GRAND TOYS INTERNATIONAL, INC.
1710 Route Transcanadienne
Dorval, Quebec, H9P 1H7
Canada
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 22, 1997
To the Shareholders:
The Annual Meeting of the Shareholders of Grand Toys International, Inc. (the
"Company") will be held at the offices of the Company, 1710 Route
Transcanadienne, Dorval, Quebec, Canada, on Thursday, May 22, 1997, at 11:00a.m.
(Montreal time), for the following purposes:
1. To elect directors to serve until the 1998 Annual Meeting of Shareholders or
until their successors are elected and shall qualify (Proposal 1);
2. To consider and act upon a proposal to ratify the appointment by the Board
of Directors of KPMG as independent certified public accountants for the
Company for the 1997 fiscal year (Proposal 2); and
3. To transact such other business as may properly be brought before the
Meeting or any adjournment.
Shareholders of record at the close of business on April 10, 1997 are entitled
to notice of and to vote at the meeting and any adjournment thereof.
You are invited to attend the Meeting. It is desired that as many Shareholders
as practicable be represented at the meeting. Consequently, whether or not you
now expect to be present, you are requested to date and sign the enclosed proxy
and return it promptly to the Company, in the accompanying envelope which
requires no postage if mailed in the United States, in order that your vote
can be recorded. This may save the Company the expense of further proxy
solicitation.
YOU MAY REVOKE THE PROXY AT ANY TIME BEFORE THE AUTHORITY GRANTED THEREIN IS
EXERCISED.
By order of the Board of Directors,
RON GOLDENBERG
Secretary
Dated: Dorval, Quebec, Canada
April 22, 1997
<PAGE>
GRAND TOYS INTERNATIONAL, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Grand Toys International, Inc. (the "Company") of
proxies to be voted at the Annual Meeting of Shareholders of the Company (the
"Meeting") to be held on Thursday, May 22, 1997 at 11:00 a.m. (Montreal time)
at the principal offices of the Company, 1710 Route Transcanadienne, Dorval,
Quebec, CANADA. All properly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting.
Any proxy may be revoked at any time before it is exercised by giving notice in
writing to the Secretary of the Company, by granting a proxy bearing a later
date or by voting in person.
References to the Company in this Proxy Statement also include Grand Toys
(U.S.) Ltd. ("Grand U.S."), a holding company and a subsidiary of the
Company, and Grand Toys Ltd., a Canadian operating company and a subsidiary
of Grand U.S. ("Grand Canada").
The Board of Directors does not intend to present at the Meeting any matters
other than those set forth in this Proxy Statement, nor does the Board of
Directors know of any other matters that may come before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their judgment.
As of April 10, 1997, the record date for determination of shareholders
entitled to notice of and to vote at the Meeting, there were 7,887,986 shares
of the Common Stock of the Company (the "Common Stock") outstanding which is
the only outstanding class of voting securities outstanding as of the record
date. Each outstanding share is entitled to one vote on all matters that may
come before the Meeting. The Company expects to mail this Proxy Statement
together with a proxy, the Notice of Annual Meeting, and the Company's Annual
Report to its shareholders on or about April 22, 1997.
Any shareholder giving a proxy may revoke it any time prior to its use at the
Meeting by giving written notice of revocation to the Secretary of the
Company; mere attendance at the Meeting without such notice will not revoke
the proxy. Properly executed proxies will be voted in the manner directed by
a shareholder and, if no direction is made, will be voted in favor of the
election of the management nominees for election as directors and in favor of
Proposal 2. An abstention from voting on a matter by a shareholder present in
person or represented by proxy at the Meeting and a broker non-vote will not
be counted as a vote "for" or
<PAGE>
"against" the matter in question, but will be
counted for purposes of determining the presence or absence of a quorum.
The Company's Bylaws provide that shareholders holding a majority of the
shares of Common stock issued and outstanding and entitled to vote thereon
shall constitute a quorum at meetings of shareholders. The affirmative vote
of a majority of the votes of Common stock voting together as a single class
present in person or represented by proxy at the Meeting is necessary for the
election of directors and approval of Proposal 2.
Only shareholders of record at the close of business on April 10, 1997 will
be entitled to vote at the Meeting or any adjournment or adjournments thereof.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE SHAREHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE
PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED
PROXY TO ENSURE THAT YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT
THE MEETING AND DESIRE TO DO SO, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON BY GIVING WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. PLEASE
RETURN YOUR EXECUTED PROXY PROMPTLY.
EXCEPT AS OTHERWISE INDICATED, REFERENCES IN THIS PROXY STATEMENT TO DOLLARS
OR "$" ARE UNITED STATES DOLLARS.
Principal Shareholders
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 10, 1997 by (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the outstanding shares of its Common Stock, (ii)
each director of the Company and director nominees, (iii) each executive
officer of the Company and (iv) all executive officers and directors of the
Company as a group. Except as indicated in the footnotes to this table, the
persons named in this table have sole voting and investment power with respect
to all shares of Common Stock shown as benefically owned by them.
3
<PAGE>
<TABLE>
Name and Address of Beneficial Owner Number of Shares Percent of Class
Beneficially Owned and Voting
Power (1)
<S> <C> <C>
Amgo Investments, Inc.
1710 Rte. Transcanadienne 4,535,000(2) 49.62%
Dorval, Quebec, Canada H9P 1H7
Stephen Altro 5,566,983(3) 54.73%
1710 Rte. Transcanadienne
Dorval, Quebec
Canada, H9P 1H7
David Mars 5,566,983(4) 54.73%
1710 Rte. Transcanadienne
Dorval, Quebec
Canada H9P 1H7
Ron Goldenberg 4,602,391(5) 50.00%
1710 Rte. Transcanadienne
Dorval, Quebec
Canada H9P 1H7
Elliot L. Bier 147,500(6) 1.84%
999 Boul. de Maisonneuve Quest
Montreal, Quebec
Canada H3A 3L4
James B. Rybakoff 285,000(7) 3.49%
780 Third Avenue
New York, NY 10017
Kam Toys & Novelty Manufacturing Ltd. 1,000,000(8) 11.25%
6F Guardforce Center
3 Hok Yueun Street East
Hunghom, Kowloon
Hong Kong
All Executive officers and 6,854,297(9) 58.57%
directors as a group (five
persons)
</TABLE>
(1) Computed on the basis of 7,887,986 shares of Common Stock and, with
respect to those persons holding warrants or options to purchase Common Stock
excercisable within sixty (60) days, the number of shares of Common Stock
that are issuable upon the exercise thereof.
(2) Includes options to purchase 1,250,000 shares of Common Stock exercisable
within sixty (60) days. Amgo Investments, Inc. ("Amgo") is controlled by
corporations controlled by David Mars, Stephen Altro and Ron Goldenberg.
(3) Includes options to purchase 2,281,983 shares of Common Stock exercisable
within sixty (60) days. Options to purchase 1,250,000 of such shares are
owned of record by Amgo. Mr. Altro's interest in Amgo is owned of record by
2870304 Canada, Inc., a privately held corporation controlled by Mr. Altro,
of which his wife and children, the only other shareholders of such
corporation, are minority shareholders. Mr. Altro disclaims beneficial
ownership of (i) 1,376,744 shares of Common Stock and options to purchase
523,750 shares of Common Stock exercisable within sixty (60) days owned by
Amgo and beneficially owned by Mr. Mars, (ii) 354,452 shares of Common Stock
and options to purchase 135,000
4
<PAGE>
shares of Common Stock exercisable within sixty (60) days
owned by Amgo and beneficially owned by Mr. Goldenberg and (iii) 177,060
shares of Common Stock and options to purchase 67,500 shares of Common Stock
exercisable within sixty (60) days owned by Amgo and beneficially owned by an
officer of Grand Canada. See "Executive Compensation".
(4) Includes options to purchase 2,281,983 shares of Common Stock exercisable
within sixty (60) days. Options to purchase 1,250,000 of such shares are
owned of record by Amgo. Mr. Mars' interest in Amgo is owned of record by
2884330 Canada, Inc., a privately held corporation controlled by Mr. Mars, of
which his wife and children, the only other shareholders of such corporation,
are minority shareholders. Mr. Mars disclaims beneficial ownership of (i)
1,376,744 shares of Common Stock and options to purchase 523,750 shares of
Common Stock exercisable within sixty (60) days owned by Amgo and
beneficially owned by Mr. Altro, (ii) 354,452 shares of Common Stock and
options to purchase 135,000 shares of Common Stock exercisable within sixty
(60) days owned by Amgo and beneficially owned by Mr. Goldenberg and (iii)
177,060 shares of Common Stock and options to purchase 67,500 shares of
Common Stock exercisable within sixty (60) days owned by Amgo and
beneficially owned by an officer of Grand Canada. See "Executive Compensation".
(5) Includes options to purchase 1,317,291 shares of Common Stock exercisable
within sixty (60) days. Options to purchase 1,250,000 of such shares are
owned of record by Amgo. Mr. Goldenberg's interest in Amgo is owned of
record by 2884348 Canada, Inc., a privately held corporation controlled by
Mr. Goldenberg, of which his wife, the only other shareholder of such
corporation, is a minority shareholder. Mr. Goldenberg disclaims beneficial
ownership of (i) 1,376,744 shares of Common Stock and options to purchase
523,750 shares of Common Stock exercisable within sixty (60) days owned by
Amgo and beneficially owned by Mr. Altro, (ii) 1,376,744 shares of Common
Stock and options to purchase 523,750 shares of Common Stock exercisable
within sixty (60) days owned by Amgo and beneficially owned by Mr. Mars and
(iii) 177,060 shares of Common Stock and options to purchase 67,500 shares of
Common Stock exercisable within sixty (60) days owned by Amgo and
beneficially owned by an officer of Grand Canada. See "Executive Compensation".
(6) Represents options to purchase 147,500 shares of Common Stock exercisable
within sixty (60) days. See "Election of Directors".
(7) Represents options and warrants to purchase 285,000 shares of Common
Stock exercisable within (60) days, 275,000 of such warrants are owned of
record by Akin Bay Company of which Mr. Rybakoff is a controlling member.
See "Certain Transactions".
(8) Represents options to purchase 1,000,000 shares of Common Stock
exercisable within sixty (60) days.
(9) See footnotes (1)-(7).
As of April 10, 1997, 4,132,118 shares of Common Stock (approximately 52.4%
of the outstanding Common Stock) were owned of record by Cede & Co., a
nominee of the Depository Trust Company. The Company has been advised by
each of the firms which Cede & Co. indicates own more than 5% of the Common
Stock that, except as set forth above, as of the most recent practical date
it did not hold more than 5% of the Company's outstanding voting securities
for any single person or, to its knowledge, any group.
5
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
Pursuant to the Bylaws of the Company, the number of directors constituting
the full Board of Directors has been fixed by the Board at five. At the
Annual Meeting, action will be taken to elect a Board consisting of the five
incumbent directors, Stephen Altro, David Mars, Ron Goldenberg, Elliot L.
Bier and James B. Rybakoff. All directors serve until the next Annual
Meeting of Shareholders and until their respective successors shall be duly
elected and shall qualify.
Each of the incumbent directors has consented to be named a nominee in this
Proxy Statement and to serve as a director if elected. It is the intention
of the persons named in the accompanying form of proxy, unless shareholders
otherwise specify by their proxies, to vote for the election of the nominees
named below. The Board of Directors has no reason to believe that any of the
persons named will be unable or unwilling to serve as a director. Should any
of the nominees be unable or unwilling to serve, it is intended that the proxies
will be voted for the election of a substitute nominee or nominees selected by
the Board of Directors. There are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which he is or was selected as a director or officer of the Company.
Set forth below is the name, age, principal occupation during the past five
years and other information concerning each director and nominee.
<TABLE>
Name Age Position with the Company
<S> <C> <C>
Stephen Altro 58 Chairman, President and Director
David Mars 58 Vice Chairman and Director
Ron Goldenberg 41 Vice President, Chief Financial
Officer and Director
Elliot L. Bier 47 Director
James B. Rybakoff 30 Director
</TABLE>
Stephen Altro has been the President and a director of the Company since July
20, 1993. He has held similar positions with Grand Canada, the Company's
Canadian operating subsidiary, for over 30 years. Mr. Altro co-founded Grand
Canada with David Mars more than 30 years ago.
David Mars has been the Vice Chairman since 1995 and a director of the
Company since July 20, 1993. He has held similar positions with Grand Canada
for over 30 years. Mr. Mars co-founded Grand Canada with Stephen Altro more
than 30 years ago.
Ron Goldenberg has been Vice President, Chief Financial Officer and a
director of the Company since July 20, 1993. Prior to such time, he was the
Vice President of Finance and Chief Financial Officer of Grand Canada for
over seven years. Mr. Goldenberg is a chartered public accountant in Canada.
Elliot L. Bier has been a director of the Company since July 20, 1993. He
has been a practicing attorney in Montreal for the last 19 years. He is a
senior partner in Adessky Poulin, the Company's Canadian legal counsel.
James B. Rybakoff is the President of Akin Bay Company, an investment bank
and brokerage firm, which Mr. Rybakoff co-founded in 1990. From 1992 to 1993
he served as an associate for Zilkha & Company, an international mergers and
acquisition investment banking and strategic planning firm.
6
<PAGE>
Directors are elected annually by the shareholders and hold office until the
next annual meeting and until their respective successors are elected and
qualified. Executive officers are elected by and serve at the discretion of
the Board of Directors. There are no family relationships among any of the
Company's directors and executive officers.
Each of Messrs. Altro, Mars and Goldenberg were executive officers of Grand
Group Inc., the Company's former United States Operating Company ("Grand
Group"). On January 4, 1996, an order for relief under Chapter 7 of the
United States Bankruptcy Code was entered against Grand Group, at which time
a trustee was appointed to supervise its liquidation.
Directors do not get paid any compensation for attendance at directors'
meetings or for attending or participating in any committee meetings, but are
eligible to participate in the Company's Stock Option Plan.
Directors who are also officers of the Company are not paid any compensation
for attendance at directors' meetings or for attending or participating in
any committee meetings. Non-employee directors of the Company are
compensated for their services and attendance at meetings through the
automatic grant of options pursuant to the Company's Amended and Restated
1993 Stock Option Plan.
One director (Mr. Bier) who is not an employee of the Company, was granted
options outside of the Company's Stock Option Plan in July 1993, January 1994
and April 1994, for the purchase of 10,000 shares of Common Stock at an
exercise price of $2.25 per share, 2,500 shares of Common Stock at an
exercise price of $5.22 per share and 2,500 shares of Common Stock at an
exercise price of $7.00 per share, respectively. Pursuant to the Company's
Stock Option Plan, Mr. Bier is automatically granted 2,500 options to purchase
shares of Common Stock on a quarterly basis. The exercise prices for shares of
stock granted to Mr. Bier under the Stock Option Plan range from $0.78 -
$6.37 per share. In October 1996, in consideration for assistance that Mr.
Bier provided in connection with the refinancing of the Company's working
capital lines of credit and other assistance that Mr. Bier provided to the
Company, Mr. Bier was granted additional options to purchase Common Stock at
an exercise price of $0.95 per share. The options currently are exercisable
for 100,000 shares of Common Stock. However, the options are intended to
be non-dilutive, representing 1.28% of the issued and outstanding Common Stock
of the Company on a fully diluted basis. Accordingly, the number of shares
issuable upon exercise of the options are subject to increase or decrease
based upon the number of shares of the Company's Common Stock outstanding
from time to time.
One director (Mr. Rybakoff) who is not an employee of the Company, was
automatically granted 2,500 options to purchase shares of Common Stock on a
quarterly basis. The exercise prices for shares of stock granted to Mr.
Rybakoff under the Stock Option Plan range from $0.78 - $1.34. For
information concerning additional compensation paid to Mr. Rybakoff or his
affiliates, see "Certain Transactions".
Certain Transactions
During 1995 and 1996 Adessky Poulin, a law firm in which Mr. Bier is a
partner, has provided legal services to the Company totalling $26,300 and
$114,700 respectively.
On June 26, 1995, the Company entered into an agreement with Akin Bay
Company, LLC ("Akin Bay") to assist it in securing a new credit facility for
Grand Canada and to provide certain related financial advisory services,
which agreement was amended on January 11, 1996. James Rybakoff, a director
of the Company, is President and owns an 80% membership interest in Akin Bay.
On March 28, 1996, Grand Canada entered into a new credit facility and Akin
Bay received a fee of Canadian $175,000, of which Canadian $131,250 was paid
in 1996 and the balance is due to be paid during fiscal 1997. In addition,
the Company issued and delivered to Akin Bay warrants to purchase 275,000
shares of the Company's Common Stock at a price of $1.47 exercisable until
March 31, 2001.
7
<PAGE>
During 1996, Akin Bay wrote a research report on the Company. The Company
paid Akin Bay a fee of $15,000 for such report.
The Company believes that its arrangements with Adessky Poulin and Akin Bay
Company LLC were on terms comparable to those that could have been obtained
from unaffiliated sources.
The Company believes that the terms of all of the transactions discussed in
this section involving transactions between the Company and its affiliates
were on terms comparable to those that could have been obtained from
unaffiliated sources.
The Committees
The Company has an Audit Committee, a Compensation Committee, and a Stock
Option Committee. The Board of Directors does not have a Nominating
Committee, and the usual functions of such a committee are performed by the
entire Board of Directors.
Audit Committee. The functions of the Audit Committee include
recommendations to the Board of Directors with respect to the engagement of
the Company's independent certified public accountants and the review of the
scope and effect of the audit engagement. The Audit Committee, whose members
are Mr. Bier and Mr. Rybakoff did not hold any meetings but took action by
written consent two times during the 1996 fiscal year.
Compensation Committee. The function of the Compensation Committee is to
make recommendations to the Board with respect to compensation of management
employees. In addition, the Compensation Committee makes recommendations to
the Stock Option Committee with respect to grants of options to management
employees. The Compensation Committee also administers plans and programs
relating to employee benefits, incentives and compensation. The Compensation
Committee, whose members are Mr. Bier and Mr. Rybakoff did not hold any meetings
but took action by written consent two times during the 1996 fiscal year.
Stock Option Committee. The Stock Option Committee determines the persons to
whom options should be granted under the Company's Stock Option Plan and the
number of options to be granted to each person. The Stock Option Committee,
whose members are Mr. Bier and Mr. Rybakoff, did not hold any meetings but
took action by written consent two times during the 1996 fiscal year.
Attendance at Meetings
From January 1, 1996 through December 31, 1996, there were three meetings of
the Board of Directors. Each director of the Company attended all of the
meetings held except for Mr. Rybakoff who was appointed after the first meeting.
Compliance on Section 16(a) of Exchange Act
The directors and executive officers of the Company, and the owners of more
than ten (10%) percent of the Company's outstanding Common Stock, are
required to file reports with the Securities and Exchange Commission and with
NASDAQ, reporting changes in the number of shares of the Company's Common
Stock beneficially owned by them and provide the Company with copies of all
such reports. Based solely on its review of the copies of such reports
furnished to the Company and written representatives from the executive
officers and directors, the Company believes that all reports were timely
made for the year ended December 31, 1996, except that Kam Toys and Novelty
Manufacturing Ltd. has not filed a report on Form 3.
8
<PAGE>
Executive Officers
All of the Company's executive officers are also directors of the Company.
Information with respect to such executive officers is located elsewhere in
this Proxy Statement.
Key Employees
The following persons, although not executive officers of the Company, are
regarded by the Company's management as key employees:
Glennis Carey has been the Director of Marketing for Grand Canada for 15
years. Prior thereto, Ms. Carey worked for Mattel International, Inc. in
marketing for ten years.
Robert Herbst has been the Director of Operations for Grand Canada since
April 1995. Prior to such time he worked at Grand Canada in various
capacities for 19 years.
Tanya Clarke has been the Controller for Grand Canada since May 1994. Prior
to such time she worked at KPMG as an auditor for three years.
Ron Oboler has been the Director of Merchandising for Grand Canada since
1992. Prior thereto, Mr. Oboler worked in the toy business in South Africa
for 15 years.
Executive Compensation
The following table shows, as to the President, who is the Company's chief
executive officer, and the two other executive officers other than the
President whose compensation, during the year ended December 31, 1996
exceeded $100,000, information concerning compensation paid for service to
the Company in all capacities during the fiscal year ended December 31, 1996,
as well as total compensation paid to each such individual for the Company's
two previous fiscal years (to the extent that such person was the President, as
the case may be, during any part of such fiscal year). There were no other
executive officers on December 31, 1996.
9
<PAGE>
Summary Compensation Table
<TABLE>
Long-Term
Annual Compensation Compensation Awards
Other
Annual All Other
Name and Compensa- Compensa-
Principal Salary Bonus tion Options tion
Position Year ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Larry Bernstein, 1996 - - - - -
President (1) 1995 96,154 0 0 400,000 0
1994 - - - - -
Stephen Altro, 1996 175,000(2) 0 22,000(5) 1,031,983 0 (7)
President 1995 176,000(3) 0 23,000(5) 0 0
1994 232,000(4) 0 25,000(6) 0 0
David Mars, 1996 175,000(2) 0 22,000(5) 1,031,983 0 (8)
Vice Chairman 1995 176,000(3) 0 23,000(5) 0 0
1994 107,000(4) 0 25,000(6) 0 0
Ron Goldenberg, 1996 128,000(2) 24,000(2) 8,000(5) 67,391 0 (9)
Chief Financial 1995 129,000(3) 0 8,000(5) 0 0
Officer 1994 89,000(4) 0 0 0 0
</TABLE>
(1) Mr. Bernstein served as President of the Company from August 9, 1995 to
September 30, 1995.
(2) Such amounts are based on an exchange rate of Canadian $1.37 to United
States $1.00 (the exchange rate on December 31, 1996)
(3) Such amounts are based on an exchange rate of Canadian $1.36 to United
States $1.00 (the exchange rate on December 31, 1995).
(4) Such amounts are based upon an exchange rate of Canadian $1.40 to United
States $1.00 (the exchange rate on December 31, 1994).
(5) Other Annual Compensation for each of Messrs. Altro and Mars consists of
$11,000 ($12,000 in 1995) for car lease payments and $11,000 for annual
country club dues. Other annual compensation for Mr. Goldenberg consists of
car lease payments.
(6) The $25,000 of Other Annual Compensation for each of Messrs. Altro and
Mars in 1994 consists of $14,000 for car lease payments and $11,000 for
annual country club dues. (Other than as disclosed herein, no perquisites or
other personal benefits, securities, or property were given to such persons
in such year that exceeded the lesser of either $50,000 or 10% of the total
annual salary and bonus reported for any individual named).
(7) This amount does not reflect special awards and payments Mr. Altro was
entitled to receive under Mr. Altro's employment agreement if his employment
were to be terminated as a result of a change of control of the Company (see
"Employment Agreements" elsewhere in this Proxy Statement) which would have
had a value of approximately $523,250 as of December 31, 1996.
(8) This amount does not reflect special awards and payments Mr. Mars was
entitled to receive under Mr. Mars' employment agreement if his employment
were to be terminated as a result of a change of control of the Company (see
"Employment Agreements" elsewhere in this Proxy Statement) which would have
had a value of approximately $523,250 as of December 31, 1996.
(9) This amount does not reflect special awards and payments Mr. Goldenberg
was entitled to receive under Mr. Goldenberg' employment agreement if his
employment were to be terminated
10
<PAGE>
as a result of a change of control of the
Company (see "Employment Agreements" elsewhere in this Proxy Statement) which
would have had a value of approximately $382,720 as of December 31, 1996.
Option Grants in Fiscal 1996
The following table sets forth further information regarding the stock option
grants pursuant to the Company's Stock Option Plan during fiscal 1996 to the
officers named in the Summary Compensation Table above.
<TABLE>
% of Total
Options Exercise or
Options granted to Base Price Expiration
Name Granted(#) Employees in ($/Sh) Date
Fiscal 1996
<S> <C> <C> <C> <C>
Stephen Altro 1,031,983 46.6 1.53 May 28, 2006
David Mars 1,031,983 46.6 1.53 May 28, 2006
Ron Goldenberg 42,391 1.9 1.53 May 28, 2006
Ron Goldenberg 25,000 1.1 1.50 May 14, 2006
</TABLE>
All of the Options granted to Messrs. Altro and Mars and 42,391 of the
options granted to Mr. Goldenberg during 1996 were granted independent of the
Company's stock option plans. The options were granted to compensate Messrs.
Mars, Altro and Goldenberg for personally guaranteeing an aggregate of
$2,400,000 of Grand Canada's credit agreement with its former lender and
providing $1,400,000 of cash collateral in support of the same, and for
certain other guarantees made by Messrs. Altro and Mars on Behalf of the Company
and its subsidiaries. The two disinterested directors of the Company determined
that these financial accommodations had a value of approximately $1,957,000
and that the options represented fair and reasonable compensation for them.
The options issued to Messrs. Altro, Mars and Goldenberg are intended to be
non-dilutive, representing 11.81%, 11.81% and .54%, respectively, of the
issued and outstanding Common Stock of the Company on a fully diluted basis.
Accordingly, the number of shares issuable upon exercise of the options
represented in the foregoing table are subject to increase or decrease based
upon the number of shares of the Company's Common Stock outstanding from
time to time.
Option Exercises and Fiscal Year-End Values
The following table sets forth certain information concerning the exercise of
options by each of the officers listed in the Summary Compensation Table
above during fiscal 1996, including the aggregate amount of gains on the date
of exercise. In addition, the table includes the number of shares covered by
both exercisable and unexercisable stock options as of December 31, 1996.
Also reported are values for "in-the-money" options that represent the
positive spread between the respective exercise prices of outstanding stock
options and the fair market value of the Company's Common Stock as of
December 31, 1996, as determined by the closing price of the Company's Common
Stock on that date as reported by Nasdaq.
11
<PAGE>
Aggregated Option Exercises in Fiscal 1996 and December 31, 1996 Option Values
<TABLE>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares Ac- Value at Fiscal Year-End(#) at Fiscal Year-end($)
Name quired On Real- Exercisable/Unexer- Exercisable /Unexer-
Exercise(#) ized$(1) cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Stephen Altro 0 0 1,555,733 0 0 0
David Mars 0 0 1,555,733 0 0 0
Ron Goldenberg 0 0 202,391 0 0 0
</TABLE>
(1) "Value Realized" represents the fair market value of the shares of
Common Stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
Employment Agreements
Stephen Altro
The Company has entered into a three-year employment agreement with Mr.
Altro, expiring on October 31, 1998. Pursuant to such agreement, Mr. Altro
is employed as President of the Company, and has agreed to devote his full
time and efforts to the Company. Under the terms of Mr. Altro's employment
agreement, the Company agreed to pay Mr. Altro a base salary of Canadian
$240,000 (approximately U.S. $175,000 as of December 31, 1996). Such
employment agreement also provides that Mr. Altro will be entitled to increase
in compensation and bonus payments at such time and in the amounts determined
by the compensation Committee of the Board of Directors, whose decisions will
be based upon a number of factors including the performance of the Company
and Mr. Altro. The employment agreement further provides that Mr. Altro is
precluded from competing with the Company (i) during the term of his
employment by the Company, or (ii) for a period of two years after
termination of employment by the Company if such termination is for cause.
The employment agreement also provides that if within 24 months following a
change in control of the Company, Mr. Altro's employment is terminated, he
would be entitled to receive an amount equal to 2.99 times the average of his
annual compensation (including any bonuses) for the past five years, unless
such termination is for cause. Termination of employment includes
termination by Mr. Altro if within 24 months after such change in control he
determines in good faith that there has occured an adverse change with
respect to the terms of his employment.
David Mars
The Company has entered into a three-year employment agreement with Mr. Mars,
expiring on October 31, 1998. Pursuant to such agreement, Mr. Mars is
employed as Vice Chairman of the Company, and has agreed to devote his full
time and efforts to the Company. Under the terms of Mr. Mars employment
agreement, the Company agreed to pay Mr. Mars a base salary of Canadian
$240,000 (approximately U.S. $175,000 as of December 31, 1996). Such
employment agreement also provides that Mr. Mars will be entitled to increase
in compensation and bonus payments at such time and in the amounts determined by
the Compensation Committee of the Board of Directors, whose decisions will be
based upon a number of factors including the performance of the Company and
Mr. Mars. The employment agreement further provides that Mr. Mars is
precluded from competing with the Company (i) during the term of his
employment by the Company, or (ii) for a period of two years after
termination of employment by the Company if such termination is for cause.
The employment agreement also provides that if within 24 months following a
change in control of the Company, Mr. Mars employment is terminated, he would
be entitled to receive an amount
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equal to 2.99 times the average of his annual compensation (including any
bonuses) for the past five years, unless such termination is for cause.
Termination of employment includes termination by Mr. Mars if within 24
months after such change in control he determines in good faith that there has
occured an adverse change with respect to the terms of his employment.
Mr. Goldenberg
The Company has entered into a three-year employment agreement with Mr.
Goldenberg, expiring on October 31, 1998. Pursuant to such agreement, Mr.
Goldenberg is employed as Vice President and Chief Financial Officer of the
Company and has agreed to devote his full time and efforts to the Company.
Under the terms of Mr. Goldenberg's employment agreement, the Company agreed
to pay Mr. Goldenberg a base salary of Canadian $175,000 (approximately U.S.
$128,000 as of December 31, 1996). Such employment agreement also provides
that Mr. Goldenberg will be entitled to increase in compensation and bonus
payments at such time and in the amounts determined by the Compensation
Committee of the Board of Directors, whose decisions will be based upon a
number of factors including the performance of the Company and Mr.
Goldenberg. The employment agreement further provides that Mr. Goldenberg is
precluded from competing with the Company (i) during the term of his employment
by the Company, or (ii) for a period of two years after termination of
employment by the Company if such termination is for cause. The employment
agreement also provides that if within 24 months following a change in control
of the Company Mr. Goldenberg's employment is terminated, he would be
entitled to receive an amount equal to 2.99 times the average of his annual
compensation (including any bonuses) for the past five years, unless such
termination is for cause. Termination of employment includes termination by
Mr. Goldenberg if within 24 months after such change in control he determines
in good faith that there has occured an adverse change with respect to the
terms of his employment.
Employment Benefit Plans
The Company has group insurance plans available to its Canadian employees
that provide life insurance, dental, medical, long-term disability and vision
care coverage to the employee and his or her dependents. The cost of the
plan is shared by the Company and the employee equally. The Company also has
a group retirement savings plan for its Canadian employees. The Company
contributes to this plan the lesser of (a) 50% of the employee's contribution
to the plan; (b) 3% of the employee's gross earnings; or (c) Canadian $3,000.
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(Proposal 2)
Upon the recommendation of the Audit Committee of the Board of Directors,
none of whose members is an officer of the Company, the Board of Directors of
the Company has selected the firm of KPMG, independent certified public
accountants, as the principal independent auditors of the Company for the
year ending December 31, 1997, subject to ratification by the shareholders.
KPMG served as the Company's independent auditors during 1996. If the
appointment of the firm of KPMG is not approved or if that firm shall decline
to act or their employment is otherwise discontinued, The Board of Directors
will appoint other independent auditors. Representatives of KPMG are not
expected to be present at the Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE RATIFICATION OF
THE APPOINTMENT OF KPMG.
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Other Matters
The Company's 1996 Annual Report is being mailed to shareholders
contemporaneously with this Proxy Statement. The Company knows of no other
matters to be brought before the Meeting. If other matters should properly
come before the Meeting, proxies will be voted on such matters in accordance
with the best judgement of the persons appointed by the proxies.
The Company will bear all costs in connection with the solicitation of
proxies for the Meeting. The Company intends to request brokerage houses,
custodians, nominees and others who hold stock in their names to solicit
proxies from the persons who own stock, and such brokerage houses,
custodians, nominees and others will, at their request, be reimbursed for
their out-of-pocket expenses and reasonable clerical expenses. In addition
to the use of the mails, solicitation may be made by employees of the Company
personally or by mail or telephone to the extent necessary in order to assure
sufficient representation. No outside proxy solicitation firm is expected to
be employed by the Company in respect of the Meeting as of the date of this
Proxy Statement.
Shareholder Proposals for the 1998 Annual Meeting
Shareholder proposals for the 1998 Annual Meeting must be received by the
Company at its principal executive offices set forth above not later than
December 23, 1997 in order to be included in the Company's proxy materials.
By order of the Board of Directors
RON GOLDENBERG
Secretary
Dated: April 22, 1997
PLEASE COMPLETE, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY
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