124 shares of common stock issuable upon
conversion of 25,757.53 shares of outstanding series A preferred stock and
1,666,667 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 9,475,104 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 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
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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 Messrs. Brady, Brown, Shlopak and Stanton and the trusts
have agreed to vote in favor of certain nominees of Yucaipa to our Board.
Mr. Shlopak expressly disclaims beneficial ownership of any shares except
for the 1,064,900 shares as to which he possesses sole voting and
dispositive power.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information at March 31, 2001 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, 2001) 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
OF COMMON STOCK PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS(2)
- --------------------------------------- ------------------ -----------
Ronald W. Burkle(3)................................ 4,788,791 22.9%
Patrick D. Brady(4)................................ 1,507,822 9.2%
Allan I. Brown(5).................................. 1,072,205 6.7%
Terry B. Angstadt.................................. 6,992 *
Ted L. Axelrod(6).................................. 54,786 *
Dominic F. Mammola(7).............................. 63,065 *
Joseph W. Bartlett(8).............................. 72,500 *
Joseph Anthony Kouba(9)............................ 32,500 *
George G. Golleher(10)............................. 17,500 *
Erika Paulson...................................... -- *
All directors, nominees and executive officers as a
group (ten persons)(11).......................... 7,616,161 35.7%
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* Represents less than 1%
(1) The address of each of the directors and executive officers is c/o
Cyrk, Inc., 101 Edgewater Drive, Wakefield, Massachusetts 01880. 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, 2001 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 16,112,791 shares of common stock outstanding as of March 31,
2001.
(3) Represents 3,122,124 shares of common stock issuable upon conversion of
25,757.53 shares of outstanding series A preferred stock and 1,666,667
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-
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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 9,475,104 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 expressly 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, 2001. 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 Messrs. Brown,
Shlopak, Stanton, Yucaipa and the trusts have agreed to vote in favor of
certain nominees of Yucaipa to our Board. 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 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. 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) The 54,786 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2001.
(7) Includes 62,312 shares issuable pursuant to stock options exercisable
within 60 days of March 31, 2001.
(8) The 72,500 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2001.
(9) The 32,500 shares are issuable pursuant to stock options exercisable within
60 days of March 31, 2001.
(10) Includes 15,000 shares of common stock held by Mr. Golleher and 2,500
shares issuable pursuant to stock options exercisable within 60 days of
March 31, 2001.
(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 454,598 shares issuable pursuant to stock options exercisable
within 60 days of March 31, 2001 and (3) 3,122,124 shares of common stock
issuable upon conversion of 25,757.53 shares of outstanding series A
preferred stock and 1,666,667 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 2000, 1999, and 1998, respectively, by our Co-Chief
Executive Officers and our other three executive officers.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ---- -------- ---------- ------------ ------------ ------------
Allan I. Brown(2).............. 2000 $628,846 $ 800,000 -- -- $1,213,508(3)
Co-Chief Executive 1999 $300,000 $2,850,000 -- -- $ 994,428
Officer and Co-President
Patrick D. Brady............... 2000 $600,000 -- -- -- $ 114,524(4)
Co-Chief Executive 1999 $346,153 $ 500,000 -- -- $ 287,114
Officer and Co-President 1998 $300,000 $ 250,000 -- -- $ 252,153
Terry B. Angstadt(5)........... 2000 $225,000 -- -- -- $ 664,700(6)
Executive Vice President 1999 $225,000 $ 100,000 -- -- $ 25,029
1998 $189,999 $ 48,000 -- 15,000 $ 23,124
Dominic F. Mammola............. 2000 $300,000 $ 250,000 -- -- $ 105,241(7)
Executive Vice President 1999 $250,000 $ 250,000 -- -- $ 26,443
and Chief Financial Officer 1998 $206,346 $ 125,000 -- 15,000 $ 22,308
Ted L. Axelrod................. 2000 $250,000 $ 300,000 -- -- $ 41,244(8)
Executive Vice President 1999 $250,000 $ 250,000 -- -- $ 16,123
1998 $200,000 $ 125,000 -- 15,000 $ 15,095
- -------------------------
(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 2000, 1999, and 1998.
(2) Mr. Brown joined us in June 1997 and became an executive officer on November
10, 1999.
(3) Represents (1) $5,100 contributed by us to our 401(k) plan on behalf of Mr.
Brown, (2) $611,326 of other compensation paid directly by us to Mr. Brown
or on his behalf, (3) $220,794 paid by us on behalf of Mr. Brown for
medical, legal, accounting and other expenses, and (4) $376,288, the benefit
to Mr. Brown of the payment in 2000 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."
(4) Represents (1) $5,100 contributed by us to our 401(k) plan on behalf of Mr.
Brady, (2) $12,662 in premiums paid for by us for term life insurance
policies for the benefit of Mr. Brady's estate, (3) $23,140 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) $73,622, such amount representing the benefit to Mr. Brady of the
payment by us in 2000 of premiums with respect to certain split-dollar life
insurance policies, calculated as the present
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value of an interest-free loan of the premiums to Mr. Brady over his present
actuarial life expectancy. See "Insurance Arrangements."
(5) As a result of a reallocation of his duties during 2000 to focus on Cyrk's
e-business subsidiary, Mr. Angstadt no longer serves as an executive
officer.
(6) Represents (1) $5,100 contributed by us to our 401(k) plan on behalf of Mr.
Angstadt and (2) a payment of $329,800 and a deferred payment to be made to
Mr. Angstadt in 2001 of $329,800 in connection with the reallocation of his
duties. See "Employment and Severance Agreements."
(7) Represents (1) $5,100 contributed by us to our 401(k) plan on behalf of Mr.
Mammola, (2) $3,612 in premiums paid for by us for a term life insurance
policy for the benefit of Mr. Mammola's estate, (3) $32,057 paid by us
associated with an automobile lease and related taxes, (4) $47,759 in
forgiveness of a loan by us to Mr. Mammola, and (5) $16,713, such amount
representing the benefit to Mr. Mammola of the payment by us in 2000 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) $5,100 contributed by us to our 401(k) plan on behalf of Mr.
Axelrod, (2) $26,315 paid by us associated with an automobile lease and
related taxes, (3) $9,829, such amount representing 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."
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OPTION GRANTS IN THE LAST FISCAL YEAR
Cyrk did not grant stock options to any of its executive officers during
2000.
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 2000 and stock options
held at the end of 2000.
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............ -- -- 230,000/-- --/--
Terry B. Angstadt(2)........ -- -- --/-- --/--
Dominic F. Mammola.......... -- -- 62,312/5,000 --/--
Ted L. Axelrod.............. -- -- 54,786/5,000 --/--
- -------------------------
(1) This "value" is the difference between the market price of our common stock
subject to the options on December 31, 2000 ($3.00 per share) and the option
exercise (purchase) price, assuming the options were exercised and the
shares sold on that date.
(2) In connection with the reallocation of his duties, Mr. Angstadt forfeited
all of his options.
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 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 2000 in respect of the split-dollar policies insuring the lives of Mr.
Brady and Mr. Brown are $80,000 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 is 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 other executive
officers, Messrs. Axelrod and Mammola, and have agreed to pay the premiums for a
whole life policy on the
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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. Axelrod and Mammola. See "Employment and Severance 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. Axelrod and Mammola is
$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
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
$462,000. Pursuant to a Purchase Agreement dated February 15, 2001, we sold our
Corporate Promotions Group business. Pursuant to the terms of the purchase
agreement, the buyer occupies the lease for the facility in Danvers, however,
Cyrk remains liable under the lease to the extent that the buyer does not
perform its obligations under the lease.
TRANSACTIONS WITH CERTAIN STOCKHOLDERS
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 1999 and 2000, 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. Effective January 1, 2000 the Company became a strategic marketing
agent for Ty Inc. and will provide Ty Inc. with advisory, design, development
and/or creative services on a project by project basis. Ty Warner is the sole
shareholder of Ty Inc. and beneficially owns more than 5% of our shares. In
2000, net sales of Beanie Babies related products by us were approximately
$7,560,090 for which Ty, Inc. and Ty related parties received no royalty fees.
Pursuant to a consulting agreement among Eric Stanton, Cyrk and Simon
Marketing, Mr. Stanton provided consulting services to Simon Marketing in 2000
in exchange for $455,889. Pursuant to the consulting agreement, Mr. Stanton also
received $104,698 for business related
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expenses and $40,857 for medical and personal expenses. 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 or 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 46,511 of our shares of common stock to Ms. Foo in 2000
as the common stock portion of such payment. In 2000, Ms. Foo's annual base
salary and bonus was $778,383 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 2000, these benefits had an aggregate value of
$663,324. The term of Ms. Foo's agreement is for five years ending in June 2002.
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 2000, Patrick D. Brady, our Co-Chief Executive Officer and
Co-President, was indebted to us for the principal amount of $79,050. Mr. Brady
incurred this sum of indebtedness because of advances made to him by us. His
largest indebtedness at any time during fiscal 2000 was $85,060. The rate of
interest charged on the indebtedness is 5.5%. 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 2000, Allan I. Brown, our Co-Chief Executive Officer and
Co-President, was indebted to us under three promissory notes and pledge
agreements for the principal amount of $575,000, $1,000,000 and $1,000,000
respectively. Mr. Brown incurred these sums of indebtedness because of advances
made to him by us. The $575,000, $1,000,000 and $1,000,000 indebtedness are
secured by 52,904, 421,054 and 666,667 shares of our common stock, respectively,
and accrues interest at a rate of 7%, 6.6% and 6.3% per annum, respectively.
Pursuant to Mr. Brown's employment agreement, the $575,000 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 principal amount of indebtedness of Mr. Brown to us
during fiscal 2000 was $2,575,000.
During fiscal 2000, 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 2000 was
$100,000. The rate of interest charged on the indebtedness is the federal
statutory rate.
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EMPLOYMENT AND SEVERANCE 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 up to a maximum bonus of $480,000. Mr.
Brady also may be paid a discretionary bonus, as determined by the Board. Mr.
Brady is also 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 our 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 as of December 31, 2000 of
$85,060 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 up to
a maximum bonus of $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 also may be paid a
discretionary bonus, as determined by the Board. Mr. Brown is also entitled to
receive from us all fringe benefits eligible to our executive officers,
reimbursement of reasonable business-related and certain other expenses and a
$2,000,000 line of credit (which he has drawn in full) secured by a portion of
his shares of our 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 principal amount of $575,000 at the
end of the term of his employment agreement. Mr. Brown is also entitled to
reimbursement for medical and health expenses not covered by insurance. He is
also entitled to reimbursement for all care-giver and other expenses related to
family members who accompany him on business trips which extend longer than
seven days.
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.
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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. As a result of the Company's recent restructuring and
other events, the Company may be required to make severance payments to Mr.
Mammola and Mr. Axelrod pursuant to these agreements in the aggregate amount of
approximately $3,500,000.
Mr. Angstadt ceased to be an executive officer during fiscal 2000 as a
result of a reallocation of his duties enabling him to focus on the Company's
e-business subsidiary. In connection with Mr. Angstadt's change in duties he
entered into a new arrangement with Cyrk pursuant to which all of his stock
options were cancelled, a change of control agreement between Cyrk and Mr.
Angstadt was terminated and he is entitled to certain deferred payments
including a payment of $329,800 payable to Mr. Angstadt in 2001 for services
rendered during fiscal 2000.
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."
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, 1995 and
compares changes thereafter (through December 31, 2000) 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).
The Nasdaq Market Index includes both U.S. and foreign companies listed on
The Nasdaq Stock Market and The Nasdaq SmallCap Market. 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 MARKETING SERVICE GROUP.
The performance of the indices is shown on a total return (dividend
reinvestment) basis; however, we paid no dividends on our common stock 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
[COMPANY INDEX MARKET]
NASDAQ MARKET
CYRK, INC. MG GROUP INDEX INDEX
---------- -------------- -------------
1995 100.00 100.00 100.00
1996 133.33 98.82 124.27
1997 99.36 154.91 152.00
1998 76.92 229.11 214.39
1999 121.79 208.75 378.12
2000 30.77 141.05 237.66
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report has been prepared by our Compensation Committee of the Board
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. Generally, 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
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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.
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 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
No mandatory bonuses were paid to our Co-Chief Executive Officers for 2000
under their employment agreements because the Company's EBITDA targets were not
met. Annual bonuses made at the discretion of the Committee 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 2000, we paid a
$800,000 bonus to Mr. Brown. We also paid a $250,000 bonus to Mr. Mammola and a
$300,000 bonus to Mr. Axelrod.
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 2000.
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
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its four other most highly compensated executives. Qualifying, performance-based
compensation will not be subject to the deduction limit if certain requirements
are met. The Committee 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:
Joseph W. Bartlett Ronald W. Burkle Joseph Anthony Kouba
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions concerning executive compensation are made by the Compensation
Committee of the Board, which during 2000 consisted of Messrs. Bartlett, Burkle
and Kouba. Neither Messrs. Bartlett, Burkle nor Kouba is or was an officer or
employee of us or any of our subsidiaries. In 2000, none of our executive
officers served as an executive officer, or on the board of directors, of any
entity of which Messrs. Bartlett, Burkle or 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, 2000
and, subject to stockholder approval, has been appointed by the Board of
Directors as our independent auditors for the fiscal year ending December 31,
2001.
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.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees Cyrk's financial reporting process on behalf
of the Board of Directors. The current members of the Audit Committee are
Messrs. Bartlett, Golleher and Kouba. The Audit Committee meets with Cyrk's
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of Cyrk's internal controls,
and the overall quality of Cyrk's financial reporting. The Audit Committee met
in March 2001 to review the results of the audit of fiscal year 2000. The Audit
Committee operates under a written charter approved by the Board of Directors.
The Audit Committee's current charter is attached as ANNEX A to this Proxy
Statement.
In fulfilling its oversight responsibilities regarding Cyrk's financial
statements for the year ended December 31, 2000, the Audit Committee reviewed
with management the audited financial statements included in Cyrk's Annual
Report. This review included a discussion of the quality, and not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
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The Audit Committee reviewed with the independent auditors their judgments
as to the quality, and not just the acceptability, of Cyrk's accounting
principles and other matters required for discussion under Statement of
Accounting Standards No. 61.
The Audit Committee received and reviewed the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1. Further, the Audit Committee discussed with the independent
auditors the auditors' independence from management and Cyrk.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board approved, that
Cyrk's audited financial statements for the year ended December 31, 2000 be
included in the Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
The aggregate fees the Company expects to be billed for professional
services rendered for the audit of Cyrk's financial statements for the fiscal
year ended December 31, 2000 and for the reviews of Cyrk's consolidated
financial statements included in its Quarterly Reports on Form 10-Q for that
fiscal year is $471,744. During 2000, PricewaterhouseCoopers LLP billed $721,823
in aggregate fees for all services rendered other than the audit services
described above.
The Audit Committee:
Joseph W. Bartlett George G. Golleher Joseph Anthony Kouba
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT AUDITORS FOR THE 2001 FISCAL YEAR.
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PROPOSAL NUMBER THREE:
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has approved and recommends that our stockholders
approve a proposal to change the name of the Company to Simon Worldwide, Inc.
The amendment will be accomplished by amending our Certificate of Incorporation.
In connection with the sale of the CPG business in March 2001, we agreed to
change our corporate name. The Board believes that the proposed name is more
descriptive of the Company's current business.
The change in corporate name will not affect the status of the Company or
the rights of any stockholder in any respect, or the validity or transferability
of stock certificates presently outstanding. The Company's stockholders will not
be required to exchange stock certificates to reflect the new name. If a
stockholder's shares of common stock are currently represented by a physical
certificate, that certificate will continue to represent such stockholder's
ownership of such shares.
If the amendment is adopted, Article I of our Certificate of Incorporation
would be amended to read as follows:
"The name of the Corporation is Simon Worldwide, Inc."
In addition, all other references to our corporate name in our Certificate
of Incorporation would be changed to Simon Worldwide, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION CHANGING THE NAME OF THE COMPANY TO SIMON
WORLDWIDE, INC.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Any stockholder who wishes to present a proposal for action at the 2002
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,
2001 and must meet the other requirements for inclusion set forth in Rule 14a-8
under the Securities Exchange Act of 1934, as amended.
April 24, 2001 By Order of the Board of
Directors
Patricia J. Landgren
Secretary
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ANNEX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation to
any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the corporation's policies, procedures and practices
at all levels. The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Establish standards of internal control to be followed by the Co-Chief
Executive Officers and senior management, to include achieving and
maintaining a control environment that promotes discipline and structure
with regard to the (i) integrity, ethical values and competence of the
Company's people; (ii) management's philosophy and operating style; (iii)
the way management assigns authority and responsibility, and organizes
and develops its people; (iv) and the attention and direction by the
Board of Directors.
- Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing team.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing team,
and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section V. of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee. A
director will be deemed "independent" for purposes of this Charter in accordance
with the NASDAQ rules regarding Audit Committees. All members of the Committee
shall have a working familiarity with basic finance and accounting practices,
and at least one member of the Committee shall have accounting or related
financial management expertise. Committee members may enhance their familiarity
with finance and accounting by participating in educational programs conducted
by the Corporation or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
A-1
26
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing team and the independent accountants in separate executive
sessions to discuss any matters that the Committee or each of these groups
believe should be discussed privately. In addition, the Committee or at least
its Chair should meet with the independent accountants and management quarterly
to review the Corporations financials consistent with V., below.
IV. REPORTS
To enable the Committee to fulfill its duties and responsibilities:
- The Co-Chief Executive Officers will submit to the Committee on a
quarterly basis a report from the Office of the Co-Chief Executive
Officers updating the Audit Committee on issues regarding, among other
things, risks from external and internal sources that must be assessed,
as well as the Company's control activities that help ensure that
management directives are carried out.
- The Company's Chief Financial Officer and Legal Counsel will issue to the
Committee on a quarterly basis a report updating the Committee on the
control activities of the operating and other units of the Company.
V. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, but no less than annually,
as conditions dictate.
2. Review the organization's annual financial statements and any reports
or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditing team and management's response.
4. Review with financial management and the independent accountants the
10-Q prior to its filing or prior to the release of earnings. The Chair
of the Committee may represent the entire Committee for purposes of
this review.
INDEPENDENT ACCOUNTANTS
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
On an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
A-2
27
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the organization's financial reporting processes, both
internal and external.
FINANCIAL REPORTING PROCESSES
8. In consultation with the independent accountants and the internal
auditors, review the integrity of the organization's financial
reporting processes, both internal and external.
9. Consider the independent accountants' judgements about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the internal auditing team.
PROCESS IMPROVEMENT
11. Establish regular and separate systems of reporting to the Committee by
each of management, the independent accountants and the internal
auditors regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to
appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each
of management, the independent accountants and the internal auditing
team any significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or access to
required information.
13. Review any significant disagreement among management and the
independent accountants or the internal auditing team in connection
with, among other things, the preparation of the financial statements.
14. Review with the independent accountants, the internal auditing team and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented. (This review should be conducted at an appropriate time
subsequent to implementation of changes or improvements, as decided by
the Committee.)
ETHICAL AND LEGAL COMPLIANCE
15. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
16. Review management's monitoring of the Company's compliance with the
organization's Ethical Code, and ensure that management has the proper
review system in place to ensure that Corporation's financial
statements, reports and other financial information disseminated to
governmental organization, and the public satisfy legal requirements.
17. Review activities, organizational structure, and qualifications of the
internal audit team.
18. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
A-3
28
19. Review, with the organization's counsel, any legal matter that could
have a significant impact on the organization's financial statements.
20. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
A-4
29
1201-PS-01
30
CYRK, INC.
ZCYR5B
DETACH HERE
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MAY 22, 2001
The undersigned stockholder of Cyrk, Inc. hereby acknowledges receipt of
the Notice of Annual Meeting of Stockholders and related Proxy Statement,
revokes any prior proxies, and appoints Allan I. Brown, Dominic F. Mammola and
Patricia J. Landgren, or any of them, each with full power to 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 22,
2001 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, "FOR" THE NAME CHANGE OF THE
COMPANY, AND "FOR" THE OTHER PROPOSALS. 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 CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
31
VOTE BY TELEPHONE
- -----------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER
1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
VOTE BY INTERNET
- ----------------
It's fast, convenient, and your vote is immediately confirmed and posted.
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD.
2. GO TO THE WEBSITE
HTTP://WWW.EPROXYVOTE.COM/CYRK
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Go to HTTP://WWW.EPROXYVOTE.COM/CYRK anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
ZCYR5A
DETACH HERE
Please mark votes as in this example. [X]
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, 2, and 3.
1. Election of Directors.
Nominees: (01) Ronald W. Burkle, (02) George G. Golleher,
and (03) Erika Paulson.
[ ] FOR ALL NOMINEES
[ ] WITHHELD FROM ALL NOMINEES
[ ] For all nominees except as noted above
2. Ratify the selection of PricewaterhouseCoopers LLP as independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Amend the Certificate of Incorporation changing the name of the Company to
Simon Worldwide, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
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.
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.
Signature:_______________ Date:________ Signature:________________ Date:________