<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
MATTEL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] 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:
-------------------------------------------------------------------------
[X] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LETTERHEAD OF MATTEL, INC.]
March 23, 1996
To Our Stockholders:
On behalf of the Board of Directors, I am pleased to invite you to the
Annual Meeting of Stockholders of Mattel, Inc. to be held May 8, 1996 at 10:00
a.m., local time, in the Manhattan Ballroom of the Radisson Plaza Hotel, 1400
Parkview Avenue, Manhattan Beach, California. I look forward to greeting you
personally and reporting on the progress of your company.
The items of business to be acted on during the meeting are listed in the
Notice of Annual Meeting of Stockholders and are described more fully in the
Proxy Statement. The formal business of the meeting will also include a report
on operations followed by a question and discussion period.
To ensure that your shares will be represented, I urge you to vote, date,
sign and mail the enclosed proxy in the envelope which is provided whether or
not you expect to be present. You may, of course, attend the Annual Meeting
and vote in person even if you have previously returned your proxy card.
I hope to see you at the meeting.
Sincerely,
/s/ John W. Amerman
John W. Amerman
Chairman and Chief Executive Officer
<PAGE>
MATTEL, INC.
333 CONTINENTAL BOULEVARD
EL SEGUNDO, CALIFORNIA 90245
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
The Annual Meeting of the Stockholders of MATTEL, INC. will be held
Wednesday, May 8, 1996 at 10:00 a.m., local time, in the Manhattan Ballroom of
the Radisson Plaza Hotel, 1400 Parkview Avenue, Manhattan Beach, California,
to consider and act upon the following matters:
1. The election of directors;
2. The approval of the Mattel 1996 Stock Option Plan;
3. The approval of the Mattel Long-Term Incentive Plan;
4. The approval of an amendment to Article Fourth of Mattel's Restated
Certificate of Incorporation;
5. The ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants for the year ending December 31, 1996;
and
6. Such other business as may properly come before the meeting or any
adjournment or postponement thereof.
Shares represented by properly executed proxies hereby solicited by the
Board of Directors of Mattel will be voted in accordance with instructions
specified therein. It is the intention of the Board of Directors that shares
represented by proxies which are not limited to the contrary will be voted in
favor of the election as directors of the persons named in the accompanying
Proxy Statement, for proposals 2, 3, 4 and 5 and on other matters as
recommended by the Board.
The Board of Directors has fixed the close of business on March 13, 1996 as
the record date for determination of stockholders entitled to receive notice
of, and to vote at, the meeting and any adjournment thereof.
By Order of the Board of Directors
Ned Mansour
Secretary
El Segundo, California
March 23, 1996
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE STOCKHOLDERS'
INTEREST BE REPRESENTED AT THE MEETING. THEREFORE, IF YOU ARE UNABLE TO BE
PRESENT IN PERSON OR OTHERWISE REPRESENTED AT THE MEETING, YOU ARE REQUESTED
TO SIGN AND RETURN THE ENCLOSED PROXY IN ORDER THAT YOUR STOCK WILL BE
REPRESENTED.
<PAGE>
MATTEL, INC.
333 Continental Boulevard
El Segundo, California 90245
----------------
PROXY STATEMENT
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Mattel, Inc., a Delaware
corporation ("Mattel" or the "Company"), for use at the Annual Meeting of
Stockholders (the "Meeting"), to be held at 10:00 a.m., local time, Wednesday,
May 8, 1996 in the Manhattan Ballroom of the Radisson Plaza Hotel, 1400
Parkview Avenue, Manhattan Beach, California, and at any adjournment or
postponement of such meeting. This Proxy Statement and the form of proxy to be
utilized at the Meeting were mailed or delivered to the stockholders of Mattel
on or about March 23, 1996.
RECORD DATE AND VOTING
The Board has fixed the close of business on March 13, 1996 as the record
date (the "Record Date") for the determination of the holders of common stock,
$1.00 par value per share (the "Common Stock"), entitled to vote at the
Meeting and any adjournment or postponement thereof. As of the Record Date,
there were outstanding 279,057,614 shares of Common Stock.
QUORUM, CUMULATIVE VOTING AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the Meeting.
As to all matters, each stockholder is entitled to one vote for each share of
Common Stock he or she holds. Abstentions and broker non-votes (shares held by
a broker or nominee which are represented at the Meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular
proposal) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. In the election of directors, holders
of Common Stock are entitled to elect eleven directors with the eleven
candidates who receive the highest number of affirmative votes being elected.
Votes against a candidate and votes withheld have no legal effect. In electing
directors, stockholders have the unconditional right to cumulate their votes
and give one candidate the number of votes equal to the number of directors to
be elected multiplied by the number of votes per share of stock held in their
name or to distribute such votes among as many candidates as they see fit.
Stockholders may cumulate their votes by writing the name or names of the
nominee or nominees with respect to whom they are withholding their votes in
the space provided on the proxy card and the shares voted will be cumulated in
the manner described above and voted for the remaining candidate or spread
equally, adjusted to whole votes, among the remaining candidates. In matters
other than the election of directors, abstentions have the effect of votes
against a proposal in tabulations of the votes cast on proposals presented to
stockholders, whereas broker non-votes do not have any effect for purposes of
determining whether a proposal has been approved.
All proxies which are properly completed, signed and returned prior to the
Meeting will be voted. Any proxy given by a stockholder may be revoked at any
time before it is exercised by filing with the Secretary of the Company an
instrument revoking it, by delivering a duly executed proxy bearing a later
date or by the stockholder attending the Meeting and expressing a desire to
vote his or her shares in person.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Mattel's Common Stock as of February 15, 1996 by (i) each
director and nominee for director, (ii) the Chairman and Chief Executive
Officer and each of the four other most highly compensated executive officers
of Mattel and (iii) all directors and executive officers of Mattel as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER POSITION WITH THE COMPANY OF BENEFICIAL OWNERSHIP(1)
------------------------ ------------------------- --------------------------
<S> <C> <C>
John W. Amerman Chairman & Chief Executive Officer 2,473,089(2)
Jill E. Barad President, COO & a Director 1,182,832(2)
Dr. Harold Brown Director 43,945
James A. Eskridge Group President, Mattel, Worldwide & a Director 588,359(2)
Tully M. Friedman Director 1,250
Joseph C. Gandolfo President, Mattel Operations, Inc. 682,110(2)
Ronald M. Loeb Director 83,795
Edward H. Malone Director 1,551
Edward N. Ney Director 13,472
William D. Rollnick Director 167,070
Christopher A. Sinclair Director 0
John L. Vogelstein Director 521,875
Lindsey F. Williams President, Mattel International & a Director 953,028(2)(3)
All Executive Officers
and Directors as a group (20 persons) 7,029,553(4)
</TABLE>
- --------
(1) Except as set forth below, the directors and officers named above have
sole voting power and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable, and no director or executive officer named
above owns or controls or may be deemed to beneficially own or control 1%
or more of any class of capital stock of the Company. Adjusted for a five-
for-four stock split payable as a stock dividend declared February 6,
1996.
(2) Includes shares of Common Stock which the following officers and directors
have the right to acquire by exercise of options within 60 days following
February 15, 1996: Amerman 1,691,457; Barad 881,095; Eskridge 342,969;
Gandolfo 666,298; and Williams 515,625.
(3) Includes 58,593 shares of Common Stock held in a trust of which Mr.
Williams is trustee for the benefit of his children and as to which he
disclaims beneficial ownership. Mr. Williams retired from his positions
with the Company effective December 31, 1995.
(4) The amount stated includes an aggregate of 4,397,104 shares of Common
Stock which may be acquired upon the exercise of options within 60 days
following February 15, 1996 and represents approximately 2.5% of the
outstanding shares of Common Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Meeting to serve until the next
Annual Meeting of Stockholders and until their respective successors have been
elected and qualified. In the absence of instructions to the contrary, proxies
will be voted in favor of the election of the persons listed below. In the
event that any nominee for election as director should become unavailable to
serve, it is intended that votes will be cast, pursuant to the enclosed proxy,
for such substitute nominee as may be nominated by the Company. Management has
no present knowledge that any of the persons named will be unavailable to
serve.
2
<PAGE>
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
director or nominee. None of the nominees has any family relationship to any
other nominee or to any executive officer of the Company.
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the incumbent directors, all of
whom are also nominees for election as directors, and the year in which each
director was first elected as a director of the Company. Each nominee has
furnished the information as to his or her beneficial ownership of Common
Stock as of February 15, 1996 and the nominee's principal occupation. Each
nominee has consented to being named in this Proxy Statement as a nominee for
director and has agreed to serve as a director if elected.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME OR POSITION AGE SINCE
---- -------------------- --- --------
<C> <S> <C> <C>
John W. Amerman............. Chairman of the Board and Chief 64 1985
Executive Officer (also a
Director of Unocal, Inc.)
Jill E. Barad............... President and Chief Operating 44 1991
Officer (also a Director of
BankAmerica Corporation,
Microsoft Corp. and Reebok
International Ltd.)
Dr. Harold Brown............ Senior Managing Director of E.M. 68 1991
Warburg, Pincus & Co., Inc.;
Counselor, Center for Strategic
and International Studies (also
a Director of International
Business Machines Corporation,
Cummins Engine Company, Alumax,
Inc., Philip Morris Companies,
Inc. and Evergreen Holdings, Inc.)
James A. Eskridge........... Group President, Mattel, 53 1993
Worldwide (also a Director of
NeXstar, Inc.)
Tully M. Friedman........... Founding Partner of Hellman & 54 1984
Friedman, a private investment
firm (also on the Advisory Board
of Tevecap, S.A., the Board of
Representatives of Falcon
Holding Group, L.P. and a
Director of American President
Companies, Ltd., Levi Strauss &
Co., McKesson Corporation and
MobileMedia Corporation)
Ronald M. Loeb.............. Partner in the law firm of Irell 63 1970
& Manella
Edward H. Malone............ Retired Vice President of General 71 1984
Electric Co. (also a Director of
Allegheny Power System, Inc.,
General Re Corporation and a
Trustee of the Fidelity group of
mutual funds)
Edward N. Ney............... Chairman, Board of Advisors, 70 1993
Burson-Marsteller (also a
Director of American Barrick,
Fortune Bank and The Horsham
Corporation)
William D. Rollnick......... Retired Chairman and a Director 64 1984
of Genstar Rental Electronics,
Inc.
Christopher A. Sinclair..... Chairman and Chief Executive 45 1996
Officer of Pepsi-Cola Company
(also a Director of PepsiCo,
Inc., Perdue Farms, Inc. and the
Woolworth Corporation)
John L. Vogelstein.......... Vice Chairman of the Board, 61 1983
President and Director of E.M.
Warburg, Pincus & Co., Inc.
(also a Director of ADVO, Inc.,
Aegis Group plc, Magma Copper
Company, LCI International and
Value Health, Inc.)
</TABLE>
3
<PAGE>
Except as set forth below, each of the directors has served in the capacity
indicated in the table for at least the past five years. Ms. Barad has served
in the capacity indicated since August 1992. Prior to that, she served as an
executive officer of Mattel for more than five years. Mr. Eskridge has served
in the capacity indicated since April 1, 1995. Prior to that, he was President
of Fisher-Price, Inc. from November 1993 through April 1995 and Executive Vice
President-Chief Financial Officer of Mattel from December 1988 through
November 1993. Mr. Ney has served in the capacity indicated since 1992. From
March 1989 through July 1992 he was U.S. Ambassador to Canada. Mr. Sinclair
has served in the capacity indicated since March, 1996. Prior to that, he
served as President and Chief Executive Officer of PepsiCo Foods & Beverages
International and Pepsi-Cola International.
THE BOARD OF DIRECTORS
MEETINGS AND REMUNERATION
During 1995, the Board held five meetings, and no director attended less
than 75% of the aggregate of all Board meetings and of all meetings held by
any committee of the Board on which he or she served, except for Mr.
Vogelstein.
Non-employee members of the Board receive an annual retainer of $30,000 per
year. Each Committee Chairman receives an annual fee of $4,000 per year and
each non-employee committee member receives $1,500 per committee meeting
attended. Directors may elect to defer all or part of their directors' fees
under an arrangement which provides for the investment of such fees in Common
Stock equivalents or in interest-bearing accounts. The distribution of such
deferred amounts may be in a lump sum or installments over a period of years
commencing on or after the individual ceases to be a director of Mattel. If
the Mattel 1996 Stock Option Plan is approved by the Company's stockholders,
each non-employee member of the Board will receive on the date of such
stockholder approval options to purchase 15,000 shares of Common Stock with an
exercise price equal to the fair market value on the date of grant. The
options will be immediately exercisable and will expire ten years from the
date of grant. Subsequent to the date of such stockholder approval, each new
non-employee member of the Board will receive similar options to purchase
15,000 shares of Common Stock upon their initial election to the Board. Upon
each annual re-election to the Board, each non-employee member of the Board
will receive options to purchase either 5,000 or 10,000 shares of Common Stock
with an exercise price equal to the fair market value on the date of grant. To
recognize continued service on the Board, directors with five years of service
or less would receive options to purchase 5,000 shares of Common Stock, and
directors with more than five years of service would receive options to
purchase 10,000 shares of Common Stock. The options will vest at the rate of
25% per year and will expire ten years from the date of grant. (See "Proposal
2--Approval of the Mattel 1996 Stock Option Plan" below.)
COMMITTEES
Mattel has an Audit Committee chaired by Mr. Rollnick and including Messrs.
Friedman, Loeb, Vogelstein and Ney as members. During 1995, the Committee held
six meetings. The primary functions which the Audit Committee performs are to
review periodic financial statements and certain financial information before
publication; discuss the scope of the independent accountants' engagement and
review the independent accountants' performance, reports and fees; review the
scope and adequacy of Mattel's financial controls, internal audit plans and
the findings of internal audit examinations; and recommend the selection of
independent accountants.
Mattel's Executive/Finance Committee, chaired by Mr. Vogelstein and
including Messrs. Amerman, Friedman, Malone and Rollnick as members, also
functions as a Nominating Committee. During 1995, the Executive/Finance
Committee held three meetings. The Executive/Finance Committee has all the
powers of the Board of Directors subject to limitations of applicable law.
Sitting as a Nominating Committee, its primary functions are to submit to the
Board for consideration nominees for membership to be presented to the
stockholders for their election at the Annual Meeting of Stockholders; solicit
recommendations and select persons as candidates to fill vacancies on the
Board; and present to the Board its recommendations for committee assignments.
The Committee will consider nominee recommendations by the stockholders. The
names of any such nominee should be sent to the Secretary, Mattel, Inc., 333
Continental Boulevard, El Segundo, California 90245-5012.
4
<PAGE>
Mattel has a Compensation/Options Committee chaired by Mr. Vogelstein and
including Messrs. Malone and Rollnick as members. During 1995, the
Compensation/Options Committee held seven meetings. Its primary functions are
to review compensation levels of members of management; evaluate the
performance of management and consider management succession and related
matters; and develop and oversee the various incentive plans, including the
Company's stock option plan and incentive compensation plans.
Mattel has a Foundation Committee chaired by Dr. Brown and including Messrs.
Eskridge, Gandolfo and Ney and Ms. Barad as members. During 1995, the
Foundation Committee held four meetings. The Foundation Committee provides
direction to and approves the budget and major expenditures for the Mattel
Foundation. Funded annually from corporate profits, the Mattel Foundation
supports a variety of programs and organizations that benefit children in
need.
Mattel has a Pension Committee chaired by Mr. Malone and including Dr. Brown
and Ms. Barad. During 1995, the Pension Committee held two meetings. The
Pension Committee oversees the operation of Mattel's pension and employee
benefit plans by reviewing investment policies and financial performance,
selecting trustees and other fiduciaries and monitoring the administration of
the plans.
REPORT OF THE COMPENSATION/OPTIONS COMMITTEE
The following Report of the Compensation/Options Committee and the
Performance Graph shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission (the "Commission") or
subject to Regulations 14A or 14C of the Commission or the liabilities of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"). Such
Report and Performance Graph shall not be deemed incorporated by reference
into any filing under the Securities Act of 1933 or the Exchange Act,
notwithstanding any general incorporation by reference of this Proxy Statement
into any other document.
GENERAL
The Compensation/Options Committee (the "Committee"), a committee composed
entirely of directors who have never served as officers of the Company,
develops and oversees the Company's various incentive and stock plans, reviews
compensation levels of members of management, evaluates the performance of
management and considers management succession and related matters. In
evaluating the performance of members of management, the Committee consults
with the Chief Executive Officer except when reviewing his performance, in
which case the Committee meets independently. The Committee reviews with the
Board in detail all aspects of compensation for the senior executives,
including the five individuals named in the Summary Compensation Table (the
"Compensation Table"). The Committee met seven times during 1995.
STATEMENT ON PHILOSOPHY OF EXECUTIVE COMPENSATION
In establishing and evaluating the effectiveness of compensation programs
for executive officers, as well as other employees of the Company, the
Committee is guided by three basic principles:
. The Company must offer competitive salaries to be able to attract and
retain highly-qualified and experienced executives and other management
personnel;
. Executive cash compensation in excess of base salaries should be tied to
Company and individual performance; and
. The financial interests of the Company's senior executives should be
aligned with the financial interests of the stockholders, primarily
through stock option grants, restricted stock, the Management Incentive
Plan and the Long-Term Incentive Plan.
IMPLEMENTATION OF PHILOSOPHY
The Company has retained the services of Hewitt Associates LLC ("Hewitt"), a
compensation consulting firm, to assist the Committee in connection with the
performance of its various duties, including developing
5
<PAGE>
compensation plans to achieve this policy. Hewitt has been retained by the
Company in this capacity since 1987. Hewitt also provides data and advice to
the Committee with respect to the compensation paid to senior officers of the
Company. Hewitt periodically reviews the compensation plans in which each of
the officers named in the Compensation Table participates and reports to the
Committee (i) whether the plans meet the objectives of motivating the officers
to continue to achieve the superior stockholder return the Company has
experienced and (ii) if the plans also achieve the objective of attracting and
retaining qualified officers.
BASE SALARY
Base salaries for the Chief Executive Officer and other executive officers
are established at levels considered appropriate in light of the duties and
scope of responsibilities of each officer's position. Salaries are reviewed
periodically (typically once every eighteen months) and adjusted as warranted
to reflect sustained individual performance. The Committee measures individual
performance and contribution against total annual compensation, including
incentive awards, rather than base salary alone.
MANAGEMENT INCENTIVE PLAN
Under the Company's Management Incentive Plan ("MIP"), incentive
compensation is earned based on current year's performance as compared to
business and financial goals for the year. These annual goals are established
by the Committee at the beginning of the period and include Cash Flow Return
on Investment ("CFROI") and operating profit, weighted 33% and 67%,
respectively. CFROI is a measure of the cash flow generated by the Company's
assets and is based on a formula developed by an independent financial
consulting firm. This formula is related to the economic performance of a
company, and an increase in CFROI is strongly correlated to improvement in
stock price. In determining individual awards under the MIP, the Committee
also considers individual accomplishments. The maximum annual amounts that the
Chief Executive Officer and the four other officers named in the Compensation
Table are eligible to receive under the MIP range from 75% to 100% of base
salary. In 1995, the Company reported record sales and earnings for the
seventh consecutive year. During 1995, retention awards under the MIP were
earned by Messrs. Amerman, Eskridge, Gandolfo and Williams and Ms. Barad in
the amounts of $740,800, $327,600, $300,000, $275,000, and $558,900,
respectively. Acknowledging the need to maintain management continuity,
payment of these retention awards will be made in December, 1996. Also in
1995, Ms. Barad was awarded a deferred special achievement bonus of $135,000
for services performed in 1994.
LONG-TERM INCENTIVE PLAN
The individuals listed in the Compensation Table participate in the
Company's Long-Term Incentive Plan (the "LTIP"). Awards under the LTIP are
based on Mattel's financial performance over a three-year performance cycle
with performance targets that relate to the long-range financial goals of the
Company. The performance targets used to determine awards under the LTIP are
based primarily on CFROI, sales growth and earnings per share. Prior to April
1 of the first year of the three-year performance period, the Committee
establishes, in writing, the level of each executive's participation and
target levels for the performance criteria which must be achieved before
incentive payments are awarded. Payments of performance awards for achieving
interim performance objectives are determined at the end of each annual
performance period. Each interim award is paid annually in the first quarter
of the following year. Payments at the end of the three-year performance
period include amounts earned for exceeding performance objectives. Individual
participation is established by the Committee at levels considered appropriate
in light of the duties and scope of responsibilities of each officer's
position. During the three-year period covered by the Compensation Table,
Mattel's Common Stock price, adjusted for stock splits, increased from $12.99
to $24.60, a 90% increase. Payments under the LTIP were made during 1995 for
awards granted in 1993 to Messrs. Amerman, Eskridge, Gandolfo and Williams and
Ms. Barad of $2,611,550, $1,595,947, $1,305,775, $1,595,947 and $2,176,291,
respectively.
EQUITY-BASED INCENTIVE COMPENSATION
The 1990 Stock Option Plan authorizes the Committee to make grants and
awards of stock options, stock appreciation rights, restricted stock and other
stock-based awards. Stock options are granted with an exercise price equal to
the market price of Mattel's Common Stock on the date of grant and generally
vest over four years. This approach is designed to motivate management to
increase stockholder value over the long-term since
6
<PAGE>
the full benefit of the compensation package cannot be realized unless stock
price appreciation occurs over a number of years. In determining the number of
options awarded, the Committee considers competitive practices, the duties and
scope of responsibilities of each officer's position and the amount and terms
of options already held by management.
The Committee believes that significant equity interests in the Company held
by the Company's management more closely align the interests of stockholders
and management. In light of this belief and effective January 1, 1995, the
Company established stock ownership guidelines for senior management. Those
executives to whom the guidelines apply have up to five years to attain target
minimum levels of stock ownership, based on an ascending scale commensurate
with their level in the Company. Compliance with these guidelines is monitored
by the Committee and, while not mandatory, will be taken into consideration at
the time future stock option grants are made.
INTERNAL REVENUE CODE SECTION 162(M)
As one of the factors in its review of compensation matters, the Committee
considers the anticipated tax treatment to the Company and to the executives
of various payments and benefits. The deductibility of some types of
compensation payments depends upon the timing of an executive's vesting or
exercise of previously granted rights. Furthermore, interpretations of and
changes in the tax laws and other factors beyond the Committee's control also
affect the deductibility of compensation. For these and other reasons, the
Committee will not necessarily limit executive compensation to that deductible
under Section 162(m) of the Internal Revenue Code. The Committee will consider
various alternatives to preserving the deductibility of compensation payments
and benefits to the extent reasonably practicable and to the extent consistent
with its other compensation objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In 1995, Mr. Amerman earned a total compensation of $1,783,118 in salary and
retention awards. Acknowledging the need to maintain management continuity,
payment of the retention awards will be made in December, 1996. Also in 1995,
Mr. Amerman was awarded a deferred special achievement bonus of $175,000 for
services performed in 1994. The Committee considers this level of compensation
appropriate in light of Mr. Amerman's leadership of the world's largest toy
company. Mr. Amerman's employment agreement with Mattel establishes a minimum
base salary and the minimum benefits to which he is entitled under the
compensation plans available to Mattel's executive officers. The Committee
typically reviews Mr. Amerman's base salary every eighteen months, and his
base salary was reviewed in 1995 and increased to $1,100,000.
In setting Mr. Amerman's 1995 compensation, the Committee relied heavily on
its assessment of his short-term performance and long-term ability and
dedication to enhance Mattel's value. In the short-term, Mattel reported
record sales and earnings in 1995. In the long-term, over the eight full years
of Mr. Amerman's service as Chief Executive Officer, Mattel's market value has
increased by approximately $6 billion, and in the last seven of those years,
Mattel reported record sales and earnings. This long-term performance is
further highlighted on the eight year Performance Graph following this Report,
which compares the total return of the Common Stock during Mr. Amerman's
tenure as CEO to the total return over such period of the S&P 500 and the
Recreation Products Group. Mattel's performance over such eight year period
exceeded the S&P 500 by more than four times and the Recreation Products Group
by more than five times. Accordingly, Mr. Amerman's total compensation for
1995 was based on both short-term performance and the long-term success of the
Company under his leadership.
COMPENSATION/OPTIONS COMMITTEE
John L. Vogelstein (Chairman)
Edward H. Malone
William D. Rollnick
7
<PAGE>
PERFORMANCE GRAPH
MATTEL, INC.
Comparison of Eight Year Cumulative Total Return*
Mattel, Inc., S&P 500, and Recreation Products Group 1988 to 1995
[PERFORMANCE GRAPH CHART APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN* 1988 1989 1990 1991 1992 1993 1994 1995
- ------------------------ ------ ------ ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MATTEL, INC............. $138.2 $287.3 $294.1 $608.9 $704.9 $774.3 $888.5 $1,370.3
S&P 500................. 116.6 153.6 148.8 194.1 208.9 230.0 233.0 319.7
RECREATION PRODUCTS
GROUP.................. 110.5 132.9 118.9 146.3 184.9 227.4 206.0 258.7
</TABLE>
* Annual Return assumes reinvestment of dividends. Cumulative Total Return
assumes an initial investment of $100.
Recreation Products Group includes the Dow Jones Recreational Toys and Other
Recreational Groups which include the following companies: Acclaim
Entertainment, Inc.; Brunswick Corp.; The Walt Disney Company; Eastman Kodak
Co.; Electronic Arts, Inc.; Hasbro Inc.; International Game Technology Corp.;
King World Productions, Inc.; Outboard Marine Corp.; Polaroid Corp.; and Time
Warner, Inc.
8
<PAGE>
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and the four most highly
compensated executive officers of the Company who served in such capacities on
December 31, 1995 for service rendered to the Company during each of the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------- ---------
OTHER
ANNUAL SECURITIES LTIP ALL OTHER
NAME AND BONUS COMPENSATION UNDERLYING PAYOUT COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) OPTIONS(#)(3) ($)(1) ($)(4)
- ------------------ ---- --------- --------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Amerman......... 1995 1,042,318 915,800 2,262,000 0 2,611,550 138,078
Chairman and 1994 950,014 833,150 -- 1,637,500 621,810 125,919
Chief Exec. Officer 1993 828,759 1,425,000 -- 556,641 300,000 106,053
Jill E. Barad........... 1995 786,546 693,900 1,809,500 0 2,176,291 61,015
President and Chief 1994 725,010 635,800 -- 1,232,813 518,175 59,650
Operating Officer 1993 628,237 1,070,000 -- 429,063 250,000 35,329
James A. Eskridge....... 1995 615,016 327,600 1,809,500 0 1,595,947 245,541
Group President, 1994 555,786 425,000 -- 1,076,563 379,995 337,194
Mattel, Worldwide 1993 421,667 690,000 -- 341,798 183,333 44,720
Joseph C. Gandolfo...... 1995 410,772 300,000 1,809,500 62,500 1,305,775 45,351
President 1994 390,000 300,000 -- 685,938 310,905 42,523
Mattel Operations, Inc. 1993 357,450 560,000 -- 449,219 150,000 36,128
Lindsey F. Williams..... 1995 517,313 275,000 1,809,500 62,500 1,595,947 59,931
President 1994 500,006 370,000 -- 685,938 379,995 61,191
Mattel International(5) 1993 468,958 775,000 -- 273,438 183,333 55,905
</TABLE>
- --------
(1) Amounts were earned in the years indicated. The annual bonus is generally
paid in the first quarter of the following year and interim long-term
incentive plan payouts are based on one-third of the three-year target
amount and paid annually in the first quarter of the following year.
Payments at the end of the three year performance period include amounts
earned for exceeding performance objectives. Bonus amounts for 1995
include retention award payments to Messrs. Amerman, Eskridge, Gandolfo
and Williams and Ms. Barad in the amounts of $740,800, $327,600, $300,000,
$275,000 and $558,900, respectively. Bonus amounts for 1995 also include
awards of a deferred special achievement bonus for services performed in
1994 to Mr. Amerman and Ms. Barad in the amounts of $175,000 and $135,000,
respectively. Bonus amounts for 1993 include retention award payments to
Messrs. Amerman, Eskridge, Gandolfo and Williams and Ms. Barad in the
amounts of $600,000, $350,000, $300,000, $400,000 and $450,000,
respectively.
(2) Represents payments made in 1995 in exchange for the cancellation of SARs
granted in 1993.
(3) Adjusted for five-for-four stock split payable as a stock dividend
declared February 6, 1996.
(4) 1995 amounts consist of the taxable portion of premiums on Company-
provided life insurance for Messrs. Amerman, Eskridge, Gandolfo and
Williams and Ms. Barad in the amounts of $22,788, $5,909, $4,274, $8,757
and $2,861, respectively, and contributions to the Company's Personal
Investment Plan and PIP Excess Plan to the named individuals in the
amounts of $115,290, $56,828, $41,077, $51,174 and $58,154, respectively.
1995 and 1994 amounts for Mr. Eskridge also include relocation expenses of
$182,804 and $279,398, respectively.
(5) Mr. Williams retired from his positions with the Company effective
December 31, 1995.
9
<PAGE>
The following table sets forth certain information relating to options and
SARs granted to the named executive officers in the 1995 fiscal year.
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE ($)(2)
---- ------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
John W. Amerman......... 0 -- -- -- --
Jill E. Barad........... 0 -- -- -- --
James A. Eskridge....... 0 -- -- -- --
Joseph C. Gandolfo...... 62,500(1) 2.6 16.16 1/4/05 496,000
Lindsey F. Williams..... 62,500(1) 2.6 16.16 1/4/05 496,000
</TABLE>
- --------
(1) Options were granted at fair market value on the date of grant, were for a
term of ten years and vest in four equal installments commencing one year
and one day after the date of grant. Adjusted for a five-for-four stock
split payable as a stock dividend declared February 6, 1996. Potential
realizable value calculated using a variation of the Black-Scholes option
pricing method based on the following assumptions: 7.78% risk free rate;
10 year option term; 1.19% dividend yield; 26.2% volatility; and $16.16
exercise price.
(2) The actual value, if any, an executive may realize will depend upon the
excess of the stock price over the exercise price on the date the option
is exercised, so there is no assurance that the value realized by the
executive will be at or near the amount shown.
The following table shows exercises and values of options and SARs held by
the named executive officers.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FY-END SARS AT FY-END
SHARES ACQUIRED VALUE ------------------------- -------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Amerman......... 0 0 1,202,295 1,229,882 13,220,141 10,565,673
Jill E. Barad........... 35,628 642,979 683,321 967,968 6,566,009 8,315,899
James A. Eskridge....... 526,126 3,994,807 176,955 806,833 1,446,315 6,999,205
Joseph C. Gandolfo...... 79,375 1,059,230 419,354 494,578 3,989,313 4,530,373
Lindsey F. Williams..... 141,603 1,771,231 382,032 542,186 3,445,291 5,148,864
</TABLE>
- --------
(1) Adjusted for five-for-four stock split payable as a stock dividend
declared February 6, 1996. The value of underlying securities is
determined at exercise date or year-end, as the case may be, minus the
exercise price or base price of "in-the-money" options.
10
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER
NUMBER OF OTHER PERIOD NON-STOCK PRICE-BASED PLANS
SHARES, UNITS UNTIL -----------------------------
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) PAYOUT ($) ($) ($)
---- ------------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
John W. Amerman......... -- 1/1/96-12/31/98(1) 1,050,000 3,500,000 8,750,000
Jill E. Barad........... -- 1/1/96-12/31/98(1) 1,050,000 3,500,000 8,750,000
James A. Eskridge....... -- 1/1/96-12/31/98(1) 750,000 2,500,000 6,250,000
Joseph C. Gandolfo...... -- 1/1/96-12/31/98(1) 405,000 1,350,000 3,375,000
Lindsey F. Williams(2).. 0 -- 0 0 0
</TABLE>
- --------
(1) Reflects awards under Mattel's Long-Term Incentive Plan ("LTIP"). Awards
under the LTIP are based on a combination of factors, including cash flow
return on investment, sales growth and earnings per share. For additional
information regarding the LTIP including the material terms and conditions
of the award and a general description of the formula used in determining
the amounts payable under that plan, see "Proposal 3--Approval of the
Mattel Long-Term Incentive Plan,"; and Report of the Compensation/Options
Committee.
(2) Mr. Williams retired from his positions with the Company effective
December 31, 1995.
RETIREMENT PLANS
The Company adopted the Mattel, Inc. Supplemental Executive Retirement Plan
(the "SERP") effective April 1, 1994. Under the SERP, a vested participant
shall be entitled to a yearly benefit for fifteen years beginning at age sixty
based on (i) Final Average Compensation, (the average annual compensation
during the final three years of employment), and (ii) years of service, (up to
a maximum of fifteen). A participant vests upon completing five years of
service and attaining age fifty-five. The compensation used in determining
Final Average Compensation under the SERP is the participant's base salary
plus bonus paid under the Company's Management Incentive Plan. At December 31,
1995, Final Average Compensation under the SERP for Messrs. Amerman, Eskridge,
Gandolfo and Williams and Ms. Barad was $1,692,300, $878,264, $629,444,
$815,347 and $1,279,711, respectively, and the years of credited service with
the Company were 16, 7, 5, 27 and 15, respectively. The SERP benefit is
computed as a fifteen-year certain payment and is not reduced for Social
Security.
The following table shows the estimated annual benefit that would be payable
to participants in the SERP at age sixty.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL RETIREMENT BENEFITS RETIRING AT AGE 60
----------------------------------------------------------
FINAL AVERAGE
COMPENSATION 5 YEARS OF SERVICE 10 YEARS OF SERVICE 15 YEARS OF SERVICE
------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
$ 500,000 $ 41,667 $ 83,333 $125,000
600,000 50,000 100,000 150,000
700,000 58,333 116,667 175,000
800,000 66,667 133,333 200,000
900,000 75,000 150,000 225,000
1,000,000 83,333 166,667 250,000
1,250,000 104,167 208,333 312,500
1,500,000 125,000 250,000 375,000
1,750,000 145,833 291,667 437,500
2,000,000 166,667 333,333 500,000
</TABLE>
The Company adopted the Mattel, Inc. Supplemental Executive Retirement Plan
(the "Old SERP") effective October 1, 1990. Under the Old SERP, a vested
participant shall be entitled to a yearly benefit for fifteen years equal to
(i) 10% of Compensation, (the average monthly base compensation for the final
twelve months of employment), plus (ii) 1.5% of Compensation for each year of
service after attaining age fifty; provided, however, that a participant's
total benefit may not exceed 30% of Compensation. Participants must be at
least fifty years of age with five years of service to receive benefits.
Compensation under the Old SERP is the
11
<PAGE>
participant's base salary and is identical to the compensation disclosed as
"Salary" in the Summary Compensation Table. The estimated annual amount
payable upon retirement at age sixty-four to Messrs. Amerman, Eskridge,
Gandolfo and Williams and Ms. Barad based on their current Compensation would
be $330,000, $192,000, $135,000, $165,000 and $247,500, respectively. The Old
SERP benefit is computed as a fifteen-year certain payment and is not reduced
for Social Security.
Participants in both the SERP and the Old SERP may receive benefits under
only one plan and must elect from which plan to receive benefits prior to
retirement.
EMPLOYMENT AGREEMENTS
Mattel has entered into employment agreements with the executive officers
named in the Summary Compensation Table in order to assure the continued
service of such persons. Such agreements generally provide a three-year term
of employment of the executives, five in the case of each of Mr. Amerman and
Ms. Barad, for salaries at the amounts set forth in the Summary Compensation
Table and for participation in various incentive and employee benefit plans as
may be in effect from time to time with respect to executives employed by
Mattel at the executive's level. The termination date of each agreement is
automatically extended by one month on the first day of each month during the
period of employment. The agreements do not provide for payments in the event
of a change of control of the Company but do provide for payments due under
the agreements if the executives' employment is terminated by the Company for
its convenience and without cause or if there is a material change in the
executives' duties and responsibilities as described in the agreements.
CERTAIN TRANSACTIONS
The law firm of Irell & Manella, of which Mr. Loeb is a partner, provided
legal services to the Company during 1995.
During 1995, the Company made payments in the aggregate of $1,035,058 to
Electronic Catalogue Network ("ECN") for the production of a BARBIE
infomercial and royalties based on resulting product sales. Thomas Barad, the
husband of Jill Barad, Mattel's President and Chief Operating Officer, and a
director of the Company, beneficially owns a 50% interest in ECN.
On November 1, 1994, Mattel loaned $3.0 million at 4.12% per annum, (the
short-term applicable federal rate for the month of September 1994), to Ms.
Barad for the purchase of a home pursuant to the terms of her employment
agreement. The loan is secured by a first deed of trust on the home and is
payable in full on November 1, 1997.
PROPOSAL 2
APPROVAL OF THE MATTEL 1996 STOCK OPTION PLAN
On January 17, 1996, the Compensation/Options Committee of Board (the
"Committee") approved, subject to stockholder approval, the Mattel 1996 Stock
Option Plan. The Board recommends that the stockholders vote to approve the
Plan for the reasons indicated below.
The Plan is designed to promote the interests of the Company and its
stockholders by enabling the Company to offer an opportunity to acquire an
equity interest in the Company so as to better attract, retain, and reward
employees, directors, and other persons providing services to the Company and,
accordingly, to strengthen the mutuality of interests between those persons
and the Company's stockholders by providing those persons with a proprietary
interest in pursuing the Company's long-term growth and financial success.
When approved by the stockholders of the Company, the Plan will replace the
Company's most recent stock option plan, the Mattel 1990 Stock Option Plan
(the "1990 Plan"), which was approved by the stockholders in May 1990.
Following stockholder approval of the Plan, the 1990 Plan shall terminate on
December 31, 1996, except as to options and other awards then outstanding.
12
<PAGE>
Adoption of the Plan has been recommended by the Committee. In the opinion
of the Committee and of the Board of Directors, it is in the best interests of
the Company and its stockholders to provide, through the Plan, a comprehensive
incentive compensation program designed to enable the Company to attract,
retain and reward directors and key employees through performance-based
incentives in shares of Common Stock.
SUMMARY OF THE PLAN
The Plan would authorize the Committee to grant (i) incentive stock options
under the Internal Revenue Code of 1986 (the "Code"), (ii) nonqualified stock
options, (iii) stock appreciation rights and (iv) shares of Common Stock
("Awards") to key employees of the Company and its subsidiaries, and other
persons providing services to the Company and its subsidiaries
("Participants"). In addition, as described below, the Plan would also
authorize the grant of nonqualified stock options to Outside Directors (as
defined below).
The Plan provides that up to 1.5% of the total outstanding shares of the
capital stock of the Company as of the first day of each calendar year will be
available for Awards under the Plan. Any unused portion of the percentage
limit for any calendar year shall be carried forward and be made available for
Awards in succeeding calendar years. The aggregate number of shares of the
Company's Common Stock available for grants under the Plan shall not exceed
fifty million (50,000,000) shares. Options may be granted under the 1990 Plan
until it expires on December 31, 1996; any outstanding options or other
benefits under the 1990 Plan may be exercised in accordance with the terms
thereof. If there is a stock split, stock dividend or similar change affecting
the Company's Common Stock, appropriate adjustments may be made in the number
of shares that may be issued or transferred in the future and in the number of
shares and price of all outstanding Awards made before such event. If shares
under an Award are not issued or transferred, those shares would again be
available for inclusion in future Awards. On February 15, 1996, the closing
price of Company's Common Stock on the New York Stock Exchange was $27.20, as
adjusted for a five-for-four stock split payable as a stock dividend declared
February 6, 1996.
AWARDS UNDER THE PLAN
Stock Options. The Committee may grant options qualifying as incentive stock
options under the Code, and nonqualified stock options. The term of an option
shall be fixed by the Committee. The option price for an incentive stock
option shall not be less than the fair market value of the Company's Common
Stock on the date of grant. Incentive stock options may only be granted to
employees.
Stock Appreciation Rights. The Committee may grant stock appreciation rights
("SARs") either singly or in combination with an underlying stock option under
the Plan. The term of an SAR shall be fixed by the Committee. SARs entitle the
participant to receipt of the same economic value that would have been derived
from exercise of an option. Payment may be made in cash, in shares of Common
Stock or in any combination of both at the discretion of the Committee.
Restricted Stock Grants. The Committee may also award shares under a grant
of Restricted Stock. At the Committee's discretion, the Award may set forth a
restriction period during which the Participant must remain in the employ of
the Company in order to retain shares under grant. If the Participant's
employment terminates during the period, the grant would terminate and the
Participant would be required to return the shares to the Company. The
Participant could not dispose of the shares prior to the expiration of the
restriction period. During this period, the Participant would be entitled to
vote the shares and receive dividends. Each certificate may bear a legend
giving notice of the restrictions in the Award.
Reload Options. In the case of a Participant who pays the exercise price of
an option prior to the date on which it expires by means of surrendering
shares of Common Stock previously acquired by the Participant, the Committee
may at its discretion grant the Participant another option (a "Reload Option")
of the same type as the option being exercised for the same number of shares
that were so surrendered. The duration of the Reload Option will be for the
remaining term of the underlying option, and the exercise price shall be the
fair market value of the Common Stock on the day on which the underlying
option was exercised. Reload Options may only be granted to individuals
performing services for the Company at the time the underlying option is
exercised. Reload Options will not be available with respect to the exercise
of options issued to Outside Directors. A Reload Option may not be granted
upon the exercise of another Reload Option.
13
<PAGE>
Formula Grants to Outside Directors. Upon the commencement of an
individual's service as an Outside Director (as defined below), the individual
shall receive a nonqualified stock option to purchase fifteen thousand
(15,000) shares of Common Stock. In the case of an individual who already was
a member of the Board on the effective date of the Plan, that individual will
receive a similar grant on that date. The exercise price will be the fair
market value of the Common Stock on the date on which the individual was
elected to the Board or the date on which the Plan becomes effective in the
case of an individual who was a director before the effective date of the
Plan. The option will be immediately exercisable, and it will expire on the
tenth anniversary of the date of its grant. Upon each subsequent reelection to
the Board, each Outside Director shall receive a nonqualified stock option in
the amount of either five thousand (5,000) or ten thousand (10,000) shares. To
recognize continued service on the Board, Outside Directors with five (5)
years of service or less would receive options to purchase five thousand
(5,000) shares of Common Stock, and Outside Directors with more than five (5)
years of service would receive options to purchase ten thousand (10,000)
shares of Common Stock. This option shall vest at the rate of 25% per year of
service and shall expire on the tenth anniversary of the date of its grant.
"Outside Director" means a director who is not also an employee of the
Company. In the case of an individual who was formerly an employee of the
Company, the individual will not be considered to be an Outside Director until
the first anniversary of their severance from the Company. Such individual
shall be eligible to receive grants on the first day on which the individual
is again elected to the Board after such anniversary.
Bonus Grants. The Committee is authorized to grant shares of Common Stock as
a bonus, or to grant shares of Common Stock or other Awards in lieu of Company
obligations to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences of
stock options and restricted stock awards under the Plan:
(a) Upon the exercise of a non-qualified stock option, the optionee will
realize ordinary income for federal income tax purposes in an amount equal
to the excess of the fair market value of the shares purchased over the
option price. The tax basis for the stock so acquired will be the option
price plus the taxable excess. At the time the optionee makes an election
to exercise a non-qualified stock option, Mattel is entitled to an income
tax deduction equal to the amount of income recognized by the optionee.
(b) An optionee will not realize federal taxable income upon the exercise
of an incentive stock option. If the optionee does not dispose of the stock
acquired within one year after its receipt (and two years after the option
was granted), the gain or loss realized on the subsequent disposition of
the stock will be treated as capital gain or loss. If the stock is disposed
of prior to that time, the optionee will realize ordinary income in an
amount equal to the excess of the sale price of the stock over the option
price. Mattel is generally not entitled to an income tax deduction with
respect to the grant or exercise of an incentive stock option or the
disposition of the option stock by the optionee. However, if the optionee
disposes of the option stock prior to the required holding period, a
deduction is available to Mattel to the extent of the income realized by
the optionee on the date of the early disposition.
(c) The recipient of a restricted stock award will have no taxable income
for federal income tax purposes on the receipt of an award. The recipient
will realize taxable income for federal income tax purposes for the year in
which the restrictions expire or are removed in an amount equal to the
difference between the recipient's cost of the stock and the fair market
value thereof on the day the restriction expired or was removed. As an
alternative, the recipient has the right to elect to include in taxable
income in the year the award is made an amount equal to the excess of the
fair market value of such shares on the date of the award over the cost of
such shares. At the time the recipient of a restricted stock award
recognizes income, Mattel is entitled to an income tax deduction equal to
the amount of income recognized by the recipient of the award. However,
income related to restricted stock received by a "covered employee" could
be subject to the $1.0 million deduction limitation imposed by Section
162(m) of the Code, unless the exemption from the deduction limitation for
performance-based compensation is available.
14
<PAGE>
OTHER INFORMATION
Assuming approval of the Company's stockholders, the Plan will be effective
as of January 1, 1996 and will terminate on the tenth anniversary thereof,
unless terminated earlier by the Board of Directors. Other than formula grants
to Outside Directors, no options shall be granted under the Plan prior to
January 1, 1997. The Board may amend the Plan as it deems advisable but, if
the Securities Exchange Act of 1934 requires the Company to obtain stockholder
approval, then such approval will be sought. No employee may receive grants
under this Plan in any given year which, singly or in the aggregate, cover
more than one million (1,000,000) shares of Common Stock. Employees who will
participate in the Plan in the future and the amounts of their allotments are
to be determined by the Committee subject to any restrictions outlined above.
Since no such determinations have yet been made, it is not possible to state
the terms of any individual Awards which may be issued under the Plan or the
names or positions of or respective amounts of the allotment to any individual
who may participate. Immediately following approval of the Company's
stockholders, each of Messrs. Brown, Friedman, Loeb, Malone, Ney, Rollnick,
Sinclair and Vogelstein will receive nonqualified stock options to purchase
fifteen thousand (15,000) shares of Common Stock. (See "-Awards Under the
Plan--Formula Grants to Outside Directors" above.) The full text of the Plan
is attached as Exhibit A to this Proxy Statement. The Board of Directors
believes that the Plan is a valuable aid to the Company in its efforts to
attract and retain directors and key employees. Approval of the Plan requires
the affirmative vote of a majority of shares of Common Stock in person or
represented by proxy and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATTEL 1996
STOCK OPTION PLAN.
PROPOSAL 3
APPROVAL OF MATTEL LONG-TERM INCENTIVE PLAN
The Board of Directors, including the Compensation/Options Committee (the
"Committee") which is composed of disinterested directors, has approved and
recommends for stockholder approval, the Mattel Long-Term Incentive Plan (the
"LTIP"). The LTIP which was originally adopted by the Board for a performance
period beginning in 1987, was developed with the assistance of an independent
compensation consultant. The LTIP had as its principal objective increasing
Mattel's strategic focus on long-term goals. The Board and the Committee
believe the LTIP has been instrumental in producing the excellent financial
performance achieved by Mattel since 1987. In light of Mattel's significant
stockholder returns, which have substantially outperformed those of the peer
group companies and the S&P 500, reflected in the Performance Graph, the Board
has determined that it is in the best interest of the Company to continue the
LTIP.
DESCRIPTION OF THE MATTEL LONG-TERM INCENTIVE PLAN
Awards under the LTIP are based on Mattel's financial performance over a
three-year performance cycle with performance targets that relate to the long-
range financial goals of the Company. The performance targets used to
determine awards under the LTIP are based primarily on Cash Flow Return on
Investment ("CFROI"), sales growth and earnings per share, weighted 40%, 20%
and 40%, respectively. CFROI is a measure of cash flow generated by the
Company's assets and is based on a formula developed by an independent
financial consultant. This formula is related to the economic performance of a
company, and an increase in CFROI is strongly correlated to improvement in
stock price. Prior to April 1 of the first year of the three-year performance
period, the Committee establishes, in writing, the level of each executive's
participation and target levels for the performance criteria which must be
achieved before incentive payments are awarded. Payments of performance awards
for achieving interim performance objectives are determined at the end of each
annual performance period. Each interim award is paid annually in the first
quarter of the following year. Individual participation is established by the
Committee at levels considered appropriate in light of the duties and scope of
responsibilities of each officer's position.
15
<PAGE>
The LTIP is overseen by the Committee, which includes only directors who are
considered outside directors for purposes of Section 162(m) of the Code. Under
the terms of the LTIP, eligible participants include executive officers of the
Company and its subsidiaries and other officers of the Company or its
subsidiaries that are determined by the Committee to have a direct,
significant and measurable impact on the Company's long-term growth and
profitability. The actual selection of participants is within the discretion
of the Committee. At the present time, approximately 40 officers are eligible
to participate in the LTIP. Under the terms of the LTIP, the Committee retains
discretion, subject to plan limits, to modify established targets to take into
account the effect of unforseen or extraordinary events or accounting changes.
However, to comply with Section 162(m) of the Code, the targets cannot be
changed as they apply to the Chief Executive Officer of Mattel and the four
other most highly compensated executives ("Covered Employees") if the effect
of such change is to increase the compensation those individuals would
otherwise receive. The Covered Employees will be named each year in the
Summary Compensation Table. The LTIP permits the Committee to add participants
and make additional awards to participants who are determined by the Committee
to have assumed additional responsibility or to have otherwise positively
impacted directly on the attainment of the performance objectives established
by the Committee beyond that originally anticipated.
In February 1996, the Committee selected 40 persons, including the
individuals listed in the Summary Compensation Table other than Mr. Williams
who has retired, as participants in the LTIP for the three-year performance
period ending in 1998. For information regarding the awards to the Covered
Employees and the target and maximum amounts payable for the three-year period
ending in 1998, see "Long-Term Incentive Plan Awards Table." See "LTIP
Payouts" in the "Summary Compensation Table" for amounts paid under the LTIP
in the prior three years.
The approval by stockholders of the LTIP is required in order to exclude
compensation payable under the LTIP to the Covered Employees from the
deduction limitations imposed by Section 162(m) of the Code. If the
stockholders do not approve the LTIP, the Committee will not make further
payments to such individuals under the LTIP and will consider other
alternatives.
THE MATTEL BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATTEL
LONG-TERM INCENTIVE PLAN.
PROPOSAL 4
APPROVAL OF AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION
On February 8, 1996, the Board of Directors adopted a resolution amending,
subject to stockholder approval at the Meeting, Article Fourth of the
Company's Restated Certificate of Incorporation to increase the number of
shares of authorized Common Stock from 300,000,000 to 600,000,000 shares (the
"Amendment"). A copy of the Amendment is attached to this Proxy Statement as
Exhibit B. The additional shares would have the same rights and privileges as
the shares of Common Stock presently outstanding. As of February 15, 1996, and
as adjusted to reflect the five-for-four stock split payable as a stock
dividend declared February 6, 1996 (i) 279,067,715 shares of Common Stock were
issued, (ii) an aggregate of 17,463,257 shares of Common Stock were reserved
for issuance pursuant to stock option plans, (iii) an aggregate of 1,202,477
shares of Common Stock were reserved for issuance upon exercise of warrants,
and (iv) 2,266,551 shares of Common Stock were authorized, unissued and
unreserved.
The Board of Directors believes it is desirable to have the additional
authorized shares of Common Stock available for possible future financing
transactions, stock dividends or splits and other general corporate purposes.
In addition to the five-for-four stock split declared February 6, 1996,
Mattel's Board of Directors distributed a five-for-four stock split in
November 1991, a three-for-two stock split in June 1992, a five-for-four stock
split in January 1994, and a five-for-four stock split in January 1995.
16
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It should be noted that any issuance of additional shares of Common Stock
could be disadvantageous to existing stockholders since such issuance might
serve to dilute their percentage interest in the Company. Holders of Common
Stock do not have preemptive rights to purchase any additional shares of
Common Stock which may be issued. The Company would not be required to obtain
stockholder approval to issue authorized but unissued shares of Common Stock,
unless required to do so by applicable law or the rules of any stock exchange
on which the Company's shares may be listed, such as the New York Stock
Exchange.
It should also be noted that the authorized but unissued shares of Common
Stock, if issued, could be used by incumbent management to make more
difficult, and thereby discourage, an attempt to acquire control of the
Company even though stockholders of the Company may deem such an acquisition
desirable. For example, the shares could be privately placed with purchasers
who might support the Board of Directors in opposing a hostile takeover bid.
The issuance of the new shares could also be used to dilute the stock
ownership and voting power of a third party seeking to remove directors,
replace incumbent directors, accomplish certain business combinations or
alter, amend or repeal provisions of the Company's Restated Certificate of
Incorporation. To the extent that it impedes any such attempts, the issuance
of shares following the Amendment may serve to perpetuate existing management.
The Amendment does not alter the Company's present ability to issue up to
3,000,000 shares of preferred stock and up to 20,000,000 shares of preference
stock in such series with such special rights (including voting rights),
preferences, restrictions, qualifications, and limitations as the Board of
Directors may designate. The Company would not be required to obtain
stockholder approval to issue authorized but unissued shares of preferred
stock or preference stock, unless required to do so by applicable law or the
rules of any stock exchange on which the Company's shares may be listed, such
as the New York Stock Exchange. The Board of Directors could use its authority
to make such designations and to issue preferred stock or preference stock in
a manner that would create impediments or to otherwise discourage persons in
attempting to gain control of the Company.
The affirmative votes of a majority of the outstanding shares of Common
Stock are required for approval of the Amendment. If the proposed Amendment is
approved by the stockholders, the Company intends to promptly effect the
Amendment by filing an appropriate amendment to the Restated Certificate of
Incorporation with the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED INCREASE IN THE
AUTHORIZED COMMON STOCK OF THE COMPANY.
PROPOSAL 5
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has served as the Company's independent accountants
since their appointment for fiscal 1975. The Board of Directors, on the
unanimous recommendation of the Audit Committee, has selected Price Waterhouse
LLP as Mattel's independent accountants for the year ending December 31, 1996.
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting to respond to questions and will have an opportunity to make a
statement if they desire to do so.
All services provided to Mattel by Price Waterhouse LLP were approved by the
Audit Committee which also considered the possible effect on the independence
of Price Waterhouse LLP by rendering such services.
Audit services of Price Waterhouse LLP for 1995 included the examination of
the consolidated financial statements, services related to filings with the
Securities and Exchange Commission, and the performance of limited reviews of
Mattel's quarterly unaudited financial information.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE YEAR ENDING DECEMBER 31, 1996.
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PRINCIPAL STOCKHOLDERS
As of February 15, 1996, the only persons known by the Company to own
beneficially or that may be deemed to own beneficially more than 5% of any
class of its voting stock were:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------- ------------------- -------------------- --------
<C> <S> <C> <C>
Common Stock Oppenheimer Group, 15,123,301(1) 6.85%
Inc.
Oppenheimer Tower
World Financial
Center
New York, NY 10281
</TABLE>
- --------
(1) As reported in a Schedule 13G dated February 1, 1996 and filed with the
Securities and Exchange Commission by Oppenheimer Group, Inc.
("Oppenheimer Group") and Oppenheimer Capital, a subsidiary of Oppenheimer
Group, the amount shown includes 15,105,543 shares of Common Stock owned
by Oppenheimer Capital. The Schedule 13G states that Oppenheimer Group,
Oppenheimer Capital, and certain of their affiliates may be deemed to
share the voting and dispositive powers with respect to such shares of
Common Stock owned by Oppenheimer Capital. Oppenheimer Group and such
other affiliates expressly disclaim any shared voting and dispositive
powers.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and certain of its officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership of such securities with the
Commission. Officers, directors and greater than 10 percent stockholders are
required to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the year ended
December 31, 1995, all filing requirements applicable to its officers,
directors and greater than 10 percent beneficial owners were complied with,
except for Ms. Barad who filed a late Form 5 disclosing the acquisition of 283
shares of Common Stock pursuant to the Mattel, Inc. Dividend Reinvestment
Plan.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors knows of no
other business that will be presented by management for consideration at the
Meeting. If any other business properly comes before the Meeting, the proxy
holders intend to vote the proxies as recommended by the Board.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1997 Annual Meeting of
Stockholders must be received by the Company not later than November 23, 1996.
Such proposals should be addressed to the Secretary of the Company.
ANNUAL REPORT (FORM 10-K)
THE COMPANY UNDERTAKES, ON WRITTEN REQUEST AND WITHOUT CHARGE, TO PROVIDE
EACH PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED WITH A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES. COPIES OF EXHIBITS NOT INCLUDED IN THE FORM 10-K ARE
ALSO AVAILABLE, ON WRITTEN REQUEST, AT THE COMPANY'S COST THEREFOR. REQUESTS
SHOULD BE ADDRESSED TO MATTEL, INC., 333 CONTINENTAL BOULEVARD, EL SEGUNDO,
CALIFORNIA 90245-5012, ATTENTION: SECRETARY.
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SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by Mattel. It is contemplated
that proxies will be solicited principally through the use of the mail, but
officers and regular employees of Mattel may solicit proxies personally or by
telephone, telegraph or special letter. Such officers and employees shall
receive no additional compensation in connection with such efforts.
In addition, the Company has retained Georgeson & Co., Inc. to assist in
connection with the solicitation of proxies from stockholders whose shares are
held in nominee name by various brokerage firms. The cost of such solicitation
is estimated to be $8,000 plus out-of-pocket costs and expenses.
Mattel will reimburse banks, brokerage houses and other custodians, nominees
and fiduciaries for their reasonable expenses in forwarding proxy materials to
the beneficial owners of the shares held by them.
By Order of the Board of Directors
Ned Mansour
Secretary
El Segundo, California
March 23, 1996
19
<PAGE>
EXHIBIT A
MATTEL 1996 STOCK OPTION PLAN
1. Purpose. The purpose of the Mattel, Inc. 1996 Stock Option Plan ("Plan") is
to promote the interests of Mattel, Inc. ("Company") and its stockholders by
enabling the Company to offer an opportunity to acquire an equity interest in
the Company so as to better attract, retain, and reward employees, directors,
and other persons providing services to the Company and, accordingly, to
strengthen the mutuality of interests between those persons and the Company's
stockholders by providing those persons with a proprietary interest in
pursuing the Company's long-term growth and financial success.
2. Definitions. For purposes of this Plan, the following terms shall have the
meanings set forth below.
(a) "Board" means the Board of Directors of Mattel, Inc.
(b) "Code" means the Internal Revenue Code of 1986, as amended. Reference
to any specific section of the Code shall be deemed to be a reference to
any successor provision.
(c) "Committee" means the Compensation/Options Committee of the Board, or
such other committee of the Board that is designated by the Board to
administer the Plan.
(d) "Common Stock" means the common stock of Mattel, Inc., $1.00 par
value per share, or any security issued in substitution, exchange, or in
lieu thereof.
(e) "Company" means Mattel, Inc., a Delaware corporation, or any
successor corporation. Except where the context indicates otherwise, the
term "Company" shall include its Parent and Subsidiaries.
(f) "Disabled" means that there is a determination to that effect under
the group long-term disability plan of the Company and the Participant is
also approved for permanent disability benefits by the Social Security
Administration. However, in no event will a Participant be considered to be
disabled for purposes of this Plan if the Participant's incapacity is a
result of intentionally self-inflicted injuries (while sane or insane),
alcohol or drug abuse, or a criminal act for which the Participant is
convicted or to which the Participant pleads guilty or nolo contendere.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
(h) "Fair Market Value" shall mean, unless a different method or value is
determined by the Committee, the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Tape for that day, or, if
the New York Stock Exchange is closed on that day, the next preceding day
on which the New York Stock Exchange was open. In the case of an Incentive
Stock Option, "Fair Market Value" shall be determined without reference to
any restriction other than one that, by its terms, will never lapse.
(i) "Grant" means an award of an Option or Restricted Stock.
(j) "Incentive Stock Option" means an option to purchase Common Stock
that is intended to be and is specifically designated as an incentive stock
option under Section 422 of the Code.
(k) "Insider" means a person or entity that is subject to the provisions
of Section 16 of the Exchange Act.
(l) "Non-Qualified Stock Option" means an option to purchase Common Stock
that is intended not to be and is specifically designated as not being an
Incentive Stock Option.
(m) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(n) "Outside Director" means a director who is not also an employee of
the Company. In the case of an individual who was formerly an employee of
the Company, the individual will not be considered to be an Outside
Director for purposes of Section 14 below until the first anniversary of
his Severance. Such an
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individual shall be eligible to receive Grants pursuant to Section 14 below
on the first day on which the individual is again elected to the Board of
Directors after such anniversary.
(o) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in the chain, as determined in accordance
with the rules of Code Section 424(e).
(p) "Participant" means a person who has received a Grant.
(q) "Plan" means this Mattel, Inc. 1996 Stock Option Plan, as it may be
amended from time to time.
(r) "Restricted Stock" means shares of Common Stock issued pursuant
Section 11 below that are subject to restrictions on ownership.
(s) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act and as amended from time to
time.
(t) "Severance" means, with respect to a Participant, the termination of
his or her provision of services to the Company as an employee, director,
or independent contractor, whether by reason of death, disability,
resignation, dismissal, or any other reason. For purposes of determining
the exercisability of an Incentive Stock Option, a Participant who is on a
leave of absence that exceeds ninety (90) days will be considered to have
incurred a Severance on the ninety-first (91st) day of the leave of
absence, unless his or her rights to reemployment are guaranteed by statute
or contract. However, a Participant will not be considered to have incurred
a Severance because of a transfer of employment between the Company and a
Subsidiary or a Parent (or vice versa).
(u) "Stock Appreciation Right" means a right granted pursuant to Section
12 below to receive a payment in cash, shares of Common Stock or any
combination thereof with respect to a specified number of shares of Common
Stock equal to the excess of the Fair Market Value of the Common Stock on
the date the right is exercised over the Fair Market Value of the Common
Stock on the date the right was granted.
(v) "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain, as determined in accordance with the rules of Code Section 424(f).
(w) For purposes of the rules relating to Incentive Stock Options, "Ten
Percent Stockholder" means any person who owns (after taking into account
the constructive ownership rules of Section 424(d) of the Code) more than
ten percent (10%) of the capital stock of the Mattel, Inc. or of any of its
Parents or Subsidiaries.
3. Administration.
(a) Except as set forth in Section 15(b) below, this Plan shall be
administered by the Committee. The Board may remove members from, or add
members to, the Committee at any time. The Committee shall be composed of
individuals selected in a manner that complies with Rule 16b-3 and with
Code Section 162(m).
(b) The Committee may conduct its meetings in person or by telephone.
One-third ( 1/3rd) of the members of the Committee shall constitute a
quorum, and any action shall constitute the action of the Committee if it
is authorized by a majority of the members present at any meeting or by all
of the members in writing without a meeting.
(c) The Committee is authorized to interpret this Plan and to adopt rules
and procedures relating to the administration of this Plan. All actions of
the Committee in connection with the interpretation and administration of
this Plan shall be binding upon all parties.
(d) Subject to the limitations of Sections 16 and 22 below, the Committee
is expressly authorized to make such modifications to this Plan as well as
to the Options, Restricted Stock, and Stock Appreciation
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Rights granted hereunder as are necessary to effectuate the intent of this
Plan as a result of any changes in the tax, accounting, or securities laws
treatment of Participants and the Plan.
(e) The Committee may delegate its responsibilities to others under such
conditions and limitations as it may prescribe, except that the Committee
may not delegate its authority with regard to the granting of Options to
Insiders, except to the extent permitted by Rule 16b-3.
4. Duration of Plan.
(a) This Plan shall be effective as of January 1, 1996, provided this
Plan is approved by the majority of the Company's stockholders, in
accordance with the provisions of Code Section 422, within twelve (12)
months before or after its adoption by the Board. The approval by the
stockholders must relate to:
(i) The class of employees entitled to receive Incentive Stock
Options; and
(ii) The aggregate number of shares of Common Stock that may be
issued under the Plan, except as adjusted pursuant to Section 18 below.
If either of those items are changed, the approval of the stockholders
must again be obtained.
(b) In the event that this Plan is not approved within the time period
specified in Paragraph (a) above, this Plan shall terminate and any Options
granted under this Plan shall be void.
(c) This Plan shall terminate on December 31, 2005, except with respect
to Options, Restricted Stock, and Stock Appreciation Rights then
outstanding.
5. Number of Shares.
(a) The maximum number of shares of Common Stock for which Grants may be
awarded under the Plan in a calendar year during any part of which the Plan
is effective shall be one and a half percent (1.5%) of the total
outstanding shares of the capital stock of the Company as of the first day
of that calendar year. Any unused portion of the percentage limit for any
calendar year shall be carried forward and be made available for Grants in
succeeding calendar years. However, in no event shall more than fifty
million (50,000,000) shares of Common Stock be cumulatively available for
Grants under the Plan. The maximum number of shares that may be issued to a
single Participant in a single calendar year is one million (1,000,000).
(b) In the event that a Participant pays part or all of the exercise
price of an Option or the purchase price of Restricted Stock in the form of
Common Stock, only the net additional shares issued (i.e., the number of
shares issued in excess of the number of shares surrendered) will be taken
into account for purposes of the limitations of Paragraph (a) above.
(c) Upon the forfeiture of shares of Restricted Stock, the forfeited
shares of Common Stock shall again become available for use under the Plan.
Upon the expiration or termination of an outstanding Option which shall not
have been exercised in full, the shares of Common Stock remaining unissued
under the Option shall again become available for use under the Plan.
6. Eligibility.
(a) Persons eligible to receive Grants under this Plan shall consist of
key employees, directors, and other persons providing services to the
Company. However, Incentive Stock Options may only be granted to employees.
(b) In the event that the Company acquires another entity by merger or
otherwise, the Committee may authorize the issuance of Options ("Substitute
Options") to the individuals performing services for the acquired entity in
substitution of stock options previously granted to those individuals in
connection with their performance of services for the acquired entity upon
such terms and conditions as the Committee shall determine, taking into
account the limitations of Code Section 424(a) in the case of a Substitute
Option that is intended to be an Incentive Stock Option.
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7. Form of Options. Options shall be granted under this Plan on such terms and
in such form as the Committee may approve, which shall not be inconsistent
with the provisions of this Plan, but which need not be identical from Option
to Option.
(a) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option. However, except in the case of
Options subject to the provisions of Section 6(b) above, the exercise price
of an Incentive Stock Option, determined on the date of the Grant, shall be
no less than:
(i) One hundred ten percent (110%) of the Fair Market Value of the
Common Stock in the case of a Ten Percent Stockholder; or
(ii) One hundred percent (100%) of the Fair Market Value of the
Common Stock in the case of any other employee.
(b) Except in the case of Options subject to the provisions of Section
6(b) above, the aggregate Fair Market Value (determined as of the date of
Grant) of the number of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year shall not exceed one hundred thousand dollars
($100,000) or such other limit as may be required by Code Section 422.
(c) The Committee may include dividend equivalent rights on shares of
Common Stock that are subject to Options. The Committee shall specify in
the Option such terms as it deems appropriate regarding the dividend
equivalent rights, including whether the dividend rights are payable
currently or only when the Option is exercised, and whether any interest
accrues on any unpaid dividend equivalent rights. In deciding whether to
grant dividend equivalent rights to an individual, the Committee shall take
into consideration the impact (if any) under Code Section 162(m) of
granting such rights in connection with the Option.
8. Exercise of Options.
(a) An Option shall be exercisable at such time or times and be subject
to such terms and conditions as may be set forth in the Option. However, no
Option shall be exercisable prior to the date this Plan is approved by the
Company's stockholders, as set forth in Section 4 above. Furthermore,
Options shall only be exercisable for whole numbers of shares.
(b) Options are exercised by payment of the full amount of the purchase
price to the Company. The payment shall be in the form of cash or such
other forms of consideration as the Committee shall deem acceptable, such
as the surrender of outstanding shares of Common Stock owned by the person
exercising the Option or by withholding shares that would otherwise be
issued upon the exercise of the Option. If the payment is made by means of
the surrender of Restricted Stock, a number of shares issued upon the
exercise of the Option equal to the number of shares of Restricted Stock
surrendered shall be subject to the same restrictions as the Restricted
Stock that was surrendered. The Committee may also authorize the exercise
of Options by the delivery to the Company or its designated agent of an
irrevocable written notice of exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of
the shares of Common Stock and to deliver the sale or margin loan proceeds
directly to the Company to pay the exercise price of the Option.
(c) In the event of the Disability of the Participant, an Option held by
the Participant may be exercised (to the extent that the Option is then
exercisable) by his or her conservator, agent under durable power of
attorney, or trustee of any trust holding the Option.
(d) In the event of the death of the Participant, an Option held by the
Participant may be exercised (to the extent that the Option is then
exercisable) by his or her administrator, executor, personal
representative, or trustee of a trust holding the Option, or other person
to whom the Option has been transferred by means of the laws of descent and
distribution.
9. Termination of Options.
(a) Except to the extent the terms of an Option require its prior
termination, each Option shall terminate on the earliest of the following
dates:
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(i) The date which is ten (10) years from the date on which the
Option is granted or five (5) years in the case of an Incentive Stock
Option granted to a Ten Percent Stockholder; or
(ii) The date that is sixty (60) days from the date of the Severance
of the Participant to whom the Option was granted; provided, however,
that if the Participant's Severance is as a result of their death, then
the date shall be extended to one (1) year from the date of the
Severance of the Participant to whom the Option was granted.
(b) Notwithstanding the provisions of Paragraph (a) above, in the case of
a Participant who incurs a Severance after the attainment of age fifty-five
(55) and the completion of five (5) years of service (as determined for a
Participant who is also an employee of the Company in accordance with the
terms of the Mattel, Inc. Personal Investment Plan), the Participant's Non-
Qualified Stock Options will continue to vest for five (5) years following
Severance, and the Participant will be able to exercise his or her Non-
Qualified Stock Options until the earlier of (i) five (5) years following
Severance or (ii) the date on which the Options would otherwise expire.
10. Reload Options.
(a) In the case of a Participant who pays the exercise price of an Option
prior to the date on which it expires by means of surrendering shares of
Common Stock previously acquired by the Participant, the Committee may at
its discretion grant the Participant another Option ("Reload Option") of
the same type (i.e., an Incentive Stock Option or Non-Qualified Stock
Option) as the Option being exercised ("Underlying Option") for the same
number of shares that were so surrendered.
(b) The duration of the Reload Option will be for the remaining term of
the Underlying Option, and the Exercise Price shall be the Fair Market
Value of the Common Stock on the day on which the Underlying Option was
exercised.
(c) Reload Options may only be granted to individuals performing services
for the Company at the time the Underlying Option is exercised.
Furthermore, Reload Options will not be available with respect to the
exercise of Options issued pursuant to Section 14 below (relating to
Outside Directors). A Reload Option may not be granted upon the exercise of
another Reload Option.
11. Restricted Stock.
(a) The Committee may issue Grants of Restricted Stock upon such terms
and conditions as it may deem appropriate, which terms need not be
identical for all such Grants.
(b) Restricted Stock may be sold to Participants, or it may be issued to
Participants without the receipt of any consideration. If the Participant
is required to give any consideration, the payment shall be in the form of
cash or such other forms of consideration as the Committee shall deem
acceptable, such as the surrender of outstanding shares of Common Stock
owned by the Participant.
(c) A Participant shall not have a vested right to the Restricted Stock
until the satisfaction of the vesting requirements specified in the Grant.
(d) A Participant may not assign or alienate his or her interest in the
shares of Restricted Stock prior to vesting. Otherwise, the Participant
shall have all of the rights of a stockholder of the Company with respect
to the Restricted Stock, including the right to vote the shares and to
receive any dividends.
(e) The following rules apply with respect to events that occur prior to
the date on which the Participant obtains a vested right to the Restricted
Stock.
(i) Stock dividends issued with respect to the shares covered by a
Grant of Restricted Stock shall be treated as additional shares
received under the Grant of Restricted Stock.
(ii) Cash dividends are taxable compensation to the Participant that
is deductible by the Company.
12. Stock Appreciation Rights.
(a) Stock Appreciation Rights may be granted separately or in conjunction
with all or part of an Option granted under the Plan. In the case of a Non-
Qualified Stock Option, such rights may be granted either at or
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after the time of the Grant of the Option. In the case of an Incentive
Stock Option, the rights may be granted only at the time of the Grant of
the Incentive Stock Option.
(b) A Stock Appreciation Right that is granted in conjunction with an
Option may provide that it may only be exercised when the Option may be
exercised. Furthermore, Stock Appreciation Rights issued to Insiders may
only be exercised in accordance with Rule 16b-3.
13. Participant Elections. Pursuant to such rules and procedures as may be
prescribed by the Committee, Participants may elect to exchange one type of
Grant under the Plan for another type of Grant, and/or enter into other
arrangements to defer the receipt of income or items of tax preference that
would otherwise be recognized by the Participant under the Plan.
14. Outside Directors. Outside Directors may participate in the Plan only in
accordance with this Section 14. It is intended that the Grants pursuant to
this Section 14 will not preclude the Outside Directors from being
"disinterested" for purposes of Rule 16b-3, and this Section 14 shall be
operated accordingly.
(a) Upon the commencement of an individual's service as an Outside
Director, the individual shall receive a Non-Qualified Stock Option to
purchase fifteen thousand (15,000) shares of Common Stock. In the case of
an individual who already was a member of the Board on the date of
stockholder approval of the Plan, that individual will receive a similar
Grant on that date. The exercise price will be the Fair Market Value of the
stock on the date on which the individual is elected to the Board, or the
date of stockholder approval of the Plan in the case of an individual who
was a director before the date of stockholder approval of the Plan. The
Option will be immediately exercisable, and it will expire on the tenth
anniversary of the date of its Grant.
(b) Upon each subsequent re-election to the Board, the Director shall
receive a Non-Qualified Stock Option in the amount of shares corresponding
to his or her years of service as set forth in the table below. In
calculating years of service, partial years of service shall be counted as
whole years of service.
<TABLE>
<CAPTION>
YEARS OF SERVICE AMOUNT OF OPTION
---------------- ----------------
<S> <C>
1-5 5,000
6+ 10,000
</TABLE>
This Option shall vest at the rate of twenty-five percent (25%) per year of
service, and shall expire on the tenth anniversary of the date of its
Grant.
(c) Except as otherwise required to conform to the requirements of
applicable laws, the provisions of this Section 14 may not be amended more
than once every six (6) months.
15. Bonus Grants and Grants In Lieu Of Compensation.
(a) The Committee is authorized to grant shares of Common Stock as a
bonus, or to grant shares of Common Stock, Restricted Stock or Options in
lieu of Company obligations to pay cash or deliver other property under the
Plan or under other plans or compensatory arrangements. Such grants shall
be upon such terms and conditions as the Committee may deem appropriate.
(b) At the discretion of either the Company's chief executive officer or,
if there is no chief executive officer, the most senior officer of the
Company, Outside Directors may receive shares of Common Stock in lieu of
the equivalent of 50% of their annual compensation. Such shares of Common
Stock shall be valued at the Fair Market Value on the date of grant. The
determination of Fair Market Value shall be at the discretion of the
officer approving the grant. Such grants shall be upon such terms and
conditions as the officer approving the grant may deem appropriate.
16. Modification of Options.
(a) The Committee may modify an existing Option, including the right to:
(i) Change the exercise price;
A-6
<PAGE>
(ii) Accelerate the right to exercise it;
(iii) Extend or renew it; or
(iv) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the
rights of the Participant holding the Option without his or her consent.
The Committee may make similar modifications to Grants of Restricted Stock.
(b) In the event that the Board amends the terms of an Option so that it
no longer qualifies as an Incentive Stock Option under Code Section 422,
the limitations imposed upon the Option under the Code and the Plan solely
by virtue of it (formerly) qualifying as an Incentive Stock Option shall no
longer apply, to the extent specified in the amendment.
(c) Whether a modification of an existing Incentive Stock Option will be
treated as the issuance of a new Incentive Stock Option will be determined
in accordance with the rules of Code Section 424(h).
(d) Whether a modification of an existing Option granted to an Insider
will be treated as a new Option for purposes of Section 16 of the Exchange
Act will be determined in accordance with Rule 16b-3.
17. Non-transferability of Grants.
(a) During the lifetime of the Participant, Incentive Stock Options are
exercisable only by the Participant. Incentive Stock Options are not
assignable or transferable except by will or the laws of descent and
distribution.
(b) Except to the extent specified in the Grant, Non-Qualified Stock
Options will be subject to the same restrictions on non-transferability
that apply to Incentive Stock Options. The Committee shall prescribe such
rules and procedures as it deems appropriate regarding the transfer of Non-
Qualified Stock Options, taking into account the impact of Section 16 of
the Exchange Act, the need to register those shares under the Securities
Act of 1933, and applicable State Blue Sky Laws.
(c) Grants of Restricted Stock and Stock Appreciation Rights shall be
subject to such restrictions on transferability as may be imposed in such
Grants.
18. Adjustments.
(a) In the event of a stock split, stock dividend, recapitalization,
merger, consolidation, split-up, combination, exchange of shares, or
similar change affecting Common Stock, the Committee shall authorize such
adjustments as it may deem appropriate with respect to:
(i) The number and/or kind of shares covered by each outstanding
Option;
(ii) The aggregate number and/or kind of shares for which Options may
be granted under this Plan; and
(iii) The exercise price per share in respect of each outstanding
Option.
Except as set forth above in this Section 18(a), no issuance by the Company
of shares of stock of any class, or securities convertible into, or options
or warrants to purchase shares of any class of stock, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to any Grant.
(b) The Committee may also make such adjustments in the event of a
spinoff (or other distribution) of Company assets to stockholders, other
than normal cash dividends.
19. Effect of Change in Control.
(a) In the event of a Change in Control (as defined in Paragraph (b)
below) of the Company, all Options and Stock Appreciation Rights then
outstanding shall become fully exercisable as of the date of the Change in
Control, and all restrictions and conditions of all Grants of Restricted
Stock then outstanding shall be deemed satisfied as of the date of the
Change in Control.
A-7
<PAGE>
(b) A "Change in Control" shall be deemed to have occurred on:
(i) The "Distribution Date," as that term is defined in Section 1(h)
of the Company's Rights Agreement dated February 7, 1992, as it may be
amended from time to time. The definition of "Distribution Date"
contained in the Company's Rights Agreement shall continue to apply,
notwithstanding the expiration or termination of that agreement; or
(ii) The date (during any period of two (2) consecutive calendar
years) that individuals who at the beginning of such period constituted
the Company's Board of Directors, cease for any reason (other than
natural causes, including death, disability, or retirement) to
constitute a majority thereof; or
(iii) The date the stockholders of the Company approve:
(A) A plan of complete liquidation of the Company;
(B) An agreement for the sale or disposition of all or
substantially all of the assets of the Company; or
(C) A merger, consolidation, or reorganization of the Company with
or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting
stock of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting stock of the surviving entity) at least eighty
percent (80%) of the combined voting power of the stock that is
outstanding immediately after the merger, consolidation, or
reorganization, unless the Board of Directors of the Company
determines by a majority vote prior to the merger, consolidation, or
reorganization that no Change in Control will occur as a result of
such transaction.
20. Cancellation of Grants. Except as otherwise provided in the Grant, the
Committee may cancel any unexpired, unpaid, or deferred Grant at any time if
the Participant does not comply with all of the terms of the Grant and the
following conditions.
(a) A Participant shall not render services for any organization or
engage directly or indirectly in any business that, in the judgment of the
Chief Executive Officer of the Company or other senior officer designated
by the Committee, is or becomes competitive with the Company, or which
organization or business, or the rendering of services to such organization
or business, is or becomes otherwise prejudicial to or in conflict with the
interests of the Company. For Participants whose employment has terminated,
the judgment of the Chief Executive Officer shall be based on the
Participant's position and responsibilities while employed by the Company,
the Participant's post-employment responsibilities and position with the
other organization or business, the extent of past, current and potential
competition or conflict between the Company and the other organization or
business, the effect on the Company's customers, suppliers and competitors
of the Participant assuming the post-employment position and such other
considerations as are deemed relevant given the applicable facts and
circumstances. A Participant who has retired shall be free, however, to
purchase as an investment or otherwise, stock or other securities of such
organization or business so long as they are listed upon a recognized
securities exchange or traded over-the-counter, and such investment does
not represent a substantial investment to the Participant or a greater than
five percent (5%) equity interest in the organization or business.
(b) A Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material, as those
terms are used in the Company's Employee Patent and Confidence Agreement,
relating to the business of the Company, acquired by the Participant either
during or after employment with the Company.
(c) A Participant, pursuant to the Company's Employee Patent and
Confidence Agreement, shall disclose promptly and assign to the Company all
right, title, and interest in any invention or idea, patentable or not,
made or conceived by the Participant during employment by the Company,
relating in any manner to the actual or anticipated business, research, or
development work of the Company and shall do anything reasonably necessary
to enable the Company to secure a patent where appropriate in the United
States and in foreign countries.
A-8
<PAGE>
(d) Upon exercise, payment, or delivery pursuant to an Award, the
Participant shall certify on a form acceptable to the Committee that he or
she is in compliance with the terms and conditions of the Plan. Failure to
comply with the provisions of paragraph (a), (b) or (c) of this Section 20
prior to, or during the six (6) months after, any exercise, payment or
delivery pursuant to an Award may, at the Committee's discretion, cause
such exercise, payment or delivery to be rescinded. The Company shall
notify the Participant in writing of any such rescission within two (2)
years after such exercise, payment or delivery. Within ten (10) days after
receiving such a notice from the Company, the Participant shall pay to the
Company the amount of any gain realized or payment received as a result of
the rescinded exercise, payment, or delivery pursuant to an Award. Such
payment shall be made either in cash or by returning to the Company the
number of shares of Common Stock that the Participant received in
connection with the rescinded exercise, payment, or delivery.
21. Notice of Disqualifying Disposition. A Participant must notify the Company
if the Participant disposes of stock acquired pursuant to the exercise of an
Incentive Stock Option issued under the Plan prior to the expiration of the
holding periods required to qualify for long-term capital gains treatment on
the sale.
22. Amendments and Termination.
(a) Except as set forth in Section 14(c), the Board may at any time amend
or terminate this Plan. However, no amendment or termination of the Plan
may impair the rights of a Participant holding a Grant without his or her
consent.
(b) Except as may otherwise be permitted under Rule 16b-3, no amendment
to the Plan may be adopted without the approval of the stockholders that
would materially:
(i) Increase the number of shares that may be issued to Insiders;
(ii) Increase the benefits accruing to Insiders; or
(iii) Modify the requirements for Insiders to participate.
23. Tax Withholding.
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the
operation of this Plan.
(b) If Common Stock is used to satisfy the Company's tax withholding
obligations, the stock shall be valued at its Fair Market Value when the
tax withholding is required to be made.
24. No Additional Rights.
(a) Neither the adoption of this Plan nor the granting of any Option or
Restricted Stock shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable
law; or
(ii) Confer upon any Participant the right to continue performing
services for the Company, nor shall it interfere in any way with the
right of the Company to terminate the services of any Participant at
any time, with or without cause.
(b) No Participant shall have any rights as a stockholder with respect to
any shares covered by a Grant until the date a certificate for such shares
has been issued to the Participant following the exercise of an Option or
the receipt of Restricted Stock.
25. Securities Law Restrictions.
(a) No securities shall be issued under this Plan unless the Committee
shall be satisfied that the issuance will be in compliance with applicable
federal and state securities laws.
(b) The Committee may require certain investment (or other)
representations and undertakings in connection with the issuance of
securities in connection with the Plan in order to comply with applicable
law.
A-9
<PAGE>
(c) Certificates for shares of Common Stock delivered under this Plan may
be subject to such restrictions as the Committee may deem advisable. The
Committee may cause a legend to be placed on the certificates to refer to
those restrictions.
26. Indemnification. To the maximum extent permitted by law, the Company shall
indemnify each member of the Committee and of the Board, as well as any other
employee of the Company with duties under this Plan, against expenses
(including any amount paid in settlement) reasonably incurred by the
individual in connection with any claims against the individual by reason of
the performance of the individual's duties under this Plan, unless the losses
are due to the individual's gross negligence or lack of good faith. The
Company will have the right to select counsel and to control the prosecution
or defense of the suit. The Company will not be required to indemnify any
person for any amount incurred through any settlement unless the Company
consents in writing to the settlement.
27. Governing Law. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
To signify its adoption of this Plan, the Company has caused its execution.
Mattel, Inc.,
a Delaware Corporation
/s/ E. Joseph McKay
By: _________________________________
Senior Vice President, Human
Resources
Its: ________________________________
March 1, 1996
Date: _______________________________
A-10
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MATTEL, INC.
PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Mattel, Inc. (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST. At a meeting of the Board of Directors of the Corporation duly called
and held on February 8, 1996, resolutions were duly adopted setting forth a
proposed amendment to the Restated Certificate of Incorporation of the
Corporation, declaring such amendment to be advisable and directing that such
amendment be submitted to the stockholders of the Corporation for approval at
an Annual Meeting of Stockholders to be held on May 8, 1996. Such resolutions
recommended that the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation of the Corporation be amended and restated in its
entirety as follows:
"FOURTH. The Company is authorized to issue a total of six hundred twenty
three million (623,000,000) shares of all classes of stock. Of such total
number of authorized shares of stock, six hundred million (600,000,000) shares
are Common Stock, each of which shares of Common Stock has a par value of One
Dollar ($1.00), three million (3,000,000) shares are Preferred Stock, each of
which shares of Preferred Stock has a par value of One Dollar ($1.00), and
twenty million (20,000,000) shares of Preference Stock, each of which shares
of Preference Stock has a par value of one cent ($0.01)."
SECOND. At an Annual Meeting of Stockholders of the Corporation duly called
and held on May 8, 1996, the affirmative vote of a majority of the votes
permitted to be cast by the holders of the outstanding shares of the
Corporation's common stock, par value $1.00 per share, was obtained in favor
of such amendment with respect to Article FOURTH.
THIRD. Said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
In Witness Whereof, Mattel, Inc. has caused this Certificate of Amendment to
be signed by , its [President/Vice President], and
attested by , its [Secretary/Assistant Secretary],
this day of , 1996.
_____________________________________
[President/Vice President]
Attest:
_______________________________
[Secretary/Assistant
Secretary]
B-1
<PAGE>
MATTEL, INC.
P
R PROXY SOLICITED BY THE BOARD OF DIRECTORS
O ANNUAL MEETING OF STOCKHOLDERS MAY 8, 1996
X
Y
JOHN W. AMERMAN, NED MANSOUR and JOHN L. VOGELSTEIN, or any of them,
each with power of substitution, are hereby appointed proxies to represent
and vote as designated hereon all shares of Common Stock of Mattel, Inc.
which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held in the Manhattan Ballroom of the
Radisson Plaza Hotel, 1400 Parkview Avenue, Manhattan Beach, California, at
10:00 a.m. on the 8th day of May, 1996, or any adjournment or postponement
thereof, with all powers the undersigned would possess if personally
present.
Election of all Directors listed below:
NOMINEES:
John W. Amerman, Jill E. Barad, Harold Brown, James A. Eskridge,
Tully M. Friedman, Ronald M. Loeb, Edward H. Malone, Edward N.
Ney, William D. Rollnick, Christopher A. Sinclair and John L.
Vogelstein.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not
mark any boxes.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
<PAGE>
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
---
1. ELECTION OF DIRECTORS (named on reverse).
FOR WITHHELD
[_] [_]
MARK HERE
FOR ADDRESS
CHANGE AND [_]
NOTE BELOW
- ---------------------------------------
For all nominees except as noted above.
FOR AGAINST ABSTAIN
2. APPROVAL OF THE MATTEL 1996 STOCK OPTION PLAN. [_] [_] [_]
3. APPROVAL OF THE MATTEL LONG-TERM INCENTIVE [_] [_] [_]
PLAN.
4. APPROVAL OF AN AMENDMENT TO ARTICLE FOURTH [_] [_] [_]
OF MATTEL'S RESTATED CERTIFICATE OF
INCORPORATION.
5. RATIFICATON OF THE SELECTION OF PRICE WATER- [_] [_] [_]
HOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
6. TO CONSIDER AND ACT UPON SUCH OTHER BUSINESS
MATTERS OR PROPOSALS AS MAY PROPERLY COME
BEFORE THE MEETING.
Please sign exactly as your name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature: Date
----------------------------- ----------------
Signature: Date
----------------------------- ----------------
PLEASE MARK, SIGN, DATE AND RETURN THIS FORM OF WRITTEN CONSENT PROMPTLY,
USING THE ENCLOSED ENVELOPE.
