GRAND TOYS INTERNATIONAL, INC.
1710 Route Transcanadienne
Dorval, Quebec, H9P 1H7
CANADA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 27, 1999
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 27, 1999, at 11:00 a.m. (Montreal
time), for the following purposes:
1. To elect directors to serve until the 2000 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
1999 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 12, 1999 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 26, 1999
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 27, 1999 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."),
Ark Puzzles, Inc. ("Ark") subsidiaries 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 12, 1999, 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 26, 1999.
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 12, 1999 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 rep-
resented. 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 12, 1999 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>
<S> <C> <C>
Name and Address of Number of Shares Percent of Class
Beneficial Owner Beneficially Owned and Voting Power (1)
Amgo Investments, Inc.
1710 Rte. Transcanadienne
Dorval, Quebec, Canada
H9P 1H7 561,588 (2) 35.59%
Stephen Altro
1710 Rte. Transcanadienne
Dorval, Quebec, Canada,
H9P 1H7 1,172,853 (3) 53.58%
David Mars
1710 Rte. Transcanadienne
Dorval, Quebec, Canada
H9P 1H7 1,172,853 (4) 53.58%
Ron Goldenberg
1710 Rte. Transcanadienne
Dorval, Quebec, Canada
H9P 1H7 720,153 (5) 41.48%
Elliot L. Bier
999 Boul. de Maisonneuve Quest
Montreal, Quebec, Canada
H3A 3L4 55,500 (6) 3.52%
James B. Rybakoff
780 Third Avenue
New York, NY 10017
85,500 (7) 5.42%
Lawrence Bernstein
41 Beacon St. 2nd Floor
Framingham, MA 01701-4906
170,000 (8) 9.73%
All Executive officers
and directors as a
group (six persons) 2,253,683 (9) 68.93%
</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 611,265 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) 248,770 shares of Common Stock owned by
Amgo and beneficially owned by Mr. Mars and (ii) 64,048 shares of
Common Stock owned by Amgo and beneficially owned by Mr. Goldenberg.
See "Executive Compensation".
(4) Includes options to purchase 611,265 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) 248,770 shares of Common Stock owned by
Amgo and beneficially owned by Mr. Altro, and (ii) 64,048 shares of
Common Stock owned by Amgo and beneficially owned by Mr. Goldenberg.
See "Executive Compensation".
(5) Includes options to purchase 158,565 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) 248,770 shares of Common Stock owned by Amgo
and beneficially owned by Mr. Altro and (ii) 248,770
shares of Common Stock owned by Amgo and beneficially owned by Mr. Mars.
See "Executive Compensation".
(6) Represents options to purchase 55,500 shares of
Common Stock exercisable within sixty (60) days.
See "Election of Directors".
(7) Represents options and warrants to purchase
85,500 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) Includes options to purchase 140,000 shares of
Common Stock exercisable within sixty (60) days.
(9) See footnotes (1)-(8).
As of April 12, 1999, 928,803 shares of Common Stock
(approximately 58.9% 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 six. At the Annual Meeting, action
will be taken to elect a Board consisting of the six
incumbent directors, Stephen Altro, David Mars, Ron Goldenberg,
Elliot L. Bier, James B. Rybakoff and Lawrence Bernstein. 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)
<S> <C> <C>
Name Age Position with the Company
Stephen Altro 61 Chairman and Director
David Mars 61 Vice Chairman and Director
Ron Goldenberg 43 Vice President, Chief Financial
Officer and Director
Elliot L. Bier 49 Director
James B. Rybakoff 32 Director
Lawrence Bernstein 58 President, Chief Executive
Officer and Director
</TABLE>
Stephen Altro has been the Chairman 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 21 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 cofounded 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.
Lawrence Bernstein has been the President, C.E.O and a director of the
Company since July 1998. Prior to joining the Company, Mr Bernstein was a
private investor and a consultant to the toy industry through his
wholly-owned Rockport Entertainment Group. From 1969 to 1994,
Mr. Bernstein was associated with Hasbro, Inc., including, for
the period 1998 to 1994, serving as President of the Toy Division of Hasbro.
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, Goldenberg and Bernstein
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 January 1994 and April 1994, for the
purchase of 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 $2.88 - $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 shares of 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, 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. Rybakoff under
the Stock Option Plan range from $2.88 - $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, 1998, the
Board of Directors held three 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, 1998, the Audit
Committee did not hold any meetings , but took action by written
consent two times during the 1998 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, 1998, 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, 1998, Elliot L. Bier and
James B. Rybakoff 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, 1998, an
officer or employee of the Company, or a former 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, 1998, the
Company paid Adessky, Poulin an aggregate of $6,247
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 agree-
ment 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 invest-
ment banking agreement and the agreement to sponsor
research reports was approved by the Company's disin-
terested 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, 1998, the Company paid Akin Bay a
total of $105,000 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, bonuses, stock options, a retirement savings
plan, and employment agreements and miscellaneous personal benefits.
Salaries. The Compensation Committee's policy is to pro-
vide 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 perform-
ance. The Compensation Committee determines compa-
rable 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 de-
termine the salary and severance arrangements for an
executive officer. Salaries for fiscal 1998 were deter-
mined based on a subjective evaluation of the factors de-
scribed above, without giving any specific priority or
weighting to any of the factors.
Bonuses. The Compensation Committee's policy is to rec-
ommend bonuses that compensate executive officers for
achieving Company goals. In addition, the Compensation
Committee's policy is to pay discretionary bonuses, de-
termined 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 di-
rector of the Company in amounts reflecting the partici-
pant'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 op-
tions granted by other companies), the number of options
remaining available for grant and management's recom-
mendations. 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 number of options granted to an executive in 1998
were granted as an inducement for employment.
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 mar-
ket 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 execu-
tives, management's recommendations and the Commit-
tee'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 pur-
poses. 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 rec-
ommend 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 Com-
mittee determined that such grants were more important
to the Company than the potential loss of related com-
pensation 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, 1998, the Company
contributed approximately $26,000 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 posi-
tions, 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.
Fiscal 1998 Compensation Decisions Concerning CEO.
In July 1998 Lawrence Bernstein was hired by the Com-
pany as CEO and President. The compensation committee recommended that
Mr. Bernstein be compensated by
a grant of 140,000 options and that his salary was to
commence at $150,000 per annum once a targeted sales
volume was achieved by the Company. To date this
sales volume has not been achieved.
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, 1998, with the following
exceptions: Lawrence Bernstein, Director, reported late on
Form 3 his receipt of options to purchase 120,000 shares
of Common Stock granted on July 7, 1998 and 20,000
shares of Common Stock granted on July 30, 1998; Elliot
Bier, Director, reported late on Form 3 his receipt of
options to purchase 500 shares of Common Stock
granted on July 1, 1998 and on October 1, 1998; James
Rybakoff, Director, reported late on Form 3 his receipt of
options to purchase 500 shares of Common Stock
granted on October 1, 1998; David Mars, Vice Chairman
and Director, reported late on Form 4 his sale on October 22, 1998 of 14,841
shares of Common Stock; Ron Goldenberg, Vice President, Chief Financial
Officer and Director, reported late on Form 4 his sale on
October 22, 1998 of 3,821 shares of Common Stock; Stephen Altro,
Chairman and Director, reported late on Form 4 his sale
on October 22, 1998 of 14,841 shares of Common Stock.
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 18 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.
Executive Compensation
The following table shows, as to the President, who is the
Company's chief executive officer, and the three other
executive officers other than the President whose
compensation, during the year ended December 31, 1997
exceeded $100,000, information concerning compensation paid for service to
the Company in all capacities during the fiscal year ended December
31, 1998, as well as total compensation paid to each such
individual for the Company's two previous fiscal years (to
the extent that such person was the President, as the
case may be, during any part of such fiscal year). There
were no other executive officers on December 31, 1998.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term
Compensation
Awards
Name and Principal
Position Year Salary Bonus Other Annual
Compensation Options All
Other
Compe
nsat
ion
($)
<S> <C> <C> <C> <C> <C> <C>
($) ($) (#)
Larry Bernstein,
President (1) 1998 - - - 140,000 -
1997 - - - - -
1996 - - - - -
Stephen Altro,
Chairman 1998 156,000(2) 0 22,000(5) - 0
1997 168,000(3) 105,000(3) 22,000(5) 400,000 0(7)
1996 175,000(4) 0 22,000(5) 211,265 0
David Mars,
Vice Chairman 1998 156,000(2) 0 11,000(5) - 0
1997 168,000(3) 105,000(3) 11,000(5) 400,000 0(8)
1996 175,000(4) 0 22,000(6) 211,000 0
Ron Goldenberg,
Chief Financial
Officer 1998 114,000(2) 0 8,000(5) - 0
1997 122,000(3) 70,000(3) 8,000(5) 150,000 0(9)
1996 128,000(4) 24,000(4) 8,000(5) 0 0
</TABLE>
(1) Mr. Bernstein was hired as President of the Company in July 1998.
(2) Such amounts are based upon an exchange rate of Canadian $1.54 to
United States $1.00 (the exchange rate on December 31, 1998)
(3) Such amounts are based upon an exchange rate of Canadian $1.43 to
United States $1.00 (the exchange rate on December 31, 1997).
(4) Such amounts are based upon an exchange rate of Canadian $1.37 to
United States $1.00 (the exchange rate on December 31, 1996).
(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) 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 $499,000 as of
December 31, 1998.
(8) 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 Agreement" elsewhere in this Proxy
Statement) which would have had a value of approximately $499,000 as of
December 31, 1998.
(9) 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 $364,000 as of
December 31, 1998.
Option Grants in Fiscal 1998
The following table sets forth further information regarding the
stock option grants during fiscal 1998 to the officers named in the
Summary Compensation Table above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Options % of total Exercise Potential Realizable
Granted Options or Base Value at Assumed Annual
Granted Price Expiration Rates of Stock Price
(#) to Employees ($/Share) Date Appreciation for 10
in Fiscal year Option Term
1998 5% ($) 10%($)
Name
Lawrence
Bernstein 140,000 92.4 $5.50 07/30/08 $484,400 $1,227,800
</TABLE>
All of the Options granted during 1998 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 1998, 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, 1998.
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, 1998, as
determined by the closing price of the Company's Common Stock
on that date as reported by NASDAQ.
Aggregated Option Exercises in Fiscal 1998 and December 31, 1998 Option Values
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name Share Value Number of Value of Unexercised
Acquired Realized Unexercised Options in the Money Option
on $(1) At Fiscal Year-End at Fiscal Year-End
Exercise (#) ($)
(#)
Exercisable Unexercisable Exercisable (2) Unexercisable
Stephen
Altro 0 0 611,265 0 0 0
David Mars 0 0 611,265 0 0 0
Ron
Goldenberg 0 0 158,565 0 0 0
Lawrence
Bernstein 0 0 140,000 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.
(2) Closing stock price on December 31, 1998 was $4.18.
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
Chairman 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.
$156,000 as of December 31, 1998).
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.
$156,000 as of December 31, 1998). 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. $114,000 as of December 31, 1998). 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, 1999, subject to
ratification by the shareholders.
KPMG served as the Company's independent auditors during 1998. 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 1998 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 2000 Annual Meeting
Shareholder proposals for the 2000 Annual Meeting must
be received by the Company at its principal executive
offices set forth above not later than December 28, 1999
in order to be included in the Company's proxy materials.
By order of the Board of Directors
RON GOLDENBERG
Secretary
Dated: April 26, 1999
PLEASE COMPLETE, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY
