<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
EDUCATIONAL INSIGHTS, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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 0-11(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:
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</TABLE>
<PAGE>
EDUCATIONAL INSIGHTS, INC.
16941 KEEGAN AVENUE
CARSON, CALIFORNIA 90746
(310) 884-2000
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 2000
---------------------
To the Shareholders of EDUCATIONAL INSIGHTS, INC.
You are cordially invited to attend the Annual Meeting of Shareholders of
Educational Insights, Inc., a California corporation (the "Company"), which will
be held at the Company's corporate offices, 16941 Keegan Avenue, Carson,
California, at 10:00 A.M., California time, on Friday, June 16, 2000, to
consider and act upon the following matters, all as more fully described in the
accompanying Proxy Statement which is incorporated herein by this reference:
1. To elect a board of five directors to serve until the next annual
meeting of the Company's shareholders and until their successors have
been elected and qualify;
2. To ratify the selection of Deloitte & Touche LLP as the Company's
independent public accountants for fiscal year 2000; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record of the Company's common stock at the close of
business April 27, 2000, the record date fixed by the Board of Directors, are
entitled to notice of, and to vote at, the meeting.
THOSE WHO CANNOT ATTEND ARE URGED TO SIGN, DATE, AND OTHERWISE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. ANY SHAREHOLDER
GIVING A PROXY HAS THE RIGHT TO REVOKE IT ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen E. Billis
SECRETARY
Carson, California
May 12, 2000
<PAGE>
EDUCATIONAL INSIGHTS
16941 KEEGAN AVENUE
CARSON, CALIFORNIA 90746
(310) 884-2000
------------------------
PROXY STATEMENT
---------------------
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
MAY 12, 2000
------------------------
The following information is provided in connection with the solicitation of
proxies for the Annual Meeting of Shareholders of Educational Insights, Inc., a
California corporation (the "Company"), to be held at the Company's corporate
offices, 16941 Keegan Avenue, Carson, California, at 10:00 A.M., California
time, on Friday, June 16, 2000, and any adjournments thereof (the "Meeting"),
for the purposes stated in the Notice of Annual Meeting of Shareholders
preceding this Proxy Statement.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
shareholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting. The entire cost of soliciting these
proxies will be borne by the Company. The Company may pay persons holding shares
in their names or the names of their nominees for the benefit of others, such as
brokerage firms, banks, depositaries, and other fiduciaries, for costs incurred
in forwarding soliciting materials to their principals. Members of the
Management of the Company may also solicit some shareholders in person, or by
telephone, telegraph or telecopy, following solicitation by this Proxy
Statement, but will not be separately compensated for such solicitation
services.
Proxies duly executed and returned by shareholders and received by the
Company before the Meeting will be voted "FOR" the election of all five of the
nominee-directors specified herein and "FOR" the ratification of the selection
of Deloitte & Touche LLP as the Company's independent public accountants for
fiscal year 2000, unless a contrary choice is specified in the proxy. Where a
specification is indicated as provided in the proxy, the shares represented by
the proxy will be voted and cast in accordance with the specification made. As
to other matters, if any, to be voted upon, the persons designated as proxies
will take such actions as they, in their discretion, may deem advisable. The
persons named as proxies were selected by the Board of Directors of the Company
and each of them is a director of the Company.
Under the Company's bylaws and California law, shares represented by proxies
that reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any shares represented at the Meeting but
not voted (whether by abstention, broker non-vote or otherwise) will have no
impact in the election of directors, except to the extent that the failure to
vote for an individual results in another individual receiving a larger
proportion of votes. Any shares represented at the Meeting but not voted
(whether by abstention, broker non-vote or otherwise) with respect to the
proposal to ratify the selection of Deloitte & Touche LLP will have no effect on
the vote for such proposal except to the extent the number of abstentions causes
the number of shares voted in favor of the proposal not to equal or exceed a
majority of the quorum required for the Meeting (in which case the proposal
would not be approved).
2
<PAGE>
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (a) a later-dated proxy,
(b) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES AND CERTAIN SHAREHOLDERS
The Company has outstanding only common stock, of which 7,040,000 shares
were outstanding as of the close of business on April 27, 2000 (the "Record
Date"). Only shareholders of record on the books of the Company at the close of
business on the Record Date will be entitled to vote at the Meeting. Each share
of common stock is entitled to one vote.
Representation at the Meeting by the holders of a majority of the
outstanding common stock of the Company, either by personal attendance or by
proxy, will constitute a quorum.
The following table sets forth information as to the beneficial ownership of
the Company's common stock by all directors and the persons identified in the
Summary Compensation Table contained elsewhere herein, as well as by directors
and executive officers of the Company as a group and, to the best of the
Company's knowledge, beneficial owners of 5% or more of the Company's common
stock. Except as indicated below, the information in the following table is
based on ownership of the Company's common stock as of the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- -------------- ------------------------ ------------ ----------
<S> <C> <C> <C>
DIRECTORS:
Common Stock Burton Cutler 2,539,700(3) 36.08%
Common Stock Jay Cutler 1,192,870(4) 16.94%
Common Stock Theodore J. Eischeid 100,000 1.42%
Common Stock Gerald Bronstein 95,000(5) 1.35%
Common Stock Courtney V. Moe 55,000(6) *
Common Stock Timothy J. Kilpin 0 *
NON-DIRECTOR EXECUTIVE OFFICERS:
Common Stock George C. Atamian 66,303(8) *
Common Stock Kevin M. Casey 29,633(9) *
Common Stock Alan I. Fine 20,000 *
Common Stock James B. Whitney 44,043(7) *
Common Stock All directors and executive 4,177,019 59.33%
officers as a group
(11 persons)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- -------------- ------------------------------------ ------------ ----------
<S> <C> <C> <C>
5% SHAREHOLDERS:
Common Stock Burton Cutler 2,539,700(3) 36.08%
Diana P. Cutler
16941 Keegan Avenue
Carson, CA 90746
Common Stock Jay Cutler 1,192,870(4) 16.94%
Karen Duncan Cutler
16941 Keegan Avenue
Carson, CA 90746
Common Stock Carol Joan Csapo 600,000 8.52%
438 N. Hidalgo
Alhambra, CA 90801
Common Stock Peter A. Moncado 600,000(10) 8.52%
Corey Cutler Moncado
207 Sunspring Court
Pleasant Hill, CA 94523
</TABLE>
- ------------------------
(1) Except as otherwise indicated and subject to applicable community property
and similar laws, the Company assumes that each named person has the sole
voting and investment power with respect to such person's shares (other
than shares subject to options). The amount of beneficially owned shares
includes, with respect to each named person or group, the number of shares
of common stock, if any, which the shareholder has the right to acquire
within 60 days of the Record Date.
(2) Percent of class is based on the number of shares outstanding on the Record
Date plus, with respect to each named person or group, the number of shares
of common stock, if any, which the shareholder has the right to acquire
within 60 days of such date. Ownership of less than one percent is
indicated by an asterisk.
(3) Shares are held by Burton Cutler and Diana P. Cutler as Trustees of the
Cutler Family Living Trust, which Trustees have the power to own, hold,
vote, sell, transfer, encumber and receive distributions with respect to
such shares.
(4) Shares are held by Jay Cutler and Karen Duncan Cutler as Trustees of the
Cutler Family Trust, which Trustees have the power to own, hold, vote,
sell, transfer, encumber and receive distributions with respect to such
shares.
(5) Includes 5,000 shares which are issuable upon exercise of outstanding
options.
(6) Includes 5,000 shares which are issuable upon exercise of outstanding
options. The remaining are held by Courtney V. Moe and Audrey S. Moe
Trustees of the C&A Moe Revocable Trust dated March 27, 1992, which
Trustees have the power to own, hold, vote, sell, transfer, encumber and
receive distributions with respect to such shares. Mr. Moe resigned from
the Board of Directors on April 6, 2000.
(7) Includes 40,543 shares which are issuable upon exercise of outstanding
options.
(8) Includes 41,103 shares which are issuable upon exercise of outstanding
option.
(9) Includes 28,133 shares which are issuable upon exercise of outstanding
option.
(10) Shares are held by Peter A. Moncado and Corey Cutler Moncado as Trustees
of the Peter Anthony Moncado and Corey Cutler Moncado Family Trust dated
December 2, 1994, which Trustees have the
4
<PAGE>
power to own, hold, vote, sell, transfer, encumber and receive
distributions with respect to such shares.
The Company knows of no contractual arrangements which may at a subsequent
date result in a change of control of the Company.
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
shareholders. At this Meeting, five directors are to be elected to serve until
the next annual meeting of shareholders and until their successors are elected
and qualify. The nominees for election as directors at this Meeting set forth in
the table below are all recommended by the Board of Directors of the Company.
Four of the nominated directors were elected as directors of the Company by the
shareholders at the Company's 1999 annual Meeting of Shareholders. The fifth
nominated director is Timothy J. Kilpin, who was appointed to serve as a
director on April 6, 2000 by unanimous approval of the then existing Board of
Directors.
In the event that any of the nominees for director should become unable to
serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
The five nominee-directors receiving the highest number of votes cast at the
Meeting will be elected as the Company's directors to serve until the next
annual meeting of shareholders and until their successors are elected and
qualify.
The following table sets forth certain information concerning the nominees
for election as directors (all of such nominees being continuing members of the
Company's present Board of Directors):
<TABLE>
<CAPTION>
NOMINEE(1) PRINCIPAL OCCUPATION AGE
- ---------- -------------------- --------
<S> <C> <C>
Burton Cutler(2).................. Chairman of the Board 73
Theodore J. Eischeid(3)........... President and Chief Executive Officer 49
Jay Cutler........................ Director 48
Gerald Bronstein(2)(3)............ Chairman of the Board of Bomaine 72
Corporation
Timothy J. Kilpin(2)(3)........... Chief Executive Officer of Ememories.com 40
</TABLE>
- ------------------------
(1) The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Meeting were selected by the
Board of Directors of the Company.
(2) Member of the compensation committee of the Board of Directors of the
Company, currently consisting of three directors, none of whom is an
employee of the Company. During 1999, no separate meetings of the
Compensation Committee were held. Any compensation committee matters were
discussed as part of the Board of Directors meetings. The compensation
committee was created in July 1994 and reviews the performance of the Chief
Executive Officer of the Company and reviews the compensation programs for
other key employees, including salary and cash incentive payment levels and
option grants under the Educational Insights, Inc. Stock Awards Plan.
(3) Member of the audit committee of the Board of Directors of the Company,
currently consisting of three directors, one of whom is an employee of the
Company, which held one meeting during 1999. The audit committee was created
in July 1994 and reviews, acts on, and reports to the Board of Directors
with respect to various auditing and accounting matters, including the
selection of the Company's independent public accountants, the scope of the
annual audits, the nature of nonaudit services, fees to be paid to the
independent public accountants, the performance of the Company's independent
public accountants, and the accounting practices of the Company.
5
<PAGE>
Burton Cutler is one of the founders of the Company. He was elected as a
director of the Company and has served as Chairman of the Board, since the
Company's inception in 1962. Mr. Cutler also served as the Company's principal
executive officer from its formation until 1992. From 1992 to 1996, Mr. Cutler
served as an executive officer of the Company in his capacity as Chairman of the
Board of Directors. In 1996, Mr. Cutler resigned as an employee.
Jay Cutler was employed by the Company from 1975 to 1998 and was elected as
a director in 1982. He served as President and Chief Executive Officer of the
Company from 1992 to September 1998. In 1998, Mr. Cutler founded and served as
the President of Scherer Cutler, Inc. which developed and sold business
management hardware until its dissolution in 1999. Mr. Cutler currently holds no
position other than as director of the Company. Jay Cutler is the son of Burton
Cutler.
Theodore J. Eischeid joined the Company in September 1998 as President and
Chief Executive Officer and was appointed as a director of the Company on
October 13, 1998. From 1991 to 1998, Mr. Eischeid served as President of
Revell-Monogram of Morton Grove, Illinois, a subsidiary of Binney and Smith and
Hallmark Cards, Inc. He currently serves as Chairman of the Toy Manufacturers of
America.
Gerald Bronstein was elected as a director of the Company on July 15, 1994.
For more than the last five years, Mr. Bronstein has been a major shareholder
and served as Chairman of the Board of Bomaine Corporation, a manufacturer of
home furnishings.
Timothy J. Kilpin was appointed as director of the Company on April 6, 2000.
Since November 1999, Mr. Kilpin has been the Chief Executive Officer of
Ememories.com, an online photo and memory sharing service. He is an eighteen
year veteran of the toy and games industry, who most recently served as General
Manager/Executive Vice President at Mattel, Inc., leading its Disney and
character brands business.
There were four meetings of the Board of Directors of the Company during the
last fiscal year of the Company. Each of the directors of the Company attended
75% or more of the aggregate of the total number of meetings of the Board of
Directors held during the period in which he was a director and the total number
of meetings held by all committees of the Board of Directors on which he served
during such period.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive $1,000 for each
formal meeting of the Board of Directors. Directors who are employees of the
Company receive no additional compensation for serving on the Board of
Directors. Directors are entitled to reimbursement for out-of-pocket expenses in
connection with attendance at Board and committee meetings. See "Compensation
Committee Interlocks and Insider Participation" for information regarding
certain transactions between the Company and members of the Board of Directors.
Further, directors who are not employees of the Company are eligible to
receive options for shares of the Company's common stock pursuant to the
Director's Stock Option Plan No. 1 ("the Plan"). The Plan, which is a
non-qualified stock option plan, was approved by unanimous written consent of
the Board of Directors of the Company on February 14, 1997. The Plan is
administered by the Directors Award Committee, a committee of the Board of
Directors, consisting of two members, Burt Cutler and Theodore J. Eischeid, who
served as Plan Administrator in 1999. Options granted under the Plan have an
exercise price equal to 100% of the fair market value of the shares of the
common stock on the date of grant and have a term ending five years after the
date of grant or three months after the date the Director ceases to be a
Director of the Company, whichever is earlier. Pursuant to the Plan, 2,500
shares of the Company's common stock covered by stock options were granted to
each of Gerald Bronstein and Courtney V. Moe each of the years in 1997 and 1999.
Said shares were granted with an exercise price of
6
<PAGE>
$2.00 and $2.06 per share in 1997 and 1999, respectively, which was deemed to be
the fair market value on the grant date. All stock options granted under the
Plan are immediately exercisable.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning compensation of the
principal executive officer of the Company and the four most highly compensated
executive officers of the Company during the year ended December 31, 1999 for
each of the last three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) ------------
---------------------- STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTS(2) COMPENSATION(3)
- --------------------------- -------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Theodore J. Eischeid.................... 1999 $235,155 -- -- $33,171
President and Chief Executive Officer 1998 123,154(4) -- 300,000 17,500
George C. Atamian....................... 1999 183,269 -- 54,730 1,347
Vice President, Product Concept, 1998 135,385 -- -- 1,459
Development and Production 1997 120,000 $20,000 -- 200
Kevin M. Casey.......................... 1999 133,269 -- 70,200 1,526
Vice President, Sales & Marketing, 1998 115,367 -- -- 1,346
Educational Division 1997 108,150 -- -- 1,253
Alan I. Fine............................ 1999 114,039(5) -- 100,000 168
Vice President, Sales & Marketing,
Consumer Division
James B. Whitney........................ 1999 158,000 -- 57,790 1,348
Vice President, Sales & Marketing, 1998 156,304 -- -- 1,460
Learning Advantage Division 1997 150,648 -- -- 2,880
</TABLE>
- ------------------------
(1) Perquisites and other personal benefits did not in the aggregate equal or
exceed the lesser of $50,000 for any named individual or 10 percent of the
total of annual salary and bonus reported in this table for such person.
(2) The amounts in the table represent the number of shares of the Company's
common stock covered by stock options granted to the named individual under
the Educational Insights, Inc. Stock Awards Plan.
(3) The amounts shown in this column represent (i) the Company's matching
contributions to the Educational Insights, Inc. Savings and Retirement Plan
for Theodore Eischeid, James Whitney, George C. Atamian, and Kevin M. Casey,
in the amounts of $671, $1,180, $1,179 and $1,250, respectively, in 1999,
and for James Whitney, George C. Atamian, and Kevin M. Casey in the amounts
of $1,250, $1,250, and $1,154, respectively, in 1998, and for James Whitney,
George C. Atamian and Kevin M. Casey in the amounts of $1,188, $1,188 and
$1,061, respectively, in 1997. (ii) group term life insurance premiums paid
James Whitney, George C. Atamian, Kevin M. Casey, and Alan Fine in the
amount of $168, $168, $276, and $168, respectively, in 1999, and for James
Whitney, George C. Atamian, and Kevin M. Casey in the amount of $210, $210,
and $192 in 1998, respectively, and $206, $206, and $192, respectively, in
1997. (iii) Company contributions to the Educational Insights, Inc. Profit
Sharing Plan and Trust, a qualified defined contribution/deferred
compensation plan covering substantially all of its employees, who are
eligible to participate after one year of service. Company contributions for
James Whitney amounted to $1,486 in 1997. There were no Company
contributions in 1999 or 1998. The exact amounts of the Company's
contribution to the defined contribution/
7
<PAGE>
deferred compensation plan for the named employee does not include any
reallocation of forfeitures under such plan for 1997 as such amounts would
not be significant and (iv) moving allowance paid to Theodore J. Eischeid
amounting to $32,500 and $17,500 during 1999 and 1998, respectively, in
accordance with Mr. Eischeid's employment agreement.
(4) Mr. Eischeid became an employee and executive officer of the Company in
September 1998. As such, the amount shown represents salary paid after such
date as well as an incentive payment of $63,000.
(5) Mr. Fine became an employee and executive officer of the Company in
August 1999. As such, the amount shown represents salary paid after such
date, as well as an incentive payment of $50,000.
KEY EMPLOYEE EMPLOYMENT AND SEVERANCE AGREEMENTS
Pursuant to the terms of an Employment Agreement dated September 4, 1998
(the "Employment Agreement"), the Company retained Theodore J. Eischeid as its
President and Chief Executive Officer and agreed to appoint Mr. Eischeid as a
member of the Company's Board of Directors. Pursuant to the terms of the
Employment Agreement, Mr. Eischeid is entitled to receive an initial base salary
of $230,000 per year which will be reviewed annually by the Compensation
Committee of the Board of Directors. Mr. Eischeid received an additional
incentive payment of $63,000 in 1998 and an incentive stock option grant of
300,000 shares of Common Stock (the "Initial Option"). In addition, beginning
with calendar year 1999, Mr. Eischeid shall be entitled to receive an annual
discretionary bonus which shall be tied to specific performance criteria
established by the Board of Directors which bonus shall be at least 50% of the
then current base year salary if such criteria are met or exceeded.
Pursuant to the terms of the Employment Agreement, in the event of a
termination of Mr. Eischeid other than for "cause" (as defined in the Employment
Agreement) or the resignation of Mr. Eischeid as a result of a decrease in his
base salary, or a termination as a result of "change of control" (as defined in
the Employment Agreement) Mr. Eischeid shall be entitled to receive a severance
payment equal to (i) one year's then base salary, plus (ii) the earned portion
of any discretionary bonus. In addition, in the event of a termination of
Mr. Eischeid other than for "cause" or the resignation of Mr. Eischeid as a
result of a decrease in his base salary, Mr. Eischeid shall also be entitled to
receive a cash payment equal to the excess of the closing price of the Company's
Common Stock on the date of termination over the exercise price of the Initial
Option multiplied by the number of unvested option shares, if any, under the
Initial Option.
Pursuant to the terms of an Employment Agreement dated August 5, 1999 (the
"Employment Agreement"), the Company retained Alan I. Fine as its Vice
President, Sales & Marketing, Consumer Division. Pursuant to the terms of the
Employment Agreement, Mr. Fine is entitled to receive an initial base salary of
$185,000 per year which will be reviewed annually by the Chief Executive
Officer. Mr. Fine received an additional incentive payment of $50,000 in 1999
and an incentive stock option grant of 100,000 shares of Common Stock (the
"Initial Option"). In addition, beginning with calendar year 2000, Mr. Fine
shall be entitled to receive an annual discretionary bonus which shall be tied
to specific performance criteria established by the Board of Directors which
bonus shall be at least 25% of the then current base year salary if such
criteria are met or exceeded.
Pursuant to the terms of the Employment Agreement, in the event of a
termination of Mr. Fine other than for "cause" (as defined in the Employment
Agreement) or the resignation of Mr. Fine as a result of a decrease in his base
salary, or a termination as a result of "change of control" (as defined in the
Employment Agreement) Mr. Fine shall be entitled to receive a severance payment
equal to six month's then base salary.
8
<PAGE>
OPTION GRANTS DURING 1999
The following table sets forth information on grants of stock options
pursuant to the Educational Insights, Inc. Stock Awards Plan during the year
ended December 31, 1999, to the officers identified in the Summary Compensation
Table:
OPTION GRANTS IN YEAR 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(4)
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION ---------------------------
NAME GRANTED(1) IN 1999(2) PRICE(3) DATE 5% 10%
- ---- ---------- ---------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
George C. Atamian........... 54,730 16.2% $2.03 7/20/05 $37,785 $ 85,722
Kevin M. Casey.............. 70,200 20.7% 2.03 7/20/05 48,466 109,952
Theodore J. Eischeid........ -- -- -- -- -- --
Alan I. Fine................ 100,000 29.5% 2.03 8/05/05 69,039 156,627
James B. Whitney............ 57,790 17.1% 2.03 7/20/05 39,898 90,515
</TABLE>
- ------------------------
(1) The amounts in the table represent shares of the Company's common stock
covered by stock options granted to the named individual under the
Educational Insights, Inc. Employee Stock Awards Plan. Each option becomes
exercisable on a cumulative basis as to one-third of the option shares two
years after the date of grant and as to an additional one-third of the
option shares each one year interval thereafter.
(2) The percentages represent the number of shares of Company common stock
covered by the options granted to the named individual during the last
completed fiscal year of the Company compared to the total number of shares
of the Company common stock covered by all options granted by the Company to
employees of the Company during such year.
(3) The exercise price of each option is the market price of the common stock of
the Company on the date of grant.
(4) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a five
and ten percent compound annual rate over the six year term of the options.
The five and ten percent rates of stock price appreciation are presented as
examples pursuant to the Proxy Rules and do not necessarily reflect
management's assessment of the Company's future stock price performance. The
potential realizable values presented herein are not intended to indicate
the value of the options.
9
<PAGE>
OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table sets forth information concerning stock options which
were exercised during, or held at the end of, the year ended December 31, 1999
by the officers named in the Summary Compensation Table:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR END(1) AT FISCAL YEAR END(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George C. Atamian................. -- -- 41,103 58,897 $11,560 $ 1,055
Kevin M. Casey.................... -- -- 28,133 71,867 7,912 469
Theodore J. Eischeid.............. -- -- -- 300,000 0 159,375
Alan I. Fine...................... -- -- -- 100,000 0 0
James B. Whitney.................. -- -- 40,543 59,457 11,403 469
</TABLE>
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(1) Shares of common stock.
(2) Valued based on the closing price of the Company's common stock of $2.03125
per share on December 31, 1999 and the applicable exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company during 1999 were
Burton Cutler, Gerald Bronstein, and Courtney V. Moe. Mr. Moe resigned as a
director on April 6, 2000. Each of the members of the Compensation Committee has
served in such capacity since the date of creation of the Compensation Committee
in July 1994. No member of the Compensation Committee is now, or was at any time
during the last completed fiscal year of the Company, an officer or employee of
the Company. During 1999, no executive officer of the Company served as a member
of the compensation committee (or its equivalent) or as a director of any entity
whose executive officers served on either the Compensation Committee or the
Board of Directors of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Tennessee distribution facility (the "Tennessee Facility") is
owned by Karen Duncan Cutler and Jay Cutler, a director of the Company, and
leased to the Company pursuant to the terms of an Industrial Real Estate Lease
dated April 21, 1992 (the "Tennessee Lease"). The Tennessee Lease is for an
initial term of ten years and terminates on April 20, 2002. Base rental payments
for the Tennessee Facility are $20,000 per month until April 1995, $17,500 per
month until April 1999 and $14,000 per month for the remainder of the Tennessee
Lease term. In addition to the base rent, the Company is responsible for paying
property taxes, insurance and maintenance expenses for the leased premises. The
Tennessee Facility was expanded by approximately 42,000 square feet in 1995.
This expansion was financed by Jay and Karen Cutler, as owners of the property.
Upon completion of the expansion of the Tennessee Facility in mid-1995, payments
under the Tennessee Lease were increased by $7,820 per month to amortize the
costs of the expansion over the term of the Tennessee Lease. Total rent payments
with respect to the Tennessee Lease were $275,840, $304,000, and $304,000 in
1999, 1998, and 1997, respectively. The Company believes that the terms of the
Tennessee Lease are at least as favorable as those that would have been
available to the Company in a third-party transaction.
Pursuant to the terms of an Agreement of Unconditional Guaranty, dated
April 21, 1992, the Company has guaranteed the obligations of Jay Cutler and
Karen Duncan Cutler incurred in connection with the acquisition of the Tennessee
Facility. These obligations bear interest at a rate of 8% per annum.
10
<PAGE>
The initial aggregate principal amount of such obligations was $1,000,000 and
the principal balance as of December 31, 1999 was approximately $300,000.
Stanley Cutler, an electronic engineer and the brother of Burton Cutler,
assisted in the design and development of certain of the Company's electronic
learning aids, most significantly the Company's GeoSafari line of products. In
order to compensate Mr. Cutler for his electronic engineering and designing
services, and in exchange for his assignment of any and all of his patent rights
to the Company for products developed by him (including the patents to the
GeoSafari game board and teaching apparatus), Mr. Cutler and the Company entered
into a Royalty Agreement, dated May 12, 1993, and expiring December 31, 2010.
Under the terms of the Royalty Agreement, the Company is required to pay a
royalty equal to 1% of the Company's net sales of certain products. Effective
January 1, 1994, royalty payments are capped at $150,000 annually. Total royalty
payments for the years ended December 31, 1999, 1998, and 1997 totaled $35,000,
$53,000 and $79,000, respectively. The May 12, 1993 Royalty Agreement superseded
a number of prior agreements between the Company and Stanley Cutler as to
royalties for products developed with his assistance. The Company believes that
the terms of the Royalty Agreement with Stanley Cutler are at least as favorable
as those that would have been available to the Company in a third-party
transaction. Stanley Cutler also provides certain consulting services relating
to the Company's new product development activities. Payments for said services
commenced in 1997 and amounted to $1,200, $17,000 and $87,500 in 1999, 1998 and
1997, respectively.
Subsequent to his resignation in September 1998, Jay Cutler was retained to
provide consulting services for which he was paid $34,615 in 1998.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes this report on
executive compensation pursuant to Item 402 of Regulation S-K. Notwithstanding
anything to the contrary set forth in any of the Company's previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that might incorporate future filings,
including this Proxy Statement, in whole or in part, this report and the graph
which follows this report shall not be incorporated by reference into any such
filings, and such information shall be entitled to the benefits provided in Item
402(a)(9).
The Compensation Committee reviews the performance of the Chief Executive
Officer of the Company, makes recommendations to the Board of Directors as to
the compensation of the Chief Executive Officer and the executive officers of
the Company and reviews the compensation programs for other key employees,
including salary and cash bonus levels, and stock option awards under the Stock
Awards Plan.
COMPENSATION POLICIES AND PHILOSOPHY. The Company's executive compensation
policies are designed to attract, retain and reward executive officers who
contribute to the Company's success, to provide economic incentives for
executive officers to achieve the Company's business objectives by linking the
executive officers' compensation to the performance of the Company, to
strengthen the relationship between executive pay and shareholder value, to
reward individual performance and to be cost effective from the standpoint of
the Company's shareholders. The Company uses a combination of base salary, cash
bonuses and stock option awards to achieve the aforementioned objectives.
In carrying out these objectives, the Compensation Committee considers a
number of factors which include the types of compensation paid to executive
officers in similar positions by comparable companies. In addition, the
Compensation Committee evaluates corporate performance by looking at factors
such as performance relative to business conditions, and the success of the
Company in meeting its financial objectives. The Compensation Committee also
reviews the individual performance of the Chief Executive Officer and, as
appropriate, approves the recommendations of the Chief Executive Officer
relating to the
11
<PAGE>
performance of other executive officers and their ability to perform their given
tasks, knowledge of their jobs, and their ability to work with others toward the
achievement of the Company's goals.
COMPONENTS OF COMPENSATION. Executive officer salaries are established in
relation to a range of salaries for comparable positions among other companies
of comparable size and complexity based on information generated in the process
of the Company's recruiting and human resources activities, with the exception
of the Chief Executive Officer's salary which also takes into consideration the
relationship to the salaries of the top three executive officers reporting to
the Chief Executive Officer. The Company seeks to pay its executive officers
salaries that are commensurate with the qualifications, duties and
responsibilities of such officer and that are competitive in the marketplace. In
making its annual salary recommendations, the Compensation Committee looks at
the Company's financial position and performance and the overall contribution of
the executive officers as a group during the prior fiscal year in helping to
meet the Company's financial and business objectives. The Compensation Committee
recommends and approves the Chief Executive Officer's annual salary and makes
recommendations on a range of salary changes for other executive officers as a
group.
Executive officer annual cash bonuses are used to provide executive officers
with financial incentives to meet annual performance targets of the Company or
its operating divisions. Performance targets and bonus recommendations for
executives other than principal executive officers are proposed by the
management of the Company's principal operating departments, reviewed and, when
appropriate, revised by the Compensation Committee and approved by the Board of
Directors.
The Compensation Committee believes that equity ownership by executive
officers provides incentives to build shareholder value and align the interests
of executive offers with the shareholders. The Compensation Committee typically
recommends stock option grants on an annual basis to the executive officers and
other key employees under the Awards Plan, subject to applicable vesting
periods. The Compensation Committee believes that these grants provide
incentives for executive officers to remain with the Company. Stock options
generally have value only if the price of the Company's common stock increases
over the exercise or grant price. The size of the option grants is usually based
upon factors such as comparable equity compensation offered by other companies,
the seniority of the executive officer and the contribution that the executive
officer is expected to make to the Company. In determining the size of the
periodic grants, the Compensation Committee also considers prior grants to the
executive officer and his or her expected contributions during the succeeding
fiscal year.
COMPENSATION OF THE PRINCIPAL EXECUTIVE OFFICER. The Compensation Committee
reviews the performance of the principal executive officer of the Company, as
well as other executive officers of the Company and its subsidiaries, annually.
As the principal executive officer of the Company, Theodore J. Eischeid's
compensation was determined on a consideration of the various factors discussed
above, including the performance of the Company and the individual performance
of Mr. Eischeid.
Respectfully submitted,
Compensation Committee(1):
Burton Cutler
Gerald Bronstein
- ------------------------
(1) Mr. Courtney V. Moe resigned from the Board of Directors and the
Compensation Committee thereof on April 6, 2000.
12
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total shareholder return on the
Company's common stock with the cumulative total return on the Nasdaq U.S. Stock
Market Index and a peer group of six corporations in the same or similar
line-of-business as the Company for the five year period ended December 31,
1999.
COMPARISON OF CUMULATIVE TOTAL RETURN*
EDUCATIONAL INSIGHTS, INC. COMMON STOCK, NASDAQ U.S. STOCK MARKET INDEX AND
EDUCATIONAL INSIGHTS, INC. PEER GROUP**
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EDUCATIONAL INSIGHTS NASDAQ U.S. PEER GROUP ONLY
<S> <C> <C> <C>
1994 $100.00 $100.00 $100.00
1995 $51.16 $141.33 $94.44
1996 $41.86 $173.89 $121.38
1997 $40.11 $213.07 $188.92
1998 $31.40 $300.24 $237.90
1999 $39.53 $542.41 $248.01
</TABLE>
- ------------------------
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on January 1, 1995.
** Peer group consists of the following corporations selected by the Company in
good faith: American Educational Products, Houghton Mifflin Co., 4 Kids
Entertainment, Inc. (formerly known as Leisure Concepts, Inc.), Ohio Art
Co., Hockey Company, Inc., and Golden Books Family Entertainment, Inc.
(formerly known as Western Publishing Group, Inc.). Each of the component
corporations of the peer group was weighted according to the respective
corporation's stock market capitalization at the beginning of the period for
which a return is indicated.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Deloitte & Touche LLP serves the Company as its
independent public accountants at the direction of the Board of Directors of the
Company. One or more representatives of Deloitte & Touche LLP are expected to be
present at the Meeting and will have an opportunity to make a statement, if they
desire to do so, and to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
selection of Deloitte & Touche LLP as the independent public accountants for the
Company for fiscal year 2000. This matter is not required to be submitted for
shareholder approval, but the Board of Directors has elected to seek
ratification of its selection of the independent public accountants by the
affirmative vote of a majority of the shares represented and voting at the
Meeting.
13
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file various reports with the Securities and
Exchange Commission and the National Association of Securities Dealers
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that during the 1999 fiscal year its officers, directors and
greater than 10% shareholders complied with all applicable Section 16(a) filing
requirements except that the following officers inadvertently failed to file a
Form 4 to reflect the award of incentive stock options awarded in July 1999:
George Atamian 54,730 shares, Stephen Billis 19,000 shares, Kevin Casey 70,200
shares, Kelly Cole 5,200 shares, and James Whitney 57,790 shares; and the
following directors inadvertently failed to file a Form 4 to reflect the award
of incentive stock options awarded in June 1999: Gerald Bronstein 2,500 shares,
and Courtney Moe 2,500 shares.
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for action at next year's annual
meeting should submit their proposals in writing to the Secretary of the Company
at the address of the Company set forth on the first page of this Proxy
Statement. Proposals must be received by the Secretary no later than
January 21, 2001, for inclusion in next year's proxy statement and proxy card.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1999, including audited consolidated financial statements, has been
mailed to the shareholders concurrently herewith, but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
OTHER MATTERS
The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their collective judgment.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished
without charge to any person from whom the accompanying proxy is solicited upon
written request to Investor Relations, Educational Insights, Inc., 16941 Keegan
Avenue, Carson, California 90746. If Exhibit copies are requested, a copying
charge of $.30 per page will be made.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen E. Billis
SECRETARY
Carson, California
May 12, 2000
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION WILL BE APPRECIATED.
14
<PAGE>
<TABLE>
<S><C>
PROXY PROXY
EDUCATIONAL INSIGHTS, INC.
16941 KEEGAN AVENUE
CARSON, CALIFORNIA 90746
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Burton Cutler and Theodore J. Eischeid as Proxies, each with the power
to appoint his substitute, and hereby authorizes them or either of them to represent and vote as designated below,
all the shares of common stock of Educational Insights, Inc. held of record by the undersigned on April 27, 2000,
at the Annual Meeting of Shareholders to be held on June 16, 2000, or any adjournment thereof.
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR all nominees listed WITHHOLD AUTHORITY TO
below (EXCEPT AS MARKED VOTE FOR ALL NOMINEES
TO THE CONTRARY BELOW) LISTED BELOW FOR AGAINST ABSTAIN
/ / / / / /
1. Election of Directors / / / / 2. RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE WRITE THAT NOMINEES NAME IN THE SPACE BELOW): 3. In their discretion, the Proxies are
authorized to vote upon such other
Burton Cutler Gerald Bronstein Jay Cutler business as may properly come before
Timothy J. Kilpin Theodore J. Eischeid the meeting.
- ----------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
Dated: , 2000 PLEASE READ, SIGN, DATE AND RETURN THE PROXY CARD
- ------------------ --------------------------- ------------- PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature (Signature if held jointly)
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
</TABLE>
