<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Just Toys, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
JUST TOYS, INC.
50 WEST 23RD STREET
NEW YORK, NEW YORK 10010
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To the Stockholders of
Just Toys, Inc.
Please take notice that the 1997 Annual Meeting of Stockholders of Just
Toys, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
June 3, 1997 at 10:00 A.M. at the Company's showroom at 200 Fifth Avenue,
Suite 1250, New York, New York for the following purposes:
1. to elect a board of seven directors;
2. to approve the issuance of two options, each for the purchase of up to
50,000 shares of the Company's common stock, to Morton J. Levy, the
Company's Chairman of the Board and Chief Executive Officer;
3. to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the 1997 fiscal year; and
4. to transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 30, 1997 as
the record date for the purpose of determining stockholders entitled to notice
of, and to vote at, the meeting.
YOU ARE EARNESTLY REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors
Seymour Rosenthal
Secretary
New York, New York
May 2, 1997
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
JUST TOYS, INC.
----------------
PROXY STATEMENT
----------------
The proxy accompanying this proxy statement is solicited by the Board of
Directors of Just Toys, Inc., a Delaware corporation (the "Company"), for use
at the 1997 Annual Meeting of Stockholders to be held on Tuesday, June 3, 1997
at 10:00 A.M. at the Company's showroom at 200 Fifth Avenue, Suite 1250, New
York, New York, and at any adjournment or adjournments thereof.
All proxies in the accompanying form which are properly executed and duly
returned will be voted in accordance with the instructions specified therein.
If no instructions are given, the shares represented by the proxies will be
voted in accordance with the recommendations of the Board of Directors as
indicated in this proxy statement and in the discretion of the proxy holders
on any other matters that may properly come before the meeting. A proxy may be
revoked at any time prior to its exercise by written notice to the Company, by
submission of another proxy bearing a later date or by voting in person at the
meeting. Such revocation will not affect a vote on any matters taken prior
thereto. The mere presence at the meeting of the person appointing a proxy
will not revoke the appointment.
The approximate date of mailing of this proxy statement and the accompanying
proxy to stockholders is May 2, 1997. The Company's principal executive
offices are located at 50 West 23rd Street, New York, New York 10010.
VOTING SECURITIES--RECORD DATE
Only holders of the Company's common stock, $.01 par value per share (the
"Common Stock"), of record at the close of business on April 30, 1997 (the
"Record Date") will be entitled to notice of and to vote at the meeting or at
any adjournment or adjournments thereof. On that date, 4,150,000 shares of
Common Stock were issued and outstanding.
Each share of Common Stock entitles the holder thereof to one vote with
respect to each proposal properly brought before the meeting for consideration
by stockholders. The holders of a majority of the outstanding shares of Common
Stock entitled to vote must be present at the meeting in person or by proxy to
constitute a quorum.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information at April 30, 1997, as to
shares of Common Stock beneficially owned by (i) each person known by the
Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) the Company's directors, the Chief Executive
Officer and the other three executive officers identified in the Summary
Compensation Table below that continue to be employed by the Company and (iii)
the directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
------------------- ----------------------- ------------
<S> <C> <C>
Roger Gimbel.............................. 726,888(2) 17.5%
4 West 33rd Street
New York, New York 10001
RGA Accessories, Inc. .................... 630,000 15.2%
4 West 33rd Street
New York, New York 10001
Morton J. Levy............................ 268,395(3) 6.3%
50 West 23rd Street
New York, New York 10010
FMR Corp. ................................ 253,900(4) 6.1%
82 Devonshire Street
Boston, Massachusetts 02109
Kennedy Capital Management, Inc. ......... 219,680(5) 5.3%
10829 Olive Blvd.
St. Louis, Missouri 63141
Howard Kaufman............................ 98,888(6) 2.4%
Bishops Estate
Lenox, Massachusetts 01290
Barry Shapiro............................. 49,866(7) 1.2%
50 West 23rd Street
New York, New York 10010
Donald D. Shack........................... 34,000(8) Less than 1%
530 Fifth Avenue
New York, New York 10036
Irwin Naitove............................. 3,000(9) Less than 1%
RR1
Box 630
Mount Holly, Vermont 05758
Robert Pagano............................. 2,000(10) Less than 1%
50 West 23rd Street
New York, New York 10010
Charmaine Jefferson....................... 1,000(11) Less than 1%
2003 Victoria Avenue
Los Angeles, California 90016
All directors and executive officers as
a group (twelve persons)................. 1,209,563(12) 27.7%
</TABLE>
- --------
(1) Except as otherwise indicated in the following footnotes, the persons
listed in the table own of record the shares of Common Stock opposite
their name and have sole voting and investment power with respect to such
shares of Common Stock.
2
<PAGE>
(2) Includes 630,000 shares of Common Stock owned by RGA Accessories, Inc. of
which Roger Gimbel is the controlling stockholder, President and Chief
Executive Officer, and 8,000 shares issuable upon exercise of currently
exercisable stock options granted under the Company's 1992 Incentive and
Non-Qualified Stock Option Plan (the "Plan").
(3) Includes 1,500 shares owned by Mr. Levy as custodian for his grandson
under the Uniform Gifts to Minors Act and 70,000 shares issuable upon
exercise of currently exercisable stock options granted under the Plan
and 50,000 shares issuable upon exercise of a separate currently
exercisable stock option.
(4) Based upon information set forth in Schedule 13G filed by FMR Corp. with
the Securities and Exchange Commission on or about February 14, 1997. The
ownership of Fidelity Advisor Strategic Opportunities Fund ("Fidelity
Advisor") amounted to 253,900 shares or 6.1% of the Common Stock
outstanding at December 31, 1996. Fidelity Management and Research
Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., is the
beneficial owner of such shares as a result of acting as investment
adviser to Fidelity Advisor. Mr. Edward C. Johnson 3d, FMR Corp., through
its control of Fidelity, and Fidelity Advisor, each have sole power to
dispose of such shares.
(5) Based upon information set forth in Schedule 13G filed by Kennedy Capital
Management, Inc. ("Kennedy") with the Securities and Exchange Commission
on or about February 10, 1997, Kennedy is the beneficial owner of 219,680
shares or 5.3% of the Common Stock outstanding at December 31, 1996 as a
result of acting as an investment advisor. Kennedy has sole power to
dispose of such shares.
(6) Includes 10,000 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(7) Includes 23,200 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(8) Includes 34,000 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(9) Includes 3,000 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(10) Includes 2,000 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(11) Includes 1,000 shares issuable upon exercise of currently exercisable
stock options granted under the Plan.
(12) Includes 204,400 shares issuable upon exercise of currently exercisable
stock options and 13,799 shares issuable upon exercise of a currently
exercisable warrant issued in connection with the acquisition by the
Company of certain assets of Table Toys, Inc. (the "Table Toys
Acquisition"). Also includes 1,027 shares issuable upon conversion of
1,027 shares of the Company's Series B Convertible Redeemable Preferred
Stock owned by Scott Buske, the Company's Vice President of Domestic
Manufacturing Operations and/or his spouse which were issued in
connection with the Table Toys Acquisition.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
At the 1997 Annual Meeting of Stockholders, seven directors, constituting
the entire Board of Directors, are to be nominated for election, to serve
until the 1998 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualify. Unless a proxy shall specify that it
is not to be voted for the directors, it is intended that the shares of Common
Stock represented by each duly executed and returned proxy will be voted FOR
the election as directors of the persons named below.
Each of the persons named below as a nominee for director is currently a
director of the Company and their respective stock ownership is set forth
above under "Security Ownership of Certain Beneficial Owners and Management."
If any nominee is not a candidate for election at the meeting, an event
which the Board of Directors does not anticipate, the proxies will be voted
for a substitute nominee and for the others named below.
The Company's By-Laws provide that directors be elected by a plurality of
the votes cast at the meeting by the holders of the outstanding shares of
Common Stock entitled to notice of, and to vote in, the election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<S> <C> <C> <C>
Roger Gimbel............ 66 Vice Chairman of the Board of Directors; Chief 1992
Executive Officer and President of RGA
Accessories, Inc.
Charmaine Jefferson..... 43 Director of the Company; Vice President of 1995
Business Affairs of de Passe Entertainment;
President of Kelan Resources
Howard Kaufman.......... 70 Director of the Company; private investor 1992
Morton J. Levy.......... 75 Chairman of the Board of Directors and Chief 1992
Executive Officer of the Company
Irwin Naitove........... 79 Director of the Company; private investor 1995
Donald D. Shack......... 68 Director of the Company; member of the law firm 1992
of Shack & Siegel, P.C.
Barry Shapiro........... 55 Director, President and Chief Operating Officer 1995
of the Company
</TABLE>
4
<PAGE>
ROGER GIMBEL was appointed Vice Chairman of the Board of Directors, Chief
Financial Officer and Vice President of the Company in August 1992. Due to
health reasons, Mr. Gimbel resigned as Chief Financial Officer and Vice
President of the Company in April 1995. Mr. Gimbel was one of the founders of
the Company, and, since the commencement of operations, he and RGA
Accessories, Inc. ("RGA"), one of the partners of the joint venture that was
the predecessor to the Company, have provided administrative services to the
Company. See "Certain Relationships and Related Transactions." Mr. Gimbel is
the Chief Executive Officer and President of RGA, which in addition to
providing services to the Company, is an importer and distributor of personal
accessories, small leather goods and related items.
CHARMAINE JEFFERSON was appointed a director of the Company in July 1995.
Ms. Jefferson is an attorney and is currently employed as Vice President of
Business Affairs for de Passe Entertainment, Inc. which is engaged in the
development and production of television programming and feature films and
talent management and as President of Kelan Resources, a non-profit arts
management consulting firm. From June 1995 to April 1996, Ms. Jefferson was
self-employed as a consultant providing management advice to not-for-profit
corporations. From August 1992 to June 1995, Ms. Jefferson was employed as the
Executive Director of the Dance Theatre of Harlem, Inc. From 1988 through
August 1992, Ms. Jefferson was Deputy and Acting Commissioner for the New York
City Department of Cultural Affairs.
HOWARD KAUFMAN was appointed a director of the Company in October 1992. Mr.
Kaufman has been engaged in the toy business for approximately 34 years,
having been a founder and principal officer of KayBee Stores, a division of
the Melville Corporation. For more than the past five years, Mr. Kaufman has
been a private investor. Mr. Kaufman is also a director of Berkshire Life
Insurance Company.
MORTON J. LEVY was appointed Chairman of the Board and Chief Executive
Officer of the Company in March 1995. Effective July 1, 1997, Mr. Levy will
remain as Chairman of the Board and Mr. Shapiro will become the Chief
Executive Officer. Mr. Levy is a director and officer of each of the Company's
subsidiaries. He was appointed a director of the Company in October 1992 and
became a consultant to the Company in 1994 until being hired as Chief
Executive Officer in March 1995. Mr. Levy has been engaged in the toy business
for over 35 years, having been a founder and principal officer of Gabriel
Industries, Inc., a diversified toy manufacturer. For more than five years
prior to his engagement as a consultant to the Company, Mr. Levy was a private
investor.
IRWIN NAITOVE was appointed a director of the Company in May 1995. Mr.
Naitove has been in corporate finance for the past 45 years. For more than the
past five years, Mr. Naitove has been a private investor.
DONALD D. SHACK was appointed a director of the Company in August 1992. Mr.
Shack is an attorney and, since April 1993, has been a member of the law firm
of Shack & Siegel, P.C., general counsel to the Company. From January 1990
through March 1993, Mr. Shack was a member of the law firm of Whitman & Ransom
which served as general counsel to the Company during that period. Mr. Shack
is also a director of the following publicly-held companies: Andover Togs,
Inc., Ark Restaurants Corp. and International Citrus Corporation.
BARRY SHAPIRO was appointed President and Chief Operating Officer of the
Company in March 1995. Effective July 1, 1997, Mr. Shapiro will become the
Chief Executive Officer of the Company. Mr. Shapiro is Chairman of the
Company's Hong Kong subsidiaries and a director and officer of each of the
Company's subsidiaries. He was appointed a director of the Company in April
1995. Mr. Shapiro has been engaged in the toy business for almost 30 years. In
November 1994, Mr. Shapiro was appointed Executive Vice President of the
Company. From December 1993 until November 1994, he served as Managing
Director for the Company's Hong Kong subsidiaries, Joyful World Enterprises,
Ltd. and Just Toys Products, Ltd. From October 1991 to November 1993, he was
the President of Packaging Specialists, a manufacturer and distributor of
protective packaging. From January 1984 to June 1991, Mr. Shapiro was
Executive Vice President and General Manager of Imagineering, Inc.
5
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During the Company's 1996 fiscal year, the Board of Directors held three
meetings and took action 10 times by unanimous written consent. During the
Company's past fiscal year, each member of the Board attended at least 75% of
the meetings of the Board and Board Committees on which he or she served.
The Compensation Committee, comprised of Messrs. Gimbel and Naitove and Ms.
Jefferson, which makes determinations pertaining to the compensation of the
Company's executive officers, held one meeting and took action by unanimous
written consent one time during the past fiscal year. The Stock Option
Committee, consisting of Howard Kaufman and Irwin Naitove, makes
determinations pertaining to the grant of options under the Company's 1992
Incentive and Non-Qualified Stock Option Plan. During the Company's past
fiscal year, the Stock Option Committee held one meeting and took action by
unanimous written consent six times.
The Board of Directors' Audit Committee, comprised of Messrs. Kaufman and
Shack and Ms. Jefferson, reviews the performance of the Company's independent
auditors, their fees and services and the scope of their audit. The selection
of the independent auditors, however, is made by the Board as a whole. The
Audit Committee held one meeting during the past fiscal year. The Board of
Directors does not maintain a standing nominating committee, the customary
functions of such committee being performed by the entire Board of Directors.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Executive officers serve
at the pleasure of the Board of Directors.
Directors who are not officers of the Company receive a $10,000 annual
retainer, plus reimbursement of reasonable out-of-pocket expenses. Pursuant to
the Company's 1992 Incentive and Non-Qualified Stock Option Plan, each
director who is not an officer of the Company and who does not provide legal
or consulting services to the Company is entitled to receive, on the
commencement of service as a director and on each anniversary thereof on which
such director remains a director of the Company, options to purchase 5,000
shares of Common Stock at an exercise price equal to the fair market value of
such shares on the date of grant. Directors who are also officers of the
Company do not receive any compensation for services rendered in their
capacity as directors.
6
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages as of April 30, 1997 of
executive officers of the Company and all offices held by each person.
<TABLE>
<CAPTION>
OFFICER
NAME AGE TITLE SINCE
---- --- ----- -------
<S> <C> <C> <C>
Morton J. Levy.......... 75 Chairman of the Board of Directors and Chief 1995
Executive Officer
Barry Shapiro........... 55 President, Chief Operating Officer and Director 1995
of the Company
David Schwartz.......... 37 Chief Financial Officer and Treasurer 1996
Seymour Rosenthal....... 66 Secretary 1996
Robert Pagano........... 42 Vice President--Marketing and Product Planning 1996
Vice President--Domestic Manufacturing
Scott Buske............. 47 Operations 1996
Larry Scott............. 47 Vice President of Sales 1997
</TABLE>
See "Election of Directors" above for a description of Messrs. Levy's and
Shapiro's occupations and prior engagements.
DAVID SCHWARTZ was appointed Chief Financial Officer and Treasurer of the
Company in November 1996. Mr. Schwartz is an officer of each of the Company's
United States subsidiaries. From January 1996 through November 1996, Mr.
Schwartz was self-employed as a consultant to a number of companies in the
consumer products business. From May 1994 through December 1995, he was the
Chief Financial Officer of Philips Industries, Inc., a distributor of women's
hair and cosmetic accessories. From December 1990 through May 1994, Mr.
Schwartz was the Controller of Ameriscribe Management Services, Inc., a
provider of facilities management services.
SEYMOUR ROSENTHAL was appointed Secretary of the Company in November 1996.
Mr. Rosenthal has been the Director of Internal Operations for the Company
since September 1995. From 1993 through 1995, he was a consultant working with
various financial institutions in the workout of bankrupt organizations.
During 1992, Mr. Rosenthal was the Manager of Operations of Sunweave Linens, a
manufacturer and distributor of linens.
ROBERT PAGANO returned to the Company in December 1995 and was appointed
Vice President--Marketing and Product Planning of the Company in February
1996. From May 1994 through December 1995, Mr. Pagano was the Vice President
for Research and Development at Toy Biz, Inc. Prior to that time, starting in
November 1991 through May 1994, Mr. Pagano was Vice President--Marketing of
the Joint Venture and then of the Company.
SCOTT BUSKE was appointed Vice President of Domestic Manufacturing
Operations in February 1996. Mr. Buske, for more than the past five years, was
Chairman of the Board, President and Chief Executive Officer of Table Toys,
Inc. In February 1996, immediately following Mr. Buske's employment by the
Company, Table Toys, Inc. filed a petition under Chapter 11 of the federal
bankruptcy laws.
LARRY SCOTT was appointed Vice President of Sales of the Company in February
1997. From 1994 through 1996, Mr. Scott was the Vice President--Seasonal
Product and Regional Sales Manager of Trendmasters, Inc., a manufacturer and
distributor of toys. Prior to that time, starting in 1990, he was the Vice
President of International Sales of Collegeville Imagineering, Inc.
7
<PAGE>
PROPOSAL 2: AUTHORIZATION OF STOCK OPTIONS
Morton J. Levy was appointed as a director of the Company in October 1992
and has served as the Company's Chairman of the Board and Chief Executive
Officer since March 1995. In accordance with Mr. Levy's desire to step down as
the Company's Chief Executive Officer, the Company has entered into an
agreement with Mr. Levy which provides for a transition period for his
successor and for Mr. Levy to be available to the Company in the future for
advice and assistance. In recognition of Mr. Levy's contributions to the
Company, the agreement provides for the issuance to Mr. Levy of two options,
each for the purchase of up to 50,000 shares of Common Stock. The complete
terms of the agreement with Mr. Levy are described under "Executive
Compensation--Compensation Arrangements" below. The Company's Board of
Directors has designated Barry Shapiro, currently the Company's President and
Chief Operating Officer, to succeed Mr. Levy as Chief Executive Officer.
In accordance with the agreement, on December 5, 1996, the Company's Stock
Option Committee granted Mr. Levy an option to purchase up to 50,000 shares of
Common Stock (the "December 5th Option") and Mr. Levy will be granted an
additional option to purchase up to 50,000 shares of Common Stock on June 30,
1997 (the "June 30th Option"). Neither of such options is governed by the
Company's 1992 Incentive and Non-Qualified Stock Option Plan. The December 5th
Option and the June 30th Option are together hereinafter referred to as the
"Options."
TERMS OF THE OPTIONS
The exercise price of each Option is the closing price of the Common Stock
on the Nasdaq National Market on the date of grant. Accordingly, the exercise
price of the December 5th Option is $1.50 per share and the exercise price of
the June 30th Option will be determined on June 30, 1997. The options are
fully vested and exercisable on their respective grant date and expire ten
years thereafter.
The number of shares subject to the Options, the exercise price and other
terms and conditions of the Options may be equitably adjusted by the Company's
Stock Option Committee in the event of changes in the Company's capital
structure resulting from certain corporate transactions, including stock
dividends, stock splits or a spin-off, reorganization, repurchase, combination
or reclassification of shares, a merger or consolidation, change of control or
similar events. In addition, if the Company is involved in a merger,
consolidation, dissolution or liquidation, the Options will be adjusted,
assumed, or, under certain conditions, will terminate, subject to the right of
Mr. Levy to exercise the Options or comparable Options substituted at the
discretion of the Company prior to such event. The Options are exercisable by
Mr. Levy or his beneficiary notwithstanding the cessation of Mr. Levy's
services to the Company.
In connection with the acquisition of shares of Common Stock pursuant to the
exercise of the Options, the Company's Stock Option Committee may authorize
(i) the extension of a loan by the Company, (ii) the payment of the purchase
price of the Common Stock in installments, (iii) the guarantee by the Company
of a loan obtained from a third party or (iv) such other reasonable
arrangements to facilitate the exercise of the Options in accordance with
applicable law. The last reported sale price of the Common Stock on the Nasdaq
National Market on April 30, 1997 was $1.3125.
Pursuant to the Nasdaq National Market-Issuer Designation Requirements, the
issuance of an option to an officer or director of the Company must be
approved at a meeting of Stockholders by the vote of a majority of the total
votes cast at the meeting with respect to such approval. If the Stockholders
shall fail to approve the Options at the 1997 Annual Meeting of Stockholders,
the Company will negotiate alternative arrangements with Mr. Levy.
FEDERAL INCOME TAX CONSEQUENCES OF NON-QUALIFIED STOCK OPTIONS
The Options are non-qualified stock options for tax purposes. Mr. Levy will
not realize any income for Federal income tax purposes on the grant of the
Options. He will realize ordinary income for Federal income tax
8
<PAGE>
purposes on the exercise of an Option in an amount equal to the excess, if
any, of the fair market value of the shares of Common Stock on the date of
exercise over the exercise price thereof. The amount realized for tax purposes
by Mr. Levy by reason of the exercise of an Option is subject to withholding
by the Company and the Company is entitled to a deduction in an amount equal
to the income so realized by Mr. Levy.
Provided that Mr. Levy satisfies certain holding period requirements
provided by the Code, he will realize a long-term capital gain or loss, as the
case may be, if the shares issued upon exercise of the Options are disposed of
more than one year after the shares are transferred to him. The amount
recognized upon such disposition will be the difference between Mr. Levy's
basis in such shares and the amount realized upon such disposition. Mr. Levy's
basis in the shares will be equal to the exercise price plus the amount of
income recognized upon exercise of the Option.
REQUIRED VOTE
The affirmative vote of a majority of the total votes cast at the meeting is
required to approve the grant of the Options.
The following resolution will be submitted to the Stockholders for approval
at the 1997 Annual Meeting of Stockholders:
Resolved, that the Common Stock purchase option granted by the Company to
Morton J. Levy on December 5, 1996, and the Common Stock purchase option to
be granted by the Company to Morton J. Levy on July 1, 1997, each as
described in the Company's Proxy Statement dated May 2, 1997, are hereby
approved and ratified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
9
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth certain information
concerning compensation paid or accrued in 1996 to the Chief Executive Officer
of the Company and the three executive officers whose total salary and bonus
in 1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
NAME AND PRINCIPAL --------------------- OPTIONS ALL OTHER
POSITION YEAR SALARY($) BONUS($)(1) AWARDED(#) COMPENSATION($)
------------------ ---- -------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Morton J. Levy(2)....... 1996 229,327 9,300 50,000 --
Chairman of the Board 1995 166,833 -- 85,000 --
and Chief Executive
Officer
Barry Shapiro(3)........ 1996 217,778 7,750 30,000 --
President and Chief
Operating Officer 1995 185,000 -- 39,000 45,801(4)
Michael Vastola (5)..... 1996 143,238 -- -- 37,500(6)
Vice President--Finance 1995 121,446 -- 40,000 --
and Chief Financial
Officer
Robert Pagano(7)........ 1996 142,850 2,000 20,000 --
Vice President--
Marketing and Product
Planning
</TABLE>
- --------
(1) Represents bonuses to be paid in 1997 relating to the 1996 fiscal year.
(2) Mr. Levy was appointed as Chief Executive Officer of the Company in 1995.
(3) Mr. Shapiro was appointed as an executive officer of the Company at the
end of 1994.
(4) Includes a $35,470 housing allowance paid to Mr. Shapiro while he served
as Managing Director of the Company's Hong Kong subsidiaries.
(5) Mr. Vastola was appointed as an executive officer of the Company in 1995.
As of November 15, 1996, he is no longer employed by the Company.
(6) Represents amounts paid to Mr. Vastola at the time he left the Company's
employment.
(7) Mr. Pagano was appointed as an executive officer of the Company in 1996.
10
<PAGE>
The following table sets forth certain information with respect to options
to purchase Common Stock granted in fiscal year 1996 under the Company's 1992
Incentive and Non-Qualified Stock Option Plan for the executive officers named
in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------------------------------------------- --------------
PERCENT OF TOTAL
OPTIONS GRANTED EXERCISE
TO EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS GRANTED (#) 1996 ($/SHARE) DATE 5%($) 10% ($)
---- ------------------ ---------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Morton J. Levy.......... 50,000 22.6% 1.500 12/04/06 47,167 119,531
Barry Shapiro........... 30,000 13.6% 1.500 12/04/06 28,300 71,718
Robert Pagano........... 10,000 4.5% 3.625 02/21/06 -- 7,519
10,000 4.5% 1.500 12/04/06 9,433 23,906
</TABLE>
The following table details the value on December 31, 1996 of options to
purchase Common Stock held by the executive officers named in the Summary
Compensation Table above.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
------------------------------------- ------------------------------
NAME EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
---- ---------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Morton J. Levy.......... 120,000 40,000 -- --
Barry Shapiro........... 18,200 76,800 -- --
Robert Pagano........... -- 20,000 -- --
Michael Vastola......... 8,000 -- -- --
</TABLE>
- --------
(1) Based on closing price of the Common Stock on the Nasdaq National Market
on December 31, 1996 of $1.3125 per share.
COMPENSATION ARRANGEMENTS
The Compensation Committee has established a company wide bonus pool to
enable employees of the Company to participate in the Company's profits in
1996 and 1997. The pool consists of 20% of the first $1,000,000 of pre-tax
earnings, 15% of the next $1,000,000 of pre-tax earnings and 10% of all pre-
tax earnings over $2,000,000 for each year. In respect of 1996, Mr. Levy and
Mr. Shapiro are entitled to receive 30% and 25% respectively, of the pool and
the remaining 45% of the pool is distributed to the employees of the Company,
subject to the discretion of Messrs. Levy and Shapiro.
In December 1996, Mr. Levy entered into an agreement with the Company which
provides for Mr. Levy to (i) relinquish the post of Chief Executive Officer of
the Company on July 1, 1997, (ii) render consulting services to the Company
thereafter and (iii) remain as Chairman of the Board. Until June 30, 1997, Mr.
Levy will receive a base salary at the rate of $225,000 per annum. Mr. Levy
will receive one-half of the amount he would otherwise have been entitled to
under the 1997 bonus pool as if he were employed by the Company for all of
1997. The Company will pay Mr. Levy at the rate of $100,000 per annum during
the period from July 1, 1997 through December 31, 1997; $75,000 per annum
during the period from January 1, 1998 through December 31, 1998; and $50,000
per annum during the period from January 1, 1999 through December 31, 1999.
Such payments
11
<PAGE>
will be made to Mr. Levy's beneficiary in the event of his death. Through
December 31, 1999, the Company will provide Mr. Levy with the use of an office,
telephone and secretarial services. In addition, on December 5, 1996, the
Company granted Mr. Levy a fully vested and exercisable ten year option to
purchase up to 50,000 shares of Common Stock at an exercise price of $1.50 per
share. The Company has agreed to grant to Mr. Levy an additional fully vested
and exercisable ten year option to purchase up to 50,000 shares of the Common
Stock on June 30, 1997 at an exercise price equal to the closing price of the
Common Stock on the Nasdaq National Market on such date. Neither of such
options is governed by the Company's stock option plan. Both of such options
will remain outstanding for their full term until exercised, whether or not Mr.
Levy is still a director or consultant to the Company.
In February 1996, the Board approved an agreement with Mr. Shapiro which
provided that if the Company was acquired during 1996 and Mr. Shapiro was
terminated as a consequence thereof, Mr. Shapiro would be paid an amount equal
to his 1996 base salary.
PERFORMANCE MEASUREMENT COMPARISON
The following graph sets forth as of December 31, 1996, the cumulative total
stockholder return on the Common Stock compared with the cumulative total
return of a broad equity market index (Nasdaq Index) and a peer group common
stock index. The Nasdaq Index is comprised of all companies which trade on the
Nasdaq Stock Market and the peer group common stock index is comprised of those
public companies whose business activities fall within the same Standard
Industrial Classification Code as the Company. The total return assumes a $100
investment on October 1, 1992 (the date of the initial public offering of the
Common Stock) and reinvestment of dividends in the Common Stock and in each
index. Each index is weighted by outstanding shares.
COMPARISON OF CUMULATIVE TOTAL RETURN OF THE
COMMON STOCK, PEER GROUP COMMON
STOCK INDEX AND NASDAQ INDEX
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
1992 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Just Toys, Inc Common Stock 100 112.24 51.02 15.31 11.73 10.71
Peer Group Common Stock Index 100 96.73 112.26 104.25 138.27 165.99
NASDAQ Index 100 108.57 130.23 136.73 177.35 220.39
</TABLE>
12
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of Messrs.
Gimbel and Naitove and Ms. Jefferson. The Compensation Committee determines
the compensation of the Company's Chief Executive Officer and President and
sets policies for and reviews with the Chief Executive Officer and President
the compensation of the other executive officers identified in the Summary
Compensation Table above and the Company's other principal executives. The
Company's executive compensation packages are comprised primarily of base
salaries, performance based bonus awards and stock options. It is the
philosophy of the Compensation Committee that a substantial portion of a
senior executive officer's compensation be directly related to the performance
of the Company. Individual compensation is reviewed on the basis of various
considerations, including Company performance, individual performance,
position tenure, and internal comparability.
In March 1995, the Company employed Mr. Levy as Chairman of the Board and
Chief Executive Officer for a base annual salary of $225,000. Mr. Levy's
salary was the result of negotiations between Mr. Levy and the other members
of the Board of Directors at the time of his retention. The Board sought to
compensate Mr. Levy fairly to reflect his extensive experience in the toy
industry and the substantial difficulties facing the Company at the time of
his retention. Prior to becoming an officer of the Company, Mr. Levy had
received options to purchase 25,000 shares of the Common Stock in connection
with his service as a director and consultant to the Company. In keeping with
the Company's philosophy that a substantial portion of an executive's
compensation be performance based, from his appointment as Chief Executive
Officer through November 1996, Mr. Levy received options to purchase an
additional 85,000 shares of Common Stock having exercise prices equal to or
higher than the fair market value of the Common Stock on the date of grant of
such options.
In accordance with Mr. Levy's desire to step down as the Company's Chief
Executive Officer, in December 1996 the Company entered into an agreement with
Mr. Levy which provides for an orderly transition to his successor and for Mr.
Levy to be available to the Company in the future for advice and assistance.
On July 1, 1997, Mr. Levy will relinquish the post of Chief Executive Officer
of the Company, will render consulting services to the Company thereafter and
will remain as Chairman of the Board. The Company will pay Mr. Levy at the
rate of $100,000 per annum from July 1, 1997 through December 31, 1997 and
$75,000 and $50,000, respectively, during 1998 and 1999. Mr. Levy will receive
one-half of the amount he would have been entitled to under the 1997 bonus
pool as if he were employed by the Company for all of 1997. In recognition of
Mr. Levy's contributions to the Company, Mr. Levy was granted a fully vested
stock option for 50,000 shares of Common Stock in December 1996 and will be
granted an additional fully vested stock option for 50,000 shares of Common
Stock in June 1997 having exercise prices equal to the fair market value of
the Common Stock on the date of grant. See "Proposal 2: Authorization of Stock
Options" above. The complete terms of the agreement with Mr. Levy are
described under "Executive Compensation--Compensation Arrangements" above.
During 1996, the compensation of the other executive officers identified in
the Summary Compensation Table and the Company's other principal executives
consisted of a combination of base salary and stock options. The Compensation
Committee has also established a Company-wide bonus pool to enable management
employees of the Company to participate in the Company's profits for 1996 and
1997. The pool consists of 20% of the first $1,000,000 of pre-tax earnings,
15% on the next $1,000,000 of pre-tax earnings and 10% of all pre-tax earnings
over $2,000,000 for each year. In respect of 1996, Mr. Levy and Mr. Shapiro
are entitled to receive 30% and 25% respectively, of the pool and the
remaining 45% of the pool is distributed to certain employees of the Company,
at the discretion of Messrs. Levy and Shapiro.
The Company's stock option program is designed to further align the interest
of the executives with those of the stockholders at large. Options are granted
with exercise prices equal to or above market on the grant date and vest,
generally, in 20% increments over a period of five years. This approach is
designed to incentivise creation of stockholder values over the long term
since the full benefit of the option cannot be realized unless price
appreciation occurs over a number of years and the executive is rewarded only
to the extent that stockholders at large have benefited. The Company does not
issue options to executives on any fixed basis preferring to maintain a
flexible program.
13
<PAGE>
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and the four other most highly
compensated executive officers unless such compensation is paid pursuant to
performance standards prescribed under Section 162(m). Section 162(m) provides
that qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Company currently intends
to structure grants under future stock option plans in a manner that complies
with this requirement. The Company does not anticipate that the compensation
package for the Chief Executive Officer or any of the four most highly
compensated executive officers, will exceed $1,000,000 as contemplated by
Section 162(m) within the next year. The Company has not found it necessary to
address the issue of Section 162(m) in respect of compensation paid in excess
of $1,000,000.
Roger Gimbel
Charmaine Jefferson
Irwin Naitove
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gimbel is the Chief Executive Officer and President of RGA and is a
stockholder in another company, each of which provided certain administrative
and warehouse services to either the Company or its Hong Kong subsidiaries
during 1996. See "Certain Relationships and Related Transactions" directly
below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, the Company incurred expenses of $260,000 and $17,800,
respectively, for computer-related services and warehouse services provided by
RGA. Mr. Gimbel, Vice Chairman of the Company's Board of Directors is Chief
Executive Officer and President of RGA. The Company incurred expenses of
$123,000 in 1996 for computer-related services provided to the Company's Hong
Kong subsidiaries by a company of which Mr. Gimbel is a stockholder. During
1996, the Company terminated all such arrangements.
Mr. Shack, a director of the Company, is a member of the law firm of Shack &
Siegel, P.C., which is general counsel to the Company. In 1996, the Company
paid approximately $350,000 in legal fees to such firm.
PROPOSAL 3: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The following disclosures are required by the rules and regulations of the
Securities Exchange Commission in connection with the Company's decision to
change its independent auditors in 1995.
The Company determined to change its independent auditors and accordingly
dismissed Richard A. Eisner & Company, LLP ("Eisner") as its independent
auditors effective as of November 8, 1995. The decision to change independent
auditors was unanimously approved by the Company's Board of Directors
including all members of the Audit Committee of the Board of Directors.
During the Company's two most recently completed fiscal years and the
subsequent interim period up to the date of the change of accountants
(November 8, 1995), there were no disagreements between the Company and Eisner
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of Eisner, would have caused it to make reference
to the matter of disagreement in its report. During the two most recently
completed fiscal years and the subsequent interim period up to the date of the
change of accountants (November 8, 1995), the Company was not advised by
Eisner of any of the reportable events listed in Item 304(a)(1)(v)(A) through
(D) of Regulation S-K (the "Regulation").
14
<PAGE>
The audit report of Eisner on the consolidated financial statements of the
Company as of and for the fiscal year ended December 31, 1993 did not contain
any adverse opinion or disclaimer of opinion, nor was it qualified or modified
as to uncertainty, audit scope, or accounting principles. The audit report of
Eisner on the consolidated financial statements of the Company as of and for
the fiscal year ended December 31, 1994 contained a statement regarding the
uncertainty of the Company to continue as a going concern. In addition, the
report noted that the Company adopted the method of accounting for certain
investments in debt and equity securities prescribed by Statement of Financial
Accounting Standards No. 115.
Effective November 13, 1995, the Company retained Ernst & Young LLP ("E&Y")
as its independent auditors. E&Y had previously served as independent auditors
for the Company's Hong Kong subsidiaries for the fiscal year ended December
31, 1994. During the Company's two most recently completed fiscal years and
the interim period prior to the engagement of E&Y, the Company (or someone on
its behalf) did not consult E&Y regarding either (i) the application of
accounting principles to a specified transaction either completed or proposed
or the type of audit opinion that might be rendered on the Company's financial
statements; or (ii) any matter that was either the subject of a disagreement
(as such term is used in Item 304(a)(1)(iv) of the Regulation and the related
instruction to Item 304 of the Regulation) or any of the reportable events
listed in Item 304(a)(1)(v)(A) through (D) of the Regulation.
It is proposed that the stockholders ratify the appointment by the Board of
Directors of E&Y as the independent auditors of the Company for the fiscal
year ending December 31, 1997. The Company expects a representative of E&Y to
be present at the annual meeting who will respond to appropriate questions
submitted by stockholders and will make such statements as he or she may
desire.
Approval by the stockholders of the appointment of independent auditors is
not required, but the Company's Board of Directors deems it desirable to
submit this matter to the stockholders. If a majority of the votes cast at the
meeting should not ratify the selection of E&Y, the selection of independent
auditors will be reconsidered by the Board of Directors. Even if the selection
is ratified, the Company's Board of Directors reserves the right to appoint,
and at its discretion, may direct the appointment of, any other independent
certified public accounting firm at any time if the Company's Board of
Directors determines that such a change would be in the best interests of the
Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Commission and the National Association of Securities Dealers, Inc. Officers,
directors and greater than ten percent stockholders are required by the
Commission's regulations to furnish the Company with copies of all Forms 3, 4
and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations that no Form 5 is required to be filed,
the Company believes that all of its officers, directors and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during fiscal 1996.
VOTING PROCEDURES
Pursuant to Securities and Exchange Commission rules, a designated blank
space is provided on the proxy card to withhold authority to vote for one or
more nominees for director and boxes are provided on the proxy card for
stockholders to mark if they wish to abstain on Proposals 2 or 3. Votes
withheld in connection with the election of one or more of the nominees for
director will not be counted in determining the votes cast and will
15
<PAGE>
have no effect on the vote. Abstentions in connection with Proposals 2 or 3
are not counted in determining the votes cast with respect to such proposals
and will have no effect on the vote.
Under the rules of the National Association of Securities Dealers, Inc.,
brokers who hold shares in street name for customers have the authority to
vote on certain items when they have not received instructions from beneficial
owners. Brokers that do not receive instructions are entitled to vote upon the
election of directors and Proposals 2 and 3. Under the General Corporation Law
of the State of Delaware, a broker non-vote will have no effect on the outcome
of the election of directors or upon Proposal 2 or 3.
OTHER MATTERS
MANNER AND EXPENSES OF SOLICITATION
The solicitation of proxies in the accompanying form is made by the Board of
Directors and the cost thereof will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, some of the officers,
directors and other employees of the Company may also solicit proxies
personally or by mail, telephone or telegraph, but they will not receive
additional compensation for such services. Brokerage firms, custodians banks,
trustees, nominees or other fiduciaries holding shares of Common Stock in
their names will be requested by the Company to forward proxy materials to
their principals and will be reimbursed for their reasonable out-of-pocket
expenses in such connection.
It is important that proxies be returned promptly. Therefore, whether or not
you plan to attend the meeting in person, you are urged to mark, date,
execute, and return your proxy in the enclosed envelope, to which no postage
need be affixed if mailed in the United States.
DISCRETIONARY AUTHORITY TO VOTE PROXY
As of the date of this proxy statement, the Board of Directors is not aware
of any other matters to be presented for action, but if any other matters
properly come before the meeting, it is intended that the persons voting the
accompanying proxy will vote the shares represented thereby in accordance with
their best judgment.
ANNUAL REPORT
The Annual Report of the Company for 1996, including financial statements,
accompanies this proxy statement.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals in respect of matters to be acted at the Company's
1998 Annual Meeting of Stockholders should be received by the Company on or
before January 2, 1998 in order that they may be considered for inclusion in
the Company's proxy materials.
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO, TO EACH OF THE COMPANY'S
STOCKHOLDERS OF RECORD ON APRIL 30, 1997 AND EACH BENEFICIAL SHAREHOLDER ON
THAT DATE, UPON RECEIPT OF A WRITTEN REQUEST THEREFORE MAILED TO THE COMPANY'S
OFFICES, 50 WEST 23RD STREET, NEW YORK, NEW YORK 10010, ATTENTION: SECRETARY.
REQUESTS FROM BENEFICIAL STOCKHOLDERS MUST SET FORTH A GOOD FAITH
REPRESENTATION AS TO SUCH OWNERSHIP ON THAT DATE.
By Order of the Board of Directors
Seymour Rosenthal
Secretary
Dated: May 2, 1997
16
<PAGE>
Genpalagreement
JUST TOYS, INC.
STOCK OPTION
OPTION dated this 5th day of December 1996 (the "Effective Date"), granted
by Just Toys, Inc., a Delaware corporation (hereinafter the "Company"), to
Morton J. Levy (the "Holder").
WHEREAS, the Company desires to afford the Holder the opportunity to
purchase shares of its Common Stock, par value $.01 per share (the "Common
Stock"), as hereinafter provided; and
WHEREAS, on December 5, 1996, the Board of Directors authorized the grant
of the option conferred hereby to the Holder.
NOW, THEREFORE, in consideration of the foregoing premises, the Company
hereby agrees as follows:
1. Grant of Option. The Company hereby grants to the Holder an option
---------------
(the "Option") to purchase up to an aggregate of 50,000 shares of Common Stock
(such number of shares being subject to adjustment as provided in paragraph 5
hereof) on the terms and subject to the conditions hereinafter set forth. The
Holder shall not have any of the rights of a shareholder of the Company with
respect to the shares of Common Stock covered by the Option except to the extent
that one or more certificates for such shares shall be delivered to him upon the
due exercise of the Option.
2. Purchase Price. The purchase price per share of the shares of Common
--------------
Stock to be issued upon exercise of the Option shall be the closing price of a
share of the Common Stock on the Nasdaq National Market on the Effective Date.
3. Expiration Date; Vesting of Option. (a) Subject to the provisions of
----------------------------------
paragraph 5 hereof, the Option shall expire at 5:00 P.M. New York time on
December 4, 2006 (the "Expiration Date"), and any portion of the Option
remaining unexercised after such time shall be cancelled without further notice
or action.
(b) The Option may be exercised in full or in installments at any time
after the Effective Date and prior to the Expiration Date.
4. Non-Transferability. The Option, and the rights and privileges
-------------------
conferred hereby, are not transferable by the Holder other than by will or under
the laws of descent and distribution. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of
<PAGE>
the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall render the Option null and
void.
5. Adjustments. (a) New option rights may be substituted for the Option,
-----------
or the Company's duties as to the Option 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 5.1(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 Option, or assume the Option, the Option 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 of
Common Stock in a single transaction; provided, however, that the Holder 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 portion of the Option whether or
not then exercisable.
(b) The existence the Option 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 Common Stock 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.
(c) In the event that the Stock Option Committee (the "Committee") of the
Company's Board of Directors determines that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other corporate transaction or event affects the Common Stock 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 Option, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of shares of Common
Stock subject to the Option and (ii) the exercise price with respect to the
Option or, if deemed appropriate, make provision for a cash payment to the
Holder. Without limiting the generality of the foregoing, any such adjustment
shall be deemed to have prevented any dilution and enlargement of the Holder's
rights if the Holder receives in any such adjustment rights
2
<PAGE>
which are substantially similar (after taking into account the fact that the
Holder has not paid the applicable exercise price) to the rights the Holder
would have received had he exercised the Option and become a shareholder of the
Company immediately prior to the event giving rise to such adjustment.
(d) Adjustments and elections under this Section 5 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.
6. Securities Regulations. (a) If at any time the Company's Board of
----------------------
Directors shall in its discretion determine that the listing, registration or
qualification of the shares of Common Stock subject to the 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 such shares hereunder, the Option
shall not be exercisable 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 Company's Board of
Directors.
(b) Unless at the time of the exercise of the Option and the issuance of
the shares of Common Stock purchased by the Holder 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 Securities
and Exchange Commission (the "Commission"), the Holder 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
of Common Stock so acquired may be "restricted securities" within the meaning of
Rule 144 promulgated under the Act; (ii) certifying that he is acquiring the
shares of Common Stock issuable to him upon such exercise for the purpose of
investment and not with a view to their sale or distribution; and (iii)
containing the Holder's agreement that such shares of Common Stock 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
shares of Common Stock until there shall have been compliance with all
applicable laws, rules and regulations, including rules and regulations of the
Commission.
7. Loans and Financial Accommodations to Holder. (a) In order to assist
--------------------------------------------
the Holder with the acquisition of shares of Common Stock pursuant to the
exercise of the Option, including the payment of any taxes resulting from such
exercise, the Committee may, in its discretion authorize (i) the extension of a
loan to the Holder by the Company, (ii) the payment by the Holder of the
purchase price of such shares in installments, (iii) the guarantee by the
Company of a loan obtained by the Holder from a third party or (iv) such other
reasonable arrangements to facilitate the exercise of the Option in accordance
with applicable law.
(b) The Committee or the Board of Directors shall determine the terms of
any loan or guarantee made pursuant hereto, 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
3
<PAGE>
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 the Option plus (i)
related interest payments and (ii) the amount of tax liability incurred by the
Holder as a result of the exercise of the Option. No amount loaned to the
Holder 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 upon the exercise of the Option, (ii) taxes attributable to such
exercise and (iii) interest.
8. Method of Exercising Option. (a) The Option (or installments thereof)
---------------------------
may be exercised by executing and delivering an Option Exercise Notice in the
form attached hereto as Exhibit A. Such notice shall be accompanied by payment
---------
of the full purchase price as follows: (i) in cash (including check, bank draft
or money order) payable to the order of the Company or (ii) at the discretion of
the Committee, by delivering to the Company shares of Common Stock already owned
by the Holder, and having a fair market value (as defined in paragraph 8(b)) 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.
(b) For the purpose of any computation under paragraph 8(a) of the fair
market value per share of Common Stock, such value shall be deemed to mean (i)
if the of Common Stock is 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 of Common Stock is 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 of Common Stock in the
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 Common
Stock is not then publicly-traded, as determined, in good faith, by the
Committee, on the date of exercise of the Option, or if such date shall not be a
day during which shares of Common Stock were traded, then on the next date
immediately preceding such date during which such trades were effected.
(c) If the Option should be exercised in part only, the Company shall, upon
surrender of the Option for cancellation, execute and deliver a new option
evidencing the rights of the Holder to purchase the balance of the shares of
Common Stock purchasable hereunder. All shares purchased hereunder shall be
deemed to be fully paid and non-assessable.
9. Conditions to Issuance of Shares. The Company shall not be required to
--------------------------------
issue any certificate for shares of Common Stock purchased upon the exercise of
the Option unless such shares are at the time of such exercise listed on the
Nasdaq National Market or any national securities exchange on which the Common
Stock may then be listed.
10. General. (a) The Option shall be construed in accordance with the
-------
laws of the State of New York and shall be binding upon the Company and inure to
the benefit of the Holder and any successors of the business of the Company,
but, except as provided for herein, neither the Option nor any rights or
privileges conferred hereunder shall be assignable by the Holder.
4
<PAGE>
(b) The Company may establish from time to time, appropriate procedures to
provide for payment or withholding of such income or other taxes as may be
required by law to be paid or withheld in connection with the exercise of the
Option. The Holder shall pay the Company all such amounts requested by the
Company to permit the Company to take any deduction available to it resulting
from the exercise of the Option. The Company may also establish, from time to
time, appropriate procedures to ensure that the Company receives prompt advice
concerning the occurrence of any event which may create, or affect the timing or
amount of, any obligation to pay or withhold any such taxes or which may make
available to the Company any tax deduction resulting from the occurrence of such
event, and the Holder will comply with all such procedures so established.
IN WITNESS WHEREOF, the Company has caused the Option to be duly executed
by its duly authorized officer, on the day and year first above written.
JUST TOYS, INC.
By: /s/ Barry Shapiro
-----------------
Barry Shapiro
President and Chief Operating Officer
Agreed to and Accepted:
/s/ Morton J. Levy
- ------------------
Morton J. Levy
5
<PAGE>
EXHIBIT A
---------
FORM OF OPTION EXERCISE NOTICE
------------------------------
____________ __, ____
Just Toys, Inc.
50 West 23rd Street
New York, New York 10010
Attention: President
Ladies and Gentlemen:
The undersigned hereby irrevocably elects to exercise the within
Option to the extent of purchasing ________ shares of Common Stock at
$__________ per share for an aggregate purchase price of $__________________.
Enclosed is payment of the purchase price as follows (check applicable box):
[ ] 1. Payment in Cash.
Check, bank draft or money order in the aggregate amount of the
exercise price, payable to Just Toys, Inc.
[ ] 2. Payment with Common Stock or Common Stock and Cash.
(a) Delivery of Certificate No.(s)__________ representing ________
shares of Common Stock, duly endorsed to Just Toys, Inc. The
shares of Common Stock evidenced by such certificate have been
valued at $_______ per share, in accordance with Section 8(b) of
the Option. I understand that if the enclosed certificate
represents more full shares of Common Stock than are necessary to
cover the exercise price, the Company will deliver to the
undersigned a certificate covering the excess number of full
shares.
(b) Check, bank draft or money order for the remaining exercise price
of $__________, payable to Just Toys, Inc. (required if a
fractional share is involved or if payment is being made only
partly with Common Stock).
Please have the certificate representing said shares forwarded to me
as indicated below.
A-1
<PAGE>
Instructions: PLEASE PRINT YOUR NAME BELOW (FIRST, MIDDLE INITIAL,
-------------
LAST). If joint tenancy is requested, please mark the box below and list both
names in full.
Mr.________________ Soc. Sec. #__________________
Mrs._______________ Soc. Sec. #__________________
Miss_______________ Soc. Sec. #__________________
Ms.________________ Soc. Sec. #__________________
Joint Tenancy [ ]
Street Address _______________________________________
City ________________ State ___________ Zip Code _____
Very truly yours,
________________________
(Signature)
________________________
(Signature)
A-2
<PAGE>
JUST TOYS, INC.
Proxy Solicited by the Board of Directors
for the Annual Meeting of Stockholders
June 3, 1997
UNDERSIGNED, revoking all previous proxies, hereby appoints MORTON J. LEVY,
BARRY SHAPIRO and DONALD D. SHACK, or any of them as attorneys, agents and
proxies with power of substitution, and with all powers the undersigned would
possess if personally present, to vote all shares of Common Stock of JUST TOYS,
INC. (the "Company") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, June 3, 1997 at
10:00 A.M. local time at the Company's showroom at 200 Fifth Avenue, New York,
New York, and at all adjournments thereof. The shares represented by this Proxy
will be voted as indicated below upon the following matters, all more fully
described in the Proxy Statement dated May 2, 1997.
(SEE REVERSE SIDE)
<PAGE>
[X] Please mark your
votes as in this
example using
dark ink only
1. Election of a board of seven directors
WITHHOLD
VOTE AUTHORITY
FOR TO VOTE FOR
[ ] [ ]
NOMINEES: Roger Gimbel, Charmaine Jefferson,
Howard Kaufman, Morton J. Levy,
Irwin Naitove, Donald D. Shack,
Barry Shapiro
For except vote withheld from the following nominee(s).
2. Approval of the following resolution:
FOR AGAINST ABSTAIN
Resolved, that the Common Stock purchase option [ ] [ ] [ ]
granted by the Company to Morton J. Levy on
December 5, 1996, and the Common Stock purchase
option to be granted by the Company to Morton J. Levy
on July 1, 1997, each as described in the Company's
Proxy Statement dated May 2, 1997, are hereby
approved and ratified.
3. Ratification of the appointment of Ernst & Young LLP [ ] [ ] [ ]
as independent auditors for the 1997 fiscal year.
4. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN. IF NO SUCH INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS
DESIGNATED BY THE BOARD OF DIRECTORS AND FOR ITEMS 2 and 3.
<TABLE>
<S> <C> <C>
Date: , 1997 Date: ,1997
- -------------------------------------- ----- --------------------------
Signature Signature if held jointly
</TABLE>
NOTE: Please sign exactly as your name or names appear hereon. Joint owners
should each sign personally. When signing as executor, administrator,
corporation, officer, attorney, agent, trustee or guardian, etc., please add
your full title to your signature.
NOTE: PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY IN THE ENVELOPE ENCLOSED FOR
THIS PURPOSE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
