1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
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)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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:
- --------------------------------------------------------------------------------
2
CYRK, INC.
3 POND ROAD
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-5800
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO THE STOCKHOLDERS OF CYRK, INC.
Notice is hereby given that the annual Meeting of Stockholders of Cyrk, Inc., a
Delaware corporation, will be held as follows:
DATE: Tuesday, May 19, 1998
PLACE: The offices of Choate, Hall & Stewart
Exchange Place, 53 State Street - 36th Floor
Boston, Massachusetts
TIME: 10:00 a.m., local time
PURPOSE: To elect two Class II directors to serve for a term of three
years and until their successors are elected and qualified;
To ratify the Board of Directors' appointment of Coopers &
Lybrand L.L.P. as the Company's independent auditors for the
1998 fiscal year; and
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 30, 1998 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
April 17, 1998 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.
3
CYRK, INC.
3 POND ROAD
GLOUCESTER, MASSACHUSETTS 01930
(978) 283-5800
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of Cyrk, Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held on May 19, 1998 at the offices of Choate, Hall &
Stewart, Exchange Place, 53 State Street - 36th Floor, Boston, Massachusetts 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 the Company
prior to the meeting and are not revoked prior to the voting.
A proxy may be revoked at any time before it is voted by giving the Secretary of
the Company 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.
The Company's Annual Report for the year ended December 31, 1997, is being
mailed with this Notice of Annual Meeting and Proxy Statement on or about April
17, 1998.
MATTERS TO BE CONSIDERED
The Annual Meeting has been called for the following purposes:
1. To elect two 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 Coopers &
Lybrand L.L.P. as the Company's independent auditors for the
1998 fiscal year; and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
RECORD DATE AND VOTING
Only stockholders of record at the close of business on March 30, 1998 (the
"Record Date") are entitled to notice of, and, to vote at, the meeting or any
adjournment thereof. At the close of business on the Record Date, there were
14,725,328 shares of the Company's common stock, $0.01 par value ("Common
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 named herein, to serve for a
term of three years and until their successors are elected and
qualified;
2. FOR the ratification of the Board of Directors' appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors
for the 1998 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 know of any such other matter or business
to be brought before the meeting.
1
4
QUORUM, ABSTENTIONS, NON-VOTES AND VOTE REQUIRED
The presence in person or representation by proxy of the holders of a majority
of the Company's Common Stock 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 Common Stock is entitled to one vote for each share so
held on the Record Date. 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 shares of Common Stock voted "for" and "against" such
matter.
PROXY SOLICITATION AND EXPENSES
The accompanying proxy is being solicited on behalf of the Board of Directors of
the Company, and all expenses for such solicitation will borne by the Company.
In addition to the use of the mails, proxies may be solicited by directors,
officers and employees of the Company and, if deemed necessary, through a third
party solicitation agent by means of personal interview, telephone, facsimile or
telegram. The Company will request banks, brokerage houses and other custodians,
nominees and fiduciaries to solicit their customers who are beneficial owners of
Common Stock and to forward solicitation materials to such beneficial owners.
The Company will reimburse them for their reasonable out-of-pocket expenses
incurred in such solicitation.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the Company 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. There are currently five
directors. The newly-elected Class II directors will hold office until the 2001
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 of the nominees become
unavailable to serve when elected, the proxy holders may vote each proxy (unless
authority to vote has been withheld for such nominee) for the election of any
other person the Board of Directors 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 lists the names and ages of the directors and the nominee,
the year in which each director was first elected a director of the Company and
the year his term expires:
YEAR
NAME AGE CLASS TERM EXPIRES DIRECTOR SINCE
- ---- --- ----- ------------ --------------
Joseph W. Bartlett 64 I 2000 1993
Patrick D. Brady (nominee) 42 II 1998 1990
Joseph Anthony Kouba (nominee) 50 II 1998 1997
Louis Marx, Jr. 66 III 1999 1993
Gregory P. Shlopak 51 III 1999 1990
2
5
BUSINESS HISTORY OF DIRECTORS AND NOMINEES
MR. BARTLETT has been a partner in the law firm of Morrison & Foerster LLP since
March 1996. Prior to this he was a partner in the law firm of Mayer, Brown &
Platt from July 1991 until March 1996. From 1969 until November 1990 he 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 undersecretary 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 a founder of the Company and has served as one of its directors
since its incorporation in 1990. Mr. Brady was the Chief Operating Officer and
Treasurer of the Company from May 1990 until May 1993 and served as Chief
Financial Officer from May 1993 to September 1994. Mr. Brady was elected
President and Chief Operating Officer of the Company in May 1993.
MR. KOUBA was elected to the board of Directors on April 4, 1997. Since 1980,
Mr. Kouba has served as the President and a director of Cloverleaf Group, Inc.,
which is engaged in the real estate investment business. Additionally, since
1995, Mr. Kouba has been a director of Trusted Brands, Inc., a company engaged
in the sale of food products.
MR. MARX has served as Co-Chairman and director of Hudson River Capital LLC, a
venture capital company, since March 1996. In addition, he has served as a
director of Victory Ventures LLC, a private equity investment fund company, and
its predecessor company, Forschner Enterprises, Inc., since October 1996, and
Mr. Marx has also served as Co-Chairman of Victory Ventures LLC since May 1997.
Also, Mr. Marx is a director of Swiss Army Brands, Inc., the exclusive United
States and Canadian importer and distributor of Victorinox Swiss Army brand
knives and Swiss Army brand watches.
MR. SHLOPAK is a founder of the Company and has served as one of its directors
since its incorporation in 1990. From May 1990 to May 1993, Mr. Shlopak served
as the Company's President and Secretary and was elected Chairman of the Board
and Chief Executive Officer in May 1993. Mr. Shlopak was also the founder,
President and a director of a company engaged in the manufacture of custom
screen-printed and embroidered apparel and accessories that was incorporated in
1976 and merged into the Company in July 1993.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR.
MEETINGS OF THE BOARD AND ITS COMMITTEES
The Board of Directors held two meetings in May and September of 1997, each of
which were attended by each director. In addition, the Board transacted certain
business through written consents. The only standing committees of the Board are
the Audit Committee and the Compensation Committee.
The Audit Committee (comprised of Messrs. Bartlett and through February 5, 1998,
Mr. Marx; and effective February 6, 1998, Mr. Kouba) reviews the Company's
system of internal controls, recommends the appointment of the Company's
independent auditors, and periodically reviews their services. There was one
meeting held by the Audit Committee during 1997.
The Compensation Committee (comprised of Mr. Bartlett and through April 4, 1997,
Mr. Marx; and effective April 5, 1997, Mr. Kouba) reviews and determines
compensation payable to officers of the Company and administers the Company's
stock plans. There was one meeting held by the Compensation Committee during
1997. In addition, the Committee transacted certain business through written
consents.
3
6
DIRECTORS' COMPENSATION
Directors who are employees of the Company receive no compensation, as such, for
their services on the Board. Directors who are not employees of the Company
receive $1,000 for each Board meeting they attend and are also reimbursed for
out-of-pocket expenses incurred in attending such meetings. In addition, on
March 31 of each year, non- employee directors of the Company are granted a
stock option covering 5,000 shares of Common Stock that vests in two equal
installments on each of the first and second anniversaries of the date of grant.
Prior to the termination of the Company's Non-Employee Director Stock Option
Plan in April of 1997, such grants to non-employee directors were made out of
that plan. Subsequent grants to non-employee directors are expected to be
consistent with previous grants in all respects except that they will be made
out of the Company's 1993 Omnibus Stock Plan.
SECTION 16(a) REPORTS
Based solely on its review of copies of reports filed by reporting persons of
the Company pursuant to Section 16(a) of the Securities Exchange Act of 1934, or
a written representation from certain reporting persons that no Form 5 filing
was required for such person, the Company believes that all filings required to
be made by reporting persons of the Company were timely made in accordance with
the requirements of that Act, except that Ted L. Axelrod failed to file a Form 3
on a timely basis upon becoming an executive officer of the Company on September
24, 1997. Mr. Axelrod did timely file a Form 5 correcting such delinquency.
4
7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock at March 30, 1998. Except as otherwise
indicated in the footnotes, the Company believes that the beneficial owners of
the Common Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to the shares of Common Stock
shown as beneficially owned by them.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person known by the Company (other than
executive officers) to own beneficially 5% or more of the outstanding Common
Stock.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER OF COMMON STOCK OF CLASS
- ------------------- ---------------- ----------
The Equitable Companies Incorporated(1) 1,818,900 12.4%
1290 Avenue of the Americas
New York, NY 10104
Heartland Advisors, Inc.(2) 1,171,000 8.0%
790 North Milwaukee Street
Milwaukee, WI 53202
Franklin Resources, Inc.(3) 1,187,200 8.1%
777 Mariners Island Boulevard
San Mateo, CA 94404
Dimensional Fund Advisors Inc.(4) 812,600 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Ty Warner(5) 1,075,610 7.3%
Ty, Inc.
807 Blackhawk
Westmont, IL 60559
Allan I. Brown(6) 920,069 6.2%
c/o Simon Marketing, Inc.
1900 Avenue of the Stars, 4th Floor
Los Angeles, CA 90067-4301
Eric Stanton(7) 920,069 6.2%
c/o Simon Marketing, Inc.
Evergo House
38 Gloucester Road
Wanchai
Hong Kong
- ------------------------------
1 The information concerning this holder is based solely on information
contained in filings it has made with the Securities and Exchange
Commission pursuant to Section 13(d) or 13(g) of the Securities Exchange
Act of 1934, or in written communications to the Company or the
Company's representatives. The Equitable Companies Incorporated (the
"Equitable Companies") is the parent holding company of Alliance Capital
Management L.P., a registered investment adviser ("Alliance"), which is
deemed to have sole voting power as to 994,700 of these shares and sole
dispositive power as to 1,790,400 of the shares. Alliance indicates that
it acquired the shares solely for investment purposes
5
8
on behalf of client discretionary investment advisory accounts. A
majority interest in the Equitable Companies is owned beneficially by
AXA-UAP (23, Avenue Matignon, Paris, France), and a group of four French
mutual funds located in Paris, France beneficially owns a majority
interest in AXA-UAP.
2 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. Heartland Advisors, Inc. is a registered
investment adviser, and has indicated that it has the sole power to
vote, or direct the vote, and the sole power to dispose, or to direct
the disposition of, all of the shares.
3 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. Franklin Resources, Inc. ("FRI") is the parent
holding company of Franklin Advisory Services, Inc., which is deemed to
have 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 FRI and are the principal
shareholders of FRI.
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, or in written communications to the Company or the
Company's representatives. Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, has the sole power to
vote or direct the vote as to 509,400 of the shares. As of December 31,
1997, Dimensional is deemed to have beneficial ownership and sole
dispositive power of 812,600 shares, all of which are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of investment vehicles for qualified
employee benefit plans, for the DFA Investment Trust Company, a Delaware
business trust, the DFA Group Trust and DFA Participation Group Trust,
all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all shares.
5 Includes 100,000 shares issuable pursuant to a warrant which is
currently exercisable.
6 Allan Brown has the sole power to vote or to direct the vote and the
sole power to dispose or to direct the disposition of 920,069 shares.
Mr. Brown is party to a Shareholders Agreement dated June 9, 1997 by and
among Cyrk, Inc., Allan Brown, Eric Stanton, Gregory Shlopak and Patrick
Brady, pursuant to which he may be deemed to have shared voting power
over 4,393,138 shares for the purpose of electing certain directors 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. Brown
expressly disclaims beneficial ownership of any shares of Cyrk, Inc.
common stock except the shares as to which he possesses sole voting and
dispositive power.
7 Eric Stanton has the sole power to vote or to direct the vote and the
sole power to dispose or to direct the disposition of 920,069 shares.
Mr. Stanton is party to a Shareholders Agreement dated June 9, 1997 by
and among Cyrk, Inc., Allan Brown, Eric Stanton, Gregory Shlopak and
Patrick Brady, pursuant to which he may be deemed to have shared voting
power over 4,393,138 shares for the purpose of electing certain
directors 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. Stanton expressly disclaims beneficial ownership of any shares of
Cyrk, Inc. common stock except the shares as to which he possesses sole
voting and dispositive power.
6
9
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information at March 30, 1998 regarding
beneficial ownership of the Company's Common Stock (including Common Stock
issuable upon the exercise of stock options exercisable within 60 days of March
30, 1998) by each director, each executive officer named in the Summary
Compensation Table, and by all directors and executive officers of the Company
as a group.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER(1) OF COMMON STOCK CLASS
- ---------------------- ---------------- -------------
Gregory P. Shlopak(2) 1,344,067 9.1%
Patrick D. Brady(3) 1,372,267 9.3%
Terry B. Angstadt(4) 49,725 *
Dominic F. Mammola(5) 30,753 *
Ted L. Axelrod(6) 49,167 *
Joseph W. Bartlett(7) 17,500 *
Louis Marx, Jr.(7) 27,500 *
Joseph Anthony Kouba 0 *
All directors and executive officers as a group
(eight persons)(2/3/8) 2,882,646 19.2%
- ------------------------------
* Represents less than 1%.
1 The address of each of the directors and executive officers is c/o Cyrk,
Inc., 21 Pond Road, Gloucester, Massachusetts 01930.
2 Includes (i) 74,401 shares held by a private charitable foundation as to
which Mr. Shlopak, as trustee, has sole voting and dispositive power and
(ii) 76,667 shares issuable pursuant to stock options exercisable within
60 days of March 30, 1998.
3 Includes (i) 90,408 shares held by a private charitable foundation as to
which Mr. Brady, as trustee, has sole voting and dispositive power and
(ii) 76,667 shares issuable pursuant to stock options exercisable within
60 days of March 30, 1998.
4 Includes 46,666 shares issuable pursuant to stock options exercisable
within 60 days of March 30, 1998.
5 Includes 30,000 shares issuable pursuant to stock options exercisable
within 60 days of March 30, 1998.
6 Includes 49,167 shares issuable pursuant to stock options exercisable
within 60 days of March 30, 1998.
7 These shares are issuable pursuant to stock options exercisable within
60 days of March 30, 1998.
8 Includes 74,401 shares held by a private charitable foundation as to
which Mr. Shlopak, as trustee, has sole voting and dispositive power.
Includes 90,408 shares held by a private charitable foundation as to
which Mr. Brady, as trustee, has sole voting and dispositive power.
Includes a total of 315,834 shares issuable pursuant to stock options
exercisable within 60 days of March 30, 1998.
7
10
EXECUTIVE COMPENSATION
The following table sets forth the compensation the Company paid or accrued for
services rendered in 1997, 1996 and 1995, respectively, by the Chief Executive
Officer and the other four executive officers of the Company:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARD
---------------------------------- --------------------------------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
- ------------------ ---- ------ ----- ------------ ---------- ---------- ------------
Gregory P. Shlopak..... 1997 $300,000 -- -- -- 230,000 $413,962(1)
Chief Executive Officer 1996 $300,000 -- -- -- -- $415,407
1995 $300,000 -- -- -- -- $415,200
Patrick D. Brady....... 1997 $300,000 -- -- -- 230,000 $253,647(2)
President and Chief 1996 $300,000 -- -- -- -- $257,989
Operating Officer 1995 $300,000 -- -- -- -- $255,612
Terry B. Angstadt...... 1997 $185,096 $ 50,000 -- -- 55,000 $ 27,129(3)
Executive Vice 1996 $175,000 -- -- -- -- $ 26,156
President 1995 $175,000 -- -- -- -- $ 7,304
Dominic F. Mammola..... 1997 $185,096 $ 50,000 -- -- 70,000 $ 25,750(4)
Executive Vice 1996 $166,635 $ 25,000 -- -- -- $ 22,828
President 1995 $150,000 -- -- -- -- $ 5,594
and Chief Financial
Officer
Ted L. Axelrod(5)...... 1997 $200,000 $155,000 -- -- 27,500 $ 17,652(6)
Executive Vice
President
- ------------------------------
1 Represents (i) $6,231 contributed by the Company to the Company's 401(k)
plan on behalf of Mr. Shlopak (ii) $5,846 in premiums paid by the
Company with respect to the cash surrender value benefit payable to Mr.
Shlopak's estate under certain reverse split-dollar life insurance
policies, and (iii) $401,885, the benefit to Mr. Shlopak of the payment
by the Company in 1997 of premiums with respect to certain split-dollar
life insurance policies, calculated as the present value of an
interest-free loan of the premiums to Mr. Shlopak over his present
actuarial life expectancy or, in the case of two of the policies which
are survivorship policies, the actuarial life expectancy of the later to
die of Mr. Shlopak and his wife. See "Insurance Arrangements."
2 Represents (i) $6,231 contributed by the Company to the Company's 401(k)
plan on behalf of Mr. Brady, (ii) $7,655 in premiums paid by the Company
with respect to the cash surrender value benefit payable to Mr. Brady's
estate under certain reverse split-dollar life insurance policies, and
(iii) $239,761, the benefit to Mr. Brady of the payment by the Company
in 1997 of premiums with respect to certain split-dollar life insurance
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."
3 Represents (i) $5,510 contributed by the Company to the Company's 401(k)
plan on behalf of Mr. Angstadt and (ii) $21,619, the benefit to Mr.
Angstadt of the payment by the Company in 1997 of respect to a
split-dollar life insurance policy, calculated as the present value of
an interest-free loan
8
11
of the premiums to Mr. Angstadt over his present actuarial life
expectancy. See "Insurance Arrangements."
4 Represents (i) $5,341 contributed by the Company to the Company's 401(k)
plan on behalf of Mr. Mammola and (ii) $20,409, the benefit to Mr.
Mammola of the payment by the Company in 1997 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."
5 Mr. Axelrod joined the Company in July 1995 and became an executive
officer on September 24, 1997.
6 Represents (i) $5,654 contributed by the Company to the Company's 401(k)
plan on behalf of Mr. Axelrod and (ii) $11,998, the benefit to Mr.
Axelrod of the payment by the Company in 1997 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
The following table sets forth certain information with respect to stock options
granted to each of the Company's executive officers during 1997.
POTENTIAL
REALIZED VALUE
INDIVIDUAL GRANTS AS ASSUMED
--------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR(2) PRICE(3) DATE 5% 10%
---- ---------- -------------- -------- ---------- -- ---
Gregory P. Shlopak.... 230,000 16.0% $10.875 4/15/07 $1,572,050 $3,987,050
Patrick D. Brady...... 230,000 16.0% $10.875 4/15/07 $1,572,050 $3,987,050
Terry B. Angstadt..... 55,000 3.8% $10.875 4/15/07 $ 375,925 $ 953,425
Dominic F. Mammola.... 70,000 4.9% $10.875 4/15/07 $ 478,450 $1,213,450
Ted L. Axelrod........ 27,500 1.9% $10.875 4/15/07 $ 187,963 $ 476,713
- ------------------------------
1 These options become exercisable in three equal installments on the
first, second and third anniversaries of the date of grant.
2 Based on an aggregate of 1,433,600 shares subject to options granted to
employees of the Company in 1997.
3 The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant.
4 The potential realizable value is calculated based on the term of the
option (ten years) at its date of grant. It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for
the appreciated stock price. However, the optionee
9
12
will not actually realize any benefit from the option unless the market
value of the Company's stock price in fact increases over the option
price.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for each of the Company's executive officers
certain information regarding exercises of stock options during 1997 and stock
options held at the end of 1997.
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- -------------------------- -----------------------------
Gregory P. Shlopak...... -- -- 0/230,000 --
Patrick D. Brady........ -- -- 0/230,000 --
Terry B. Angstadt....... -- -- 28,332/69,168 --
Dominic F. Mammola...... -- -- 6,666/73,334 --
Ted L. Axelrod.......... -- -- 24,167/50,833 $15,625/$7,812
- ------------------------------
1 This "value" is the difference between the market price of the Common
Stock subject to the option on December 31, 1997 ($9.6875 per share) and
the option exercise (purchase) price, assuming the option were exercised
and the shares sold on that date.
INSURANCE ARRANGEMENTS
The Company provides split-dollar life insurance benefits to Messrs. Shlopak and
Brady. The Company has agreed to pay the premiums for (i) two whole life
policies on the lives of each of Messrs. Shlopak and Brady and (ii) two
survivorship policies on the lives of Mr. Shlopak and his wife. The Company is
obligated to pay these premiums whether or not either executive remains employed
by the Company, except that such obligation terminates with respect to the
policies of either executive if he breaches the consulting agreement between
such executive and the Company pursuant to which the insured executive has
agreed to render consulting services to the Company after the termination of his
employment by the Company. The Company has certain rights to borrow against
these policies and the right to receive an amount equal to all premiums paid by
it not later than upon the death of the insured executive (or, in the case of
the survivorship policies, upon the death of the later to die of Mr. Shlopak or
his wife). The irrevocable trusts established by Messrs. Shlopak and Brady which
own the foregoing policies are entitled to borrow against the policies, subject
to certain limitations while the Company has an interest in the policies. Such
trusts are also entitled to receive the death benefits under the policies net of
the cumulative premiums paid by the Company. The aggregate annual premium amount
payable by the Company in respect of the split-dollar policies insuring the
lives of Messrs. Shlopak and Brady is $435,261 and $257,462, respectively.
The Company also provides split-dollar life insurance benefits to its three
other executive officers, Messrs. Angstadt, Mammola and Axelrod. The Company has
agreed to pay the premiums for a whole life policy on the lives of each of
Messrs. Angstadt, Mammola and Axelrod. However, the Company can terminate its
obligation at any time upon written notice to the executive, and the Company's
obligation terminates automatically upon the termination (for whatever reason)
of the executive's employment at the Company. The Company has 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 (i) the cash surrender value
of the policy or (ii) the aggregate amount of premiums paid by the company to
such date. The aggregate annual premium
10
13
amount payable by the Company for the split-dollar policies insuring the lives
of Messrs. Angstadt, Mammola and Axelrod is $27,935, $25,442 and $14,954,
respectively.
In addition, the Company provides Messrs. Shlopak and Brady with reverse
split-dollar life insurance pursuant to which the Company pays the premiums on
universal life insurance policies on the lives of Messrs. Shlopak and Brady.
Upon the death of either, assuming the policies are still in force, the Company
is entitled to receive the death benefit ($4,250,000 on the life of each) and
the deceased executive's estate is entitled to receive the cash surrender value
of the policy.
INDEBTEDNESS OF MANAGEMENT
During fiscal 1997, Dominic F. Mammola, Executive Vice President and Chief
Financial Officer of the Company, was indebted to the Company in the amount of
$75,000. Mr. Mammola incurred this sum of indebtedness because of a loan to him
by the Company. His largest aggregate amount of indebtedness outstanding at any
time during fiscal 1997 was $75,000. The amount of indebtedness outstanding as
of March 30, 1998 was $75,000. The rate of interest charged on the indebtedness
is the federal statutory rate.
During fiscal 1997, Ted L. Axelrod, Executive Vice President of the Company, was
indebted to the Company in the amount of $100,000. Mr. Axelrod incurred this sum
of indebtedness because of a loan to him by the Company. His largest aggregate
amount of indebtedness outstanding at any time during fiscal 1997 was $100,000.
The amount of indebtedness outstanding as of March 30, 1998 was $100,000. The
rate of interest charged on the indebtedness is the federal statutory rate.
CHANGE OF CONTROL AGREEMENTS
The Company plans to enter into change of control agreements with Messrs.
Angstadt, Mammola and Axelrod. Pursuant to these agreements, upon termination of
their employment (other than for cause or disability or by them without "good
reason") within two years following a change of control, Messrs. Angstadt,
Mammola and Axelrod would 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 the Company until the second anniversary
of the change of control, and all of their stock options would become
immediately exercisable.
11
14
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 filings of the Company with the Securities
and Exchange Commission by implication or by any reference in any such filings
to this Proxy Statement.
PERFORMANCE GRAPH
The following graph assumes an investment of $100 on July 7, 1993 (the date the
Company's Common Stock was first registered under Section 12 of the Exchange
Act) and compares changes thereafter (through December 31, 1997) in the market
price of the Common Stock with (i) the Nasdaq Market Index (a broad market
index) and (ii) the Advertising Agency Group (a published industry index). In
past years the Company has compared itself to the Textile Apparel Group (a
published industry index); however, the Company has recently decided to switch
indices and instead compare itself to the Advertising Agency Group. This change
is in connection with the Company's announcement on February 13, 1998, that the
Company plans to restructure its worldwide operations to focus its core business
in the promotional marketing industry rather than in the apparel business. For
comparison purposes, the Textile Apparel Group, which was used as of December
31, 1996, is also included on the graph.
The Nasdaq Market Index includes both U.S. and foreign companies listed on the
Nasdaq National Market and the Nasdaq SmallCap Market. The Advertising Agency
Group (MG Industry Group 91) consists of all companies listed on the New York
and American Stock Exchanges, and the Nasdaq National and SmallCap Markets that
derive a majority of their revenues (as shown in their annual reports) from
advertising. The Textile Apparel Group (MG Industry Group 57) consists of all
companies listed on the New York and American Stock Exchanges, and the Nasdaq
National and SmallCap Markets that derive a majority of their revenues (as shown
in their annual reports) from the manufacture of lines of clothing using woven
and knitted fabrics. UPON THE REQUEST OF ANY STOCKHOLDER, THE COMPANY WILL
FURNISH A LIST OF THE COMPANIES COMPRISING THE ADVERTISING AGENCY GROUP AND THE
TEXTILE APPAREL GROUP.
The performance of the indices is shown on a total return (dividend
reinvestment) basis; however, the Company 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.
Comparison of Annual Cumulative Return
Cyrk, Inc., Advertising Agency Group, Textile Apparel Group & Nasdaq Market
Index
[PERFORMANCE GRAPH OMITTED]
- ------------------------------------------------------------------------------------------------------
Jul-7-93 Dec-31-93 Dec-31-94 Dec-31-95 Dec-31-96 Dec-31-97
- ------------------------------------------------------------------------------------------------------
CYRK, INC. $100.00 $202.20 $363.74 $ 85.71 $114.29 $ 85.16
TEXTILE APPAREL GROUP INDEX $100.00 $104.25 $ 95.83 $121.52 $140.46 $149.22
NASDAQ MARKET INDEX $100.00 $107.50 $112.86 $146.39 $181.92 $222.52
ADVERTISING AGENCY GROUP INDEX $100.00 $114.44 $121.56 $165.56 $192.45 $284.79
12
15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report has been prepared by the Compensation Committee of the Board of
Directors of the Company and addresses the Company's compensation policies with
respect to the Chief Executive Officer and executive officers of the Company in
general. Each member of the Committee is a non-employee director.
The Company's overall policy for compensating executive officers is to establish
aggregate compensation levels sufficient to retain and attract executive
officers capable of leading the Company to achieve its business objectives. The
principal components of executive compensation are salary, bonus and stock
option grants. The Company also provides supplemental life insurance benefits to
its 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 the Company's 401(k)
plan.
The Company's compensation policy with respect to its Chief Executive Officer is
the same as its policy for executives generally. While the Committee considers
various factors in determining the amount of each component of compensation,
such determinations are ultimately based on the Committee's subjective judgment
as to what is reasonable and appropriate and not on established criteria or
formulas.
Salary: The 1993 salaries of Messrs. Shlopak and Brady were established by
agreement among the Company's stockholders. Immediately prior to the initial
public offering, these salaries were increased to $300,000 per year to reflect
the anticipated increase in their responsibilities as executive officers of a
publicly traded company and because of the Company's anticipated discontinuance
of the payment of cash dividends after the offering. These salaries were
subsequently ratified by the Compensation Committee and were not changed
materially in either 1994, 1995, 1996 or 1997. The salaries of Messrs. Angstadt
and Mammola were established based on the compensation paid to them during the
prior year and the Committee's subjective judgment as to their accomplishments.
The salary of Mr. Axelrod, who became an executive officer in 1997, was based on
his experience in the investment banking industry and the compensation paid to
him by the Company in his capacity as a consultant prior to his becoming an
employee of the Company.
Bonus: In 1997, a $50,000 bonus was paid to each of Messrs. Angstadt and
Mammola, and a $155,000 bonus was paid to Mr. Axelrod. The decision to pay these
bonuses was made by the Committee in its discretion and not on any established
or objective criteria.
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. The exercise price of
stock options is equal to the market price of the Common Stock on the date of
grant. The stock options granted to the executive officers in 1997 were based on
the Committee's subjective evaluation of their contributions and not on any
established or objective criteria.
Insurance: The split-dollar life insurance program for Messrs. Shlopak and
Brady was implemented by the Committee in 1994 in recognition of the substantial
contributions made by these two key officers in 1994 and in prior years. In
1995, the Committee implemented split-dollar life insurance programs for its
other executive officers. Messrs. Angstadt, Mammola and Axelrod participate in
this program. The Committee's decision to make this insurance available was
based on the Committee's subjective evaluation of their contributions and not on
any established or objective criteria.
13
16
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 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 the Company's policy of establishing
executive compensation at levels sufficient to retain and attract executive
officers, regardless of deductibility.
The Compensation Committee: Joseph W. Bartlett Joseph Anthony Kouba
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
GENERAL. Decisions concerning executive compensation are made by the
Compensation Committee of the Board of Directors, which during 1997 consisted of
Mr. Bartlett and through April 4, 1997, Mr. Marx; and effective April 5, 1997,
Mr. Kouba, neither of whom is or was an officer or employee of the Company or
any of its subsidiaries. In 1997, none of the executive officers of the Company
served on the board of directors of another entity other than as described
below.
REAL ESTATE MATTERS. Pursuant to a lease entered into in 1989, the Company
leases its principal executive offices located in Gloucester, Massachusetts from
PG Realty Trust, of which Mr. Shlopak is a trustee and beneficiary. In addition,
pursuant to a lease also entered into in 1989, the Company leases certain
combined office and warehouse space located in Gloucester, Massachusetts from
LPG Realty Trust, of which Mr. Shlopak is also a trustee and beneficiary. The
aggregate annual rent under these leases is $536,000. Both leases are triple net
and terminate in April 1999. Additionally, pursuant to a lease entered into in
January 1997, the Company leases other executive office and warehouse space in
Gloucester, Massachusetts from PG Realty Trust, of which Mr. Shlopak is a
trustee and beneficiary. The aggregate annual rent under the lease is $171,000.
The lease is triple net and terminates in December 1999.
The Company leases warehouse space in Danvers, Massachusetts under the terms of
a fifteen-year operating lease agreement which expires December 2011 from a
limited liability company which is owned by Messrs. Shlopak and Brady. The lease
is triple net and the aggregate annual rent under the lease is $462,000.
TRANSACTIONS WITH DIRECTORS. Louis Marx, Jr., a director and through April 4,
1997, chairman of the Compensation Committee of the Company, is a director of
Swiss Army Brands, Inc. ("Swiss Army Brands") which is a supplier of promotional
products to the Company. The Company purchased $9,904,000 of products from this
affiliate of Mr. Marx in 1997. The Company owns a 2.6% equity interest in Hudson
River Capital LLC, a venture capital company founded and controlled by Swiss
Army Brands. Messrs. Shlopak and Brady each own a .74% equity interest in Hudson
River Capital LLC. Messrs. Marx and Shlopak are directors of Hudson River
Capital LLC.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The firm of Coopers & Lybrand L.L.P., certified public accountants, served as
the Company's independent auditors for the fiscal year ended December 31, 1997
and, subject to stockholder approval, has been appointed by the Board of
Directors as the Company's independent auditors for the fiscal year ending
December 31, 1998.
14
17
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 Coopers & Lybrand L.L.P. is
not ratified by stockholders, the Board will reconsider its appointment.
A representative of Coopers & Lybrand L.L.P. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 1999 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 the Company, must
deliver such proposal to the Company at its principal executive offices no later
than December 17, 1998 and must meet the other requirements for inclusion set
forth in Rule 14a-8 under the Securities Exchange Act of 1934.
By Order of the Board of Directors
Patricia J. Landgren
Secretary
April 17, 1998
15
18
1201-PS-98
19
CRK61 2 DETACH HERE
PROXY
CYRK, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) revokes previous proxies given with respect to
the shares of the common stock of Cyrk, Inc. (the "Company") noted on the
reverse side hereof and registered in the name of the undersigned (the
"Shares"); (ii) acknowledges receipt of the Notice and Proxy Statement dated
April 17, 1998 in connection with the Annual Meeting of Stockholders of the
Company to be held on May 19, 1998 at 10:00 a.m. at the offices of Choate, Hall
& Stewart, Exchange Place, 53 State Street, 36th Floor, Boston, Massachusetts,
or any adjournment thereof; and (iii) appoints Gregory P. Shlopak, Patrick D.
Brady and Patricia J. Landgren, or any of them, each with full power to act
alone, the attorneys and proxies of the undersigned with power of substitution
to each, to vote all of the Shares that the undersigned is entitled to vote at
the 1998 Annual Meeting of Stockholders of the Company, and at any adjournment
thereof, with all the powers the undersigned would have had if personally
present at said meeting. Without limiting the generality of the authorization
hereby given, said proxies are, and each of them is instructed to vote or act
as follows on the matters to be voted upon set forth in said Proxy Statement.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS, YOU NEED ONLY SIGN AND DATE THIS PROXY ON THE REVERSE SIDE - YOU
NEED NOT MARK ANY BOXES.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
20
CRK61 1 DETACH HERE
[X] Please mark
votes as in
this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES AND "FOR" PROPOSAL 2.
FOR AGAINST ABSTAIN
1. Election of Directors. 2. Ratification of the appointment of [ ] [ ] [ ]
Coopers & Lybrand L.L.P. as the
NOMINEES: Patrick D. Brady and Company's independent auditors.
Joseph Anthony Kouba
3. In their discretion, the Proxies are authorized to vote upon such
FOR WITHHELD other business as may properly come before the meeting or any
BOTH FROM BOTH adjournment thereof.
[ ] NOMINEES [ ] NOMINEES
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
[ ] ___________________________________________
For both nominees except as noted above PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as your name appears hereon. Joint owners should
both sign. When signing as an attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, plese
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: __________