K-tel International, Inc.
2605 Fernbrook Lane North
Minneapolis, Minnesota 55447
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date February 18, 1997
To our shareholders:
The Annual Meeting of shareholders of K-tel International, Inc. will be
held at the Marquette Hotel, 7th & Marquette, Minneapolis, Minnesota on February
18, 1997 at 10:00 a.m., Central Time, for the following purposes:
(1) To elect directors.
(2) To approve appointment of Arthur Andersen LLP as independent
accountants.
(3) To act upon any other business that may properly come before
the meeting.
Only shareholders of record at the close of business on January 7,
1997 will be entitled to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting please read the attached Proxy Statement and
complete, sign, date and return your Proxy in the reply envelope provided as
soon as possible.
By Order of the Board of Directors
David Weiner
Secretary
Approximate Date of Mailing Proxy Material:
January 10, 1997
K-tel International, Inc.
-------------------------
Proxy Statement
Annual Meeting of Shareholders
to be held on
February 18, 1997
-----------------
The Board of Directors of K-tel International, Inc. (the "Company")
solicits the enclosed Proxy for the Annual Meeting of Shareholders to be held at
the Marquette Hotel, 7th & Marquette, Minneapolis, Minnesota on February 18,
1997 at 10:00 a.m., Central Time, and any adjournment thereof. Shares
represented by proxies in the form solicited will be voted. Proxies may be
revoked at any time before being exercised by filing with the Company's
Secretary a proxy dated at a later time or a written revocation dated after the
date of the proxy.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on January 7, 1997
will be entitled to vote at the meeting or any adjournment thereof. As of
October 18, 1996, the Company had outstanding 3,748,822 shares of Common Stock.
Each share of common stock has one vote.
SECURITY OWNERSHIP
The following table sets forth, as of the record date, all persons
known by the Company to be the owner, of record or beneficially, of as much as
approximately five percent of the outstanding common stock of the Company, and
such ownership by all officers and directors as a group.
Number of Common Shares Percent of
Name and Address Owned Beneficially Class
- ---------------- ----------------------- ----------
Philip Kives 2,814,360 75.1%
220 Saulteaux Crescent
Winnipeg, Manitoba R3J 3W3
Canada
All officers and directors 2,994,636 (1) 76.5%
as a group (6 persons)
- --------------------------
(Footnotes on following page.)
(1) Includes 166,375 shares with respect to which the officers and
directors have rights to acquire beneficial ownership through the
exercise of stock options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and any person who owns more than 10% of
the Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Specific due dates have
been established by the SEC for the filing of these reports and the Company is
required to disclose in this Proxy Statement any failure to file the reports by
these dates. Based upon (i) the copies of the Section 16(a) reports that the
Company received from such persons for their 1996 fiscal year transactions and
(ii) the written representations received from such persons that no annual Form
5 reports were required to be filed for the 1996 fiscal year, the Company
believes that there has been compliance with all Section 16(a) filing
requirements applicable to such directors, executive officers and beneficial
owners of 10% or more of the Company's outstanding common stock, except that Mr.
Kives filed a late Form 4 with respect to shares which he acquired from Mickey
Elfenbein, the Company's former President, in connection with the termination of
Mr. Elfenbein's employment with the Company and other transactions between them.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the executiv
officers of the Company as of.
Name of Officer Age Positions and Offices Held
- --------------- --- --------------------------
Philip Kives 67 Chairman of the Board,
Chief Executive Officer
David Weiner 39 President and Secretary
Jeffrey Koblick 49 Senior Vice President,
Purchasing and Operations
Mark Dixon 37 Vice President - Finance.
Chief Financial Officer/Treasurer
Messrs. Kives, Koblick and Dixon have held various offices and/or
managerial positions with the Company for more than the past five years. Mr.
Kives was reappointed Chief Executive Officer of the Company on October 16,
1995. Mr. Weiner joined K-tel on December 16, 1993 and held the position of Sr.
Vice President of Corporate Development until July 12, 1996 and became President
on September 16, 1996 after a break in service of approximately two months.
Prior to joining the Company, and since 1989, Mr. Weiner held various managerial
positions within the firm of Deloite & Touche Management Consulting.
<TABLE>
<CAPTION>
PROPOSAL NUMBER ONE
Election of Directors
Six (6) directors are to be elected at the meeting, each for a term of
one year or until his successor is elected and qualified. All the persons listed
below are now serving as directors of the Company. The Board of Directors
proposes for election all of the nominees listed below:
Common Shares
Beneficially
Principal Occupation Owned as of
Name and Age during the past five Director October 18, Percent
of Nominee years Since 1996 of Class
- ------------------ ----------------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Philip Kives Founder of the Company; 1968 2,814,360 75.1%
(67) Chairman of the Board
of the Company,
Chief Executive Officer
David Weiner President and Secretary 1996 100,600 (1) (2)
(39)
Mark Dixon Vice President - Finance, 1993 15,126 (1) (2)
(37) Chief Financial Officer/Treasurer
of the Company
Jeffrey Koblick Sr. Vice President - Purchasing 1996 64,550 (1) (2)
(49) and Operations
Garry Kieves CEO - Anagram International, Inc. 1996 ----- -----
(48 )
Louis Scheimer CEO - Lou Scheimer Productions, Inc. 1996 ----- -----
(68)
- ----------------------
(1) Includes shares pursuant to options of which Mr. Weiner has 100,000,
Mr. Dixon has 15,125 and Mr. Koblick has 51,250. No options
are held by Messrs. Kives, Kieves and Scheimer.
(2) Represents less than 1%.
</TABLE>
Garry Kieves is the nephew of Philip Kives.
Philip Kives founded the Company in 1968 and has served as its Chairman
of the Board since the Company's inception. In addition, Mr. Kives was
reappointed the Chief Executive Officer on October 16, 1996.
David Weiner is President and Secretary of the Company. Mr. Wiener
joined the Company in 1993 and became a corporate officer in 1994 and served in
that capacity until July 1996. Mr. Weiner was rehired as President in September
1996. Prior to joining the Company, Mr. Weiner held various positions within the
firm of Deloite & Touche Management Consulting since 1989.
Mark Dixon is Vice President Finance - Chief Financial Officer/
Treasurer of the Company. Mr. Dixon joined the Company in 1983 and became a
corporate officer in 1989. Prior to joining K-tel, Mr. Dixon was with KPMG Peat
Marwick, St. Paul, MN, earning his CPA in 1981. Mr. Dixon is a member of the
Minnesota Society of CPA's and the AICPA.
Jeffrey Koblick is Sr. Vice President - Purchasing and Operations of
the Company. Mr. Koblick joined the Company in 1970 and became a corporate
officer in 1978. Mr. Koblick has served K-tel International, Inc. in various
capacities and was appointed Sr. Vice President - Purchasing and Operations in
1986.
Garry Kieves is the founder and Chief Executive Officer of Anagram
International, Inc., a closely held manufacturer and distributor of metallic
(mylar) balloons. Mr. Kieves founded Anagram in Belgium in 1976 and moved
manufacturing to the United States in 1980. Anagram has become the world's
largest manufacturer of metallic (mylar) balloons with its corporate
headquarters and manufacturing plant located in Eden Prairie, Minnesota. From
its Minnesota facility, the Company markets its products in over 80 countries
around the world. To support its worldwide marketing effort, sales offices and
distribution facilities are located in London, Frankfurt, Madrid, Paris, Tokyo,
Mexico City, Sydney, and Toronto.
Louis Scheimer is President and founder of Lou Scheimer Productions,
Inc., an animated film production company formed in 1984. Lou Scheimer
Productions is currently involved in program acquisition through international
sources for U.S. release. In 1961, Mr. Scheimer founded Filmation Associates,
Inc. a film production company responsible for such animated films and shows as
Superman, Batman, Aquaman and Fat Albert with Bill Cosby, the longest running
(1972-1984) animated series of all time. Mr. Scheimer was CEO and President of
Filmation Associates from 1961 until 1984, at which time the Company was sold.
Mr. Scheimer has received numerous industry awards (an Emmy, a Scott Neuman and
a Christopher) and is a member of the Motion Picture and Television Academies.
During fiscal 1996 the Company's Board of Directors took action by way
of Unanimous Actions in writing and held one formal meeting. At its meeting on
February 13, 1996, the Board of Directors elected Mr. Kieves as outside director
and member of the compensation and audit committees of the Board of Directors
and Mr. Koblick was elected a director. Mr. Weiner was appointed as a director
by unanimous action on October 29, 1996 and Mr. Scheimer was appointed as a
director and member of the compensation and audit committees by unanimous action
on October 29, 1996.
The Audit Committee consists of Messrs., Kieves and Scheimer. The
principal functions of the Audit Committee are to (i) recommend to the Board of
Directors the independent public accountants to act as the Company's independent
auditors; (ii) discuss with representatives of management and the independent
auditors the scope and procedures used in auditing the records of the Company;
and (iii) review the financial statements of the Company. The Audit Committee
held no meeting in fiscal 1996.
The Compensation Committee consists of Messrs. Kives, Kieves and
Scheimer. The principal functions of the Compensation Committee are to review
and recommend compensation for executive personnel and to administer the
Company's stock option and other compensation plans. The Compensation Committee
held no meeting in fiscal 1996.
Board members who are not also officers or employees of the Company
receive a fee of $1,000 for each regular meeting attended and an annual
directors fee of $12,000 to be paid on a quarterly basis at the end of each
quarter. The Company paid director fees of $66,000 during fiscal 1996.
All shares represented by proxies will be voted for the election of the
foregoing nominees who have indicated a willingness to serve, if elected unless
otherwise provided on the proxy. If any such nominee should withdraw or
otherwise become unavailable for reasons not presently known, the Board of
Directors may designate substitute nominees, in which event the shares
represented by proxy cards returned to the Company will be voted for such
substitute nominees unless an instruction to the contrary is indicated on the
proxy card.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee establishes the general compensation
policies of the Company and specific compensation for each executive officer of
the Company, and administers the stock option and other compensation plans. The
Compensation Committee attempts to make the compensation packages of the
executive officers of the Company sufficient to attract and retain persons of
exceptional quality while at the same time including effective incentives to
motivate Company executives to perform as necessary to continue the success and
growth of the Company.
Management Incentive Plan
The Company has a management incentive plan under which management and
other key employees may be awarded annual bonuses based upon the achievement of
financial goals and objectives and an assessment of personal performance during
the year. Approximately 25 employees currently participate in the plan. Payments
made to the executive officers under the management incentive plan are included
in the Cash Compensation Table. Pursuant to the plan, no bonuses were earned by
Messrs., Dixon and Weiner for fiscal 1994 or fiscal 1995. Mr. Koblick earned a
bonus of $58,353 for fiscal 1994 which relates primarily to the performance by
the Company's business in the U.S. Pursuant to the plan, no bonus was earned by
Mr. Koblick for fiscal 1995. Pursuant to the plan, no bonuses were earned by
Messrs., Weiner, Dixon and Koblick for fiscal 1996.
Retirement Plan
Retirement benefits for full-time U.S. based employees of the Company
are provided under a retirement savings plan qualified under Section 401(k) of
the Internal Revenue Code. Participants may elect to contribute, through salary
reductions, up to 20% of their salary to the retirement plan up to a maximum of
$9,500 per year, and the Company may make matching contributions up to 50% of
the first 6% of the participants contributions. Employee contributions vest
immediately; employer contributions vest 50% after one year of service and 100%
after two years. Distributions upon death or termination of employment are
subject to certain restrictions in order that federal income tax regulations be
complied with and the amounts vested remain on a tax deferred basis until
retirement. Amounts contributed by the Company as matching contributions for the
executive officers under the 401(k) plan are included in the Cash Compensation
Table. The Company made matching contributions of $28,109.87 in fiscal 1996.
Stock Options
On July 15, 1987 the Board of Directors adopted the K-tel
International, Inc. Stock Incentive Plan for officers and other key employees of
the Company. The shareholders approved the plan on December 8, 1987. The stock
incentives may take the form of incentive stock options, nonqualified stock
appreciation rights and/or restricted stock. A total of 350,000 shares of the
Company's common stock were reserved for issuance upon exercise of the options.
The Board of Directors has sole authority to determine the employees to whom
options and awards are granted, the duration of the exercise period and any
other matters arising under the plan. The Compensation Committee expects to
review option grants on an annual basis.
As of October 18, 1996 there were 142,125 outstanding incentive stock
options granted under the plan with 134,624 options exercisable and 217,500
nonqualified stock options granted under the plan with 110,625 options
exercisable. As of October 18, 1996 there were 54,000 options available to be
granted under the plan.
During fiscal 1996, no options were granted to the executive officers.
In September 1996, the Board of Directors granted Mr. Weiner a non-qualified
stock option on 200,000 shares at an exercise price of $4.00 per share in
connection with his hiring as the President of the Company after a break in
service of approximately two months. The option vests 100,000 shares on the date
of grant and in three equal installments on the first three anniversaries of the
date of grant.
Chief Executive Officer Compensation
Mr. Kives was reappointed as Chief Executive Officer October 16, 1995.
Mr. Kives does not receive any compensation for his services to the Company.
Philip Kives Garry Kieves Louis Scheimer
Compensation Committee Compensation Committee Compensation Committee
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by the Chief Executive Officer and each of the other highest paid
executive officers of the Company for services in all capacities to the Company
and its subsidiaries during the year ended June 30, 1996.
Long Term
Annual Compensation Compensation
---------------------------------- ------------
Name and Awards All Other
Principal Position(s) Year Salary Bonus Options Compensation
- --------------------- ---- ------ ------ ------------ ------------
<S> <C> <C> <C> <C>
Philip Kives 1996 $ -- $ -- -- $ --
Chief Executive Officer 1995 $ -- $ -- -- $ --
1994 $ -- $ -- -- $ --
Mickey Elfenbein 1996 $203,888 $ -- -- $101,466 (1)
Chief Executive Officer 1995 $228,250 $ -- -- $ 2,022
(until October 16, 1995) 1994 $200,000 $ -- 75,000 $ 866
President and Secretary
(until March 1, 1996)
Jeffrey Koblick 1996 $195,000 $ -- -- $ 1,210
Senior Vice President - 1995 $177,482 $ -- -- $ 2,022
Purchasing and Operations 1994 $167,500 $ 58,353 5,000 $ 1,275
David Weiner 1996 $146,250 $ -- -- $ 495
Vice President - Corporate 1995 $117,500 $ -- -- $ 1,366
Development 1994 $ 59,583 $ -- 10,000 $ 275
Mark Dixon 1996 $115,000 $ -- -- $ 1,260
Chief Financial Officer, 1995 $ 97,500 $ -- -- $ 1,221
Vice President - Finance 1994 $ 88,750 $ -- 7,500 $ 681
and Treasurer
- --------------------------
(1) Other compensation for the 1994, 1995 and 1996 fiscal years consists of the
Company contributions under the 401(k) plan, except for $100,000 paid to Mr.
Elfenbein in 1996 in connection with the termination of his employment.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No option grants were made to any officer named in the Summary
Compensation Table, during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, as to each executive officer named in
the Summary Compensation Table, certain information with respect to stock
options exercised during the last fiscal year and unexercised options held as of
June 30, 1996.
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Year-End (#) Fiscal Year-End (1)
------------------------------ ----------------------------
Shares Acquired Value
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Weiner 0 0 7,500 2,500 $ 0 $ 0
Jeffrey Koblick 0 0 51,250 1,250 $111,600 $ 0
Mark Dixon 7,000 $ 17,500 15,125 1,875 $ 19,968 $ 0
- ---------------
(1) Market value of underlying securities at year-end minus the exercise price.
</TABLE>
Certain Transactions
During fiscal 1996, the Company purchased $1,050,000 of consumer
convenience product from K-tel International, Ltd., another company controlled
by the Chairman of the Board. The purchase prices for these products were at
prices comparable to transactions with a third party. However, the payment terms
are open-ended as a method of financing the Company's consumer convenience
product expansion in Europe and the U.S. There was no outstanding balance owed
by the Company to this affiliate at June 30, 1996. The Company reimbursed such
other company $4,000 during fiscal 1996 for warehousing and shipping services
provided in Canada and travel, telephone and legal fees incurred on behalf of
the Company.
The Company sold approximately $217,000 of consumer convenience product
in fiscal 1996 to K-tel International, Ltd. and K-tel International (Canada),
Inc., both affiliates controlled by the Company's Chairman of the Board. The
prices for these products were comparable to prices in transactions with third
parties. There was no outstanding balance owed by these affiliates to the
Company at June 30, 1996.
COMPANY STOCK PRICE PERFORMANCE
The following Stock Price Performance Graph compares the cumulativ
total return * of the Company, the S&P 500 Stock Index and peer groups for a
five year period:
[GRAPHIC OMITTED]
Z-Trac - Zacks total return annual comparison - page 1
================================================================================
Prepared for ----------: K-Tel Internati
Prepared on -----------: August 26, 1996
5 year cumulative total
================================================================================
Starting
Basis
Description 1991 1992 1993 1994 1995 1996
- ----------------------- ------- ------- ------- ------- ------- -------
K-Tel Internati(%) 294.74 266.67 -42.42 -23.68 12.06
K-Tel Internati($) $100.00 $394.74 $1,447.37 $833.34 $635.97 $712.64
S & P 500(%) 13.41 13.63 1.41 26.07 26.00
S & P 500($) $100.00 $113.41 $128.87 $130.68 $164.75 $207.59
Peer Group Only(%) -88.18 -26.02 29.18 -11.90 29.69
Peer Group Only($) $100.00 $11.82 $8.74 $11.29 $9.95 $12.90
Peers + Your Company(%) -83.47 28.34 -8.77 -15.83 24.37
Peers + Your Company($) $100.00 $16.53 $21.22 $19.36 $16.30 $20.27
* Cumulative total return assumes quarterly reinvestment of dividends.
Note: Data incomplete through last fiscal year.
Note: Corporate Performance Graph with peer uses peer group only performance
(excludes your company).
Note: Peer group indices use begining of period market capitalization weighting.
PROPOSAL NUMBER TWO
Independent Public Accountants
Arthur Andersen & Co., independent public accountants for the Company
for fiscal 1996, have been selected by the Board of Directors for fiscal 1997. A
representative of Arthur Andersen LLP is expected to be present at the 1996
Annual meeting and will have an opportunity to make a statement, if such
representative desires to do so, and will be available to respond to appropriate
questions.
The Board of Directors recommends that shareholders vote "FOR" Arthur
Andersen LLP as independent public accountants. The affirmative vote of a
majority of the shares voting at the meeting is required for approval.
All shares represented by proxies will be voted for the appointment of
the foregoing unless otherwise provided on the proxy.
ADDITIONAL INFORMATION
General
As of the date of this Proxy Statement, management knows of no matters
that will be presented for determination at the meeting other than those
referred herein. If any other matters properly come before the meeting calling
for a vote of shareholders, it is intended that proxies in the enclosed form
will be voted in accordance with the judgment of the individual voting the
proxies.
Expenses in connection with the solicitation of proxies will be paid by
the Company. Proxies are being solicited principally by mail. In addition,
directors, officers and regular employees of the Company may solicit proxies
personally by telephone or by special letter. The Company may reimburse
brokerage firms and others for their expenses in forwarding proxy materials to
the beneficial owners of stock of the Company.
The Company's Annual Report for the year ended June 30, 1996
accompanies this proxy statement.
Shareholder Proposal
Any shareholders proposals for the Company's 1998 annual meeting must
be received by the Company's Secretary by September 13, 1997 in order to be
included in the proxy statement. The proposals must comply with all applicable
statutes and regulations.
By Order of the Board of Directors
David Weiner
Secretary
Minneapolis, Minnesota
January 10, 1997
K-TEL INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Philip Kives and David Weiner, or either of
them, as proxies, each with full power of substitution, to represent and to
vote, as designated below, all of the undersigned's shares of common stock of
K-tel International, Inc. which the undersigned would be entitled to vote at the
Annual Meeting of Stockholders to be held on February 18, 1997 at 10:00 a.m. and
at any adjournment thereof.
1. Election of Directors: For all nominees listed below
(except as marked on the contrary below)
WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
Nominees: Philip Kives, David Weiner, Mark Dixon, Garry Kieves,
- --------- -----------------------------------------------------
Jeffrey Koblick, Lou Scheimer
-----------------------------
2. Approve the appointment of Arthur Andersen LLP as Company's Independent
Accountants
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
3. In their discretion on any other matter that may properly come before the
meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED "FOR"
PROPOSALS 1 AND 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
Please sign exactly as your name or names appear below. If a partnership, sign
in Partnership name by authorized person. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian give your full title as such. If a corporation, sign the full corporate
name by a duly authorized officer.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Date_____________________________________
Signatures(s):
_________________________________________
_________________________________________
