As filed with the Securities and Exchange Commission on September 24, 1999
PRELIMINARY COPY
CONFIDENTIAL PURSUANT TO RULE 14a-6(e)(2), FOR THE USE OF THE COMMISSION ONLY
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
---------------
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
|X| Confidential, for the use of the Commission only (as permitted by
Rule 14a-6(e)(2)
---------------
SIRCO INTERNATIONAL CORP.
(Name of Registrant as Specified in Its Charter)
(Name of Person Filing Proxy Statement)
---------------
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-1l(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
SIRCO INTERNATIONAL CORP.
24 Richmond Hill Avenue
Stamford, Connecticut 06901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October __, 1999
To the Shareholders of Sirco International Corp.:
Notice is hereby given that the Annual Meeting of Shareholders of Sirco
International Corp., a New York corporation (the "Company"), will be held at the
offices of the Company's subsidiary, Essex Communications, Inc. at 48 South
Service Road, Third Floor, Melville, New York 11747 on Wednesday, November 10,
1999 at 10:00 A.M., local time, for the following purposes:
1. To elect four (4) directors to the Board of Directors for the ensuing
year;
2. To amend the Company's Certificate of Incorporation to change the name
of the Company from Sirco International Corp. to eLEC Communications
Corp.;
3. To approve and adopt a proposal to amend the Company's 1995 Stock
Option Plan to increase the number of shares of Common Stock that may
be issued thereunder from 1,200,000 shares to 2,400,000 shares; and
4. To consider and act upon such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on September 24,
1999 will be entitled to vote at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, please mark,
sign and promptly return the enclosed proxy in the postpaid envelope provided.
If you receive more than one proxy because your shares are registered in
different names or addresses, each such proxy should be signed and returned so
that all your shares will be represented at the meeting.
Sincerely,
/s/JOEL DUPRE
-------------
JOEL DUPRE
Chairman of the Board
<PAGE>
SIRCO INTERNATIONAL CORP.
24 Richmond Hill Avenue
Stamford, Connecticut 06901
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of Sirco
International Corp., a New York corporation (the "Company"), in connection with
the solicitation, by order of the Board of Directors of the Company, of proxies
to be voted at the Annual Meeting of Shareholders to be held on Wednesday,
November 10, 1999 at 10:00 A.M., New York City time, at the offices of the
Company's subsidiary, Essex Communications, Inc. at 48 South Service Road, Third
Floor, Melville, New York 11747 and at any adjournment or adjournments thereof
(the "Annual Meeting"). The accompanying proxy is being solicited on behalf of
the Board of Directors of the Company. This Proxy Statement and the enclosed
proxy card were first mailed to shareholders of the Company on or about October
6, 1999, accompanied by the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1998, and the Company incorporates the contents of such
report herein by reference thereto.
At the Annual Meeting, the following matters will be considered and
voted upon:
(1) Election of four (4) directors to hold office until the 2000
Annual Meeting of Shareholders or until their successors shall
have been duly elected and qualified;
(2) Approval and adoption of a proposal to amend the Company's
Certificate of Incorporation to change the name of the Company
from Sirco International Corp. to eLEC Communications Corp.;
(3) Approval and adoption of a proposal to amend the Company's 1995
Stock Option Plan to increase the number of shares of Common Stock
that may be issued thereunder from 1,200,000 shares to 2,400,000
shares; and
(4) Such other business as may properly come before the Annual Meeting.
Voting and Revocation of Proxies; Adjournment
All of the voting securities of the Company represented by valid
proxies, unless the shareholder otherwise specifies therein or unless revoked,
will be voted FOR the election of the persons nominated as directors, FOR the
other proposals set forth herein, and at the discretion of the proxy holders on
any other matters that may properly come before the Annual Meeting. The Board of
Directors does not know of any matters to be considered at the Annual Meeting
other than the election of directors and the other proposals set forth above.
If a shareholder has appropriately specified how a proxy is to be
voted, it will be voted accordingly. Any shareholder has the power to revoke
such shareholder's proxy at any time before it is voted. A proxy may be revoked
by delivery of a written statement to the Secretary of the Company stating that
the proxy is revoked, by a subsequent proxy executed by the person executing the
prior proxy and presented to the Annual Meeting, or by voting in person at the
Annual Meeting.
<PAGE>
A plurality of the votes cast at the Annual Meeting by the shareholders
entitled to vote in the election is required to elect the director nominees, the
approval of the holders of a majority of the outstanding shares of Common Stock
is required to approve the proposed amendment to the Company's Certificate of
Incorporation and a majority of the votes cast by the shareholders entitled to
vote at the meeting is required to take any other action. In the event that
sufficient votes in favor of any of the matters to come before the meeting are
not received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
<PAGE>
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of any such proposed adjournment or adjournments.
Solicitation
The solicitation of proxies pursuant to this Proxy Statement will be
primarily by mail. In addition, certain directors, officers or other employees
of the Company may solicit proxies by telephone, telegraph, mail or personal
interviews, and arrangements may be made with banks, brokerage firms and others
to forward solicitation material to the beneficial owners of shares held by them
of record. No additional compensation will be paid to directors, officers or
other employees of the Company for such services. The total cost of any such
solicitation will be borne by the Company and will include reimbursement of
brokerage firms and other nominees.
Quorum and Voting Rights
The Board of Directors of the Company has fixed Friday, September 24,
1999 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. Holders of
record of shares of Common Stock at the close of business on the Record Date
will be entitled to one vote for each share held. The presence, in person or by
proxy, of the holders of a majority of the outstanding voting securities
entitled to vote at the Annual Meeting is necessary to constitute a quorum at
the Annual Meeting.
Common Stock Owned by Directors, Officers and Other Beneficial Owners
The following table sets forth, as of September 15, 1999, the names,
addresses and number of shares of Common Stock beneficially owned by all persons
known to the management of the Company to be beneficial owners of more than 5%
of the outstanding shares of Common Stock, and the names and number of shares
beneficially owned by all directors of the Company and all executive officers
and directors of the Company as a group (except as indicated, each beneficial
owner listed exercises sole voting power and sole dispositive power over the
shares beneficially owned):
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Percent of Outstanding
Name and Address Owned Common Stock
- ---------------- ----- ------------
<S> <C> <C>
Access One Communications Corp. 1,800,000 16.2%
4205 Vineland Road
Suite L15
Orlando, FL 32811
Joel Dupre(1) 1,084,668 9.7%
c/o Sirco International Corp.
24 Richmond Hill Avenue
Stamford, Connecticut 06901
Paul Riss(2) 142,000 1.3%
Anthony Scalice (3) 107,500 *
Eric M. Hellige(4) 65,500 *
Barrie Sommerfield (5) 20,200 *
All directors and executive
officers of the Company as a
group (five individuals) 1,419,868 12.1%
</TABLE>
2
<PAGE>
- ------------------
* Less than 1%.
(1) Includes 290,000 shares of Common Stock subject to options which are
presently exercisable.
(2) Includes 137,000 shares of Common Stock subject to options that are
presently exercisable.
(3) Includes 50,000 shares of Common Stock subject to warrants that are
presently exercisable.
(4) Includes 32,500 shares of Common Stock subject to options and warrants that
are presently exercisable. Does not include 35,000 shares of Common Stock
subject to options that are presently exercisable held by Pryor Cashman
Sherman & Flynn LLP, of which Mr. Hellige is a member, as to which shares
Mr. Hellige disclaims beneficial ownership.
(5) Includes 20,000 shares of Common Stock subject to options that are
presently exercisable.
<PAGE>
ELECTION OF DIRECTORS
(Proxy Item 1)
The Amended and Restated Bylaws of the Company provide that the number
of directors of the Company shall be at least three, except that where all the
shares are owned beneficially and of record by fewer than three shareholders,
the number of directors may be less than three but not less than the number of
shareholders. Subject to the foregoing limitation, such number may be fixed from
time to time by action of the Board of Directors or of the shareholders, or, if
the number of directors is not so fixed, the number shall be five. In April
1998, the Board of Directors fixed the number of directors at six. With the
resignation of one director of the Company in connection with the recent sale by
the Company of substantially all of the assets of its luggage division and the
retirement of Barrie Sommerfield from the Board at the end of his current term,
there will be two vacancies on the Board of Directors. In accordance with the
By-Laws of the Company, the vacancies will be filled by the affirmative vote of
a majority of the remaining directors who shall serve until their respective
successors are duly elected at next year's annual meeting. The term of office of
the directors is one year, expiring on the date of the next annual meeting, or
when their respective successors shall have been elected and shall qualify, or
upon their prior death, resignation or removal.
Except where the authority to do so has been withheld, it is intended
that the persons named in the enclosed proxy will vote for the election of the
nominees to the Board of Directors listed below to serve until the date of the
next annual meeting and until their successors are duly elected and qualified.
Although the directors of the Company have no reason to believe that the
nominees will be unable or decline to serve, in the event that such a
contingency should arise, the accompanying proxy will be voted for a substitute
(or substitutes) designated by the Board of Directors.
3
<PAGE>
The following table sets forth certain information regarding the
director nominees:
<TABLE>
<CAPTION>
Principal Occupation for Past Five Years and
Name Age Current Public Directorships or Trusteeships
- ---- --- --------------------------------------------
<S> <C> <C> <C>
Joel Dupre 46 Director since 1990; Chairman of the Board since March 1995; President of the
Sirco Division of Interbrand L.L.C., a manufacturer and distributor of apparel
accessories and luggage, since August 1999, Chief Executive Officer of the
Company from March 1995 to August 1999; Executive Vice President of the Company
from November 1992 to March 1995 and a Vice President of the Company from 1989 to
1992.
Eric M. Hellige 44 Director since 1995 and Secretary of the Company; Partner for more than five
years of Pryor Cashman Sherman & Flynn LLP, counsel to the Company.
Paul Riss 44 Director since 1995, Chief Executive Officer of the Company since August 1999 and
Chief Financial Officer and Treasurer of the Company since November 1996; Chief
Financial Officer of Sequins International Inc., a manufacturer of sequined
fabrics and trimmings, from June 1992 to November 1996.
Anthony Scalice 61 Director since 1998; President of Crescent Public Communications, Inc., a private
payphone sales and servicing company ("Crescent"), since September 1999; Vice
President of the Company, and President and Chief Executive Officer of Essex
Communications, Inc., a wholly-owned subsidiary of the Company, from February
1998 to September 1999; President of Pinnacle Telephone Consultants, Inc., a
telecommunications consulting firm specializing in the private payphone industry,
from June 1997 to February 1998; President of Crescent from May 1995 to May 1997;
Owner and President of Pinnacle Telecommunications Consultants, Inc., a
telecommunications consulting firm specializing in the private payphone industry
from July 1991 to May 1995; Director of the Independent Payphone Association of
New York (IPANY), a non-profit payphone association, from June 1996 to the
present.
</TABLE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities ("10% Stockholders"), to
file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and 10% Stockholders
are required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company, the Company believes that for
the fiscal year 1998, all Section 16(a) filing requirements applicable to its
officers, directors and 10% Stockholders were complied with, except for the late
filing of an Initial Statement of Beneficial Ownership on Form 3 by Anthony
Scalice.
<PAGE>
Board Meetings and Committees; Management Matters
The Board of Directors held eight meetings during the fiscal year ended
November 30, 1998. Each director attended at least 75% of the Board and
Committee meetings of which he was a member during such time as he served as a
director. From time to time, the members of the Board of Directors act by
unanimous written consent pursuant to the laws of the State of New York. No fees
are paid to directors for attendance at meetings of the Board.
4
<PAGE>
The Board of Directors has a Stock Option Committee, which met one time
during the fiscal year ended November 30, 1998 and currently consists of Eric M.
Hellige and Barrie Sommerfield. Mr. Sommerfield will not stand for re-election
to the Board of Directors at the Annual Meeting. The Stock Option Committee has
exclusive authority to grant options to the Company's executive officers under
the 1995 Stock Option Plan. In October 1997, the Board of Directors established
an Audit Committee, which met one time during the fiscal year ended November 30,
1998. The Audit Committee currently consists of Eric M. Hellige, Paul H. Riss
and Barrie Sommerfield. The Board of Directors does not have standing nominating
or compensation committees or, except in the case of the grant of stock options
by the Stock Option Committee, any committee performing similar functions.
The Directors recommend a vote FOR the election of each of the director
nominees.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the Chairman of the Board and
former Chief Executive Officer of the Company, Mr. Joel Dupre, and all other
executive officers of the Company who received more than $100,000 in
compensation during fiscal 1998 (collectively referred to as the "Named
Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Name and Fiscal Other Annual Options All Other
Principal Position Year Salary($) Bonus($) Compensation ($) (#) (4) Compensation
- ------------------ ------ --------- -------- ---------------- ------- ------------
<S> <C> <C> <C>
Joel Dupre (1) 1998 $223,323 None None 125,000 None
Chairman of the 1997 240,000 None None 80,000 None
Board and former Chief 1996 216,667 None None 80,000 None
Executive Officer
Richard Pyles (2) 1998 95,833 None None 20,000 None
Senior Vice President 1997 100,000 None None 5,000 None
1996 98,341 $6,000 None 135,000 None
Paul H. Riss (3) 1998 120,833 None None 50,000 None
Chief Executive Officer 1997 125,000 None None 20,000 None
and Chief Financial 1996 12,354 None None 70,000 None
Officer
</TABLE>
- -----------------
(1) In March 1995, Mr. Dupre was elected Chairman of the Board and Chief
Executive Officer of the Company. On August 11, 1999, Mr. Dupre resigned as
the Chief Executive Officer of the Company.
(2) Mr. Pyles served as Vice President - Marketing and Sales of the Company
prior to November 1996 and as Senior Vice President from November 1996 to
August 1999, at which time he was separated from his employment with the
Company.
(3) Mr. Riss has been Chief Financial Officer of the Company since November
1996 and was appointed Chief Executive Officer of the Company in August
1999.
(4) Options have been adjusted to reflect a two-for-one stock split in May
1997.
6
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options and
stock appreciation rights ("SARs") made by the Company during fiscal 1998 to
each of the Named Executives.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Number of Percent of Total Rates of Stock Price
Securities Options/SARs Appreciation For Option
Underlying Granted to Exercise or Term (3)
Options/SARs Employees in Base Price Expiration
Name Granted(1) Fiscal Year(2) ($/Share) Date 5% ($) 10% ($)
---- ---------- -------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Joel Dupre 125,000(4) 41.7% $2.13 01/29/03 $73,600 $162,500
Richard Pyles 20,000(4) 6.7 1.94 01/29/03 10,700 23,700
Paul H. Riss 50,000(4) 16.7 1.94 01/29/03 26,800 59,200
All Other 68,500(4) 22.9 1.94 01/29/03 36,700 76,600
Employees 36,000(5) 12.0 2.88 08/14/03 28,600 63,300
</TABLE>
- ------------------
(1) No SARs were granted by the Company in fiscal 1998.
(2) In fiscal 1998, the Company granted options to purchase an aggregate of
299,500 shares, as adjusted for a two-for-one stock split in May 1997, of
Common Stock to 20 employees.
(3) The amounts shown in these two columns represent the potential realizable
values using the options granted and the exercise price. The assumed rates
of stock price appreciation are set by the Commission's executive
compensation disclosure rules and are not intended to forecast the future
appreciation of the Company's Common Stock.
(4) Options become exercisable on the first anniversary date of the option
grant date of January 29, 1998.
(5) Options become exercisable on the first anniversary date of the option
grant date of August 14, 1998.
7
<PAGE>
Stock Option Exercises
The following table contains information relating to the exercise of the
Company's stock options by the Named Executives in fiscal 1998, as well as the
number and value of their unexercised options as of November 30, 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised
Shares Acquired Unexercised Options at Fiscal In-the-Money Options at Fiscal
on Value Year-End(#)(1) Year-End ($)(2)
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel Dupre - - - - 125,000 165,000 - - - -
Richard Pyles - - - - 20,000 10,000 - - - -
Paul H. Riss 500 3,000 97,000 57,500 - - - -
- -----------------
</TABLE>
(1) The sum of the numbers under the Exercisable and Unexercisable column of
this heading represents each Named Executive's total outstanding options to
purchase shares of Common Stock.
(2) The dollar amounts shown under the Exercisable and Unexercisable columns of
the heading represent the number of exercisable and unexercisable Company
options, respectively, which were "In-the-Money" on November 30, 1998,
multiplied by the difference between the closing price of the Common Stock
on November 30, 1998, which was $0.97 per share, and the exercise price of
the Company options. For purposes of these calculations, In-the-Money
options are those with an exercise price below $0.97 per share.
Board of Directors Compensation
The Company does not currently compensate directors for service on the
Board of Directors.
Employee Retirement Plan
In June 1995, the Board of Directors of the Company determined to
discontinue benefit accruals under the Company's tax qualified Employee
Retirement Plan (the "Retirement Plan"). Pursuant to action taken by the Board
of Directors at such time, benefits ceased to accrue for all active participants
under the Retirement Plan on June 30, 1995. The Retirement Plan is administered
by the Board of Directors.
Each of the Company's United States-based employees was eligible to
participate in the Retirement Plan. However, effective as of July 1, 1995 and in
connection with the Board's action, the Retirement Plan was amended to provide
that no additional eligible employees may participate in the Retirement Plan and
accrue benefits thereunder. The following table discloses estimated annual
benefits payable upon retirement in specified compensation and years of service
classification.
8
<PAGE>
<TABLE>
<CAPTION>
Projected Benefit at Retirement
-------------------------------
Years of Service
- -----------------------------------------------------------------------------------------------------------
Salary(1) 15 20 25 30 35
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 20,000 $ 3,750 $ 5,000 $ 6,250 $ 7,500 $ 8,750
25,000 4,625 6,250 7,313 9,375 10,938
30,000 5,625 7,500 9,375 11,250 13,125
35,000 6,563 8,750 10,938 13,125 15,313
40,000 7,500 10,000 12,500 15,000 17,500
50,000 9,980 12,604 15,625 18,750 21,875
75,000 17,105 22,104 26,948 31,986 37,249
100,000 24,730 31,604 38,873 46,236 53,874
125,000 31,355 41,104 50,698 60,406 70,499
150,000(2) 38,480 50,004 62,573 74,736 87,124
175,000 45,605 60,104 74,448 88,986 103,749
200,000 52,730 69,604 86,323 103,236 120,374(3)
</TABLE>
- -----------------
(1) The annual benefits shown in the Table are integrated with Social Security
benefits and there are no other offsets to benefits.
(2) In general, Section 401(a)(17) of the Internal Revenue Code provides that
for 1994, compensation used for computing benefits under a tax-qualified
employee pension plan cannot exceed $150,000 (as adjusted).
(3) Under current law, the maximum annual benefit payable under the Retirement
Plan cannot exceed $120,000 (as adjusted).
The Retirement Plan is funded by the Company on an actuarial basis, and
the Company contributes annually the minimum amount required to cover the normal
cost for current service and to fund supplemental costs, if any, from the date
each supplemental cost was incurred. Contributions were intended to provide for
benefits attributed to service to date, and also for those expected to vest in
the future. Based on the assumptions used in the actuarial valuation, the
Retirement Plan is fully funded.
The estimated credited years of service for each of the executive
officers named in the Summary Compensation Table is as follows: Joel Dupre (12
years), Richard Pyles (3 years) and Paul H. Riss (none). The frozen accrued
monthly benefit for Mr. Dupre and Mr. Pyles is $1,678 and $239, respectively.
$150,000 of Mr. Dupre's compensation shown in the Summary Compensation Table was
used to compute his projected benefit under the Retirement Plan.
Benefits are computed on the basis of a straight-life annuity. Benefits
under the Retirement Plan are integrated with Social Security benefits.
<PAGE>
The Retirement Plan will continue to comply with the applicable
sections of the Internal Revenue Code, the Employee Retirement Income Security
Act, and applicable Internal Revenue Services rules and regulations. In
accordance with the terms of the Retirement Plan, distributions will continue to
be made to retired and terminated employees who are participants in the
Retirement Plan.
9
<PAGE>
Comparison of Five-Year Cumulative Total Return
During the period December 1993 to November 30, 1998, the Company's
business activities primarily fell within the standard industrial classification
code 513 (apparel, piece goods and notions). Following the disposition by the
Company of substantially all of its luggage division in August 1999, the
Company's business activities primarily fall within the standard industrial
classification code 4813 (telephone communications).
The graph set forth below compares the cumulative total shareholder
return on the Common Stock for the period commencing December 1, 1993 and ending
November 30, 1998 against the cumulative total return on the NASDAQ Stock Market
Index and a peer group comprised of those public companies whose business
activities fall within the same standard industrial classification code as the
Company during such period (513) and whose stock has been publicly traded for at
least five years. This graph assumes a $100 investment in the Common Stock and
in each index on December 1, 1993 and that all dividends paid by companies
included in each index were reinvested.
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
<TABLE>
<CAPTION>
COMPARE 5-YEAR CUMULATIAVE TOTAL RETURN
AMONG SIRCO INTERNATIONAL CORP.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
FISCAL YEAR ENDING
-----------------------------------------------------------------------------------
COMPANY/INDEX/MARKET 11/30/1993 11/30/1994 11/30/1995 11/29/96 11/28/1997 11/30/1998
<S> <C> <C> <C> <C> <C> <C>
Sirco Internat 100.00 96.15 69.23 111.54 200.00 59.62
Apparel, Piece Goods, Notions 100.00 98.32 153.90 171.80 125.36 141.79
NASDAQ Market Index 100.00 107.70 136.55 16l9.42 210.44 260.13
</TABLE>
Report on Executive Compensation
The Board of Directors determines the compensation of the Chief
Executive Officer and sets policies for and reviews with the Chief Executive
Officer the compensation awarded to the other principal executives. During the
fiscal year ended November 30, 1998 the Company's executive officers consisted
of Joel Dupre, Paul H. Riss, Eric Smith and Richard Pyles.
Salaries. Base salaries for the Company's executive officers are
determined initially by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for management talent, including a comparison of base salaries for
comparable positions at comparable companies within the Company's industry.
Several of such companies are in the Company's Peer Group as described above
under "-- Comparison of Five-Year Cumulative Total Return." The Company believes
that its salaries are below average as compared to its competitors. Annual
salary adjustments are determined by evaluating the competitive marketplace, the
performance of the Company, the performance of the executive, particularly with
respect to the ability to manage growth of the Company, the length of the
executive's service to the Company and any increased responsibilities assumed by
the executive.
<PAGE>
Compensation of Former Chief Executive Officer and Chairman of the
Board. Joel Dupre, the former Chief Executive Officer of the Company and the
current Chairman of the Board, is a principal shareholder of the Company who, at
September 15, 1999, beneficially owned and controled approximately 9.7% of the
outstanding shares of Common Stock of the Company. See "Common Stock Owned by
Directors, Officers and Other Beneficial Owners." The Board believes that during
the fiscal year ended November 30, 1998, at which time Mr. Dupre served as Chief
Executive Officer of the Company, Mr. Dupre was substantially motivated, both by
reason of his stock ownership and his commitment to the Company, to act on
behalf of all shareholders to optimize overall corporate performance.
Accordingly, during such fiscal year the Board did not consider it necessary to
specifically relate the Chairman's compensation to corporate performance.
10
<PAGE>
Board of Directors Interlocks and Insider Participation in Compensation
Decisions
The following former and present members of the Board of Directors were
officers of the Company or a subsidiary of the Company during the fiscal year
ended November 30, 1998: Joel Dupre, Eric Smith, Eric M. Hellige and Paul H.
Riss. Such members participated in deliberations of the Company's Board of
Directors concerning executive officer compensation during the fiscal year ended
November 30, 1998.
Certain Relationships and Related Transactions
Mr. Joseph Takada, the beneficial owner of approximately 4.9% of the
outstanding shares of Common Stock, is the Managing Director of Ideal Pacific
Ltd, ("Ideal"), the Company's manufacturing agent in Hong Kong. During the
fiscal year ended November 30, 1998, the Company paid aggregate commissions of
approximately $18,000. Mr. Cheng-Sen Wang, the beneficial owner of approximately
2.7% of the outstanding shares of Common Stock, is the Managing Director of
Kao-Lien International Co., Ltd. ("Kao-Lien"), the Company's manufacturing agent
in Taiwan. During the fiscal year ended November 30, 1998, the Company paid
aggregate commissions of approximately $295,000 to Kao-Lien. Mr. Albert Cheng,
the beneficial owner of approximately 2.7% of the outstanding shares of Common
Stock, is the President of Constellation Enterprise Co., Ltd. ("Constellation").
During the fiscal year ended November 30, 1998, the Company purchased
approximately $548,000 of luggage and backpack products from Constellation.
In May 1998, Ideal accepted 66,667 shares of Common Stock and
Constellation accepted 88,889 shares of Common Stock in settlement of unpaid
debts from the Company amounting to $300,000 and $400,000, respectively. The
Company is obligated to issue additional shares of Common Stock to Ideal and
Constellation, of up to 66,667 shares and 88,889 shares, respectively, should
the sale of the shares issued in May 1998 obtain a selling price of less than
$4.50 per share.
At November 30, 1998, the Company owed Ideal, Kao-Lien and
Constellation approximately $69,000, $107,000 and $253,000, respectively.
In December 1998 and February 1999, Mr. Dupre lent the Company $110,000
and $225,000, respectively. Such loans were for a term of two years, bore
interest at the rate of 8% per annum and were convertible into shares of Common
Stock. In September 1999, Mr. Dupre converted $204,000 of the outstanding
principal and accrued interest on such loans into 272,000 shares of Common
Stock. The outstanding balance owed to Mr. Dupre by the Company at September 15,
1999 was $48,000.
Paul H. Riss, a director, the Chief Executive Officer and Chief
Financial Officer of the Company, is a member of the Board of Directors of
Access One, an affiliate of the Company. Mr. Riss owns options to purchase
100,000 shares of common stock of Access One. The Company's Chairman, Joel
Dupre, owns 306,000 shares of common stock of Access One, or approximately 1.8%
of the outstanding shares, and owns options to purchase an additional 150,000
shares.
Eric M. Hellige, a director of the Company, is a member of Pryor
Cashman Sherman & Flynn LLP, counsel to the Company ("Pryor Cashman"). Fees paid
by the Company to Pryor Cashman for legal services rendered during the fiscal
year ended November 30, 1998 did not exceed 5% of such firm's or the Company's
revenues. Mr. Hellige owns 25,000 shares of common stock of Access One, an
affiliate of the Company.
<PAGE>
Barrie Sommerfield, a director of the Company, is a Vice Chairman of
Licensing of Gore, Sommerfield, Ditnes International, Inc. ("Gore Sommerfield"),
a firm which provides consulting services to the Company with regard to the
licensing of trademarked names. The Company paid fees to Gore Sommerfield in
fiscal 1998 of approximately $17,000.
The Company believes that all purchases from or transactions with
affiliated parties were on terms and at prices substantially similar to those
available from unaffiliated third parties.
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<PAGE>
PROPOSAL 2 - AMENDMENT THE CERTIFICATE OF
INCORPORATION TO CHANGE THE CORPORATE NAME
Proposed Amendment
On August 25, 1999, the Board adopted, subject to shareholder approval,
a resolution to amend Article First of the Company's Certificate of
Incorporation to change the Company's corporate name from Sirco International
Corp. to eLEC Communications Corp.
Pursuant to the terms of the Asset Purchase Agreement between the
Company and Interbrand L.L.C. ("Interbrand"), whereby the Company sold a portion
of its wholesale luggage division in August 1999, the Company transferred the
rights to the name "Sirco" to Interbrand. In the judgment of the Board, the
change of the Company's corporate name is desirable in view of the change in the
character and strategic focus of the Company's business from wholesale luggage
to telecommunications and the Internet.
If the proposed amendment is adopted, Article First of the Certificate
of Incorporation will read as follows:
"FIRST: That the name of the corporation is eLEC
Communications Corp. (the "Corporation")."
If the proposed amendment is adopted, shareholders will not be required
to exchange outstanding stock certificates for new stock certificates.
Vote Required
The proposed amendment to the Certificate of Incorporation to change
the corporate name of the Company will become effective only upon approval by
the holders of a majority of the outstanding shares of Common Stock and the
filing of a Certificate of Amendment to the Certificate of Incorporation with
the Secretary of the State of New York (the "Certificate of Amendment"), which
filing is expected to take place shortly after the Annual Meeting. If this
proposed amendment is not approved by the shareholders, then the Certificate of
Amendment will not be filed.
The Board recommends a vote FOR approval of the proposed amendment to
change the corporate name of the Company.
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<PAGE>
PROPOSAL TO AMEND THE 1995 STOCK OPTION PLAN
Proposed Amendment
On August 25, 1999, the Board of Directors adopted, subject to
shareholder approval, an amendment to the Company's 1995 Stock Option Plan (the
"Option Plan") to increase the number of shares of Common Stock that may be
issued thereunder from 1,200,000 shares to 2,400,000 shares. At September 15,
1999, options with respect to an aggregate of 1,199,500 shares of Common Stock
were outstanding under the Option Plan. On September 10, 1999, the Company
granted options to purchase 736,000 shares of Common Stock to management,
certain employees and consultants contingent upon the approval by the
shareholders of the increase in the number of shares of Common Stock available
under the Option Plan. Of such option grants, options to purchase 150,000 shares
were issued to Joel Dupre, options to purchase 150,000 shares were issued to
Paul H. Riss and options to purchase 25,000 shares were issued to Eric M.
Hellige.
The Option Plan
The purpose of the Option Plan, which was adopted in June 1995, is to
enable the Company to compete successfully in attracting, motivating and
retaining directors and key employees with outstanding abilities by making it
possible for them to purchase shares of Common Stock on terms that will give
them a more direct and continuing interest in the future success of the
Company's business. The Option Plan is intended to provide a method whereby
directors and key employees and others who are making and are expected to
continue to make substantial contributions to the successful growth and
development of the Company may be offered additional incentives thereby
advancing the interests of the Company and its shareholders. The Board believes
that the Option Plan increases the Company's flexibility in furthering such
purposes.
Terms of the Option Plan
The Option Plan provides for the grant of incentive stock options
("ISO"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options, tandem stock appreciation
rights and stock appreciation rights exercisable in conjunction with stock
options. The purchase price of shares of Common Stock covered by an ISO must be
at least 100% of the fair market value of such shares of Common Stock on the
date the option is granted and, for all options is payable in either cash or
shares of Common Stock, or any combination thereof. No ISO will be granted to
any employee who immediately after the grant would own more than 10% of the
total combined voting power or value of all classes of capital stock of the
Company, or any subsidiary of the Company, unless the option price is at least
110% of the fair market value of the shares of Common Stock subject to the
option, and the option on the date of grant shall expire not later than five
years from the date the option is granted. In addition, the aggregate fair
market value of the shares of Common Stock, determined at the date of grant,
with respect to which ISOs are exercisable for the first time by an optionee
during any calendar year, shall not exceed $100,000. No ISO may be granted under
the Option Plan to any director who is not an employee of the Company and no
option or stock appreciation right may be granted under the Option Plan after
July 1, 2005.
<PAGE>
Administration of the Option Plan
The Option Plan is administered by the Board of Directors of the
Company. The Board will have full authority, in its sole discretion, to
interpret the Option Plan, to establish from time to time regulations for the
administration of the Option Plan and to determine the directors and key
employees to whom options will be granted and the terms of the options. The term
"employees," as defined under the Option Plan, encompasses employees, including
officers, regularly employed on a salary basis by the Company or any subsidiary
of the Company. The Board may delegate all or part of its authority to
administer the Option Plan to a committee appointed by the Board and consisting
of not less than two members thereof. No director may serve as a member of such
committee unless such director is a "disinterested person" within the meaning of
Rule 16(b)(3) ("Rule 16(b)(3)") under the Securities Exchange Act of 1934, as
amended (the "1934 Act").
13
<PAGE>
Exercise of Options and Rights
Under the Option Plan, an option or stock appreciation right may be
exercised in such installments as are specified in the terms of its grant, but
not sooner than one year from the date of its grant, unless otherwise provided
at the time of its grant. Each option or stock appreciation right shall expire
ten years after the date granted (or five years in the case of an ISO granted to
any person who owns more than 10% of the Company's voting stock).
Tandem stock appreciation rights and stock appreciation rights granted
in conjunction with options may be exercised only to the extent, during the
period and on the conditions that their related options are exercisable and may
not be exercised after the expiration or termination of their related options.
Options and stock appreciation rights are not transferable by the
option holder otherwise than by will or the laws of descent and distribution and
are exercisable during the option holder's lifetime only by such person.
If an option holder ceases to be continuously employed by the Company
or any of its subsidiaries for any reason other than death or for cause, such
holder may exercise the option and/or any stock appreciation rights at any time
Within three months after such termination (provided it shall not have
first expired by its own term), but only to the extent that such holder was
entitled to do so at the date employment terminated. If an option holder dies
while employed by the Company or within a period of three months after
termination of employment for any reason other than cause, the option and/or any
stock appreciation right may be exercised at any time within one year after the
date of such death (provided it shall not have first expired by its own terms),
but only to the extent the decedent was entitled to do so at the date of death.
If an option holder's employment is terminated for cause as determined by the
Board, the option and/or any stock appreciation right terminates concurrently
with the termination of such employment.
Amendment of the Option Plan
The Board of Directors may alter, amend or terminate the Option Plan at
any time with respect to shares of Common Stock not subject at such time to
options or stock appreciation rights, but such amendments shall not adversely
affect the rights of any person under any option or stock appreciation right
theretofore granted without such person's consent. The Board may not, without
the approval of the shareholders of the Company, increase the aggregate number
of shares of Common Stock to be issued pursuant to options or stock appreciation
rights granted (except as permitted by section 3 of the Option Plan); decrease
the minimum option price; increase the maximum amount a holder of a stock
appreciation right may receive upon its exercise; extend the option period with
respect to any option or stock appreciation right; permit the granting of
options or stock appreciation rights to anyone other than as provided in the
Option Plan; or provide for the administration of the Option Plan by the Board
or a committee appointed by the Board unless such administration meets the
requirements for exemption provided by Rule 16b-3.
Federal Income Tax Consequences
The Company has been advised that ISOs, non-qualified stock options and
stock appreciation rights granted under the Option Plan are subject to the
following Federal income tax treatment:
<PAGE>
Incentive Stock Options. An employee will recognize no taxable income
and no deduction is available to the Company upon either the grant or exercise
of an ISO.
In general, if Common Stock acquired upon the exercise of an ISO is
subsequently sold, the realized gain or loss, if any, will be measured by the
difference between the exercise price of the option and the amount realized on
the sale. Any such gain or loss on the sale will generally be treated as
long-term capital gain or loss if the holding period requirements have been
satisfied. The holding period requirements will be satisfied if the shares are
14
<PAGE>
not sold within two years of the date of grant of the option pursuant to which
such shares were transferred or within the one-year period beginning on the day
of the transfer of such shares pursuant to the exercise of the option.
If Common Stock acquired upon the exercise of an ISO is subsequently
sold and the holding period requirements noted above are not satisfied (a
"disqualifying disposition"), the employee will recognize ordinary income for
the year in which the disqualifying disposition occurs in an amount equal to the
excess of the fair market value of such Common Stock on the date the option was
exercised (or, if lower, the amount realized on the sale) over the exercise
price of the option. Any additional gain recognized on the sale will be a
capital gain, and will be long-term or short-term depending upon whether the
sale occurs more than one year after the date of exercise. The amount recognized
by the employee as ordinary income will be treated as compensation and the
Company will receive a corresponding deduction. The Company may be required to
withhold additional taxes from the wages of the employee with respect to the
amount of ordinary income taxable to the employee.
The excess of the fair market value of the Common Stock acquired by
exercise of an ISO (determined on the date of exercise) over the exercise price
is in effect an item of tax preference which must be taken into account for
purposes of calculating the "alternative minimum tax" of Section 55 of the Code.
If a disqualifying disposition is made of such Common Stock, however, during the
same year acquired, there will be no tax preference item for alternative minimum
tax purposes.
Non-qualified Stock Options and Stock Appreciation Rights.
Non-qualified stock options granted under the Option Plan do not result in any
income to the optionee at the time of grant or any tax deduction to the Company
at that time. Except as stated below with respect to officers, upon exercise of
a non-qualified option, the excess of the fair market value of the Common Stock
acquired (determined at the time of exercise) over its cost to the optionee (i)
is taxable to the optionee as ordinary income and (ii) is deductible by the
Company, subject to general rules relating to the reasonableness of
compensation; and the optionee's tax basis for the shares is the fair market
value at the time of exercise.
Gain or loss recognized upon disposition of shares acquired pursuant to
the exercise of a non-qualified option will generally be reportable as short or
long-term gain or loss depending on the length of time the shares were held by
the optionee as of the date of disposition.
The exercise of a stock appreciation right by an employee results in
taxable compensation to such employee in the amount of the cash received plus an
amount equal to the fair market value (determined at the time of exercise) of
any shares received.
The Company believes that compensation received by participants on the
exercise of nonqualified stock options or the disposition of shares acquired
upon the exercise of ISOs will be considered performance-based compensation and
thus not subject to the $1,000,000 limit of Section 162(m) of the Code.
<PAGE>
Vote Required
The proposed amendment to the Option Plan will become effective only
upon approval by the holders of a majority of the outstanding shares of Common
Stock.
The Board of Directors recommends a vote FOR approval of the proposed
amendment to the Option Plan.
INDEPENDENT PUBLIC ACCOUNTANTS
Nussbaum Yates & Wolpow, P.C. ("Nussbaum"), served as the Company's
independent public accountants for the fiscal year ended November 30, 1998. A
representative of Nussbaum is expected to attend the Annual Meeting, and such
representative will have the opportunity to make a statement if he so desires
and will be available to respond to appropriate questions from shareholders.
15
<PAGE>
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for presentation at the 2000 Annual
Meeting of Shareholders and intended to be included in the Company's Proxy
Statement and form of proxy relating to that meeting must be received at the
offices of the Company by February 1, 2000.
OTHER BUSINESS
Other than as described above, the Board of Directors knows of no
matters to be presented at the Annual Meeting, but it is intended that the
persons named in the proxy will vote your shares according to their best
judgment if any matters not included in this Proxy Statement do properly come
before the meeting or any adjournment thereof.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended November
30, 1998, including financial statements, is being mailed herewith. If, for any
reason you do not receive your copy of the Report, please contact Mr. Paul H.
Riss, Chief Executive Officer, Sirco International Corp., 37 North Avenue,
Norwalk Connecticut 06851, and another will be sent to you.
By Order of the Board of Directors,
/s/JOEL DUPRE,
--------------
JOEL DUPRE,
Chairman of the Board
Dated: October __, 1999
Stamford, Connecticut
16
<PAGE>
REVOCABLE PROXY
SIRCO INTERNATIONAL CORP.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
The undersigned hereby appoint(s) Joel Dupre and Paul Riss, or any of them,
lawful attorneys and proxies of the undersigned with full power of substitution,
for and in the name, place and stead of the undersigned to attend the Annual
Meeting of Shareholders of Sirco International Corp. to be held at the offices
of Essex Communications, Inc., at 48 South Service Road, Third Floor, Melville,
New York 11747 on Wednesday, November 10, 1999 at 10:00 a.m., local time, and
any adjournment(s) or postponement(s) thereof, with all powers the undersigned
would possess if personally present and to vote the number of votes the
undersigned would be entitled to vote if personally present.
The Board of Directors recommends a vote "FOR" the proposals set forth
below.
PROPOSAL 1.
The Election of Directors:
Joel Dupre, Eric M. Hellige, Paul H. Riss and Anthony M. Scalice
[ ] For [ ] Withhold [ ] For All Except
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
[ ] For [ ] Against [ ] Abstain
PROPOSAL 2:
Proposal to amend the Company's Certificate of Incorporation to change the
name of the Company from Sirco International Corp. to eLEC Communications Corp.
[ ] For [ ] Against [ ] Abstain
PROPOSAL 3:
Proposal to increase the number of shares authorized for issuance under the
Company's 1995 Stock Option Plan from 1,200,000 to 2,400,000.
In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for each of the Proposals set forth herein. Any prior proxy is hereby
revoked.
<PAGE>
Shareholder sign above Co-holder (if any) sign above
SIRCO INTERNATIONAL CORP.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
