<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
Toys "R" Us
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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:
<PAGE>
TOYS "R" US
461 FROM ROAD
PARAMUS, NJ 07652
MICHAEL GOLDSTEIN
CHIEF EXECUTIVE OFFICER
April 25, 1997
Dear Stockholder:
I am pleased to invite you to our Company's 1997 Annual Meeting of
Stockholders on Wednesday, June 4, 1997, beginning at 10:00 a.m. The meeting
will be held at the Somerset Hills Hotel, located at 200 Liberty Corner Road,
Warren, New Jersey.
As we anticipated during last year's meeting, 1996 was a year of
significant changes as we prepared the Company for the future. Immediately
following the meeting, you are invited to see one of last year's
accomplishments: our new toy store prototype, Concept 2000. The store is our
first Concept 2000 store and is located in Raritan, New Jersey, approximately 10
miles from the meeting site.
Directions and a map to the Somerset Hills Hotel are included in the back
of this letter and can be easily detached from the proxy along the perforated
line. Please bring this map with you to the meeting as it will serve as your
admittance pass to the meeting. Additionally, in order to better accommodate
you, we ask that you contact us at 1-800-236-0397 to advise us that you plan on
attending the 1997 meeting.
Sincerely,
/s/ Michael Goldstein
<PAGE>
SOMERSET HILLS HOTEL
(Map of Northern New Jersey appears here)
FROM NEWARK AIRPORT AND ROUTE 78 WESTBOUND:
Route 78 to Exit 33 (Martinsville-Bernardsville). Turn right
at top of ramp toward Liberty Corner. At second light turn
right to hotel entrance.
FROM PENNSYLVANIA AND ROUTE 78 EASTBOUND:
Route 78 to Exit 33 (Martinsville-Bernardsville). Turn left at
top of ramp. At third light turn right to hotel entrance.
FROM POINTS NORTH AND ROUTE 287 SOUTHBOUND:
Follow Route 287 to Route 78 East (toward Newark). Proceed to
Exit 33 (Martinsville-Bernardsville). Turn left at top of
ramp. At third light turn right to hotel entrance.
FROM POINTS SOUTH AND ROUTE 287 NORTHBOUND:
Stay to the right as I-287 splits. Follow signs to Route 78
East (toward Newark). Proceed to Exit 33
(Martinsville-Bernardsville). Turn left at top of ramp. At
third light turn right to hotel entrance.
200 Liberty Corner Road
Warren, New Jersey 07059
(908) 647-6700
PLEASE PRESENT FOR ADMITTANCE INTO THE MEETING
<PAGE>
TOYS "R" US
461 FROM ROAD
PARAMUS, NJ 07652
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
JUNE 4, 1997
TO THE STOCKHOLDERS OF
TOYS "R" US, INC.
The Annual Meeting of Stockholders of Toys "R" Us, Inc. will be held at the
Somerset Hills Hotel, 200 Liberty Corner Road, Warren, New Jersey 07059, on
Wednesday, June 4, 1997 at 10:00 A.M., for the following purposes:
1. to elect directors;
2. to consider and act upon a proposal to approve the Amended and Restated
Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive Plan (the
"1994 Plan");
3. to consider and act upon a proposal to ratify the 1996 grant of
Restoration Options to each of Michael Goldstein and Robert C. Nakasone
under the 1994 Plan;
4. to consider and act upon a proposal to approve the Amended and Restated
Toys "R" Us, Inc. Management Incentive Compensation Plan;
5. to consider and act upon a proposal to approve the Amended and Restated
Toys "R" Us, Inc. Non-Employee Directors' Stock Option Plan; and
6. to consider and transact such other business as may properly be brought
before the meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 14, 1997 will
be entitled to vote at the meeting.
ANDRE WEISS
SECRETARY
April 25, 1997
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
TOYS "R" US, INC.
461 FROM ROAD
PARAMUS, NEW JERSEY 07652
ANNUAL MEETING OF STOCKHOLDERS
JUNE 4, 1997
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Toys "R" Us,
Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held at the Somerset Hills Hotel, 200 Liberty Corner Road,
Warren, New Jersey 07059, on Wednesday, June 4, 1997 at 10:00 A.M., or at any
adjournment or adjournments thereof.
A stockholder who executes a proxy may revoke it at any time before it is voted.
Attendance at the meeting shall not have the effect of revoking a proxy unless
the stockholder so attending shall, in writing, so notify the secretary of the
meeting at any time prior to the voting of the proxy. A proxy that is properly
signed and not revoked will be voted for the nominees for election as directors
listed herein unless contrary instructions are given or the persons named in the
proxy elect to exercise their discretionary authority to accumulate votes in
favor of less than all nominees. As to the other matters to be presented at the
meeting, all proxies received pursuant to this solicitation will be voted except
as to matters where authority to vote is specifically withheld. Where a choice
is specified as to a proposal, such proposal will be voted in accordance with
such specification, and if no instructions are given, the persons named in the
proxy intend to vote FOR approval of the proposals (the "Proposals") : (i) to
approve the Amended and Restated Toys "R" Us, Inc. 1994 Stock Option and
Performance Incentive Plan (the "1994 Plan"); (ii) to ratify the 1996 grant of
Restoration Options (as hereinafter defined) to each of Michael Goldstein and
Robert C. Nakasone under the 1994 Plan; (iii) to approve the Amended and
Restated Toys "R" Us, Inc. Management Incentive Compensation Plan; and (iv) to
approve the Amended and Restated Toys "R" Us, Inc. Non-Employee Directors' Stock
Option Plan. The Board of Directors knows of no other business to come before
the meeting, but if other matters properly come before the meeting, the persons
named in the proxy intend to vote thereon in accordance with their best
judgment.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, directors, officers and employees of the Company may
solicit proxies by telephone or otherwise. The Company will reimburse brokers or
other persons holding stock in their names or in the names of their nominees for
their charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock. It is anticipated that the mailing of this
Proxy Statement will commence on or about April 25, 1997.
VOTING SECURITIES
The Company had outstanding 285,744,987 shares of common stock ("Common Stock")
at the close of business on April 14, 1997, which are the only securities of the
Company entitled to be voted at the meeting. Each share of Common Stock is
entitled to one vote (except as stated below under "Election of Directors") on
each matter as may properly be brought before the meeting. Only stockholders of
record at the close of business on April 14, 1997 will be entitled to vote.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Directors are elected by a plurality of the votes
cast in the election. Votes that are withheld will be excluded entirely from the
vote and will have no effect. Abstentions may be specified on any proposal other
than the election of directors and will be counted as present for purposes of
determining the existence of a quorum regarding such proposal. Pursuant to
applicable law, abstentions will have the same effect as a negative vote.
1
<PAGE>
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name have the authority to vote on certain "routine" matters when they
have not received instructions from beneficial owners. Brokers that do not
receive instructions are entitled to vote on the election of directors and the
Proposals. Under applicable law, a broker non-vote will have no effect on the
outcome of the election of directors.
Proxies identifying individual stockholders are confidential except: (i) as
necessary to determine compliance with law or assert or defend legal claims;
(ii) as necessary to allow the inspector of elections to certify the results of
a vote; (iii) in the event that a stockholder expressly authorizes disclosure
with respect to his or her vote; (iv) in certain circumstances in a contested
proxy solicitation; or (v) in the event that a stockholder makes a written
comment on a proxy card or an attachment to it. The Company retains an
independent organization to tabulate stockholder votes and to certify voting
results.
PRINCIPAL STOCKHOLDER
As of April 14, 1997, the following are the only entities known to the Company
to be the beneficial owner of more than five percent of the Common Stock:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
<S> <C> <C>
FMR Corp.(1)..................................................... 41,004,721 14.35%
82 Devonshire Street
Boston, Massachusetts 02109
Trimark Financial Corporation(2)................................. 16,263,700 5.69%
One First Canadian Place
Suite 5600, POB 487
Toronto, Ontario M5X 1ES
</TABLE>
(1) According to the Schedule 13G, dated February 14, 1997, filed with the
Securities and Exchange Commission (the "Commission") jointly by FMR Corp.,
Edward C. Johnson 3d, Abigail P. Johnson and Fidelity Management & Research
Company ("Fidelity"), Mr. Johnson is chairman and Ms. Johnson is a director
of FMR Corp. and may be deemed to be members of a controlling group with
respect to FMR Corp. The Schedule 13G indicates that at February 14, 1997:
(i) Fidelity, a wholly-owned subsidiary of FMR Corp., was the beneficial
owner of 37,048,943 shares of Common Stock in its capacity as investment
adviser to various registered investment companies (the "Fidelity Funds")
(the power to vote such shares resides solely with the boards of trustees of
the Fidelity Funds, while the power to dispose of such shares resides with
Mr. Johnson, FMR Corp., Fidelity and the Fidelity Funds); (ii) Fidelity
Management Trust Company, a bank that is wholly-owned by FMR Corp., was the
beneficial owner of 3,814,878 shares of Common Stock; and (iii) Fidelity
International Limited, an investment adviser of which Mr. Johnson is
chairman but which is managed independently from FMR Corp., was the
beneficial owner of 140,900 shares of Common Stock. FMR Corp. and Fidelity
International Limited each disclaim beneficial ownership of Common Stock
beneficially owned by the other.
(2) According to the Schedule 13G, dated February 5, 1997, filed with the
Commission by Trimark Financial Corporation, a corporation incorporated
under the laws of Ontario, Canada ("Trimark"), certain Trimark mutual funds
(the "Trimark Funds"), which are trusts organized under the laws of Ontario,
Canada, are owners of record of 16,263,700 shares of Common Stock. Trimark
Investment Management Inc. ("TIMI"), a corporation incorporated under the
laws of Canada, is a manager and trustee of the Trimark Funds. TIMI is
qualified to act as an investment adviser and manager of the Trimark Funds
in the province of Ontario pursuant to a registration under the Securities
Act (Ontario). Trimark owns 100% of the voting equity securities of TIMI.
Other than as set forth above, there were no persons, entities or groups
known to the Company to be the beneficial owner of more than five percent of the
Common Stock. This determination was based on a review of all statements filed
with respect to the Company since the beginning of the past fiscal year with the
Securities and Exchange Commission pursuant to Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act").
2
<PAGE>
ELECTION OF DIRECTORS
In accordance with the recommendation of its Nominating Committee, the
Board of Directors has proposed for election at the Annual Meeting of
Stockholders the nine individuals listed below to serve (subject to the
Company's By-Laws) as directors of the Company until the next annual meeting and
until the election and qualification of their successors. All such nominees,
with the exception of Arthur B. Newman, are current directors of the Corporation
and were elected by the stockholders at the annual meeting held in 1996. If any
such person should be unwilling or unable to serve as a director of the Company
(which is not anticipated) the persons named in the proxy will vote the proxy
for substitute nominees selected by them unless the number of directors has been
reduced to the number of nominees willing and able to serve.
In electing directors, holders of Common Stock have cumulative voting
rights; that is, each holder of record of Common Stock shall be entitled to as
many votes as shall equal the number of shares owned of record multiplied by the
number of directors to be elected, and may cast all of such votes for a single
director or may distribute them among all or some of the directors to be voted
for, as such holder sees fit. Unless contrary instructions are given, the
persons named in the proxy will have discretionary authority to accumulate votes
in the same manner.
Certain information for each nominee for director is set forth below:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
PRINCIPAL OCCUPATION, EMPLOYMENT, ETC. MARCH 11, 1997 OF CLASS
<S> <C> <C>
Robert A. Bernhard................................................................. 42,841(a)(b) *
Private real estate developer since prior to 1992; director of the Company since
1980; age 70 years.
RoAnn Costin....................................................................... 500 *
President of Reservoir Capital Management, Inc., an investment management firm,
since April 1992; Senior Vice President of The Putnam Companies, a Boston
investment group, since prior to 1992 to April 1992; director of the Company
since 1996; age 44 years.
Michael Goldstein.................................................................. 1,022,752(c) *
Vice Chairman of the Board and Chief Executive Officer of the Company since
February 1994 (also Chief Administrative Officer of the Company since prior to
1992 to February 1994 and Chief Financial Officer since prior to 1992 to January
1993); director of the Company since 1989; age 55 years.
Shirley Strum Kenny................................................................ 10,787(b)(d) *
President of The State University of New York at Stony Brook since September
1994; President of Queens College of The City University of New York since prior
to 1992 to August 1994; director of the Company since 1990; director of Computer
Associates International, Inc.; age 62 years.
Charles Lazarus.................................................................... 1,190,759(e) *
Chairman of the Board since prior to 1992; Chief Executive Officer of the Company
since prior to 1992 to February 1994; director of the Company since 1969;
director of Automatic Data Processing, Inc. and Loral Space and Communications
Ltd.; age 73 years.
Norman S. Matthews................................................................. 2,000(b) *
Independent retail consultant since prior to 1992; President of Federated
Department Stores, Inc. from 1987 to 1988 and Vice Chairman of the Board of
Federated Department Stores, Inc. from 1983 to 1988; director of the Company
since 1995; director of Lechters Inc., Loehmann's Holdings Inc., Finlay
Enterprises Inc., Progressive Corp. and Eye Care Centers of America, Inc.; age 64
years.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
PRINCIPAL OCCUPATION, EMPLOYMENT, ETC. MARCH 11, 1997 OF CLASS
<S> <C> <C>
Howard W. Moore.................................................................... 96,000(f) *
President of Howard Moore Associates, business consultants, since prior to 1992,
director of the Company since 1984; age 66 years.
Robert C. Nakasone................................................................. 1,059,046(g) *
President and Chief Operating Officer since February 1994; Vice Chairman of the
Board and President of Worldwide Toy Stores of the Company since prior to 1992 to
February 1994; director of the Company since 1989; director of Staples, Inc.; age
49 years.
Arthur B. Newman................................................................... 5,000 *
Member of Blackstone Group Holdings, a private investment banking firm, since
prior to 1992; director of Lone Star Industries, Inc. and Premium Standard Farms,
Inc.; nominee for director of the Company; age 53 years.
</TABLE>
* Less than 1% of the outstanding Common Stock.
(a) Includes 5,422 shares owned by a profit sharing plan of which Mr. Bernhard
is the sole beneficiary. Also includes 28,919 shares beneficially owned by
his wife, as to which shares Mr. Bernhard disclaims beneficial ownership.
(b) Includes 8,000 shares (for each of Mr. Bernhard and Ms. Kenny) and 2,000
shares (for Mr. Matthews) with respect to which such persons have the right
to acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage is calculated on the basis that such shares are
deemed outstanding.
(c) Includes 753,430 shares with respect to which Mr. Goldstein has the right to
acquire beneficial ownership upon exercise of currently exercisable options,
of which 370,000 options, although exercisable, provide that the shares
acquired upon the exercise of such options having a value equal to the
aggregate fair market value over the exercise price of such options are
generally subject to forfeiture if Mr. Goldstein does not remain with the
Company until the fifth anniversary from the date such options are granted.
Also includes 239,824 shares required to be held for a minimum of two years
from the date on which such shares were deposited in a trust established by
the Company (the "Grantor Trust"); Mr. Goldstein does not have voting power
with respect to the shares held in the Grantor Trust. The percentage of Mr.
Goldstein's aggregate ownership is calculated on the basis that all such
shares are deemed outstanding.
(d) Includes 1,000 shares beneficially owned by a trust of which Ms. Kenny is
co-trustee, as to which shares Ms. Kenny disclaims beneficial ownership, and
the percentage is calculated on the basis that such shares are deemed
outstanding.
(e) Includes 1,125,000 shares with respect to which Mr. Lazarus has the right to
acquire beneficial ownership upon exercise of currently exercisable options,
and the percentage is calculated on the basis that such shares are deemed
outstanding.
(f) Includes 68,000 shares with respect to which Mr. Moore has the right to
acquire beneficial ownership upon exercise of currently exercisable options,
and the percentage is calculated on the basis that such shares are deemed
outstanding.
4
<PAGE>
(g) Includes 759,475 shares with respect to which Mr. Nakasone has the right to
acquire beneficial ownership upon exercise of currently exercisable options,
of which 370,000 options, although exercisable, provide that the shares
acquired upon the exercise of such options having a value equal to the
aggregate fair market value over the exercise price of such options are
generally subject to forfeiture if Mr. Nakasone does not remain with the
Company until the fifth anniversary from the date such options are granted.
Also includes 274,288 shares required to be held for a minimum of two years
from the date on which such shares were deposited in the Grantor Trust; Mr.
Nakasone does not have voting power with respect to the shares held in the
Grantor Trust. Additionally, includes 2,925 shares beneficially owned by his
minor children as to which shares Mr. Nakasone disclaims beneficial
ownership. The percentage of Mr. Nakasone's aggregate ownership is
calculated on the basis that all such shares are deemed outstanding.
The address of each person named in the table above is c/o Toys "R" Us,
Inc., 461 From Road, Paramus, New Jersey 07652.
As of March 11, 1997, all present executive officers and directors of the
Company as a group (17 persons) owned beneficially 4,368,299 shares of Common
Stock (including 3,635,744 shares with respect to which such persons had the
right to acquire beneficial ownership as of such date or within sixty days
thereof, shares deposited in the Grantor Trust which are subject to forfeiture
under certain circumstances and shares beneficially owned by the family members
of certain executive officers and directors as to which shares such executive
officers and directors disclaim beneficial ownership), which constituted
approximately 1.52% of the shares deemed outstanding on that date. Except for
those shares of which such persons have the right to acquire beneficial
ownership, shares beneficially owned by such family members and shares deposited
in the Grantor Trust, such executive officers and directors have sole voting
power and sole investment power with respect to such shares.
As of March 11, 1997, the Named Officers (as defined below) not identified
in the table above owned beneficially the following shares of Common Stock (in
each case, less than 1% of the shares deemed outstanding on such date): Richard
L. Markee, President of Kids "R" Us and Babies "R" Us Divisions, owned
beneficially 217,858 shares of Common Stock (including 217,800 shares with
respect to which Mr. Markee had the right to acquire beneficial ownership upon
exercise of currently exercisable options); Gregory R. Staley, President of Toys
"R" Us International Division, owned beneficially 184,942 shares of Common Stock
(including 184,800 shares with respect to which Mr. Staley had the right to
acquire beneficial ownership upon exercise of currently exercisable options);
and Louis Lipschitz, Executive Vice President-Chief Financial Officer, owned
beneficially 195,540 shares of Common Stock (including 159,235 shares with
respect to which Mr. Lipschitz had the right to acquire beneficial ownership
upon exercise of currently exercisable options, 28,554 shares required to be
held for a minimum of two years from the date on which such shares are deposited
in the Grantor Trust, and 2,760 shares beneficially owned by certain family
members of Mr. Lipschitz, as to which 2,760 shares Mr. Lipschitz disclaims
beneficial ownership).
The Board of Directors held six meetings during the Company's last fiscal
year. The Board of Directors has an Executive Committee, a Nominating Committee,
an Audit Committee, a Management Compensation and Stock Option Committee (the
"Compensation Committee"), and an Operating Committee.
The Executive Committee currently has as its members Michael Goldstein,
Charles Lazarus (Chairperson), Norman S. Matthews, Robert C. Nakasone and Harold
M. Wit. The Executive Committee of the Board of Directors has and may exercise
all the powers and authority of the full Board of Directors, subject to certain
exceptions. The Executive Committee took action twice by unanimous written
consent during the Company's last fiscal year.
The Nominating Committee currently has as its members three directors who
are not officers or employees of the Company: Robert A. Bernhard, RoAnn Costin
and Shirley Strum Kenny (Chairperson). The Nominating Committee recommends to
the Board of Directors the individuals to be nominated for election as directors
at the annual meeting of stockholders and has the authority to recommend the
individuals to be elected as directors to fill any vacancies or additional
directorships which may arise from time to time on the Board of Directors. The
Nominating Committee considers nominations made in accordance with the procedure
in the following paragraph. The Nominating Committee held one meeting during the
Company's last fiscal year.
5
<PAGE>
The Company's By-Laws provide that nominations for the election of
directors may be made by any stockholder of at least $1,000 in current value of
shares of the Company entitled to vote for the election of directors in writing,
delivered or mailed to the executive offices of the Company, Toys "R" Us, Inc.,
461 From Road, Paramus, New Jersey 07652, not less than 90 days nor more than
120 days prior to the meeting, except that if less than 100 days' notice of the
meeting is given, such written notice shall be delivered or mailed not later
than the close of the tenth day following the day on which notice of the meeting
was mailed. Each notice shall set forth: (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director: (i)
the name, age, business address and residence address of such person; (ii) the
principal occupation or employment of such person; (iii) the class and number of
shares of the Company that are beneficially owned by such person; and (iv) any
other information that is required to be disclosed in solicitations of proxies
for election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act (including without limitation
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (b) as to the Company's
stockholder giving the notice: (i) the name and address, as they appear on the
Company's books, of such stockholder; (ii) the class and number of shares of the
Company that are beneficially owned by such stockholder as of the record date;
(iii) a representation that the stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
and (iv) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedure, such nomination shall be
disregarded.
In accordance with the Company's recently adopted retirement policy,
Non-Employee Directors (as defined below), other than current Directors, may not
serve on the Board of Directors after reaching the age of seventy-two, except
that any such Director who reaches age seventy-two may continue to serve until
the next succeeding annual meeting of stockholders and the election and
qualification of such Director's successor.
The Audit Committee currently has as its members three directors who are
not current or former officers or employees of the Company: RoAnn Costin,
Shirley Strum Kenny and Harold M. Wit (Chairperson). The Audit Committee held
two meetings during the Company's last fiscal year. The Audit Committee: (i)
reviews the procedures employed in connection with the internal auditing program
and accounting procedures; (ii) consults with the independent auditors; (iii)
reviews the reports submitted by such independent auditors; and (iv) makes such
reports and recommendations to the Board of Directors as it may deem
appropriate.
The Compensation Committee currently has as its members three directors who
are not current or former officers or employees of the Company: Robert A.
Bernhard (Chairperson), Milton S. Gould and Norman S. Matthews. The Compensation
Committee held five meetings and took action eight times by unanimous written
consent during the Company's last fiscal year. The Compensation Committee
reviews management compensation standards and practices and functions as the
independent committee under certain of the Company's compensation plans. See
"Report of the Management Compensation and Stock Option Committee on Executive
Compensation".
The Operating Committee consists of three directors and has as its members
Charles Lazarus, Michael Goldstein and Robert C. Nakasone. The Operating
Committee is authorized to incur indebtedness on behalf of the Company within
limits established by the full Board of Directors. The Operating Committee took
action three times by unanimous written consent during the Company's last fiscal
year.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the Company or any of its
subsidiaries ("Non-Employee Directors") each receive $20,000 per annum for
service on the Board and an additional $1,000 for attending any meetings of the
Board and any committee meetings, subject to a maximum $1,000 meeting fee per
day. Effective May 1, 1997: (i) the annual fee will be increased to $30,000;
(ii) the meeting fee will be increased to $1,500 per day; (iii) each
Non-Employee Director who serves as a Chairperson of a Committee will receive an
additional annual fee of $2,500; and (iv) each Non-Employee Director who serves
on the Executive Committee will receive an additional annual fee of $2,500. Such
fees may be taken in the form of Stock Units (see discussion below). Directors
who are also officers or employees of the Company receive no additional
compensation for services as a director, committee participation or special
assignments.
6
<PAGE>
Non-Employee Directors may elect to receive all or a portion of their cash
fees in the form of units representing shares of Common Stock to be purchased in
the name of the Company for the benefit of eligible Directors ("Stock Units").
The Stock Units will generally be settled by delivery of Common Stock upon a
Non-Employee Director's death, retirement or resignation.
Under the Company's Amended and Restated Non-Employee Directors' Stock
Option Plan (the "Amended DSO Plan"), each year: (i) each Non-Employee Director
is granted options to purchase 2,500 shares of Common Stock; and (ii) each
Non-Employee Director who serves as the Chairperson of any committee of the
Board of Directors (consisting of Shirley Strum Kenny, as Chairperson of the
Nominating Committee; Harold M. Wit, as Chairperson of the Audit Committee; and
Robert A. Bernhard, as Chairperson of the Compensation Committee) is granted
additional options to purchase 1,000 shares of Common Stock under the Amended
DSO Plan. Subject to certain conditions, one-fifth of such options become
exercisable on a cumulative basis on each anniversary of the date of grant.
Options expire ten years after the date of grant. Such option grants for the
Company's last fiscal year were made effective November 1, 1996 at an exercise
price of $33.75 per share, the market value of Common Stock on the date of
grant. If the Amended DSO Plan is approved by the stockholders, the following
option grants will be made effective November 1, 1997 and each subsequent year:
(i) each Non-Employee Director will be granted options to purchase 5,000 shares
of Common Stock; (ii) each Non-Employee Director who serves on the Executive
Committee will be granted additional options to purchase 5,000 shares of Common
Stock; and (iii) each Chairperson of a Committee of the Board will continue to
receive an option grant to purchase 1,000 shares of Common Stock. See "Proposal
to Approve the Amended and Restated Toys "R " Us, Inc. Non-Employee Directors'
Stock Option Plan". In addition, each new Non-Employee Director will continue to
be granted options to purchase 10,000 shares of Common Stock upon his or her
election or appointment to the Board of Directors.
Effective January 31, 1994, Charles Lazarus terminated his employment as
Chief Executive Officer of the Company and, pursuant to his employment
agreement, exercised his right to become a consultant to the Company for a
five-year period. Under the terms of his agreement, Mr. Lazarus is required to
refrain from competing either directly or indirectly with any business carried
on by the Company during the term of his consulting period and for three years
thereafter. As a consultant, Mr. Lazarus is obligated to render such consulting
services as may be requested by the Board of Directors at such times as may be
mutually convenient for the Company and Mr. Lazarus. Mr. Lazarus is entitled to
receive as compensation during the five-year consulting period the following
amounts: for the first year an amount equal to his total compensation (base
salary and incentive compensation) received for the full fiscal year prior to
his becoming a consultant (for the fiscal year ended January 29, 1994) and for
the second through fifth years, 90%, 80%, 70% and 60% of such amount,
respectively. For the fiscal year ended February 1, 1997, Mr. Lazarus received
$6,290,024 in consulting fees. The employment agreement also provides that Mr.
Lazarus is entitled to receive a payment of $200,000 a year for five years
commencing at the termination of his consulting period.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the annual and long-term compensation of those persons who were, at February 1,
1997, (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
FISCAL ANNUAL COMPENSATION STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ENDED SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)(1)
<S> <C> <C> <C> <C> <C>
Michael Goldstein........................ 2/1/97 800,000 344,942(2) 264,144(3) 102,891
Vice Chairman of the Board 2/3/96 800,000 135,375 303,430 299,711
and Chief Executive Officer 1/28/95 800,000 402,700 -0- 16,500
Robert C. Nakasone....................... 2/1/97 800,000 344,942(2) 416,339(3) 102,891
President and Chief 2/3/96 800,000 135,375 332,901 303,932
Operating Officer 1/28/95 800,000 402,700 -0- 16,500
Richard L. Markee........................ 2/1/97 412,308 464,094(2) 40,000 50,206
President of Kids "R" Us and 2/3/96 366,154 49,875 147,800 103,036
Babies "R" Us Divisions 1/28/95 350,000 166,420 30,000 16,500
Gregory R. Staley(4)..................... 2/1/97 395,385 143,074(2) 40,000 48,598
President of Toys "R" Us 2/3/96 306,539 49,875 99,800 64,355
International Division
Louis Lipschitz.......................... 2/1/97 342,308 123,893(2) 59,021 40,938
Executive Vice President and 2/3/96 296,923 35,625 88,230 63,343
Chief Financial Officer 1/28/95 266,923 93,963 15,000 16,500
</TABLE>
(1) "All Other Compensation" represents the Company's contributions to the "TRU"
Partnership Employees' Savings and Profit Sharing Plan (the "Profit Sharing
Plan") and, as to the fiscal years ended February 3, 1996 and February 1,
1997, to its Supplemental Executive Retirement Plan (the "SERP") for the
accounts of the Named Officers. See "Report of the Management Compensation
and Stock Option Committee on Executive Compensation."
(2) Includes amounts related to long-term performance unit awards of $289,520
for each of Messrs. Goldstein and Nakasone and $106,920 for each of Messrs.
Markee, Staley and Lipschitz. See "Report of the Management Compensation and
Stock Option Committee on Executive Compensation."
(3) See footnotes 1 and 3 of "Option Grants in Last Fiscal Year" table.
(4) Mr. Staley became an executive officer of the Company on August 28, 1995.
8
<PAGE>
The following table sets forth certain information concerning stock options
granted during the fiscal year ended February 1, 1997 to the Named Officers. The
hypothetical present value on date of grant shown below is presented pursuant to
the rules of the Securities and Exchange Commission (the "Commission") and is
calculated under the Modified Black-Scholes Model for pricing options. The
actual before-tax amount, if any, realized upon the exercise of a stock option
will depend upon the excess, if any, of the market price of the Common Stock
over the exercise price per share of the stock option at the time the stock
option is exercised. There is no assurance that the hypothetical present value
or any value of the stock options reflected in this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
% OF TOTAL
OPTIONS EXERCISE EXPIRATION GRANT DATE
OPTIONS (#) GRANTED(4) PRICE/SHARE ($) DATE PRESENT VALUE ($)(5)
<S> <C> <C> <C> <C> <C>
Michael Goldstein...................... 64,383(1) 0.95 22.38 2/02/1998 188,642
100,000(2) 1.48 27.13 3/14/2006 680,000
85,617(1) 1.27 26.69 2/02/1998 237,159
14,144(1,3) 0.21 26.69 2/02/1998 39,179
Robert C. Nakasone..................... 124,230(1) 1.84 22.38 2/02/1998 363,994
100,000(2) 1.48 27.13 3/14/2006 680,000
25,770(1) 0.38 26.69 2/02/1998 71,383
148,742(1,3) 2.20 26.69 2/02/1998 412,015
17,597(1,3) 0.26 29.94 2/02/1998 55,079
Richard L. Markee...................... 40,000(2) 0.59 27.13 3/14/2006 272,000
Gregory R. Staley...................... 40,000(2) 0.59 27.13 3/14/2006 272,000
Louis Lipschitz........................ 40,000(2) 0.59 27.13 3/14/2006 272,000
629(1) 0.01 27.63 11/02/1997 1,906
3,986(1) 0.06 33.13 11/02/1997 10,722
5,779(1) 0.09 33.13 11/01/1998 23,521
3,675(1) 0.05 33.13 11/01/1999 19,184
4,952(1) 0.07 33.13 11/01/2000 30,851
</TABLE>
(1) Restoration Options received pursuant to the Toys "R" Us, Inc. 1994 Stock
Option and Performance Incentive Plan, as amended (the "1994 Plan"). See
"Report of the Management Compensation and Stock Option Committee on
Executive Compensation".
(2) Non-qualified stock options granted March 1996 under the 1994 Plan. Such
options became exercisable six months after the date of grant. Upon exercise
of the options, the number of shares having a value equal to the aggregate
fair market value over the exercise price of the options is generally
subject to forfeiture if the grantee does not remain with the Company until
the fifth anniversary from the date the options were granted. See "Report of
the Management Compensation and Stock Option Committee on Executive
Compensation."
(3) Restoration Options granted subject to stockholder approval. See "Proposal
to Ratify the 1996 Grant of Restoration Options to each of Michael Goldstein
and Robert C. Nakasone under the Amended and Restated 1994 Stock Option and
Performance Incentive Plan".
(4) Based on a total of 6,752,997 options granted to 34,668 employees of the
Company.
(5) The hypothetical present values on grant date are calculated under the
Modified Black-Scholes Model, which is a mathematical formula used to value
options traded on stock exchanges. This formula considers a number of
factors in hypothesizing an option's present value. Factors used to value
original 1996 options at date of grant include the stock's expected
volatility rate (31.2%), risk-free rate of return (6.2%), current dividend
yield (0%), projected time to exercise (6 years) and projected risk of
forfeiture rate for vesting period (approximately 8% per annum). Restoration
Option values are calculated using the same model and factors as original
options, except that the projected date of exercise is generally the
remaining term of the prior option and the stock's expected volatility rate
(ranging from 28.4% to 32.8%) and risk-free rate of return (ranging from
5.0% to 6.1%) are calculated at date of grant of the Restoration Option.
9
<PAGE>
The following table sets forth information concerning the exercise of
options by the Named Officers during the last fiscal year and the value of
unexercised options held by the Named Officers as of the fiscal year ended
February 1, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
SHARES OF COMMON UNEXERCISED
STOCK UNDERLYING IN-THE-MONEY
VALUE REALIZED ($) OPTIONS AT OPTIONS AT
SHARES OF COMMON (MARKET PRICE FY-END (#) FY-END ($)
STOCK ACQUIRED AT EXERCISE LESS EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) EXERCISE PRICE) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Michael Goldstein........................ 280,958 3,012,542(1) 885,158(2) 2,461,673(4)
324,761(3) 0
Robert C. Nakasone....................... 532,736 5,588,332(1) 733,705(2) 264,106(4)
417,109(3) 0
Richard L. Markee........................ 0 0 217,800(2) 62,400(4)
110,000 0
Gregory R. Staley........................ 0 0 184,800(2) 171,375(4)
0 0
Louis Lipschitz.......................... 51,861 786,721(1) 140,843(2) 2,904(4)
98,392 0
</TABLE>
(1) The amounts set forth under "Value Realized" are the result of the exercise
of options predominantly granted prior to 1989. The value of the exercised
options were not realized in the form of cash but were in the form of
116,814, 216,397, and 25,018 shares of Common Stock for Messrs. Goldstein,
Nakasone and Lipschitz, respectively, and are held in the Grantor Trust for
two years from the date of exercise. Such shares were acquired under the
provisions of the Restoration Option feature of the 1994 Plan, which
encourages continuing employee ownership of Common Stock.
(2) Included in the totals for "Unexercised Options -- Exercisable" are 370,000
for each of Messrs. Goldstein and Nakasone and 187,800, 139,800, and 126,400
options for Messrs. Markee, Staley and Lipschitz, respectively, which,
although exercisable, provide that the shares acquired upon the exercise of
such options having a value equal to the aggregate fair market value over
the exercise price of such options are generally subject to forfeiture if
the grantee does not remain with the Company until the fifth anniversary
from the date such options are granted.
(3) Included in the totals for "Unexercised Options -- Unexercisable" for
Messrs. Goldstein and Nakasone are 14,144 and 166,339 Restoration Options,
respectively, which are subject to stockholder approval at the 1997 Annual
Meeting of Stockholders. See "Proposal to Ratify the 1996 Grant of
Restoration Options to each of Michael Goldstein and Robert C. Nakasone
under the Amended and Restated 1994 Stock Option and Performance Incentive
Plan."
(4) The actual amount, if any, realized upon exercise of the above stock options
will depend on the market price of Common Stock relative to the exercise
price of the stock options at the time the stock options are exercised.
There is no assurance that the values of unexercised in-the-money stock
options reflected in this table will be realized in the amounts set forth
above, or at all.
10
<PAGE>
The following table sets forth information concerning long-term
compensation awards granted under the Toys "R" Us, Inc. Amended and Restated
Management Incentive Plan (the "Incentive Plan") to the Named Officers for the
Company's fiscal year ended February 1, 1997:
LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
NUMBER OF OTHER PERIOD UNDER NON-STOCK
SHARES, UNITS OR UNTIL MATURATION PRICE-BASED PLANS(1)
NAME OTHER RIGHTS (#) OR PAYOUT TARGET(2) ($)
<S> <C> <C> <C>
Michael Goldstein.................................... 658,000 2 years $302,680
658,000 3 years $315,840
Robert C. Nakasone................................... 658,000 2 years $302,680
658,000 3 years $315,840
Richard L. Markee.................................... 243,000 2 years $111,780
243,000 3 years $116,640
Gregory R. Staley.................................... 243,000 2 years $111,780
243,000 3 years $116,640
Louis Lipschitz...................................... 243,000 2 years $111,780
243,000 3 years $116,640
</TABLE>
(1) Each unit awarded annually represents the right to receive a payment in cash
and/or stock (at the discretion of the Compensation Committee) based upon
the attainment of earnings per share levels exceeding earnings per share
hurdles pre-determined by the Compensation Committee for the designated
performance period. All the payments shown are potential assumed amounts.
There is no assurance that the Company will achieve results that would lead
to payments under the Incentive Plan. If payouts are made, the Named
Officers will be entitled to elect to receive shares of Common Stock in lieu
of cash.
(2) If threshold earnings per share are not exceeded, no awards will be paid.
Subject to certain limitations contained in the Incentive Plan relating to
Section 162(m) of the Internal Revenue Code of 1986, as amended, the unit
awards do not provide for maximum payouts.
11
<PAGE>
REPORT OF THE MANAGEMENT COMPENSATION AND STOCK OPTION COMMITTEE ON
EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee is composed entirely of independent outside
directors, none of whom is or has been an officer or employee of the Company.
The Board of Directors has delegated to the Committee the authority to review
and consider the Company's management compensation standards and practices on an
annual basis particularly with regard to the compensation to be paid to the
Chief Executive Officer and the other executive officers of the Company. The
Committee's responsibilities include administering the Company's stock option
plans and agreements and approving all grants to be made in connection
therewith, and administering, setting performance goals and approving awards
under the Toys "R" Us, Inc. Management Incentive Compensation Plan (the
"Incentive Plan").
The Company's executive compensation program is based on its pay for
performance policy and has been designed to:
(Bullet) attract and retain high-caliber talent to meet the organization's
executive resource needs;
(Bullet) attract and retain top-performing executives at the corporate
level and in each of the divisions;
(Bullet) provide compensation opportunities that are fair and competitive
with those offered by comparable organizations;
(Bullet) motivate and reward executives based on corporate, division and/or
individual annual and long-term business performance, strategic
progress and the creation of stockholder value; and
(Bullet) reinforce the mutuality of interest with the Company's
stockholders by linking a major portion of total compensation to
the financial results of the Company or relevant division and the
market value of the Common Stock.
In accordance with the responsibilities delegated by and subject to the
oversight of the Board of Directors, at the beginning of each year the
Compensation Committee reviews the Company's near and long-term strategies and
objectives with the Chief Executive Officer. These form the basis for adopting
or modifying division and corporate annual operating income, net income and
earnings per share plan goals recommended by the Chief Executive Officer. Based
on this review, the Compensation Committee establishes the Company's total
compensation structure for the year, including the elements and level of
compensation opportunities and the variable portion of "at risk" pay for
performance and equity participation. The Compensation Committee considers,
among other matters, marketplace pay levels and practices, as well as the
Company's need to continue to attract, retain and motivate its key employees.
Such compensation structure is discussed with the Board of Directors, which is
asked to ratify base salary amounts for officer level employees, including the
Company's executive officers.
At year-end, the Compensation Committee, in consultation with the Chief
Executive Officer, assesses results achieved and strategic progress relative to
previously approved goals, taking into consideration prevailing economic and
business conditions and opportunities, performance by comparable organizations,
and stockholder value. No particular weightings are assigned by the Compensation
Committee to any such factors. Based on this assessment, the Committee reviews
and considers the Chief Executive Officer's year-end compensation proposals.
In fiscal 1996 (as in fiscal 1995), the Compensation Committee was assisted
in its review and evaluation by Pearl Meyer & Partners, Inc. ("Pearl Meyer"),
national executive compensation consultants retained by the Compensation
Committee to serve as outside experts in the discharge of its responsibilities.
Pearl Meyer provided advice to the Compensation Committee as to the
reasonableness, fairness and competitiveness of compensation awarded to
executive officers of the Company, including the Chief Executive Officer. In so
doing, Pearl Meyer reviewed with the Compensation Committee survey data
regarding compensation levels and practices by a peer group of comparable
companies, consisting of organizations regarded by Pearl Meyer as the
marketplace for comparable management talent at the Company.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Total compensation for target performance under the Company's compensation
program for executive officers for 1996 was generally positioned at the 50th to
the 75th percentile of the peer group, depending upon the individual's level,
position, responsibilities and the degree of difficulty and challenge associated
with 1996's performance objectives. The Compensation Committee has balanced the
program with a high proportion of compensation based on variable performance
incentives so that actual annual and long-term compensation levels will vary
from year to year both below and above those of the peer group directly with
results achieved by the Company and the individual.
The Company's 1996 compensation program for executive officers, including
the Chief Executive Officer, was comprised of base salary, annual cash incentive
and long-term incentive compensation in the form of stock options and
performance unit awards. Over two-thirds of the targeted regular total
compensation of the Chief Executive Officer and all other executive officers of
the Company for 1996 was based upon achieving performance targets relating to
annual and long-term business goals or the market price of the Common Stock.
BASE SALARIES. Base salaries are established within the context of the
total compensation opportunity offered to executive officers. Base salary levels
are set so that the principal compensation opportunities are derived from annual
and long-term cash and stock incentives. Salaries are reviewed annually in
consideration of the Company's overall financial performance as well as the
competitive marketplace (as discussed above) at the appropriate level relative
to the position, responsibilities and performance of each executive officer. The
Compensation Committee is aware that the responsibilities and contributions of
certain of the Company's executive officers transcend those generally associated
with similar positions in the peer group. The base salaries of the Chief
Executive and Chief Operating Officers have not been increased since 1994.
ANNUAL CASH AND STOCK INCENTIVES. Executive officers, including the Chief
Executive Officer, participate in the Incentive Plan under which annual cash
incentives are awarded based on achievement relative to targeted performance
goals for the year. In December 1996, the Incentive Plan was amended to permit
participants to designate a percentage of their awards to be received in Common
Stock of the Company. For 1996, the performance goal was based upon corporate
consolidated pre-tax earnings for all executive officers, and division or
combined division and corporate pre-tax earnings for certain executive officers
who also have divisional responsibilities. Because the threshold earnings goals
set by the Compensation Committee were achieved for 1996, bonuses were awarded
under the foregoing program for 1996 to executive officers of the Company,
including the Chief Executive Officer. However, actual consolidated earnings
fell short of targeted earnings goals and, accordingly, awarded annual bonuses
for most of the executive officers represented a small fraction of targeted
bonuses.
STOCK OPTION AND PERFORMANCE UNIT AWARDS AND OTHER MATTERS. During 1995,
the Compensation Committee grew increasingly concerned regarding the Company's
ability to attract and motivate qualified executive officers and other key
employees, as well as the risk of losing such critical talent in a period of
increasing competition, depressed market prices for the Common Stock and
difficult business conditions. Accordingly, the Compensation Committee
commissioned Pearl Meyer in 1995 to prepare a special in-depth study of the
Company's long-term compensation plans and practices. The study indicated that
the Company's overall and long-term compensation had fallen significantly below
those of other comparable retailers. The Compensation Committee again consulted
with its consultant in 1996 in its continuing review of the Company's
compensation practices. The Compensation Committee took certain actions, as
described below, in order to retain and motivate its executive officers and
other key employees to achieve the Company's long-term performance goals.
STOCK OPTIONS. Stock options have long been a cornerstone of the Company's
program for executive officer and employee compensation. Through this incentive
to create stockholder value and become an owner of Toys "R" Us Common Stock, the
Compensation Committee has sought to create and strengthen the long-term
mutuality of interest between all of the Company's employees and its
stockholders in the Company's growth in real value over the long term.
As a result of the special study, the Compensation Committee made grants of
nonqualified stock options in 1996 to executive officers, including the Chief
Executive Officer, and other key employees which the Compensation Committee
believed would serve to reinforce the Company's ability to retain and motivate
its highly qualified management team. Such stock options have an exercise price
of $27.13 per share, the market price of Common Stock on the date of grant, and
became exercisable six months after the date of grant. The shares received
13
<PAGE>
upon exercise of such options having an aggregate market value in excess of the
aggregate exercise price of the options so exercised are generally subject to
forfeiture if the optionee does not remain with the Company until the fifth
anniversary of the date of option grant.
To promote increased executive share ownership by encouraging the early
exercise of options and retention of shares, in 1995 the Compensation Committee
provided for the grant of non-qualified stock options upon the exercise of
options in a stock-for-stock transaction, subject to the market value of a share
of Common Stock exceeding the option price by at least 33%. Under this feature,
if an option holder pays the exercise price of a stock option and/or the related
withholding taxes using shares of Common Stock, such holder will receive a new
option exercisable at the then-current market price (a "Restoration Option") to
purchase a number of shares of Common Stock equal to the number of shares
surrendered to exercise the original option. A Restoration Option grant does not
dilute stockholders' holdings of Common Stock because the aggregate of the
number of shares of Common Stock and shares of Common Stock underlying options
is not increased. A Restoration Option becomes fully exercisable six months
after the date of grant and is subject to the same forfeiture provisions as the
original options. The term of a Restoration Option is the remaining life of the
original option at the time the original option is exercised. The Compensation
Committee has reserved the authority to impose certain penalties on an executive
who exercises an original option, receives a Restoration Option and sells shares
representing the profits realized upon exercise of the original option within
two years following such exercise.
PERFORMANCE UNIT AWARDS. To enable the Company to offer its executive
officers and other key employees long-term incentive opportunities on a
performance basis that are competitive with those provided by its peer
companies, the Compensation Committee established a long-term performance
program that will be phased in over a three-year period by granting units under
the Incentive Plan to those whose decisions and performance are critical to the
future success of the Company. Each unit awarded annually represents the right
to receive a payment in cash and/or stock (at the discretion of the Compensation
Committee) based upon the attainment of earnings per share levels exceeding an
earnings per share hurdle pre-determined by the Compensation Committee for the
designated performance period. During 1996, the awards were measured on one-year
results. Payments made in connection with such awards are set forth under the
column "Annual Compensation-Bonus" in the Summary Compensation Table and reflect
achieving earnings in excess of the applicable threshold but below targeted
performance. Long-term targets were also set for 1996 through 1997 and for 1996
through 1998. Awards are reflected under the "Long-Term Incentive Plans-Awards
In Last Fiscal Year" table. For all periods, the Compensation Committee has
determined that the results achieved would be computed before giving effect to
the costs of the July 1996 arbitration award rendered against the Company. The
Compensation Committee also amended the Incentive Plan to permit awards to be
deferred or paid in the form of Common Stock.
Performance unit awards by the Compensation Committee are made within a
guideline that takes into account competitive practice and position,
responsibilities, current performance and future potential of each individual
executive officer, including the Chief Executive Officer.
TAX CONSIDERATIONS. The Compensation Committee's policy is to preserve
corporate tax deductions, including deductions for compensation paid to "Covered
Employees" (which are subject to the restrictions contained in Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code")).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer participates in the Company's executive
compensation plans on the same basis as all other executive officers and key
employees. In determining the Chief Executive Officer's compensation
opportunities and performance goals, the Compensation Committee conducts the
same type of competitive review and analysis as it does for other executive
officers. For 1996, the Compensation Committee established the Chief Executive
Officer's total compensation (base salary, annual incentive and performance
units plus regular stock options) for target performance between the 50th and
the 75th percentiles for chief executive officers of the peer group companies.
Because corporate pre-tax earnings exceeded the threshold level, an annual
incentive was awarded to the Chief Executive Officer. In addition, due to
earnings per share above the threshold level, a performance unit award was paid.
However, both corporate pre-tax earnings and earnings per share fell short of
targeted goals; accordingly, the annual incentive and performance unit payouts
were below targeted award levels.
14
<PAGE>
Both the Chief Executive Officer and the Chief Operating Officer
participated in the 1996 stock option grants discussed above, and, in the case
of these two senior executive officers, a portion of which is subject to
ratification by stockholders. See "Proposal to Ratify the 1996 Grant of
Restoration Options to Each of Michael Goldstein and Robert C. Nakasone under
the Amended and Restated 1994 Stock Option and Performance Incentive Plan."
Robert A. Bernhard, Chair
Milton S. Gould
Norman S. Matthews
MEMBERS OF THE MANAGEMENT
COMPENSATION AND STOCK
OPTION COMMITTEE DURING 1996
15
<PAGE>
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on Common Stock, on an indexed basis, against the cumulative
total returns of the S&P Composite-500 Stock Index, the S&P Retail Composite
Index and the S&P Specialty Retail Index for the period of the Company's last
five fiscal years (January 31, 1992 = 100):
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON
TOYS "R" US, INC. COMMON STOCK, S&P 500,
S&P RETAIL COMPOSITE AND
S&P SPECIALTY RETAIL INDICES
(Chart appears here with the following plot points:)
1992 1993 1994 1995 1996 1997
Toys "R" Us 100 117.09 111.01 88.96 66.91 76.03
S & P 500 Index 100 110.57 124.76 125.42 173.85 219.63
S & P Specialty Retail Index 100 113.16 109.12 92.30 76.05 89.31
S & P Retail Composite Index 100 119.59 113.21 105.18 112.31 133.81
(1) The S&P Specialty Retail Index used by the Company in prior years was
modified by Standard and Poor's in 1996, by reducing the number of companies
from nine to four which reflects the elimination of six such companies and
the addition of one new company. Accordingly, the Company has elected to use
the S&P Retail Composite Index, consisting of thirty-five companies. The S&P
Retail Composite Index includes the four companies in the current Specialty
Retail Index as well as many members of the peer group of comparable
companies used by the Compensation Committee in its evaluation and
determination of executive officer compensation. In accordance with the
rules and regulations of the Commission, the Company is including both
indices in the above chart for this transitional year.
COMPLIANCE WITH SECTION 16(A)
The Company believes that all persons who were subject to Section 16(a) of
the Securities Exchange Act, as amended, for the past fiscal year complied with
the filing requirements thereof. In making this disclosure, the Company has
relied on written representations of its directors and executive officers and
its ten percent holders (if any) and copies of the reports that they have filed
with the Commission.
16
<PAGE>
PROPOSAL TO APPROVE THE AMENDED AND RESTATED
TOYS "R" US, INC.
1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
INTRODUCTION
At the 1994 Annual Meeting of Stockholders the Company adopted the Toys "R"
Us, Inc. 1994 Stock Option and Performance Incentive Plan (the "Original 1994
Plan"). Based upon the recommendation of the Compensation Committee, the Board
of Directors approved and adopted amendments to the Original 1994 Plan (as
proposed to be amended, the "Amended 1994 Plan") and recommended such amendments
to the stockholders of the Company. The Amended 1994 Plan differs from the
Original 1994 Plan by: (i) providing that no employee may receive awards of or
relating to more than 35% of the maximum shares of Common Stock available for
awards under the Amended 1994 Plan for any ten year period; (ii) providing that
shares of Common Stock withheld by, or surrendered to, the Company in payment of
the exercise price of options or taxes relating to awards under the Amended 1994
Plan will be available for awards under the Amended 1994 Plan; (iii) adding
performance criteria to the Amended 1994 Plan upon which the grant or vesting of
Restricted Shares, Restricted Units or Performance Units (each as defined in the
Amended 1994 Plan) may be based; (iv) providing that non-statutory stock options
("NSOs") may have an exercise price of not less than 100% of the Market Price
(as defined in the Original 1994 Plan) of the Common Stock on the date of grant;
(v) limiting the aggregate grant of Restricted Shares, Restricted Units,
Performance Units and Unrestricted Shares (each as defined below) to 3,000,000
shares of Common Stock; (vi) providing the Compensation Committee with the
authority currently only provided to the Board of Directors with authority to
amend, modify or terminate the Amended 1994 Plan; and (vii) eliminating existing
voting and dividend limits on holders of Restricted Shares. The Company is not
requesting additional shares of Common Stock under the amended 1994 Plan. The
following description of the Amended 1994 Plan is a summary and is qualified in
its entirety by reference to the complete text of the Amended and Restated 1994
Stock Option and Performance Incentive Plan, which is attached hereto as Exhibit
A.
AMENDMENTS
MAXIMUM INDIVIDUAL AWARD
The Amended 1994 Plan provides that no employee may receive awards of or
relating to more than 35% of the maximum shares of Common Stock available for
award under the Amended 1994 Plan for any ten year period (the "Maximum
Individual Award"). Under the Original 1994 Plan, no employee has been permitted
to receive awards of or relating to more than 250,000 shares of Common Stock in
the aggregate during any fiscal year of the Company.
Since the adoption of the Original 1994 Plan, the Compensation Committee
has granted Restoration Options to the Company's management. Restoration Options
are granted when holders of options use shares of Common Stock to pay for the
exercise price of such options and related withholding taxes. Upon such
exercise, such holders receive Restoration Options exercisable for a number of
shares of Common Stock equal to the number surrendered to exercise the original
option. The exercise price of Restoration Options is the current Market Price on
the date the original option is exercised and the date on which the Restoration
Option is granted. Restoration Options require continuing employee ownership of
Common Stock and are an important component of the Company's compensation
philosophy. See "Report of the Management Compensation and Stock Option
Committee on Executive Compensation." A Restoration Option grant does not dilute
stockholders' holdings of Company shares since the number of shares of Common
Stock and options held by an executive prior to exercise is not increased. A
Restoration Option becomes fully exercisable six months after the date of grant
and is subject to the same forfeiture provisions as the original options. The
term of a Restoration Option is the remaining life of the original option at the
time the original option is exercised.
The 250,000 share limitation in the Original 1994 Plan presents a practical
impediment to the utilization of Restoration Options. The Board of Directors
believes the issuance of Restoration Options is in the best interests of the
Company; however, some limitation is necessary to satisfy the requirements of
Section 162(m) of the Code and the Company believes that the Maximum Individual
Award limitation satisfies such requirements while providing sufficient
flexibility for the utilization of Restoration Options. Accordingly, the Board
of Directors approved and adopted, subject to stockholder approval, the Maximum
Individual Award as part of the Amended
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1994 Plan. Although the utilization of the increased flexibility of the Maximum
Individual Award is intended to accommodate Restoration Options, the Maximum
Individual Award will apply to all awards under the Amended 1994 Plan.
AVAILABLE SHARES
Under the Original 1994 Plan, shares of Common Stock attributable to lapsed
or forfeited awards could become available for subsequent awards. Because of the
increasing use of the Restoration Options feature, the Company is experiencing
receipt of shares of Common Stock upon exercise of options. The receipt of such
shares is anti-dilutive and, accordingly, the Board of Directors has proposed to
make such shares, as well as shares withheld or surrendered in payment of taxes
relating to awards under the Amended 1994 Plan, available for future awards
under the Amended 1994 Plan.
GRANTS BASED UPON PERFORMANCE CRITERIA
The Original 1994 Plan did not specify performance criteria upon which the
Compensation Committee could base the grant or vesting of Restricted Shares,
Restricted Units and Performance Units (each as defined below). To preserve the
deductibility of such grants as performance-based compensation under Section
162(m) of the Code (see "Federal Income Tax Consequences -- LIMITATIONS ON THE
COMPANY'S COMPENSATION DEDUCTION"), the Board of Directors has included in the
Amended 1994 Plan, subject to stockholder approval, alternative measures of
performance that the Compensation Committee may consider when setting
performance thresholds and targets upon which the grant or vesting of Restricted
Shares, Restricted Units and Performance Units may be based. Such Performance
Objectives (the "Performance Objectives"), which would be applied to a specific
period, would be based upon a desired level of one or more of the following
criteria on an absolute or relative basis, and, where applicable, measured
before or after interest, depreciation, amortization, service fees,
extraordinary items and/or special items: (i) pre-tax earnings; (ii) operating
earnings; (iii) after-tax earnings; (iv) return on investment; (v) earned value
added; (vi) earnings per share; (vii) revenues; (viii) cash flow or cash flow
return on investment; (ix) return on assets or return on net assets; (x) return
on capital; (xi) return on equity; (xii) return on sales; (xiii) operating
margin; or (xiv) total shareholder return or stock price appreciation; provided
that with respect to certain participants, the Performance Objectives may be
based on divisional rather than consolidated results, or a combination of the
two. The Compensation Committee has the authority to modify the Performance
Objectives subject to obtaining shareholder approval to the extent and in the
manner required under Section 162(m) of the Code.
NSO EXERCISE PRICE
At present the Compensation Committee may grant NSOs under the Original
1994 Plan with an exercise price equal to 90% of the Market Price on the date of
grant. The Compensation Committee has, however, granted options under the
Original 1994 Plan only with an exercise price equal to 100% of the Market Price
on the date of grant. In order to more closely align the interests of holders of
NSOs with the stockholders of the Company, the Board of Directors has determined
to provide that NSO grants may be made at an exercise price not less than 100%
of the Market Price of the Common Stock on the date of grant.
Under both the Original 1994 Plan and the Amended 1994 Plan, the "Market
Price" of the Common Stock on any day shall be determined as follows: (i) if the
Common Stock is listed on a national securities exchange or quoted through the
NASDAQ National Market System, the Market Price shall be the average of the high
and low reported Consolidated Trading sales prices, or if no such sale is made
on such day, the average of the closing bid and asked prices reported on the
Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on
the NASDAQ inter-dealer quotation system, the Market Price on any day shall be
the average of the representative bid and asked prices at the close of business
for such day; or (iii) if the Common Stock is not listed on a national stock
exchange or quoted on NASDAQ, the Market Price shall be the average of the high
bid and low asked prices reported by the National Quotation Bureau, Inc. for
such day.
LIMITATION ON COMMON STOCK GRANTS
Under the Original 1994 Plan, the Compensation Committee may grant awards
to employees in the following forms, among others: (i) shares of Common Stock
subject to certain restrictions ("Restricted Shares"); (ii) units representing
shares of Common Stock ("Restricted Units"); (iii) units that do not represent
shares of
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Common Stock but may be paid in Common Stock ("Performance Units"); and (iv)
shares of unrestricted Common Stock ("Unrestricted Shares"). At present, such
grants have not been limited by amount. The Board of Directors continues to
believe that options should continue to be the predominant form for equity based
incentives to employees and has determined to limit such other grants to
3,000,000 shares of Common Stock of the 15,000,000 shares of Common Stock
authorized under the Original 1994 Plan.
COMPENSATION COMMITTEE AUTHORITY TO AMEND
At present, the Board of Directors is empowered to suspend, amend, modify
or terminate the Amended 1994 Plan; however, the Company's stockholders must
approve any amendment that would (i) increase the aggregate number of shares
issuable under the Amended 1994 Plan; (ii) increase the benefits accruing to
employees under the Amended 1994 Plan; or (iii) materially modify the
requirements for eligibility to participate in the Amended 1994 Plan. Because
the Compensation Committee is authorized to make other determinations under the
Amended 1994 Plan and is authorized to act on substantially all other
compensation matters relating to the Company's management, the Board of
Directors has determined, subject to stockholder approval, to provide the
Compensation Committee with such authority in addition to the Board of
Directors.
RIGHTS OF HOLDERS OF RESTRICTED SHARES
Under the Original 1994 Plan, any recipients of grants of Restricted Shares
would not enjoy the rights of a stockholder to vote or receive cash dividends or
other cash distributions with respect to their Restricted Shares. The Board of
Directors believed that this restriction limited the benefits of an equity award
that would be made to align the recipient's interests with those of the
Company's stockholders. Accordingly, the Amended 1994 Plan provides that, unless
the Compensation Committee determines otherwise, holders of Restricted Shares
shall have the same rights as other stockholders with respect to the right to
vote and receive cash dividends or other cash distributions.
PURPOSE OF PLAN
The purpose of the Amended 1994 Plan is to encourage and enable employees
of the Company and its subsidiaries to acquire a proprietary interest in the
Company through the ownership of Common Stock, and other rights with respect to
the Common Stock. Such ownership provides employees with a more direct stake in
the future welfare of the Company and encourages them to remain with the Company
and its subsidiaries. Management believes that the Amended 1994 Plan encourages
qualified persons to seek and accept employment with the Company and its
subsidiaries.
MAXIMUM SHARES AVAILABLE
The maximum aggregate number of shares of Common Stock available for award
under the Plan to employees of the Company and its subsidiaries is 15,000,000
(of which 10,079,040 shares were available as of April 14, 1997) subject to the
Maximum Individual Award. The Compensation Committee may, at its discretion,
also award Tax Offset Payments (as defined below) under the Amended 1994 Plan
subject to such maximum number of shares available for issuance. The shares of
Common Stock available under the Amended 1994 Plan and all awards are subject to
adjustment in certain circumstances as hereinafter described.
ADMINISTRATION OF THE PLAN
A committee of two or more outside directors administers the Amended 1994
Plan, and such committee must be composed of eligible directors. The
determination of which members of the Board serve on this committee is made in
accordance with the requirements of Section 162(m) of the Code (and any
regulations promulgated thereunder). Such committee has the full power in its
discretion to grant awards under the Amended 1994 Plan, to determine the terms
thereof, to interpret the provisions of the Amended 1994 Plan and to take such
action as it deems necessary or advisable for the administration of the Amended
1994 Plan. The Board of Directors has authorized the Compensation Committee to
function as the committee under the Amended 1994 Plan.
ELIGIBILITY AND PARTICIPATION
All employees of the Company and its subsidiaries are generally eligible to
receive awards under the Amended 1994 Plan, although stock option grants to
non-management employees are being made under the Toys
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"R" Us, Inc. 1995 Employee Stock Option Plan. Participation in the Amended 1994
Plan is at the discretion of the Compensation Committee and is based upon the
employee's present and potential contributions to the success of the Company and
its subsidiaries and such other factors as the Compensation Committee deems
relevant.
TYPE OF AWARDS UNDER THE PLAN
The Amended 1994 Plan provides that the Compensation Committee may grant
awards to employees in any of the following forms, subject to such terms,
conditions and provisions as the Compensation Committee may determine to be
necessary or desirable: (i) incentive stock options ("ISOs"); (ii) NSOs; (iii)
stock appreciation rights ("SARs"); (iv) Restricted Shares; (v) Restricted
Units; (vi) Performance Units; (vii) Unrestricted Shares; and (viii) tax offset
payments ("Tax Offset Payments").
GRANTS OF OPTIONS AND SARS
The Compensation Committee may award ISOs and/or NSOs to employees
(collectively, "Options"). SARs may be awarded either in tandem with Options
("Tandem SARs") or on a stand-alone basis ("Nontandem SARs").
OPTION/SAR PRICE
The exercise price of an option is determined by the Compensation Committee
at the time of the grant. The exercise price determined with respect to an
Option is also applicable in connection with the exercise of any Tandem SAR
granted with respect to such Option. At the time of grant of a Nontandem SAR,
the Compensation Committee specifies the base price of the shares of Common
Stock to be used for determining the amount of cash or number of shares of
Common Stock to be distributed upon the exercise of such Nontandem SAR. Neither
the option price per share of Common Stock nor the base price of Nontandem SARs
will be less than 100% of the Market Price of the Common Stock on the date of
such grant. The closing market price of the Common Stock, as reported in the New
York Stock Exchange Consolidated Trading tables on April 14, 1997, was $ 26.875
per share.
VESTING
The Compensation Committee will determine at the time of grant the terms
under which Options and SARs shall vest and become exercisable.
SPECIAL LIMITATIONS ON ISOS
No ISO may be granted to an employee who owns, at the time of the grant,
stock representing more than 10% of the total voting power of all classes of
stock of the Company or its subsidiaries (a "10% Stockholder") unless the
exercise price for the shares subject to such ISO is at least 110% of the Market
Price on the date of grant and such ISO award is not exercisable more than five
years after its date of grant. In addition, the total fair market value of
shares subject to ISOs which are exercisable for the first time by an employee
in a given calendar year shall not exceed $100,000, valued as of the date of the
ISO's grant. ISOs may not be granted more than 10 years after the date of
adoption of the Amended 1994 Plan by the Board of Directors.
EXERCISE OF OPTIONS AND SARS
An Option may be exercised in whole or in part in accordance with
procedures established by the Compensation Committee. Common Stock purchased
upon the exercise of the Option shall be paid for in full at the time of
purchase. Such payment shall be made in cash or, if the Compensation Committee
so permits, through delivery of shares of Common Stock, or a combination of cash
and shares of Common Stock. Any shares of Common Stock so delivered shall be
valued at their Market Price on the date of exercise. If payment for exercised
Options is made through the delivery of shares of Common Stock, the Compensation
Committee, in accordance with procedures it established, may grant Restoration
Options (which would be NSOs) to the person exercising the Option for the
purchase of a number of shares equal to the number of shares of Common Stock
delivered to the Company in connection with the payment of the exercise price of
the Option and the payment of or surrender of shares for any withholding taxes
due upon such exercise. The exercise price per share under each Restoration
Option shall be the Market Price of the Common Stock on the date the Restoration
Option is granted.
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Tandem SARs are exercisable only to the extent that the related Option is
exercisable and only for the period determined by the Compensation Committee.
Upon exercise of all or a portion of Tandem SARs, the related Option shall be
canceled with respect to an equal number of shares of Common Stock. Similarly,
upon exercise of all or a portion of an Option, the related Tandem SARs shall be
canceled with respect to an equal number of shares of Common Stock. Nontandem
SARs shall be exercisable for the period determined by the Compensation
Committee.
SURRENDER OR EXCHANGE OF SARS
Upon surrender of a Tandem SAR and the related unexercised Option, an
employee is entitled to receive shares of Common Stock having an aggregate
Market Price equal to (i) the Market Price of the shares subject to the
unexercised Option, less (ii) the aggregate exercise price specified in the
Option. Upon surrender of a Nontandem SAR, an employee is entitled to receive
shares of Common Stock having an aggregate Market Price equal to (i) the Market
Price of the shares covered by the Nontandem SAR, less (ii) the aggregate base
price of such shares specified by the Compensation Committee. The Compensation
Committee, at its discretion, may cause all or any portion of such payment to be
made in cash in lieu of Common Stock. Fractional shares resulting from the
exercise of an SAR are paid in cash.
NONTRANSFERABILITY OF OPTIONS AND SARS
Options and SARs are not transferable except by will or applicable laws of
descent and distribution. The Compensation Committee may, however, authorize
certain transfers to the extent allowable under applicable law.
EXPIRATION OF OPTIONS
Options will expire at such time as the Compensation Committee determines.
ISOs may not be exercised more than 10 years from the date of the grant, unless
held by a 10% Stockholder, in which case such ISOs may not be exercised more
than five years from the date of grant.
TERMINATION OF OPTIONS AND SARS
Except as expressly determined by the Compensation Committee in its sole
discretion, no Option or SAR shall be exercisable after 30 days following an
employee's termination of employment with the Company or a subsidiary, unless
such termination of employment occurs by reason of such employee's Disability,
Retirement, death or a Relocation Event or Special Event (each as defined in the
Amended 1994 Plan). In addition, the Compensation Committee may, in its sole
discretion, cause any Option or SAR to be forfeited upon an employee's
termination of employment if the employee was terminated for cause (as defined
in the Amended 1994 Plan).
RESTRICTED SHARES
Restricted Shares granted under the Amended 1994 Plan may not be sold,
transferred, pledged or otherwise encumbered or disposed of during the
restricted period established by the Compensation Committee. The restrictions
applicable to Restricted Shares may lapse upon completion of a specified period
of service and/or when one or more specified Performance Objectives have been
satisfied. The Compensation Committee may also impose additional restrictions on
an employee's right to dispose of or encumber Restricted Shares. Unless the
Compensation Committee determines otherwise, holders of Restricted Shares shall
have the right to vote such shares and the right to receive cash dividends with
respect to such shares.
Upon termination of an employee's employment prior to the end of the
applicable restricted period, Restricted Shares granted to such employee shall
be forfeited; however, in the event of such employee's retirement, death, total
disability, or certain other events the Compensation Committee shall have the
discretion to determine otherwise.
RESTRICTED UNITS AND PERFORMANCE UNITS
The Compensation Committee may award Restricted Units, which are equivalent
to one share of Common Stock, and Performance Units which will have a specified
value or formula-based value at the end of a performance period. The
Compensation Committee shall determine performance periods and Performance
Objectives
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in connection with each grant of Restricted Units or Performance Units.
Restricted Units may be granted without Performance Objectives subject to the
completion of a specified period of service.
Vesting of Restricted Units and Performance Units will occur upon
achievement of the applicable objectives within the applicable performance
period. It is intended that vesting of Restricted Units and Performance Units
may be based upon achieving one or more Performance Objectives established by
the Compensation Committee. Payment for vested Restricted Units and Performance
Units may be in cash, Common Stock or any combination thereof, as determined by
the Compensation Committee.
No voting or dividend rights attach to the Restricted Units. The
Compensation Committee may, however, credit an employee's Restricted Unit
account with additional shares equivalent to the fair market value of any
dividends paid on a number of shares of Common Stock equal to the number of
Restricted Units held by such employee.
UNRESTRICTED SHARES
Unrestricted Shares may also be granted at the discretion of the
Compensation Committee. No payment shall be required for the Unrestricted
Shares.
TAX OFFSET PAYMENTS
The Compensation Committee may make Tax Offset Payments to assist employees
in paying income taxes incurred as a result of their participation in the
Amended 1994 Plan. The number of shares with respect to which Tax Offset
Payments may be awarded will not exceed the number of shares available for
issuance under the Amended 1994 Plan. The amount of the Tax Offset Payments will
be determined by multiplying a percentage (established by the Compensation
Committee) by all or a portion of the taxable income recognized by an employee
upon (i) the exercise of a NSO or SAR; (ii) the disposition of shares received
upon exercise of an ISO; (iii) the lapse of restrictions on Restricted Shares;
(iv) the award of Unrestricted Shares; or (v) payments of Restricted Units or
Performance Units.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The number and class of shares available under the Amended 1994 Plan may be
adjusted by the Compensation Committee to prevent dilution or enlargement of
rights in the event of various changes in the capitalization of the Company. At
the time of grant of any award, the Compensation Committee may provide that the
number and class of shares issuable in connection with such award shall be
adjusted in certain circumstances to prevent dilution or enlargement of rights.
TERMINATION
Awards granted prior to a termination of the Amended 1994 Plan shall
continue in accordance with their terms following such termination. No
amendment, suspension or termination of the Amended 1994 Plan shall adversely
affect the rights of an employee in awards previously granted without such
employee's consent.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is based upon an analysis of the Code and judicial
and administrative authorities now in effect. Any such change could be
retroactive. Moreover, the following is only a summary of federal income tax
consequences and the federal income tax consequences to employees may be either
more or less favorable than those described below depending on their particular
circumstances.
INCENTIVE STOCK OPTIONS
All options that qualify under the rules of Section 422 of the Code will be
entitled to "incentive option" treatment. In general, neither the grant nor the
exercise of an ISO awarded under the Amended 1994 Plan will result in taxable
income to the employee or a deduction to the Company. However, the excess of the
fair market value of the Common Stock acquired upon exercise of an ISO over the
option price is included in the "alternative minimum taxable income"of the
optionee for the year in which the ISO is exercised and may subject the optionee
to increased taxes under the "alternative minimum tax." To receive incentive
option treatment, generally, the optionee must not dispose (a "disqualifying
disposition") of the Common Stock within two years after the option
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is granted and must hold the Common Stock itself for at least one year after the
transfer of such Common Stock to such optionee.
If Common Stock acquired pursuant to the exercise of an ISO is disposed of
in a disqualifying disposition, any gain realized by the optionee generally will
be taxable at the time of such disqualifying disposition as (i) ordinary income
to the extent of the difference between the exercise price and the lesser of (a)
the fair market value of the Common Stock on the date the ISO is exercised and
(b) the amount realized on such disqualifying disposition; and (ii) short-term
or long-term capital gain to the extent of any excess of the amount realized on
the disposition over the fair market value of the Common Stock on the date the
ISO was exercised. Upon a disqualifying disposition, the Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee at the time such income is recognized.
Payment for Common Stock upon the exercise of an ISO may, at the discretion
of the Compensation Committee, be made in whole or in part with other shares of
Common Stock. If an optionee uses stock acquired pursuant to the exercise of any
ISO to acquire other stock in connection with the exercise of an ISO, such use
may constitute a disqualifying disposition of the stock so used.
NONSTATUTORY STOCK OPTIONS
Generally, no taxable income will be recognized by the optionee and no
deduction will be available to the Company upon the grant of a NSO, including a
NSO that is a Restoration Option. Upon exercise of a NSO, an optionee generally
will recognize an amount of ordinary income and the Company will be entitled to
a corresponding tax deduction equal to the amount by which the fair market value
of the shares on the exercise date exceeds the exercise price.
STOCK APPRECIATION RIGHTS, RESTRICTED UNITS AND PERFORMANCE UNITS
The grant of a SAR, Restricted Unit or Performance Unit will not result in
any federal income tax consequences to the employee or the Company. Generally,
the employee will recognize ordinary income upon the receipt of payment pursuant
to a SAR, Restricted Unit or Performance Unit, and the Company will be entitled
to a corresponding deduction, in an amount equal to the fair market value of the
Common Stock and the aggregate amount of cash received.
RESTRICTED SHARES
Generally, absent an election to be taxed currently under Section 83(b) of
the Code (a "Section 83(b) Election"), there will be no federal income tax
consequences to either the employee or the Company upon the grant of Restricted
Shares. At the expiration of the restriction period and the satisfaction of any
other restrictions applicable to the Restricted Shares, the employee will
recognize ordinary income and the Company will be entitled to a corresponding
deduction in an amount equal to the fair market value of the Common Stock at
that time. If an employee makes a Section 83(b) Election within 30 days after
the date the Restricted Shares are granted, the employee will recognize ordinary
income at the time of the receipt of the Restricted Shares and the Company will
be entitled to a corresponding deduction, in an amount equal to the fair market
value (determined without regard to applicable restrictions) of the shares at
such time. If a Section 83(b) Election is made, no additional income will be
recognized by the employee upon the lapse of restrictions on the shares, but, if
the shares are subsequently forfeited, the employee will not be entitled to any
loss or deduction in respect of such forfeiture.
UNRESTRICTED SHARES
Generally, the employee will recognize ordinary income upon the receipt of
Unrestricted Shares, and the Company will be entitled to a corresponding
deduction, in an amount equal to the fair market value of the Unrestricted
Shares.
TAX OFFSET PAYMENTS
Tax Offset Payments will constitute ordinary income to an employee when
received by an employee or when used by the Company to satisfy its withholding
obligations with respect to an employee. The Company generally will be entitled
to a tax deduction equal to the amount of the Tax Offset Payment included in an
employee's income.
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LIMITATIONS ON THE COMPANY'S COMPENSATION DEDUCTION
Under Section 162(m) of the Code, the Company may not deduct otherwise
deductible compensation paid to "Covered Employees" (i.e., generally, the Chief
Executive Officer and the four highest compensated officers of the Company) to
the extent that such compensation exceeds $1 million. An exception applies,
however, for performance-based compensation if the terms under which such
compensation is paid are approved by the Company's stockholders and certain
other requirements are satisfied. Although the Company intends that awards under
the Amended 1994 Plan (other than grants of Unrestricted Shares and Tax Offset
Payments, as described below) will satisfy the requirements to be considered
performance-based compensation for purposes of Section 162(m) of the Code, there
is no assurance such awards will satisfy such requirements, and, accordingly,
Section 162(m) of the Code may limit the amount of deductions otherwise
available to the Company (as described in the foregoing summary) with respect to
awards to "Covered Employees" under the Amended 1994 Plan. The inclusion of the
Maximum Individual Award and the Performance Objectives discussed above satisfy
the requirements of Section 162(m) by establishing a maximum number of shares
that may be represented by awards granted to any employee and by specifying the
performance criteria that may be used by the Compensation Committee with respect
to awards made under the Amended 1994 Plan. In addition, because the grant of
Unrestricted Shares and the payment of Tax Offset Payments will not be
conditioned upon the achievement of performance goals, the deduction
attributable to the grant of Unrestricted Shares and the payment of Tax Offset
Payments to "Covered Employees" may be limited under Section 162(m) of the Code.
TAX WITHHOLDING
The Compensation Committee may require payment, or withhold payments made
under the Amended 1994 Plan, in order to satisfy applicable withholding tax
requirements.
EFFECT OF APPROVAL OF THE AMENDED 1994 PLAN
Approval by the stockholders of the Amended 1994 Plan will permit greater
utilization of Restoration Options and permit the Compensation Committee the
ability to award Restricted Shares, Restricted Units and Performance Units based
upon the specified performance criteria, thereby preserving the deductibility of
the resulting compensation. As the administration of the Amended 1994 Plan
involves discretionary choices to be made by the Compensation Committee, the
effect of the changes to the Original 1994 Plan included in the Amended 1994
Plan, if approved by the stockholders, is not determinable. If the Amended 1994
Plan is not approved, the Compensation Committee will make future grants, if
any, only in accordance with the terms of the Original 1994 Plan prior to the
proposed amendments thereto referred to herein.
APPROVAL OF PLAN
Approval of the Amended 1994 Plan requires the affirmative vote of a
majority of the shares of Common Stock represented at the meeting in person or
by proxy and entitled to vote on the matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES FOR
APPROVAL OF THE AMENDED 1994 PLAN.
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PROPOSAL TO RATIFY THE 1996 GRANT OF RESTORATION OPTIONS
TO EACH OF MICHAEL GOLDSTEIN AND ROBERT C. NAKASONE
UNDER THE AMENDED AND RESTATED 1994 STOCK OPTION AND
PERFORMANCE INCENTIVE PLAN
GENERAL
During 1996, each of Michael Goldstein and Robert C. Nakasone exercised
options previously granted to him. Because Messrs. Goldstein and Nakasone used
shares of Common Stock they owned to pay the exercise price of these options and
the related withholding taxes, they received Restoration Options. Unless and
until stockholder approval is obtained at the 1997 Annual Meeting of
Stockholders to increase the maximum grants to any particular employee during a
particular period, the Original 1994 Plan does not permit grants of options to
any particular employee in the aggregate relating to in excess of 250,000 shares
of Common Stock in any fiscal year. See "Proposal to Approve the Amended and
Restated Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive Plan." As
a result of the August exercise of options, Mr. Goldstein received, subject to
stockholder approval, Restoration Options for 14,144 shares of Common Stock in
excess of such 250,000 share limit, and Mr. Nakasone received, subject to
stockholder approval, Restoration Options for 166,339 shares of Common Stock in
excess of such 250,000 share limit. Consequently, the grants of Restoration
Options for such 14,144 and 166,339 shares of Common Stock were made subject to
approval by the stockholders of the Company.
Of the Restoration Options subject to stockholder approval, all of Mr.
Goldstein's Restoration Options and 148,742 of Mr. Nakasone's Restoration
Options have an exercise price of $26.69 per share, and 17,597 of Mr. Nakasone's
Restoration Options have an exercise price of $29.94 per share.
The Restoration Options granted to Messrs. Goldstein and Nakasone in August
1996 expire on February 2, 1998, the expiration date of the original related
options. Shares of Common Stock received with the grant of Restoration Options
representing the profits realized upon exercise of the original option are held
in the Grantor Trust for two years from the date of such exercise.
FEDERAL INCOME TAX CONSEQUENCES
For a description of the federal income tax consequences of the grant and
exercise of Restoration Options see "Proposal to Approve the Amended and
Restated Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive Plan
-- Federal Income Tax Consequences".
VOTE REQUIRED
Ratification of the Restoration Options requires the affirmative vote of a
majority of the shares of Common Stock represented at the meeting in person or
by proxy and entitled to vote on the matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE THEIR SHARES
FOR THE PROPOSAL TO GRANT THE OPTIONS.
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PROPOSAL TO APPROVE THE AMENDED AND RESTATED
TOYS "R" US, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
INTRODUCTION
At the 1994 Annual Meeting of Stockholders, the Company approved and
adopted the Toys "R" Us, Inc. Management Incentive Compensation Plan (the
"Incentive Plan"). The Compensation Committee has since that time approved and
adopted amendments to the Incentive Plan, which (i) permit the Compensation
Committee to base performance awards on multiple-year targets; (ii) add
additional performance objectives for the Compensation Committee to consider
when establishing targets for performance under the Incentive Plan; and (iii)
permit participants in the Incentive Plan to designate a percentage of incentive
awards received under the Incentive Plan to be paid in the form of Common Stock
in lieu of cash (collectively, the "Incentive Plan Amendments"). The following
description of the Incentive Plan and the proposed amendments thereto is a
summary and is qualified in its entirety by reference to the Amended and
Restated Toys "R" Us, Inc. Management Incentive Compensation Plan (as proposed
to be amended, the "Amended Incentive Plan"), which is attached hereto as
Exhibit B.
AMENDMENTS
MULTIPLE YEAR AWARDS
The Compensation Committee determined that in order to meet the Company's
objectives for recruitment, retention and long-term compensation needs, the
Incentive Plan should be amended to allow awards to be based upon performance
over multiple years. Accordingly, subject to stockholder approval, the
Compensation Committee included in the Amended Incentive Plan the authority to
set targets for incentive awards based upon performance over one or more fiscal
years. Prior thereto, the Compensation Committee was permitted to establish
incentive targets only for a single fiscal year.
PERFORMANCE OBJECTIVES
The Compensation Committee was advised by Pearl Meyer that additional
performance criteria should be specified in the Amended Incentive Plan upon
which incentive awards for performance could be based. Accordingly, the
Compensation Committee adopted additional Performance Objectives which the
Compensation Committee must adopt, generally within 90 days after the start of
each fiscal year, a target ("Target") for such fiscal year (or for multiple
years beginning with such years) equal to a desired level of any or a
combination of the following financial results of the Company on a consolidated
basis either on an absolute or relative basis. The Performance Objectives, which
are identical to those proposed under the Amended 1994 Plan, would be based upon
a desired level of one or more of the following criteria on an absolute or
relative basis, and where applicable, measured before or after interest,
depreciation, amortization, service fees, extraordinary items and/or special
items: (i) pre-tax earnings; (ii) operating earnings; (iii) after-tax earnings;
(iv) return on investment; (v) earned value added; (vi) earnings per share;
(vii) revenues; (viii) cash flow or cash flow return on investment; (ix) return
on assets or return on net assets; (x) return on capital; (xi) return on equity;
(xii) return on sales; (xiii) operating margin; or (xiv) total stockholder
return or stock price appreciation; provided that, with respect to certain
Participants (as defined below), the Performance Objectives may be based upon
divisional rather than consolidated results, or a combination of the two. The
Performance Objectives currently permitted by the Incentive Plan include only
items (i) through (vi). The Performance Objectives may be measured before or
after interest, depreciation, amortization, service fees, extraordinary items
and/or special items.
EQUITY ENHANCEMENTS
The Compensation Committee, in furtherance of the Company's goal of
encouraging management to own equity in the Company, included in the Amended
Incentive Plan a provision allowing Participants in the Amended Incentive Plan
to designate a percentage of awards to be received, in lieu of cash, in the form
of Common Stock. Participants under the Incentive Plan could receive such awards
in cash only. The purpose of such amendment is to facilitate increasing the
ownership of equity interests in the Company, thereby further aligning the
interests of the Company's management with the Company's stockholders.
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DESCRIPTION OF THE AMENDED INCENTIVE PLAN
Under the Amended Incentive Plan, the participants in the Amended Incentive
Plan, constituting approximately fifty-six persons (the "Participants"), are
eligible to receive an award after the close of each fiscal year of the Company
based upon the attainment and certification of performance goals established by
the Compensation Committee.
The Compensation Committee assigns to each Participant a percentage of his
or her base salary ("Base Salary Percentage") which is awarded as a bonus in the
event that 100% of the Target is achieved. With respect to each Target, the
Compensation Committee also specifies a separate amount based upon one or more
of the Performance Objectives (a "Base Amount"), which, if not achieved, shall
result in no bonus being awarded. At the same time, the Compensation Committee
also adopts a mathematical formula or matrix for the fiscal year which indicates
the extent to which bonuses shall be paid if the applicable Base Amounts are
exceeded.
Provided that the applicable Base Amount is exceeded (and subject to
certain limitations discussed in the next paragraph), each Participant is
awarded an incentive bonus after the close of the fiscal year of a portion of
his or her base salary representing his or her Base Salary Percentage in
accordance with the Compensation Committee's formula or matrix depending upon
the extent to which the applicable Base Amount was exceeded.
Except as the Compensation Committee may otherwise provide in its sole
discretion, all bonus awards under the Amended Incentive Plan are contingent
upon the Participant remaining in the employ of the Company or its subsidiaries.
Furthermore, the Amended Incentive Plan provides that the annual bonuses of
"covered employees" within the meaning of Section 162(m) of the Code (generally,
the Company's Chief Executive Officer and the four other most highly compensated
officers) ("Covered Employees"), as a group, shall not exceed a maximum amount
equal to 0.5% of the Company's consolidated pre-tax earnings, and no individual
Covered Employee may receive an annual bonus exceeding 35% of such maximum
amount. In addition, the Compensation Committee retains discretion under the
Amended Incentive Plan to (i) increase or decrease the bonus payable to any
Participant who is not a Covered Employee or (ii) decrease the bonus payable to
any Covered Employee (or increase such bonus to the extent permitted under
Section 162(m) of the Code), in each case, to reflect the individual performance
and contribution of, or other factors relating to, such Participant.
If any Performance Objective upon which bonuses for a fiscal year or years
are based shall have been affected by special factors (including material
changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual or unplanned items) which in the
Compensation Committee's judgment should or should not be taken into account in
the equitable administration of the Amended Incentive Plan, the Compensation
Committee may, for any purpose of the Amended Incentive Plan, adjust such Target
or criterion for such fiscal year (and subsequent fiscal years, as appropriate)
and make credits, payments and reductions accordingly under the Plan; provided,
however, that the Compensation Committee shall not have the authority to make
any such adjustments with respect to bonuses paid to any Participant who is at
such time a Covered Employee.
The Amended Incentive Plan may be amended by the Compensation Committee
provided that no such amendment shall be effective that alters the bonus or
bonus criteria applicable to a Covered Employee for the fiscal year in which
such amendment is made or any prior fiscal year, except as may be permitted
under Section 162(m) of the Code. The Board of Directors of the Company may
generally terminate the Amended Incentive Plan at any time, provided that
bonuses earned but unpaid are paid promptly after such termination.
EFFECT OF THE AMENDED INCENTIVE PLAN
As the administration of the Amended Incentive Plan involves discretionary
choices to be made by the Compensation Committee and the Participants, the
effect of the changes to the Incentive Plan included in the Amended Incentive
Plan, if approved by the stockholders, is not determinable. However, consistent
with the provisions of Section 162(m), the Company has made long-term incentive
grants covering 1996-1997 and 1996-1998. See "Report of the Management
Compensation and Stock Option Committee on Executive Compensation --
Compensation of Executive Officers". If the Amended Incentive Plan is not
approved, the Compensation Committee will make future grants, if any, only in
accordance with the terms of the Incentive Plan prior to its amendment.
Accordingly, awards based on multiple-year targets or on performance goals
(other than those listed
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in clauses (i) through (vi) above under the caption "Amendments -- PERFORMANCE
OBJECTIVES") will not be permitted.
APPROVAL OF THE AMENDED INCENTIVE PLAN
Approval of the Amended Incentive Plan requires the affirmative vote of a
majority of the shares of Common Stock present in person or by proxy and
entitled to vote on the matter.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE THEIR SHARES
FOR THE PROPOSAL TO ADOPT THE AMENDED INCENTIVE PLAN.
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PROPOSAL TO APPROVE THE AMENDED AND RESTATED
TOYS "R" US, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
GENERAL
The following description of the Amended DSO Plan is a summary and is
qualified in its entirety by reference to the Amended DSO Plan which is attached
hereto as Exhibit C.
The Company's Non-Employee Directors' Stock Option Plan (the "DSO Plan")
provides for the granting of options to purchase Common Stock to members of the
Board of Directors of the Company who are not employees of the Company or any of
its subsidiaries ("Non-Employee Directors"). The DSO Plan is designed to provide
a means of giving existing and new Non-Employee Directors an increased
opportunity to acquire an investment in the Company, thereby maintaining and
strengthening their desire to remain with or join the Company's Board of
Directors and further aligning their interests with the interests of the
stockholders of the Company. The DSO Plan was originally approved by the
Company's stockholders at the 1991 Annual Meeting of Stockholders. The DSO Plan
was amended by approval of the Company's stockholders at the 1996 Annual Meeting
of Stockholders, to increase grants of stock options to new Non-Employee
Directors, to increase annual grants of stock options to all Non-Employee
Directors and to provide additional grants of stock options to Non-Employee
Directors who serve as Chairperson of any Committee of the Board of Directors.
AMENDMENTS
In its 1996 executive compensation review, the Compensation Committee's
compensation consultants reviewed director compensation and noted that the
Company's total director compensation was below the median of comparable
companies. Accordingly, the Board of Directors increased certain fees payable to
Directors (see "Election of Directors -- Compensation of Directors"), adopted a
plan that would permit directors' fees to be converted to equity interests in
the Company and, subject to stockholder approval, adopted the Amended DSO Plan
providing for (a) an increase in the number of shares of Common Stock that may
be issued under the DSO Plan from 200,000 to 500,000 (options to purchase
113,500 shares of Common Stock having already been granted, net of
cancellations, through March 31, 1997); and (b) commencing on November 1, 1997,
an annual grant of an option to purchase 5,000 shares of Common Stock to each
Non-Employee Director and an annual grant of an option to purchase 5,000 shares
of Common Stock to each Non-Employee Director who serves on the Executive
Committee of the Board of Directors. Each new Non-Employee Director will
continue to be granted options to purchase 10,000 shares of Common Stock upon
his or her election or appointment to the Board of Directors, and each
Chairperson of a Committee of the Board of Directors will continue to receive an
option grant to purchase 1,000 shares of Common Stock.
The effect of the Amended DSO Plan, if approved by the stockholders, is as
follows: (i) the number of shares of Common Stock available under the Amended
DSO Plan should be sufficient for the remaining term of the Amended DSO Plan;
and (ii) effective November 1, 1997, and each year thereafter all Non-Employee
Directors will receive the options described in clause (b) above.
Prior to the Amended DSO Plan all Non-Employee Directors received an annual
grant of an option to purchase 2,500 shares of Common Stock and no additional
grant of options was awarded to Non-Employee Directors who served on the
Executive Committee of the Board of Directors.
THE AMENDED DSO PLAN
The remaining provisions of the DSO Plan remain unchanged in the Amended
DSO Plan. The exercise price of options granted under the Amended DSO Plan is
100% of the market value of such shares on the date of grant. One-fifth of the
shares of Common Stock covered by an option becomes exercisable on a cumulative
basis on each anniversary of the date of grant (if the holder thereof has been a
Non-Employee Director of the Company at all times since such date of grant);
provided, however, that if the holder of an option ceases to be a Non-Employee
Director prior to the date that an option is fully exercisable by reason of
retirement (after reaching age 60 at least six months after the date of grant),
death or disability, in each case, if such holder has been a member of the Board
of Directors for at least five years prior to the date of such cessation, all of
the shares of Common Stock covered by the Option will become immediately
exercisable.
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Options granted under the Amended DSO Plan expire no later than 10 years
from the date of grant and no options may be granted after September 19, 2000.
Payment for shares of Common Stock purchased upon exercise of an option must be
made in full upon exercise, in cash. Adjustments in the number of shares issued
and sold under the Amended DSO Plan and in outstanding options will be made to
reflect stock dividends, recapitalizations and similar events. Options are not
transferable other than by will or the laws of descent and distribution.
If a Non-Employee Director terminates his or her service on the Board of
Directors for any reason (other than retirement, death or disability), any
exercisable option that has not expired may be exercised at any time until the
earlier of (i) the fifth anniversary of the date of termination and (ii) the
date of expiration of such option with respect to the number of shares of Common
Stock that were exercisable on the date the Non-Employee Director terminated his
or her service with the Company; provided, however, that such option will
terminate immediately if such former Non-Employee Director becomes a director,
officer, agent or owner of a competitor of the Company.
The Amended DSO Plan is administered by the Board of Directors, which has
the full and final authority to interpret the Amended DSO Plan and to adopt and
amend such rules and regulations for the administration of the Amended DSO Plan
as the Board may deem desirable. In addition, the Board of Directors has the
right, generally, to amend, suspend or terminate the Amended DSO Plan at any
time; provided, however, that unless first duly approved by the holders of
Common Stock entitled to vote thereon, no amendment or change may be made in the
Amended DSO Plan: (i) increasing the maximum number of shares for which options
may be granted under the Amended DSO Plan; (ii) increasing the number of shares
subject to an option; (iii) reducing the purchase price previously specified for
the shares subject to options; (iv) extending the period during which options
may be granted or exercised under the Amended DSO Plan; or (v) changing the
class of persons eligible to receive options under the Amended DSO Plan.
The Amended DSO Plan is not subject to any of the requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Amended DSO
Plan is not, nor is it intended to be, qualified under Section 401(a) of the
Code.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Options granted or to be granted under the Amended DSO Plan will be
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Code. An optionee will not recognize any income
at the time he or she is granted an option. An optionee will recognize ordinary
income upon exercise of a non-qualified stock option in an amount equal to the
excess of the fair market value on the exercise date of the shares of Common
Stock issued to an optionee over the exercise price. The optionee's holding
period with respect to the shares acquired will begin on the date of exercise.
The Company will generally be entitled to a deduction for Federal income tax
purposes at the same time and in the same amount as any optionee recognizes
ordinary income in connection with the exercise of an option. If the Amended DSO
Plan is not approved, future grants will continue to be made under the DSO Plan.
VOTE REQUIRED
Approval of the Amended DSO Plan requires the affirmative vote of a
majority of the votes cast at the meeting by the holders of the outstanding
shares of Common Stock entitled to vote thereon who are present in person or by
proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE THEIR SHARES
FOR THE PROPOSAL TO ADOPT THE AMENDED DSO PLAN.
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APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed and designated Ernst &
Young LLP, independent auditors, New York, New York, to audit the consolidated
financial statements of the Company for the fiscal year ending January 31, 1998.
Representatives of Ernst & Young LLP are expected to be present at the
meeting and will be afforded the opportunity to make a statement if they desire
to do so, and such representatives are expected to be available to respond to
appropriate questions
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the annual meeting to be held
in 1998 must be received for inclusion in the Company's proxy statement and form
of proxy by December 26, 1997.
By order of the Board of Directors
ANDRE WEISS
SECRETARY
April 25, 1997
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EXHIBIT A
AMENDED AND RESTATED
TOYS "R" US, INC.
1994 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
The underlined language reflects the amendments to this Plan discussed elsewhere
in this Proxy Statement and was not part of the Original 1994 Plan.
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. Toys "R" Us, Inc., a Delaware
corporation (the "Corporation"), hereby establishes a stock incentive plan to be
known as the "Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive
Plan" (the "Plan"). The Plan shall become effective as of November 1, 1993,
subject to the approval of the Corporation's stockholders at the 1994 Annual
Meeting of Stockholders. In the event that such stockholder approval is not
obtained, any awards made hereunder shall be canceled and all rights of
employees with respect to such awards shall thereupon cease. Upon approval by
the Board of Directors of the Corporation (the "Board") and the Board's
Management Compensation and Stock Option Committee (the "Committee"), awards may
be made as provided herein.
1.2 PURPOSE. The purpose of the Plan is to encourage and enable all
employees (subject to such requirements as may be prescribed by the Committee)
of the Corporation and its subsidiaries to acquire a proprietary interest in the
Corporation through the ownership of the Corporation's common stock, par value
$.10 per share ("Common Stock"), and other rights with respect to the Common
Stock. Such ownership will provide such employees with a more direct stake in
the future welfare of the Corporation and encourage them to remain with the
Corporation and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with the Corporation
and its subsidiaries.
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one or all
of the following forms: (i) incentive stock options ("Incentive Stock Options")
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) non-qualified stock options ("Non-qualified Stock
Options") (unless otherwise indicated, references in the Plan to "Options" shall
include both Incentive Stock Options and Non-qualified Stock Options); (iii)
stock appreciation rights ("Stock Appreciation Rights"), as described in Article
6 hereof, which may be awarded either in tandem with Options ("Tandem Stock
Appreciation Rights") or on a stand-alone basis ("Nontandem Stock Appreciation
Rights"); (iv) shares of Common Stock which are restricted as provided in
Article 9 hereof ("Restricted Shares"); (v) units representing shares of Common
Stock, as described in Article 10 hereof ("Restricted Units"); (vi) units which
do not represent shares of Common Stock but which may be paid in the form of
Common Stock, as described in Article 11 hereof ("Performance Units"); (vii)
shares of Common Stock that are not subject to any conditions to vesting
("Unrestricted Shares"); and (viii) tax offset payments ("Tax Offset Payments"),
as described in Article 13 hereof.
2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 15,000,000 subject to
adjustment pursuant to Article 14 hereof; provided, that the aggregate shares of
Common Stock underlying Restricted Shares, Restricted Units, Performance Units
and Unrestricted Shares awarded under the Plan shall not exceed 3,000,000
subject to adjustment pursuant to Article 14 hereof. In addition, Tax Offset
Payments which may be awarded under the Plan will not exceed the number of
shares available for issuance under the Plan. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Corporation. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Option or any
Nontandem Stock Appreciation Rights under the Plan expires unexercised or is
terminated, surrendered or canceled (other than in connection with the exercise
of Stock Appreciation Rights) without being exercised in whole or in part for
any reason, or any
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Restricted Shares, Restricted Units or Performance Units are forfeited, or if
such awards are settled in cash in lieu of shares of Common Stock, then such
shares or units shall be available for subsequent awards under the Plan, upon
such terms as the Committee may determine. Shares of Common Stock (i) withheld
by the Company in payment of the exercise price of options or taxes relating to
awards, or (ii) surrendered to the Company in payment of the exercise price of
options or taxes relating to awards, will be available for awards under the
Plan.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent award, the
Committee shall have the right, at its discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be upon such terms and
conditions as are specified by the Committee at the time the new award is
granted.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. Awards shall be determined, and the Plan shall be
administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board.
Except as permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock, stock options, stock
appreciation rights or any other equity security or derivative security of the
Corporation or any of its affiliates pursuant to the Plan or any other plan of
the Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee; (ii) is an
employee or former employee of the Corporation; or (iii) receives remuneration
from the Corporation, either directly or indirectly, in any capacity other than
as a director.
3.2 POWERS OF COMMITTEE. Subject to the express provisions of the Plan, the
Committee shall have the power and authority (i) to grant Options and to
determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by each
Option and any performance objectives or vesting standards applicable to each
Option; (ii) to designate Options as Incentive Stock Options or Non-qualified
Stock Options and to determine which Options, if any, shall be accompanied by
Tandem Stock Appreciation Rights, (iii) to grant Tandem Stock Appreciation
Rights and Nontandem Stock Appreciation Rights and to determine the terms and
conditions of such rights; (iv) to grant Restricted Shares and to determine the
term of the restricted period and other conditions and restrictions applicable
to such shares; (v) to grant Restricted Units and Performance Units and to
determine the performance objectives, performance periods and other conditions
applicable to such shares or units; (vi) to grant Unrestricted Shares; (vii) to
determine the amount of, and to make, Tax Offset Payments; and (viii) to
determine the employees to whom, and the time or times at which, Options, Stock
Appreciation Rights. Restricted Shares, Restricted Units, Performance Units and
Unrestricted Shares shall be granted.
3.3 DELEGATION. The Committee may delegate to one or more of its members or
to any other person or persons such ministerial duties as it may deem advisable;
provided, however, that the Committee may not delegate any of its
responsibilities hereunder if such delegation would cause the Plan to fail to
comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants, or other
professional advisors and shall be entitled to rely upon the advice, opinions or
valuations of any such advisors.
3.4 INTERPRETATIONS. The Committee shall have sole discretionary authority
to interpret the terms of the Plan, to adopt and revise rules, regulations and
policies to administer the Plan to make any other factual determinations which
it believes to be necessary or advisable for the administration of the Plan. All
actions taken and interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Corporation, all employees who
have received awards under the Plan and all other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Committee, nor any person
to whom ministerial duties have been delegated, shall be personally liable for
any action, interpretation or determination made with respect to the Plan or
awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any liability he or
she may incur with respect to any such action,
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interpretation or determination, to the extent permitted by applicable law and
to the extent provided in the Corporation's Certificate of Incorporation and
Bylaws, as amended from time to time, or under any agreement between any such
member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all employees of the Corporation or any of its
subsidiaries (subject to such requirements as may be prescribed by the
Committee); PROVIDED, HOWEVER, that no employee may receive awards of or
relating to more than 35% of the maximum shares of Common Stock available for
award under the Plan as set forth in Section 2.2 hereof in a ten-year period;
provided, further, that any grants to any one employee relating to in excess of
250,000 shares of Common Stock in the aggregate in either fiscal 1996 or 1997
until the Corporation's 1997 Annual Meeting of Stockholders shall not be
exercisable unless and until such excess grants are ratified by the
Corporation's stockholders. Awards may be made to a director of the Corporation
who is not also a member of the Committee, provided that the director is also an
employee. In determining the employees to whom awards shall be granted and the
number of shares to be covered by each award, the Committee shall take into
account the nature of the services rendered by such employees, their present and
potential contributions to the success of the Corporation and its subsidiaries
and such other factors as the Committee in its sole discretion shall deem
relevant.
As used herein the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 40% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation (as
such term is defined in Section 424 (f) of the Code) shall be eligible to
receive Incentive Stock Options.
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION OR INCENTIVE STOCK OPTION. In
connection with any grant of Options, the Committee shall designate in the
written agreement required pursuant to Article 16 hereof whether the Options
granted shall be Incentive Stock Options or Non-qualified Stock Options, or in
the case both are granted, the number of shares of each.
5.3 OPTION PRICE. The purchase price per share under each Incentive Stock
Option shall be the Market Price (as hereinafter defined) of the Common Stock on
the date the Incentive Stock Option is granted. The purchase price per share
under each Non-qualified Stock Option shall be specified by the Committee, but
in no event shall it be less than 100% of the Market Price on the date the
Non-qualified Stock Option is granted. In no case, however, shall the purchase
price per share of either an Incentive Stock Option or Non-qualified Stock
Option be less than the par value of the Common Stock ($.10). Notwithstanding
the foregoing, to the extent required by the Code, the purchase price per share
under each Non-qualified Stock Option granted to an employee who is treated as a
"covered employee" (as defined in Section 162(m)(3) of the Code) on the date
such Non-Qualified Option is exercised shall not be less than 100% of the Market
Price of the Common Stock on the date of the grant. In the case of an Incentive
Stock Option granted to an employee owning (actually or constructively under
Section 424(d) of the Code), more than 10% of the total combined voting power of
all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market Price
of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted through the NASDAQ National Market System, the Market Price on any day
shall be the average of the high and low reported Consolidated Trading sales
prices, or if
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no such sale is made on such day, the average of the closing bid and asked
prices reported on the Consolidated Trading listing for such day; (ii) if the
Common Stock is quoted on the NASDAQ inter-dealer quotation system, the Market
Price on any day shall be the average of the representative bid and asked prices
at the close of business for such day; or (iii) if the Common Stock is not
listed on a national stock exchange or quoted on NASDAQ, the Market Price on any
day shall be the average of the high bid and low asked prices reported by the
National Quotation Bureau, Inc. for such day. In no event shall the Market Price
of a share of Common Stock subject to an Incentive Stock Option be less than the
fair market value as determined for purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in connection with
the exercise of any Tandem Stock Appreciation Rights granted with respect to
such Option.
5.4 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any subsidiary)
shall not exceed $100,000.
5.5 LIMITATION ON TIME OF GRANT. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan is
approved by stockholders of the Corporation.
5.6 EXERCISE AND PAYMENT. Options may be exercised in whole or in part.
Common Stock purchased upon the exercise of Options shall be paid for in full at
the time of purchase. Such payment shall be made in cash or, in the discretion
of the Committee, through delivery of shares of Common Stock or a combination of
cash and Common Stock, in accordance with procedures to be established by the
Committee. Any shares so delivered shall be valued at their Market Price on the
date of exercise. Upon receipt of notice of exercise and payment in accordance
with procedures to be established by the Committee, the Corporation or its agent
shall (except as the Committee may otherwise determine on or prior to the date
of grant of the Options being exercised) deliver to the person exercising such
Options (or his or her designee a certificate for such shares. In the event that
payment for exercised Options is made through the delivery of shares of Common
Stock, the Committee, in accordance with procedures established by the
Committee, may grant Non-qualified Stock Options ("Restoration Options") to the
person exercising the Option for the purchase of a number of share equal to the
number of shares underlying the number of shares of Common Stock delivered to
the Corporation in connection with the payment of the exercise price of the
Option and the payment of or surrender of shares for any withholding taxes due
upon such exercise. The purchase price per share under each Restoration Option
shall be the Market Price of the Common Stock on the date the Restoration Option
is granted.
5.7 TERM. The term of each Option granted hereunder shall be determined by
the Committee; provided, however, that, notwithstanding any other provision of
the Plan, in no event shall an Incentive Stock Option be exercisable after ten
(10) years from the date it is granted, or in the case of an Incentive Stock
Option granted to a 10% Stockholder, five (5) years from the date it is granted.
5.8 RIGHTS AS A STOCKHOLDER. A recipient of Options shall have no rights as
a stockholder with respect to any shares insurable or transferable upon exercise
thereof until the date a stock certificate is issued to such recipient
representing such shares. Except as otherwise expressly provided in the Plan, no
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
5.9 GENERAL RESTRICTIONS. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
affected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any
Option, require the individual to whom the Option is to be granted to enter an
agreement with the Corporation stating that as a condition precedent to each
exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee may
prescribe.
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5.10 CANCELLATION OF STOCK APPRECIATION RIGHTS. Upon exercise of all or a
portion of an Option, the related Tandem Stock Appreciation Rights shall be
canceled with respect to an equal number of shares of Common Stock.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1 GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights
may be awarded by the Committee in connection with any Option granted under the
Plan, either at the time the Option is granted or thereafter at any time prior
to the exercise, termination or expiration of the Option. Nontandem Stock
Appreciation Rights may also be granted by the Committee at any time. At the
time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 6.4 below. The base price of any Nontandem Stock
Appreciation Rights shall be not less than 100% of the Market Price of a share
of Common Stock on the date of grant. Stock Appreciation Rights shall be subject
to such terms and conditions not inconsistent with the other provisions of the
Plan as the Committee shall determine.
6.2 LIMITATIONS ON EXERCISE. Tandem Stock Appreciation Rights shall be
exercisable only to the extent that the related Option is exercisable and shall
be exercisable only for such period as the Committee may determine (which period
may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be canceled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.
6.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights shall entitle the recipient to surrender to the Corporation
unexercised the related Option, or any portion thereof, and to receive from the
Corporation in exchange therefor that number of shares of Common Stock having an
aggregate Market Price equal to (A) the excess of (i) the Market Price of one
(1) share of Common Stock as of the date the Tandem Stock Appreciation Rights
are exercised over (ii) the option price per share specified in such Option,
multiplied by (B) the number of Common Stock subject to the Option, or portion
thereof, which is surrendered. Cash shall be delivered in lieu of any fractional
shares.
6.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The exercise of
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of shares of Common Stock having an aggregate Market
Price equal to (A) the excess of (i) the Market Price of one (1) share of Common
Stock as of the date on which the Nontandem Stock Appreciation Rights are
exercised over (ii) the base price of the shares covered by the Nontandem Stock
Appreciation Rights, multiplied by (B) the number of shares of Common Stock
covered by the Nontandem Stock Appreciation Rights, or the portion thereof being
exercised. Cash shall be delivered in lieu of any fractional shares.
6.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as it reasonably
practicable after the exercise of any Stock Appreciation Rights, the Corporation
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full shares of Common Stock to which the recipient is
entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to
the Market Price, as of the date of exercise, of any resulting fractional
shares, and (ii) if the Committee causes the Corporation to elect to settle all
or part of its obligations arising out of the exercise of the Stock Appreciation
Rights in cash pursuant to Section 6.6 hereof, deliver to the recipient an
amount in cash equal to the Market Price, as of the date of exercise, of the
shares of Common Stock it would otherwise be obligated to deliver.
6.6 CASH SETTLEMENT. The Committee, in its discretion, may cause the
Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver in
an amount equal to the Market Price of such shares on the date of exercise.
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ARTICLE 7
NONTRANSFERABLITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution and no
Option or Stock Appreciation Rights shall be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of an Option or Stock Appreciation Rights not specifically
permitted therein shall be null and void and without effect. An Option or Stock
Appreciation Rights may be exercised by the recipient only during his or her
lifetime, or following his or her death pursuant to Section 8.4 hereof.
Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may, in its sole discretion, cause the written agreement relating to
any Non-qualified Stock Options or Stock Appreciation Rights granted hereunder
to provide that the recipient of such Non-qualified Stock Options or Stock
Appreciation Rights may transfer any of such Non-qualified Stock Options or
Stock Appreciation Rights other than by will or the laws of descent and
distribution in any manner authorized under applicable law; PROVIDED, HOWEVER,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the Act,
or would cause any recipient of awards hereunder to fail to be entitled to the
benefits of Rule 16b-3 under the Act, or would cause any recipient of awards
hereunder to fail to be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the Act or be subject to liability
thereunder.
ARTICLE 8
EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT,
DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT
8.1 GENERAL RULE. Except as expressly determined by the Committee in its
sole discretion, no Option or Stock Appreciation Rights shall be exercisable
after 30 days following the recipient's termination of employment with the
Corporation or a subsidiary, unless such termination of employment occurs by
reason of (i) a Relocation Event (as defined in Section 8.2), (ii) Retirement
(as defined in Section 8.3), (iii) death or (iv) a Special Event (as defined in
Section 8.5), provided that, in the case of a Special Event, the Committee shall
have modified such Option or Stock Appreciation Rights to remain exercisable as
provided in Section 8.5.
Options and Stock Appreciation Rights shall not be affected by any change
of employment so long as the recipient continues to be employed by either the
Corporation or a subsidiary. The Committee may, in its sole discretion, cause
any Option or Stock Appreciation Rights to be forfeited upon an employee's
termination of employment if the employee was terminated for one (or more) of
the following reasons: (i) the employee's conviction, or plea of guilty or NOLO
CONTENDERE to the commission of a felony, (ii) the employee's commission of any
fraud, misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the employee
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach of
the employee's fiduciary duties to the Corporation as an employee or officer, or
(v) a violation by the employee of the Toys "R" Us Ethics Agreement or any other
serious violation of a Corporation policy. It shall be within the sole
discretion of the Committee to determine whether the employee's termination was
for one of the foregoing reasons, and the decision of the Committee shall be
final and conclusive.
8.2 RELOCATION EVENT. Options and Stock Appreciation Rights granted to an
employee shall remain outstanding after termination of such employee's
employment with the Corporation or a subsidiary, if such termination solely
occurs by reason of a "Relocation Event," which shall be deemed to occur if (i)
husband and wife are both current employees of the Corporation, (ii) the
Corporation transfers one spouse to a new location, (iii) the Corporation is
unable to offer the other spouse a position that is substantially comparable to
his or her current position, and (iv) as a result, the other spouse's employment
with the Corporation is terminated and the other spouse, as recipient, holds
outstanding Options or Stock Appreciation Rights.
In case of a Relocation Event, the Options or Stock Appreciation Rights
held by a terminated employee shall be exercisable for a period equal to the
lesser of (i) the period such Options or Stock Appreciation Rights would
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be exercisable absent the termination of such employee, and (ii) the period such
Options or Stock Appreciation Rights would be exercisable if granted to the
spouse continuing in the Corporation's employ on the date originally granted to
the terminated spouse.
8.3 DISABILITY OR RETIREMENT. Except as expressly provided otherwise in the
written agreement relating to any Option or Stock Appreciation Rights granted
under the Plan, in the event of the Disability or Retirement of a recipient of
Options or Stock Appreciation Rights, the Options or Stock Appreciation Rights
which are held by such recipient on the date of such Disability or Retirement,
whether or not otherwise exercisable on such date, shall be exercisable at any
time until the expiration date of the Options or Stock Appreciation Rights;
provided, however, that any Incentive Stock Option of such recipient shall no
longer be treated as an Incentive Stock Option unless exercised within three (3)
months of the date of such Disability or Retirement (or within one (1) year in
the case of an employee who is "disabled" within the meaning of Section 22(e)(3)
of the Code).
"Disability" shall mean any termination of employment with the Corporation
or a subsidiary because of a long-term or total disability, as determined by the
Committee in its sole discretion. "Retirement" shall mean a termination of
employment with the Corporation or a subsidiary either (i) on a voluntary basis
by a recipient who is at least 60 years of age and has at least 15 years of
service with the Corporation or a subsidiary or (ii) otherwise with the written
consent of the Committee in its sole discretion. The decision of the Committee
shall be final and conclusive.
8.4 DEATH. In the event of the death of a recipient of Options or Stock
Appreciation Rights while an employee of the Corporation or any subsidiary,
Options or Stock Appreciation Rights which are held by such employee at the date
of death, whether or not otherwise exercisable on the date of death, shall be
exercisable by the beneficiary designated by the employee for such purpose (the
"Designated Beneficiary") or if no Designated Beneficiary shall be appointed or
if the Designated Beneficiary shall predecease the employee, by the employee's
personal representatives, heirs or legatees at any time within three (3) years
from the date of death (subject to the limitation in Section 5.7 hereof), at
which time such Options or Stock Appreciation Rights shall terminate: PROVIDED,
HOWEVER, that any Incentive Stock Option of such recipient shall no longer be
treated as an Incentive Stock Option unless exercised within three (3) months of
the date of the recipient's death.
In the event of the death of a recipient of Options or Stock Appreciation
Rights following a termination of employment due to Retirement, Disability or a
Special Event (as defined in Section 8.5 hereof), if such death occurs before
the Options or Stock Appreciation Rights are exercised, the Options or Stock
Appreciation Rights which are held by such recipient on the date of termination
of employment, whether or not otherwise exercisable on such date, shall be
exercisable by such recipient's Designated Beneficiary, or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall predecease
such recipient, by such recipient's personal representatives, heirs, or legatees
to the same extent such Options or Stock Appreciation Rights were exercisable by
the recipient following such termination of employment.
8.5 SPECIAL EVENT. In the case of a Special Event, the Committee in its
sole discretion may elect to modify all or any lesser number of any Options or
Stock Appreciation Rights held by an employee terminated as a result of a
Special Event which are or are not exercisable on the date of termination, to
provide that any of such Options or Stock Appreciation Rights may continue to be
exercisable for the term and in the manner specified therein or for such other
term and subject to such other provisions and conditions (including, without
limitation, acceleration of the time or times at which any such Options or Stock
Appreciation Rights may be exercised) as the Committee shall specify. The
Committee shall have the sole discretion to determine the employees to whom and
in the manner in which any such modification shall be made. If the Committee
does not elect to modify an Option or Stock Appreciation Rights, then only
Options and Stock Appreciation Rights currently exercisable at the date of
termination shall be exercisable as provided in the first sentence of Section
8.1 hereof.
A "Special Event" shall mean (i) the sale or other disposition of a
subsidiary or division of the Corporation; (ii) the closing or discontinuation
of a specific operation of the Corporation or any subsidiary; (iii) the
elimination of job categories; or (iv) a limited program of terminations in
connection with a personnel reorganization or restructuring of the Corporation
or any subsidiary of the Corporation scheduled to be completed on a date
certain, provided, however, that only those employees who meet the terms and
conditions as established by the Board or the Committee in its discretion shall
be eligible to receive accelerated vesting of Options and Stock Appreciation
Rights.
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8.6 LEAVE OF ABSENCE. In the case of an employee on an approved leave of
absence, the Options and Stock Appreciation Rights of such employee shall not be
affected unless such leave is longer than 13 weeks. The date of exercisability
of any Options or Stock Appreciation Rights of an employee which are
unexercisable at the beginning of an approved leave of absence lasting longer
than 13 weeks shall be postponed for a period equal to the length of such leave
of absence. Notwithstanding the foregoing, the Committee may, in its sole
discretion, waive in writing any such postponement of the date of exercisability
of any Options of Stock Appreciation Rights due to a leave of absence.
ARTICLE 9
RESTRICTED SHARES
9.1 GRANT OF RESTRICTED SHARES. The Committee may from time to time cause
the Corporation to grant Restricted Shares under the Plan to employees, subject
to such restrictions, conditions and other terms as the Committee may determine.
9.2 RESTRICTIONS. At the time a grant of Restricted Shares is made, the
Committee shall establish a period of time (the "Restricted Period") applicable
to such Restricted Shares. Each grant of Restricted Shares may be subject to a
different Restricted Period. The Committee may, in its sole discretion, at the
time a grant is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which shall be applicable to all or any
portion of the Restricted Shares. The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of such Restricted Shares. None of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Shares.
9.3 RESTRICTED STOCK CERTIFICATES. The Corporation shall issue, in the name
of each employee to whom Restricted Shares have been granted, stock certificates
representing the total number of Restricted Shares granted to the employee, as
soon as reasonably practicable after the grant. The Corporation, at the
direction of the Committee, shall hold such certificates, properly endorsed for
transfer, for the employee's benefit until such time as the Restricted Shares
are forfeited to the Corporation, or the restrictions lapse.
9.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Unless the Committee determines
otherwise, holders of Restricted Shares shall have the right to vote such shares
and the right to receive cash dividends with respect to such shares. All
distributions, if any, received by an employee with respect to Restricted Shares
as a result of any stock split, stock distribution, a combination of shares, or
other similar transaction shall be subject to the restrictions of this Article
9.
9.5 FORFEITURE. Any Restricted Shares granted to an employee pursuant to
the Plan shall be forfeited if the employee terminates employment with the
Corporation or its subsidiaries prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Restricted Shares that are
forfeited shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be canceled upon forfeiture. If the employee's employment
terminates as a result of his or her Disability, Retirement or death, or a
Relocation Event or Special Event, Restricted Shares of such employee shall be
forfeited, unless the Committee, in its sole discretion, shall determine
otherwise.
9.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed by
the Committee, the restrictions applicable to the Restricted Shares shall lapse
and a stock certificate for the number of Restricted Shares with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the employee or the employee's beneficiary or estate, as the
case may be.
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ARTICLE 10
RESTRICTED UNITS
10.1 AWARD OF RESTRICTED UNITS. For each Performance Period (as defined in
Section 10.2), Restricted Units may be granted under the Plan to such employees
of the Corporation and its subsidiaries as the Committee shall determine in its
sole discretion. Each Restricted Unit shall be deemed to be equivalent to one
(1) share of Common Stock. Restricted Units granted to an employee shall be
credited to an account (a "Restricted Unit Account") established and maintained
for such employee.
10.2 PERFORMANCE PERIOD. "Performance Period" shall mean such period of
time as shall be determined by the Committee in its sole discretion. Different
Performance Periods may be established for different employees receiving
Restricted Units. Performance Periods may run consecutively or concurrently.
10.3 RIGHT TO PAYMENT OF RESTRICTED UNITS. With respect to each award of
Restricted Units under the Plan, the Committee shall specify performance
objectives (the "Performance Objectives") which must be satisfied in order for
the employee to vest in the Restricted Units which have been awarded to him or
her for the Performance Period. If the Performance Objectives established for an
employee for the Performance Period are partially but not fully met, the
Committee may, nonetheless, in its sole discretion, determine that all or a
portion of the Restricted Units have vested. If the Performance Objectives for a
Performance Period are exceeded, the Committee may, in its sole discretion,
grant additional, fully vested Restricted Units to the employee. The Committee
may also determine, in its sole discretion, that Restricted Units awarded to an
employee shall become partially or fully vested upon the employee's Disability,
Retirement or death, or upon a Relocation Event or Special Event, or upon the
termination of the employee's employment prior to the end of the Performance
Period.
10.4 PAYMENT FOR RESTRICTED UNITS. As soon as practicable following the end
of a Performance Period, the Committee shall determine whether the Performance
Objectives for this Performance Period have been achieved (or partially achieved
to the extent necessary to permit partial vesting at the discretion of the
Committee pursuant to Section 10.3). If the Performance Objectives for the
Performance Period have been exceeded, the Committee shall determine whether
additional Restricted Units shall be granted to the employee pursuant to Section
10.3. As soon as reasonably practicable after such determinations, or at such
later date as the Committee shall determine at the time of grant, the
Corporation shall pay to the employee an amount with respect to each vested
Restricted Unit equal to the Market Price of a share of Common Stock on such
payment date or, if the Committee shall so specify at the time of grant, an
amount equal to (i) the Market Price of a share of Common Stock on the payment
date less (ii) the Market Price of a share of Common Stock on the date of grant
of the Restricted Unit. Payment shall be made entirely in cash, entirely in
Common Stock (including Restricted Shares) or in such combination of cash and
Common Stock as the Committee shall determine in its sole discretion.
10.5 VOTING AND DIVIDEND RIGHTS. Except as provided in Article 14 hereof,
no employee shall be entitled to any voting rights, to receive any cash
dividends, or to have his or her Restricted Unit Account credited or increased
as a result of any cash dividends or other distribution with respect to Common
Stock. Notwithstanding the foregoing, within sixty (60) days from the date of
payment of a cash dividend by the Corporation on its shares of Common Stock, the
Committee, in its sole discretion, may credit an employee's Restricted Unit
Account with additional Restricted Units having an aggregate Market Price equal
to the cash dividend per share paid on the Common Stock multiplied by the number
of Restricted Units credited to his or her account at the time the cash dividend
was declared.
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ARTICLE 11
PERFORMANCE UNITS
11.1 AWARD OF PERFORMANCE UNITS. For each Performance Period (as defined in
Section 10.2). Performance Units may be granted under the Plan to such employees
of the Corporation and its subsidiaries as the Committee shall determine in its
sole discretion. The award agreement covering such Performance Units shall
specify a value for each Performance Unit or shall set forth a formula for
determining the value of each Performance Unit at the time of payment (the
"Ending Value"). If necessary to make the calculation of the amount to be paid
to the employee pursuant to Section 11.3, the Committee shall also state in the
award agreement the initial value of each Performance Unit (the "Initial
Value"). Performance Units granted to an employee shall be credited to an
account (a "Performance Unit Account") established and maintained for such
employee.
11.2 RIGHT TO PAYMENT OF PERFORMANCE UNITS. With respect to each award of
Performance Units under the Plan, the Committee shall specify Performance
Objectives which must be satisfied in order for the employee to vest in the
Performance Units which have been awarded to him or her for the Performance
Period. If the Performance Objectives established for an employee for the
Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the employee. The Committee may,
in its sole discretion, adjust the Performance Objectives or the Initial Value
or Ending Value of any Performance Units to reflect extraordinary events, such
as stock splits, recapitalizations, mergers, combinations, divestitures,
spin-offs and the like. The Committee may also determine, in its sole
discretion, that Performance Units awarded to an employee shall become partially
or fully vested upon the employee's termination of employment due to Disability,
Retirement, death or otherwise, or upon a Relocation Event or Special Event.
11.3 PAYMENT FOR PERFORMANCE UNITS. As soon as practicable following the
end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 11.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the employee
pursuant to Section 11.2. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the employee an amount with respect
to each vested Performance Unit equal to the Ending Value of the Performance
Unit or, if the Committee shall so specify at the time of grant, an amount equal
to (i) the Ending Value of the Performance Unit less (ii) the Initial Value of
the Performance Unit. Payment shall be made entirely in cash, entirely in Common
Stock (including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine in its sole discretion.
ARTICLE 12
UNRESTRICTED SHARES
12.1 AWARD OF UNRESTRICTED SHARES. The Committee may cause the Corporation
to grant Unrestricted Shares to employees at such time or times, in such amounts
and for such reasons as the Committee, in its sole discretion, shall determine.
No payment shall be required for Unrestricted Shares.
12.2 DELIVERY OF UNRESTRICTED SHARES. The Corporation shall issue, in the
name of each employee to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
employee, and shall deliver such certificates to the employee as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
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ARTICLE 13
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under the
Plan or anytime thereafter to make Tax Offset Payments to assist employees in
paying income taxes incurred as a result of their participation in the Plan. The
Tax Offset Payments shall be determined by multiplying a percentage established
by the Committee times all or a portion (as the Committee shall determine) of
the taxable income recognized by an employee upon (i) the exercise of
Non-qualified Stock Options or Stock Appreciation Rights, (ii) the disposition
of shares received upon exercise of Incentive Stock Options, (iii) the lapse of
restrictions or Restricted Shares, (iv) the award of Unrestricted Shares, or (v)
payments for Restricted Units or Performance Units. The percentage shall be
established from time to time, by the Committee at that rate which the
Committee, in its sole discretion, determines to be appropriate and in the best
interests of the Corporation to assist employees in paying income taxes incurred
as a result of the events described in the preceding sentence. Tax Offset
Payments shall be subject to the restrictions on transferability applicable to
Options and Stock Appreciation Rights under Article 7.
ARTICLE 14
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may: (i) at
any time, make or provide such adjustments to the Plan or to the number and
class of shares available thereunder or (ii) at the time of grant of any
Options, Stock Appreciation Rights, Restricted Shares or Restricted Units,
provide for such adjustments to such Options, Stock Appreciation Rights,
Restricted Shares or Restricted Units, in each case, as the Committee shall deem
appropriate to prevent dilution or enlargement of rights including, without
limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges or shares,
separations, spin-offs, reorganizations, liquidations and the like.
ARTICLE 15
AMENDMENT AND TERMINATION
The Board or the Committee may suspend, terminate, modify or amend the
Plan, provided that any amendment that would (i) materially increase the
aggregate number of shares which may be issued under the Plan, (ii) materially
increase the benefits accruing to employees under the Plan, or (iii) materially
modify the requirements as to eligibility for participation in the Plan, shall
be subject to the approval of the Corporation's stockholders, except that any
such increase or modification that may result from adjustments authorized by
Article 14 hereof shall not require such stockholder approval. If the Plan is
terminated, the terms of the Plan shall, notwithstanding such termination,
continue to apply to awards granted prior to such termination. No suspension,
termination, modification or amendment of the plan may, without the consent of
the employee to whom an award shall theretofore have been granted, adversely
affect the rights of such employee under such award.
ARTICLE 16
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Restricted Units, Performance Units, Unrestricted Shares and Tax Offset Payments
shall be evidenced by a written agreement containing such restrictions, terms
and conditions, if any, as the Committee may require. In the event of any
conflict between a written agreement and the Plan, the terms of the Plan shall
govern.
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ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 TAX WITHHOLDING. The Corporation shall have the rights to require
employees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan, including Tax
Offset Payments, amounts sufficient to satisfy all withholding tax requirements.
Whenever payments under the Plan are to be made to an employee in cash, such
payments shall be net of any amounts sufficient to satisfy all Federal, state
and local withholding tax requirements. The Committee may, in its sole
discretion, permit an employee to satisfy his or her tax withholding obligation
either by (i) surrendering shares owned by the employee or (ii) having the
Corporation withhold from shares otherwise deliverable to the employee. Shares
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for income tax purposes.
17.2 COMPLIANCE WITH SECTION 16(B). In the case of employees who are or may
be subject to Section 16 of the Act, it is the intent of the Corporation that
the Plan and any award granted hereunder satisfy and be interpreted in a manner
that satisfies the applicable requirements of Rule 16b-3, so that such persons
will be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Act and will not be subjected to liability thereunder. If any
provision of the Plan or any award would otherwise conflict with the intent
expressed herein, that provision, to the extent possible, shall be interpreted
and deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, such provision shall be deemed void as
applicable to employees who are or may be subject to Section 16 of the Act.
17.3 SUCCESSORS. The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, at its discretion prior to the consummation of the
transaction and subject to Article 15 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
17.4 GENERAL CREDITOR STATUS. Employees shall have no right, title, or
interest whatsoever in or to any investments which the Corporation may make in
aid in meeting its obligations under the Plan. Nothing contained in the Plan,
and no action take pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Corporation
and any employee or beneficiary or legal representative of such employee. To the
extent that any person acquires a right to receive payments from the Corporation
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan.
17.5 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any written
agreement entered into pursuant to Article 16 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employee of
the Corporation or a subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such written agreement or interfere with
or limit the right of the Corporation or a subsidiary to modify the terms of or
terminate such employee's employment at any time.
17.6 OTHER PLANS. Effective upon the adoption of the Plan by the
stockholders, no further awards shall be made under The Toys "R" Us, Inc. Stock
Option Plan, originally adopted on April 7, 1978 and last amended and restated
as of April 22, 1993 (the "Prior Plan"). Thereafter, all awards made under the
Prior Plan prior to adoption of the Plan by the stockholders shall continue in
accordance with the terms of the Prior Plan.
17.7 NOTICES. Notices required or permitted to be made under the Plan shall
be sufficiently made if personally delivered to the employee or sent by regular
mail addressed (a) to the employee at the employee's address as set forth in the
books and records of the corporation or its subsidiaries, or (b) to the
Corporation or the Committee at the principal office of the Corporation clearly
marked "Attention: Stock Option Committee."
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17.8 SEVERABILITY. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
17.9 GOVERNING LAW. To the extent not preempted by Federal law, the Plan
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of New York.
ARTICLE 18
PERFORMANCE TARGETS
The Committee may base any award of Restricted Shares, Restricted Units,
Performance Units or Unrestricted Shares on performance criteria (the
"Performance Targets") which will qualify such award as performance-based
compensation under Section 162(m) of the Code. Such Performance Targets shall be
equal to a desired level or levels for any fiscal year or years of any or a
combination of the following criteria on an absolute or relative basis, and,
where applicable, measured before or after interest, depreciation, amortization,
service fees, extraordinary items and/or special items: (i) pre-tax earnings,
(ii) operating earnings, (iii) after-tax earnings, (iv) return on investment,
(v) earned value added, (vi) earnings per share, (vii) revenues, (viii) cash
flow or cash flow return on investment, (ix) return on assets or return on net
assets, (x) return on capital, (xi) return on equity, (xii) return on sales,
(xiii) operating margin or (xiv) total shareholder return or stock price
appreciation; provided that with respect to certain participants, the
Performance Objectives may be based upon divisional rather than consolidated
results, or a combination of the two. With respect to awards of Restricted Units
or Performance Units, such Performance Targets may be included in the
Performance Objectives for such awards to preserve the treatment of such awards
as performance-based compensation under Section 162(m) of the Code.
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EXHIBIT B
AMENDED AND RESTATED
TOYS "R" US, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The underlined language reflects the amendments to this Plan discussed elsewhere
in this Proxy Statement and was not part of the original Incentive Plan.
1. DEFINITIONS
"Award" shall mean the amount payable to a Participant as determined by the
Committee in accordance with this Plan as an incentive bonus for any one or more
Fiscal Years.
"Base Amount" shall have the meaning ascribed thereto in Section 4(b)
hereof.
"Base Salary Percentage" shall have the meaning ascribed thereto in Section
4(c) hereof.
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
references to particular provisions of the Code shall include any amendments
thereto or successor provisions and any final, temporary or proposed rules and
regulations promulgated thereunder.
"Committee" shall mean the Management Compensation and Stock Option
Committee of the Board of Directors or any other duly established committee or
subcommittee of the Board of Directors in each case satisfying the requirements
of Section 162(m)(4)(C) of the Code that the Board of Directors hereinafter
determines shall act as the Committee for purposes of the Plan.
"Company" shall mean Toys "R" Us, Inc., a Delaware corporation.
"Covered Employee" shall mean any Participant who is designated by the
Committee, prior to the Determination Date (defined below), to be a "covered
employee" within the meaning of Section 162(m) of the Code.
"Financial Goals" shall have the meaning ascribed thereto in Section 4(a)
hereof.
"Fiscal Year" shall mean the fiscal year of the Company ending on the
Saturday closest to January 31 or such other period which the Company may
hereafter adopt as its fiscal year.
"Participant" shall mean each management employee of the Company or its
subsidiaries or divisions who has been designated for participation in the Plan
by the Committee in accordance with Section 4 hereof.
"Plan" shall mean this Amended and Restated Toys "R" Us, Inc. Management
Incentive Compensation Plan, as it may be amended from time to time.
"Pool Amount," for any Fiscal Year, shall mean 0.5% of the consolidated
pre-tax earnings of the Company, determined in accordance with generally
accepted accounting principles consistently applied.
"Target" shall have the meaning ascribed thereto in Section 4(a) hereof.
2. PURPOSE
The purpose of the Plan is to permit the Company, through awards of
incentive compensation, to attract and retain qualified management employees and
to motivate such management employees to achieve maximum profitability and
stockholder returns.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
authority to interpret the Plan, to establish rules and regulations relating to
the operation of the Plan, to determine the amount of any Awards (subject to the
terms and conditions hereof) and to make all other determinations and take all
other actions necessary or appropriate for the proper administration of the
Plan. The Committee's interpretation of the Plan, and all
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actions taken within the scope of its authority, shall be final and binding on
the Company, any Participants, former Participants or their designated
beneficiaries, and other employees of the Company and its subsidiaries. No
member of the Committee shall be eligible to participate in the Plan.
4. DETERMINATION OF TARGET, BASE AMOUNT AND BASE SALARY PERCENTAGE
Prior to the beginning of each Fiscal Year (or with respect to the Fiscal
Year ending January 28, 1995, prior to April 1, 1994), or prior to any later
date to the extent the determinations set forth in this Section 4 may be made
prior to a later date without causing any Award to fail to qualify as
performance-based compensation under Section 162(m) of the Code (the
"Determination Date"), the Committee shall select the Participants for the
Fiscal Year or Years to be covered by any Award or Awards and adopt in writing,
with respect to each Participant, each of the following:
(a) one or more Targets, which shall be equal to a desired level or levels
for any Fiscal Year or Years of any or a combination of the following criteria
on an absolute or relative basis, and, where applicable, measured before or
after interest, depreciation, amortization, service fees, extraordinary items
and/or special items: (i) pre-tax earnings, (ii) operating earnings, (iii)
after-tax earnings, (iv) return on investment, (v) earned value added, (vi)
earnings per share, (vii) revenues, (viii) cash flow or cash flow return on
investment, (ix) return on assets or return on net assets, (x) return on
capital, (xi) return on equity, (xii) return on sales, (xiii) operating margin
or (xiv) total shareholder return or stock price appreciation (collectively, the
"Financial Goals"), in each case determined in accordance with generally
accepted accounting principles (subject to modifications approved by the
Committee) consistently applied for the Company on a consolidated basis;
provided, however, that, with respect to Participants who are employees of any
of the Company's divisions, the Financial Goals may be based on divisional
rather than consolidated results, or a combination of the two;
(b) a Base Amount, with respect to each Target, based upon one or more
Financial Goals, representing a minimum amount which, if not exceeded, would
result in no Award being made to the Participant; and
(c) a Base Salary Percentage, representing the percentage of the
Participant's base salary in effect at the time a Target is established, which
shall be payable as an Award in the event that 100% of the Participant's Target
is achieved.
The Committee shall also determine on each Determination Date for each
Participant a mathematical formula or matrix which shall indicate the extent to
which Awards will be made if the Base Amount is exceeded, including if the
Target is attained or exceeded, and the Committee may also determine on any
Determination Date alternative formulas or matrices to account for potential or
anticipated significant transactions or events during such Fiscal Year or Years.
5. CALCULATION OF AWARDS; CERTIFICATION
As soon as practicable after the close of the last Fiscal Year with respect
to any Target, the Committee shall determine with respect to each Participant
whether and the extent to which the applicable Base Amount is exceeded,
including the extent to which, if any, such Target was attained or exceeded.
Each Participant's Award, if any, shall be determined in accordance with the
mathematical formula or matrix determined pursuant to Section 4, and subject to
the limitations set forth in Section 6 hereof. The Committee shall certify in
writing to the Board of Directors the amounts of such Awards and whether each
material term of the Plan relating to such Awards has been satisfied.
6. LIMITATIONS WITH RESPECT TO AWARDS
Each Award determined pursuant to Section 5 hereof shall be subject to
modification or forfeiture in accordance with the following provisions:
(a) No Participant shall have any right to receive payment of any Award
unless the Participant remains in the employ of the Company or its subsidiaries
through the date of certification of such Award; provided, however, that the
Committee may, in its sole discretion, pay all or part of an Award to any
Participant whose employment with the Company or its subsidiaries is terminated
prior to such date of certification for any reason. The determination of the
Committee shall be final and conclusive.
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(b) In no event shall Covered Employees, as a group, receive awards in
excess of 100% of the Pool Amount for the Fiscal Year preceding the Fiscal Year
in which the Committee makes the certification required by Section 5 with
respect to such Award and in no event shall any Covered Employee receive
aggregate Awards in excess of 35% of the Pool Amount for such preceding Fiscal
Year. Each Covered Employee's Award shall be reduced pro rata in the event that
the foregoing 100% limitation is exceeded.
(c) The Committee may, in its sole discretion, (i) increase or decrease the
Award payable to any Participant who is not a Covered Employee and who would not
become a Covered Employee as a result of such increase or (ii) decrease the
Award payable to any Covered Employee (or increase such Award to the extent
permitted under Section 162(m) of the Code), in each case, to reflect the
individual performance and contribution of, and other factors relating to, such
Participant. The determination of the Committee shall be final and conclusive.
7. PAYMENT OF AWARDS
Subject to the limitations of Section 6 hereof, each Participant shall
receive, as soon as practicable after the amount of such Participant's Award for
any Fiscal Year or Years has been determined and certified in accordance with
Section 5 hereof, the amount of such Award in cash or common stock of the
Company. The Participant receiving such Award shall designate the percentage of
the Award to be received in Common Stock of the Company. Such designation shall
be made by the Participant on a form prescribed by the Committee and on terms
and conditions determined by the Committee. A Participant designation shall be
effective only if it is made in writing on a form provided by the Company,
signed by the Participant and received by the Company. If the Participant does
not designate the percentages of the Award to be received in cash and common
stock of the Company, then the Award shall be made in cash. The Committee may,
in its discretion, provide that if any Covered Employee would receive from the
Company during the year that the Award is granted total compensation, including
the amount of the Award, in excess of $1,000,000 and the Company would not be
entitled to a deduction for Federal income tax purposes with respect to all or a
portion of such excess as a result of the application of Section 162(m) of the
Code, then the Award for such covered Employee may be deferred, but only to the
extent necessary to preserve the deductibility of the Award for Federal income
tax purposes. Any Award (or portion thereof) so deferred shall be paid in cash
or common stock of the Company as soon as possible consistent with preserving
the deductibility of such Award (or portion thereof) for Federal income tax
purposes.
8. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the
event of the Participant's death prior to the payment of any Award earned
hereunder, shall receive such payment when due under the Plan. Such designation
shall be made by the Participant on a form prescribed by the Committee. The
Participant may at any time change or revoke such designation. A beneficiary
designation, or revocation of a prior beneficiary designation, will be effective
only if it is made in writing on a form provided by the Company, signed by the
Participant and received by the Company. If the Participant does not designate a
beneficiary or the designated beneficiary dies prior to the payment of any
Award, any amounts remaining to be paid shall be paid to the Participant's
estate.
9. ADJUSTMENTS
If any Target or other criterion upon which Awards for any Fiscal Year or
Years is based shall have been affected by special factors (including material
changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual or unplanned items) which in the
Committee's judgment should or should not be taken into account, in whole or in
part, in the equitable administration of the Plan, the Committee may, for any
purpose of the Plan, adjust such Target or criterion for such Fiscal Year or
Years (and subsequent Fiscal Years, as appropriate) and make credits, payments
and reductions accordingly under the Plan; provided, however, that the Committee
shall not have the authority to make any such adjustments with respect to Awards
paid to any Participant who is at such time a Covered Employee.
10. AMENDMENTS
The Committee may at any time amend this Plan, provided that no such
amendment shall be effective which alters the Award, Target or other criteria
relating to an Award applicable to a Covered Employee for the Fiscal
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Year in which such amendment is made or any prior Fiscal Year, except any such
amendment which may be made without the loss of any tax deduction to the Company
under Section 162(m) of the Code.
11. TERMINATION
The Board of Directors may terminate this Plan at any time; provided,
however, that any Award determined and certified pursuant to Section 5 hereof
but not yet paid as of the date of such termination shall be paid as soon as
practicable, but in no event later than 30 days after the date of such
termination, unless such payment has been deferred in accordance with the terms
and conditions designated by the Committee.
12. MISCELLANEOUS PROVISIONS
(a) This Plan is not a contract between the Company and any Participant or
other employee. No Participant or other employee shall have any claim or right
to be paid an Award under this Plan until the amount of such Award shall have
been determined and certified in accordance with Section 5 hereof. Neither the
establishment of this Plan, nor any action taken hereunder, shall be construed
as giving any Participant or other employee any right to remain in the employ of
the Company or its subsidiaries for any period. Nothing contained in this Plan
shall limit the ability of the Company to make payments or awards to employees
under any other plan, agreement or arrangement.
(b) A Participant's right and interest in any Award under the Plan may not
be assigned or transferred, except as provided in Section 8 hereof, and any
attempted assignment or transfer shall be null and void and shall permit the
Committee, in its sole discretion, to extinguish the Company's obligation under
the Plan to pay any Award with respect to such Participant.
(c) The Plan shall be unfunded. The Company shall not be required to
establish any special segregation of assets to assure payment of Awards.
(d) The Company shall have the right to deduct at the time of payment of
any Award any amounts required by law to be withheld for the payment of taxes or
otherwise.
(e) If the Company for any reason fails to make payment of an Award at the
time such Award becomes payable, the Company shall not be liable for any
interest or other charges thereon.
(f) Except where federal law is applicable, the provisions of the Plan
shall be governed by and construed in accordance with the laws of the State of
New York.
(g) If any provision of this Plan is found to be illegal or invalid or
would cause any Award not to constitute performance-based compensation under
Section 162(m)(4)(C) of the Code, the Committee shall have discretion to sever
that provision from this Plan and, thereupon, such provision shall not be deemed
to be a part of this Plan.
(h) No member of the Board of Directors or the Committee, and no officer,
employee or agent of the Company or its subsidiaries shall be liable for any act
or action hereunder, whether of commission or omission, taken by any other
member, or by any officer, agent, or employee, or, except in circumstances
involving bad faith, for anything done or omitted to be done in the
administration of the Plan.
13. EFFECTIVE DATE
The Plan shall be effective beginning with the Fiscal Year ending January
28, 1995.
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EXHIBIT C
AMENDED AND RESTATED
TOYS "R" US, INC.
NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
The underlined language reflects the amendments to the DSO Plan discussed
elsewhere in this Proxy Statement.
1. PURPOSE
The purpose of the Toys "R" Us, Inc. Non-Employee Directors' Stock Option
Plan (the "Plan") is to secure for Toys "R" Us, Inc. (the "Corporation") and its
stockholders the benefits of the incentive inherent in increased ownership of
common stock, par value $.10 per share (the "Common Stock"), of the Corporation
by the members of the Board of Directors (the "Board") of the Corporation who
are not employees of the Corporation or any of its subsidiaries ("Non-Employee
Directors"). It is expected that such ownership will provide such Non-Employee
Directors with a more direct stake in the future welfare of the Corporation and
encourage them to remain directors of the Corporation. It is also expected that
the Plan will encourage qualified persons to become directors of the
Corporation.
2. ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have all the
powers vested in it by the terms of the Plan, such powers to include authority
(within the limitations described herein) to prescribe the form of the agreement
embodying awards of stock options made under the Plan (the "Options," which term
shall include the September 19, 1990 Options (as hereinafter defined)). Subject
to the provisions of the Plan, the Board shall have the power to construe the
Plan, to determine all questions arising thereunder, and to adopt and amend such
rules and regulations for the administration of the Plan as it may deem
desirable. Any decision of the Board in the administration of the Plan, as
described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or the Secretary or any other officer of the
Corporation to execute and deliver documents on behalf of the Board. No member
of the Board shall be liable for anything done or omitted to be done by such
member or by any other member of the Board in connection with the Plan, except
for such member's own willful misconduct or as expressly provided by statute.
3. AMOUNT OF STOCK
The stock which may be issued and sold under the Plan shall not exceed
500,000 shares of Common Stock, subject to adjustment as provided in Section 8.
The Common Stock to be issued may be either authorized and unissued shares or
issued shares acquired by the Corporation. If Options granted under the Plan
terminate or expire without being exercised in whole or in part, new Options may
be granted covering the shares not purchased under such lapsed Options.
4. ELIGIBILITY
Each Non-Employee Director shall be eligible to receive an Option in
accordance with Section 5. Each Option granted under the Plan shall be evidenced
by an agreement in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the terms and conditions set
forth in Sections 5, 6 and 7.
5. GRANT OF OPTIONS
(a) Each Non-Employee Director as of September 19, 1990 shall receive an
Option (a "September 19, 1990 Option") to purchase for 10 years 5,000 shares of
Common Stock, subject to adjustment as provided in Section 8.
(b) Each new Non-Employee Director (who is not a recipient of a September
19, 1990 Option), upon the date of his election or appointment as a director of
the Corporation, shall receive an Option to purchase for 10
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years 5,000 shares of Common Stock, subject to adjustment as provided in Section
8; provided, however, that each new Non-Employee Director, upon the date of his
election or appointment as a director of the Corporation, if such election or
appointment occurs on or after December 6, 1995, shall, in lieu of the
foregoing, receive an Option to purchase for 10 years 10,000 shares of Common
Stock, subject to adjustment as provided in Section 8.
(c) Each year on November 1, commencing on November 1, 1991, each
Non-Employee Director shall automatically receive an Option to purchase for 10
years 1,000 shares of Common Stock, subject to adjustment as provided in Section
8; provided, however, that, in lieu of the foregoing, each year on November 1,
commencing on November 1, 1996, each Non-Employee Director shall automatically
receive an Option to purchase for 10 years 2,500 shares of Common Stock, subject
to adjustment as provided in Section 8. Notwithstanding and in lieu of the
foregoing, each year on November 1, commencing on November 1, 1997, each
Non-Employee Director shall automatically receive an Option to purchase for 10
years 5,000 shares of Common Stock, subject to adjustment as provided in Section
8.
(d) Each year on November 1, commencing on November 1, 1996, each
Non-Employee Director who serves as the Chairperson to any of the committees of
the Board of Directors shall automatically receive an Option to purchase for 10
years 1,000 shares of Common Stock for each such committee, subject to
adjustment as provided in Section 8.
(e) Each year on November 1, commencing on November 1, 1997, each
Non-Employee Director who serves on the Executive Committee of the Board of
Directors shall automatically receive an Option to purchase for 10 years 5,000
shares of Common Stock, subject to adjustment as provided in Section 8.
6. EXERCISE PRICE
The Option exercise price per share shall be 100% of the fair market value
of a share of Common Stock, subject to adjustment as provided in Section 8. As
used herein, fair market value shall be the average of the high and low prices
of the Common Stock on the date of determination (if the Common Stock is then
traded on a national securities exchange or in the NASDAQ National Market
System) or, if not so traded, the average of the closing bid and asked prices
thereof on such day or, if the Common Stock is not traded on the date of
determination, on the last preceding date on which the Common Stock is traded.
7. TERMINATION OF OPTIONS AND LIMITATIONS ON EXERCISE
(a) No Option shall be exercisable until and unless the Plan is approved by
the Corporation's stockholders at the Corporation's 1991 Annual Meeting of
Stockholders, and, unless the Plan is so approved, all Options will terminate
and be of no further force or effect on the earlier to occur of (i) the day
after the Corporation's 1991 Annual Meeting of Stockholders and (ii) December
31, 1991; provided, however, that no Options granted in excess of the number of
Options authorized for grant under the Plan as in effect prior to December 6,
1995 shall be exercisable until and unless the amendment to the Plan (the
"Amendment"), dated as of December 6, 1995, is approved by the Corporation's
stockholders at the Corporation's 1996 Annual Meeting of Stockholders, and,
unless the Amendment is so approved, all such excess Options will terminate and
be of no further force or effect on the earlier to occur of (i) the day after
the Corporation's 1996 Annual Meeting of Stockholders and (ii) December 31,
1996.
(b) One-fifth of the total number of shares of Common Stock covered by an
Option shall become exercisable on a cumulative basis on each anniversary of the
date of grant if the holder thereof has been a Non-Employee Director of the
Corporation at all times since such date of grant; provided, however, that if
the holder of an Option ceases to be a Non-Employee Director prior to the date
that an Option is fully exercisable by reason of (i) retirement after reaching
age 60 at least six months after the date of grant (ii) death or (ii)
disability, in each case, if he has been a member of the Board for at least five
years prior to the date of such cessation (even if such cessation occurs prior
to the approval of the Plan by the Company's stockholders and subject to the
subsequent approval of stockholders), all of the shares of Common Stock covered
by the Option will become immediately exercisable.
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(c) Subject to Section 7(d), if a person shall cease to be a Non-Employee
Director for any reason while holding an Option that has not expired and has not
been fully exercised:
(i) such person, or in the case of his death or adjudication of
incompetency, his executors, administrators, distributees, guardian or
legal representative, as the case may be, may, at any time until the
earlier to occur of the (y) fifth anniversary of the date of cessation and
(z) the termination of such Option pursuant to Section 7(e)(i), exercise
the Option with respect to any shares of Common Stock as to which it was
exercisable pursuant to Section 7(b) on the date the person ceased to be
such a Non-Employee Director; and
(ii) the Option will thereupon terminate as to the number of shares of
Common Stock which are not exercisable pursuant to Section 7(b) on the date
of such cessation.
(d) If a person shall cease to be a Non-Employee Director for any reason
while holding an Option that has not expired and has not been fully exercised,
such Option will terminate immediately if the holder thereof Participates In any
business which is engaged, directly or indirectly (through subsidiaries, joint
ventures or other entities), in the retail sales of toys or children's clothing
on a large scale or which derived (on a combined or pro forma basis, if
applicable) more than 10 percent of its revenues from the retail sale of toys or
children's clothing during the most recent fiscal year of such business. For
purposes of this Section 7(d) the term "Participate In" shall mean: "directly or
indirectly, for his own benefit or for, with or through any other person, firm
or corporation, owns, manages, operates, controls, loans money to or
participates in the ownership, management, operation or control of, or is
connected as a director, officer, employee, partner, consultant, agent,
independent contractor or otherwise with, or acquiesces in the use of his name
in." Notwithstanding the foregoing, however, the provisions of this Section 7(d)
will not be deemed breached merely because the Option holder owns not more than
one percent of the outstanding common stock of a corporation, if at the time of
its acquisition by the Option holder, such stock is listed on a national
securities exchange, is reported on NASDAQ or is regularly traded in the over-
the-counter market by a member of a national securities exchange.
(e) No Option or any part of an Option shall be exercisable:
(i) after the expiration of 10 years from the date the Option was
granted; and
(ii) unless written notice of the exercise is delivered to the
Corporation specifying the number of shares to be purchased, and payment in
full by check or bank draft is made for the shares of Common Stock being
acquired thereunder at the time of exercise.
(f) An Option shall not be transferable by the optionee otherwise than by
will or the laws of descent and distribution and shall be exercisable during his
lifetime only by him or his guardian or legal representative.
(g) For purposes of this Section 7, disability shall have the meaning
provided in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the outstanding Common Stock is hereafter changed by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination, exchange of shares, or the like, or dividends payable in
shares of the Common Stock, an appropriate adjustment shall be made by the Board
in the aggregate number of shares available under the Plan, in the number of
shares subject to Options to be granted thereafter pursuant to Sections 5(a),
5(b), 5(c), 5(d) and 5(e), and in the number of shares and price per share
subject to outstanding Options. If the Corporation shall be reorganized,
consolidated or merged with another corporation, or if all or substantially all
of the assets of the Corporation shall be sold or exchanged, the holder of an
Option shall, after the occurrence of such a corporate event, be entitled to
receive upon the exercise of his Option the same number and kind of shares of
stock or the same amount of property, cash or securities as he would have been
entitled to receive upon the happening of any such corporate event as if he had
exercised such Option and had been, immediately prior to such event, the holder
of the number of shares covered by such Option.
(b) Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of any Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next higher whole number of shares.
C-3
<PAGE>
9. MISCELLANEOUS PROVISIONS
(a) Except as expressly provided for in the Plan, no Non-Employee Director
or other person shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any Non-Employee Director any right to be retained in the service of the
Corporation.
(b) The Corporation shall not be obligated to deliver any shares of Common
Stock hereunder until they have been listed on each securities exchange on which
the Common Stock may then be listed, or until there has been qualification under
or compliance with such state or federal laws, rules or regulations as the
Corporation may deem applicable.
(c) It shall be a condition to the obligation of the Corporation to issue
shares of Common Stock upon exercise of an Option, that the optionee (or any
person entitled to act under Sections 7(c) and 7(f)) pay to the Corporation,
upon its demand, such amount, if any, as may be requested by the Corporation for
the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the
Corporation may refuse to issue shares of Common Stock.
(d) The expenses of the Plan shall be borne by the Corporation.
(e) If an Option is exercised by the executors, administrators, legatees or
distributees of the estate of a deceased optionee or by the guardian or legal
representative of an optionee, the Corporation shall be under no obligation to
issue stock thereunder unless and until the Corporation is satisfied that the
person or persons exercising the Option are the duly appointed legal
representatives of the optionee or of the deceased optionee's estate or the
proper legatees or distributees of such estate.
10. AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable including, but not limited to amendments
necessary to qualify for any exemption or to comply with applicable law or
regulations; provided, however, that the Plan shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, or the regulations thereunder, or the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder; and provided, further, that except as provided in Section 8, the
Board may not, without further approval by the stockholders of the Corporation,
increase the maximum number of shares of Common Stock as to which Options may be
granted under the Plan, increase the number of shares subject to an Option,
reduce the minimum Option exercise price described in Section 6, extend the
period during which Options may be granted or exercised under the Plan or change
the class of persons eligible to receive Options under the Plan. No amendment of
the Plan shall materially and adversely affect any right of any optionee with
respect to any Option theretofore granted without such optionee's written
consent.
11. TERMINATION
The Plan shall terminate upon the earliest to occur of (a) the adoption of
a resolution of the Board terminating the Plan, (b) September 19, 2000 and (c)
December 31, 1991 if the Plan has not been approved by the Corporation's
stockholders at the Corporation's 1991 Annual Meeting of Stockholders.
12. EFFECTIVE DATE OF PLAN
The Plan shall become effective as of September 19, 1990, provided that the
Corporation's stockholders shall have approved the Plan at the Corporation's
1991 Annual Meeting of Stockholders.
C-4
<PAGE>
TOYS "R" US
461 FROM ROAD
PARAMUS, NEW JERSEY 07652
<TABLE>
<S> <C>
PRINTED ON
RECYCLED PAPER
</TABLE>
<PAGE>
TOYS "R" US, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 4, 1997
The undersigned hereby appoints MICHAEL GOLDSTEIN and ROBERT C. NAKASONE,
jointly and severally, proxies, with power of substitution, to vote at the
Annual Meeting of Stockholders of TOYS "R" US, INC. to be held June 4, 1997
(including adjournments), with all the powers the undersigned would possess if
personally present, as specified on the reverse side with respect to the
election of directors (including discretionary authority to accumulate votes)
and the other matters to be considered, and in accordance with their discretion
on any other business that may come before the meeting, and revokes all proxies
previously given by the undersigned with respect to the shares covered hereby.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. In either event, please sign and
return this card.
(Continued and to be signed on reverse side)
_____________
| |
| SEE |
| REVERSE |
| SIDE |
|___________|
<PAGE>
A [X] Please mark your votes as in this example.
The Board of Directors Recommends a Vote "FOR" Proposals 1,2,3,4 and 5.
1. ELECTION OF DIRECTORS [ ] FOR [ ] WITHHELD
Election of Directors: Nominees:
Robert A. Bernhard Norman S. Matthews
RoAnn Costin Howard W. Moore
Michael Goldstein Robert C. Nakasone
Shirley Strum Kenny Arthur B. Newman
Charles Lazarus
For, except vote withheld from the following nominee(s):
__________________________________________________________
FOR AGAINST ABSTAIN
2. Proposal to Approve the Amended and [ ] [ ] [ ]
Restated Toys "R" Us, Inc. 1994 Stock
Option and Performance Incentive Plan.
3. Proposal to Ratify the 1996 Grant of [ ] [ ] [ ]
Restoration Options to Each of
Michael Goldstein and Robert C.
Nakasone Under the Amended and
Restated 1994 Stock Option and
Performance Incentive Plan.
4. Proposal to Approve the Amended and [ ] [ ] [ ]
Restated Toys "R" Us, Inc. Management
Incentive Compensation Plan.
5. Proposal to Approve the Amended and [ ] [ ] [ ]
Restated Toys "R" Us, Inc.
Non-Employee Directors' Stock Option
Plan.
6. In their discretion upon such other business as may properly be brought
before the meeting.
If this proxy is properly executed and returned, the shares represented hereby
will be voted, if not otherwise specified (or unless discretionary authority to
accumulate votes is exercised), for the named persons nominated as director and
FOR proposals 2,3,4 and 5.
SIGNATURE________________________ DATE_____________
SIGNATURE________________________ DATE_____________
Note: Please date and sign above exactly as name appears on this proxy.
Executors, administrators, trustees, etc. should give full title. If shares are
held jointly, each holder should sign.
