<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report:
DECEMBER 31, 1998
(Date of Earliest Event Reported)
CYRK, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-21878 04-3081657
(Commission File Number) (I.R.S. Employer Identification No.)
3 POND ROAD, GLOUCESTER, MA 01930
(Address of Principal Executive Offices)
(Zip Code)
(978) 283-5800
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Item 5: OTHER ITEMS.
On December 31, 1998, Cyrk, Inc. ("Cyrk" or the "Company") issued a
press release that announced Patrick D. Brady had been named chief executive
officer of Cyrk, as part of the Company's strategic reorganization. Brady said
that he will announce additional organizational changes within the next several
weeks. Brady will retain his current duties as Cyrk's president and chief
operating officer. Cyrk initiated a major restructuring in February of 1998,
focusing its efforts in the promotional marketing area and shedding
non-performing units in other industries.
Gregory P. Shlopak resigned from the Company effective December 31,
1998 to become co-chairman of Equity Enterprises, Inc., a New York city-based
firm which holds controlling and other interests in companies in various
industries. Equity Enterprises' co-chairman Louis Marx, Jr. resigned as a
director of Cyrk effective December 31, 1998. Mr. Shlopak will continue as a
director of Cyrk and provide consulting services to the Company.
The Company entered into an agreement with Mr. Shlopak, attached
hereto as EXHIBIT 10.1, for which it will record a $2,300,000 non-recurring,
pre-tax charge in the fourth quarter of 1998. The agreement provides for
payments and benefits to Mr. Shlopak payable over a three year period, and
includes a non compete covenant for two years.
In addition, Cyrk, Inc. files herewith as EXHIBIT 99.1 its Amended
Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995 which amends and supersedes its Amended
Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995 filed as EXHIBIT 99.3 with its Form
10-K, dated March 30, 1998.
Item 7: FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
EXHIBIT 10.1 Severance Agreement between Cyrk, Inc. and Gregory
Shlopak.
EXHIBIT 99.1 Amended Cautionary Statement For Purposes of the
"Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995.
<PAGE> 3
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYRK, INC.
By: /s/ Dominic F. Mammola
-----------------------
Dominic F. Mammola
Date: January 20, 1999 Chief Financial Officer
<PAGE> 1
Exhibit 10.1
SEVERANCE AGREEMENT
THIS AGREEMENT between Cyrk, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Gregory P. Shlopak (hereinafter referred to as the
"Executive"), dated as of this 31st day of December, 1998:
WHEREAS, the Executive is the Chairman and Chief Executive Officer of
the Company and an integral part of its management;
WHEREAS, the Company has determined to effect certain changes in management of
the Company, which changes contemplate, inter alia, the termination of the
Executive's employment with the Company;
WHEREAS, the Company wishes to provide to the Executive fair severance in
connection with the termination of his employment and to assure the Executive of
certain other benefits upon such event;
NOW, THEREFORE, in consideration of the mutual promises set forth herein and of
the Executive's past employment with and contributions to the Company and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Capitalized terms used and not otherwise defined upon first usage herein are
defined in EXHIBIT A attached to this Agreement.
1. SEVERANCE BENEFITS.
1.1. BASIC BENEFITS. On December 31, 1998 (the "Effective Date"), the
Executive's employment with the Company shall terminate, and the
Executive shall be entitled to the following benefits:
(a) Over a period of three (3) years, commencing on the Effective Date and
continuing until December 31, 2001 (the "Severance Period"), the
Company shall pay to the Executive an aggregate amount equal to
$1,224,924, such aggregate amount to be paid in 72 equal payments of
$17,012.83 each, each such payment to be made on the 15th and last day
of each calendar month commencing on January 15, 1999 and continuing
thereafter on the last
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and 15th day of each subsequent calendar month through and including
December 31, 2001.
(b) Until the end of the Severance Period, the Company shall maintain in
full force and effect for the benefit of the Executive and his family
the following benefits:
(i) all life, medical, dental, vision and disability insurance plans
and other benefit programs, including, without limitation, those
described in the Cyrk Employee Handbook, in which the Executive was
entitled to participate immediately prior to the Effective Date;
provided, that if the Executive's continued participation is not
possible under the terms of such plans and programs, the Company shall
instead arrange to provide the Executive with substantially similar
benefits upon comparable terms; and
(ii) the Special Child Care Benefit.
(c) For a period of six (6) months commencing on the Effective Date and
continuing through and including June 30, 1999, the Company shall
maintain in full force and effect for the benefit of the Executive and
his family the following benefits:
(i) the Accountant Benefit;
(ii) the Apartment Benefit;
(iii) the Club Benefit;
(iv) the Phone and Subscription Benefit; and
(v) the New York Office Benefit.
(d) ACCRUED VACATION; PERSONAL DAYS. As soon as practicable after the
Effective Date, the Company shall pay to the Executive in cash the
amount due to the Executive, as of the Effective Date, for accrued
vacation time and personal days, as determined by reference to his
Base Salary, it being agreed that the Executive shall have, as of the
Effective Date, five (5) weeks of accrued vacation due and
<PAGE> 3
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nine (9) personal days, having an aggregate value of $34,038.
(e) CASH PAYMENT. In addition to the payment described in paragraph (d)
above, as soon as practicable after the Effective Date, the Company
shall pay to the Executive a cash payment of $150,000.
(f) SPLIT-DOLLAR LIFE INSURANCE POLICIES. In accordance with the
Company's commitment to do so as set forth in its letter dated April
3, 1996 to Winged Keel Group, Inc., the Company shall continue to pay
all scheduled premiums in full for the split-dollar life insurance
policies currently existing on the life of the Executive and his
spouse, according to current terms and provisions and as currently in
effect, for eleven (11) years from the Effective Date, as more fully
set forth in EXHIBIT B attached hereto. In addition, pursuant to such
commitment, the Company shall not be entitled to the repayment of the
Company's collateral interest in such policies until the surrender of
such policies by the trusts holding the same, the second death of the
two insureds with respect to the second-to-die policies, and the death
of the insured with respect to the single life policies, as stated in
the applicable split-dollar agreements.
(g) AUTOMOBILE BENEFIT. For a period of two (2) years commencing on the
Effective Date and continuing through and including December 31, 2000,
the Company shall maintain the Automobile Benefit in full force and
effect for the continued benefit of the Executive and his family.
(h) LOAN FORGIVENESS. As of the Effective Date, the Company shall forgive
all remaining payments due from the Executive to the Company, totaling
$256,947, under certain loan arrangements existing as of the
Effective Date between the Executive and the Company.
(i) OFFICE EQUIPMENT. As soon as practicable after the Effective Date, the
Company shall provide the Executive with two personal computers and
one facsimile machine, comparable in quality to those currently used
by him and Diane Green at the Company's Gloucester office, for use by
the Executive in his home.
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1.2. OPTIONS AND OTHER STOCK AWARDS. On the Effective Date, all options and
stock appreciation rights granted under the Company's various stock
plans to the Executive as of the Effective Date shall, notwithstanding
any provision of such options, rights and/or plans to the contrary,
terminate and be canceled in full.
1.3 COORDINATION WITH PARACHUTE TAX RULES. Payments under Sections 1.1
and 3 shall be made without regard to whether the deductibility of
such payments (or any other payments to or for the benefit of the
Executive) would be limited or precluded by Internal Revenue Code
Section 280G and without regard to whether such payments (or any other
payments) would subject the Executive to federal excise tax levied on
certain "excess parachute payments" under Internal Revenue Code
Section 4999; provided, that if the total of all payments to or for
the benefit of the Executive, after reduction for all federal taxes
(including the tax described in Internal Revenue Code Section 4999, if
applicable) with respect to such payments ("Executive's total
after-tax payments"), would be increased by the limitation or
elimination of any payments under Sections 1.1 and 3, amounts payable
under Sections 1.1 and 3 shall be reduced to the extent, and only to
the extent, necessary to maximize Executive's total after-tax
payments. The determination as to whether and to what extent payments
under Sections 1.1 and 3 are required to be reduced in accordance
with the preceding sentence shall be made at the Company's expense by
PricewaterhouseCoopers or by such other certified public accounting
firm, law firm, or benefits consulting firm as the Compensation
Committee of the Company's Board of Directors may designate. In the
event of any underpayment or overpayment under Sections 1.1 and 3 as
determined by PricewaterhouseCoopers (or such other firm as may have
been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to
Executive or refunded to the Company, as the case may be, with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code.
2. NONCOMPETITION; NON-SOLICITATION; NO DISPARAGEMENT.
2.1. SCOPE AND PERIOD. The Executive agrees that he will not become an
employee, consultant, or advisor to any competitor of the Company, or
any Subsidiary, for a period of two (2) years commencing on the
Effective Date and continuing until December 31, 2000. The Executive
further agrees that he will not solicit any clients, active prospects,
suppliers or employees of
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the Company, or any Subsidiary, during the Severance Period. No
provision hereof shall prohibit the Executive from offering to employ
any person employed by the Company, or any Subsidiary, who, without
any solicitation by the Executive, initiates contact with the
Executive for the purpose of employment. The Company and the Executive
agree that neither party shall make any comments to any person,
including any potential customers, clients, partners or acquaintances
of either party, or to the media, disparaging the integrity or
reputation of the other party.
2.2. NO DUTY TO MITIGATE DAMAGES. The Executive's benefits under this
Agreement shall be considered severance pay in consideration of his
past service, and as an inducement to him to enter into and become
bound by this Agreement, and his entitlement thereto shall neither be
governed by any duty to mitigate his damages by seeking further
employment nor offset by any compensation that he may receive from
future employment nor is it dependent upon whether or not the
Executive provides services of any type to, or continues to serve as a
member of the Board of Directors of, the Company or any Subsidiary.
2.3. OTHER AGREEMENTS. If for any reason the Executive receives severance
payments (other than under this Agreement) from the Company or its
Subsidiaries upon the termination of his employment with the Company,
the amount of such payments shall be deducted from the amount paid
under this Agreement. The purpose of this provision is solely to avert
a duplication of benefits; and neither this provision nor the
provisions of any other agreement shall be interpreted to reduce the
amount payable to the Executive below the greater of the amount that
would otherwise have been payable under this Agreement or under other
agreements.
2.4. WITHHOLDING. All payments required to be made by the Company hereunder
to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Company
may reasonably determine it must withhold pursuant to any applicable
law or regulation.
3. ASSISTANT TO THE EXECUTIVE. The Company agrees to continue to employ
Diane Green (the "Assistant"), for a period of one (1) year commencing
on the Effective Date and continuing through and including December
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31, 1999 (the "Employment Period"), such employment to be for the sole
purpose of acting as an assistant to the Executive. The Company shall
employ the Assistant during the Employment Period at an annual base
salary rate of $85,000 and shall continue to maintain, in full force
and effect during the Employment Period, all benefits to which the
Assistant is entitled as of the Effective Date.
4. RESIGNATION. The Executive's resignation from the office of Chief
Executive Officer of the Company and from his positions as Chairman of
the Board and Managing Director shall be effective on the Effective
Date. The Executive shall not resign as a member of the Board of
Directors of the Company on the Effective Date.
5. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled exclusively by
single-arbitrator arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
6. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer
fees, printing costs, etc., reasonably incurred by the Executive in
connection with the negotiation, execution and delivery of this
Agreement or in seeking in good faith to obtain any right or benefit
to which the Executive believes he is entitled under this Agreement.
Any amount payable under this Agreement that is not paid when due
shall accrue interest at the prime rate as from time to time in effect
at the Company's agent bank until paid in full.
7. NOTICES. Any notices required to be given under this Agreement shall
be in writing and shall be deemed given five (5) days after mailing in
the continental United States by registered or certified mail, or upon
personal receipt after delivery, telex, telecopy, or telegram, to the
party entitled thereto at the address stated below or to such changed
address as the addressee may have given by a similar notice:
TO THE COMPANY: Cyrk, Inc.
3 Pond Road
Gloucester, MA 01930
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Attn: President
WITH A COPY TO: Cameron Read, P.C.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
TO THE EXECUTIVE: Gregory P. Shlopak
6 Camborne Way
Rockport, MA 01966
WITH A COPY TO: Victor J. Paci, Esq.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
8. GENERAL PROVISIONS.
8.1. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties and be enforceable by the Executive's
personal or legal representatives or successors if the Executive dies
while any amounts would still be payable to him hereunder, benefits
would still be provided to this family hereunder, or rights would
still be exercisable by him hereunder as if he had continued to live.
Such amounts shall be paid to the Executive's estate, such benefits
shall be provided to the Executive's family, and such rights shall
remain exercisable by the Executive's estate in accordance with the
terms of this Agreement. This Agreement shall not otherwise be
assignable by the Executive.
8.2. SUCCESSORS. This Agreement shall inure to and be binding upon the
Company's successors. The Company shall require any successor to all
or substantially of the business and/or assets of the Company by sale,
merger (where the Company is not the surviving corporation),
consolidation, lease or otherwise, by agreement in form and substance
satisfactory to the Executive, to assume this Agreement expressly.
This Agreement shall not otherwise be assignable by the Company. In
the event that it is impracticable for a successor of the Company to
perform the Company's obligations under paragraph 1.1(a), 1.1(b),
1.1(c), 1.1(f), l.l(g) and/or Section 3 of this Agreement, the Company
shall pay to the Executive, in a lump sum payment without
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discounting to present value, an amount equal to the aggregate of all
remaining payments due under such paragraph 1.1(a), 1.1(b), 1.1(c),
1.1(f), 1.1(g) and/or Section 3, as the case may be.
8.3. AMENDMENT OR MODIFICATION; WAIVER. This Agreement may not be amended
or modified unless agreed to in writing by the Executive and the
Company. No waiver by either party of any breach of this Agreement
shall be deemed a waiver of a subsequent breach.
8.4. SEVERABILITY. In the event that any provision of this Agreement shall
be determined to be invalid or unenforceable, such provision shall be
enforceable in any jurisdiction in which valid and enforceable, and in
any event the remaining provisions shall remain in full force and
effect to the fullest extent permitted by law.
8.5. RIGHTS GRANTED. This Agreement shall not give the Executive any right
to compensation or benefits from the Company or any Subsidiary, except
for the rights specifically stated herein, including those certain
severance and other benefits that become due as of the Effective Date.
8.6. GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
9. EXCLUSIVE AGREEMENT. It is agreed and understood that this Agreement
represents the entire agreement between the Company and the Executive
concerning the subject matter hereof and, except as set forth in
paragraph l(f) hereof, supersedes all prior agreements and
understandings concerning the Executive's rights upon the termination
of his employment, including, without limitation, any change of
control agreement that may be in effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the day and year first above written.
Cyrk, Inc. Executive
By its Authorized Representative
By:
------------------------------------ -----------------------------------
Name: Joseph W. Bartlett Gregory P. Shlopak
Title: Chairman, Compensation Committee
<PAGE> 10
EXHIBIT A
DEFINITIONS
The following terms as used in this Severance Agreement have the following
meanings:
(a) "ACCOUNTANT BENEFIT" means the payment by the Company of certain expenses
in connection with accounting services provided to the Executive, at the
annual rate in effect on the Effective Date, which annual rate is $50,000.
(b) "Apartment Benefit" means, so long as the Company provides the use of an
apartment in New York City to executives of the Company, the payment by the
Company of certain expenses incurred in connection with the leasing of an
apartment in New York City for use by the Executive, including rent and
maintenance fees and cleaning and phone expenses, at the annual rate in
effect on the Effective Date, which annual rate is $92,900.
(c) "AUTOMOBILE BENEFIT" means the payment by the Company of certain expenses,
including rental, insurance, maintenance and fuel costs, in connection with
the leasing of automobiles used by the Executive, at the annual rate in
effect on the Effective Date, which annual rate is $35,000.
(d) "BASE SALARY" means the Executive's base salary, exclusive of any bonus or
other benefits he may receive, at the annual rate in effect on the
Effective Date, which annual rate is $300,000.
(e) "CLUB BENEFIT" means the payment by the Company of certain expenses
incurred in connection with club memberships for the Executive, at the
annual rate in effect on the Effective Date, which annual rate is $31,700.
(f) "COMPANY" means Cyrk, Inc. or any successor.
(g) "NEW YORK OFFICE BENEFIT" means, so long as the Company maintains an office
in New York, the use by the Executive of his New York office in the same
manner as he uses it as of the Effective Date, with payment by the Company
of all expenses incurred in connection with such office, including, without
limitation, rent, furniture, equipment and communications expenses.
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(h) "PHONE AND SUBSCRIPTION BENEFIT" means the payment by the Company of
expenses incurred in connection with a cellular phone and subscriptions to
periodicals provided to the Executive, at the annual rate in effect on the
Effective Date, which annual rate is $7,600.
(i) "SPECIAL CHILD CARE BENEFIT" means the payment by the Company of the salary
and fringe benefits for a special child care provider for the Executive's
son Jackson C. Shlopak, at the annual rate of up to $25,000.
(j) "SUBSIDIARY" means any corporation in which the Company owns, directly or
indirectly, 50 percent (50%) or more of the total combined voting power of
all classes of stock.
<PAGE> 12
EXHIBIT B
<TABLE>
<CAPTION>
====================================================================================================================================
Policy
Cyrk, Inc. Owner
Total Total Cash Cash
Insurance Product Policy Death Annual Date of Deposits Surrender Surrender
Name Carrier Type Number Benefit Premium Issue To Date Value Value
================== ============ ============ ======== =========== =========== ========= ============= ============= ========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Gregory P. Shlopak The Guardian Whole Life 3777007 4,248,669 74,936.00 15-Nov-94 456,942.40 370,777.00 0.00
Gregory P. Shlopak John Hancock Whole Life 85240001 3,502,499 61,100.00 15-Nov-94 419,596.94 418,918.00 0.00
Gregory P. and Survivorship
Leslee B. Shlopak The Guardian Whole Life 3777006 4,211,222 42,349.00 15-Nov-94 258,528.30 155,709.00 0.00
Gregory P. and Survivorship
Leslee B. Shlopak John Hancock Whole Life 80099781 3,269,471 25,017.00 15-Nov-94 142,259.16 120,682.00 0.00
Gregory P. and Survivorship
Leslee B. Shlopak JHVLICO Variable
Life 20015822 20,000,000 211,850.00 26-Jun-97 667,119.00 603,186.00 0.00
----------- ----------- ------------- ------------- ------
$35,231,861 $435,261.00 $1,944,446.00 $1,669,272.00 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. Cyrk, Inc. advances premiums for the acquisition of Life Insurance
coverage. Cyrk, Inc. will recover its advances at the death of the Insured
(or sooner, at the discretion of the policy owner).
2. Each participant is responsible for the income tax on the economic benefit
received from the arrangement.
3. Each policy owner is entitled to policy cash values to the extent that they
exceed the cumulative premiums paid by Cyrk, Inc.
4. Life Insurance death benefits are not subject to income tax.
5. JHVLICO is the abbreviation for John Hancock Variable Life Insurance
Company.
Winged Keel Group, Inc. December 1998 File No: 10849
<PAGE> 13
EXHIBIT B CONT'D
CYRK, INC.
SPLIT DOLLAR LIFE INSURANCE PLAN
PREPARED FOR GREGORY P. SHLOPAK
COMPOSITE
<TABLE>
<CAPTION>
Single Life Second-to-die
----------------- ---------------------------
Hancock Total
Policy Guardian Hancock Guardian Hancock Variable Total Insurance
Year Age Premium Premium Premium Premium Premium Premium Carriers
- ------- --- -------- ------- -------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-97 50 144,188 167,500 81,556 42,017 435,260 435,261 33,744,694
1997-98 51 74,936 61,100 42,349 25,017 231,859 455,261 33,857,602
1998-99 52 74,936 61,100 42,349 25,017 231,859 455,261 33,564,662
1999-00 53 74,936 61,100 42,349 25,017 231,859 455,261 34,085,504
2000-01 54 74,936 61,100 42,349 25,017 231,859 455,261 34,219,447
2001-02 55 74,936 61,100 42,349 25,017 231,859 455,261 34,355,770
2002-03 56 74,936 61,100 42,349 25,017 231,859 455,261 34,524,614
2003-04 57 74,936 61,100 42,349 25,017 231,859 455,261 34,695,870
2004-05 58 74,936 61,100 42,349 25,017 231,859 455,261 34,835,104
2005-06 59 74,936 61,100 42,349 25,017 231,859 455,261 35,012,531
2006-07 60 74,936 61,100 42,349 25,017 231,859 455,261 35,202,277
2007-08 61 0 61,100 42,349 25,017 162,607 291,073 35,279,667
2008-09 62 0 61,100 0 0 106,400 167,500 35,314,515
2009-10 63 0 0 0 0 0 0 35,208,506
2010-11 64 0 0 0 0 0 0 35,130,904
</TABLE>
Notes:
1. Assumes Mr. Shlopak (D.O.B. 8/30/46) and Mrs. Shlopak (D.O.B. 8/13/55) do
not smoke and are classified as preferred insurance risks.
2. Actuarial life expectancy for a 50 year old male insured is 31 years (based
on 1983 IAM mortality tables).
3. Actuarial life expectancy for a 43 year old female insured is 42 years (based
on 1983 IAM mortality tables).
4. Assumes acquisitions of survivorship insurance on the lives of Mr. and Mrs.
Shlopak.
5. This spreadsheet is based on detailed illustrations provided by The Guardian
and John Hancock Life Insurance companies. The illustration is attached to
this summary spreadsheet. These projections make assumptions as to future
income as referred, mortality costs, and administrative expenses and is not
guaranteed. Actual results may be higher or lower than illustrated.
6. The contents of this report should not be considered the rendering of legal,
tax or investment advice. Clients are responsible for seeking all such advice
from their own legal counsel, accountants and investment advisors.
<PAGE> 14
EXHIBIT B CONT'D
CYRK, INC.
SPLIT DOLLAR LIFE INSURANCE PLAN
PREPARED FOR GREGORY P. SHLOPAK
COMPOSITE
<TABLE>
<CAPTION>
Income
Policy Premium Cumulative Cash Insurance Statement
Year Age Expense Premium Value Coverage Effect
- ------- --- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996-97 50 435,261 1,305,783 1,228,957 33,749,694 (42,984)
1997-98 51 435,261 1,741,044 1,558,723 33,857,802 (105,495)
1998-99 52 435,261 2,176,305 2,110,984 33,964,662 112,000
1999-00 53 435,261 2,611,566 2,585,870 34,085,904 39,625
2000-01 54 435,261 3,046,827 3,163,854 34,219,447 25,695
2001-02 55 435,261 3,482,088 3,780,911 34,365,778 0
2002-03 56 435,261 3,917,349 4,475,644 34,524,614 0
2003-04 57 435,261 4,352,610 5,218,418 34,695,978 0
2004-05 58 435,261 4,787,871 6,049,990 34,836,194 0
2005-06 59 435,261 5,223,132 6,969,177 35,012,531 0
2006-07 60 435,261 5,658,393 7,938,083 35,202,277 0
2007-08 61 291,073 5,949,466 8,911,033 35,279,667 0
2008-09 62 167,500 6,116,966 9,918,123 35,314,581 0
2009-10 63 0 6,116,966 10,746,520 35,208,506 0
2010-11 64 0 6,116,966 11,637,091 35,110,904 0
</TABLE>
Notes:
1. Assumes Mr. Shlopak (D.O.B. 8/30/46) and Mrs. Shlopak (D.O.B. 8/13/55) do
not smoke and are classified as preferred insurance risks.
2. Actuarial life expectancy for a 50 year old male insured is 31 years (based
on 1983 IAM mortality tables).
3. Actuarial life expectancy for a 43 year old female insured is 42 years (based
on 1983 IAM mortality tables).
4. Assumes acquisitions of survivorship insurance on the lives of Mr. and Mrs.
Shlopak.
5. This spreadsheet is based on detailed illustrations provided by The Guardian
and John Hancock Life Insurance companies. The illustration is attached to
this summary spreadsheet. These projections make assumptions as to future
income as referred, mortality costs, and administrative expenses and is not
guaranteed. Actual results may be higher or lower than illustrated.
6. The contents of this report should not be considered the rendering of legal,
tax or investment advice. Clients are responsible for seeking all such advice
from their own legal counsel, accountants and investment advisors.
<PAGE> 15
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the day and year first above written.
Cyrk, Inc. Executive
By its Authorized Representative
By: /s/ Joseph W. Bartlett
------------------------------------ -----------------------------------
Name: Joseph W. Bartlett Gregory P. Shlopak
Title: Chairman, Compensation Committee
<PAGE> 1
Exhibit 99.1
------------
AMENDED CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
From time to time, Cyrk, Inc. (the "Company") may provide forward-looking
information such as forecasts of expected future performance or statements about
the Company's plans and objectives. This information may be contained in filings
with the Securities and Exchange Commission, press releases or oral statements
by the officers of the Company. The Company desires to take advantage of the
"Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995
and is including this Exhibit 99.1 in this Form 8-K in order to do so.
The Company wishes to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual consolidated
results for the Company's current quarter and beyond to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the
Company.
DEPENDENCE ON PRINCIPAL CUSTOMERS
In recent years, the Company's business has been heavily dependent on purchases
of promotional products by certain key customers including, but not limited to,
Philip Morris Incorporated ("Philip Morris") and the Pepsi-Cola Company
("Pepsi"). Additionally, the business of the Company's subsidiary, Simon
Marketing, Inc. ("Simon"), is heavily dependent on purchases of promotional
products and services by McDonald's Corporation or its franchisees
("McDonald's") for which it receives an annual fee. The loss of any of these
customers or a significant reduction in their level of purchases from the
Company without an offsetting increase in purchases by new or other existing
customers would have a material adverse effect on the Company's business and
results of operations. The Company's agreements with Pepsi were terminated in
December of 1997 and the Company expects the volume of its business with Pepsi
in the future to be minimal in comparison to that of 1996 and 1997.
LIMITED CUSTOMER COMMITMENTS
As is generally the case with its other promotional product customers, the
Company's agreements with Philip Morris and McDonald's do not require them to
make a certain level of purchases. Instead, purchase commitments are represented
by purchase orders placed by the customers from time to time during the course
of a promotion. The actual level of purchases by Philip Morris and McDonald's
(and other promotional products customers) depends on a number of factors,
including the duration of the promotion and consumer redemption rates. Purchase
orders are generally subject to cancellation with
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limited penalty. Consequently, the Company's level of net sales is difficult to
predict accurately and can fluctuate greatly from quarter to quarter.
COMPETITION
Philip Morris and certain other customers seek competitive bids for their
promotional programs. The Company's profit margin depends, to a great extent, on
its competitive position when bidding and its ability to continually lower its
product costs after being awarded bids. Competition is not expected to abate and
thus will continue to exert pressure on the Company's profit margin in the
future.
INTEGRATION OF NEW SUBSIDIARIES
The successful integration of the operations of the Company's new subsidiaries,
Simon Marketing, Inc. ("Simon"), which was acquired on June 9, 1997, and Tonkin,
Inc. ("Tonkin"), which was acquired on April 7, 1997, with those of the Company
will require, among other things, the coordination of the respective product and
promotional offerings of the Company, Simon and Tonkin related sales, marketing,
development and administrative activities. There can be no assurance that the
Company will not encounter unexpected difficulties in such integration or that
the expected benefits of the business combination will be realized. Any
unexpected delays or costs incurred in such integration could have a materially
adverse effect upon the Company.
EFFECT OF INDUSTRY CONDITIONS FACING THE COMPANY'S CUSTOMERS
On November 23, 1998, certain tobacco companies, including Philip Morris,
entered into a settlement agreement with 46 states and five United States
territories that effectively ended the lawsuits brought by the states against
the tobacco industry over public-health costs connected with smoking. Among
other things, the settlement agreement prohibits the use of brand names by the
tobacco companies in connection with the marketing, distribution, licensing and
sales of apparel and other merchandise (including, but not limited to,
catalogues or direct mail orders). This restriction begins on July 1, 1999 and
will prohibit the Company from using Philip Morris brand names in connection
with the promotions and programs it provides for Philip Morris. The settlement
agreement, however, does not prohibit the use of Philip Morris's corporate name
for such promotions or programs. Due to the restrictions on the use of brand
names, and the other limitations imposed by the settlement agreement on the
tobacco industry, the settlement could have a material adverse effect on the
Company's sales to Philip Morris, which in turn will have a material adverse
effect on the Company's business and results of operations.
The United States Food and Drug Administration (the "FDA") has issued final
regulations with respect to promotional programs relating to tobacco products.
Such regulations, among other things, ban (i) gifts based on proof of purchase
of tobacco products or redeemable coupons, (ii) the use of tobacco brand names
or any other indices
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of tobacco brand identification on non-tobacco products (e.g. T-shirts, hats,
other clothing, gym bags and trinkets) and (iii) brand-name sponsorship of
sporting events, concerts and other events. These regulations became effective
on August 28, 1997, except for the ban on brand-name sponsorship, which was to
become effective on August 28, 1998. In April of 1997, a federal district court
in North Carolina ruled that the FDA did not have the authority to restrict the
use of tobacco brand identification on promotional items and struck down this
section of the regulations. The decision was appealed to the Fourth Circuit
Court of Appeals which in August of 1998 held that the FDA does not have the
authority to regulate tobacco products. The Fourth Circuit's decision has been
appealed to the Supreme Court of the United States. If the Fourth Circuit's
decision is reversed, the FDA regulations could have a material adverse effect
on the Company's sales to Philip Morris similar to the tobacco settlement
agreement, which in turn will have a material adverse effect on the Company's
business and results of operations.
The Company's business is heavily dependent on the promotional budgets of its
customers, which in turn are influenced by industry conditions and other
factors. Accordingly, industry conditions faced by Philip Morris in particular
and conditions in the tobacco industry in general are expected to impact the
Company's business. There can be no assurance that these conditions will not
lead to a reduction in advertising and promotional spending by Philip Morris, or
that Philip Morris will not change its advertising and promotional strategy in a
manner that reduces the use of promotional programs such as the Marlboro
Adventure Team, Country Store and Unlimited promotions. A significant reduction
in spending by Philip Morris on promotional product programs would have a
material adverse effect on the Company's business and results of operations.
PROMOTIONAL PRODUCT DEMAND
The Company's business is driven by spending by companies to promote their
corporate identities and brand name products. If the demand for brand name
products diminishes or if the companies decrease their use of promotional
product programs to promote their corporate identities and brands, the Company's
business could be materially and adversely affected. In addition, the Company's
relationship with certain of its promotional products customers has been limited
to the sourcing of products being offered or sold by the customer in connection
with a single promotional program. There can be no assurance that such customers
will continue to use the Company to source products for future promotional
programs.
DEPENDENCE ON FOREIGN MANUFACTURING
The majority of the Company's net sales in recent years were attributable to
products manufactured by subcontractors located in Asia. The Company has no
long-term contracts with these manufacturing sources and often competes with
other companies for production facilities and import quota capacity. In
addition, certain Asian manufactures
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require that a letter of credit be posted at the time a purchase order is
placed. There can be no assurance that the Company will continue to have the
necessary credit facilities for the purpose of posting such letters of credit.
The Company's business is subject to the risks normally associated with
conducting business abroad, such as foreign government regulations, political
unrest, disruptions or delays in shipments, fluctuations in foreign currency
exchange rates and changes in economic conditions in countries in which the
Company's manufacturing sources are located. If any such factors were to render
the conduct of business in a particular country undesirable or impractical, or
if the Company's current foreign manufacturing sources were to cease doing
business with the Company for any reason, the Company's business and operating
results could be adversely affected.
IMPORTS AND IMPORT RESTRICTIONS
The importation of products manufactured in Asia is subject to the constraints
imposed by bilateral agreements between the United States and substantially all
of the countries from which the Company imports goods. These agreements impose
quotas that limit the quantity of certain types of goods, including textile
products imported by the Company, which can be imported into the United States
from those countries. Such agreements also allow the United States to impose,
under certain conditions, restraints on the importation of categories of
merchandise that, under the terms of the agreements, are not subject to
specified limits.
The Company's continued ability to source products that it imports may be
adversely affected by additional bilateral and multilateral agreements,
unilateral trade restrictions, significant decreases in import quotas, the
disruption of trade from exporting countries as a result of political
instability or the imposition of additional duties, taxes and other charges or
restrictions on imports.
Products imported by the Company from China currently receive the same
preferential tariff treatment accorded goods from countries granted "most
favored nation" status. However, the renewal of China's most favored nation
treatment has been a contentious political issue for several years and there can
be no assurance that such status will be continued. If China were to lose its
most favored nation status, goods imported from China will be subject to
significantly higher duty rates which would increase the cost of goods from
China. Any such increase could have a material adverse effect on the Company's
business.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on several key personnel, including Patrick D. Brady,
Chief Executive Officer, President and Chief Operating Officer and Allan Brown,
Chief Executive Officer of Simon. The loss of the services of any one of them
could have a material adverse effect on the Company. Moreover, Mr. Brady is not
subject to an employment contract with the Company. The Company's continued
success is also
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dependent upon its ability to retain and attract skilled design, marketing and
management personnel.
ACQUISITIONS AND STRATEGIC ALLIANCES
The Company expects to make acquisitions of other businesses which are
complementary to the Company's business or to enter into strategic alliances
with such businesses. There can be no assurance that such strategic alliances,
or any future acquisition or strategic alliance, will be completed or, if
completed, will result in long-term benefits to the Company. Further, if the
Company is not successful in its acquisition or strategic alliance endeavors,
the Company's operating results in the future may be adversely affected.
IMPACT OF "YEAR 2000" ISSUES
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company does not anticipate that the addressing of the Year 2000 problem for
its internal information systems and current and future products will have a
material impact on its operations or financial results. However, there can be no
assurance that these costs will not be greater than anticipated, or that
corrective actions undertaken by the Company will be completed before any Year
2000 problems could occur. These combining factors could have a material adverse
impact on the Company's financial results. In addition, the Company plans to
initiate formal communications with its major customers and suppliers to
determine the extent to which the Company may be vulnerable to the failure of
those third parties to address their own Year 2000 issues. At this time, the
Company cannot determine the impact the Year 2000 will have on these third
parties. If the Company's customers or suppliers do not convert their systems to
become Year 2000 compliant, the Company's business and operating results could
be materially adversely affected.
