<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE BOYDS COLLECTION, LTD.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
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(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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</TABLE>
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[LOGO]
350 South Street, McSherrystown, Pennsylvania 17344
------------------------
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2000
------------------------
To the Stockholders of
THE BOYDS COLLECTION, LTD.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The Boyds
Collection, Ltd. ("Boyds") will be held at 248 Hunterstown Road, Gettysburg,
Pennsylvania on Wednesday, May 17, 2000 at 10:00 a.m. Eastern Daylight Time, to
consider the following matters:
1. the election of eight Directors;
2. the ratification of the appointment of Deloitte & Touche LLP as
independent certified public accountants for the current fiscal year; and
3. the transaction of such other business as may properly be brought before
the meeting.
Details concerning those matters to come before the meeting are set forth in
the accompanying proxy statement for your inspection.
The Annual Report to Stockholders of Boyds for the fiscal year ended
December 31, 1999 is enclosed. We hope you will find it informative.
Pursuant to the Amended and Restated By-laws of Boyds, the Board of
Directors has fixed the close of business on March 10, 2000, as the time for
determining shareholders of record entitled to notice of, and to vote at, the
Annual Meeting. Each share of Boyds common stock, $0.0001 per value, will
entitle the holder thereof to one vote on all matters which may properly come
before the Annual Meeting.
By Order of the Board of Directors,
/s/ PETER H. FROST
PETER H. FROST
VICE PRESIDENT--FINANCE
Dated: April 20, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Meetings and Committees of the Board of Directors........... 1
Security Ownership of Certain Beneficial Owners and
Management................................................ 2
Compliance with Section 16(a) of the Securities Exchange
Act....................................................... 3
Directors' Compensation..................................... 3
Executive Compensation...................................... 3
Compensation Committee Report............................. 3
Compensation Committee Interlocks and Insider
Participation........................................... 4
Executive Officers........................................ 5
Summary Compensation Table................................ 6
Stock Option Plans........................................ 7
Aggregated Option Exercises and Option Values............. 7
Profit Sharing and 401(k) Retirement Plan................. 7
Employment Contracts with Executive Officers.............. 7
Certain Relationships and Related Transactions.............. 8
Performance Graph........................................... 9
Proposal One: Election of Directors......................... 10
Information Concerning Directors and Nominees............. 10
Proposal Two: Selection of Auditors......................... 11
Stockholders List........................................... 12
Stockholder Proposals....................................... 12
Other Matters............................................... 12
</TABLE>
i
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------------------------
PROXY STATEMENT
------------------------
This Proxy Statement has been prepared on behalf of the Board of Directors
of The Boyds Collection, Ltd. ("Boyds" or the "Company") in connection with the
solicitation of proxies (each, a "Proxy") to be used at the Annual Meeting of
Stockholders of Boyds to be held on May 17, 2000, and any adjournments or
postponements thereof. The Proxy may be revoked at any time prior to being voted
by written notice to the Secretary of the Company, by submission of a Proxy
bearing a later date or by voting in person at the meeting. Each valid and
timely Proxy not revoked will be voted at the meeting in accordance with
instructions thereon or if no instructions are specified thereon, then the Proxy
will be voted as recommended by the Board of Directors. The affirmative vote of
a majority of the votes cast is required for the ratification of the selection
of independent accountants and the affirmative vote of a plurality of all votes
cast at a meeting at which a quorum is present is required to elect a director.
The deadline for receipt by the Secretary of Boyds of stockholder proposals for
presentation at the Annual Meeting was April 12, 2000, and no proposals were
received. Abstentions and broker non-votes will not be included in vote totals
and will have no effect on the outcome of any vote.
Only holders of record at the close of business on March 10, 2000, of Boyds
common stock, par value $0.0001 per share (the "Common Stock"), will be entitled
to vote at the Annual Meeting. On that date, there were outstanding 59,172,040
shares of Common Stock. Each share of Common Stock is entitled to one vote on
each matter to be voted on at the Annual Meeting. Shares representing a majority
of the votes entitled to be cast by the outstanding shares of Common Stock must
be represented in person or by proxy at the Annual Meeting in order for a quorum
to be present.
As of March 10, 2000, KKR 1996 Fund L.P. and KKR Partners II, L.P. (the
"Common Stock Partnerships") owned approximately 58.8% of the Common Stock. The
Common Stock Partnerships have advised Boyds that they intend to vote all of
their shares of Common Stock in favor of the election of the eight nominated
directors and the ratification of the selection of Deloitte & Touche LLP as
independent accountants. Such action by the Common Stock Partnerships is
sufficient to elect such directors and approve such matters without any action
on the part of any other holder of Common Stock. Certain of the nominees for
Director of Boyds are affiliated with the general partner of each of the Common
Stock Partnerships. See "Executive Compensation--Compensation Committee
Interlocks and Insider Participation", herein.
The Annual Report to Stockholders of Boyds for the fiscal year ended
December 31, 1999 is enclosed, but does not constitute a part hereof.
The complete mailing address of the principal executive office of the
Company is 350 South Street, McSherrystown, Pennsylvania 17344. The approximate
date on which this Proxy Statement is first being sent to Stockholders is
April 20, 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the 1999 fiscal year, the Board of Directors met on four occasions.
No incumbent Director, other than Henry R. Kravis and George R. Roberts,
attended fewer than 75% of the aggregate number of Board meetings and committee
meetings on which such Board member served. The Company's Executive Committee,
consisting of Henry R. Kravis, Scott M. Stuart, Marc S. Lipschultz and Gary M.
Lowenthal, met on four occasions during the 1999 fiscal year. The Company's
Audit Committee, consisting of Timothy Brady, met once during the year.
Mr. Brady is an independent director. The Company's Compensation Committee,
consisting of Scott M. Stuart and Marc S. Lipschultz, met on three occasions
during the year. The Company does not have a Nominating Committee.
1
<PAGE>
The functions of the Audit Committee include reviewing with the independent
accountants the plans and results of the annual audit, approving the audit and
non-audit services by such independent accountants, reviewing the scope and
results of the Company's internal auditing procedures, reviewing the adequacy of
the Company's system of internal accounting controls and reviewing the annual
financial statements prepared for release to stockholders and the public. The
functions of the Compensation Committee include reviewing the salaries and
bonuses of senior management and the review and approval of participation in,
and administration of, the 1998 Employee Stock Option Plan for Key Employees of
The Boyds Collection, Ltd (the "1998 Plan"). The Executive Committee has
authority to act for the Board of Directors on most matters during intervals
between Board meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 25, 2000 by (i) each director,
(ii) the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company during the 1999 fiscal year,
(iii) all executive officers and directors as a group and (iv) the Company's
principal stockholders. Other than as set forth in the table below, there are no
persons known to the Company to beneficially own more than 5% of the Common
Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT & NATURE PERCENTAGE OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- ----------------------- -------------
<S> <C> <C>
COMMON STOCK
KKR 1996 GP L.L.C........................................... 32,987,654(1) 55.7 %
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, NY 10019
Strata LLC.................................................. 1,804,853(2) 3.1 %
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, NY 10019
The GJL L.L.C............................................... 4,492,066(3) 7.6 %
Gary M. Lowenthal........................................... 5,682,463 9.6 %
Robert T. Coccoluto......................................... 112,302 *
Henry R. Kravis............................................. 67,381 *
George R. Roberts........................................... 67,381 *
Scott M. Stuart............................................. 67,381 *
Marc S. Lipschultz.......................................... 67,381(4) *
Timothy Brady............................................... -- *
Christine L. Bell........................................... 212,250 *
Peter H. Frost.............................................. -- *
Elizabeth E. Smith.......................................... 121,286 *
Jean-Andre Rougeot.......................................... 100,000 *
David Miller................................................ -- *
Diane Combes................................................ -- *
All executive officers and directors as a group (13
persons).................................................. 6,497,825 11.0 %
</TABLE>
2
<PAGE>
- --------------------------
* Owns less than 1% of the total outstanding Common Stock.
(1) KKR 1996 GP L.L.C. is the sole general partner of KKR Associates 1996, L.P.,
which is the sole general partner of KKR 1996 Fund L.P. KKR 1996 GP L.L.C.
beneficially owns 55.7% of the common stock. KKR 1996 GP L.L.C. is a limited
liability company, the members of which are Messrs. Henry R. Kravis, George
R. Roberts, Paul E. Raether, Michael W. Michelson, James H. Greene, Jr.,
Michael T. Tokarz, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and
Robert I. MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of
Boyds. Each of the individuals who is a member of KKR 1996 GP L.L.C. may be
deemed to share beneficial ownership of any shares beneficially owned by KKR
1996 GP L.L.C. Each of such individuals disclaims beneficial ownership of
such shares.
(2) Strata LLC is the sole general partner of KKR Associates (Strata) L.P.,
which is a general partner of KKR Partners II, L.P. Strata LLC is a limited
liability company, the member of which are Messrs. Henry R. Kravis, George
R. Roberts, Paul E. Raether, Michael W. Michelson, James H. Greene, Jr.,
Michael T. Tokarz, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and
Robert I. MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of
Boyds. Each of the individuals who is a member of Strata LLC may be deemed
to share beneficial ownership of any shares beneficially owned by Strata
LLC. Each of such individuals disclaims beneficial ownership of such shares.
(3) Gary Lowenthal is the sole managing member of The GJL L.L.C., the other
member of which is Justina Lowenthal.
(4) Mr. Marc S. Lipschultz is a director of Boyds and is also an executive of
KKR and a limited partner of KKR Associates (Strata) L.P. Mr. Lipschultz
disclaims beneficial ownership of any shares beneficially owned by KKR
Associates (Strata) L.P.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, directors and
persons who own more than ten percent of a registered class of the Company's
equity securities ("Reporting Persons") to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "SEC"). These Reporting Persons are required by SEC regulations to furnish
the Company with copies of all Forms 3, 4 and 5 they file with the SEC.
During the 1999 fiscal year and through the record date, Initial Statements
of Beneficial Ownership (Forms 3) were not timely filed for the following
Reporting Persons of the Company: Peter Frost, David Miller, Diane Combes and
Jean-Andre Rougeot. Based solely on the Company's review of the copies of forms
it has recieved and written representations from certain Reporting Persons, the
Company believes that all of its other Reporting Persons complied with all the
filing requirements applicable to them with respect to transactions during the
1999 fiscal year.
DIRECTORS' COMPENSATION
Directors of the Company who are not officers or employees of Boyds receive
no remuneration for serving as directors. All directors are reimbursed for
reasonable expenses incurred to attend director and committee meetings.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company consists of Marc S. Lipschultz and
Scott M. Stuart, both of whom are non-employee Directors. The Compensation
Committee reviews and approves all compensation arrangements for executive
officers and, in that regard, has developed compensation policies for the
executives which seek to enhance the profitability of the Company with an
appropriate balance between long-term and short-term profitability goals and to
assure the ability of the Company to
3
<PAGE>
attract and retain executive employees with competitive compensation. Actions by
the Committee are reported to the Board and, in appropriate cases, ratified by
the Board prior to implementation.
The compensation program of the Company seeks specifically to motivate the
executives of the Company to achieve objectives which benefit the Company within
their respective areas of responsibility, with particular emphasis on continued
growth in revenues, expense control, operating efficiency, and the ultimate
realization of profits for the Company, approximately equal weight being given
to each of these criteria in evaluating performance.
Base salary levels for the Company's executive officers, including the Chief
Executive Officer, are set so that the overall cash compensation package for
executive officers, including bonus opportunity, compares favorably to companies
with which the Company competes for executive talent. In determining salaries,
the Compensation Committee also takes into account a number of factors, which
primarily include individual experience and performance, the officer's level of
responsibility, the cost of living and historical salary levels. The measures of
individual performance considered include, to the extent applicable to an
individual executive officer, a number of quantitative and qualitative factors
such as the Company's historical and recent financial performance, the
individual's achievement of particular nonfinancial goals within his or her
responsibility, and other contributions made by the officer to the Company's
success. The Compensation Committee has not found it practicable to, and has not
attempted to, assign relative weights to the specific factors considered in
determining base salary levels, since the specific factors used may vary among
officers. As is typical for most companies, payment of base salary amounts
generally is not conditioned upon the achievement of any specific,
pre-determined performance targets.
In addition to base salary, each executive, including the Chief Executive
Officer, may earn an incentive of a specific, individualized percentage of such
executive's base pay. The compensation policies of the Company are general and
subjective both as to salary and as to the other components of the compensation
program.
The Company's compensation program also includes benefits typically offered
to executives of similar businesses to promote management stability, consisting
of a 401(K) retirement plan and severance agreements.
In addition, the Company periodically grants stock options to executive
officers pursuant to the 1998 Plan. The Compensation Committee believes that
granting stock options on an ongoing basis provides officers with a strong
economic interest in maximizing stock price appreciation over the long term. The
Company believes that the practice of granting stock options is critical to
retaining and recruiting the key talent necessary to ensure the Company's
continued success.
Legislation enacted in 1993 imposes certain limits on the tax deductibility
of executive compensation. The Committee's policy is to maximize the tax
deductibility of executive compensation to the extent consistent with its
responsibility to effectively compensate executives based on performance.
Respectfully submitted,
COMPENSATION COMMITTEE
Marc S. Lipschultz
Scott M. Stuart
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kohlberg Kravis Roberts & Co. L.P. ("KKR"), which is an affiliate of the
Common Stock Partnerships, may receive investment banking fees for services
rendered to the Company in connection with certain transactions. KKR renders
ongoing management, consulting and financial services to the Company for an
annual fee of $375,000 plus expenses. During the 1999 fiscal year, $521, 000,
including expenses, was paid to KKR. Mr. Stuart is a member of the general
partner of KKR and Mr. Lipschultz is an executive of KKR.
4
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The Common Stock Partnerships hold an aggregate of 34,792,507 shares of
Common Stock. The general partners of the Common Stock Partnerships are KKR 1996
GP L.L.C. and Strata LLC both Delaware limited liability companies (each a
"General Partner"), of which Mr. Stuart is one of the members. Mr. Lipschultz is
an executive of KKR. Each General Partner has sole voting and investment power
with respect to the applicable shares.
The Common Stock Partnerships have the right, under certain circumstances
and subject to certain conditions, to require the Company to register under the
Securities Act of 1933, as amended, shares of Common Stock held by them. The
Common Stock Partnerships have both demand and "piggyback" registration rights.
Under the agreements providing for registration rights, the Company will pay all
expenses in connection with any such registration.
EXECUTIVE OFFICERS
Set forth below is certain information concerning each current executive
officer of Boyds.
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD DURING PREVIOUS FIVE YEARS
- ---- -------- ------------------------------------------------------------
<S> <C> <C>
Jean-Andre Rougeot... 41 Chief Executive Officer of the Company since February 2000.
Prior thereto, he was the president and chief executive
officer of the Coty Division of Coty, Inc., from 1993
through December 1999.
Christine L. Bell.... 44 Chief Operating Officer and Controller since joining the
Company in 1992. Prior thereto, she spent twelve years at
Delaney Auto Group, most recently as controller.
Elizabeth E. Smith... 54 Vice President--Product Development since 1996. Prior
thereto, she was the manager--import division and
coordinator--product development process from 1990 to 1996.
Peter H. Frost....... 53 Vice President--Finance since April 1999. Prior thereto, he
was the corporate controller at Enesco Corporation from 1992
to 1999.
David Miller......... 34 Vice President--Marketing since April 1999. Prior thereto,
he was the group publisher of collectibles publications at
PRIMEDIA from January 1996 to 1999.
Diane Combes......... 46 Executive Vice President since August 1999. Prior thereto,
she was vice president and general merchandise manager with
The Disney Store, Inc., a division of The Walt Disney
Company, from 1993 to 1999.
</TABLE>
5
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to or accrued by the
Company during the 1999 fiscal year and for the previous two fiscal years for
Gary M. Lowenthal, the former Chief Executive Officer and current Chairman of
the Board of Directors, and the other four most highly compensated executive
officers of the Company as of the end of the 1999 fiscal year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION OPTIONS BY
FISCAL ------------------------- NUMBER
NAME / POSITION YEAR SALARY BONUS OF SHARES
- --------------- -------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
Gary M. Lowenthal.......................... 1999 $220,800 $ -0- -0-
Chairman of the Board and former CEO(1) 1998 220,800 -0- 44,921
1997 220,800 -0- -0-
Robert T. Coccoluto........................ 1999 $450,000 $ -0- -0-
President(2) 1998 -0- -0- 381,826
1997 -0- -0- -0-
Christine L. Bell.......................... 1999 $182,600 $ 16,000 -0-
Chief Operating Officer and Controller 1998 122,229 1,815,000 -0-
1997 120,000 -0- -0-
Elizabeth E. Smith......................... 1999 $146,080 $ 15,333 -0-
Vice President--Product Development 1998 81,486 1,026,000 -0-
1997 80,000 -0- -0-
Diane Combes............................... 1999 $340,000(3) $ 37,490 200,000
Executive Vice President
</TABLE>
- ------------------------
(1) Jean-Andre Rougeot became the CEO of Boyds on February 1, 2000.
Mr. Rougeout will receive an annual base salary of $500,000 and may receive
an annual bonus of up to $1.0 million.
(2) Mr. Coccoluto became an employee of Boyds on December 31, 1998 and resigned
on February 1, 2000.
(3) Represents the amount of salary paid to Ms. Combes from September 7, 1999,
her first date of employment with Boyds.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding the grant of stock
options during the 1999 fiscal year to the named executive officers. Other than
those executive officers named below no other executive officers received stock
options during the 1999 fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
--------------------------------------------- -----------------------
NUMBER OF % OF TOTAL EXERCISE
SHARES COVERED OPTIONS GRANTED PRICE
BY OPTION TO EMPLOYEES ($ / EXPIRATION
NAME GRANT(1) IN FISCAL YEAR SHARE) DATE 5% 10%
- ---- -------------- --------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Diane Combes............................... 200,000(2) 54.3% $14.00 2009 $1,760,905 $4,462,479
Peter Frost................................ 40,000(2) 10.9% $18.00 2009 $ 452,804 $1,147,495
David Miller............................... 25,000(2) 6.8% $18.00 2009 $ 283,003 $ 717,184
</TABLE>
- ------------------------------
(1) Options are non-qualified stock options and generally terminate immediately
following termination of the executive officer's employment with the Company
or the expiration date, whichever occur earlier. The exercise price of each
option was determined to be equal to the fair market value per share of the
Common Stock on the grant date.
(2) These options become exercisable over a four-year period, 25% on each
anniversary of the grant date of the option.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise of the option or the sale of the underlying shares. The actual
gains, if any, on the exercise of stock options will depend on the future
performance of the Common Stock, the option holder's continued employment
throughout the option period, and the date on which the options are
exercised.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
No executive officer of the Company exercised options during the 1999 fiscal
year.
401(K) RETIREMENT PLAN
The Company maintains a noncontributory deferred retirement plan pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended. All employees
who are not eligible to participate in a union-sponsored or co-sponsored
qualified retirement plan will participate after one year of service and
attainment of age 21.
EMPLOYMENT CONTRACTS WITH EXECUTIVE OFFICERS
The Company and Mr. Rougeot have entered into an employment agreement
pursuant to which Mr. Rougeot, among other things, (i) will receive an annual
base salary of $500,000 for three years commencing on February 1, 2000,
(ii) will receive an annual bonus, subject to the attainment of certain
performance goals, in an amount not to exceed 200% of his base salary,
(iii) purchased 100,000 shares of Common Stock at $7.00 per share, (iv) will
participate in incentive compensation plans of the Company, (v) will receive
relocation expenses and (vi) will receive twenty-four month's base salary plus
200% of his target bonus if he terminates his employment for good reason or if
the Company terminates his employment without cause.
The Company also entered into an employment agreement with Ms. Combes
pursuant to which Ms. Combes, among other things, (i) will receive an annual
base salary of $340,000, (ii) will receive an annual bonus, subject to the
attainment of certain performance goals, in amount not to exceed 100% of her
base salary, (iii) will participate in incentive compensation plans of the
Company, (iv) received relocation expenses and (v) will receive twelve month's
base salary if the Company terminates her employment without cause.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
KKR, an affiliate of the Common Stock Partnerships, renders ongoing
management, consulting and financial services to the Company for an annual fee
of $375,000 plus expenses; $521,000, including expenses, was paid to KKR during
the 1999 fiscal year. In addition, KKR may in the future receive investment
banking fees for services rendered to the Company in connection with certain
transactions. KKR received a cash fee in April 1998 of $6.0 million from Boyds
for negotiating the recapitalization and arranging the related financing, plus
the reimbursement of its associated expenses.
KKR 1996 Fund GP L.L.C. and Strata L.L.C., at February 25, 2000 beneficially
owned in the aggregate approximately 58.8% of Boyds' outstanding shares of
Common Stock on a fully diluted basis. Accordingly, affiliates of KKR are able
to elect the entire board of directors of Boyds, control the management and
policies of Boyds and, in general, determine without the consent of Boyds' other
stockholders the outcome of any corporate transaction or other matter submitted
to the stockholders for approval, including mergers, consolidations and the sale
of all or substantially all of Boyds' assets. Affiliates of KKR are also able to
prevent or cause a change in control of Boyds and to amend Boyds' by-laws at any
time. The members of each of KKR 1996 GP L.L.C. and Strata L.L.C. are
Messrs. Henry R. Kravis, George R. Roberts, Messrs. Paul E. Raether, Michael W.
Michelson, James H. Greene, Jr., Michael T. Tokarz, Edward A. Gilhuly, Perry
Golkin, Scott M. Stuart and Robert I. MacDonnell. Messrs. Kravis and Roberts
comprise the executive committee of each of KKR 1996 Fund GP L.L.C. and Strata
L.L.C. and are founding partners of KKR. Mr. Stuart is a member of the general
partner of KKR and Mr. Lipschultz is an executive of KKR. Each of
Messrs. Kravis, Roberts, Stuart and Lipschultz is a Director of Boyds.
On March 6, 1998, Boyds entered into a recapitalization and stock purchase
agreement with Bear Acquisition, Inc. Bear Acquisition was a subsidiary of KKR
1996 Fund L.P., a limited partnership formed at the direction of KKR. In
connection with the recapitalization, Bear Acquisition entered into a
registration rights agreement, dated April 21, 1998 with Boyds. Pursuant to such
agreement, Bear Acquisition has the right to require Boyds to register under the
Securities Act of 1933 shares of Common Stock held by Bear Acquisition and has
certain piggyback registration rights. The registration rights agreement
provides, among other things, that Boyds will pay all expenses in connection
with the first ten demand registrations requested by Bear Acquisition and in
connection with any registration in which Bear Acquisition participates through
piggyback registration rights granted under such agreement. Upon the liquidation
of Bear Acquisition, rights and obligations of Bear Acquisition under the
registration rights agreement with respect to demand registrations were
transferred to the Common Stock Partnerships and with respect to piggyback
registrations were transferred to all the former stockholders of Bear
Acquisition, including the Common Stock Partnerships. The Company registered
6,750,000 shares of Common Stock held by the Common Stock Partnerships in
connection with its IPO and reimbursed their expenses in connection with such
registration.
Prior to the recapitalization, all shares of Boyds' common stock were
beneficially owned by Gary and Justina Lowenthal, a portion of which were
redeemed pursuant to the recapitalization. In connection with the
recapitalization, Boyds and Mr. Lowenthal entered into a registration rights
agreement granting Mr. Lowenthal piggyback registration rights with respect to
shares of Common Stock currently owned by him.
Advanced Design Group LLC has in the past rendered strategic consulting
services to Boyds. Robert T. Coccoluto, who is a director of Boyds, is owner and
president of Advanced Design Group LLC. In addition, in connection with the
recapitalization, Mr. Coccoluto received $1.7 million in payment for advisory
services rendered to Boyds. Boyds does not expect that Advanced Design Group LLC
will render any future services to Boyds.
Boyds believes that the material terms of each of the transactions described
above are no more favorable than those that would have been agreed to by third
parties on an arm's length basis.
8
<PAGE>
PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE BOYDS COLLECTION, LTD. PEER GROUP S&P MIDCAP 400
<S> <C> <C> <C>
05/03/1999 100 100 100
12/31/1999 38.54 102.41 125.97
</TABLE>
The above graph compares the cumulative total return on $100 invested on
March 5, 1999 in the Common Stock of the Company, and on February 28, 1999 in
the Standard & Poor's MidCap 400 Index and the Company's selected peer group
index. The issuers currently within the peer group index are Action Performance
Companies, Inc., American Greetings Corporation, Blyth Industries, Inc.,
Department 56, Inc., Enesco Group, Inc., Lenox International Inc., Media Arts
Group, Inc., Racing Champions Corporation, Russ Berrie & Company, Vermont Teddy
Bear Co., Inc., Waterford Wedgewood plc. and Yankee Candle Company, Inc. Each of
the issuers is weighted in the calculation of the index to recognize its stock
market capitalization. The returns of the MidCap 400 Index and the peer group
index are calculated assuming reinvestment of dividends.
The graph specifies data for the preceding trading day nearest to the
Company's fiscal year-end.
The stock price performance shown on the graph above is not necessarily
indicative of future price performance. Data points above provided by Research
Data Group, Inc., a licensee of Standard & Poor's.
9
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is the election of eight
directors, constituting the entire Board of Directors of Boyds, to hold office
until the next Annual Meeting and until their successors are elected and
qualified. Seven of the eight nominees are now members of the Board of Directors
of Boyds. The eighth nominee is the newly appointed Chief Executive Officer of
Boyds. If, for any reason, any of said nominees becomes unavailable for
election, the holders of the Proxies may exercise discretion to vote for
substitutes proposed by the Board of Directors. Management has no reason to
believe that the persons named will be unable to serve if elected or decline to
do so.
The election of each nominated Director requires a plurality of the votes
cast at the Annual Meeting. If a Stockholder wishes to withhold authority to
vote for any nominee, such Stockholder can do so by following the directions set
forth on the enclosed Proxy or on the ballot to be distributed at the Annual
Meeting, if such Stockholder wishes to vote in person.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL EIGHT NOMINATED
DIRECTORS SET FORTH BELOW, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN
FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Set forth below is certain information concerning each nominee for Director
of Boyds.
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD DURING PREVIOUS FIVE YEARS
- ---- -------- ------------------------------------------------------------
<S> <C> <C>
Gary M. Lowenthal.... 51 Chairman of the Board of Directors and Chief Executive
Officer of the Company from its founding in 1979 until
February 2000.
Jean-Andre Rougeot... 41 Chief Executive Officer of the Company since February 2000.
Prior thereto, he was the president and chief executive
officer of the Coty Division of Coty, Inc., from 1993
through December 1999.
Robert T. 57 Director of the Company since April 1998 and was President
Coccoluto............ from December 1998 to February 2000. Prior thereto, he was
an outside strategic advisor to the Company since September
1997. Also, he has been the owner and president of Advanced
Design Group LLC since January 1995. Prior to such time, he
was an officer of Department 56, Inc. from December 1989
through December 1994, where he held various positions
including executive vice president, chief financial officer
and director.
Henry R. Kravis...... 56 Director of the Company since April 1998. Founding Partner,
Kohlberg Kravis Roberts & Co. ("KKR"). Member of the Board
of Directors of Accuride Corporation, Amphenol Corporation,
Borden, Inc., BRW Acquisition, Inc., Evenflo Company, Inc.,
The Gillette Company, IDEX Corporation, KinderCare Learning
Centers, Inc., KSL Recreation Corporation, MedCath
Incorporated, Owens-Illinois, Inc., PRIMEDIA, Inc., Regal
Cinemas, Inc., Safeway Inc., Sotheby's Holdings Inc.,
Spalding Holdings Corporation, Trinity Acquisition plc,
which is the parent company of Willis Corroon Group Limited,
and U.S. Natural Resources.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD DURING PREVIOUS FIVE YEARS
- ---- -------- ------------------------------------------------------------
<S> <C> <C>
George R. Roberts.... 56 Director of the Company since April 1998. Founding Partner,
KKR. Member of the Board of Directors of Accuride
Corporation, Amphenol Corporation, Borden, Inc., BRW
Acquisition, Inc., Evenflo Company, Inc., IDEX Corporation,
KinderCare Learning Centers, Inc., KSL Recreation
Corporation, Owens-Illinois, Inc., PRIMEDIA, Inc., Safeway
Inc., Spalding Holdings Corporation, Trinity Acquisition
plc, which is the parent company of Willis Corroon Group
Limited, and U.S. Natural Resources, Inc.
Scott M. Stuart...... 40 Director of the Company since April 1998. General Partner,
KKR. Member of the Board of Directors of Borden, Inc., KSL
Recreation Corporation, and AEP Industries Inc.
Marc S. Lipschultz... 31 Director of the Company since April 1998. Executive of KKR
since 1995. Prior thereto, he was an investment banker at
Goldman, Sachs & Co. Member of the Board of Directors of
Amphenol Corporation.
Timothy Brady........ 31 Director of the Company since January 1999. Executive
producer and senior vice president of network services at
Yahoo! since April 1995. Prior thereto, he was a product
marketing manager at Motorola, Inc., Tokyo.
</TABLE>
Messrs. Kravis and Roberts are first cousins.
PROPOSAL TWO:
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the Annual Meeting, Stockholders will be asked to ratify the selection of
Deloitte & Touche LLP as independent certified public accountants and tax
advisors of the Company for the current fiscal year. The ratification of
Deloitte & Touche LLP requires the approval of the majority of votes cast at the
Annual Meeting.
Deloitte & Touche LLP, independent certified public accountants, have
audited the financial statements of the Company for the period ended
December 31, 1999. Services provided by Deloitte & Touche LLP included work
related to the audit of the financial statements, reviews of unaudited quarterly
financial information and preparation of state and federal income tax returns.
A representative of Deloitte & Touche LLP is expected to attend this
meeting. He will be afforded the opportunity to make a statement, if he desires,
and will be available to respond to appropriate questions.
On April 21, 1998, the Company dismissed Stambaugh Ness, P.C. as its
independent accountants. The Company's Audit Committee participated in and
approved the decision to change independent accountants.
The Company engaged Deloitte & Touche LLP as its new independent accountants
and tax advisors as of July 6, 1998. During the period July 6, 1998 through
December 31, 1998 and January 1, 1999 through December 31, 1999, the Company has
not consulted with Deloitte & Touche LLP on items which (1) were or should have
been subject to SAS 50 or (2) concerned the subject matter of a disagreement or
reportable event with the former auditor (as described in Regulation SK Item
304(a)(2)).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT PUBIC ACCOUNTANTS, AND PROXIES SOLICITED BY THE BOARD
WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
11
<PAGE>
STOCKHOLDERS LIST
A complete list of the Stockholders entitled to vote at the annual meeting
of Stockholders to be held May 17, 2000, will be available for inspection during
normal business hours at the principal office of the Company for a period of at
least 10 days prior to the meeting, upon written request to the Company by a
Stockholder, and at all times during the annual meeting at the place of the
meeting.
STOCKHOLDER PROPOSALS
In order for proposals by Stockholders to be considered for inclusion in the
Proxy and Proxy Statement relating to the 2001 Annual Meeting of Stockholders,
such proposals must be received by the Secretary of Boyds at the principal
executive offices of Boyds on or before February 15, 2001.
OTHER MATTERS
Management of Boyds does not know of any other matters to be brought before
the meeting. If any other matter properly comes before the Annual Meeting, it is
intended that the holders of Proxies will act in respect thereof in accordance
with their best judgement.
Proxies may be solicited by personal interview, telephone or mail. Banks,
brokerage houses and other custodians, nominees or fiduciaries will be requested
to forward soliciting materials to their principals and to obtain authorization
for the execution of Proxies, and, upon request, will be reimbursed for their
reasonable out-of-pocket expenses incurred in that process. The Company will
bear the cost of the solicitation of proxies which is expected to be nominal.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR
EARLIEST CONVENIENCE.
By Order of the Board of Directors,
/s/ PETER H. FROST
PETER H. FROST
VICE PRESIDENT-FINANCE
12
<PAGE>
THE BOYDS COLLECTION, LTD.
MCSHERRYSTOWN, PENNSYLVANIA
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS ON THE 17TH DAY OF MAY, 2000.
The undersigned hereby appoints Christine L. Bell and Peter H. Frost, and
each of them, with the power to appoint his or her substitute, attorneys with
the powers the undersigned would possess if personally present to vote all of
the Common Stock of The Boyds Collection, Ltd. held of record by the undersigned
on March 10, 2000, at the annual meeting of the Stockholders to be held on the
17th day of May 2000, at 248 Hunterstown Road, Gettysburg, Pennsylvania 17325,
at 10:00 o'clock a.m. Eastern Daylight Time, and at any adjournments thereof,
upon the matters set forth below and described in the notice and proxy statement
for said meeting, copies of which have been received by the undersigned; and, in
their discretion, upon all other matters which may come before the meeting.
Without otherwise limiting the general authorization hereby given, said
attorneys are instructed to vote as follows on the matters set forth below:
<TABLE>
<S> <C> <C> <C>
(1) ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) / / TO VOTE FOR ALL NOMINEES LISTED BELOW / /
</TABLE>
INSTRUCTION--TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.
Gary M. Lowenthal, Jean-Andre Rougeot, Robert T. Coccoluto, Henry R. Kravis,
George R. Roberts, Scott M. Stuart, Marc S. Lipschultz and Timothy Brady.
(2) Proposal to ratify the engagement of the accounting firm of Deloitte &
Touche LLP as independent public accountants and tax advisors for the
current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion, upon such other matters as may properly come before
the meeting.
/ / AUTHORIZED / / NOT AUTHORIZED
The shares represented by this proxy will be voted in accordance with the
specifications made by the undersigned herein. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Please mark, sign, date and return this proxy in the enclosed envelope as
soon as possible, even though you plan to attend this meeting.
To help our preparations for the meeting, please check here if you plan to
attend. / /
<PAGE>
SIGN HERE EXACTLY AS NAME(S)
APPEAR(S) ABOVE
___________________Date: _________
___________________Date: _________
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
president or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
If your address has changed,
please note new address:
Address: _________________________
Zip Code _________________________
