<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___
COMMISSION FILE NO: 0-20612
----------------------
JUST TOYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
DELAWARE 13-3677074
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
50 WEST 23RD STREET, NEW YORK, NEW YORK 10010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212)645-6335
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED
ALL REPORTS TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS
(OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
--- ---
THE AGGREGATE NUMBER OF THE REGISTRANT'S SHARES OUTSTANDING ON
NOVEMBER 8, 1996 WAS 4,150,000 SHARES OF COMMON STOCK, $.01 PAR VALUE
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets - September 30, 1996
and 1995 (unaudited) and December 31, 1995............................... 1
Condensed Consolidated Statements of Operations (unaudited)
for the Three Months and Nine Months Ended September 30, 1996 and 1995... 2
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Nine Months Ended September 30, 1996 and 1995.................... 3
Notes To Condensed Consolidated Financial
Statements (unaudited)................................................... 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................ 7
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS........................................................11
Item 2. CHANGES IN SECURITIES....................................................11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.........................................12
SIGNATURES............................................................................14
</TABLE>
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JUST TOYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, 1995
-------------------------------- -----------------
1996 1995
----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................ $ 184,452 $ 739,888 $ 241,443
Accounts receivable, net of allowances
of $827,000, $1,037,000 and $1,017,000
(Note B).......................... 293,968 3,346,579 1,779,598
Inventories (Note C)................ 4,731,613 3,126,277 3,270,206
Prepaid and refundable income taxes. 46,269 224,774 248,459
Prepaid expenses and other current assets. 1,126,557 2,153,925 646,422
----------- ----------- -----------
Total current assets............. 6,382,859 9,591,443 6,186,128
Property and equipment, at cost, net
of accumulated depreciation and
amortization........................ 3,452,570 3,404,539 2,653,702
Property held for sale (Note F)....... --- 3,908,840 2,907,340
Other assets.......................... 120,555 96,009 76,188
----------- ----------- -----------
TOTAL............................. $9,955,984 $17,000,831 $11,823,358
=========== =========== ===========
LIABILITIES
Current liabilities:
Current portion of long-term debt.. $ -- $ 352,000 $ 360,000
Accounts payable.................... 1,309,233 1,208,793 1,925,467
Due RGA Accessories, Inc. .......... --- 131,558 45,242
Accrued liabilities................. 1,493,684 1,666,495 1,582,761
----------- ----------- -----------
Total current liabilities......... 2,802,917 3,358,846 3,913,470
----------- ----------- -----------
Long-term debt, less current portion.. --- 1,976,000 1,886,000
Deferred income taxes................. 15,971 15,971 15,971
Commitments and contingencies (Note E)
Series B Convertible Redeemable Preferred
Stock, 650,000 shares authorized,
538,243 shares issued and outstanding
(liquidation value $1,951,131)
(Note 6)........................... 941,932 -- --
STOCKHOLDERS' EQUITY
Stockholders' equity: (Note D)
Preferred stock, $1.00 par value,
1,000,000 shares authorized:
Series A Convertible Redeemable
Preferred Stock
150,000 shares authorized, 120,000
shares issued and outstanding
(liquidation value $240,000) ... 120,000 -- 120,000
Common stock, $.01 par value, authorized
15,000,000 shares; 4,150,000
issued and outstanding............ 41,500 41,500 41,500
Additional paid-in capital.......... 29,795,768 29,795,768 29,795,768
Accumulated deficit................. (23,762,104) (18,187,254) (23,949,351)
----------- ----------- -----------
Total stockholders' equity........ 6,195,164 11,650,014 6,007,917
----------- ----------- -----------
TOTAL............................. $9,955,984 $17,000,831 $11,823,358
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these Condensed Financial Statements.
Page 1
<PAGE>
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ........................................... $ 6,871,877 $ 6,181,604 $ 15,379,904 $ 14,577,622
Cost of goods sold .................................. 3,936,388 3,543,178 9,181,501 8,758,287
------------ ------------ ------------ ------------
Gross profit ........................................ 2,935,489 2,638,426 6,198,403 5,819,335
------------ ------------ ------------ ------------
Expenses:
Merchandising, selling, warehousing
and distribution .............................. 636,833 586,050 1,589,303 2,469,419
Royalties ....................................... 242,589 482,038 518,627 1,115,429
General and administrative ...................... 1,358,961 1,265,916 3,822,265 4,579,339
------------ ------------ ------------ ------------
Total ................................ 2,238,383 2,334,004 5,930,195 8,164,187
------------ ------------ ------------ ------------
Operating income (loss) ............................. 697,106 304,422 268,208 (2,344,852)
Interest and dividend income ........................ -- 18,278 3,242 118,755
Interest expense .................................... (120,968) (71,101) (293,401) (137,887)
Write down of investment in Hong Kong property ...... -- -- -- (576,500)
Other income (expense) .............................. (42,665) (12,807) 209,198 (84,343)
------------ ------------ ------------ ------------
Net income (loss) ................................... $ 533,473 $ 238,792 $ 187,247 $ (3,024,827)
============ ============ ============ ============
Per share data:
Net income (loss) per share ......................... $0.13 $0.06 $0.05 $(0.73)
============ ============ ============ ============
Weighted average common shares outstanding .......... 4,150,000 4.150,000 4,150,000 4,150,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these Condensed Financial Statements.
Page 2
<PAGE>
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................. $ 187,247 $(3,024,827)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Depreciation and amortization ................................. 253,747 950,306
Gain on sale of property ...................................... (118,707) --
Provision for resizing and restructuring ...................... -- 303,160
Write down in investment in Hong Kong property. ............... -- 576,500
Realized and unrealized gain on marketable securities ......... -- (81,211)
Changes in operating assets and liabilities (net of
the effects of the acquisition of Celt Specialty
Partners, Inc. in 1995 and Table Toys, Inc. in 1996):
(Increase) decrease in:
Accounts receivable ..................................... 1,485,630 (1,052,226)
Inventories ............................................. (661,407) 1,165,755
Prepaid and refundable taxes ............................ 202,190 (158,975)
Prepaid expenses and other current assets ............... (649,351) (358,040)
Other assets ............................................ (44,367) (28,638)
Increase (decrease) in:
Accounts payable ........................................ (616,234) (1,080,041)
Due RGA Accessories, Inc. ............................... (45,242) 16,625
Accrued liabilities ..................................... (264,077) (1,627,655)
Income taxes payable .................................... -- (473,422)
----------- -----------
Net cash (used in) operating activities .......................... (270,571) (4,872,689)
----------- -----------
Cash flows from investing activities:
Cash received from sale of property (Note F) ...................... 3,026,047 --
Purchase of assets of Table Toys (Note G) ........................ (391,291) --
Acquisition of property and equipment ............................ (175,176) (918,392)
Purchase of marketable securities ................................. -- (2,873,589)
Redemption of marketable securities ............................... -- 7,470,252
----------- -----------
Net cash provided by investing activities .............. 2,459,580 3,678,271
----------- -----------
Cash flows from financing activities:
Payments of long-term debt ........................................ (2,246,000) (234,000)
----------- -----------
Net cash (used in) financing activities ................ (2,246,000) (234,000)
----------- -----------
Net increase (decrease) in cash ...................................... (56,991) (1,428,418)
Cash-beginning of period ............................................. 241,443 2,168,306
----------- -----------
Cash-end of period ................................................... $ 184,452 $ 739,888
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these Condensed Financial Statements.
Page 3
<PAGE>
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - Basis of Presentation and Summary of Significant Accounting Policies
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. On
April 23, 1995, the Company purchased the remaining 50% joint interest in Celt
Specialty Partners, Inc. ("Partners") which was organized on June 7, 1994. The
accounts of Partners are consolidated with the Company from January 1, 1995
because of the Company's direct and indirect degree of control. The results of
operations for the interim periods are not necessarily indicative of the results
for a full year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
(1) Loss per share of Common Stock
Loss per share is based on the weighted average number of shares
outstanding during each period, including Common Stock equivalents, when
dilutive. Primary and fully diluted loss per share are the same for each period.
(2) Reclassifications
Certain previously reported amounts have been reclassified to conform to
the 1996 presentation and that of the Form 10-K for the year ended December 31,
1995.
Note B - Accounts Receivable
Accounts receivable and amounts due from factor consist of the following:
<TABLE>
<CAPTION>
September 30, September 30, December 31,
1996 1995 1995
------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C>
Accounts Receivable - factor ................................. $ 3,260,897 $ 3,206,600
Borrowings from factor ....................................... (3,283,638) (881,024)
----------- -----------
Net due to/from factor ....................................... (22,741) 2,325,576
Accounts receivable - trade .................................. 1,143,939 $ 4,383,579 471,022
----------- ----------- -----------
Total accounts receivable ................................. 1,121,198 4,383,579 2,796,598
Less: Accounts receivable allowances ......................... (827,230) (1,037,000) (1,017,000)
----------- ----------- ----------
Total accounts receivable net of allowances ............... $ 293,968 $3,346,579 $1,779,598
=========== ========== ==========
</TABLE>
Page 4
<PAGE>
<PAGE>
Note C - Inventories
The inventories consist of the following:
<TABLE>
<CAPTION>
September 30, September 30, December 31,
1996 1995 1995
------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C>
Finished goods ............................. $2,891,530 $2,170,679 $2,178,278
Material components and supplies ........... 1,840,083 955,598 1,091,928
---------- ---------- ---------
Total ............................. $4,731,613 $3,126,277 $3,270,206
========== ========== =========
</TABLE>
Note D - Stockholders' Equity
Stockholders' equity consists of the following:
<TABLE>
<CAPTION>
Additional
Series A Common Paid-in Accumulated
Stock Stock Capital Deficit Total
----- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 $ 120,000 $ 41,500 $29,795,768 $(23,949,351) $6,007,917
Net income (unaudited) 187,247 187,247
------- ---------- ----------- ------------ ------------
Balance September 30, 1996
(unaudited)
$ 120,000 $ 41,500 $ 29,795,768 $(23,762,104) $6,195,164
========== ========== ============ ============ ==========
</TABLE>
Note E - Commitments and Contingencies
Litigation
On July 31, 1996, the United States District Court for the
Northern District of California granted summary judgment in favor of the Company
and the other defendants in the lawsuit commenced in April 1995 by OddzOn
Products, Inc. In that lawsuit, OddzOn Products, Inc. alleged that the Company's
Micro Ultra Pass'r' and Ultra Pass'r' infringed a design patent allegedly owned
by the plaintiff and constituted trade dress infringement and unfair
competition. The Court's decision held that the Company's products do not
infringe in any way on the plaintiff's rights. OddzOn Products, Inc. has
appealed that decision.
On June 21, 1996, the Company commenced an action against CFB Venture Fund
II, L.P. ("CFB") and Stephen Broun which is currently pending in the United
States District Court for the Southern District of New York. This action arises
out of negotiations regarding the possible acquisition by the Company of certain
assets of BRIK, Inc. ("Brik") and seeks a declaratory judgment to the effect
that the Company did not breach any agreement with CFB. On July 19, 1996, the
defendants answered and interposed pleaded four counterclaim against the Company
seeking damages against the Company in an amount of at least $600,000 and
punitive damages in an amount three times thereof. The defendants claim that the
Company and CFB had reached an enforceable agreement
Page 5
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<PAGE>
pursuant to which the Company would purchase certain assets of Brik from CFB, a
secured creditor of Brik. The Company does not believe that any such agreement
ever existed and, if any such contract is determined by a court to have existed,
the Company believes that it was fraudulently induced by the defendants to enter
into such agreement. The Company intends to pursue this action and to contest
the counterclaims vigorously. However, the outcome of this action cannot be
predicted and an adverse judgment could have a material adverse effect on the
Company.
Note F - Property Held for Sale
Because the Company decided to sell its property in Hong Kong, the book
value of the property was written down by approximately $577,000 in the first
quarter of 1995 to reflect management's estimate of the net proceeds from the
sale. In March 1996, the Company entered into a provisional sale agreement for
the sale of this property. In the fourth quarter of 1995, the Company wrote down
the value of the property by an additional $1,001,000 based on the provisional
sales agreement. The transaction closed on April 30, 1996 and because the final
selling price was marginally higher than expected and selling expenses were less
than expected, a gain of $119,000 was recognized in the second quarter.
Note G - Acquisition
On January 22, 1996, the Company entered into an agreement to purchase
certain assets of Table Toys, Inc. ("Table Toys"). Because Table Toys had filed
a petition under Chapter 11 of the Federal Bankruptcy laws, the acquisition was
subject to approval by the Bankruptcy Court. The acquisition was approved on May
9, 1996 and closed on June 28, 1996.
The Company accounted for this acquisition under the purchase method of
accounting and has preliminarily allocated the purchase price as follows:
Assets acquired:
Inventory $ 800,000
Property and equipment 877,439
----------
$1,677,439
==========
The acquisition of the above assets was financed as follows:
Cash Paid $ 391,291
Series B Convertible Redeemable Preferred Stock 941,932
Other liabilities incurred 344,216
----------
$1,677,439
The consideration paid for the assets acquired included 538,243 shares
of Series B Convertible Redeemable Preferred Stock with a liquidation value of
$3.625 per share. Such shares were valued at approximately $1.75 per share.
The Company also issued warrants to purchase an aggregate of 60,000 shares of
the Company's Common Stock at $3.625 per share. Other liabilities incurred
include $169,216 of expenses incurred in connection with the acquisition that
were included in prepaid expenses and other current assets as of December 31,
1995.
Page 6
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net sales for the three months ended September 30, 1996 increased 11.2%
to $6,872,000 from $6,182,000 in the comparable period in 1995. Net sales of the
Company's Sports Toys increased -- 43.7% to $2,665,000 from $1,855,000 in the
comparable period in 1995. This increase was offset by a decrease in the Toys
Category of 2.8% from $4,327,000 in 1995 to $4,207,000 in the same period of
1996. Sales credits in the three month period ended September 30, 1996 (in the
form of returns, advertising and other allowances and concessions to retailers)
were 3.1% of net sales as compared to (1.6)% of net sales in the comparable 1995
period. The higher rate used for the three months ended September 30, 1996 more
accurately reflects anticipated annual results.
Gross profit increased 11.3% to $2,935,000 from $2,638,000 in the
comparable period in 1995. Gross profit as a percentage of net sales was 42.7%
for the three months ended September 30, 1996 and 1995.
Merchandising, selling, warehousing and distribution expenses increased
8.7% to $637,000 as compared to $586,000 in the comparable 1995 period. The
increase is a result of negotiated settlements of outstanding payables at less
than full invoice amount during the three months ended September 30, 1995. The
results for the three months ended September 30, 1996 are more indicative of the
Company's performance. As a percentage of net sales, merchandising, selling,
warehousing and distribution expenses decreased to 9.3% from 9.5% in the
comparable period in 1995.
Royalties decreased 49.7% to $243,000 from $482,000 in the three months
ended September 30, 1995. The decrease reflects the change in the Company's
product mix away from character licensed products which carry higher royalty
rates than branded products and products obtained from third party inventors.
Royalties, as a percentage of net sales, decreased to 3.5% from 7.8% in the 1995
period.
General and administrative expenses increased 7.4% to $1,359,000 from
$1,266,000 in the comparable period in 1995. The quarter ending September 30,
1995 included credits to certain expenses due to the negotiated settlements of
outstanding payables at less than full invoice amount. The increase was
partially offset by a reduction in depreciation and amortization and fees for
RGA's services for the period. As a percentage of net sales, general and
administrative expenses decreased to 19.8% from 20.5% due to the increase in net
sales partially offset by increased general and administrative expense.
Operating income increased to $697,000 from $304,000 in the comparable
period in 1995.
Interest expense increased $50,000 for the quarter ended September 30,
1996 compared to the quarter ended September 30, 1995 due to the Company having
drawn advances under its factor arrangement.
Page 7
<PAGE>
<PAGE>
Net income was $533,000 for the quarter ended September 30, 1996
compared to $239,000 for the comparable period in 1995. Net income per common
share increased to $0.13 from $0.06 on 4,150,000 weighted average shares
outstanding on the three months ended September 30, 1996 and 1995, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net sales for the nine months ended September 30, 1996 increased 5.5% to
$15,380,000 from $14,578,000 in the comparable period in 1995. Net sales of the
Company's Sports Toys increased 30.0% to $7,749,000 from $5,959,000 in the
comparable period in 1995. This increase was partially offset by a decrease in
the Toys Category of 11.5% from $8,619,000 in the first nine months of 1995 to
$7,631,000 in the same period of 1996. Sales credits in the nine month period
ended September 30, 1996 (in the form of returns, advertising and other
allowances and concessions to retailers) were 3.7% of net sales as compared to
2.8% of net sales in the comparable 1995 period.
Gross profit increased 6.5% to $6,198,000 from $5,819,000 in the
comparable period in 1995. Gross profit as a percentage of net sales was 40.3%
compared to 39.9% for the nine months ended September 30, 1995.
Merchandising, selling, warehousing and distribution expenses decreased
35.6% to $1,589,000 as compared to $2,469,000 in the comparable 1995 period. The
sharp decrease is a result of the cost reduction program initiated in the second
quarter of 1995 as well as unusually high expenditures incurred in the first
quarter of 1995. The cost reduction measures reduced costs associated with
product development and design, samples, advertising, communication, costs
associated with the recall of one of the Company's products and warehousing and
distribution expenses. As a percentage of net sales, merchandising, selling,
warehousing and distribution expense decreased to 10.3% from 16.9% in the
comparable period in 1995.
Royalties decreased 53.5% to $519,000 from $1,115,000 in the nine months
ended September 30, 1995. The decrease reflects the change in the Company's
product mix away from character licensed products which carry higher royalty
rates than branded products and products obtained from third party inventors. As
a result, royalties, as a percentage of net sales, decreased to 3.4% from 7.7%
in the 1995 period.
General and administrative expenses decreased 16.5% to $3,822,000 from
$4,579,000 in the comparable period in 1995 due to the effects of the Company's
cost reduction program which resulted in a decrease in the number of personnel,
decreased depreciation and amortization and a decrease in fees for RGA's
services for the period. As a percentage of net sales, general and
administrative expenses decreased to 24.9% from 31.4% due to the decline in
general and administrative expenses.
Operating income was $268,000 in the nine months ended September 30,
1996 compared to an operating loss of $2,345,000 in the comparable period in
1995.
The Company earned interest and dividend income of $3,000 as compared to
$119,000 in the comparable period in 1995. The decrease in interest and dividend
income is a result of the Company having redeemed marketable securities during
1995 to fund its losses. Interest expense increased to $293,000 as compared to
$138,000 in the comparable period in 1995. This increase was due primarily to
the Company having drawn advances under its factoring arrangement.
Page 8
<PAGE>
<PAGE>
Because the Company decided to sell its property in Hong Kong, the book
value of the property was written down by approximately $577,000 in the first
half of 1995 to reflect management's estimate of the net proceeds from the sale.
Other income was $209,000 in the nine months ended September 30, 1996
compared to a loss of $84,000 in the comparable period in 1995. The nine months
ended September 30, 1996 included approximately $119,000 of income from the sale
of the Company's Hong Kong property, a result of the proceeds from the sale
being marginally higher than initially anticipated and previously estimated
expenses being marginally lower.
Net income was $187,000 as compared to a net loss of $3,025,000 in the
comparable period in 1995. The net loss for the nine months ending September 30,
1995 included approximately $303,000 of expenses associated with the resizing
and restructuring of the Company that took place during that period. Net income
per common share was $0.05 compared to a net loss per common share of $0.73 in
the comparable period in 1995 on 4,150,000 weighted average shares outstanding
in the nine months ended September 30, 1996 and 1995, respectively.
OTHER INFORMATION
The business of the Company is characterized by customer order patterns
which vary from one year to the next largely because of the different levels of
consumer acceptance of a product line, product availability, marketing
strategies and inventory levels of retailers. The use of just-in-time/quick
response inventory techniques and replenishment programs by larger retailers has
resulted in fewer orders being placed in advance of shipment. This distorts the
comparisons of unshipped orders at any given date. Additionally, it is a general
industry practice that orders are subject to amendment or cancellation by
customers prior to shipment. Therefore, comparisons of unshipped orders in any
specific period in any given year with those same periods in preceding years are
not necessarily indicative of sales for an entire year. The Company's unshipped
orders were approximately $2,430,000 at September 30, 1996 compared to
approximately $1,865,000 at September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1996 was $3,580,000 as
compared to $6,233,000 at September 30, 1995.
Cash provided by investing activities was $2,459,000 in the nine months
ending September 30, 1996, which was attributable to the sale of the Company's
Hong Kong property, partially offset by an investment in equipment, molds and
tooling for new products. In the comparable period in 1995, cash provided by
investing activities was $3,678,000, consisting primarily of a net redemption of
marketable securities, partially offset by an investment in equipment, molds and
tooling for new products.
Cash used in financing activities was $2,246,000 in the first nine
months of 1996 and $234,000 in the comparable period in 1995. Cash from
financing activities was used to repay the principal portion of the mortgage on
the Company's facility in Hong Kong.
Effective February 1, 1996, the Company's factoring agreement with
Milberg Factors, Inc. was amended to increase the amount of the advance to the
lesser of 85% of total accounts receivable or $5,000,000. The factoring charge
is .65% of receivables. Advances bear interest at the rate of prime plus one
percent. Milberg has also agreed to advance to the Company, at the Company's
request, the
Page 9
<PAGE>
<PAGE>
lesser of $2,000,000 or 50% of the Company's inventory located in the United
States. Such advances will also bear interest at the rate of prime plus one
percent.
The Company believes that the cash flow it expects to generate from
operations and available borrowings will be adequate to meet its obligations for
the year.
SEASONALITY
The toy industry is typically seasonal in nature due to the heavy demand
for toy products during the Christmas season, with the majority of orders being
placed during the first two-thirds of the year for shipment during the third and
fourth quarters, and with the majority of collections from such sales being
received in the fourth quarter.
Page 10
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 31, 1996, the United States District Court for the Northern
District of California granted summary judgment in favor of the Company
and the other defendants in the lawsuit commenced in April 1995 by OddzOn
Products, Inc. In that lawsuit, OddzOn Products, Inc. alleged that the Company's
Micro Ultra Pass'r' and Ultra Pass'r' infringed a design patent allegedly owned
by the plaintiff and constituted trade dress infringement and unfair
competition. The Court's decision held that the Company's products do not
infringe in any way on the plaintiff's rights. OddzOn Products, Inc. has filed
an appeal from the decision.
ITEM 2. CHANGES IN SECURITIES
SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK
The Board of Directors of the Company pursuant to the Certificate of
Incorporation has authorized 150,000 shares of Series A Convertible Redeemable
Preferred Stock ("Series A Stock") with par value $1.00 per share of which
120,000 shares are issued and outstanding. A Certificate of Designation,
Preferences and Rights of the Series A Stock has been filed with the Secretary
of State of Delaware and became effective October 16, 1996.
The Series A Stock ranks senior to the Company's common stock par value
$0.01 per share ("Common Stock") with respect to dividend rights and rights on
liquidation, winding-up and dissolution. The Series A Stock has a cumulative
preferred quarterly dividend of 6% per annum of the Series A Liquidation Value
(as defined below). As long as any shares of the Series A Stock remain
outstanding, no cash dividends will be paid on the Common Stock nor will Common
Stock be acquired by the Company unless all accrued and unpaid dividends have
been paid on the Series A Stock. The Series A Stock has a liquidation preference
over the Common Stock in an amount equal to $1.00 per share (the "Series A
Liquidation Value") plus dividends accrued and unpaid. At the holder's option
until December 31, 1998, the Series A Stock is convertible into Common Stock at
a conversion price of $2.00 per share (subject to certain adjustments) of Common
Stock. The Series A Stock is redeemable at the Series A Liquidation Value plus
dividends accrued and unpaid at the Company's option at any time.
SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK
The Board of Directors of the Company pursuant to the Certificate of
Incorporation has also authorized 650,000 shares of Series B Convertible
Redeemable Preferred Stock ("Series B Stock") with par value $1.00 per share of
which 538,243 are issued and outstanding. A Certificate of Designation,
Preferences and Rights of the Series B Stock, has been filed with the Secretary
of State of Delaware and became effective July 1, 1996.
The Series B Stock ranks senior to the Common Stock with respect to
dividend rights and rights on liquidation, winding up and dissolution. The
Series B Stock has a cumulative quarterly preferred dividend of 7% per annum of
the Series B Liquidation Value (as defined below). As long as any shares of the
Series B Stock remain outstanding, no cash dividends will be paid on the Common
Stock nor will Common Stock be acquired by the Company unless all accrued and
unpaid dividends have been paid on the Series B Stock and any required
redemption have been provided for. The Series B Stock has a liquidation
preference over the Common Stock in an amount equal to $3.625 per share (the
"Series B Liquidation Value") plus dividends accrued and unpaid. At the holders
option, the shares of Series B Stock are convertible into Common Stock at a rate
of one share of Common Stock for each share of Series B Stock (subject to
certain adjustments). After December 30, 1996, the Series B Stock is redeemable
at the Company's option at the Series B Liquidation Value plus dividends accrued
and unpaid. The Series B Stock is subject to mandatory redemption through the
operation of a sinking fund at the Series B Liquidation Value plus dividends
accrued and unpaid.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. At the Company's Annual Meeting of Shareholders held on August 19, 1996, the
following individuals were elected to the Board of Directors:
<TABLE>
<CAPTION>
Votes in Favor Withheld Authority
<S> <C> <C>
Roger Gimbel 3,662,218 205,895
Charmaine Jefferson 3,664,218 203,895
Howard Kaufman 3,664,218 203,895
Morton J. Levy 3,662,218 205,895
Irwin Naitove 3,664,218 203,895
Donald D. Shack 3,664,218 203,895
Barry Shapiro 3,662,218 205,895
</TABLE>
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<PAGE>
B. The following resolution relating to amendments to the Company's Amended and
Restated 1992 Incentive and Non-Qualified Stock Option Plan was approved at the
Annual Meeting:
RESOLVED, that the Company's Amended and Restated 1992 Incentive
and Non-Qualified Stock Option Plan be amended to increase the
maximum number of shares available for issuance thereunder from
600,000 to 1,000,000 and to make such other revisions to the Plan
as more particularly set forth in the form of amended and
restated Plan annexed as Exhibit A to the Company's Proxy
Statement dated July 19, 1996.
Below are the results of the stockholder vote on this matter:
Votes in Favor Votes Against Abstentions
--------------- -------------- -------------
2,249,395 704,356 21,409
C. The following resolution relating to amendment to the Company's Certificate
of Incorporation to provide for the authorization of an additional 1,000,000
shares of preferred stock was also approved at the Annual Meeting:
RESOLVED, that the amendment to the Company's Certificate of
Incorporation be approved in the form annexed as Exhibit B to the
Company's Proxy Statement dated July 19, 1996.
Below are the results of the stockholder vote on this matter:
Votes in Favor Votes Against Abstentions
--------------- -------------- -------------
2,492,811 559,124 13,304
D. A proposal relating to the appointment of Ernst & Young LLP as the Company's
independent auditors for its 1996 fiscal year was also approved at the Annual
Meeting.
Below are the results of the stockholder vote on this proposal:
Votes in Favor Votes Against Abstentions
--------------- -------------- -------------
3,738,185 48,639 6,289
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Asset Purchase Agreement dated January 22, 1996 between the
Company and Table Toys, Inc. (the "Asset Purchase Agreement"),
incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K filed on July 10, 1996 (the "July 1996 Form 8-K").
2.2 Amendment dated April 12, 1996 to the Asset Purchase Agreement,
incorporated by reference to Exhibit 2.2 to the July 1996 Form
8-K.
2.3 Second Amendment dated April 15, 1996 to the Asset Purchase
Agreement, incorporated by reference to Exhibit 2.3 to the July
1996 Form 8-K.
3.1 Certificate of Incorporation, incorporated by reference to
Exhibit 3.1 to the Registration Statement on Form S-1 (File No.
33-50878) (the "Form S-1").
3.2 Certificate of Designations, Preferences and Rights of the Series
A Stock incorporated by reference to Exhibit 4 to the Quarterly
Report on Form 10-Q filed on November 7, 1995.
3.3 Certificate of Designation, Preferences and Rights of the Series
B Stock, incorporated by reference to Exhibit 3.2 to the July
1996 Form 8-K.
*3.4 Amended and Restated By-laws.
*3.5 Certificate of Amendment of Certificate of Incorporation.
4.1 Certificate of Designations, Preferences and Rights of the Series
A Stock (included in Exhibit 3.2 hereof).
4.2 Certificate of Designation, Preferences and Rights of the Series
B
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<PAGE>
Stock (included in Exhibit 3.3 hereof).
4.3 Form of Warrant, dated June 26, 1995, issued to various parties
in respect of the aggregate of 60,000 shares of the Company's
common stock, incorporated by reference to Exhibit 4.2 to the
July 1995 Form 8-K.
*10.3 Amended and Restated 1992 Incentive and Non-Qualified Stock
Option Plan.
*27 Financial Data Schedule.
- ----------------------------------------
* Filed herewith
(b) Reports on Form 8-K:
None.
Page 13
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 8, 1996
JUST TOYS, INC.
a Delaware Corporation
By: /s/ Morton J. Levy
--------------------------
Morton J. Levy
Chief Executive Officer
By: /s/ Michael J. Vastola
-------------------------
Michael J. Vastola
Chief Financial Officer
STATEMENT OF DIFFERENCES
The register trademark symbol shall be expressed as.... 'r'
Page 14
<PAGE>
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
JUST TOYS, INC.
(Formed under the laws of the State of Delaware)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. A meeting of the stockholders shall be held
annually for the election of Directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the Board of Directors or by the Chairman of the Board, the Chief
Executive Officer or the President and shall be called by the Board upon the
written request of the holders of record of a majority of the outstanding shares
of the Corporation entitled to vote at the meeting requested to be called. Such
request shall state the purpose or purposes of the proposed meeting.
SECTION 3. PLACE OF MEETINGS. Meetings of stockholders shall be held at
such place, within or without the State of Delaware, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of Delaware.
SECTION 4. NOTICE OF MEETINGS. Notice of each meeting of stockholders
shall be given in writing and shall state the place, date and hour of the
meeting and, in the case of a special
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meeting, the purpose or purposes for which the meeting is called. Notice of a
special meeting shall indicate that it is being issued by or at the direction of
the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle objecting stockholders to receive payment for their shares, the
notice shall include a statement of that purpose and to that effect.
A copy of the notice of each meeting shall be given, personally or by
first class mail, not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice is given when deposited in the United States mail, with postage thereon
prepaid, directed to the stockholder at his address as it appears on the record
of stockholders. In the event of a change of address, he shall file with the
Secretary of the Corporation a written request that his address be changed in
the records of the Corporation, in which event notices to him shall be directed
to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, or if meeting is adjourned for more than 30 days, a
notice of the adjourned meeting shall be given to each stockholder of record on
the new record date entitled to notice under the preceding paragraphs of this
Section 4.
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SECTION 5. WAIVER OF NOTICE. Notice of a meeting need not be given to
any stockholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
SECTION 6. INSPECTORS OF ELECTION. The Board of Directors, in advance of
any stockholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a stockholders' meeting may, and on the request of any
stockholder entitled to vote thereat shall, appoint one or more inspectors to
act at the meeting. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the validity and effect of proxies and ballots, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, certify their determination of the
number of shares represented at the meeting and their count of all votes,
ballots and consents, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting or any stockholder entitled to vote thereat, the inspectors shall
3
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<PAGE>
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Any report or certificate
made by them shall be prima facie evidence of the facts stated and of the vote
as certified by them.
SECTION 7. LIST OF STOCKHOLDERS AT MEETINGS. A list of stockholders as
of the record date, certified by the Secretary or Assistant Secretary or by a
transfer agent, shall be prepared at least 10 days prior to each meeting. Such
list shall be open to the examination of any stockholder for purposes germane to
the meeting and may be inspected by any stockholder who is present. If the right
to vote at any meeting is challenged, the inspectors of election, or person
presiding thereat, shall require such list of stockholders to be produced as
evidence of the right of the persons challenged to vote at such meeting, and all
persons who appear from such list to be stockholders entitled to vote thereat
may vote at such meeting.
SECTION 8. QUALIFICATION OF VOTERS. Unless otherwise provided in the
certificate of incorporation, every stockholder of record shall be entitled at
every meeting of stockholders to one vote for every share standing in his name
on the record of stockholders.
Treasury shares as of the record date and shares held as of the record
date by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of Directors of such
other corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, trustee or other fiduciary, may be voted by him, either in person or
by proxy, without transfer of such shares into his name.
4
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Shares outstanding in the name of another domestic or foreign
corporation of any type or kind may be voted by such officer, agency or proxy as
the By-laws of such corporation may provide, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
A stockholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
SECTION 9. QUORUM OF STOCKHOLDERS. Unless otherwise provided in the
Certificate of Incorporation, the holders of a majority of the shares entitled
to vote thereat shall constitute a quorum at a meeting of stockholders for the
transaction of any business, provided that when a specified item of business is
required to be voted on by a class or series voting as a class, the holders of a
majority of the shares of such class or series shall constitute a quorum for the
transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any stockholders.
The stockholders who are present in person or by proxy and who are
entitled to vote may, by a majority of votes cast, adjourn the meeting despite
the absence of a quorum.
SECTION 10. PROXIES. Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after the expiration of three years from the date
thereof unless otherwise provided in
5
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the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except as otherwise provided by law.
Except as otherwise required by applicable law, the authority of the
holder of a proxy to act shall not be revoked by the incompetence or death of
the stockholder who executed the proxy unless before the authority is exercised,
written notice of an adjudication of such incompetence or of such death is
received by the Secretary or any Assistant Secretary.
SECTION 11. VOTE OR CONSENT OF STOCKHOLDERS. Directors shall, except as
otherwise required by law, be elected by a plurality of the votes cast at a
meeting of stockholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of Directors, is
to be taken by vote of stockholders, it shall, except as otherwise required by
law or the Certificate of Incorporation, be authorized by a majority of the
votes cast at a meeting of stockholders by the holders of shares entitled to
vote thereon.
Whenever stockholders are required or permitted to take any action by
vote, such action may be taken without a meeting, without prior notice, and
without a vote, on written consent, setting forth the action so taken, signed by
the holders of outstanding stock having not less than the minimum numbers of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Written
consent thus given by such holders so entitled to vote shall have the same
effect as a vote of stockholders at a meeting duly called and held. Prompt
notice of the taking of such action without a meeting by less than the unanimous
consent of all stockholders shall be given to those stockholders who did not
consent in writing.
6
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SECTION 12. FIXING RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
When a determination of stockholders of record entitled to notice of or
to vote at any meeting of stockholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date for the adjournment meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. POWER OF BOARD AND QUALIFICATION OF DIRECTORS. The business
of the Corporation shall be managed by the Board of Directors. Each director
shall be at least 18 years of age.
SECTION 2. NUMBER OF DIRECTORS. The number of Directors constituting the
entire Board of Directors shall be the number, not less than one nor more than
15, fixed from time to time by a majority of the total number of Directors which
the Corporation would have, prior to any increase or decrease, if there were no
vacancies, provided, however, that no decrease shall
7
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<PAGE>
shorten the term of an incumbent director. Until otherwise fixed by the
Directors, the number of Directors constituting the entire Board shall be seven.
SECTION 3. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
stockholders, Directors shall be elected to hold office until the next annual
meeting of stockholders and until their successors have been elected and qualify
or until their respective deaths, resignations or removals in the manner
hereinafter provided.
SECTION 4. QUORUM OF DIRECTORS AND ACTION BY THE BOARD. A majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these By-laws, the vote of a
majority of the Directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
SECTION 5. MEETINGS OF THE BOARD. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
stockholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the Chairman of the Board, the Chief Executive Officer, the
President or any two Directors. Any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board or the committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consent
thereto by the members of the Board or committee shall be filed with the minutes
of the proceedings of the Board or committee.
Any and all members of the Board or of any committee of the Board may
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar
8
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communication equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
Meetings of the Board of Directors shall be held at such places as may
be fixed by the Board for annual and regular meetings and in the notice of
meeting for special meetings. If no place is so fixed, meetings of the Board
shall be held at the office of the Corporation.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, Eastern time, on the third day
prior to the meeting or by telegram, telephone facsimile, written message or
orally to the director not later than noon, Eastern time, on the day prior to
the meeting. Notices are deemed to have been given: by mail, when deposited in
the United States mail; by telegram or telecopier at the time of sending; and by
messenger at the time of delivery. Notices by mail, telegram or messenger shall
be sent to each director at the address designated by him for the purpose, or,
if none has been so designated, at his last known residence or business address.
Notice of a meeting of the Board of Directors need not to be given to
any director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any
meeting of the Board of Directors.
A majority of the Directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the Directors who were not present
9
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at the time of the adjournment and, unless such time and place are announced at
the meeting, to the other Directors.
SECTION 6. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors or to the Chairman
of the Board, the Chief Executive Officer, the President or to the Secretary of
the Corporation. Such resignation shall take effect at the time specified
therein; and unless otherwise specified therein the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 7. REMOVAL OF DIRECTORS. Any or all of the Directors may be
removed with or without cause by vote of the stockholders.
SECTION 8. NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly created
Directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reason except the removal
of Directors by stockholders may be filled by vote of a majority of the
Directors then in office, although less than a quorum exists. Vacancies
occurring as a result of the removal of Directors by stockholders shall be
filled by the stockholders. A director elected to fill a vacancy shall be
elected to hold office for the unexpired term of his predecessor.
SECTION 9. EXECUTIVE AND OTHER COMMITTEES OF DIRECTORS. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of one or more Directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
10
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(1) The submission to stockholders of any action that needs
stockholders' approval;
(2) The amendment of the Certificate of Incorporation;
(3) The filling of vacancies in the board or in any committee;
(4) The fixing of compensation of the Directors for serving on
the Board or on any committee;
(5) The amendment or repeal of the By-laws, or the adoption of
new By-laws;
(6) The amendment or repeal of any resolution of the Board which,
by its terms, shall not be so amendable or repealable;
(7) The removal or indemnification of Directors; or unless the
resolution, these By-laws or the Certificate of Incorporation otherwise
provide;
(8) The declaration of a dividend;
(9) The issuance of stock; or
(10) The adoption of a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law.
The Board of Directors may designate one or more Directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a
11
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quorum for the transaction of business, and the vote of a majority of the
members present at a meeting at the time of such vote, if a quorum is then
present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of
Directors.
SECTION 10. COMPENSATION OF DIRECTORS. The Board of Directors shall have
authority to fix the compensation of Directors for services in any capacity.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS; SECURITY. The Board of Directors, as soon as may be
practicable after the annual election of Directors, shall elect a Chairman of
the Board, one or more Vice Chairmen, a Chief Executive Officer, a President, a
Chief Operating Officer, a Chief Financial Officer, one or more Vice Presidents
(including an Executive Vice President, if the board so determines), a Treasurer
and a Secretary, and from time to time may elect or appoint such other officers
as it may determine. Any two or more offices may be held by the same person. The
Board of Directors may require any officer, agent or employee to give security
for the faithful performance of his duties.
SECTION 2. OTHER OFFICERS. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION 3. COMPENSATION. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
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SECTION 4. TERM OF OFFICE AND REMOVAL. Each officer shall hold office
for the term for which he is elected or appointed or until his earlier
resignation or removal. Unless otherwise provided in the resolution of the Board
of Directors electing or appointing an officer, his term of office shall extend
to and expire at the meeting of the Board following the next annual meeting of
stockholders. Any officer may be removed by the Board, with or without cause, at
any time. Removal of an officer without cause shall be without prejudice to this
contract rights, if any, and the election or appointment of an officer shall not
of itself create contract rights under these By-laws or otherwise.
SECTION 5. POWER AND DUTIES.
(a) Chairman of the Board: The Chairman of the Board shall
preside at all meetings of the Board of Directors and, in the absence of the
Chief Executive Officer, of the stockholders and shall have such powers and
duties as the Board of Directors or Chief Executive Officer assigns to him.
(b) Chief Executive Officer: The Chief Executive Officer of the
Corporation shall be responsible for the general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. He shall also preside at all
meetings of the stockholders.
He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation. The Chief Executive Officer shall
counsel freely with the President and shall exercise such other powers,
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shall perform such other duties and have such other responsibilities as may be
given from time to time by the Board of Directors or the By-laws of the
Corporation.
(c) President: The President shall have responsibility for
general operation of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors or Chief Executive Officer are
carried into effect. In the absence of the Chairman of the Board or a
Vice-Chairman or in the event of their inability or refusal to act, the
President shall perform the duties and exercise the powers of the Chairman of
the Board. The President shall perform such other duties and have such other
responsibilities as from time to time may be determined by the Board of
Directors.
(d) Chief Operating Officer: The Chief Operating Officer shall
have responsibility for overseeing the day to day operations of the Corporation
and such other responsibilities as the Chief Executive Officer or the President
may from time to time prescribe.
(e) Chief Financial Officer: The Chief Financial Officer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board, the Chief Executive Officer, the
President and the Board of Directors, at its
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regular meetings, or when the Board of Directors so requires, an account of all
his transactions as Chief Financial Officer and of the financial condition of
the Corporation.
If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
(f) Treasurer and Assistant Treasurer: The Treasurer shall have
such responsibilities as the Chief Financial Officer may from time to time
prescribe. The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or of
there be no such determination, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Chief Financial Officer may
from time to time prescribe.
(g) Vice-Presidents: The Vice-Presidents, in the order designated
by the Board of Directors, or in the absence of any designation, then in the
order of their election, during the absence or disability of or refusal to act
by the President, shall perform the duties and exercise the powers of the
President, and shall perform such other duties as the Board of Directors shall
prescribe.
(h) Secretary and Assistant Secretary: The Secretary shall attend
all meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of
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the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 6. BOOKS TO BE KEPT. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
stockholders, Board of Directors and any committees of Directors, and (c) a
current list of the Directors and officers and their residence addresses; and
the Corporation shall also keep at its office or at the office of its transfer
agent or registrar if any, a record containing the names and addresses of all
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stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
The Board of Directors may determine whether and to what extent and at
what times and places and under what conditions and regulations any accounts,
books, records or other documents of the Corporation shall be open to
inspection, and no creditor, security holder or other person shall have any
right to inspect any accounts, books, records or other documents of the
Corporation except as conferred by statute or as so authorized by the Board.
SECTION 7. CHECKS, NOTES, ETC. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, endorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
SECTION 1. FORMS OF SHARE CERTIFICATES. The shares of the Corporation
shall be represented by certificates, in such forms as the Board of Directors
may prescribe, signed by the Chairman of the Board, the Chief Executive Officer,
the President or a Vice-President and the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or
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registered by a registrar other than the Corporation or its employee. In case
any officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any stockholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one, authorized to be issued
and the designation, relative rights, preferences and limitations of each series
of any class of preferred shares authorized to be issued so far as the same have
been fixed, and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State
of Delaware;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the
series, if any, which such certificate represents.
SECTION 2. TRANSFERS OF SHARES. Shares of the Corporation shall be
transferable on the record of stockholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper endorsement on the certificate or on a
separate accompanying document, together with such
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evidence of the payment of transfer taxes and compliance with other provisions
of law as the Corporation or its transfer agent may require.
SECTION 3. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. No certificate
for shares of the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or wrongfully taken, except, if and to the
extent required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful
taking;
(2) Delivery of a bond indemnifying the Corporation and its
agents against any claim that may be made against it or them on account
of the alleged loss, destruction or wrongful taking of the replaced
certificate or the issuance of the new certificate;
(3) Payment of the expenses of the Corporation and its agents
incurred in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
OTHER MATTERS
SECTION 1. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be the
12 months ending December 31 or such other period as may be fixed by the Board
of Directors.
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SECTION 3. AMENDMENTS. By-laws of the Corporation may be adopted,
amended or repealed by vote of the holders of the shares at the time entitled to
vote in the election of any Directors. By-laws may also be adopted, amended or
repealed by the Board of Directors, but any By-law adopted by the Board may be
amended or repealed by the stockholders entitled to vote thereon as hereinabove
provided.
If any By-law regulating an impending election of Directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of stockholders for the election of Directors they
By-law so adopted, amended or repealed, together with a concise statement of the
changes made.
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EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
JUST TOYS, INC.
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Under Section 242 of the General Corporation Law of the State of
Delaware
FIRST: The name of the corporation is Just Toys, Inc. (the
"Corporation").
SECOND: The Certificate of Incorporation of the Corporation was
originally filed with the Department of State of the State of Delaware on August
3, 1992.
THIRD: The Certificate of Incorporation of the Corporation is hereby
amended, as authorized by Section 242 of the General Corporation Law, to
authorize an additional 1,000,000 shares of Preferred Stock, $1.00 par value per
share, which may be issued in one or more series.
FOURTH: To accomplish the foregoing amendment, Paragraph FOURTH of the
Corporation's Certificate of Incorporation which refers to the authorized
capital of the Corporation is hereby deleted and the following Paragraph FOURTH
is substituted in lieu thereof:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Seventeen Million
(17,000,000), consisting of Fifteen Million (15,000,000) shares of
Common Stock, $0.01 par value per share, and Two Million (2,000,000)
shares of Preferred Stock, $1.00 par value per share (the "Preferred
Stock").
The Preferred Stock may be issued, from time to time, in one or
more series, with such powers, designations, preferences and relative,
participating, optional or other rights, qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution
or resolutions providing for the issue of such series adopted by the
Board of Directors from time to time, pursuant to the authority herein
given, a copy of which resolution or resolutions shall have been set
forth in a certificate made, executed, acknowledged, filed and recorded
in the
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manner required by the laws of the State of Delaware in order to make
the same effective. Each series shall consist of such number of shares
as shall be stated and expressed in such resolution or resolutions
providing for the issuance of the stock of such series. All shares of
any one series of Preferred Stock shall be alike in every particular.
No holder of any of the shares of the stock of the Corporation,
whether now or hereafter authorized and issued, shall be entitled as of
right to purchase or subscribe for (1) any unissued stock of any class,
or (2) any additional shares of any class to be issued by reason of any
increase of the authorized capital stock of the Corporation of any
class, or (3) bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the Corporation, or carrying any
right to purchase stock of any class, but any such unissued stock or
such additional authorized issue of any stock or of other securities
convertible into stock, or carrying any right to purchase stock, may be
issued and disposed of pursuant to resolution of the Board of Directors
to such persons, firms, corporations or associations and upon such terms
as may be deemed advisable by the Board of Directors in the exercise of
its discretion."
FIFTH: The amendment of the Certificate of Incorporation of the
Corporation provided for herein was approved by a majority of the members of the
Board of Directors of the Corporation and later followed by the affirmative vote
of the holders of a majority of the outstanding shares entitled to vote thereon
at the annual meeting of the shareholders of the Corporation duly called and
held on the 19th day of August, 1996, a quorum being present.
IN WITNESS WHEREOF, I, Morton J. Levy, Chairman of the Board of the
Corporation, have signed this document on the date set forth below and do hereby
affirm, under the penalties of perjury, that the statements contained therein
have been examined by me and are true and correct.
Dated: November 7, 1996
/s/ Morton J. Levy
----------------------------------------
Morton J. Levy, Chairman of the Board
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EXHIBIT 10.3
JUST TOYS, INC.
AMENDED AND RESTATED
1992 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN
ARTICLE I
PURPOSE AND SCOPE OF THE PLAN
1.1 PURPOSE. This Stock Option Plan (the "Plan") is intended to
assist Just Toys, Inc. (the "Company") in attracting and maintaining a strong
management for the Company by encouraging ownership of common stock of the
Company by the Company's officers, directors, independent contractors and
employees. The Plan is also intended to enable the Company to reward the
efforts, abilities and industries of such officers, directors, independent
contractors and employees who render employment and other services which
contribute materially to the success of the Company's business.
1.2 DEFINITIONS. For purposes of the Plan, unless the context
otherwise indicates, the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Commission" means the Securities and Exchange Commission.
(d) "Committee" means the Stock Option Committee of the Company which
shall be composed of not less than two persons appointed by the Board of
Directors, each of whom shall be a "disinterested person" as that term is
defined in Rule 16b-3(c)(2)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934.
(e) "Director" means any person who is a member of the Board of
Directors whether or not such person is an Employee.
(f) "Employee" means and includes any person who is an employee of the
Company or any Subsidiary (including officers and directors who are also
employees).
(g) "Fair Market Value" of a Share means (i) if the Shares are quoted on
the Nasdaq National Market System or listed on a national securities exchange,
the closing price on such market or such exchange, (ii) if the Shares are not
quoted on the Nasdaq National Market System or listed on a national securities
exchange, the mean between the closing bid and asked prices of publicly-traded
Shares in the
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over-the-counter market as reported on the Nasdaq system or by any nationally
recognized quotation service selected by the Company, or (iii) if the Shares are
not then publicly-traded, as determined, in good faith, by the Committee.
(h) "Grant Date," as used with respect to a particular option, means the
date as of which such option is granted by the Committee pursuant to the Plan.
(i) "Grantee" means an individual or entity to whom an option is granted
by the Committee pursuant to the Plan.
(j) "Incentive Stock Option" and "ISO" means an option intended to
qualify under Section 422 of the Code.
(k) "Independent Contractor" means any third party retained or engaged
by the Company or any Subsidiary to provide services to the Company or such
Subsidiary, including any employee of such third party providing such services.
(l) "Non-Qualified Stock Option" or "NQO" means an option which does not
qualify as an ISO.
(m) "Option Agreement" means a written agreement between a Grantee and
the Company evidencing an option granted under the Plan, consistent with the
provisions of Article II of the Plan.
(n) "Service", as used herein, means the employment of an Employee by
the Company or any Subsidiary or the service of a Director as a director of the
Company, or the retention of an Independent Contractor (including the retention
of an Independent Contractor by whom a Grantee is employed) by the Company or
any Subsidiary.
(o) "Shares" or "Shares of Stock" means shares of common stock, $.01 par
value, of the Company. Shares may consist of authorized but unissued shares or
shares which have been previously issued and reacquired by the Company.
(p) "Subsidiary" of the Company, if any, means and includes a
"Subsidiary Corporation" as that term is defined in Section 424(f) of the Code.
1.3 ADMINISTRATION. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the Committee, in its
sole discretion, from time to time, shall determine the persons from among those
eligible under the Plan to whom, and the time or times at which, options shall
be granted, and the number of Shares to be subject to each option, whether an
option shall be designated an ISO or an NQO and the manner in, and the price at
which, such option may be exercised. In making such determinations the Committee
may take into account recommendations made by management, the nature and length
of Service rendered by the prospective Grantee, his or her level of
compensation, his or her past, present and potential contributions to the
Company and such other factors as the Committee shall in its discretion deem
relevant. Subject to the express provisions of the Plan and any consents
required by any applicable laws affecting the Plan and options, the Committee
shall have authority to interpret and construe the Plan, to prescribe, amend and
rescind rules and regulations related to it, to determine the terms and
provisions of the respective Option Agreements and to make all other
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determinations necessary or advisable for the administration of the Plan.
Nothing contained herein shall be deemed to prevent the Committee in the sound
exercise of business judgment, from canceling outstanding options and reissuing
new options at a lower exercise price in the event that the Fair Market Value
per share of Common Stock at any time prior to the date of exercise falls below
the exercise price of options granted pursuant to the Plan. Shares subject to
any such canceled options shall be immediately available for reissuance under
the Plan. The determinations of the Committee under the Plan shall be conclusive
and binding on all persons.
1.4 ELIGIBILITY FOR PARTICIPATION. Any Director, Employee or
Independent Contractor providing services to the Company or any Subsidiary or
any employee of any such Independent Contractor shall be eligible to receive
options granted under the Plan, except that (i) only Employees shall be eligible
to receive Incentive Stock Options and (ii) members of the Committee are not
eligible to receive options under the Plan during their term of service on the
Committee and for a period of one year thereafter except pursuant to Article V
of the Plan.
1.5 SHARES SUBJECT TO THE PLAN. Subject to adjustment as
hereinafter provided, no more than 1,000,000 Shares may be issued pursuant to
the exercise of options granted under the Plan. If any option shall expire,
terminate or be canceled for any reason without having been exercised in full,
the unpurchased Shares subject thereto shall again be available for the purposes
of the Plan.
1.6 DURATION OF THE PLAN. Unless previously terminated by the
Committee or the Board of Directors, the Plan will terminate on August 9, 2002.
Such termination will not terminate any option then outstanding.
ARTICLE II
TERMS AND CONDITIONS OF OPTIONS
2.1 OPTIONS AND OPTION AGREEMENTS. Each option granted under the
Plan shall be subject to all of the applicable terms and conditions of the Plan
and shall be evidenced by an Option Agreement. The Option Agreement shall
contain such terms and conditions not inconsistent with the Plan as the
Committee may deem appropriate, including, among other things, when and to what
extent the option is exercisable, the number of Shares that may be purchased
upon exercise of an option, the price at which each Share may be purchased
pursuant to the exercise of an option, the conditions to the exercise of any
option and the Grantee's obligation to remain in the continuous Service of the
Company. The provisions of Option Agreements need not be identical.
2.2 EXERCISABILITY AND TERM. (a) Except as otherwise provided
below, the Committee shall determine the term of each option and whether the
option shall be exercisable in full or in installments and, if in installments,
the number of installments. No option, however, may remain outstanding for more
than ten years after the Grant Date.
(b) Except as otherwise provided herein, an option granted under the
Plan may be exercised from time to time during its term for the full number of
Shares then purchasable upon exercise of the option or from time to time for any
part thereof.
(c) Except as otherwise provided below, options shall terminate
immediately upon the termination of the Service of the Grantee. Options granted
under the Plan shall not, however, be affected
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by any change of Service so long as the Grantee continues to be a Director,
Employee or Independent Contractor.
(d) If a Grantee dies while he or she is a Director, Employee or
Independent Contractor or within three months after the termination of such
option holder's Service by reason of retirement with the written consent of the
Company or a Subsidiary, such option may be exercised within one year (or such
other shorter period as determined by the Committee and specified in the Option
Agreement) from the date of such Grantee's death by his or her personal
representative or representatives, or by the person or persons to whom the
Grantee's rights under the option pass by will or by the applicable laws of
descent and distribution; provided, however, that an option may not be exercised
after its expiration and provided further that such option may only be exercised
for the number of Shares which could have been purchased by the Grantee on the
date of his or her death.
(e) If a Grantee voluntarily retires or quits his or her Service with
the written consent of the Company or a Subsidiary, or if the Service of the
Grantee is terminated by the Company or Subsidiary for reasons other than cause,
such Grantee may exercise his or her option at any time prior to the expiration
of the original option period as specified in the Option Agreement or the
expiration of three months (or such other period as determined by the Committee
and specified in the Option Agreement), whichever shall occur first; provided,
however, that no option may be exercised after its expiration and provided
further that the Grantee may only exercise his or her option for the number of
Shares which he or she could have purchased as of the date such Grantee retired
or quit his or her Service or the date the Service of such Grantee was
terminated.
(f) Notwithstanding Subsections (c), (d) and (e) above, the Committee
may in its sole discretion, with respect to any or all NQOs granted by it,
provide that in the event that the Service of a holder of an NQO shall terminate
for any reason, including without limitation death, disability, termination with
or without cause or retirement with or without the consent of the Company, the
NQOs held by such holder, to the extent of the number of Shares subject to such
NQO which were not purchasable by him or her on the date of termination of his
or her Service, shall forthwith terminate and that any NQOs exercisable on the
date of such termination shall remain exercisable until the expiration of such
NQO unless earlier terminated pursuant to the provisions of this Plan or of the
agreement pursuant to which the NQO is granted.
(g) Options may be terminated at any time by agreement between the
Company and the Grantee.
(h) Nothing herein contained shall impose upon the Company the
obligation to continue the Service of any Grantee. The rights of the Company to
terminate the Service of a Grantee shall not be diminished or affected by reason
of the granting of an Option.
(i) No Employee shall receive options for, in the aggregate, more than
250,000 shares during any calendar year.
2.3 OPTION PRICE. (a) Except as provided in subsection 2.3(c)
hereof, the option price per Share shall be determined by the Committee at the
time the option is granted, but shall not, in the case of ISOs, be less than
100% of the Fair Market Value of a Share on the Grant Date. In the case of NQOs,
the option price per Share may be less than, equal to or greater than the Fair
Market Value of
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a Share on the Grant Date. The Committee may modify the option price of
outstanding options or cancel such options and grant new options in lieu thereof
at a new option price, provided that, in the case of ISOs, the option price of
such modified or new option may not be less than 100% of the Fair Market Value
of a Share on the date of such action by the Committee.
(b) To the extent that the aggregate Fair Market Value (determined at
the time an ISO is granted) of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year under all
incentive stock option plans of the Company and its Subsidiaries exceeds
$100,000, such ISOs will be treated as NQOs. The foregoing rule shall be applied
by taking ISOs into account in the order in which they were granted. In the
event outstanding ISOs granted to an Employee become immediately exercisable
under Section 4.1(c) hereof, such ISOs will, to the extent the aggregate Fair
Market Value thereof exceeds $100,000, be treated as NQOs.
(c) An ISO may be granted to an Employee owning, or who is considered as
owning by applying the rules of ownership set forth in Section 424(d) of the
Code, over ten percent of the total combined voting power of all classes of
capital stock of the Company or any Subsidiary if the option price of such ISO
equals or exceeds 110% of the Fair Market Value of a Share subject to the ISO
and such ISO shall expire not more than five years from the date of grant.
2.4 NONTRANSFERABILITY. No option granted under the Plan shall be
transferable by the Grantee otherwise than by will or by the applicable laws of
descent and distribution and any option granted under the Plan shall be
exercisable during the lifetime of the Grantee solely by such Grantee.
2.5 METHOD OF EXERCISE. A Grantee electing to exercise an option
shall exercise such option by delivering to the Company written notice of such
election to exercise, specifying the number of Shares such Grantee has elected
to purchase, together with the option price for the Shares being purchased in
accordance with the terms of Section 2.6 below.
2.6 PAYMENT FOR SHARES. The option price shall become immediately
due and payable upon exercise of the option and payment thereof shall be made to
the Company as follows: (i) in cash (including check, bank draft or money
order), or (ii) at the discretion of the Committee, by delivering to the Company
Shares of Stock already owned by the Grantee and having a Fair Market Value on
the date of exercise equal to the option price or a combination of such Shares
and cash, or (iii) by any other proper method specifically approved by the
Committee.
ARTICLE III
LOANS AND FINANCIAL ACCOMMODATIONS TO GRANTEES
3.1 PURPOSE. In order to assist the Grantee with the acquisition
of Shares of Stock pursuant to the exercise of an option granted under the Plan,
including the payment of any taxes resulting from such exercise, the Committee
may, in its discretion, whenever, in the judgment of the Committee, such
assistance is permitted by applicable law and may reasonably be expected to
benefit the Company or a Subsidiary, authorize, either at the time of the grant
of the option or thereafter (a) the extension of a loan to the Grantee by the
Company, (b) the payment by the optionee of the purchase price of the Shares of
stock in installments, (c) the guarantee by the Company of a loan obtained by
the Grantee from
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a third party or (d) such other reasonable arrangements to facilitate the
exercise of options in accordance with applicable law.
3.2 TERMS OF LOAN OR GUARANTEE. The Committee or Board shall
determine the terms of any loan or guarantee made pursuant to this Article III,
including the interest rate and other terms of repayment thereof, and whether
such loan or guarantee shall be secured or unsecured. Each loan shall be
evidenced by a promissory note having a maximum term to maturity of not more
than sixty (60) months. The maximum amount of any loan or guarantee shall be the
option price for Shares purchased upon exercise of an option plus (a) related
interest and (b) the amount of tax liability incurred by the Grantee as a result
of the exercise of an option. In the case of ISOs, the interest rate on any loan
authorized by the Committee shall not be less than the higher of (i) the "prime"
rate as from time to time in effect of a commercial bank of recognized standing
or (ii) the rate of interest from time to time computed under Section 483 of the
Code.
3.3 USE OF LOANED OR GUARANTEED FUNDS. No amount actually
advanced as a loan to a Grantee and no amount the repayment of which is
guaranteed by the Company shall be used for any purpose other than payment of
(i) the purchase price of Shares acquired on the exercise of an option granted
or to be granted under the Plan and (ii) taxes attributable to such exercise.
ARTICLE IV
GENERAL PROVISIONS
4.1 ADJUSTMENTS. (a) New option rights may be substituted for the
options granted under the Plan, or the Company's duties as to options
outstanding under the Plan may be assumed, by a corporation other than the
Company, or by a parent or subsidiary of the Company or such corporation, in
connection with any merger, consolidation, acquisition, separation,
reorganization, liquidation or like occurrence in which the Company is involved.
Notwithstanding the foregoing or the provisions of Sections 4.1(b) and (c)
hereof, in the event such corporation, or parent or subsidiary of the Company or
such corporation, does not substitute new option rights for and substantially
equivalent to, the options granted hereunder, or assume the options granted
hereunder, the options granted hereunder shall terminate and thereupon become
null and void (i) upon dissolution or liquidation of the Company, or similar
occurrence, (ii) upon any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be a surviving
entity or (iii) upon a transfer of substantially all of the assets of the
Company or more than 80% of the outstanding Shares in a single transaction;
provided, however, that each Grantee shall have the right immediately prior to
or concurrently with such dissolution, liquidation, merger, consolidation,
acquisition, separation, reorganization or similar occurrence, to exercise any
unexpired option granted hereunder whether or not then exercisable.
(b) The existence of outstanding options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of Common Stock or subscription rights thereto, or
any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Shares
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
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(c) In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which options may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding options and (iii) the grant or exercise price with
respect to any option or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding option; provided, in each case, that
with respect to Incentive Stock Options no such adjustment shall be authorized
to the extent that such authority would cause the Plan to violate Section
422(b)(1) of the Code. Without limiting the generality of the foregoing, any
such adjustment shall be deemed to have prevented any dilution and enlargement
of a Grantee's rights if such Grantee receives in any such adjustment rights
which are substantially similar (after taking into account the fact that the
Grantee has not paid the applicable exercise price) to the rights the Grantee
would have received had he exercised his outstanding options and become a
shareholder of the Company immediately prior to the event giving rise to such
adjustment.
(d) Adjustments and elections under this Section 4.1 shall be made by
the Committee whose determination as to what adjustments, if any, shall be made
and the extent thereof shall be final, binding and conclusive.
4.2 PRIVILEGES OF STOCK OWNERSHIP. No Grantee shall be entitled
to the privileges of stock ownership as to any Shares of Stock not actually
issued and delivered to him or her.
4.3 SECURITIES REGULATIONS. (a) Each option shall be subject to
the requirement that if at any time the Board shall in its discretion determine
that the listing, registration or qualification of the Shares subject to such
option upon any securities exchange or under any federal or state law, or the
approval or consent of any governmental regulatory body, is necessary or
desirable in connection with the issuance or purchase of Shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, approval or consent shall have been effected or
obtained free from any conditions not reasonably acceptable to the Board.
(b) Unless at the time of the exercise of an option and the issuance of
the Shares purchased by a Grantee pursuant thereto there shall be in effect as
to such Shares a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations of the Commission, the
Grantee exercising such option shall deliver to the Company at the time of
exercise, a certificate in a form reasonably satisfactory to the Company and/or
counsel to the Company (i) acknowledging that the Shares so acquired may be
"restricted securities" within the meaning of Rule 144 promulgated under the
Act; (ii) certifying that he or she is acquiring the Shares issuable to him or
her upon such exercise for the purpose of investment and not with a view to
their sale or distribution; and (iii) containing such Grantee's agreement that
such Shares may not be sold or otherwise disposed of except in accordance with
applicable provisions of the Act. The Company shall not be required to issue or
deliver certificates for
-7-
<PAGE>
<PAGE>
Shares until there shall have been compliance with all applicable laws, rules
and regulations, including rules and regulations of the Commission.
4.4 SUSPENSION, AMENDMENT AND TERMINATION OF THE PLAN. The
Committee may at any time suspend, amend or terminate the Plan, provided that
the approval of the Board of Directors of the Company will be required for any
amendment which will:
(a) increase the maximum number of Shares which may be issued
pursuant the exercise of options granted under the Plan; or
(b) change the provisions of Section 1.4; or
(c) permit the grant of any ISO under the Plan with an option price
less than 100% of the Fair Market Value of the Shares at the time
such ISO is granted; or
(d) extend the term of options or the period during which options may
be granted under the Plan; or
(e) materially increase the benefits provided under the Plan to the
extent that stockholder approval would then be required pursuant
to Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The power of the Committee to amend the Plan under this Section 4.4 is
subject in certain instances to the requirements of the Exchange Act and other
provisions of applicable law which may require stockholder approval of such
amendments in order to achieve the Company's objectives and the purposes of the
Plan.
Unless the Plan shall theretofore have been terminated by the Committee
or the Board of Directors, the Plan shall terminate August 9, 2002. No option
may be granted during the term of any suspension of the Plan or after
termination of the Plan. The amendment or termination of the Plan shall not,
without the written consent of the Grantee, alter or impair any rights or
obligations of such Grantee under any option theretofore granted under the Plan.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
4.5 EFFECTIVE DATE. The effective date of the Plan shall be
August 10, 1992, subject to the approval by the holders of a majority of the
Company's outstanding stock within one year of such effective date.
Notwithstanding anything in the Plan to the contrary, if the Plan shall have
been approved by the Board prior to such stockholder approval, options may be
granted by the Committee as provided herein subject to such subsequent
stockholder approval.
-8-
<PAGE>
<PAGE>
ARTICLE V
NON-EMPLOYEE DIRECTORS
5.1 GRANT OF OPTIONS. Each Non-Employee Director shall be
entitled to receive, on the date such Non-Employee Director is first elected as
a Director of the Company and on each anniversary thereof (each, an "Award
Date"), Non-Qualified Stock Options to purchase 5,000 Shares. The purchase price
per share of Common Stock under each option shall be one hundred percent (100%)
of the Fair Market Value of the Common Stock on the applicable Award Date. Such
options shall become exercisable as to 20% of the Shares covered thereby one
year after the Award Date and as to an additional 20% of the Shares covered
thereby on each of the four succeeding anniversaries of the Award Date on which
such Non-Employee Director is then a Non-Employee Director and has served
continuously as such since the Award Date. Each option granted under the plan to
Non-Employee Directors shall constitute a Non-Qualified Stock Option. All
instruments evidencing options granted to Non-Employee Directors under the Plan
shall be in such form as shall be consistent with the Plan. For purposes of the
Plan, the term "Non-Employee Director" shall mean any Director of the Company
who is not an Employee and who is not on the Award Date providing, and has not
at any time within six months prior thereto provided, legal or consulting
services to the Company.
5.2 AMENDMENT OF THIS ARTICLE. The provisions of this Article V
shall not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the Rules
under either of them.
-9-
<PAGE>
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