<PAGE>
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:
/ / 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
TOYMAX INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TOYMAX INTERNATIONAL, INC.
125 E. BETHPAGE ROAD
PLAINVIEW, NEW YORK 11803
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of TOYMAX
INTERNATIONAL, INC. (the "Company") to be held on Thursday, August 5, 1999, at
The Chase Manhattan Bank, Media Room, Lower Level, 395 North Service Road,
Melville, New York 11747, at 9:00 a.m., local time.
The Notice of Meeting and Proxy Statement on the following pages cover the
formal business of the meeting, which includes proposals to (i) elect one
director to serve on the Board of Directors, (ii) amend the 1997 Share Option
Plan to increase the number of shares of common stock of the Company which may
be issued or transferred pursuant to options granted thereunder, and (iii)
ratify the re-appointment of BDO Seidman LLP, certified public accountants, as
the Company's independent auditors for the fiscal year ending March 31, 2000.
We hope that you will be able to attend the Annual Meeting in person. In any
event, in order that we may be assured of a quorum, we request that you
complete, sign, date and return the enclosed proxy as soon as possible. Your
vote is important regardless of the number of shares you own.
Sincerely,
DAVID CHU
CHAIRMAN OF THE BOARD
July 1, 1999
<PAGE>
TOYMAX INTERNATIONAL, INC.
125 E. BETHPAGE ROAD
PLAINVIEW, NEW YORK 11803
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 1999
---------------------
To the Stockholders of
TOYMAX INTERNATIONAL, INC.
Notice is hereby given that the Annual Meeting of Stockholders of TOYMAX
INTERNATIONAL, INC. (the "Company") will be held at The Chase Manhattan Bank,
Media Room, Lower Level, 395 North Service Road, Melville, New York 11747, on
Thursday, August 5, 1999, at 9:00 a.m., local time (the "Annual Meeting"), for
the following purposes, all as more fully described in the attached Proxy
Statement:
1. to elect one (1) director to serve on the Board of Directors;
2. to amend the 1997 Share Option Plan to increase the number of shares of
common stock of the Company which may be issued or transferred pursuant to
options granted thereunder;
3. to ratify the re-appointment of BDO Seidman, LLP as the independent
auditors of the Company for the fiscal year ending March 31, 2000; and
4. to consider and transact such other business as may properly be brought
before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed July 1, 1999 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting. A list of stockholders entitled to vote at the
Annual Meeting will be available at the Annual Meeting and at the offices of the
Company for ten days prior to the Annual Meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting, either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
A copy of the Company's Annual Report for the fiscal year ended March 31,
1999 is enclosed herewith.
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
By Order of the Board of Directors
Sanford B. Frank
SECRETARY
July 1, 1999
<PAGE>
TOYMAX INTERNATIONAL, INC.
125 E. BETHPAGE ROAD
PLAINVIEW, NEW YORK 11803
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 5, 1999
------------------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of TOYMAX
INTERNATIONAL, INC., a Delaware corporation (the "Company" and, together with
its predecessor companies, "Toymax"), for use at the Annual Meeting of
Stockholders to be held at The Chase Manhattan Bank, Media Room, Lower Level,
395 North Service Road, Melville, New York 11747, on Thursday, August 5, 1999,
at 9:00 a.m., or at any adjournment or adjournments thereof (the "Annual
Meeting").
A proxy that is properly submitted to the Company may be properly revoked at
any time before it is voted. Proxies may be revoked by (i) delivering to the
Secretary of the Company (Sanford B. Frank) at or before the Annual Meeting a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same shares of common stock of the
Company and delivering it to the Secretary of the Company at or before the
Annual Meeting, or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy). A proxy which is properly signed, submitted and not
revoked will be voted for the nominees for director named in proposal 1 and in
favor of proposals 2 and 3 unless contrary instructions are given, and such
proxy may be voted by the persons named in the proxy in their discretion upon
such other business as may be properly brought before the meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, directors, officers and employees of the Company may
solicit proxies by telephone or otherwise. The Company will reimburse brokers or
other persons holding stock in their names or in the names of their nominees for
their charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock. On or about July 15, 1999, this Proxy Statement
and the accompanying proxy, together with a copy of the Annual Report of the
Company for the fiscal year ended March 31, 1999, including financial
statements, are to be mailed to each stockholder of record at the close of
business on July 1, 1999 (the "Record Date").
VOTING SECURITIES
The Company had outstanding 10,595,600 shares of common stock, par value
$.01 per share ("Common Stock"), at the close of business on the Record Date,
which are the only securities of the Company entitled to be voted at the Annual
Meeting. Each stockholder of the Company will be entitled to one vote on each
matter as may properly be brought before the meeting for each share of Common
Stock registered in its name on the Record Date. Only stockholders of record at
the close of business on July 1, 1999 will be entitled to vote. A majority of
all of the outstanding shares of Common Stock constitutes a quorum at the Annual
Meeting.
1
<PAGE>
VOTING PROCEDURES
The votes of stockholders present in person or represented by proxy at the
Annual Meeting will be tabulated by an inspector of elections appointed by the
Company. Abstentions may be specified on all proposals except the election of
directors and will be counted as present for purposes of determining the
existence of a quorum. With regard to the election of directors, votes may be
cast in favor of or withheld from each nominee. Since Proposals 2 and 3 must be
approved by the affirmative vote of the holders of a majority of the shares of
Common Stock of the Company represented and entitled to vote at the Annual
Meeting, abstentions on those proposals will also have the effect of a negative
vote.
Under the rules of the National Association of Securities Dealers, Inc. (the
"NASD"), brokers who hold shares in street name have the authority to vote on
certain routine items when they have not received instructions from beneficial
owners. Brokers that do not receive instructions are entitled to vote on the
non-contested election of directors, amendments to the Certificate of
Incorporation and ratification of auditors. Under applicable Delaware law, a
broker non-vote will have no effect on the outcome of Proposals 1, 2 and 3.
Shares of Common Stock held by stockholders who do not return a signed and
dated proxy will not be considered present at the Annual Meeting, will not be
counted towards a quorum and will not be voted on any matter.
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. The
classification of the Board of Directors was implemented in August 1998. At each
annual stockholders' meeting successors to the class of directors whose term
expires at that meeting are elected for a three-year term. The term of the Class
1 director expires at this meeting, and the terms of the Class 2 and Class 3
directors expire on the date of the annual meetings to be held in 2000 and 2001,
respectively.
Mr. Goldberg has been nominated by the Board of Directors for election at
the Annual Meeting as a Class 1 director to serve until the election and
qualification of his successor at the 2002 Annual Meeting of Stockholders. If
the nominee should be unwilling or unable to serve as a director of the Company
(which is not anticipated), the Board of Directors may, unless the Board of
Directors by resolution provides for a lesser number of Class 1 directors,
designate a substitute nominee. Proxies cannot be voted for a greater number of
persons than the number of nominees named. The election of directors requires a
majority vote of the shares of Common Stock represented at the Annual Meeting.
CLASS 1 DIRECTOR NOMINATED FOR TERM ENDING 2002
HARVEY GOLDBERG. Mr. Goldberg is the Executive Vice President of the
Company and has been a director since 1997. Prior to the Company's Initial
Public Offering in October, 1997, Mr. Goldberg served as a director of Toymax
(H.K.) Limited since 1995 and has served as Executive Vice President of Toymax
Inc. since 1995. Prior to that Mr. Goldberg was a consultant to Toymax since
1990.
CLASS 2 DIRECTORS UP FOR ELECTION IN 2000
STEVEN A. LEBENSFELD. Mr. Lebensfeld is the President of the Company and
has been a director since 1997. Prior to the Company's Initial Public Offering
in October, 1997, Mr. Lebensfeld served as a director and President of Toymax
Inc., since its inception in 1990 and as a director of Toymax (H.K.) Limited.
OREN ASHER. Mr. Asher has been a director since October 1997. Mr. Asher has
been the Chairman of MGI Software Corp. ("MGI"), a leading developer of photo
and video software, since January 2, 1996. Prior to joining MGI, Mr. Asher was
President and CEO of Ditek Software Corp., a graphics software development
company which he founded in 1985 and which specializes in computer-aided design
and drafting (CADD). Mr. Asher continues to hold the office of Chairman of Ditek
Software Corp
CLASS 3 DIRECTORS UP FOR ELECTION IN 2001
DAVID KI KWAN CHU. Mr. Chu is the Chairman of the Board of Directors and
has been a director since 1997. Prior to the Company's Initial Public Offering
in October, 1997, Mr. Chu served as Chairman of the Board of Directors of Toymax
(H.K.) Limited, the then parent company of Toymax Inc., since its inception in
1990.
JOEL M. HANDEL. Mr. Handel has been a director since October 1997. Mr.
Handel has been a partner in the law firm of Baer Marks & Upham LLP, which
serves as counsel to the Company, since 1968. From April 1987 through March
1997, Mr. Handel was a member of the Board of Directors of Tyco Toys, Inc., a
company for which Baer Marks & Upham LLP also served as counsel.
Additional biographical information concerning the directors is contained
under the heading "Directors and Executive Officers".
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four (4) meetings during the
fiscal year ended March 31, 1999. Each current director attended all meetings of
the Board of Directors and of the committees of which he was a member during
such year.
3
<PAGE>
The Board of Directors has created two standing committees: a three-member
Audit Committee and a three-member Compensation Committee.
The members of the Audit Committee are David Chu, Joel Handel and Oren
Asher. The Audit Committee recommends to the Board of Directors the engagement
of the independent auditors, and has the authority to review with the auditors
and with the Company's management all matters relating to the annual audit of
the Company.
The members of the Compensation Committee are David Chu, Joel Handel and
Oren Asher. The Compensation Committee has the authority to review and approve
the remuneration arrangements for executive officers and employees of the
Company, review the benefit plans for employees and select participants, approve
awards under, interpret and administer the employee benefit plans of the
Company.
PROPOSAL 2: APPROVAL OF AMENDMENT TO THE 1997 STOCK OPTION PLAN
The Board of Directors has adopted, subject to approval by the shareholders,
an amendment and restatement of the Company's 1997 Stock Option Plan ("Option
Plan").
The amendment and restatement of the Option Plan increased the aggregate
number of shares of Common Stock which may be issued and sold under the Option
Plan from 750,000 to 1,500,000. Prior to its adoption of the amendment and
restatement of the Option Plan, the Compensation Committee had granted options
for 716,500 shares of the 750,000 shares of Common Stock then available to be
issued and transferred under the Option Plan. Since its adoption of the
amendment and restatement of the Option Plan, the Compensation Committee granted
options to purchase an additional 658,525 shares of Common Stock under the
Option Plan, subject to the Stockholders' approval of the amendment and
restatement. No option granted after the Board of Director's adoption of the
amendment to the Option Plan is exercisable until the amendment is approved by
the Stockholders.
The purpose of the Option Plan, as amended hereby, is to promote the
long-term financial success of the Company and its subsidiaries by encouraging
ownership in the Company by directors, officers and other key employees whose
continued services are considered essential to the Company's future progress and
to provide them with further incentives to remain as directors, officers and
employees, respectively, as well as to obtain qualified new directors, officers,
and employees for the Company.
The Option Plan is administered by the Compensation Committee. The
Compensation Committee has complete discretion to select the optionee and to
establish the terms and conditions of each option, subject to the provisions of
the Plan. Each director, officer or employee of the Company or any subsidiary of
the Company is eligible to participate in the Option Plan. Options granted under
the Plan may or may not be "incentive stock options" as defined in Section 422
of the Code ("Incentive Options") depending upon the terms established by the
Compensation Committee at the time of grant, but the exercise price of Incentive
Options granted may not be less than 100% of the fair market value of the Common
Stock as of the date of the grant (110% of the fair market value if the grant is
an Incentive Option to an employee who owns more than 10% of the outstanding
voting power of the Company). Options may not be exercised more than 10 years
after the grant (five years if the grant is an Incentive Option to any employee
who owns more than 10% of the outstanding voting power of the Company).
The closing price of a Share of Common Stock of the Company on the Nasdaq
National Market on July 1, 1999 was $4.875.
As of July 1, 1999, the Compensation Committee has granted options to
purchase an aggregate of 1,408,525 shares under the Option Plan, of which
658,525 would be covered by this amendment. The Company cannot now determine the
number of options to be granted in the future to the directors, officers and
employees. During the fiscal year 1999, options to purchase an aggregate of
208,500 shares were issued to certain directors, officers and employees under
the Option Plan.
4
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL 2.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE SHARES OF THE COMPANY'S
COMMON STOCK REPRESENTED AT THE ANNUAL MEETING IS REQUIRED FOR APPROVAL OF THIS
PROPOSAL.
PROPOSAL 3: APPOINTMENT OF AUDITORS
BDO Seidman, LLP ("BDO"), certified public accountants, audited the
Company's consolidated financial statements for the fiscal year ended March 31,
1999. The Board of Directors, upon recommendation of the Audit Committee, has
appointed BDO to audit the Company's consolidated financial statements for the
fiscal year ended March 31, 2000, and recommends that the Stockholders vote for
ratification of such appointment. A representative of BDO is expected to be
present at the Annual Meeting and will make a statement and/or respond to
appropriate questions from Stockholders present at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL 3.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE SHARES OF THE COMPANY'S
COMMON STOCK REPRESENTED AT THE ANNUAL MEETING IS REQUIRED FOR APPROVAL OF THIS
PROPOSAL.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 1, 1999, with
respect to the beneficial ownership of the Company's Common Stock by each
director, each nominee for director, each named executive officer in the summary
compensation table under "Executive Compensation" below, all executive officers
and directors as a group, and each person known by the Company to be the
beneficial owner of 5% or more of the Company's Common Stock. This information
is based upon information received from or on behalf of the named individuals or
entities.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME OWNED(1)(2) CLASS(3)
- ------------------------------------------------------------------------------ ---------------------- -------------
<S> <C> <C>
David Ki Kwan Chu (4)(6)...................................................... 4,342,335 40.9%
Steven Lebensfeld (5)(7)...................................................... 1,324,500 12.5%
Harvey Goldberg (5)........................................................... 82,666 *
Goldberg Family Trust (8)..................................................... 1,241,833 11.7%
Frances Shuk Kuen Leung (4)(6)................................................ 4,342,335 40.9%
Kenneth Price (5)............................................................. 234,200 2.2%
Carmine Russo (5)............................................................. 27,950 *
William A. Johnson, Jr. (5)................................................... 7,251 *
Oren Asher (5)................................................................ 7,500 *
Joel M. Handel (5)............................................................ 7,500 *
Executive Officers and Directors as a Group (10 Persons)...................... 6,033,902 56.6%
</TABLE>
- ------------------------
* Less than 1% of issued and outstanding shares of Company Common Stock.
(1) Includes shares which may be acquired upon the exercise of options which are
presently exercisable.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares
beneficially owned by them.
(3) Percentage amounts are based on the number of shares of Common Stock
outstanding as of the Record Date.
(4) David Ki Kwan Chu and Frances Shuk Kuen Leung are husband and wife. Their
address is: Units A and B, CDW Building, 382-392 Castle Peak Road, Tsuen
Wan, N.T, Hong Kong.
(5) Messrs. Lebensfeld, Goldberg, Price, Russo, Johnson, Asher and Handel's
address is: 125 East Bethpage Road, Plainview, New York 11803.
(6) The share amounts shown for Mr. Chu and Ms. Leung are owned by Best Phase
Limited, a British Virgin Islands corporation, of which Mr. Chu and Ms.
Leung own 100% of the outstanding shares. The address of Best Phase Limited
is Units A and B, CDW Building, 382-392 Castle Peak Road, Tsuen Wan, N.T,
Hong Kong. Frances Shuk Kuen Leung is the wife of Mr. Chu and they are
deemed to be the beneficial owners of each other's shares of Common Stock of
the Company.
(7) Includes 126,000 shares held in trust or custodian accounts for the benefit
of Mr. Lebensfeld's children. Mr. Lebensfeld is not the trustee of such
trust and disclaims beneficial ownership of 120,000 shares held in trust.
(8) A total of 1,241,833 shares of Common Stock are beneficially owned by a
trust for the benefit of Mr. Goldberg's wife and children. The trustee of
this trust is not affiliated with Mr. Goldberg and Mr. Goldberg disclaims
beneficial ownership of such shares. The Goldberg Family Trust's address is:
c/o CIBC West Indies Offshore Banking Corporation, as trustee, International
Centre, Warrens, St. Michael, RO. Box 405, Bridgetown, Barbados, West
Indies.
6
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
officers and directors of the Company and persons who own more than ten-percent
of the Common Stock, to file initial statements of beneficial ownership (form 3)
and statements of changes in beneficial ownership (Forms 4 or 5) of Common Stock
with the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than ten-percent stockholders are required by SEC regulations to furnish
the Company with copies of all such forms they file. To the Company's knowledge,
based solely on its review of the copies of such forms received by it and
written representations from certain reporting persons that no additional forms
were required for those persons, during fiscal 1999 all filing requirements
applicable to all other officers, directors and greater than ten-percent
beneficial owners were complied with.
DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers and certain other key employees of the
Company are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------- --------- --------------------------------------------------
<S> <C> <C>
David Ki Kwan Chu................................. 52 Chairman of the Board
Steven A. Lebensfeld.............................. 46 President and Director
Harvey Goldberg................................... 47 Executive Vice President and Director
Kenneth Price..................................... 37 Senior Vice President-Sales and Marketing
William A. Johnson, Jr............................ 45 Senior Vice President, Chief Financial Officer and
Treasurer
Carmine Russo..................................... 39 Chief Operating Officer
Andrew B. Stein................................... 45 Vice President-International Sales
Amy L. Weltman.................................... 49 Vice President-Marketing
Barry Shapiro..................................... 57 Vice President
Mark Merryweather................................. 37 Vice President-New Business Development
Sanford B. Frank.................................. 46 General Counsel and Secretary
Jonathan Muir..................................... 38 Controller
Oren Asher........................................ 45 Director
Joel M. Handel.................................... 63 Director
</TABLE>
The business experience, principal occupations and employment, as well as
period of service, of each of the directors, executive officers and certain
other key employees of the Company during at least the last five years are set
forth below.
DAVID KI KWAN CHU, CHAIRMAN OF THE BOARD. Mr. Chu is a co-founder of Toymax
and has served as a director of the Company since 1997 and as Chairman of Toymax
(H.K.) Limited since its inception in 1990. In this capacity, Mr. Chu, who is
based in Hong Kong, is the senior executive in charge of all of the Company's
sourcing, manufacturing and strategic planning activities. Mr. Chu became
involved in the toy industry in 1966. In 1972, he was named president of his
father's company and grew the manufacturing plant into one of Hong Kong's
leading OEM toy manufacturers. Mr. Chu serves as Chairman of Pingshan
Manufacturing Association, a local federation organized by a group of
manufacturers operating factories in Pingshan, and as the Vice Chairman of
Shenzhen Toys Association, a quasi-governmental organization devoted to
fostering toy industry development in China's Shenzhen Special Economic Zone.
Mr. Chu and his wife, Francis Shuk Kuen Leung, own and manage Tai Nam, the
Company's purchasing agent, and Jauntiway, the Company's leading manufacturer.
STEVEN A. LEBENSFELD, PRESIDENT AND DIRECTOR. Mr. Lebensfeld is a
co-founder of Toymax and has served as the President and a director of the
Company since 1997, the President and a director of Toymax Inc. since May 1990
and as a director of Toymax (H.K.) Limited since December 1995. Mr. Lebensfeld
is the senior executive in charge of the Company's toy design and development
activities. Prior to his involvement with Toymax, Mr. Lebensfeld founded and was
President of Toy Biz from 1987 to 1989. Mr. Lebensfeld started the Kidworks
(H.K.) Ltd., FOB division of Panosh Place, Inc. in 1985.
7
<PAGE>
Between 1984 and 1986, Mr. Lebensfeld was Managing Director of HG Toys (H.K.)
Ltd. Between 1979 and 1984, Mr. Lebensfeld was affiliated with Regent Toys, a
company he and Mr. Goldberg founded.
HARVEY GOLDBERG, EXECUTIVE VICE PRESIDENT AND DIRECTOR. Mr. Goldberg is a
co-founder of Toymax. He has been a director of the Company since 1997, a
director of Toymax (H.K.) Limited since December 1995 and has served as
Executive Vice President of Toymax Inc. since September 1995. In this capacity,
Mr. Goldberg is the senior executive in charge of all of the Company's sales
activities and both of Toymax's domestic and international vice presidents of
sales report to him. Prior to joining Toymax, Mr. Goldberg served as a senior
sales and marketing executive for Toy Biz, H-G Toys (HK) Ltd., Regent Toys, H-G
Canada and Grand Toys as well as a consultant to Toymax, Inc. Mr. Goldberg is a
director of MGI Software Corp., a public company traded on the Canadian
over-the-counter market.
KENNETH PRICE, SENIOR VICE PRESIDENT OF SALES AND MARKETING. Mr. Price is a
co-founder of Toymax. From its inception in May 1990 through September 1995, Mr.
Price served as Secretary of, as well as holding key sales and marketing
positions with, Toymax. From September 1995 through May 1996, Mr. Price served
as Vice President of Sales and Marketing. Since May 1996, Mr. Price has served
as Senior Vice President of Sales and Marketing. Mr. Price supervises the
Company's domestic sales and marketing activities and is closely involved in the
development and distribution of Toymax's promotional television commercial
advertising. Mr. Price is also the Company's senior executive in charge of
securing, negotiating and maintaining licenses. Prior to joining Toymax, Mr.
Price served as a marketing and sales executive for Toy Biz and H-G Toys (HK)
Ltd.
WILLIAM A. JOHNSON, JR., SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER. Mr. Johnson was appointed to Senior Vice President in 1998 and also
serves as Chief Financial Officer and Treasurer of the Company each since March
1997. In this capacity, Mr. Johnson is the senior executive in charge of the
Company's finance, treasury, accounts receivable, customer service department,
as well as all MIS functions. From July 1987 to January 1997, Mr. Johnson was
employed by Noodle Kidoodle, Inc., and from May 1989, served as Vice President,
Chief Financial Officer and Secretary. Mr. Johnson was responsible for all
corporate financial functions and administration including Securities and
Exchange Commission and shareholder relations matters. From January 1976 to
April 1982, and then again from January 1987 to July 1987, Mr. Johnson was
employed by Deloitte & Touche, serving in various capacities, most recently as
Audit Manager and Consultant. From July 1982 to January 1987, Mr. Johnson was
employed by Associated Dry Goods (ADG) as Divisional Vice President of Corporate
Accounting.
CARMINE RUSSO, CHIEF OPERATING OFFICER. Mr. Russo has served as Chief
Operating Officer for the Company since April 1997. In this capacity, Mr. Russo
is responsible for the day-to-day management of all operational and research and
development activities including design, development, purchasing, sourcing,
production, shipping, and warehousing. Prior to that position, Mr. Russo served
as Vice President of Operations and R&D for Toymax from December 1994 through
March 1997. From December 1987 to December 1994, Mr. Russo held various senior
management positions at Buddy L, a subsidiary of SLM International, where he
served as Senior Vice President-Operations and was a member of their Operating
Committee. Before joining Buddy L, Mr. Russo was a development and production
executive for H-G Toys from January 1984 to November 1987.
ANDREW B. STEIN, VICE PRESIDENT OF INTERNATIONAL SALES. Mr. Stein has
served as Vice President of International Sales for Toymax since March 1993. In
this capacity, Mr. Stein is responsible for managing all of the day-to-day
international sales activities, including calling on existing customers,
developing new business accounts, managing sales representative firms and
working closely with the Company's research and development department in
connection with the development of new products. From December 1990 to March
1993, Mr. Stein served in a similar capacity at Tyco Playtime. Prior to that,
Mr. Stein served as Vice President of International Sales and Marketing at Nasta
International. Mr. Stein has also served as an executive for H-G Toys, Inc.,
Amtoy and Ideal Toy Corporation.
8
<PAGE>
AMY L. WELTMAN, VICE PRESIDENT-MARKETING. Ms. Weltman has served as Vice
President of Marketing of Toymax Inc. since January 1996. Ms. Weltman has
day-to-day responsibility for advertising, public relations, licensing, sales
promotion, marketing and merchandising programs, and research. She is involved
in the development and execution of brand strategies, and in short and long term
strategic planning and product development. Prior to serving as Vice President
for the Company, Ms. Weltman served as a consultant to Toymax from July 1994 to
December 1996. From 1982 to 1994, Ms. Weltman was Senior Vice President of
Account Services at TSR Advertising, where she was responsible for the following
accounts: Galoob Toys, Cap Toys, CBS Toys and Ideal Toys. Ms. Weltman is a
member of the Board of Directors of Women In Toys.
BARRY SHAPIRO, VICE PRESIDENT. Mr. Shapiro became a Vice President of the
Company and President of Toymax Enterprises, a new administrative group of the
Company, on June 1, 1999. In this capacity, Mr. Shapiro is responsible for
integrating and managing prior and future business acquisitions. Prior to
joining the Company, Mr. Shapiro was President, CEO and Director of JustToys,
Inc. Mr. Shapiro has been engaged in the toy business for over 30 years. Mr.
Shapiro is also currently Treasurer and serves on the Executive Committee of the
Board of Directors of the Toy Manufacturers of America (TMA) trade association.
MARK I. MERRYWEATHER, VICE PRESIDENT-STRATEGIC DEVELOPMENT. Mr.
Merryweather became a Vice President of the Company on March 1, 1999. In this
capacity, Mr. Merryweather is responsible for initiating, executing and managing
strategic business initiatives for the Company, including acquisitions. Prior to
joining the Company, Mr. Merryweather was a Director of Corporate Finance
Services at BDO Seidman, LLP, the Company's auditors. Mr. Merryweather is the
Education Director and a former President of the Association of Chartered
Accountants in the United States, a professional not-for-profit professional
organization representing the interests of members of Institutes of Chartered
Accountants from Australia, Canada, England & Wales, Ireland, New Zealand,
Scotland, and South Africa, working in the United States, and he serves as the
United States contact representative of the Institute of Chartered Accountants
of England and Wales. In addition, Mr. Merryweather sits on the National
Advisory Forum of Beta Alpha Psi, the national accounting honors fraternity.
SANFORD B. FRANK, GENERAL COUNSEL AND SECRETARY. Mr. Frank has served as
General Counsel for Toymax since April 1994 and as Secretary since September
1995. In this capacity, Mr. Frank is responsible for overseeing all legal
affairs of the Company. Prior to joining Toymax, Mr. Frank served as Vice
President and General Counsel for Tyco Playtime, a division of Tyco, from
September 1990 to December 1993. From 1980 to 1990, Mr. Frank was in private
practice.
JONATHAN P MUIR, CONTROLLER. Mr. Muir has served as controller of Toymax
Inc. since July 1995. In this capacity, Mr. Muir is responsible for the
day-to-day operations of the Finance Department including the preparation of
financial statements, budgets and forecasts, accounting, accounts payable and
accounts receivable. Mr. Muir joined Toymax in September 1993 as Assistant
Controller. Prior to his association with Toymax, Mr. Muir served as Controller
of Balducci's Inc. from 1989 to 1993.
OREN ASHER, DIRECTOR. Mr. Asher has been a director of the Company since
October 1997. Mr. Asher has been the Chairman of MGI Software Corp., a leading
developer of photo and video software, since January 2, 1996. Prior to joining
MGI, Mr. Asher was President and CEO of Ditek Software Corp., a graphics
software development company which he founded in 1985 and which specializes in
computeraided design and drafting. Mr. Asher continues to hold the office of
Chairman of Ditek Software Corp.
JOEL M. HANDEL, DIRECTOR. Mr. Handel has been a director of the Company
since October 1997. Mr. Handel has been a partner in the law firm of Baer Marks
& Upham LLP, which serves as counsel to the Company, since 1968. From April 1987
through March 1997, Mr. Handel was a member of the Board of Directors of Tyco
Toys, Inc., a company for which Baer Marks & Upham LLP also served as counsel.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the Company's last three fiscal years
(ended March 31, 1999, March 31, 1998 and March 31, 1997), the compensation of
those persons who were, at March 31, 1999, the chairman of the Board of
Directors, the chief executive officer and the other four most highly
compensated executive officers of the Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------
<S> <C> <C> <C> <C> <C>
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ---------------------------------------------- ----------- ---------- ---------- ---------------- -----------------
David Ki Kwan Chu (1)......................... 1999 $ -- $ -- $ -- $ --
Chairman 1998 -- -- 30,000 --
1997 -- 240,000 --
Steven Lebensfeld (2)......................... 1999 322,875 233,595 14,400 2,643
President 1998 326,500 236,250 7,300 8,935
1997 253,500 -- 6,000 867
Harvey Goldberg (2)(3)........................ 1999 322,875 233,595 14,400 3,154
Executive Vice President 1998 307,500 236,250 9,700 3,424
1997 240,300 -- 6,000 544
Ken Price (2)................................. 1999 281,728 152,344 7,200 2,223
Sr. Vice President Sales and Marketing 1998 270,961 208,250 6,600 3,576
1997 265,000 -- 6,500 399
Carmine Russo (2)............................. 1999 268,313 152,344 7,200 996
Chief Operating Officer 1998 224,385 198,750 6,600 8,904
1997 160,000 -- 6,000 268
Andrew Stein (2).............................. 1999 187,313 81,250 7,200 1,069
Vice President International Sales 1998 185,000 138,750 6,600 8,736
1997 150,000 -- 6,000 383
</TABLE>
- ------------------------
(1) Other Annual Compensation represents director's fees paid to Mr. Chu.
(2) Amounts shown as Other Annual Compensation constitute car allowances.
(3) Mr. Goldberg's salary in fiscal 1999 included $207,000 of salary from Toymax
(HK) Limited and in fiscal 1998 included $130,500 in director's fees from
Toymax (HK) Limited.
10
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth, for fiscal 1999, information concerning
grants of stock options to the named officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------- VALUE AT ASSUMED RATES
NUMBER OF OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ----------------------
GRANTED(#)(1) FISCAL YEAR(2) PRICE DATE 5%($) 10%($)
------------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Ki Kwan Chu....................... 33,902 16.26% $ 6.75 07/02/08 $ 143,915 $ 364,709
Steven Lebensfeld....................... 33,902 16.26 6.75 07/02/08 143,915 364,709
Harvey Goldberg......................... 33,902 16.26 6.75 07/02/08 143,915 364,709
Ken Price............................... 24,579 11.79 6.75 07/02/08 104,339 264,415
Carmine Russo........................... 24,579 11.79 6.75 07/02/08 104,339 264,415
Andrew Stein............................ 10,171 4.88 6.75 07/02/08 43,176 109,417
</TABLE>
- ------------------------
(1) Options granted under the Company's Stock Option Plan. Such options vest and
become exercisable with respect to 20% of the shares subject thereto one
year after the date of grant and, thereafter, options with respect to 20% of
the shares subject thereto will vest and become exercisable on each of the
second, third, fourth, and fifth anniversary of the date of grant, provided
that the grantee remains in the employ of the Company. Vested options may
not be exercised beyond three months after the grantee ceases to be employed
by the Company.
(2) Based on a total of 205,500 options granted to 8 employees and 3 directors
of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
During fiscal 1999 none of the named executive officers exercised any
options and, as of July 1, 1999, all of the options granted by the Company have
exercise prices in excess of the market value ($4.875) of the underlying Common
Stock.
The Company has not awarded stock appreciation rights to any employee and
has no long-term incentive plans, as that term is defined in the regulations of
the SEC. The Company has a stock option plan and bonus plans. During fiscal
1999, the Company did not adjust or amend the exercise price of stock options
awarded to the named officers, whether through amendment, cancellation or
replacement grants, or other means. Also, the Company presently has no defined
benefit or actuarial plans covering any employees of the Company.
COMPENSATION OF DIRECTORS
Each director of the Company who is not an officer or full-time employee of
the company is entitled to receive director's fees at the rate of $15,000 per
year. All directors are reimbursed for actual expenses incurred in connection
with attendance at meetings of the Board of Directors or committees of the
Board.
EMPLOYMENT AGREEMENTS
The Company has separate employment agreements with Messrs. Lebensfeld,
Goldberg, Russo, Price, Johnson and Stein, each effective October 1, 1997
(individually and collectively, the "Employment Agreements"). The Employment
Agreements (except for Mr. Johnson's) each have a term of three years with
annual automatic one-year extensions, unless advance notice of non-extension is
timely furnished by either party. The Employment Agreement with Mr. Johnson has
a term of two years. Pursuant to the Employment Agreements, Messrs. Lebensfeld,
Goldberg, Price, Russo, Johnson and Stein received base salaries for the fiscal
year ending March 31, 1999 of $322,875, $322,875, $281,725, $268,313, $174,327
and
11
<PAGE>
$187,313, respectively, increasing each succeeding year during the term of the
agreement and are entitled to participate in the Executive Bonus Plan and the
Stock Option Plan. Each of the Employment Agreements with Messrs. Lebensfeld and
Goldberg also provide an annual "Stock Appreciation Bonus" of 1% of the
appreciation of the value of the outstanding common stock of the Company during
the immediately preceding year.
Under the Employment Agreements, the Company may terminate each executive
officer's employment upon notice to the executive officer and each executive
officer may resign and terminate the Employment Agreement at any time. If the
executive officer's employment is terminated at death, or by resignation or for
"Good Cause" (as defined in the applicable Employment Agreement) the Company has
no obligation to the executive except for payment of compensation and benefits
accrued but unpaid at the time of termination.
In the cases of Messrs. Lebensfeld and Goldberg, if the Company terminates
the executive officer's employment without "Good Cause" or if the executive
officer resigns with "Good Reason" (as defined in the applicable Employment
Agreement), in addition to accrued but unpaid compensation and benefits, the
executive officer is entitled to the payment of his base salary and continued
participation in the Executive Bonus Plan, payment of the Stock Appreciation
Bonus, and medical, dental and life insurance coverage for the remaining term of
the applicable Employment Agreement. In the cases of Messrs. Russo, Price,
Johnson and Stein, if the Company terminates the executive officer's employment
without "Good Cause," in addition to accrued but unpaid compensation and
benefits, the executive officer is entitled to the payment of his base salary
for twelve months following termination of employment.
All of the Employment Agreements provide for enhanced compensation in the
event of termination of employment following a "Change of Control" of the
Company, as such term is defined in each Employment Agreement. The Employment
Agreements with Messrs. Russo, Price, Stein and Johnson provide that, in the
event that following a Change of Control, the executive officer's employment is
terminated without Good Cause, in lieu of the twelve months' continuation of
base salary otherwise due the executive officer on account of termination
without Good Cause, the executive officer is entitled to 24 months' continuation
of base salary.
The Employment Agreements with Messrs. Lebensfeld and Goldberg provide that
in the event that the executive officer resigns within six months following a
Change of Control (as defined in the applicable Employment Agreement), or
following a Change of Control the executive officer's employment is terminated
without Good Cause, then in lieu of the continuation of base salary due the
executive officer but in addition to all other compensation and benefits due in
the event of termination for Good Reason or without Good Cause, the executive
officer is entitled to (1) a lump sum cash payment equal to three times his
average compensation (i.e., base salary, Stock Appreciation Bonuses and
Executive Bonus Plan awards) for the two prior calendar years, and (2) an amount
equal to any additional income and excise taxes that will be payable by the
executive officer on account of "excess parachute payments' (within the meaning
of Section 280G of the Internal Revenue Code).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of David Chu,
Joel Handel and Oren Asher. As more fully disclosed under "Certain Relationships
and Related Transactions", Mr. Chu, who is Chairman of the Board of the Company,
owns Tai Nam Industrial Company Limited ("Tai Nam"), which serves as the
Company's purchasing agent, and Jauntiway, which manufactures the majority of
the Company's products. Further, during fiscal 1999, the Company leased its
showroom facility in Hong Kong from Mr. Chu. Mr. Handel is a partner at Baer
Marks & Upham LLP, a law firm which serves as outside Counsel to the Company.
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW AND PHILOSOPHY. The Compensation Committee (the "Committee") has
been delegated the authority to review and approve the remuneration arrangements
for the Chief Executive Officer and each of the other executive officers of the
Company. In addition, the Committee reviews the benefit plans for employees of
the Company, administers the Stock Option Plan and approves grants to be made in
connection therewith and administers the Company's Executive Bonus Plan.
The Company's executive compensation is based upon three primary components:
base salary, annual bonuses and grants of stock options. Such compensation also
includes participation in various benefit plans generally available to employees
of the Company. The objectives of the Committee in determining the type and
amount of such executive officer compensation are to attract, motivate and
retain key management employees and to align the interest of management with the
best interests of stockholders.
In determining base salaries and annual bonuses, the Committee considered
the individual experience and performance of each executive officer as well as
the competitive marketplace to hire and retain qualified executives at the
appropriate level relative to the position, responsibilities and performance of
such executives. Mr. Lebensfeld's compensation arrangements are determined by
the Committee as well as his employment agreement. With respect to fiscal 1999,
Mr. Lebensfeld and Mr. Goldberg each received a base salary of $322,875 and a
bonus of $233,595. The Committee has increased each of Mr. Lebensfeld and Mr.
Goldberg's salary by an additional $100,000 for the fiscal year ending March 31,
2000. In setting Mr. Lebensfeld's and Mr. Goldberg's compensation, the Committee
considered and recognized their positioning the Company for continued high
growth, as well as each of their efforts in implementing the Company's growth
strategy.
CASH COMPENSATION. Cash compensation typically consists of a base salary
plus an annual performance bonus under the Executive Bonus Plan. The base
salaries for each of the executive officers are fixed under such employee's
employment agreements, each of which is described under the caption "Employment
Agreements," and annual performance bonuses are also determined by the Committee
pursuant to the Executive Bonus Plan. The Committee determines whether to
maintain the Executive Bonus Plan in any given fiscal year, the key management
employees of the Company who will be eligible to participate in a given fiscal
year and the amount, if any, for each participant based on such participant's
performance. The aggregate amount of awards under this plan for any fiscal year
are limited based on certain formulas. In determining cash compensation, the
Committee considers prevailing economic and business conditions and
opportunities, performance by comparable organizations, performance of
individual executives, stockholder value and such other criteria as the
Committee deems relevant. No particular weightings are assigned by the Committee
to any such factors. The Company paid bonuses to the Named Officers as described
above in the Summary Compensation Table under the caption "Executive
Compensation."
STOCK OPTION PLAN. The executive officers, as well as other employees of
the Company, are eligible to participate in the Stock Option Plan. The purpose
of the Stock Option Plan is to motivate and retain employees who are responsible
for the attainment of the primary long-term performance goals of the Company.
The Stock Option Plan is administered by the Committee. The Committee believes
that awards made under the Stock Option Plan provide the necessary long-term
incentive to focus managers on building profitability and stockholder value. The
Committee has the authority to determine the individuals to whom stock options
are awarded, the terms upon which option grants shall be made and the number of
shares subject to each option, all subject to the terms and conditions of the
Stock Option Plan. The Committee granted options to eleven directors, executive
officers or other key officers under the Stock Option Plan as described above
under the caption "Options Granted in Last Fiscal Year." The Committee believes
that such awards provide the necessary long-term incentive to focus managers on
building profitability and stockholder value.
13
<PAGE>
OTHER COMPENSATION. The Company provides certain other benefits, such as
health insurance, to the executive officers that are generally available to
Company employees.
David Chu
Joel Handel
Oren Asher
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
stockholder return, calculated on a dividend reinvested basis, for the Company's
Common Stock, against the cumulative total returns of the NASDAQ Composite Stock
Index and the Peer Group Index (as defined below) for the period from
commencement of public trading of the Common Stock on October 21, 1997 through
March 31, 1999. The graph assumes $100 was invested in the Company's Common
Stock, the NASDAQ Composite Stock Index and the Peer Group Index on October 21,
1997. Note that historic stock price performance is not necessarily indicative
of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN TOYMAX INTERNATIONAL, INC. COMMON STOCK,
NASDAQ COMPOSITE AND PEER GROUP INDICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOYMAX INTERNATIONAL,
INC. NASDAQ STOCK MARKET (US COMPANIES) SELF-DETERMINED PEER INDEX
<S> <C> <C> <C>
10/21/97 $100.000 $100.000 $100.000
10/31/97 $90.000 $93.089 $93.861
11/28/97 $92.500 $93.585 $95.917
12/31/97 $86.250 $91.975 $92.755
1/30/98 $86.250 $94.886 $94.484
2/27/98 $76.875 $103.808 $105.746
3/31/98 $71.250 $107.638 $107.818
4/30/98 $81.250 $109.451 $110.747
5/29/98 $74.375 $103.376 $105.931
6/30/98 $68.750 $110.596 $102.386
7/31/98 $73.750 $109.298 $102.675
8/31/98 $51.875 $87.718 $72.827
9/30/98 $47.500 $99.895 $77.578
10/30/98 $62.500 $104.213 $85.822
11/30/98 $67.500 $114.734 $95.730
12/31/98 $50.625 $129.603 $90.663
1/29/99 $66.250 $148.423 $92.992
2/26/99 $72.500 $135.108 $82.082
3/31/99 $67.500 $144.863 $82.010
</TABLE>
In accordance with SEC rules, the Company has elected to select a group of
peer companies (the "Peer Group Index") on an industry basis for comparison
purposes. The Peer Group Index is comprised of
14
<PAGE>
10 industry participants: DSI Toys, Inc., Empire of Carolina, Inc., Equity
Marketing, Inc., Jakks Pacific Inc., Play by Play Toys & Novelties, Inc., Radica
Games Limited, Toy Biz, Inc., Ohio Art, Co., THQ Inc., and Racing Champions
Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PURCHASING AND MANUFACTURING
Tai Nam, which is based in Hong Kong, serves as the Company's purchasing
agent pursuant to an Agency Agreement dated April 1, 1997, as amended (the
"Agency Agreement") between Tai Nam and Toymax Inc. Since the Company's
founding, Tai Nam and its affiliate, Concentric, have served as the Company's
purchasing agent. Tai Nam and Concentric are owned by David Chu, the Chairman
and a principal stockholder of the Company. As the Company's purchasing agent,
Tai Nam arranges for the manufacturing of the Company's products based on
purchase orders placed with Tai Nam by the Company. In addition, Tai Nam handles
all shipping documents, letters of credit, bills and payment, serves as liaison
with other vendors and performs quality control functions.
Pursuant to the Agency Agreement, Tai Nam receives an agency fee equal to
seven percent (7%) of the gross invoiced value of products purchased by Toymax,
Inc. (based on the factory purchase price of the merchandise). Until April 1997,
the Company utilized Concentric as its purchasing agent on similar terms. In
fiscal 1997, Concentric earned $1.4 million in agency fees and in fiscal 1998
and fiscal 1999 Tai Nam earned $3.4 million and $3.8 million respectively in
such fees. Tai Nam's duties include handling purchase orders for, and acting as
liaison to, manufacturers and vendors for the Company. Pursuant to the Agency
Agreement, the Company purchases products at FOB Yien Tian prices. The Company
pays all expenses associated with the making of molds for new products and such
molds are assets of the Company. The term of the Agency Agreement ends on April
1, 2000. The terms granted to the Company and the historical willingness of Tai
Nam to permit the Company to delay payments at certain times, has benefited the
Company.
In fiscal 1999, the Company's purchases from Tai Nam totaled $52.8 million.
The majority of the Company's products are manufactured by Jauntiway, which is
also owned by Mr. Chu. In fiscal 1999, approximately 81% of the Company's
products were manufactured by Jauntiway (some using subcontractors) goods
amounting to $1.4 million were sold to Tai Nam.
In fiscal 1999, the Company purchased molds from Tai Nam for $2.4 million
and reimbursed expenses of Tai Nam totaling $638,000.
In April 1997, Toymax, Inc. entered into an agency agreement with Tai Nam
under which Toymax Inc. acts as purchasing agent for Tai Nam in the United
States in exchange for a fee equal to 5% of such purchases.
The Company rents approximately 1,628 square feet of space in Kowloon, Hong
Kong from David Chu, Chairman of the Company, which it uses as showroom
facilities. The monthly rent under this lease is $4,900. The lease expires on
September 1, 2000.
The Company, Tai Nam and Mr. Chu have agreed that, all transactions with
affiliates, including Tai Nam and Jauntiway, will be subject to the approval of
the independent directors of the Company's Board of Directors.
Joel Handel, a director of the Company, is a partner at Baer Marks & Upham
LLP, a law firm which serves as outside counsel to the Company.
2000 STOCKHOLDERS' PROPOSALS
Proposals of stockholders to be presented at the annual meeting to be held
in 2000 must be received by March 31, 2000 in order for such proposals to be
considered for inclusion in the Proxy Statement and
15
<PAGE>
form of proxy relating to such meeting. Stockholders who do not present
proposals for inclusion in the Proxy Statement but who still intend to submit a
proposal at the 2000 annual meeting, and stockholders who intend to submit
nominations for directors at the meeting, are required to notify the Secretary
of the Company of their proposal or nominations, and provide certain other
information in accordance with and during the time period set forth in the
Company's Amended and Restated Certificate of Incorporation and By-laws.
Additional information and a copy of the Company's Amended and Restated
Certificate of Incorporation and By-laws may be obtained from the Secretary of
the Company, TOYMAX INTERNATIONAL, INC., 125 E. Bethpage Road, Plainview, New
York 11803.
OTHER BUSINESS
The management of the Company is not aware of any other matters to be
brought before the Annual Meeting. However, if any other matters are properly
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will have discretionary authority to vote all proxies with respect to such
matters in accordance with their best judgment,
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of the Proxy Statement entitled "Compensation Committee Report" and
"Performance Graph" shall not be deemed to be so incorporated unless
specifically otherwise provided in any such filing.
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
MARCH 31, 1999, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES, AS FILED WITH
THE SEC ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
ADDRESSED TO WILLIAM A. JOHNSON, JR. CHIEF FINANCIAL OFFICER, TOYMAX
INTERNATIONAL, INC., 125 E. BETHPAGE ROAD, PLAINVIEW, NEW YORK 11803.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
By order of the Board of Directors
Sanford B. Frank
SECRETARY
July 1, 1999
16
<PAGE>
- --------------------------------------------------------------------------------
PROXY
TOYMAX INTERNATIONAL, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEVEN A. LEBENSFELD AND SANFORD B. FRANK
with full power to act without the others and with power to appoint his
substitute as the undersigned's proxies to vote all shares of Common Stock of
the undersigned in TOYMAX INTERNATIONAL, INC. (the "Company"), a Delaware
corporation, which the undersigned would be entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at The Chase Manhattan Bank,
Media Room, Lower Level, 395 North Service Road, Melville, New York 11747, on
August 5, 1999 at 9:00 a.m., E.D.T., and at any and all adjournments thereof as
follows:
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
|X| PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE USING
DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND EACH
OF THE PROPOSALS LISTED BELOW.
1. ELECTION OF DIRECTORS
FOR the nominee listed below (except as marked to the contrary below) to
vote for the nominee listed below
FOR WITHHELD
|_| |_|
CLASS 1
HARVEY GOLDBERG
- --------------------------------------------------------------------------------
2. Proposal to amend the 1997 Share Option Plan to increase the number of
shares of common stock of the Company which may be issued or transferred
pursuant to options granted thereunder;
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to ratify the selection of BDO Seidman LLP as the Company's
independent auditors for the fiscal year ending March 31, 2000. The Board of
Directors recommends a vote FOR this proposal.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion such other business as may properly come before the
meeting and any and all adjournments thereof.
The shares of Common Stock represented by this proxy will be voted in
accordance with the foregoing instructions. In the absence of any
instructions, such shares will be voted for the election of the nominees
listed in item 1 and for the proposals in items 2 and 3.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders to be held on August 5, 1999 and the Proxy
Statement furnished therewith.
The undersigned hereby revokes any proxy to vote shares of Common Stock
of the Company heretofore given by the undersigned.
_________________________ _________________________ Date: _________, 1999
Signature (title, if any) Signature, if held jointly
Please date, sign exactly as name appears on this proxy, and promptly
return in the enclosed envelope. When signing as guardian, executor,
administrator, attorney, trustee, custodian, or in any other similar
capacity, please give full title. If a corporation, sign in full
corporate name by president or other authorized officer, giving title,
and affix corporate seal. If a partnership, sign in partnership name by
authorized person. In the case of joint ownership, each joint owner must
sign.
- --------------------------------------------------------------------------------
