GRAND TOYS INTERNATIONAL, INC.
1710 Route Transcanadienne
Dorval, Quebec, H9P 1H7
CANADA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 28, 1998
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 28, 1998, at 11:00
a.m. (Montreal time), for the following purposes:
1. To elect directors to serve until the 1999 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 1998 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, 1998 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 24, 1998
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 28, 1998 at 11:00 a.m. (Montreal time) at the
principal offices of the Company, 1710 Route Transcanadienne, Dorval, Quebec,
CANADA, H9P 1H7. 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, Grand Toys Ltd. ("Grand Canada") and Grand Concepts Inc. ("Concepts"),
both of which are Canadian operating companies and subsidiaries of Grand U.S.
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, 1998, the record date for determination of shareholders
entitled to notice of and to vote at the Meeting, there were 1,577,597 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 24, 1998.
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 "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, 1998 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.
Effective August 4, 1997, the stock underwent a one-for-five reverse stock
split. Shares and options have been restated to reflect the split.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 10, 1998 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 beneficially owned by them.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Shares Percent of Class
Beneficially and Voting Power (1)
Owned
<S> <C> <C>
Amgo Investments, Inc.
1710 Rte. Transcanadienne
Dorval, Quebec, Canada H9P 1H7 657,000 (2) 41.65%
Stephen Altro
1710 Rte. Transcanadienne
Dorval, Quebec, Canada, H9P 1H7 1,263,397 (3) 57.84%
David Mars
1710 Rte. Transcanadienne
Dorval, Quebec, Canada H9P 1H7 1,263,397 (4) 57.84%
Ron Goldenberg
1710 Rte. Transcanadienne
Dorval, Quebec, Canada H9P 1H7 815,478 (5) 46.97%
Elliot L. Bier
999 Boul. de Maisonneuve Quest
Montreal, Quebec, Canada H3A 3L4 56,000 (6) 3.42%
James B. Rybakoff
780 Third Avenue
New York, NY 10017 83,500 (7) 5.02%
All Executive officers and directors
as a group (five persons) 2,167,772 (8) 70.19%
</TABLE>
(1) Computed on the basis of 1,577,597 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) Amgo Investments, Inc. ("Amgo") is controlled by corporations
controlled by David Mars, Stephen Altro and Ron Goldenberg.
(3) Includes options to purchase 606,397 shares of Common Stock
exercisable within sixty (60) days. 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) 275,349
shares of Common Stock owned by Amgo and beneficially owned by
Mr. Mars, (ii) 70,890 shares of Common Stock owned by Amgo and
beneficially owned by Mr. Goldenberg and (iii) 35,412 shares of
Common Stock owned by Amgo and beneficially owned by an officer
of Grand Canada. See "Executive Compensation".
(4) Includes options to purchase 606,397 shares of Common Stock
exercisable within sixty (60) days. 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) 275,349
shares of Common Stock owned by Amgo and beneficially owned by
Mr. Altro, (ii) 70,890 shares of Common Stock owned by Amgo and
beneficially owned by Mr. Goldenberg and (iii) 35,412 shares of
Common Stock owned by Amgo and beneficially owned by an officer
of Grand Canada. See "Executive Compensation".
(5) Includes options to purchase 158,478 shares of Common Stock
exercisable within sixty (60) days. 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) 275,349 shares of
Common Stock owned by Amgo and beneficially owned by Mr. Altro,
(ii) 275,349 shares of Common Stock owned by Amgo and
beneficially owned by Mr. Mars and (iii) 35,412 shares of Common
Stock owned by Amgo and beneficially owned by an officer of Grand
Canada. See "Executive Compensation".
(6) Represents options to purchase 56,000 shares of Common Stock
exercisable within sixty (60) days. See "Election of Directors".
(7) Represents options and warrants to purchase 83,500 shares of
Common Stock exercisable within (60) days, 55,000 of such warrants
are owned of record by Akin Bay Company L.L.C. of which Mr.
Rybakoff is a controlling member. See "Election of Directors" and
"Certain Transactions".
(8) See footnotes (1)-(7).
As of April 10, 1998, 890,326 shares of Common Stock (approximately
56.4 % 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.
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>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Stephen Altro 60 Chairman, President and Director
David Mars 60 Vice Chairman and Director
Ron Goldenberg 42 Vice President, Chief Financial
Officer and Director
Elliot L. Bier 48 Director
James B. Rybakoff 31 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 35 years. Mr. Altro co-founded Grand
Canada with David Mars more than 35 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 35 years. Mr. Mars co-founded Grand Canada with Stephen Altro more
than 35 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 20 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, L.L.C., an
NASD member 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. Mr. Rybakoff was elected as a director in 1996.
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 2,000 shares of Common Stock at an exercise
price of $11.25 per share, 500 shares of Common Stock at an exercise price of
$26.10 per share and 500 shares of Common Stock at an exercise price of $32.65
per share, respectively. Pursuant to the Company's Stock Option Plan, Mr.
Bier is automatically granted 500 options to purchase shares of Common Stock on
a quarterly basis. The exercise prices for the shares of stock granted to Mr.
Bier under the Stock Option Plan range from $3.90 - $31.25 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
$4.75 per share. The options currently are exercisable for 20,000 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.
See "Certain Transactions" and "Compensation Committee Interlocks".
One director (Mr. Rybakoff) who is not an employee of the Company, was
automatically granted 500 options to purchase shares of Common Stock on
a quarterly basis. The exercise prices for the shares of stock granted to Mr.
Rybakoff under the Stock Option Plan range from $3.90 - $7.31. For information
concerning additional compensation paid to Mr. Rybakoff or his affiliates, see
"Certain Transactions" and "Compensation Committee Interlocks".
During 1997, Messrs. Bier and Rybakoff were granted 25,000 options each at an
exercise price of $4.38.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of Directors held four
meetings and each of the Directors attended all of the meetings held.
AUDIT COMMITTEE
The Board of Directors has an Audit Committee which consists of two directors.
Elliot L. Bier and James B. Rybakoff are the current members of this committee.
The Audit Committee (i) recommends to the Board the conditions, compensation
and term of appointment of independent certified public accountants for the
audit of the Company's financial statements, (ii) reviews examination reports of
the Company prepared by regulatory authorities, and (iii) provides the Board
with such assistance as is necessary with respect to the Company's corporate and
reporting practices. The Audit Committee may also from time to time confer
with the auditors to exchange views relating to the scope and results of the
audit. During the fiscal year ended December 31, 1997, the Audit Committee did
not hold any meetings , but took action by written consent two times during the
1997 fiscal year.
COMPENSATION COMMITTEE
The Board of Directors has a Compensation Committee which consists of two
directors. Elliot L. Bier and James B. Rybakoff are the current members of this
committee. The Compensation Committee makes recommendations to the Board
of Directors with respect to compensation arrangements and plans for senior
management, officers and directors of the Company and administers the Company's
Stock Option Plan. During the fiscal year ended December 31, 1997, the
Compensation Committee did not hold any meetings, but took action by written
consent two times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1997, Elliot L. Bier and James B. Ry-
bakoff served as the members of the Company's Compensation Committee. None
of the members of the Company's Compensation Committee was, during the fiscal
year ended December 31, 1997, an officer or employee of the Company, or a for-
mer officer of the Company.
Mr. Bier is a senior partner in Adessky, Poulin, a Montreal, Quebec based
law firm. The firm of Adessky, Poulin acts as Canadian counsel to the Company
and its subsidiaries. During the fiscal year ended December 31, 1997, the
Company paid Adessky, Poulin an aggregate of $37,383 for legal fees and related
disbursements.
Mr. Rybakoff is a member and a managing director of Akin Bay Company L.L.C.,
an NASD member firm ("Akin Bay"). The Company is a party to an investment
banking agreement with Akin Bay. Pursuant to the terms of the investment
banking agreement, Akin Bay provides investment banking and other financial
advisory services to the Company. In addition, the Company has also paid
Akin Bay to sponsor research reports on the Company. The investment banking
agreement and the agreement to sponsor research reports was approved by the
Company's disinterested directors. The Company believes that the terms of the
investment banking and sponsored research agreements are substantially similar
to those prevailing at the time for comparable agreements and transactions with
other investment banking firms. During the fiscal year ended December 31, 1997,
the Company paid Akin Bay a total of $60,000 for services rendered to it.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee's overall compensation policy applicable
to the Company's executive officers is to provide a compensation package that
is intended to attract and retain qualified executives for the Company and to
provide them with incentives to achieve Company goals and increase shareholder
value. The Compensation Committee implements this policy through salaries, bo-
nuses, stock options, a retirement savings plan, and employment agreements and
miscellaneous personal benefits.
SALARIES. The Compensation Committee's policy is to provide salaries (i) that
are approximately at the median of the salaries paid to similar executive
officers in similar companies, adjusted in the Compensation Committee's
subjective judgment to reflect differences in duties of the officers and
differences in the size and stage of development of the companies, in order to
attract and retain qualified executives and (ii) that compensate individual
employees for their individual contributions and performance. The Compensation
Committee determines comparable salaries paid by other companies similar to the
Company through its subjective evaluation of its members' knowledge of salaries
paid by other companies, salary requests of individuals interviewed by the
Company for open positions and recommendations of management. The Committee
subjectively evaluates this information and the Company's financial resources
and prospects to determine the salary and severance arrangements for an
executive officer. Salaries for fiscal 1997 were determined based on a
subjective evaluation of the factors described above, without giving any
specific priority or weighting to any of the factors.
BONUSES. The Compensation Committee's policy is to recommend bonuses that
compensate executive officers for achieving Company goals. In addition, the
Compensation Committee's policy is to pay discretionary bonuses, determined
near the end of the fiscal year, to compensate executive officers for
performance or achievements during the fiscal year not covered by bonuses paid
earlier in the year.
STOCK OPTIONS. The Compensation Committee's policy is to award stock options
to each officer, employee and director of the Company in amounts reflecting
the participant's position and ability to influence the Company's overall
performance, determined based on the Committee's subjective judgment after
reviewing the number of options previously granted to such person, the number
of options granted to persons in similar positions both at the Company and at
other companies deemed comparable to the Company (based on the members'
knowledge of options granted by other companies), the number of options
remaining available for grant and management's recommendations. The number of
options granted in 1997 to executives was determined based on the above factors,
management's recommendations and the Compensation Committee's subjective
judgment primarily after reviewing the previous grants of options to such
executives and their ownership of Common Stock. In addition, during 1997,
option grants to Messrs. Altro, Mars and Goldenberg were granted in
consideration of the two year extension of their respective employment
agreements through October 31, 2000 without any increase in base salary.
Options are intended to provide participants with an increased incentive to
make contributions to the long-term performance and growth of the Company, to
join the interests of participants with the interests of
shareholders of the Company and to attract and retain qualified employees.
The Compensation Committee's policy is to grant options with a term of ten
years to provide a long-term incentive and to fix the exercise price of the
options at the fair market value of the underlying shares on the date of grant.
Such options only provide compensation if the price of the underlying shares
increases. The Committee's policy is also to provide new executives with
options to attract them to the Company based on negotiations with new
executives, management's recommendations and the Committee's subjective judgment
primarily after reviewing the number of options granted to similar executives of
the Company.
Generally, the Compensation Committee reserves the right to pay
compensation to Company executives in amounts it deems appropriate regardless
of whether such compensation is deductible for federal income tax purposes.
Options granted to executives in fiscal 1997 are potentially subject to limits
on permitted federal income tax deductions upon exercise of such options,
including under current treasury regulations concerning the $1,000,000 cap on
executive compensation deductions under Section 162(m) of the Internal Revenue
Code of 1986, as amended. The Committee determined to recommend the grants of
options to executives in July 1997 despite such options potentially being
subject to the $1,000,000 cap on executive compensation. The Committee
determined that such grants were more important to the Company than the
potential loss of related compensation deductions upon exercise of the options
RETIREMENT SAVINGS PLAN. The Company has adopted 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 this plan; (b) 3%
of the employee's gross earnings; or (c) Canadian $3,000 per employee. During
the year ended December 31, 1997, the Company contributed approximately
$27,600 to the plan.
EMPLOYMENT AGREEMENTS AND MISCELLANEOUS PERSONAL BENEFITS. The
Compensation Committee's policy has been to have employment agreements with
each of its executive officers to provide them with specified minimum
positions, periods of employment, salaries, fringe benefits and severance
benefits. These benefits are intended to permit the executive officer to focus
his attention on performing his duties to the Company, rather than on the
security of his employment, and to provide the officer with benefits deemed by
the Compensation Committee to be suitable for the executive's office. During
1997, the Company extended the terms of its employment agreements with its
executive officers through October 31, 2000, based on management's
recommendations and the Committee's subjective judgment of an appropriate term
to secure the services of its executives.
FISCAL 1997 COMPENSATION DECISIONS CONCERNING CEO. In July 1997, the
Compensation Committee recommended that Mr. Altro's salary remain at C
$240,000 (approximately US $168,000) for 1997, and that his employment
agreement be extended to October 31, 2000. As described in "Employment
Agreements and Miscellaneous Personal Benefits," the extension of Mr.
Altro's employment agreement was based on management's recommendations and the
Committee's subjective judgment of an appropriate term to secure Mr.
Altro's services. In 1997, the Committee recommended paying a bonus to Mr.
Altro of C $150,000 (approximately US $105,000).
In July 1997, the Committee recommended that the Board grant Mr. Altro a
10-year option to purchase 400,000 shares of Common Stock at an exercise
price of $4.375 a share. The amount granted to Mr. Altro was based on the
factors described in "Stock Options," including his position and ability to
influence the Company's overall performance, determined based on the Committee's
subjective judgment after reviewing the number of options previously granted to
him and his ownership of Common Stock, the number of options granted in the past
to persons in similar positions both at the Company and at other companies
deemed comparable to the company (based on the directors' knowledge of options
granted by other companies), management's recommendation and the Committee's
subjective judgment.
By the Compensation Committee
James B. Rybakoff
Elliot L. Bier
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997.
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 17
years. Prior thereto, Ms. Carey worked for Mattel International, Inc. in
marketing for ten 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.
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.
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, 1997 exceeded
$100,000, information concerning compensation paid for service to the Company
in all capacities during the fiscal year ended December 31, 1997, as well as
total compensation paid to each such individual for the Company's two previous
fiscal years (to the extent that such person was the President, as the case may
be, during any part of such fiscal year). There were no other executive
officers on December 31, 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation Awards
Name and
Principal Other Annual All Other
Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
<S> <C> <C> <C> <C> <C> <C>
Larry Bernstein, 1997 - - - - -
President (1) 1996 - - - - -
1995 96,154 0 0 0 0
Stephen Altro, 1997 168,000(2) 105,000(2) 22,000(5) 400,000 0(8)
President 1996 175,000(3) 0 22,000(6) 206,397 0
1995 176,000(4) 0 23,000(7) 0 0
David Mars 1997 168,000(2) 105,000(2) 11,000(5) 400,000 0(9)
Vice Chairman 1996 175,000(3) 0 22,000(6) 206,397 0
1995 176,000(4) 0 23,000(7) 0 0
Ron Goldenberg, 1997 122,000(2) 70,000(2) 8,000(5) 150,000 0(10)
Chief Financial 1996 128,000(3) 24,000(3) 8,000(5) 13,478 0
Officer 1995 129,000(4) 0 8,000(5) 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 upon an exchange rate of Canadian $1.43 to United
States $1.00 (the exchange rate on December 31, 1997).
(3) Such amounts are based on an exchange rate of Canadian $1.37 to
United States $1.00 (the exchange rate on December 31, 1996).
(4) Such amounts are based on an exchange rate of Canadian $1.36 to
United States $1.00 (the exchange rate on December 31, 1995).
(5) Other annual compensation for Mr. Altro consists of $11,000 for car
lease payments and $11,000 for annual country club dues. For Mr. Mars it
includes country club dues and for Mr. Goldenberg, car lease payments.
(6) Other Annual Compensation for each of Messrs. Altro and Mars consists
of $11,000 for car lease payments and $11,000 for annual country club dues.
(7) The $23,000 of Other Annual Compensation for each of Messrs. Altro
and Mars in 1995 consists of $12,000 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.
(8) This amount does not reflect special awards and payments Mr. Altro
would be 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 $517,102 as of December 31, 1997.
(9) This amount does not reflect special awards and payments Mr. Mars
would be 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 $517,102 as of December 31, 1997.
(10) This amount does not reflect special awards and payments Mr. Goldenberg was
entitled to receive under Mr. Goldenberg'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 $378,112 as of December 31, 1997.
OPTION GRANTS IN FISCAL 1997
The following table sets forth further information regarding the stock option
grants during fiscal 1997 to the officers named in the Summary Compensation
Table above.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
% of Total Options Exercise or Annual Rates of
Granted to Employees Base Price Expiration Stock Price Appreciation
Name Options Granted in Fiscal 1997 ($/Share) Date for 10 year Option Term
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Stephen Altro 400,000 38.1 $4.38 08/14/07 $1,100,000 $ 2,788,000
David Mars 400,000 38.1 $4.38 08/14/07 $1,100,000 $ 2,788,000
Ron Goldenberg 150,000 14.3 $4.38 08/14/07 $ 412,500 $ 1,045,500
</TABLE>
All of the Options granted to Messrs. Altro, Mars and Goldenberg during
1997 were granted independent of the Company's stock option plans.
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 1997, 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, 1997. 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, 1997, as determined by the closing price of the
Company's Common Stock on that date as reported by NASDAQ.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND DECEMBER 31, 1997 OPTION VALUES
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired on Value Options at Fiscal In-the-Money Options
Name Execise (#) Realized $(1) Year-End (#) at Fiscal Year-End ($)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Stephen Altro 0 0 600,397 0 1,172,000 0
David Mars 0 0 600,397 0 1,172,000 0
Ron Goldenberg 0 0 158,478 0 439,500 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.
(2) Closing stock price on December 31, 1997 was $7.31.
EMPLOYMENT AGREEMENTS
STEPHEN ALTRO
The Company has entered into an employment agreement with Mr. Altro, expiring
on October 31, 2000. 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. $168,000 as of December 31, 1997). Such employment
agreement also provides that Mr. Altro will be entitled to increases 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. See "Board Compensation Committee Report on Executive Compensation".
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 occurred an adverse
change with respect to the terms of his employment.
DAVID MARS
The Company has entered into an employment agreement with Mr. Mars, expiring
on October 31, 2000. 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. $168,000 as of December 31, 1997). Such employment
agreement also provides that Mr. Mars will be entitled to increases 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. See "Board Compensation Committee Report on Executive
Compensation". 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 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 occurred an adverse change with respect to the terms of his
employment.
RON GOLDENBERG
The Company has entered into an employment agreement with Mr. Goldenberg,
expiring on October 31, 2000. Pursuant to such agreement, Mr. Goldenberg is
employed as Executive 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.
$122,000 as of December 31, 1997). Such employment agreement also provides
that Mr. Goldenberg will be entitled to increases 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. See "Board Compensation Committee Report on Executive
Compensation". 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 occurred an adverse change with respect to the
terms of his employment.
PERFORMANCE GRAPH
The following graph tracks an assumed investment of $100 on the last
trading day of the calendar year indicated below in the Company's Common Stock,
the NASDAQ Stock Market and the NASDAQ Non-Financial Stocks sector,
assuming full reinvestment of dividends. Past performance is not necessarily
indicative of future performance.
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 the members of which 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, 1998, subject to ratification by the shareholders.
KPMG served as the Company's independent auditors during 1997. If the
appointment of the firm of KPMG is not approved or if that firm shall decline to
act or their engagement 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.
OTHER MATTERS
The Company's 1997 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 judgment 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 1999 ANNUAL MEETING
Shareholder proposals for the 1999 Annual Meeting must be received by the
Company at its principal executive offices set forth above not later than
December 23, 1998 in order to be included in the Company's proxy materials.
By order of the Board of Directors
RON GOLDENBERG
Secretary
Dated: April 24, 1998
PLEASE COMPLETE, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY
