SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
PLAY-BY-PLAY TOYS & NOVELTIES, 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:
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:
<PAGE>
PLAY-BY-PLAY TOYS & NOVELTIES, INC.
4400 TEJASCO
SAN ANTONIO, TEXAS 78218-0267
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 13, 1999
To the Shareholders of
Play-By-Play Toys & Novelties, Inc.
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
Play-By-Play Toys & Novelties, Inc. (the "Company") will be held at the San
Antonio Doubletree Hotel and Conference Center, 37 N. E. Loop 410, San Antonio,
Texas 78216 on the 13th day of December, 1999, at 1:30 p.m. (local time) for the
following purposes:
1. "FOR" the election of Directors of the nominees named on the
accompanying Proxy; and
2. "FOR" the ratification of the selection of PricewaterhouseCoopers LLP, as
Certified Public Accountants, for the Company for the fiscal year ending
July 31, 2000; and
3. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Only common shareholders of record at the close of business on November 24,
1999 are entitled to notice of and to vote at the annual meeting.
All shareholders are cordially invited to attend the meeting in person.
However, if you are unable to attend in person and wish to have your shares
voted, PLEASE FILL IN, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. Your proxy may be revoked by
appropriate notice to the Secretary of Play-By-Play Toys & Novelties, Inc.
at any time prior to the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JOE M. GUERRA
Joe M. Guerra
CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
San Antonio, Texas
November 24, 1999
<PAGE>
PLAY-BY-PLAY TOYS & NOVELTIES, INC.
4400 TEJASCO
SAN ANTONIO, TEXAS 78218-0267
(210) 829-4666
NOVEMBER 24, 1999
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 13, 1999
This Proxy Statement and the accompanying Proxy and Notice of Annual
Meeting of Shareholders are furnished to holders of common shares, without par
value (the "Common Shares"), of Play-By-Play Toys & Novelties, Inc. (the
"Company") in connection with the solicitation by its Board of Directors (the
"Board") of proxies to be used at the 1999 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held on Monday, December 13, 1999, at 1:30
p.m. at the San Antonio Doubletree Hotel and Conference Center, 37 N.E. Loop
410, San Antonio, Texas 78216, and at any postponements or adjournments thereof.
Only those shareholders of record at the close of business on November 24, 1999
will be entitled to receive notice of, and to vote at, the Annual Meeting.
Copies of this Proxy Statement and the accompanying Proxy and Notice of Annual
Meeting of Shareholders are first being mailed to shareholders on or about
November 29, 1999.
All Common Shares represented by each properly executed Proxy received by
the Board pursuant to this solicitation will be voted in accordance with the
shareholder's directions specified on the Proxy. If no directions have been
specified on a Proxy, the Common Shares represented by that Proxy will be voted
as follows:
"FOR" the election of Directors of the nominees named on the accompanying
Proxy; and
"FOR" the ratification of the selection of PricewaterhouseCoopers LLP as
independent Certified Public Accountants for the Company for fiscal year
2000.
Management knows of no other matters that may properly be brought, or
which are likely to be brought, before the Annual Meeting. However, if any other
matters are properly brought before the Annual Meeting, the persons named as
proxies in the accompanying Proxy or their substitutes will vote in accordance
with their best judgment on such matters.
Without affecting any vote previously taken, a shareholder signing and
returning a Proxy has the power to revoke it at any time prior to its exercise
by giving notice to the Company in writing mailed to Joe M. Guerra, Secretary of
the Company, at the Company's executive offices at 4400 Tejasco, San Antonio,
Texas 78218-0267, by executing a subsequent Proxy, or by attending the Annual
Meeting and declaring to the Company such shareholder's intent to vote in
person. Attendance at the Annual Meeting will not, in and of itself, constitute
revocation of a Proxy.
1
<PAGE>
The presence, in person or by proxy, of the holders of a majority of the
Common Shares issued and outstanding on November 24, 1999, is necessary to
constitute a quorum at the Annual Meeting. As of November 24, 1999, the Company
had 7,395,000 Common Shares issued and outstanding.
Under Texas law and the Company's Amended and Restated Bylaws, each
shareholder is entitled to one vote for each Common Share held. Common Shares
represented in person or by proxy but not voted with respect to a proposal are
counted as present. In votes other than for the election of directors, the
effect of abstention or a non-vote is the same as a "no" vote. In the election
of directors, Common Shares as to which the authority to vote is withheld and
the Common Shares represented in person or by proxy but not voted with respect
to the election of directors are not counted toward the election of directors or
toward the election of the individual nominees specified on the proxy.
All costs of solicitation of the proxies will be borne by the Company.
Solicitation will be made by mail. Proxies may be further solicited at no
additional compensation by officers, directors or employees of the Company by
telephone, written communication or in person. Upon request, the Company will
reimburse banks, brokerage firms, and other custodians, nominees and fiduciaries
for expenses reasonably incurred by them in sending proxy materials to the
beneficial owners of Common Shares of the Company. No solicitation will be made
by specially engaged employees or other paid solicitors.
MANAGEMENT
The names of the directors and executive officers of the Company, their
respective ages, positions and director terms are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION TERM
- ----------------- --- ---------------------------------------- --------
<S> <C> <C> <C>
Arturo G. Torres 63 Chief Executive Officer and Chairman of the Board 2000
Raymond G. Braun 43 President, Chief Operating Officer and Director 1999
Joe M. Guerra 37 Chief Financial Officer, Secretary and Treasurer --
Manuel F. Barroso 65 Director 1999
Ottis W. Byers 55 Director 2001
Tomas Duran 54 Director 1999
Heriberto "Berto" Guerra, Jr. 49 Director 2000
Steve K.C. Liao 53 Director 2001
Richard Neitz 50 Director 2001
</TABLE>
ARTURO G. TORRES has been Chief Executive Officer and Chairman of the
Board of the Company since April 1993. Prior thereto, Mr. Torres was the
Founder, Chairman of the Board, Chief Executive Officer and President of Pizza
Management, Inc. ("PMI") from its inception in 1972 to its eventual sale in
1992. PMI was the largest (approximately 240 restaurants) private Pizza Hut,
Inc. franchisee in the world with operations in the United States, the
Commonwealth of Puerto Rico, Spain and the United States Virgin Islands.
RAYMOND G. BRAUN has been President and Chief Operating Officer since
February 1999. Mr. Braun is a nominee to the Board of Directors for the 1999
Annual Shareholders' Meeting. Prior there to Mr. Braun served as the Chief
Financial Officer, Treasurer and Director of the Company since January 1997.
Prior to that, Mr. Braun served as the Company's engagement partner with the
independent accounting and advisory firm of Coopers & Lybrand, L.L.P. Mr. Braun
served in various roles at Coopers & Lybrand since
2
<PAGE>
1980, having joined the firm immediately after graduation. Mr. Braun received a
Bachelor of Business Administration degree in accounting from The University of
Texas at Austin.
JOE M. GUERRA has been Chief Financial Officer of the Company since
February 1999 and was appointed as Secretary and Treasurer of the Company in
October 1999. From February 1998 to February 1999, Mr. Guerra served as the
Company's Controller. From August 1996 to January 1998, Mr. Guerra was the Chief
Financial Officer of a San Antonio based restaurant company. From November 1994
to July 1996, Mr. Guerra served as the Chief Financial Officer of the Company.
Mr. Guerra is a Certified Public Accountant and received a Bachelor of Business
Administration degree in accounting from St. Mary's University, San Antonio,
Texas, in 1984.
MANUEL FERNANDEZ-BARROSO has been President of Caribe Marketing & Sales
Co., Inc. ("Caribe") since March 1999. Mr. Barroso was appointed as Director of
the Company by the Company's Board of Directors. Mr. Barroso is a nominee to the
Board of Directors for the 1999 Annual Shareholders' Meeting. Prior thereto, Mr.
Barroso was the Founder and President of Caribe from its inception to its
eventual sale in March 1999. Caribe is headquartered in Santurce, Puerto Rico
and prior to the acquisition on March 1999, was the Company's distributor in
Puerto Rico for the past two years, and has been a distributor for other
manufactures throughout Puerto Rico and Central American in excess of 15 years.
OTTIS W. BYERS has been a Director of the Company since September 1995.
Since May 1998, Mr. Byers has been the owner of Circle CB Transport, Inc. of
Crockett, Texas. Since 1990, Mr. Byers has owned 4-B Ranch in Crockett, Texas.
From 1978 through 1994, Mr. Byers owned Byers Enterprises, which operated three
Mexican food restaurants in Texas. Mr. Byers received a Bachelor of Science
degree in history from Sam Houston State University, Huntsville, Texas.
TOMAS DURAN has been a Director of the Company since November 1992. Mr.
Duran is a nominee to the Board of Directors for the 1999 Annual Shareholders'
Meeting. Mr. Duran has owned an insurance consulting business located in Corpus
Christi, Texas, since August 1992. From 1988 through July 1992, he was Director
of Management and Budget and Senior City Manager for the City of Corpus Christi,
Texas. Mr. Duran served as Trade Representative for the Monterrey, Veracruz and
Mexico City Foreign Trade Mission and served as President of the Texas Public
Employees Labor Relations Association from 1985 through 1986. Mr. Duran studied
engineering at Universidad de Madrid, Madrid, Spain from 1964 through 1965 and
received a Bachelor of Arts degree in international relations from West Texas
State University in 1970.
3
<PAGE>
HERIBERTO "BERTO" GUERRA, JR. has been a Director of the Company since its
inception in May 1992. Mr. Guerra is the Executive Vice President, External
Affairs for Southwestern Bell Telephone, and has been employed by that company
or an affiliate since 1978. Mr. Guerra served on President Bush's Hispanic
Alliance on Free Trade from 1989 through 1992 and has served on the College of
Education Foundation Advisory Council of The University of Texas from 1988 to
the present. Mr. Guerra is the Chairman of San Antonio Hispanic Chamber of
Commerce. In April 1995, Mr. Guerra was elected to the Board of Trustees of The
University of Texas-Pan American Foundation. Mr. Guerra received a Bachelor of
Science degree in interdisciplinary management from Southwest Texas State
University in 1984.
STEVE K.C. LIAO has been a Director of the Company since October 1995.
Since 1989, Mr. Liao has also been a real estate investor and property manager
of multi-family properties in Houston, Texas.
RICHARD R. NEITZ has been President of the Company's Retail Division since
October 1999 and was appointed as Director of the Company in October 1999 by the
Company's Board of Directors. From 1992 to September 1999, Mr. Neitz was
President and Chief Operating Office and Director of DSI Toys Inc., formerly
Diversified Specialists, Inc. Prior to that, Mr. Neitz was Senior Vice
President, Marketing and Product Development of Diversified Specialists. Mr.
Neitz is a member of the Board of Directors of the Toy Manufacturers of America
("TMA") and serves as the Chairman of its Membership Committee.
There are no family relationships among any of the executive officers or
directors of the Company.
NUMBER, TERM AND COMPENSATION OF DIRECTORS
The Company's Articles of Incorporation divide the Board into three
classes of as equal size as possible, with the terms of each class expiring in
consecutive years so that only one class is elected in any given year.
Successors to directors whose terms have expired are required to be elected by
shareholder vote. Vacancies in unexpired terms and any additional positions
created by Board action are filled by action of the existing Board. The terms of
Messrs. Braun, Borroso and Duran will expire at the 1999 annual meeting of
shareholders of the Company; the terms of Messrs. Torres, and Guerra will expire
at the 2000 meeting of shareholders, and the terms of Messrs. Byers, Neitz and
Liao will expire at the 2001 annual meeting of shareholders. The executive
officers of the Company are elected annually by the Board following the annual
meeting of shareholders and serve at the discretion of the Board until their
successors are elected and qualified.
The Company had entered into a Convertible Loan Agreement ("Convertible
Loan Agreement") dated July 3, 1997, pursuant to which the Company issued $15
million of convertible subordinated notes. On October 22, 1999, the Company and
the holders of the convertible subordinated notes entered into a First Amendment
to the Convertible Loan Agreement ("First Amendment"). The First Amendment
permits two representatives designated by the holders of the convertible
debentures ("Lender Representatives") to attend as observers all meetings of its
board of directors and comment on matters discussed at such meetings.
Additionally, if the Company fails to pay in full all outstanding principal and
accrued interest on the convertible debentures on December 31, 2000, the Company
shall cause those persons designated by the holders of a majority of the
outstanding principal amount of the debentures to be appointed as members of the
Board of Directors ("Lender Directors"), until the debentures are paid in full,
up to a number of directors that is the greater of (i) three and (ii) a
proportion of the full Board of Directors as equal as possible to the percentage
of the holders' ownership of Common Stock on an as-converted basis.
Outside members of the Board are compensated $1,000 per meeting for
attending Board meetings, $500 per meeting for attending Board committee
meetings and receive reimbursement for out-of-pocket
4
<PAGE>
expenses incurred for attendance at meetings. During fiscal 1999, total outside
directors' fees of $20,500 were paid in cash. Management directors receive no
fees for their services.
5
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Messrs. Braun, Barroso and Duran are the Board's nominees for election as
directors; to serve as Category III directors until the 2002 annual meeting of
shareholders or until their successors are elected and qualified. Information
concerning the nominees is set forth above. Mr. Duran was previously elected to
the Board by the Company's shareholders. Mr. Braun and Mr. Barroso were
previously appointed to the Board by the Board.
The Board currently consists of 8 members. The Board has determined to
nominate three persons for election. The proxies cannot be voted for a greater
number of persons than the number of nominees named.
If, for any reason, any of the nominees shall become unavailable for
election, the individuals named in the enclosed Proxy may exercise their
discretion to vote for any substitutes proposed by the Board, unless the Board
should decide to reduce the number of directors to be elected at the Annual
Meeting. The affirmative vote of a majority of the votes cast is required for
the election of each nominee for director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED
HEREIN.
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
BOARD MEETINGS
The Board held five meetings during the fiscal year ended July 31, 1999.
All directors attended at least 75% of the meetings of the Board and Board
committees of which they are members.
BOARD COMMITTEES
The Company's Board has two standing committees: the Audit Committee and
the Compensation Committee. The functions of the Audit Committee, of which
Messrs. Byers, Duran, Guerra, and Liao are members, are to make recommendations
to the Board regarding the engagement of the Company's independent accountants
and to review with management and the independent accountants the Company's
internal controls, financial statements, basic accounting and financial policies
and practices, audit scope and competency of accounting personnel. The Audit
Committee held two meetings during fiscal 1999. The functions of the
Compensation Committee, of which Messrs. Byers, Duran, Guerra, and Liao are
members, are to review and recommend to the Board the compensation, stock
options and employment benefits of all officers of the Company, to administer
the Play-By-Play Toys & Novelties, Inc. 1994 Incentive Plan (the "Incentive
Plan"), to fix the terms of other employee benefit arrangements and to make
awards under such arrangements. The Compensation Committee held two meetings
during fiscal 1999. During fiscal 1999, none of the individuals serving on the
Compensation Committee was an officer or employee of the Company. The Board does
not have a Nominating Committee.
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires each director and officer of the Company, and each
person who owns more than 10% of a registered class of the Company's equity
securities, to file by specific dates with the United States Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. The
Company is required to report in this Proxy Statement any failure of its
directors and officers and beneficial owners of more than 10% of the Company's
Common Stock to file by the relevant due date any of these reports during the
Company's fiscal year.
To the Company's knowledge, during fiscal 1999 all Section 16(a) filing
requirements applicable to the Company's officers, directors and 10%
shareholders were complied with.
EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS BY REFERENCE, INCLUDING
THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS, AND SHALL NOT BE DEEMED SOLICITING MATERIAL OR
FILED UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
REPORT OF THE COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE
The Compensation Committee's stated purpose is to review and recommend to
the Board the compensation, stock options and employment benefits of all
officers of the Company, administer the Incentive Plan, fix the terms of other
employee benefit arrangements and make awards under such arrangements. The
Compensation Committee is composed of directors who have never served as
officers of the Company. The following is a summary of policies of the
Compensation Committee that affect the compensation paid to executive officers,
as reflected in the tables and text set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. The Compensation Committee's overall policies
with respect to executive officers is to offer competitive compensation
opportunities for such persons based upon their personal performance, the
financial performance of the Company and their contribution to that performance.
Each executive officer's compensation package is comprised of three elements:
(i) base salary that reflects individual performance and is designed primarily
to be competitive with salary levels in the industry, (ii) stock-based incentive
awards designed to strengthen the mutuality of interests between the executive
officers and the Company's shareholders, and (iii) for executive officers and
certain personnel that perform sales and marketing functions, annual cash
bonuses related to the performance of the Company for such individual's
respective functional area.
FACTORS. Several important factors considered in establishing the
components of each executive officer's compensation package for the 1999 fiscal
year are summarized below. Additional factors were
7
<PAGE>
taken into account to a lesser degree. The Compensation Committee may, in its
sole discretion, apply entirely different factors, such as different measures of
financial performance for future fiscal years. However, it is presently
contemplated that all compensation decisions will be designed to further the
overall compensation policy described above.
BASE SALARY. The base salary for each executive officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions in similarly situated companies within the toy industry or similarly
sized public companies and internal comparability considerations. However, the
Compensation Committee did not conduct a formal survey of executive officer
salaries at such companies. The Compensation Committee believes that the
Company's most direct competitors for executive talent are not limited to the
companies that the Company would use in a comparison for shareholder returns.
Therefore, the compensation comparison group is not the same as the industry
group index used in the "Performance Graph" section below.
STOCK-BASED INCENTIVE COMPENSATION. The Company adopted the Incentive Plan
in August 1994. The Incentive Plan authorizes the Company to award incentive
stock options and non-qualified stock options to purchase Common Stock and
restricted stock to officers and other employees of the Company. The purpose of
the Incentive Plan is to attract, retain and motivate officers and employees. On
June 27, 1996, the Company registered with the SEC 700,000 shares authorized
under the Incentive Plan. On December 11, 1997, the shareholders approved an
increase in the number of shares authorized to award incentive options and
non-qualified stock options by 600,000 shares to 1,300,000 shares. On March 17,
1998, the Company registered with the SEC the additional 600,000 shares. Stock
options may be exercised at a purchase price as recommended by the Compensation
Committee and determined by the Board of Directors, provided that the exercise
price per share under the Incentive Plan shall be an amount not less than 100%
of the fair market value on the date the option is granted or 110% of fair
market value for beneficial owners of 10% or more of the Company's outstanding
shares. Thus, the optionee receives a return only if the market price of the
shares appreciates over the option term. The grants are designed to align the
interests of the optionees with those of the shareholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business, even though
certain executive officers of the Company are already significant shareholders
of the Company (see "Principal Shareholders"). Moreover, the long-term vesting
schedules encourage a long-term commitment to the Company by its executive
officers and other optionees. The size of the option grant to each optionee is
set at a level that the Compensation Committee deems appropriate in order to
create a meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but also takes into account the individual's
potential for future responsibility and promotion over the option vesting
period, and the individual's performance in recent periods. The Compensation
Committee periodically reviews the number of shares owned by, or subject to
options held by, each executive officer, and additional awards are considered
based upon past performance of the executive officer.
ANNUAL CASH BONUSES. The Company does not have a formal cash bonus program
for executive officers, although cash bonuses have been paid from time to time
in the past to selected executive officers in recognition of superior individual
performance. There were no cash bonuses awarded during fiscal 1999.
CHIEF EXECUTIVE OFFICER
In fiscal 1999, Arturo G. Torres, Chairman and Chief Executive Officer of
the Company, received total cash payments of $425,000 in salary. Mr. Torres does
not have an employment agreement with the Company.
8
<PAGE>
LIMITATIONS ON DEDUCTIBILITY
The Compensation Committee has reviewed the Company's informal
compensation policies in light of amendments to the Internal Revenue Code
enacted during 1993 that generally limit deductions for compensation paid to
certain executive officers to $1,000,000 per annum (certain performance based
compensation is not subject to that limit). At present levels of compensation,
these amendments do not limit the deductions to which the Company is entitled
and the Compensation Committee has therefore concluded that no changes in the
Company's compensation policies as a result of these amendments are appropriate.
SUMMARY
The Compensation Committee believes that the compensation programs of the
Company and the administration of those programs well serve the interests of the
Company's shareholders. These programs allow the Company to attract, retain and
motivate exceptional management talent and to compensate executives in a manner
that reflects their contribution to both the short and long-term performance of
the Company. The Company intends to continue to emphasize programs that it
believes positively affect shareholder value.
PLAY-BY-PLAY TOYS & NOVELTIES, INC. COMPENSATION COMMITTEE
1999 MEMBERS
Ottis W. Byers, Tomas Duran, Berto Guerra, Jr.,
and Steve K. C. Liao
9
<PAGE>
PERFORMANCE GRAPH
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THIS SECTION ENTITLED "PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY FILINGS OR INTO ANY FUTURE FILINGS, AND SHALL NOT BE DEEMED SOLICITING
MATERIAL OR FILED UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
The following graph compares the cumulative total shareholder return on
the Company's Common Stock from July 19, 1995 (the date the Company became a
public company) until July 31, 1999, with the cumulative total return of the
Standard and Poor's Index and the Peer Group Index (as defined below). The graph
assumes the investment of $100 in the Company's Common Stock and in each of the
indexes on July 19, 1995 and reinvestment of all dividends. The initial public
offering price of the Company's Common Stock on July 19, 1995 was $12.25 per
share.
COMPARISON OF CUMULATIVE TOTAL RETURN*
FOR THE PERIOD ENDED JULY 31, 1999
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------
7/19/95 7/95 7/96 7/97 7/98 7/99
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PLAY BY PLAY TOYS & NOVELTIES, INC ........... 100 107 75 124 80 21
NEW PEER GROUP ............................... 100 98 80 34 10 9
OLD PEER GROUP ............................... 100 108 131 139 112 56
S & P 500 .................................... 100 102 119 181 216 259
</TABLE>
CUMULATIVE TOTAL RETURN* JULY 31, 1999
- ------------------------ -------------
PLAY-BY-PLAY TOYS & NOVELTIES, INC ......................... 21.00
S&P 500 .................................................... 259.00
NEW PEER GROUP** ........................................... 9.00
OLD PEER GROUP*** .......................................... 56.00
* ANNUAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS. THERE WERE NO DIVIDENDS
PAID BY THE COMPANY DURING THE PERIOD PRESENTED. CUMULATIVE TOTAL RETURN
ASSUMES AN INITIAL INVESTMENT OF $100 ON JULY 19, 1995.
** NEW PEER GROUP INDEX IS COMPOSED OF TOY COMPANIES WITH SIMILAR MARKET
CAPITALIZATION. THESE COMPANIES ARE DSI TOYS INC., EMPIRE OF CAROLINA
INC., GRAND TOYS INTL, INC., JUST TOYS, INC., AND TOYMAX INTERNATIONAL,
INC.
*** OLD PEER GROUP INDEX IS COMPOSED OF TOY COMPANIES WITH SIMILAR MARKET
CAPITALIZATION. THESE COMPANIES ARE GALOOB LEWIS TOYS INC., EMPIRE OF
CAROLINA, INC., EQUITY MARKETING INC., JANEX INTERNATIONAL, INC. AND JUST
TOYS, INC.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth-certain information concerning compensation
of (i) the Company's Chief Executive Officer, and (ii) the three highest paid
executive officers (other than the CEO) of the Company whose annual compensation
exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- -----------------------------------
# SHARES
OTHER RESTRICTED UNDERLYING
NAME AND FISCAL ANNUAL STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) AWARDS (2) (4) COMPENSATION
- ------------------------------ ------ -------- -------- ----------------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arturo G. Torres, ............ 1999 $425,000 -- -- -- -- --
Chairman of the Board 1998 $368,154 $200,000 -- -- 200,000 --
and Chief Executive Officer 1997 $284,635 -- -- -- 60,000 --
Saul Gamoran, (6) ............ 1999 $233,798 -- -- -- -- --
Executive Vice President, 1998 $210,219 -- -- -- 70,000 --
General Counsel and 1997 $180,008 -- -- -- 30,000 --
Secretary
Raymond G. Braun, ............ 1999 $225,000 -- -- -- -- --
President and 1998 $200,577 -- -- -- 70,000 --
Chief Operating Officer (3) 1997 $101,635 -- -- -- 200,000 --
Francisco Saez Moya (5) ...... 1999 $225,000 -- -- -- -- --
President - Play By Play 1998 $200,577 -- -- -- 70,000 --
Europe and Vice Chairman 1997 $156,057 -- -- -- 30,000 --
of the Board
</TABLE>
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary; however, the Company has concluded that the aggregate
amounts of such personal benefits did not exceed the lesser of $50,000 or
10% of annual salary reported for any named executive officer.
(2) The outstanding options were granted pursuant to the Company's Incentive
Plan except for Mr. Braun whom was granted 200,000 non-qualified stock
options pursuant to his employment agreement.
(3) Mr. Braun joined the Company on January 2, 1997.
(4) Options granted on August 29, 1997 were granted outside the Incentive Plan
at an exercise price of $19.00 and options granted on December 11, 1997
were granted pursuant to the Company's Incentive Plan at an exercise price
of $18.9375.
(5) Mr. Francisco Saez Moya resigned from his position as President of Play By
Play Toys & Novelties Europa, S.A., Vice Chairman of the Board and
Director on August 25,1999.
(6) Mr. Saul Gamoran resigned from his position as Executive Vice President,
General Counsel, Secretary and Director on October 22, 1999.
11
<PAGE>
EMPLOYMENT ARRANGEMENTS
Other than employment agreements with Mr. Braun, Mr. Neitz and two other
employees, the Company does not have employment agreements with any of its
United States employees. In November 1996, the Company entered into an
employment agreement with Mr. Braun, which agreement will automatically expire
January 2, 2000, unless it is terminated by the Company or Mr. Braun. The
Company does have standard national employment contracts with all of its Spanish
employees.
STOCK OPTION GRANT TABLE
No options were granted during fiscal year 1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information with respect to the
aggregate amount of options exercised during fiscal 1999, any value realized
thereon, the number of unexercised options at the end of fiscal year 1999
(exercisable and unexercisable) and the value with respect thereto.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END (#) AT FISCAL YEAR END ($) (1)
ACQUIRED VALUE ------------------------------ --------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXCERCISABLE EXERCISABLE UNEXCERCISABLE
- ---- --------------- ------------ ----------- ------------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arturo G. Torres ................... -- -- 285,000 -- -- --
Saul Gamoran (3) ................... -- -- 163,500 35,000 -- --
Raymond G. Braun ................... -- -- 135,010 134,990 -- --
Francisco Saez Moya (2) ............ -- -- 77,000 35,000 -- --
</TABLE>
(1) Total value of options based on fair market value of $2.625 per share as
of July 30, 1999, the last date reported sale price of the Common Stock as
reported by the Nasdaq National Market on that date.
(2) Mr. Francisco Saez Moya resigned from his position as President of Play By
Play Toys & Novelties Europa, S.A., Vice Chairman of the Board and
Director on August 25,1999.
(3) Mr. Saul Gamoran resigned from his position as Executive Vice President,
General Counsel, Secretary and Director on October 22, 1999.
1994 INCENTIVE PLAN
SCOPE. During fiscal 1995, the Board of Directors and shareholders of the
Company approved the Incentive Plan. The Incentive Plan authorizes the Company
to award incentive stock options and non-qualified stock options to purchase
Common Stock and restricted stock to officers and other employees of the
Company. On June 27, 1996, the Company registered with the Securities and
Exchange Commission 700,000 shares authorized under the Incentive Plan. On
August 29, 1997, the Board of Directors amended the Incentive Plan to increase
the number of shares authorized to award incentive options and non-qualified
stock options by 600,000 shares to 1,300,000. This amendment was approved at the
December 1997 shareholders' meeting. On March 17, 1998, the Company registered
with the Securities and Exchange Commission the additional 600,000 shares. The
purpose of the Incentive Plan is to attract, retain and motivate officers and
employees. If an award made under the Incentive Plan expires, is canceled or
otherwise is terminated, those shares will be available for future awards under
the Incentive Plan. The Incentive Plan will terminate on August 24, 2004.
12
<PAGE>
ADMINISTRATION. The Incentive Plan is administered by the Company's
Compensation Committee (the "Committee"). Subject to the provisions of the
Incentive Plan, the Committee will have authority to select those officers and
other employees of the Company to receive awards, to determine the time or times
of receipt, to determine the types of awards and the number of shares covered by
the awards, and to establish the terms, conditions and provisions of such
awards.
STOCK OPTIONS. Both incentive stock options and non-qualified stock
options (collectively referred to as "Stock Options") may be granted pursuant to
the Incentive Plan. All Stock Options granted under the Incentive Plan will have
an exercise price per share to be determined by the Committee, provided that the
exercise price per share under each Stock Option shall not be less than the fair
market value of a share of Common Stock at the time the Stock Option is granted
(110% of such fair market value in the case of incentive stock options granted
to a shareholder who owns 10% or more of the Company's Common Stock). The
maximum term for all Stock Options granted under the Incentive Plan is ten years
(five years in the case of an incentive stock option granted to a shareholder
who owns 10% or more of the Company's Common Stock). Stock Options are
exercisable at such time and in such installments as the Committee may provide
at the time the Stock Option is granted. During fiscal 1999, the Committee
granted incentive stock options to purchase 11,000 shares of Common Stock under
the Incentive Plan to certain officers and employees of the Company. At July 31,
1999, 804,100 incentive stock options were outstanding. The options generally
have a four-year vesting period and are exercisable at prices per share ranging
from $7.25 to $19.00. One-fifth of such options will become exercisable six
months after the date of grant and on each of the first four anniversaries of
the date of grant. In the event of a change in control of the Company, as
defined in the Incentive Plan, awards under the Incentive Plan become
exercisable within 60 days of the change in control. The options exercisable as
of July 31, 1999 are 535,900.
RESTRICTED STOCK. Restricted stock awards are grants of Common Stock made
to officers and employees subject to conditions established by the Committee.
The terms of a restricted stock award, including the restrictions placed on such
shares and the time or times at which such restrictions will lapse, shall be
determined by the Committee at the time the award is made. Unless the Committee
determines otherwise, holders of restricted stock shall have the right to vote
the shares of restricted stock and to receive all dividends thereon. The
Committee may determine at the time of an award of restricted stock that
dividends paid on such shares may be paid to the grantee or deferred. Deferred
dividends (together with any interest accrued thereon) will be paid upon the
lapsing of the restrictions on the shares of restricted stock or forfeited upon
the forfeiture of the shares of restricted stock. The agreements evidencing
awards of restricted stock shall set forth the terms and conditions of such
awards and the effect of a grantee's termination of employment. No restricted
stock shares have been issued pursuant to the Incentive Plan as of July 31,
1999.
TERMINATION AND AMENDMENT. The Incentive Plan may be terminated or amended
by the Board, provided that, in the absence of shareholder approval, no
amendment of the Incentive Plan may materially increase the total number of
shares of Common Stock with respect to which awards may be made under the
Incentive Plan, change the exercise price of a Stock Option, materially modify
the requirements as to eligibility for participation in the Incentive Plan or
materially increase the benefits accruing to participants under the Incentive
Plan. No amendment of the Incentive Plan may adversely alter or impair any Stock
Option or share of restricted stock awarded under the Incentive Plan prior to
such amendment without the consent of the holder thereof.
13
<PAGE>
NON-PLAN OPTIONS
In connection with the employment of Raymond Braun in January 1997,
non-qualified stock options to purchase 200,000 shares of Common Stock were
granted at a purchase price of $8.00 per share. These options vest on or after
the first day of each calendar month, commencing February 1, 1997, through and
including January 1, 2002. In connection with these option grants, the Company
recognized $140,000 of compensation expense and has a balance of $338,333 of
unearned compensation in fiscal 1999.
REGISTRATION OF SHARES
On June 27, 1996, the Company registered 700,000 shares of Common Stock
that are issuable pursuant to the Incentive Plan and such non-qualified stock
options with the United States Securities and Exchange Commission. On March 17,
1998, the Company registered additional 600,000 shares that are issuable
pursuant to the Incentive Plan and such non-qualified stock options with the
United States Securities and Exchange Commission.
RESTRICTION ON ISSUANCE OF STOCK OPTIONS BY CONVERTIBLE DEBENTURE AGREEMENTS
The First Amendment to the Convertible Loan Agreement entered into on October
22, 1999 , limits the Company's ability to issue stock options to employees to
the amount of options held by employees, in the aggregate, as of the date of the
amendment.
14
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table presents certain information as of July 31, 1999
regarding the beneficial ownership of the Company's Common Stock by (i) each
person the Company knows to be the beneficial owner of 5% or more of the
outstanding shares of Common Stock, (ii) each named executive officer, (iii)
each director of the company and (iv) all executive officers and directors of
the Company as a group. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the Company believes that each
shareholder named in this table has sole investment and voting power with
respect to the shares set forth opposite such shareholder's name.
NUMBER
SHARES
BENEFICIALLY
NAME OWNED PERCENTAGE
- ---- -------------- ----------
Arturo G. Torres 1,867,990(1) 24.32%
Francisco Saez Moya (2) 183,719 2.45%
Raymond G. Braun 159,439 1.82%
Saul Gamoran (3) 176,000 1.75%
Manuel F. Barroso 80,000 1.08%
Berto Guerra, Jr. 73,665 *
Steve K. C. Liao 52,000 *
Tomas Duran 43,000 *
Ottis W. Byers 50,000 *
Joe M. Guerra 23,570 *
--------------
All directors and executive
officers as a group (nine persons) 2,709,383 29.46%
==============
* Less than 1%
(1) Includes 49,200 shares held in trust for the benefit of Mr. Torres' three
minor children (16,400 shares each), for which Mr. Torres is the trustee
and has sole voting and investment power.
(2) Mr. Francisco Saez Moya resigned from the Company on August 25, 1999.
(3) Mr. Saul Gamoran resigned from the Company on October 22, 1999.
The business address of all officers and directors of the Company is 4400
Tejasco, San Antonio, Texas 78218-0267.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Torres leases seven land and building packages to third parties with
whom the Company has revenue sharing agreements concerning the placement of
amusement machines, which may benefit Mr. Torres due to percentage rent
provisions in these real property leases. The Company paid such third parties
approximately $142,000 during fiscal 1999, pursuant to the terms of such revenue
sharing agreements. The Company believes the amounts paid to such third parties
were fair and reasonable and were on terms at least as favorable as would be
available from non-affiliated parties.
In the future, all transactions between the Company and its affiliated
entities, executive officers, directors or significant shareholders will be on
terms, which will continue to be no less favorable to the Company than the
Company could obtain from non-affiliated parties.
15
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has served as the Company's independent
accountants since its appointment for fiscal 1992. The Board, on the unanimous
recommendation of the Audit Committee, has selected PricewaterhouseCoopers LLP
as the Company's independent accountants for the fiscal year ending July 31,
2000, subject to ratification by the shareholders at the Annual Meeting.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting to respond to questions and will have an opportunity to make a statement
if they desire to do so.
All services provided to the Company by PricewaterhouseCoopers LLP were
approved by the Audit Committee. The Audit Committee also considered the
possible effect on the independence of PricewaterhouseCoopers LLP by reason of
its rendering such services.
Audit services of PricewaterhouseCoopers LLP for fiscal 1999 included the
audit of the consolidated financial statements, services related to filings with
the SEC, and the performance of limited reviews of the Company's unaudited
interim financial information.
The affirmative vote of a majority of the votes cast on this proposal will
constitute ratification of the appointment of PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR FISCAL YEAR 2000.
16
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no other
business that will be presented by management for consideration at the Annual
Meeting. If any other business properly comes before the Annual Meeting, the
proxy holders intend to vote the proxies as recommended by the Board.
The Company had entered into a Convertible Loan Agreement ("Convertible
Loan Agreement") dated July 3, 1997, pursuant to which the Company issued $15
million of convertible subordinated notes. In March 1999, the Company defaulted
under certain financial covenants of the Convertible Loan Agreement, and in July
1999 the Company defaulted in the payment of interest due on the convertible
subordinated notes.
On October 22, 1999, the Company and the holders of the convertible
subordinated notes entered into a First Amendment to the Convertible Loan
Agreement (the "First Amendment") which, among other things waived existing
defaults under the Convertible Loan Agreement, increased the interest rate from
8.5% to 10.5% per annum, changed the convertible debentures' final maturity date
from June 30, 2004 to December 31, 2000, and adjusted the conversion price from
$16 per share of common stock to the lesser of (i) $16 per share and (ii) the
greater of $6 per share or the average closing price of the Company's common
stock for the 30 days following October 22, 1999. At a conversion price of $6
per share (the lowest possible conversion price), the Company could issue up to
2,500,000 shares of its common stock upon the full conversion of the
subordinated debt, or 1,562,500 additional shares over the number of shares
issuable upon full conversion at $16 per share.
Since the 2,500,000 shares of common stock issuable upon conversion of the
convertible debentures constitute more than 20% of the 7,395,000 outstanding
shares of the Company's common stock, Rule 4460(i) of The Nasdaq Stock Market
normally would require shareholder approval of this re-set of the conversion
price. However, based on an exception to this rule, the Company has received
permission from The Nasdaq Stock Market to omit shareholder approval of the
conversion price re-set, and the Company's Audit Committee has approved the
Company's reliance on the shareholder approval exception.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting
of the shareholders must be received by the Company in writing no later than
August 2, 2000. Proposals must be mailed to Play-By-Play Toys & Novelties, Inc.,
4400 Tejasco, San Antonio, Texas 78218-0267, Attention:
Secretary, Joe M. Guerra.
17
<PAGE>
ANNUAL REPORT (FORM 10-K)
The Company undertakes, on written request and without charge, to provide
each person from whom the accompanying Proxy is solicited with a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1999, as
filed with the SEC, including the financial statements and schedules. Requests
should be addressed to Play-By-Play Toys & Novelties, Inc., 4400 Tejasco, San
Antonio, Texas 78218-0267, Attention: Secretary, Joe M. Guerra.
By Order of the Board of Directors
/S/ JOE M. GUERRA
Joe M. Guerra
Chief Financial Officer,
Secretary/Treasurer
November 24, 1999
18
<PAGE>
PLAY-BY-PLAY TOYS & NOVELTIES, INC
4400 Tejasco
San Antonio, Texas 78218-0267
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arturo G. Torres and Berto Guerra, or any
one or more of them, as proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote, as designated
below, all the shares of common stock of Play By Play Toys & Novelties, Inc.
(the "Company") held of record by the undersigned on November 24, 1999 at the
Annual Meeting of Shareholders to be held on December 13, 1999, or any
adjournments thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the To vote for all nominees
contrary below) [ ] listed below [ ]
(INSTRUCTIONS TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Raymond G. Braun, Manuel Fernandez Barroso, Tomas Duran
2. Proposal to ratify the appointment of PricewaterhouseCoopers LLP, certified
public accountants, as the independent auditors for the Company for the fiscal
year ending July 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
(BACK OF PROXY CARD)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by President or authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated___________________________
________________________________
Signature
________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
