<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 [_]
[_] Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
MATTEL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF MATTEL, INC.]
NOTICE OF ANNUAL MEETING
and
PROXY STATEMENT
Annual Meeting of Stockholders
Manhattan Beach Marriott
1400 Parkview Avenue
Manhattan Beach, California
June 7, 2000
<PAGE>
MATTEL, INC.
333 Continental Boulevard
El Segundo, California 90245-5012
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 7, 2000
The 2000 Annual Meeting of Stockholders of Mattel, Inc., will be held on June
7, 2000, at 10:00 a.m. (Los Angeles time), in the Manhattan Ballroom of the
Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach, California, to
consider and act upon the following matters:
. The election of directors;
. The ratification of the selection of PricewaterhouseCoopers LLP as
Mattel's independent accountants for the year ending December 31, 2000;
and
. Such other business as may properly come before the meeting or any
adjournment or postponement thereof. The Board of Directors knows of four
stockholder proposals that may be presented at the meeting.
Each of the above items of business is described in more detail in the Proxy
Statement accompanying this Notice.
Holders of record of Mattel common stock at the close of business on April
11, 2000, will be entitled to notice of and to vote at the annual meeting and
any adjournment or postponement thereof. In addition, holders of record of
Exchangeable Shares of Mattel's Canadian subsidiary, SoftKey Software Products
Inc., at the close of business on April 11, 2000, will be entitled to notice of
the annual meeting and to direct the vote of CIBC Mellon Trust Company, the
holder as trustee for such persons, of the one outstanding share of Mattel's
Special Voting Preferred Stock. A list of persons entitled to vote at the
annual meeting will be available for examination by any stockholder for any
purpose germane to the annual meeting during normal business hours for ten days
prior to the annual meeting at the Manhattan Beach Marriott.
By Order of the Board of Directors
/s/ Robert Normile
Robert Normile
Secretary
El Segundo, California
April 28, 2000
All stockholders are cordially invited to attend the annual meeting in
person. Whether or not you expect to attend the annual meeting, please
complete, date, sign and return the enclosed proxy card in the enclosed
postage-prepaid envelope as soon as possible in order that your stock will be
represented at the annual meeting.
<PAGE>
MATTEL, INC.
333 Continental Boulevard
El Segundo, California 90245-5012
----------------
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 7, 2000
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mattel, Inc., a Delaware corporation
("Mattel" or the "Company"), for use at its 2000 Annual Meeting of
Stockholders, to be held on June 7, 2000, at 10:00 a.m. (Los Angeles time), in
the Manhattan Ballroom of the Manhattan Beach Marriott, 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
annual meeting were first mailed or delivered to the stockholders of Mattel on
or about May 3, 2000.
Record Date and Voting
The Board of Directors of Mattel has fixed April 11, 2000, as the record date
to determine stockholders entitled to notice of and to vote at the annual
meeting. Only holders of record of shares of Mattel common stock and Mattel
Special Voting Preferred Stock on the record date are entitled to notice of and
to vote at the annual meeting.
As of the record date, there were 422,546,784 outstanding shares of common
stock held by approximately 51,695 holders of record. At the annual meeting,
each share of common stock will be entitled to one vote. At the annual meeting,
CIBC Mellon Trust Company, as the holder of record of the one Special Voting
Preferred Stock of Mattel, will be entitled to cast 3,076,014 votes. These
votes represent the number of exchangeable non-voting shares (the "Exchangeable
Shares") of Mattel's Canadian subsidiary, SoftKey Software Products Inc., that
were outstanding on the record date (other than Exchangeable Shares held by
Mattel, its subsidiaries or any entity controlled by or under common control of
Mattel, if any), multiplied by 1.2. See "Exchangeable Shares" below.
The common stock and the Special Voting Preferred Stock vote as a single
class at all meetings of stockholders. Accordingly, an aggregate of 425,622,798
votes may be cast at the annual meeting.
Quorum, Voting Requirements and Cumulative Voting
The holders of a majority of all of the shares of the stock entitled to vote
at the meeting, but in no event less than one-third of the voting power,
present in person or by properly executed proxy, is necessary to constitute a
quorum for the transaction of business at the annual meeting. Shares
represented in person or by proxy will be counted for the purposes of
determining whether a quorum is present at the annual meeting. Shares that
abstain from voting on any proposal will be treated as shares that are present
and entitled to vote at the annual meeting for purposes of determining whether
a quorum exists, but abstentions will have the same effect as votes against
approval of a proposal.
1
<PAGE>
Under the rules that govern brokers who have record ownership of shares that
are held in brokerage accounts for their clients, who are the beneficial owners
of the shares, brokers who do not receive voting instructions from their
clients have the discretion to vote uninstructed shares on routine matters, but
not on non-routine matters. The proposals to be acted upon at the annual
meeting include both routine matters such as the election of directors and the
ratification of accountants, and non-routine matters such as the four
stockholder proposals. On routine matters, a broker may return a proxy card on
behalf of a beneficial owner from whom the broker has not received instructions
that casts a vote for the routine matters, but expressly states that the broker
is not voting on the non-routine matters. The broker's inability to vote with
respect to the non-routine matters is referred to as a "broker non-vote."
Broker non-votes will be counted for the purpose of determining the presence or
absence of a quorum, but will not be counted for determining the number of
votes cast on non-routine matters.
In the election of directors, holders of common stock and the Special Voting
Preferred Stock, voting together as a class, are entitled to elect nine
directors, with the nine 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 (nine) multiplied by
the number of votes per share of common stock held in their name on the record
date for the annual meeting 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. The shares
voted will then be cumulated in the manner described above and voted for the
remaining candidate or spread equally, adjusted to whole votes, among the
remaining candidates. Stockholders wishing to cumulate their votes
disproportionately among candidates may do so by casting a ballot at the annual
meeting. In matters other than the election of directors, abstentions have the
effect of votes against a proposal in tabulations of the votes cast, whereas
broker non-votes do not have any effect for purposes of determining whether a
proposal has been approved.
Voting of Proxies
All shares of common stock that are entitled to vote and are represented at
the annual meeting by properly executed proxies received prior to or at the
annual meeting, and not revoked, will be voted at the annual meeting in
accordance with the instructions indicated on such proxies. If the enclosed
proxy card is executed and returned without instructions as to how it is to be
voted, the proxy card will be deemed an instruction to vote:
. in favor of the election as directors of the nominees named in this Proxy
Statement;
. for proposal 2; and
. against proposals 3, 4, 5 and 6, which are the four stockholder proposals
that may be presented at the annual meeting.
The Board of Directors does not know of any matters other than those
described in the notice of the annual meeting that are to come before the
annual meeting. If any other matters are properly presented for consideration
at the annual meeting, including, among other things, consideration of a motion
to adjourn or postpone the annual meeting to another time and/or place for the
purposes of soliciting additional proxies, the persons named in the enclosed
proxy card and acting thereunder generally will have discretion to vote on such
matters as they see fit.
2
<PAGE>
Revocation of Proxies
Any proxy regarding shares of common stock given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by:
. filing with the Secretary of Mattel, at or before the taking of the vote
at the annual meeting, a written notice of revocation bearing a later
date than the proxy;
. duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of Mattel before the taking of the vote at
the annual meeting; or
. attending the annual meeting and voting in person, although attendance at
the annual meeting will not in and of itself constitute a revocation of a
proxy.
Any written notice of revocation or subsequent proxy should be sent to
Mattel, Inc., 333 Continental Boulevard, El Segundo, California 90245-5012,
Attention: Secretary, or hand delivered to the Secretary of Mattel at or before
the taking of the vote at the annual meeting. Stockholders that have instructed
a broker to vote their shares must follow directions received from the broker
in order to change their vote or to vote at the annual meeting.
Exchangeable Shares
In connection with the May 1999 merger between Mattel and The Learning
Company, Inc., the Special Voting Preferred Stock was issued to CIBC Mellon
Trust Company, as Trustee, under a supplemented Voting and Exchange Trust
Agreement which provides that each holder of an Exchangeable Share (other than
Mattel, its subsidiaries, or any entity controlled by Mattel) is entitled to
instruct the Trustee to exercise 1.2 of the votes attached to the Special
Voting Preferred Stock for each Exchangeable Share held by such holder. Under
the Voting and Exchange Trust Agreement, each Exchangeable Share is currently
exchangeable for 1.2 shares of Mattel common stock.
The voting direction card enclosed with the Proxy Statement being delivered
to holders of Exchangeable Shares serves as the means by which a holder of
Exchangeable Shares may instruct the Trustee regarding the voting of such
holder's Exchangeable Shares. The Trustee will exercise each vote attached to
the Special Voting Preferred Stock only as directed by the relevant holders on
the voting direction card. In the absence of instructions from a holder as to
voting, the Trustee will not exercise such votes. A holder may also instruct
the Trustee to give him or her a proxy entitling him or her to vote personally
the relevant number of votes or to grant to Mattel's management or another
person a proxy to vote such votes. The voting direction may be revoked at any
time prior to its exercise by delivering a written notice of revocation or a
later-dated voting direction card to the Trustee. In addition, a holder of
Exchangeable Shares present at the annual meeting may revoke his or her voting
direction card and vote in person. Enclosed with this Proxy Statement is an
information statement informing holders of Exchangeable Shares in greater
detail of their rights with respect to voting at the annual meeting and
instructing such holders as to how to exercise such rights.
3
<PAGE>
PRINCIPAL STOCKHOLDERS
As of April 11, 2000, Mattel knows of no persons who own beneficially, or
that may be deemed to own beneficially, more than 5% of Mattel's common stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of common stock as of April 24, 2000, by (1) each director and nominee for
director, (2) the Chief Executive Officer and each of the four other most
highly compensated executive officers of Mattel as of December 31, 1999, and
(3) all current directors and executive officers of Mattel as a group. None of
the individuals listed below own any Exchangeable Shares.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Position with Mattel Beneficial Ownership(1)
------------------------ ---------------------- -----------------------
<C> <S> <C>
Jill E. Barad(2) Former Chairman of the Board
and Chief Executive
Officer.................... 2,769,220(3)
Eugene P. Beard Director.................... 20,000(3)
Dr. Harold Brown Director.................... 73,945(3)
Matt Bousquette President
Boys/Entertainment.......... 109,481(3)
Adrienne Fontanella President Girls/Barbie...... 94,429(3)
Neil Friedman President Fisher-Price
Brands...................... 26,998(3)
Tully M. Friedman Director.................... 130,000(3)
Joseph C. Gandolfo(4) Former President, Worldwide
Manufacturing
Operations and a Director.. 675,399(3)
Ronald M. Loeb(5) Acting Chief Executive
Officer and a Director...... 198,795(3)
Ned Mansour(6) Former President and a
Director.................... 852,450(3)
Andrea L. Rich Director.................... 16,250(3)
William D. Rollnick(5) Chairman of the Board....... 325,070(3)
Pleasant T. Rowland Vice Chairman of the Board
and President,
Pleasant Company........... 271,500(3)
Christopher A. Sinclair Director.................... 24,700(3)
John L. Vogelstein Director.................... 911,475(3)
Ralph V. Whitworth Director.................... 4,240,000(3)(7)
All current Directors and
Executive Officers, and the
Named Executive Officers,
as a group (21 persons).............................. 10,906,706(8)
</TABLE>
- --------
(1) Except for Mr. Whitworth, who may be deemed to control approximately 1% of
Mattel's common stock, no director or executive officer named above owns or
controls or may be deemed to beneficially own or control 1.0% or more of
any class of capital stock of Mattel. Except as otherwise noted, 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.
(2) As of February 3, 2000, Ms. Barad no longer serves as Chairman of the Board
and Chief Executive Officer of Mattel.
(3) Includes shares of common stock that the following directors and officers
have the right to acquire by exercise of options within 60 days following
April 24, 2000: Ms. Barad, 2,357,813;
4
<PAGE>
Mr. Beard, 15,000; Dr. Brown, 30,000; Mr. Bousquette, 65,156; Ms.
Fontanella, 58,250; Mr. Neil Friedman, 0; Mr. Tully M. Friedman, 30,000; Mr.
Gandolfo, 632,188; Mr. Loeb, 115,000; Mr. Mansour, 812,500; Ms. Rich,
16,250; Mr. Rollnick, 80,000; Ms. Rowland, 0; Mr. Sinclair, 22,500; Mr.
Vogelstein, 30,000, and; Mr. Whitworth, 15,000.
(4) As of April 21, 2000, Mr. Gandolfo no longer serves as President, Worldwide
Manufacturing Operations.
(5) Mr. Loeb was elected Acting Chief Executive Officer and Mr. Rollnick was
elected Chairman of the Board on February 3, 2000.
(6) As of March 31, 2000, Mr. Mansour no longer serves as President of Mattel.
(7) Mr. Whitworth is a Managing Member of Relational Investors, LLC ("RILLC").
RILLC is the sole general partner of certain partnerships which own
3,624,159 shares of common stock. An additional 600,841 shares are held in
three accounts managed by RILLC. Mr. Whitworth disclaims beneficial
ownership of these securities except to the extent of his pecuniary
interest therein.
(8) The amount stated represents approximately 2.6% of the outstanding shares
of common stock. The amount stated also includes an aggregate of 4,431,374
shares of common stock that may be acquired upon the exercise of options
within 60 days following April 24, 2000, which represents approximately
1.0% of the outstanding shares of common stock.
5
<PAGE>
PROPOSALS
A total of six proposals, including four proposals by stockholders, are set
forth in the Proxy Statement. The Board of Directors considered each proposal
on March 30, 2000, and the recommendation of the Board of Directors on each
proposal is set forth herein.
PROPOSAL 1
ELECTION OF DIRECTORS
Nine directors are to be elected at the annual meeting to serve until the
next annual meeting of stockholders and until their respective successors have
been duly elected and qualified. In the absence of instructions to the
contrary, executed 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, votes will be cast, pursuant to the
enclosed proxy card, for such substitute nominee as may be nominated by the
Board of Directors or an authorized committee thereof. Management presently
believes that each of the persons named will be available to serve.
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 Mattel.
Information Concerning Nominees to the Board of Directors
Information is set forth below concerning the nominees for election as
directors. All of the nominees are incumbent directors. Ms. Rowland, Mr.
Gandolfo and Mr. Mansour, who are each incumbent directors, are not standing
for election as directors. Each nominee has furnished the information as to his
or her beneficial ownership of common stock as of April 24, 2000, and the
nominee's principal occupation. Each nominee has consented to being named in
this Proxy Statement as a nominee for election as 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>
Eugene P. Beard............. Employee/Consultant, The 65 2000
Interpublic Group of Companies
(also a Director of Brown
Brothers Harriman 59 Wall Street
Fund, Bessemer Trust Company,
Old Westbury Funds and Listed
Company Advisory Committee to
the New York Stock Exchange
Board of Directors)
Dr. Harold Brown............ Senior Managing Director and 72 1991
Advisor of E.M. Warburg, Pincus
& Co., LLC; Counselor, Center
for Strategic and International
Studies (also a Director of
Cummins Engine Company, Philip
Morris Companies, Inc. and
Evergreen Holdings, Inc.)
Tully M. Friedman........... Chairman and Chief Executive 58 1984
Officer of Friedman Fleischer &
Lowe, LLC, a private investment
firm (also a Director of Levi
Strauss & Co., McKesson HBOC,
Inc. and The Clorox Company)
Ronald M. Loeb.............. Acting Chief Executive Officer of 67 1970
Mattel; Senior Vice President
and General Counsel, Williams-
Sonoma, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation Director
Name or Position Age Since
---- -------------------- --- --------
<C> <S> <C> <C>
Andrea L. Rich.............. President and Chief Executive 56 1998
Officer of the Los Angeles
County Museum of Art
William D. Rollnick......... Chairman of the Board of the 68 1984
Mattel; retired Chairman and a
Director of Genstar Rental
Electronics, Inc.
Christopher A. Sinclair..... Chairman and Chief Executive 49 1996
Officer of Caribiner
International (also a Director
of Caribiner International,
Inc. and Venator Group)
John L. Vogelstein.......... Vice Chairman of the Board, 65 1983
President and Director of E.M.
Warburg, Pincus & Co., LLC
(also a Director of ADVO, Inc.,
and Journal Register Company)
Ralph V. Whitworth.......... Managing Member, Relational 44 2000
Investors, LLC (also a Director
of Waste Management, Inc.,
Sirius Satellite Radio, Inc.,
Tektronix, Inc. and Apria
Healthcare Group, Inc. where he
serves as Chairman of the Board).
</TABLE>
Except as described below, each of the directors has served in the principal
occupation or position indicated in the table for at least the past five years.
Mr. Beard has served as an Employee/Consultant of the Interpublic Group of
Companies since February 2000. Prior to that, he served as Vice Chairman--
Finance and Operations of The Interpublic Group of Companies since October
1995. Prior to that, he was Executive Vice President--Finance and Operations
and Chief Financial Officer of The Interpublic Group of Companies for more than
five years.
Mr. Friedman has served as Chairman and Chief Executive Officer of Friedman
Fleischer & Lowe, LLC since April 1997. Prior to that, he was a founding
partner of Hellman & Friedman, a private investment firm, for more than five
years.
Mr. Loeb has served as Acting Chief Executive Officer of Mattel since
February 2000 and as Senior Vice President and General Counsel of Williams-
Sonoma, Inc., a consumer products company, since June 1999. Prior to that, he
was a senior partner of the law firm of Irell & Manella LLP for more than five
years, becoming of counsel to the firm upon his retirement in September 1997.
Ms. Rich has served as President and Chief Executive Officer of the Los
Angeles County Museum of Art since November 1995. Prior to that, she served as
Executive Vice-Chancellor and Chief Operating Officer of the University of
California, Los Angeles, since 1991.
Mr. Sinclair has served as Chairman and Chief Executive Officer of Caribiner
International since January 1999. Prior to that, he served as President and
Chief Executive Officer of Quality Food, Inc., Chairman and Chief Executive
Officer of Pepsi-Cola Company and President and Chief Executive Officer of
PepsiCo Foods & Beverages International and Pepsi-Cola International for more
than five years.
Mr. Whitworth has been a Managing Member of Relational Investors, LLC, a
private investment fund, since March 1996. Prior to that he served as president
of Whitworth and Associates, a private advisory firm for more than five years.
He is also a partner of Batchelder & Partners, Inc., a business consulting
firm.
7
<PAGE>
THE BOARD OF DIRECTORS
Meetings and Remuneration
During 1999, the Board of Directors held seven meetings, and no director
attended less than 75% of the aggregate of all Board of Directors meetings and
of all meetings held by any committee of the Board of Directors on which he or
she served.
Non-employee members of the Board of Directors receive an annual retainer of
$30,000 per year. Each non-employee committee chairman receives an annual fee
of $4,000 per year and each non-employee committee member receives a fee of
$1,500 per committee meeting attended. Directors may elect to defer all or part
of their directors' fees under an arrangement that 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. Pursuant to the terms of the Mattel 1996 Stock Option Plan, upon
initial election to the Board of Directors, each new non-employee member of the
Board of Directors receives options to purchase 15,000 shares of common stock
with an exercise price equal to the fair market value of such stock on the date
of grant. The options are immediately exercisable and expire ten years from the
date of grant; provided, however, that the options terminate 90 days after the
director ceases to be a member of the Board of Directors unless the director
ceases to be a member of the Board of Directors as a result of death or
disability in which case the date is extended to one year from the date the
director ceases to be a member of the Board of Directors. Upon each annual re-
election, each non-employee member of the Board of Directors receives options
to purchase an additional number of shares of common stock designed to
recognize continued service on the Board of Directors. Directors with five or
fewer years of service receive options to purchase 5,000 shares of common stock
and directors with more than five years of service receive options to purchase
10,000 shares of common stock, each with an exercise price equal to the fair
market value of such stock on the date of grant. The options vest semi-annually
over three years at a rate of 10% for each of the first two semi-annual periods
and 20% for the remaining four semi-annual periods, and such options expire ten
years from the date of grant; provided, however, that unvested options
terminate immediately and exercisable options terminate 90 days after the
director ceases to be a member of the Board of Directors, unless the director
ceases to be a member of the Board of Directors as a result of death or
disability in which case the date is extended to one year from the date the
director ceases to be a member of the Board of Directors.
In 1998, and upon the recommendation of the Nominations/Corporate Governance
Committee, the Board of Directors adopted policies regarding non-employee
director stock ownership and retention of shares purchased upon exercise of
stock options. Under the policy, each non-employee member of the Board of
Directors will have up to five years from the later of adoption of the policy
or joining the Board of Directors to attain target minimum levels of stock
ownership. In addition, during their service on the Board of Directors, each
non-employee member of the Board of Directors must either hold his or her
options to purchase shares of common stock or, if exercised, must hold the
underlying shares of common stock until he or she ceases to be a member of the
Board of Directors.
Mr. Rollnick was elected Chairman of the Board of Mattel on February 3, 2000,
and was granted options to purchase 50,000 shares of common stock with an
exercise price equal to the fair market value of such stock on the date of
grant. The options granted to Mr. Rollnick were immediately exercisable and are
otherwise subject to the same terms and conditions described above regarding
option grants to non-employee directors.
8
<PAGE>
Mr. Loeb was elected Acting Chief Executive Officer of Mattel on February 3,
2000, and was granted options to purchase 100,000 shares of common stock with
an exercise price equal to the fair market value of such stock on the date of
grant. The options granted to Mr. Loeb were immediately exercisable and are
otherwise subject to the same terms and conditions described above regarding
option grants to non-employee directors. Starting February 2000 and until he is
succeeded by a permanent Chief Executive Officer, Mr. Loeb will also receive
$100,000 per month in connection with his duties as Acting Chief Executive
Officer, payable in a lump sum in January 2001.
Committees
Mattel's Audit Committee is chaired by Mr. Rollnick and includes Ms. Rich,
Mr. Beard and Mr. Vogelstein as members. Mr. Loeb was a member of the Audit
Committee until his appointment as Acting Chief Executive Officer in February
2000. Mr. Beard became a member of the Audit Committee in April 2000. During
1999, the Audit Committee held six meetings. Its primary functions 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 has an Executive/Finance Committee chaired by Mr. Vogelstein that
includes Messrs. Loeb, Friedman and Rollnick as members. Mr. Loeb replaced Ms.
Barad as a member of the Executive/Finance Committee in February 2000. During
1999, the Executive/Finance Committee held five meetings. The Executive/Finance
Committee may exercise all the powers of the Board of Directors, subject to
limitations of applicable law, between meetings of the Board of Directors.
Mattel has a Nominations/Corporate Governance Committee chaired by Mr. Loeb
that includes Ms. Rich and Messrs. Friedman, Mansour, Vogelstein and Whitworth
as members. Mr. Whitworth became a member of the Nominations/Corporate
Governance Committee in March 2000. During 1999, the Nominations/Corporate
Governance Committee held three meetings. Its primary function is to act on
behalf of and with the concurrence of the Board of Directors with respect to
matters relating to the composition and membership of the Board of Directors
and the Board's governance responsibilities. The Nominations/Corporate
Governance Committee also works closely with the Chief Executive Officer and
other members of Mattel's management to assure that Mattel is governed
effectively and smoothly. Sitting as a nominating committee, it submits to the
Board of Directors for consideration each nominee to be presented to the
stockholders for election as a director at the annual meetings of stockholders,
solicits recommendations and selects candidates to fill vacancies on the Board
of Directors and presents to the Board of Directors its recommendations for
committee assignments. Any stockholder wishing to recommend a nominee to the
Nominations/Corporate Governance Committee for election to the Board of
Directors at an annual meeting of stockholders should submit a recommendation
in writing to Mattel's Secretary, indicating the nominee's qualifications and
other relevant biographical information and providing confirmation of the
nominee's consent to serve as a director. The Nominations/Corporate Governance
Committee retains discretion in the nomination of directors, and has no
obligation to nominate the candidate recommended by the stockholder or to
include such candidate in Mattel's proxy materials.
Mattel has a Compensation/Options Committee chaired by Mr. Vogelstein that
includes Messrs. Beard, Rollnick, Sinclair and Whitworth as members. Mr.
Whitworth became a member of the Compensation/Options Committee in March 2000
and Mr. Beard became a member in April 2000.
9
<PAGE>
During 1999, the Compensation/Options Committee held six 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 approve and oversee the various incentive plans, including Mattel's
stock option plans and incentive compensation plans.
Mattel has a Foundation Committee chaired by Dr. Brown that includes Mr.
Gandolfo and Ms. Rowland as members. During 1999, the Foundation Committee held
three meetings. The Foundation Committee provides direction to and approves the
budget and major expenditures for the Mattel Children's Foundation. Funded
annually from corporate profits, the Mattel Children's Foundation supports a
variety of programs and organizations that primarily benefit children in need.
Mattel has a Pension Committee chaired by Mr. Sinclair that includes Dr.
Brown as a member. During 1999, the Pension Committee held two meetings. Its
primary function is to oversee the operation of Mattel's pension and employee
retirement and savings plans by reviewing investment and financial performance,
the selection of investment managers, trustees and other fiduciaries, and
monitoring the administration of the plans.
Compensation Committee Interlocks and Insider Participation
During 1999, Messrs. Vogelstein, Rollnick and Sinclair served on the Mattel
Compensation/Options Committee. There were no interlocks with other companies
within the meaning of the Securities and Exchange Commission's proxy rules
during 1999. None of the members of the Compensation/Options Committee is or
has been an officer or employee of Mattel or any of its subsidiaries.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
FOR ELECTION AS DIRECTORS NAMED HEREIN.
10
<PAGE>
REPORT OF THE COMPENSATION/OPTIONS COMMITTEE
The following Report of the Compensation/Options Committee covering Mattel's
fiscal year ended December 31, 1999, and the performance graph that follows
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission or subject to Regulations 14A or 14C of the
Securities Exchange Act of 1934, as amended, or the liabilities of Section 18
of the Securities Exchange Act of 1934, as amended. Neither the Report nor the
Performance Graph that follows shall be deemed incorporated by reference into
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, notwithstanding any general incorporation by
reference of this Proxy Statement into any other document.
General
The Compensation/Options Committee, a committee composed entirely of
directors who have never served as officers of Mattel, approves and oversees
Mattel'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 Compensation/Options Committee consults with
Mattel's Chief Executive Officer, except when reviewing his or her performance,
in which case the Compensation/Options Committee meets independently. The
Compensation/Options Committee met six times during 1999.
Statement on Philosophy of Executive Compensation
In establishing and evaluating the effectiveness of compensation programs for
executive officers, as well as other senior executives of Mattel, the
Compensation/Options Committee is guided by three basic principles:
. Mattel must offer competitive salaries to be able to attract, retain and
motivate highly-qualified and experienced executives and other management
personnel;
. Executive cash compensation in excess of base salaries should be tied to
Mattel and individual performance; and
. The financial interests of Mattel's senior executives should be aligned
with the financial interests of the stockholders, primarily through stock
option grants, the Mattel Management Incentive Plan (the "MIP") and the
Mattel Long-Term Incentive Plan (the "LTIP").
Implementation of Philosophy
The Compensation/Options Committee has retained the services of SCA
Consulting, a compensation consulting firm, to assist Mattel in developing
compensation incentive programs on an on-going basis. SCA Consulting provides
data and advice to the Compensation/Options Committee with respect to the
compensation paid to senior executives of Mattel, including the Chief Executive
Officer and the four other most highly compensated executive officers (the
"Named Executive Officers"). At the request of the Compensation/Options
Committee, SCA Consulting from time to time provides the Committee with
information and advice regarding long-term incentive concepts, annual incentive
concepts, appropriate financial and other performance measures, peer group
comparisons, stock option plans including premium price plans, dilution
resulting from stock option grants and other matters. SCA Consulting also is
available to assist the Compensation/Options Committee in reviewing the
compensation plans in which executive officers, including each of the
11
<PAGE>
Named Executive Officers, participates and in determining whether the plans
appear likely to meet the objectives of motivating the officers to seek to
achieve superior stockholder return and attracting and retaining qualified
officers. SCA Consulting provided analysis to Mattel management in 1999, but
did not attend any Compensation/Options Committee meetings.
Base Salaries
The Compensation/Options Committee establishes the base salaries of the Chief
Executive Officer and other executive officers at levels it determines are
appropriate in light of the duties and scope of responsibilities of each
officer's position. The Compensation/Options Committee reviews executive
officer salaries regularly, usually once every 18 months, and makes adjustments
as warranted to reflect continued individual contributions, sustained
performance and competitive market factors. The Compensation/Options Committee
measures individual contributions and performance against total annual
compensation, including incentive awards, rather than against base salary
alone.
Annual Incentives
Under the MIP, participants may receive incentive compensation based upon the
achievement of specific yearly company, division, affiliate and business unit
financial performance targets for Mattel, as well as individual performance
targets. Under the MIP, the availability of funds for payment is based on
Mattel's earnings per share, net of incentive bonuses. Depending upon Mattel's
earnings per share, there may be no funding, or there may be funding at three
levels: threshold, target and maximum. The company-wide performance targets,
and the corporate group target, are based upon net operating profit after taxes
("NOPAT") less a charge on total capital. Performance targets for each business
unit are based on operating profit less a charge for capital attributable to
the business unit and revenue goals. In determining individual awards under the
MIP, the Compensation/Options Committee also considers individual
accomplishments once the company and business unit targets have been achieved.
For 1999, the maximum amounts that executive officers were eligible to receive
under the MIP ranged from 65% to 150% of base salary. Based on Mattel's
earnings per share, however, no payments under the MIP were made for 1999 to
any Named Executive Officers or any other participants in the MIP.
During 1999, the Compensation/Options Committee focused on the importance to
Mattel of retaining key senior executives during a period in which Mattel faced
a variety of challenges. As a result, the Compensation/Options Committee
authorized the payment to critical key executives of one-time retention bonuses
and other one-time bonuses recognizing special achievements.
Long-Term Incentive Plan
Executive officers also participated in the Long-Term Incentive Plan for the
three-year performance cycle beginning in 1999 and ending in 2001. Awards under
the LTIP are based on Mattel's financial performance over a three-year
performance cycle relative to performance targets relating to its long-range
financial goals and pays out at the end of any given three-year cycle. For the
1999-2001 performance cycle, the Compensation/Options Committee based the
performance targets on a combination of growth in NOPAT, less a charge on total
capital, growth in earnings per share and growth in revenue. Prior to April 1,
1999, the Compensation/Options Committee established, in writing, the level of
each executive's participation and target levels for the performance criteria
that had to be achieved before incentive payments would be awarded under the
12
<PAGE>
LTIP. No payments were made under the LTIP in 1999 to the Named Executive
Officers or any other participants in the LTIP.
Equity-Based Incentive Compensation
The Mattel 1996 Stock Option Plan (the "1996 Plan") authorizes the
Compensation/Options Committee to make grants and awards of stock options,
stock appreciation rights, "restricted stock" and other stock-based awards.
Stock options are granted under the 1996 Plan with an exercise price equal to
the market price of Mattel's common stock on the date of grant and generally
vest semi-annually over three years. This approach is designed to motivate
management to increase stockholder value over the long-term because 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 Compensation/Options Committee considers competitive
practices, the duties and scope of responsibilities of each executive's
position and the amount and terms of options already held by management. In
1999, no options were granted to the Named Executive Officers pursuant to the
1996 Plan.
The 1997 Premium Price Stock Option Plan (the "PPO Plan") authorizes the
Compensation/Options Committee to make grants and awards of stock options and
tandem limited stock appreciation rights. Stock options are granted under the
PPO Plan with an exercise price in excess of the market price of Mattel's
common stock on the date of the grant. Options granted under the PPO Plan are
exercisable and terminate at such time as may be determined by the
Compensation/Options Committee. The primary purpose for the
Compensation/Options Committee's granting of such premium price stock options
is to provide strong incentive to increase Mattel's value during the term of
the options. Options were granted to Ms. Fontanella, Mr. Bousquette and
Mr. Friedman in 1999 under the PPO Plan in recognition of their increased
responsibilities and designation as executive officers. No options were granted
to Ms. Barad or Mr. Mansour in 1999 under the PPO Plan.
The Compensation/Options Committee believes that significant equity interests
in Mattel held by its executives more closely align the interests of
stockholders and management. In light of this belief and effective January 1,
1995, Mattel established stock ownership guidelines for senior executives.
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 Mattel. Compliance with these guidelines is
monitored by the Compensation/Options Committee and, while not mandatory, is
taken into consideration when the Committee makes stock option grants.
Loans
During 1999, Ms. Fontanella, Mr. Bousquette and Mr. Friedman each received $1
million loans from Mattel, which are due and payable in October 2002, with
interest to accrue annually at 7% per annum. With respect to each executive, if
he or she is employed by Mattel on October 29, 2002, or if such executive's
employment is terminated without cause, for good reason by the executive, or in
the event there is a change of control of Mattel, the principal amount of the
loan to such executive and all accrued unpaid interest will be forgiven. See
"Employment and Severance Agreements" below. In addition, if a loan is forgiven
and the executive continues to be employed by Mattel on April 1, 2003, or a
change of control occurs, the executive will be given an additional payment to
fully reimburse the executive for all Federal, state and local income taxes and
employment taxes with respect to the forgiveness of the loan and with respect
to such taxes. Such payment will also be made
13
<PAGE>
earlier if such executive is required to pay taxes on such loan forgiveness
before April 1, 2003, if the executive is still employed by Mattel at such
time. The purpose of these loans was to help ensure that Mattel will retain the
services of these key executives.
Internal Revenue Code Section 162(m)
As one of the factors in its review of compensation matters, the
Compensation/Options Committee considers the anticipated tax treatment to
Mattel 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 or on whether
such plans qualify as "performance-based" plans under the provisions of the tax
laws. Furthermore, interpretations of and changes in the tax laws and other
factors beyond the Compensation/Options Committee's control also affect the
deductibility of compensation. For these and other reasons, the
Compensation/Options Committee will not necessarily limit executive
compensation to the amount deductible under Section 162(m) of the Internal
Revenue Code, as amended. The Compensation/Options 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
Ms. Barad's Amended and Restated Employment Agreement dated as of January 1,
1997, established the terms and conditions of her employment with Mattel,
including a minimum base salary, the minimum benefits to which she was entitled
under the compensation plans available to Mattel's executive officers and
payments or benefits she was entitled to upon termination of her employment.
See "Employment and Severance Agreements" below. The Compensation/Options
Committee typically reviews the base salary of the Chief Executive Officer
every 18 months pursuant to the same policies the Committee uses to evaluate
the base salaries of the other executive officers. In August 1999 in connection
with Mattel's ordinary 18-month executive performance review, the Committee
increased Ms. Barad's base salary by $150,000 per year. Based on the 1999
financial performance measures, no payments under the MIP or the LTIP were made
to Ms. Barad for 1999. Ms. Barad was not granted any options to purchase common
stock in 1999.
COMPENSATION/OPTIONS COMMITTEE
John L. Vogelstein (Chairman)
William D. Rollnick
Christopher A. Sinclair
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of Mattel common stock with that
of the S&P 500 Index and Mattel's peer group, the Dow Jones Entertainment,
Recreation Products, and Toys Groups. Mattel's peer group included the
following companies in 1999: Brunswick Corp.; Carnival Corp.; The Walt Disney
Company; Eastman Kodak Co.; Electronic Arts, Inc.; Harley Davidson, Inc.;
Hasbro, Inc.; International Game Technology Corp.; Royal Caribbean Cruises,
Ltd.; Time Warner, Inc.; and Viacom, Inc. As compared to 1998, the peer group
was modified by the Dow Jones by removing King World Productions, Inc. and
adding Royal Caribbean Cruises, Ltd. The Cumulative Total Return listed below
assumes an initial investment of $100 and reinvestment of dividends.
Comparison of Five Year Cumulative Total Return
Mattel, Inc., S&P 500, and Entertainment, Recreation Products, and Toys Groups
1994 to 1999
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN 1995 1996 1997 1998 1999
- ----------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Mattel, Inc. ........................... $154.32 $175.62 $237.76 $151.49 $ 86.16
S&P 500................................. 137.58 169.17 225.60 290.08 351.12
Peer Group.............................. 121.93 136.48 180.65 247.45 279.71
</TABLE>
15
<PAGE>
SUMMARY COMPENSATION TABLE
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 Mattel who served in such capacities on
December 31, 1999, for service during each of the last three fiscal years.
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------------- --------------------------- ---------
Other
Annual Restricted Securities LTIP All Other
Name and Bonus Compensation Stock Awards Underlying Payout Compensation
Principal Position Year Salary ($) ($)(1) ($) ($) Options (#)(2) ($)(3) ($)(4)
- ------------------ ---- ---------- ------- ------------ ------------ -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jill E. Barad(5)........ 1999 1,307,693 -- 104,985(6) -- -- -- 136,751
Former Chairman of the 1998 1,263,465 500,000 -- -- -- 2,855,720 131,756
Board and Chief
Executive 1997 1,100,008 445,503 -- -- 4,907,946 9,140,408 112,949
Officer
Ned Mansour(7).......... 1999 779,231 -- 128,411(8) -- -- -- 90,399
Former President 1998 698,077 500,000 -- -- -- 1,631,840 68,707
1997 623,078 440,031 -- -- 1,983,019 400,000 61,417
Adrienne Fontanella..... 1999 430,769 565,000 173,477(9) -- 500,000 -- 39,375
President 1998 232,319 75,000 -- -- 50,000 -- 18,976
Girls/Barbie 1997 200,018 110,000 -- -- 35,000 -- 16,330
Matt Bousquette......... 1999 438,464 250,000 -- -- 395,630 -- 40,712
President 1998 291,647 160,000 -- -- -- 244,776 24,562
Boys/Entertainment 1997 219,053 200,000 -- -- 409,371 60,000 16,823
Neil Friedman(10)....... 1999 442,308 250,000 -- -- 224,560 -- 22,385
President 1998 350,000 -- -- -- -- -- 17,901
Fisher-Price Brands 1997 156,250 288,750 -- -- 525,440 -- 7,598
</TABLE>
- --------
(1) No payments were made to the Named Executive Officers under the MIP in
1999. Bonus amounts for Ms. Fontanella, Mr. Bousquette and Mr. Friedman in
1999 represent special achievement awards in the amount of $350,000,
$250,000 and $250,000, respectively related to their respective business
unit performance in 1999 and increased management roles. In addition, Ms.
Fontanella was granted a retention bonus in 1999 of $215,000 for her
continued commitment to Mattel. Bonus amounts for Ms. Barad and Mr.
Mansour in 1998 represent special awards related to successful merger and
acquisition efforts related to the acquisition of Tyco Toys, Inc., in
1997, awarded in March 1998. Bonus amount for Ms. Fontanella in 1998
represents a special achievement award in the amount of $75,000 relating
to the performance of her business group. Bonus amounts for Mr. Bousquette
in 1998 represent special achievement awards of $110,000 relating to the
exceptional performance of his business unit and $50,000 related to
successful merger and acquisition efforts related to the acquisition of
Tyco Toys, Inc. in 1997. Bonus amount for Mr. Mansour for 1997 includes a
special achievement award in the amount of $250,000. Bonus amounts for
Ms. Fontanella and Mr. Bousquette in 1997 include retention bonuses of
$80,000 and $100,000, respectively, for their continued commitment to
Mattel.
(2) 1999 amounts include options granted to Ms. Fontanella, Mr. Bousquette and
Mr. Friedman pursuant to the PPO Plan to purchase 500,000, 395,630 and
224,560 shares of common stock, respectively, with exercise prices that
were in excess of 25% ($35.24 per share) and 33 1/3% ($37.59 per share)
above Mattel's prior six month average stock price on the date of grant
($28.19 per share). Such options expire on April 1, 2004, and may not be
exercised for three years from the date of grant. 1997 amounts include
options granted to Ms. Fontanella under the 1996 Plan. 1997 amounts
include options granted to Ms. Barad, Mr. Mansour, Mr. Bousquette
16
<PAGE>
and Mr. Friedman pursuant to the PPO Plan to purchase 4,082,946,
1,433,019, 354,371 and 525,440 shares of common stock, respectively, with
exercise prices that were in excess of 25% ($42.31 per share) and 33 1/3%
($44.87 per share) above Mattel's prior six month average stock price on
the date of grant ($33.62 per share). Such options expire on December 31,
2002 and may not be exercised for three years from the date of grant.
(3) $8,440,408 of the LTIP payout for Ms. Barad for 1997 represents the
vesting on January 1, 1997, of 292,968 shares of common stock previously
issued to her as "restricted stock" and the balance was a cash payment
under the LTIP.
(4) 1999 amounts consist of the taxable portion of premiums on life insurance
provided by Mattel for Ms. Barad, Mr. Mansour, Ms. Fontanella, Mr.
Bousquette and Mr. Friedman in the amounts of $5,152, $2,592, $806, $780
and $3,481, respectively, and contributions to Mattel's Personal
Investment Plan and PIP Excess Plan to such individuals in the amounts of
$130,769, $85,715, $38,569, $39,931 and $18,904, respectively. 1999
amounts for Ms. Barad and Mr. Mansour also include $830 (representing a
partial year) and $2,092, respectively, which amounts are attributable to
premiums paid under the term life portion of split dollar life insurance
policies. Ms. Barad and Mr. Mansour are not eligible to receive anything
other than death benefits under the split dollar life insurance policies.
(5) As of February 3, 2000, Ms. Barad no longer serves as Chairman of the
Board and Chief Executive Officer of Mattel.
(6) Includes $90,734 for personal use of company aircraft.
(7) As of March 31, 2000, Mr. Mansour no longer serves as President of
Mattel.
(8) Includes a gain of $53,624 recognized by Mr. Mansour on the purchase of
his company car and the payment by Mattel of $48,904 in taxes associated
with such gain.
(9) Includes the reimbursement by Mattel of $104,600 of Ms. Fontanella's
relocation expenses, $27,600 of her transitory housing expenses and the
payment by Mattel of $25,152 in taxes associated with such housing
expenses.
(10) Mr. Friedman joined Mattel following completion of the merger with Tyco
Toys, Inc. in June 1997, and therefore the 1997 salary amount represents
a partial year.
17
<PAGE>
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(1)
-----------------------------------------------
Potential Realizable
Value at
Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options/SARs Exercise Appreciation
Underlying Granted to or Base for Option Term(2)
Options/SARs Employees in Price Expiration -----------------------
Name Granted (#)(3) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- -------------- ------------ -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jill E. Barad........... -- -- -- -- -- --
Ned Mansour............. -- -- -- -- -- --
Adrienne Fontanella..... 250,000 1.3 35.24 04/01/04 -- 977,875
250,000 1.3 37.59 04/01/04 -- 390,000
Matt Bousquette......... 197,815 1.1 35.24 04/01/04 -- 773,457
197,815 1.1 37.59 04/01/04 -- 308,591
Neil Friedman........... 112,280 0.6 35.24 04/01/04 -- 441,105
112,280 0.6 37.59 04/01/04 -- 175,157
</TABLE>
- --------
(1) All of the above-listed awards were made pursuant to the PPO Plan on April
1, 1999. Nonqualified stock options were granted under the PPO Plan with an
exercise price in excess of the market price of Mattel's common stock on
the date of the grant. The options have exercise prices that were in excess
of 25% ($35.24) and 33 1/3% ($37.59) above Mattel's prior six month average
stock price on the date of grant ($28.19 per share). 25% options granted
under the PPO Plan are exercisable on or after April 1, 2002 if (1) the
fair market value of Mattel's common stock on any trading day after
April 1, 1999 and prior to April 1, 2001 exceeds the exercise price
($35.24) or (2) Mattel's earnings per share for 2000 is $1.14 or more,
representing a 15% compound annual growth between 1998 and 2000. If neither
event triggering the exercisability of the 25% options has occurred on or
before April 1, 2001, the options terminate. 33 1/3% options granted under
the PPO Plan are exercisable on or after April 1, 2002 if (1) the fair
market value of Mattel's common stock on any trading day after April 1,
1999 and prior to April 1, 2002 exceeds the exercise price ($37.59) or (2)
Mattel's earnings per share for 2001 is $1.31 or higher, representing a 15%
compound annual growth rate between 1998 and 2001. If neither event
triggering the exercisability of the 33 1/3% options has occurred on or
before April 1, 2002, the options terminate. Even if vested, such options
will expire on April 1, 2004, and may not be exercised for three years from
the date of grant. In addition, such options will terminate on the date on
which the TLSARs related to the options are exercised. The PPO Plan has
provisions about the impact of a change of control, death, disability,
retirement and termination of employment on the exercisability of options.
(2) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciation of Mattel common
stock. The gains reflect a future value based upon growth at these
prescribed rates. It is important to note that options have value to
recipients, including the Named Executive Officers, only if the stock price
advances beyond the exercise price shown in the table during the effective
option period.
(3) Pursuant to the PPO Plan, tandem limited stock appreciation rights were
granted in tandem with all of the options listed above. Each TLSAR is a
right to receive a payment in cash, or in some instances common stock,
equal to the amount the fair market value of Mattel's common stock on the
date the TLSAR is exercised exceeds the exercise price of the TLSAR. The
exercise price of the TLSARS, which may not be less than the fair market
value of Mattel common stock on the
18
<PAGE>
date of grant, was $28.19 per share. Each TLSAR will become exercisable only
immediately upon the occurrence of a change of control of Mattel and will
expire upon the exercise of the underlying option, the termination of the
underlying option (unless the TLSAR is exercisable on such date) or two
years after the date of change of control, whichever is the earliest to
occur.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs at
Options/SAR's at FY-End FY-End(1)
--------------------------- ---------------------------
Shares Acquired Value
Name on Exercise Realized Exerciseable Unexerciseable Exerciseable Unexerciseable
- ---- --------------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Jill E. Barad........... -- -- 1,870,313 4,570,446 -- --
Ned Mansour............. -- -- 481,250 1,764,269 -- --
Adrienne Fontanella..... -- -- 42,000 555,000 -- --
Matt Bousquette......... -- -- 51,406 776,251 -- --
Neil Friedman........... -- -- -- 750,000 -- --
</TABLE>
- --------
(1) The value of unexercised in-the-money options/SARs at FY-end is calculated
based on the market value of the underlying securities, minus the exercise
price, and assumes sale of the underlying securities on December 31, 1999,
at a price of $13.125 per share, the fair market value of Mattel's common
stock on such date.
LONG-TERM INCENTIVE PLANS
Awards In Last Fiscal Year(1)
<TABLE>
<CAPTION>
Performance
Or Other Estimated Future Payouts Under
Number of Period Non-Stock Price-Based Plans
Shares, Units Until --------------------------------
Or Other Rights Maturation Threshold Target Maximum
Name (#) Or Payout ($) ($) ($)
- ---- --------------- ----------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
Jill E. Barad........... -- 12/31/01 1,050,000 3,500,000 8,750,000
Ned Mansour............. -- 12/31/01 600,000 2,000,000 5,000,000
Adrienne Fontanella..... -- 12/31/01 300,000 1,000,000 2,500,000
Matt Bousquette......... -- 12/31/01 300,000 1,000,000 2,500,000
Neil Friedman........... -- 12/31/01 300,000 1,000,000 2,500,000
</TABLE>
- --------
(1) For purposes of determining bonuses payable under Mattel's LTIP for the
three-year performance cycle beginning January 1, 1999, in the first
quarter of 1999 the Compensation/Options Committee established the
participation levels for each of the Named Executive Officers and the LTIP
performance objectives. The performance objectives are based on a
combination of growth in NOPAT less a charge on total capital, growth in
earnings per share and growth in revenue. Management of Mattel believes it
is extremely unlikely that the performance objectives will be met.
19
<PAGE>
RETIREMENT PLANS
The Mattel, Inc. Amended and Restated Supplemental Executive Retirement Plan,
as amended (the "SERP") was originally adopted by Mattel effective May 1, 1996,
and amended effective November 4, 1999. An employee must be selected by the
Chief Executive Officer in order to participate in the SERP. All of the Named
Executive Officers participate in the SERP. Under the SERP, in most cases a
vested participant with five to 15 years of service will be entitled to a
yearly benefit for his or her lifetime beginning at age 60 equal to (1) 25% of
the participant's final average compensation (the average annual compensation
during the final three years of employment), multiplied by (2) a fraction, not
in excess of one, equal to the number of months of service credited to the
participant divided by 180. In most cases, a vested participant with more than
15 years of service will be entitled to a yearly benefit for his or her
lifetime beginning at age 60 equal to (1) 25% of the participant's final
average compensation, plus (2) an additional 0.1666% for each month of credited
service after 15 years, up to a maximum total percentage of 35%. A participant
vests upon completing five years of service and attaining age 55. The
compensation used in determining final average compensation under the SERP is
the participant's base salary plus bonuses paid under the MIP and the 1999
special achievement bonuses. The SERP is currently unfunded.
The following table shows the estimated annual benefit that would be payable
to participants in the SERP at age 60.
<TABLE>
<CAPTION>
Approximate Annual Retirement Benefits Retiring at
Age 60
---------------------------------------------------------
Final
Average 5 Years of 10 Years of 15 Years of 20 Years
Compensation Service Service Service of Service
------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
$ 300,000 $ 25,000 $ 50,000 $ 75,000 $ 105,000
400,000 33,333 66,667 100,000 140,000
500,000 41,667 83,333 125,000 175,000
750,000 62,500 125,000 187,500 262,500
1,000,000 83,333 166,667 250,000 350,000
2,000,000 166,667 333,333 500,000 700,000
3,000,000 250,000 400,000 750,000 1,050,000
</TABLE>
Under the terms of Ms. Barad's employment agreement and the SERP, and as
confirmed in her separation agreement with Mattel, upon her departure from
Mattel, she was immediately entitled to receive benefits under the SERP equal
to 35% of the average of the final three years of her annual base salary plus
the average of the greatest two of the five most recent annual MIP and a
special achievement bonus received by her. Such benefits equal $708,989 per
year during her lifetime. Pursuant to the terms of the SERP, Ms. Barad chose to
receive guaranteed installments of $106,745 per month over a period of 10 years
instead of payments of $708,989 per year during her lifetime. Under the terms
of Mr. Mansour's employment agreement and the SERP, as modified by his
severance and consulting agreement with Mattel, upon his departure from Mattel,
he was immediately entitled to receive benefits under the SERP equal to 35% of
the average of the final three years of his annual base salary plus the average
of the greatest two of the three most recent annual MIP bonuses received by
him. Such benefits equal $282,632 per year during his lifetime. Pursuant to the
terms of the SERP, Mr. Mansour chose to receive guaranteed installments of
$31,575 per month over a period of 15 years instead of payments of $282,632 per
year during his lifetime.
At December 31, 1999, final average compensation under the SERP for Ms.
Fontanella, Mr. Bousquette and Mr. Friedman was $320,260, $384,990 and
$402,084, respectively, and the years
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of service with Mattel were 3.6, 6.0 and 2.6, respectively. The SERP benefit is
computed as a lifetime payment and is not reduced for Social Security.
Mr. Neil Friedman also participates in the Fisher-Price Pension Plan and
Fisher-Price Deferral and Compensation Adjustment Benefit Plan. Under the
Fisher-Price Pension Plan, a participant accrues a benefit each year equal to
1.4% of compensation plus 0.4% of compensation in excess of 150.1% of Social
Security covered compensation. Compensation includes base salary and bonus paid
under the MIP. The benefit is payable at age 65 as an unreduced lifetime
payment and is not reduced for Social Security. The Fisher-Price Deferral and
Compensation Adjustment Benefit Plan makes up for benefits that cannot be
provided under the Fisher-Price Pension Plan due to the limitation on
pensionable pay under section 401(a)(17) of the IRS Code. Mr. Friedman's
projected annual benefit, assuming level continuation of compensation, payable
at normal retirement age is $126,271.
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EMPLOYMENT AND SEVERANCE AGREEMENTS
Mattel has entered into employment agreements with each of the Named
Executive Officers in order to assure their continued service. Both Ms. Barad
and Mr. Mansour no longer serve as executives of Mattel and have entered into
the separation or severance agreements described below. Each of the other Named
Executive Officers, Ms. Fontanella, Mr. Bousquette and Mr. Friedman, recently
entered into new employment agreements dated as of January 31, 2000, and
effective as of April 1, 1999, which contain substantially identical terms,
except as described below.
Employment Agreements with Adrienne Fontanella, Matthew Bousquette and Neil
Friedman. The agreements for Ms. Fontanella, Mr. Bousquette and Mr. Friedman,
generally provide a three-year term of employment. Commencing on the first day
of the month following April 1, 1999, and on the first day of each month
thereafter, the termination date of each agreement is automatically extended by
one month unless the executive or Mattel gives notice to the other that the
agreement will not be extended and will be terminated. The agreements provide
that each executive is to receive a base salary at least equal to his or her
salary in effect on the date of the agreement, and base salaries must be
reviewed no less frequently than once every eighteen months. The current base
salary for Ms. Fontanella, Mr. Bousquette and Mr. Friedman is $600,000 each.
The agreements also provide for the respective executive's participation in
various incentive and employee benefit plans as may be in effect from time to
time with respect to executives employed by Mattel, including but not limited
to the MIP, the LTIP, any of Mattel's stock option plans and retirement plans,
as well as other benefit plans and programs available to executive officers and
employees generally. Ms. Fontanella's agreement also provides that Mattel will
reimburse her for the cost of twenty-four round-trip business class tickets
over a period of two years.
Mattel may terminate Ms. Fontanella's, Mr. Bousquette's or Mr. Friedman's
employment for "cause," as defined in the agreements, if the Chief Executive
Officer of Mattel determines that "cause" exists. Each executive may terminate
his or her employment if "good reason" exists, as defined in the agreements.
"Good reason" includes, among other things, any change in duties, authority or
responsibility of the executive that is inconsistent with the executive's
position as described in his or her respective agreement, any failure of a
successor to Mattel to assume or perform the agreement and any requirement by
Mattel that the executive be based outside of Los Angeles (or, in the case of
Mr. Friedman, New York), in each case without the executive's consent. If the
executive's employment is terminated for cause or if the executive terminates
his or her employment without good reason, Mattel will pay the executive his or
her full base salary through the termination date at the then-effective rate.
The agreements also provide for, among other things, certain health care and
disability benefits to the executives or their families in the event of
termination of employment by death or disability.
If Mattel terminates Ms. Fontanella's, Mr. Bousquette's or Mr. Friedman's
employment other than for cause, death or disability or the executive
terminates his or her employment for good reason (in each case, other than
within 18 months following a change of control):
. Mattel will pay the executive a lump sum consisting of:
(1) the executive's base salary through the termination date at the then-
effective rate;
(2) a current year MIP bonus (the "Bonus") equal to the greater of (x)
the average of the two highest MIP bonuses received by the executive
in the last three years, prorated to reflect the number of months of
the executive's employment in the current year, (y) the MIP bonus
paid to the executive in 2000 or 2001, whichever is greater, and (z)
the target MIP bonus for the 2000 year;
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(3) an LTIP payment reflecting the amount the executive would have
received if the executive had remained employed for the entire
performance period, prorated based on the number of months of the
executive's employment during the performance period; and
(4) three times the sum of (x) the executive's annual base salary at the
then-effective rate and (y) the Bonus, but without proration;
. until the earlier of (x) the third anniversary of the termination date or
(y) the date the executive accepts other similar employment, Mattel will
provide the executive certain employee benefits at Mattel's expense,
including but not limited to coverage under Mattel's medical, dental and
other health care plans, outplacement services, financial counseling and
tax preparation services, country club membership costs and continued use
of leased automobiles and the right to purchase such automobiles for a
nomimal sum; and
. credit will be given for three years of service (in addition to actual
service) and for three years of attained age to be added to the
executive's actual age for purposes of computing any service and age-
related benefits for which the executive is eligible under Mattel's plans
and programs, including the SERP.
If Mattel terminates an executive's employment other than for cause, death or
disability, or if the executive terminates his or her employment for good
reason and such termination occurs within 18 months after the date upon which
Mattel changes the person to whom the executive immediately reports, then (1)
the executive's Bonus, as described above, will be no less than the executive's
maximum targeted MIP bonus for the year in which the termination of employment
occurs, and (2) the executive's LTIP payment described above will be based on
the maximum LTIP payment that the executive could have received with respect to
the pending performance period, rather than the amount which would have been
payable to the executive had he or she remained employed for the entire
performance period.
If, within 18 months following a "change of control" of Mattel, the executive
terminates his or her employment for good reason, Mattel or the surviving
entity terminates the executive's employment other than for cause or
disability, or within the 30-day period immediately following the six-month
anniversary of a change of control the executive terminates his or her
employment for any reason, Mattel will, among other things, make all the
payments and provide all the benefits to the executives described above, except
for the prorated LTIP payment. Instead of the prorated LTIP payment, the terms
of the LTIP provide that in the event of the change in control of Mattel, each
executive will receive within 30 days after the change of control any earned
but unpaid LTIP bonuses and an interim cash payment for each performance period
commenced but not completed prior to the date of the change of control equal to
the amount the executive would have received had the target performance
objectives been achieved with respect to each such performance period. If,
with respect to payments or distributions in the nature of compensation
(including accelerated vesting and exerciseability of stock options) made by
Mattel due to a change of control, the executive is subject to the payment of
excise tax under Section 4999 of the Internal Revenue Code, Mattel will pay
such executive an additional amount so as to place the executive in the same
after-tax position such executive would have been in had such excise tax not
applied.
Pursuant to an amendment, dated February 10, 2000, to each executive's
employment agreement and existing stock option grant agreements, if an
executive's employment with Mattel is terminated without cause by Mattel,
because of death or disability, for good reason by the executive, or by the
executive following a change of control, all outstanding stock options (other
than options issued under the PPO Plan) held by the executive will become
immediately exerciseable, and he or she will
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<PAGE>
have until the date that is ten years from the date each outstanding option was
granted to exercise such option.
In addition, Ms. Fontanella, Mr. Bousquette and Mr. Friedman each received a
loan from Mattel on October 29, 1999, in the principal amount of $1.0 million
and a second loan from Mattel on April 7, 2000 in the principal amount of $2.0
million, which are all due and payable on or before October 29, 2002, with
interest to accrue annually at 7% per annum. With respect to each executive, if
his or her employment with Mattel is terminated for cause prior to October 30,
2002, then the loans to such executive will become due and payable, including
interest accrued, 30 days after such termination date. If an executive is
employed by Mattel on October 29, 2002, or if an executive's employment with
Mattel is terminated without cause by Mattel, for good reason by the executive,
or in connection with a change of control, the principal amount of the loans to
such executive and all accrued unpaid interest will be forgiven. In addition,
if a loan is forgiven and the executive continues to be employed by Mattel on
April 1, 2003, or a change of control occurs, the executive will be given an
additional payment to fully reimburse the executive for all Federal, state and
local income taxes and employment taxes with respect to the forgiveness of the
loan and with respect to such taxes. Such payment will also be made earlier if
such executive shall be required to pay taxes on such loan forgiveness before
April 1, 2003, if the executive is still employed by Mattel at such time.
Separation Agreement with Jill Barad. In connection with Ms. Barad's
departure from Mattel, the Compensation/Options Committee negotiated and the
Board of Directors approved a separation agreement with Ms. Barad, the
principal terms of which implement the separation provisions of her 1997
employment agreement. Pursuant to her employment agreement, Ms. Barad was
entitled to receive cash payments of: (1) five times the sum of her annual base
salary as of February 2000 and a maximum annual bonus under the MIP; (2) one-
twelfth of her maximum annual bonus under the MIP; and (3) the full term
maximum payout under the LTIP, which together resulted in an aggregate cash
payment, confirmed in the separation agreement, of approximately $26.4 million.
Ms. Barad's separation qualified her for benefits of $708,989 per year during
her lifetime under Mattel's SERP adopted in 1994, as amended, which amount was
confirmed in the separation agreement. Ms. Barad's employment agreement
provided that the entire balance due from Ms. Barad with respect to the
November 1, 1994 loan from Mattel of $3.0 million at 4.12% per annum for the
purchase of a home would be forgiven on her termination. In the separation
agreement Mattel agreed to pay Ms. Barad approximately $3.31 million to make
her whole for the Federal and California income taxes and Medicare tax payable
by her with respect to the income she will recognize as a result of the
forgiveness of the home loan. Under the separation agreement, Mattel also
forgave the May 29, 1997 loan of $4.2 million at 6.1% per annum which it had
given Ms. Barad in connection with the Board of Directors' request that she not
sell any of the 292,968 shares of restricted stock which had been granted to
her in December 1993 and which had become vested in January 1997 in order to
pay the income taxes resulting from such vesting. As provided in her employment
agreement: (1) Mattel will continue to provide Ms. Barad with life insurance
with a basic fixed death benefit of $5.0 million under Mattel's Key Executive
Life Insurance Program for the rest of her lifetime; (2) Ms. Barad may acquire
her company car for a nominal sum; and (3) until Ms. Barad accepts other full-
time employment, Mattel will provide Ms. Barad at Mattel's expense (a) medical
and related health insurance, (b) outplacement services, (c) continuation of
certain memberships and transferal of such memberships to Ms. Barad, and
(d) financial counseling services. The separation agreement provides that: (1)
Mattel will sell Ms. Barad certain artwork at the prices recently paid for such
artwork by Mattel; (2) Mattel will continue to provide security services to
Ms. Barad for a limited period of time, and (3) Mattel will allow Ms. Barad to
retain the personal
24
<PAGE>
office equipment provided by Mattel to Ms. Barad. Additionally, the separation
agreement provides that options to acquire Mattel stock held by Ms. Barad, to
the extent not already vested, became vested in full as of February 3, 2000,
and will remain outstanding and exercisable until the expiration of the
original terms of the grants. As of February 3, 2000, Ms. Barad held options to
purchase 6,440,759 shares of Mattel common stock. 4,082,946 of Ms. Barad's
options have exercise prices of $42.31 or $44.87. The remaining options have
prices ranging from $15.76 to $26.62. In the separation agreement, Ms. Barad
provided Mattel with certain releases and agreed to certain confidentiality and
non-competition provisions. She also agreed to provide consulting services to
Mattel for up to 40 hours per month until December 31, 2000.
Severance and Consulting Agreement with Ned Mansour. In connection with Mr.
Mansour's departure from Mattel, the Compensation/Options Committee negotiated
and the Board of Directors approved a severance and consulting agreement with
Mr. Mansour, the principal terms of which implement the separation provisions
of his employment agreement. Pursuant to his employment agreement, Mr. Mansour
was entitled to receive cash payments of: (1) three times his annual base
salary as of March 2000 and the average of the highest two of his last three
MIP bonus payments and (2) the average of the highest two of his last three MIP
bonus payments, which together resulted in an aggregate cash payment, confirmed
in the severance and consulting agreement, of approximately $3.8 million. As
provided in his employment agreement: (1) Mattel is obligated to provide
Mr. Mansour medical and related health insurance for three years or until Mr.
Mansour accepts other full-time employment; (2) Mr. Mansour may acquire his
company car for a nominal sum; (3) for three years Mattel will provide Mr.
Mansour with financial planning services; and (4) Mattel will continue a
membership for three years or until Mr. Mansour accepts other full-time
employment, after which the memberships will be transferred to Mr. Mansour. The
separation agreement provides that: (1) Mattel will pay Mr. Mansour $2 million
in settlement of his participation in the LTIP; (2) Mr. Mansour may keep the
computers provided to him by Mattel for business purposes; (3) Mattel will
continue to provide Mr. Mansour with life insurance coverage under Mattel's Key
Executive Life Insurance Program for the rest of his lifetime; (4) Mattel will
pay Mr. Mansour $20,000 in lieu of outplacement services; and (5) for three
years Mattel will reimburse Mr. Mansour for the cost of maintaining a home
security system. Additionally, the severance and consulting agreement provides
that non-qualified options to acquire Mattel stock held by Mr. Mansour, to the
extent not already vested, became vested in full as of March 31, 2000, and will
remain outstanding and exercisable until the expiration of the original terms
of the grants. PPO Plan options held by Mr. Mansour ceased to vest on March 31,
2000 under the severance and consulting agreement. As of March 31, 2000, Mr.
Mansour held vested options to purchase 1,966,877 shares of Mattel common
stock. 1,154,377 of Mr. Mansour's options have exercise prices of $42.31 or
$44.87. The remaining options have prices ranging from $16.16 to $25.75. In the
event that any previously granted options are re-priced for any Mattel senior
executives prior to the expiration date of Mr. Mansour's options, options
granted to Mr. Mansour will be similarly re-priced. Pursuant to Mr. Mansour's
employment agreement and the SERP, as modified by the severance and consulting
agreement, Mr. Mansour's separation qualified him for SERP benefits of
$282,632 per year during his lifetime. Until December 31, 2000, Mr. Mansour
also agreed to provide consulting services to Mattel for up to 20 hours per
month for consideration of $8,000 per month.
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<PAGE>
CERTAIN TRANSACTIONS
The law firm of Irell & Manella LLP, to which Mr. Loeb was Of Counsel for
part of 1999, provided legal services to Mattel during the year.
On October 29, 1999, Mattel loaned $1.0 million at 7% per annum to each of
Ms. Fontanella, Mr. Bousquette and Mr. Friedman. On April 7, 2000, Mattel
loaned $2.0 million at 7% per annum to each of Ms. Fontanella, Mr. Bousquette
and Mr. Friedman. See "Employment and Severance Agreements" above.
On November 1, 1994, Mattel loaned to Ms. Barad $3.0 million at 4.12% per
annum (the short-term applicable federal rate for the month of September 1994)
for the purchase of a home pursuant to the terms of her prior employment
agreement. The loan was secured by a first deed of trust on the home and was
payable in full on November 1, 1997. On January 1, 1997, the maturity date of
the loan was extended to May 20, 2000, and the interest rate of the loan was
increased to 6.1% per annum (the medium-term applicable federal rate for the
month of January 1997). In connection with Ms. Barad's departure and as
provided for in her employment agreement, the principal amount of the loan and
all accrued unpaid interest has been forgiven. Mattel also paid Ms. Barad
approximately $3.31 million to make her whole for the Federal and California
income taxes and Medicare tax payable by her with respect to the income she
will recognize as a result of the forgiveness of the home loan. See "Employment
and Severance Agreements" above.
On May 29, 1997, Mattel loaned $4.2 million at 6.1% per annum (the medium-
term applicable federal rate for the month of May 1997) to Ms. Barad pursuant
to the terms of her employment agreement and in connection with the vesting of
292,968 shares of common stock that had previously been issued to Ms. Barad as
"restricted stock." The loan was secured by the 292,968 shares of common stock
and was payable in full, including accrued interest, on May 19, 2000; provided,
however, that if Mattel's common stock had traded on the New York Stock
Exchange for any 20 consecutive trading days during the term of the loan at a
per share price of $45 or more, then the entire unpaid principal balance and
accrued but unpaid interest thereon would have been forgiven by Mattel. The
loan was made to Ms. Barad to allow her to pay her tax liability on such shares
of common stock without having to sell any of them, thereby encouraging Ms.
Barad's enhanced ownership of common stock. In connection with Ms. Barad's
departure, the principal amount of the loan and all accrued unpaid interest has
been forgiven. See "Employment and Severance Agreements" above.
During 1999, Mattel made payments in the aggregate of $640,936 to White
Wings, Inc. for the use of an aircraft by officers of Pleasant Company. Ms.
Rowland and her husband, Jerome Frautschi, beneficially own 100% of White
Wings, Inc. Additionally, during 1999, Mattel made payments in the aggregate of
$732,933 to Webcrafters Inc. for the production of printed materials for
Pleasant Company. Ms. Rowland's brother-in-law, John Frautschi, beneficially
owns 100% of Webcrafters Inc.
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PROPOSAL 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has served as Mattel's independent accountants
since their appointment for the 1975 fiscal year. The Board of Directors, on
the unanimous recommendation of the Audit Committee, has selected
PricewaterhouseCoopers LLP as Mattel's independent accountants for the year
ending December 31, 2000. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the annual meeting to respond to questions and will
have an opportunity to make a statement if they desire to do so.
Audit services of PricewaterhouseCoopers LLP for 1999 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 and
forensic accounting services. The ratification of the selection of Mattel's
independent accountants requires the affirmative vote of the holders of a
majority of the voting power of the shares of Mattel common stock and Special
Voting Preferred Stock present in person or represented by proxy and entitled
to vote at the annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2000.
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PROPOSAL 3
STOCKHOLDER PROPOSAL REGARDING CERTAIN
REPORTS BY THE BOARD OF DIRECTORS
Marie-Claude Hessler-Grisel, whose address is 23 rue Oudinot, 75007 Paris,
France, has requested that the following proposal be included in this Proxy
Statement. Ms. Hessler-Grisel has advised Mattel that she is the beneficial
owner of 200 shares of Mattel common stock. Ms. Hessler-Grisel's proposal and
her related supporting statement are followed by a recommendation of the Board
of Directors. The Board of Directors disclaims any responsibility for the
content of the proposal and the statement in support of the proposal, which are
presented in the form received from the stockholder.
The stockholder's proposal follows:
Whereas the Shareholders request the Board of Directors to inform the public,
every six months starting in November 2000, of the progress achieved in the
implementation of the "Global Manufacturing Principles" and the resulting
improvements in the working conditions of Mattel's and its subcontractors'
workers.
Supporting Statement
One of the greatest challenges for corporations today is to satisfy the
consumers' demand for "ethical" goods. This is no longer a rhetorical demand
made by a few NGOs. It reflects a genuine concern from a rapidly growing number
of consumers, already a majority in Europe, to choose goods made by workers, in
whichever country, whose working conditions and compensation meet certain basic
standards. Corporations which want to keep or improve their market share will
have to address the issue quickly and seriously.
Mattel has recognized and started to address the issue. It adopted a code of
conduct, the "Global Manufacturing Principles" in 1997. Simultaneously it
appointed Professor Prakash Sethi to monitor the implementation of the code of
conduct.
Since then, Professor Sethi, with the help of the two other members of the
Mattel Independent Monitoring Council (MIMCO), has done a significant work,
first setting a modus operandi and specific criteria that have been approved by
Mattel's top management (and regretfully not published), and then trying to
find out whether the conditions in the Mattel owned-and-operated facilities
were in compliance with the "Global Manufacturing Principles" and the criteria.
MIMCO published its first report mid-November 1999, covering eight facilities,
making Barbies, Hot Wheels, Fashion Dolls, tools and molds in four different
countries (Indonesia, China, Malaysia and Thailand). It seems that by the time
of the next annual meeting, MIMCO will have published at least two other
reports.
The effort, time and money spent by Mattel and MIMCO are undeniable. However,
they are not sufficient to satisfy the consumers' demand for "ethical" goods.
MIMCO reports are but a first step. According to their own plan, the MIMCO
members will not have time to follow up right away on their reports, except in
certain areas of major concern such as the payroll system in China. Years will
pass before they audit again the same facilities.
Meanwhile, action is required from Mattel's Board of Directors and
management. They can make changes happen. They have the power to ensure that
the various points of concern are addressed. And above all they alone can
demonstrate that the "Global Manufacturing Principles" are
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really meant to be eventually fully implemented. Only in publishing regular,
accurate and substantiated reports on actions and results will the Board of
Directors satisfy the increasing consumers' demand for improved working
conditions and compensation.
Neither in the cautionary statement of the 1998 Annual Report nor in the
proxy statement, do Mattel's Board of Directors and top management mention the
risk that results would suffer in case of a large media and consumers' campaign
about the working conditions at its or its subcontractors' facilities. In
accepting the proposal such risk would be minimized. At the same time, public
disclosure in regular press releases every six months--press releases that
should not look like self congratulation--would create a market advantage for
Mattel and therefore increase its market share.
The Board of Directors unanimously recommends that stockholders vote AGAINST
the stockholder's proposal for the following reasons:
At a time when consumers around the world are becoming increasingly
interested in the origin of the products they purchase and the conditions under
which the products are manufactured, Mattel has elected to establish the most
comprehensive code of conduct in the toy industry--the "Global Manufacturing
Principles." Mattel is in agreement with the principles underlying the
stockholder proposal and recognizes that even the most comprehensive code
represents nothing more than an unfulfilled commitment unless it is accompanied
by an aggressive program of employee education and independent monitoring. As a
result, Mattel has initiated a worldwide independent auditing and monitoring
system of its owned-and-operated and primary contractor manufacturing
facilities. Mattel believes it is the first multi-national consumer products
company to commit to and initiate independent auditing and monitoring of its
facilities on a global basis.
Headed and supervised by the Mattel Independent Monitoring Council ("MIMCO"),
Mattel's independent monitoring program features in-depth, on-site inspections
of manufacturing facilities. These inspections include unobstructed facility
tours by MIMCO members, management interviews, auditing of personnel files and
one-on-one interviews conducted confidentially by Verite International with
statistical samplings of employees.
To further ensure the independence and transparency of the MIMCO audits,
results are published and made available publicly by MIMCO. The first such
publication, addressing Mattel's owned and operated plants in Asia, as well as
jointly owned-and-operated facilities in China, was released in November 1999.
Full copies of the report are available to the public upon request to MIMCO,
and a detailed executive summary of the report is located at www.mattel.com.
The publication of these results is the sole responsibility of MIMCO and will
occur no less than once each year. As an independent body, MIMCO has full
discretion to increase the frequency of publication beyond an annual basis.
On November 20, 1997, Mattel first announced the adoption of its Global
Manufacturing Principles, which is a code of conduct for production facilities
and contract manufacturers worldwide. At the same time, Mattel announced the
development by Dr. S. Prakash Sethi, Academic Director of Executive Programs,
Zicklin School of Business, Baruch College, City University of New York, an
international expert on corporate governance and ethics, of the worldwide
independent audit and monitoring system for the Global Manufacturing
Principles.
The Global Manufacturing Principles reflect Mattel's belief that the safety
and fair treatment of the men and women who manufacture Mattel products is
equally important as the safety and quality
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of the products themselves. Mattel's policy, among other provisions, prohibits
the use of forced, child or prison labor in such facilities and establishes
precise standards for the working environment of such facilities. Comprehensive
standards concerning the work environment, working conditions, wages and
salaries and living conditions (where applicable) have been developed for each
country in which Mattel owns facilities and in those countries in which
Mattel's primary contractors are located.
To date:
. Dr. Sethi has recruited two eminent and experienced individuals to
MIMCO--Dr. Paul F. McCleary, currently president of For Children, Inc.,
former executive vice president of Save the Children, Inc., and former
associate general secretary of the United Methodist Church; and, Dr.
Murray L. Weidenbaum, currently Distinguished University Professor and
Chairman, Center for the Study of American Business, Washington
University and former Chairman of the U.S. Council of Economic Advisors.
. A substantial number of contractor facilities have been dismissed.
. MIMCO members have visited all of Mattel's owned-and-operated facilities
outside of the U.S. as well as many of its primary contractor facilities
in Indonesia and the People's Republic of China.
. MIMCO has completed independent audits of all company owned-and-operated
facilities in Indonesia, Thailand, Malaysia, Mexico and its two jointly
owned-and-operated facilities in the People's Republic of China.
. MIMCO published a report of its audit findings in Asia in November 1999.
. MIMCO will publish a report addressing its audit findings in Mexico in
the Spring of 2000.
. MIMCO will also publish a report on its follow-up findings related to its
initial audit of Mattel's jointly owned-and-operated facilities in China
in the Summer of 2000.
. MIMCO will complete audits of all remaining company owned-and-operated
facilities outside of the United States (one in China that recently
finished construction and a former jointly owned-and-operated facility in
India) and publish a report on its findings by the end of 2000.
. MIMCO has initiated independent audits of a statistical sampling of
primary contractor facilities. MIMCO expects to complete the first round
of vendor audits by Fall of 2000.
. MIMCO will continue to issue public reports of its findings at its own
discretion, but no less than annually.
Dr. S. Prakash Sethi is expected to be present at the annual meeting to
discuss the findings of the completed MIMCO audits and respond to any questions
that may arise from meeting attendees.
While Mattel is in agreement with the principles underlying the stockholder
proposal, it believes that the current and future activities of MIMCO
demonstrate that the adoption of specific publication requirements, beyond
those already undertaken, are unnecessary.
Approval of this stockholder proposal requires an affirmative vote of the
holders of a majority of the voting power of the shares of Mattel common stock
and Special Voting Preferred Stock present in person or represented by proxy
and entitled to vote at the annual meeting, voting together as one class.
Unless marked to the contrary, proxies received will be voted against this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
30
<PAGE>
PROPOSAL 4
STOCKHOLDER PROPOSAL REGARDING SHAREHOLDER RIGHTS PLAN
The American Federation of State, County and Municipal Employees, AFL-CIO
(AFSCME), whose address is 1625 L Street, N.W., Washington, D.C. 20036-5687,
has requested that the following proposal be included in this Proxy Statement.
The AFSCME Employees Pension Plan has advised Mattel that it owns
102,600 shares of Mattel common stock. AFSCME's proposal and related supporting
statement are followed by a recommendation of the Board of Directors. The Board
of Directors disclaims any responsibility for the content of the proposal and
the statement in support of the proposal, which are presented in the form
received from the stockholder.
The stockholder's proposal follows:
Resolved: The stockholders of Mattel, Inc. ("Mattel" or the "Company")
request the Board of Directors to redeem the stockholders purchase rights
distributed on February 17, 1992 unless such distribution is approved by the
affirmative vote of stockholders, to be held as soon as may be practicable.
Supporting Statement
As of December 21st of last year, Mattel's share price stood at 12 3/8, a
drop of 73% since 1998. Stockholders have experienced a loss of over $8.5
billion in the market value of their stock during this period, as Mattel
management announced a series of negative earnings surprises. Our Company's
Board and executives must accept responsibility for these results, which we
believe have been caused by the departure of a number of top executives,
overpayment for acquisitions and a heavy reliance on the Barbie brand.
While we are not calling for the resignation of Mattel's chief executive
officer at this time, we do believe this is a particularly prudent moment for
our Board of Directors to begin to eliminate management-entrenching corporate
governance structures, particularly Mattel's poison pill.
The Board of Directors created the Company's current poison pill rights plan
in February of 1992 with the distribution of Preference Share Purchase Rights
to common stockholders. This plan replaced a similar one which had expired in
1991. We do not share the Board's view that our Company should have put two
separate poison pill rights plans into effect without stockholder approval.
We believe the terms of the rights are designed to discourage or thwart an
unwanted takeover of our Company. While management and the Board of Directors
should have appropriate tools to ensure that all shareholders benefit from any
proposal to buy the Company, we do not believe that the future possibility of a
takeover justifies the unilateral implementation of such a poison pill type
device.
Rights plans like ours have become increasingly unpopular in recent years. In
1999 a majority of stockholders at seventeen companies, including J.C. Penney,
Quaker Oats, Venator, and Novell, voted in favor of stockholder proposals
asking management to redeem or repeal poison pills.
The effect of poison pill rights plans on the trading value of companies'
stock have been the subject of extensive research. A 1986 study by the Office
of the Chief Economist of the U.S. Securities and Exchange Commission on the
economics of rights plans states that "The stock-returns evidence suggests that
the effect of poison pills to deter prospective hostile takeover bids outweighs
the beneficial effects that might come from increased bargaining leverage of
the target management."
31
<PAGE>
A 1992 study by Professor John Pound of Harvard University's Corporate Research
Project and Lilli A. Gordon of the Gordon Group found a correlation between
high corporate performance and the absence of poison pills.
Given the undeniably undemocratic way in which the share rights have been
assigned to stockholders and maintained we believe these rights should either
be redeemed or voted on by shareholders.
We urge shareholders to vote for this resolution!
The Board of Directors of Mattel unanimously recommends that stockholders
vote AGAINST the stockholder's proposal for the following reasons:
The Board of Directors adopted a Rights Plan in 1992 to protect Mattel's
stockholders in the event of certain unsolicited attempts to acquire control of
Mattel, including a partial or two-tier tender offer that fails to treat all
stockholders equally, a "creeping acquisition" of Mattel by the purchase of
stock on the open market and other acquisition tactics that the Board believes
are unfair to Mattel's stockholders and are not in their best interests.
Similar plans have been adopted by over 2,300 corporations, including a
majority of the corporations included in the Standard & Poor's 500.
A major function of the Rights Plan is to give the Board a greater period of
time within which it can properly evaluate the adequacy of an acquisition offer
and protect stockholders against potential abuses. A second important function
of the Rights Plan is to induce a potential bidder for Mattel to negotiate with
the Board and thus strengthen the Board's bargaining position vis-a-vis such a
bidder. The Rights Plan thus enables the Board, as elected representatives of
the stockholders, to better protect and further the interests of Mattel's
stockholders in the event of an acquisition proposal. The Board gains the
opportunity and additional time to determine whether an offer reflects the full
value of Mattel and is fair to all stockholders, and if not, to reject the
offer or to seek an alternative that meets these criteria.
The Rights Plan is particularly critical in ensuring that persons who may
seek to acquire control of Mattel can do so only by paying shareholders a fair
price. The Rights Plan encourages potential acquirors to negotiate the terms of
an acquisition with the Board of Directors. It thus enhances the ability of the
Board to negotiate the best results for shareholders.
It is important to keep in mind that while the Rights Plan can enhance the
Board's ability to negotiate favorable terms with a proponent of an unfriendly
or unsolicited proposal, it does not preclude takeover offers.
The Board's fiduciary duty to the stockholders dictates that it evaluate the
merits of each and every acquisition proposal presented to the Board and seek
to insure that any proposed business combination or acquisition delivers full
value to the stockholders.
The Board believes that redeeming the rights would remove an important tool
that the Board should have for the protection of stockholders. The Board
therefore believes that any decision to redeem the rights should be made in the
context of a specific acquisition proposal.
Approval of this stockholder proposal requires the affirmative vote of the
holders of a majority of the voting power of the shares of Mattel common stock
and Special Voting Preferred Stock
32
<PAGE>
present in person or represented by proxy and entitled to vote at the annual
meeting, voting together as one class. Unless marked to the contrary, proxies
received will be voted against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
33
<PAGE>
PROPOSAL 5
STOCKHOLDER PROPOSAL REGARDING COMPOSITION
OF THE BOARD OF DIRECTORS
John Chevedden, whose address is 2215 Nelson Ave., No. 205, Redondo Beach,
California 90278, acting on behalf of Bernard and Naomi Schlossman, whose
address is 10923 Rathburn Ave., Northridge, California 91326-2854, has
requested that the following proposal be included in this Proxy Statement.
Bernard and Naomi Schlossman have advised Mattel that they own 700 shares of
Mattel common stock. Mr. Chevedden's proposal and his related supporting
statement are followed by a recommendation of the Board of Directors. The Board
of Directors disclaims any responsibility for the content of the proposal and
the statement in support of the proposal, which are presented in the form
received from the stockholder.
The stockholder's proposal follows:
RESOLVED:
TWO-THIRDS INDEPENDENCE FOR MATTEL'S BOARD
Require 66% of the Mattel's board to be independent. Improve board oversight
of under-performing management. Mattel Inc. shareholders request the Board of
Directors take all necessary steps to enact this resolution today.
This includes the requirement that a change in the 66% requirement can be
made only by a majority shareholder vote, as a separate-issue to the fullest
extent permitted by law.
SUPPORTING STATEMENT
The Council of Institutional Investors Shareholder Bill of Rights
(www.ciicentral.com) states: "At least two-thirds of a corporation's directors
should be independent. A director is deemed independent if his or her only non-
trivial professional, familial or financial connection to the corporation or
its CEO is his or her directorship."
Institutional Shareholder services (www.cda.com/iss), said a fundamental
principle of corporate governance is an independent board--capable of objective
oversight of top management. ISS is a leading proxy analysis firm for
institutional shareholders. Mattel is 76% owned by institutional shareholders.
Investor Responsibility Research Center reported that the 1999 Mattel board
was only 55% independent. This was due in large part to the presence of 4
employee directors and another director collecting legal fees. The American Bar
Association discourages directors from sitting on boards of companies from
which they take additional legal fees. Furthermore 1999 was unquestionably a
disastrous year for Mattel.
It is particularly important that 66% of the board be independent, because
the independent directors have less than optimal qualifications:
. One-half of the Independent Directors (Friedman, Rollnick and Vogelstein)
have each been on the board for 16 years.
. Additionally, 8 of the 12 seats on the 3 key board committees (audit,
compensation and nomination) are held by directors with 16 to 30 years on
the board.
34
<PAGE>
. ""To allow fresh ideas" the National Association of Corporation Directors
guidelines said: Consider limits on length of director service to 10-15
years.
<TABLE>
<S> <C>
Business Week Sept. 15, 1997
</TABLE>
.Another independent director, Sinclair owns only 2,200 shares of stock.
What reports highlight challenges for Mattel directors that demand
independence?
Mattel shares remain ranked 4 (Below Average) for Timeliness.
<TABLE>
<S> <C>
Value Line Oct. 15, 1999
</TABLE>
Untimely Mattel shares have lost 43% of their value since our August
report.
<TABLE>
<S> <C>
Value Line Nov. 26, 1999
</TABLE>
Mattel chair's first year pay package could hit $26 million (based on stock
price).
<TABLE>
<S> <C>
Los Angeles Times March 14, 1998
</TABLE>
Mattel chair was previously reported to have $43,604,967 in unexercised stock
options.
Source: Internet--www.paywatch.org
. It remains to be seen how patient the board will be with Ms. Barad, under
whose leadership Mattel stock has collapsed from a high of $46 in 1998 to
$12 in 1999.
. Mattel's acquisition of the Learning Co. was controversial from the
start.
. Many analysts now question how the company missed the warning signs.
. Mattel has only limited knowledge of the software industry.
. Criticisms include that at $3.5 billion Mattel overpaid for a company
with less than $1 billion in revenue, aging brands and a history of
accounting trouble.
<TABLE>
<S> <C>
Wall Street Journal Oct. 8, 1999
</TABLE>
Remember Mattel's $46 1998 stock price.
Vote yes
Two-thirds Independence for Mattel's Board
Yes on 5
The Board of Directors unanimously recommends that stockholders vote AGAINST
the stockholder's proposal for the following reasons:
More than 66% of the persons nominated by the Company for election to the
Board pursuant to proposal 1 above (including all of the non-employee
directors) are already independent under the definition referenced in the
stockholder's proposal. Nonetheless, the Board believes that the stockholder's
proposal is excessively restrictive. The National Association of Corporate
Directors and the Conference Board, both advocates of strong, independent
boards, favor flexible arrangements with regard to Board composition and
procedures.
In 1997, the Board of Directors adopted its Corporate Governance Guidelines,
which provide that at least a majority of the members of the Board of Directors
will be independent. The Corporate Governance Guidelines state that: "A
director will not be considered as independent if he/she is an employee or
former employee of the company or has a connection with the company as a
substantial supplier of goods or services." In addition, the guidelines provide
that a director is not independent if he/she is an officer of a company on
whose board any officer of Mattel serves.
35
<PAGE>
In addition, as required by the guidelines, the Audit Committee and
Compensation/Options Committee are constituted entirely of independent, non-
employee directors. Beyond this, the Board annually reviews Board and director
performance to assure a high quality and independent Board of Directors. The
Board of Directors believes that the Corporate Governance Guidelines comport
with the best practices of corporate governance now being followed by U.S.
corporations.
Approval of this stockholder proposal requires the affirmative vote of the
holders of a majority of the voting power of the shares of Mattel common stock
and Special Voting Preferred Stock present in person or represented by proxy
and entitled to vote at the annual meeting, voting together as one class.
Unless marked to the contrary, proxies received will be voted against this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
36
<PAGE>
PROPOSAL 6
STOCKHOLDER PROPOSAL REGARDING MANAGEMENT COMPENSATION
Robert D. Morse, whose address is 212 Highland Ave., Moorestown, New Jersey
08057, has requested that the following proposal be included in this Proxy
Statement. Mr. Morse has advised Mattel that he owns at least 977 shares of
Mattel common stock. Mr. Morse's proposal and his related supporting statement
are followed by a recommendation of the Board of Directors. The Board of
Directors disclaims any responsibility for the content of the proposal and the
statement in support of the proposal, which are presented in the form received
from the stockholder.
The stockholder's proposal follows:
I propose that the Officers and Directors consider the discontinuance of all
bonuses immediately, and options, rights, SAR's, etc., after termination of any
existing programs for top management. I must also include discontinuance
request of "Severance Contracts," which overpay a person no longer satisfactory
to the Company, just to leave!
This does not include any programs for employees.
REASONS:
Management and Directors are compensated enough to buy on open market, just
as you and I, if they are so motivated.
Management is already well paid with base pay, life insurance, retirement
plans, paid vacations, free use of vehicles and other perks.
Options, rights, SAR's, are available elsewhere, and a higher offer would
induce transfers, not necessarily "attain and hold" qualified persons.
Who writes the objections to my proposal? Is it not the same persons who
nominate and pay the directors who in turn will provide Management these
exorbitant extras above a good base salary? Shareowners should start reading
and realizing that these persons are not providing them entertainment on an
individual choice basis, as do athletes, movie stars, and similar able
performers.
"Align management with shareowners" is a repeated ploy or "line" to lull us
as to continually increasing their take of our assets. Do we get any options to
purchase at previous [presumed] lower rates, expecting prices to increase?
After taxes, present base salaries are way above the $200,000.00 our
President receives plus free lodging, and Management only looks after a
Company, not the USA and some of the world problems. If they filled out a daily
work or production sheet, what would it show?
Please vote "YES" for this Proposal
The Board of Directors unanimously recommends that stockholders vote AGAINST
the stockholder's proposal for the following reasons:
Mattel has developed an executive compensation philosophy that is designed to
encourage executives to make responsible business decisions which result in
company performance that benefits Mattel stockholders. In establishing and
evaluating the effectiveness of compensation programs for
37
<PAGE>
executive officers, as well as other senior executives, Mattel's
Compensation/Options Committee is guided by three basic principles:
. Mattel must offer competitive salaries to be able to attract, retain and
motivate 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 Mattel's senior executives should be aligned
with the financial interests of stockholders, primarily through stock
option grants, restricted stock, the MIP and the LTIP.
Mattel also believes that our executive compensation program needs to be
competitive with those of companies with which Mattel competes for executive
talent. If it does not, Mattel will likely be less successful in attracting and
retaining the executive talent it needs to be a market leader. This is
especially significant now, considering Mattel's current search for a new Chief
Executive Officer. To locate and hire qualified replacements, Mattel's
compensation packages must be comprehensive, including competitive salaries,
bonus plans, equity awards and, in some cases, severance arrangements. While
such a compensation package will not always attract or retain qualified
executives, Mattel believes that these types of compensation packages are a
necessary and appropriate tool to use in seeking to maximize stockholder value.
Approval of this stockholder proposal requires the affirmative vote of the
holders of a majority of the voting power of the shares of Mattel common stock
and Special Voting Preferred Stock present in person or represented by proxy
and entitled to vote at the annual meeting, voting together as one class.
Unless marked to the contrary, proxies received will be voted against this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
38
<PAGE>
DEADLINE FOR FUTURE PROPOSALS OF STOCKHOLDERS
Proposals that a stockholder desires to have included in Mattel's proxy
materials for the 2001 Annual Meeting of Stockholders of Mattel must comply
with the applicable rules and regulations of the Securities and Exchange
Commission, including that any such proposal must be received by the Secretary
of Mattel at Mattel's principal office no later than December 31, 2000.
Mattel's By-Laws require a stockholder to give advance notice of any
business, including the nomination of candidates for the Board of Directors,
that the stockholder wishes to bring before a meeting of stockholders of
Mattel. In general, for business to be brought before an annual meeting by a
stockholder, written notice of the stockholder proposal or nomination must be
received by the Secretary of Mattel not less than 90 days nor more than 120
days prior to the anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice must be
received by the Secretary not earlier than 120 days prior to such annual
meeting, and not later than 90 days prior to such annual meeting or 10 days
following the first public announcement of such meeting date. With respect to
stockholder proposals, the stockholder's notice to the Secretary of Mattel must
contain a brief description of the business to be brought before the meeting
and the reasons for conducting such business at the meeting, as well as certain
other information set forth in Mattel's By-Laws and/or required by law. With
respect to the nomination of a candidate for the Board of Directors by a
stockholder, the stockholder's notice to the Secretary of Mattel must contain
certain information set forth in the Mattel's By-Laws about both the nominee
and the stockholder making the nominations.
If a stockholder desires to have a proposal included in Mattel's proxy
materials for the 2001 Annual Meeting of Stockholders of Mattel and desires to
have such proposal brought before the same annual meeting, the stockholder must
comply with both sets of procedures described in the two immediately preceding
paragraphs. Any required written notices should be sent to Mattel, Inc.,
333 Continental Boulevard, El Segundo, California 90245-5012, Attention:
Secretary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Mattel's directors and certain of its officers, and persons who own more than
10% of a registered class of Mattel's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission. Such officers, directors and greater than 10% stockholders
are also required to furnish Mattel with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of all Section 16(a) forms received
by it, or written representations from certain reporting persons that no Forms
5 were required for those persons, Mattel believes that during the year ended
December 31, 1999, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except
that (a) one report covering one transaction with respect to 25,000 shares of
common stock was inadvertently filed late by Mr. Tully Friedman and (b) one
report covering one transaction with respect to 520 shares of common stock,
that were purchased as a gift, was inadvertently filed late by Ms. Barad.
39
<PAGE>
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL 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
annual meeting. If any other business properly comes before the annual meeting
or any adjournment or postponement thereof, the proxy holders may vote the
proxies in their discretion.
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, Mattel has retained D.F. King & 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 $7,000, 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
/s/ Robert Normile
Robert Normile
Secretary
El Segundo, California
April 28, 2000
40
<PAGE>
DETACH HERE
MATTEL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS JUNE 7, 2000
RONALD M. LOEB, ROBERT NORMILE 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
Mattel, Inc. to be held in the Manhattan Ballroom of the Manhattan Beach
Marriott, 1400 Parkview Avenue, Manhattan Beach, California, on Wednesday, June
7, 2000, at 10:00 a.m. (Los Angeles time), or any adjournment or postponement
thereof, with all powers the undersigned would possess if personally present.
Election of all Directors listed below:
Nominees:
Eugene P. Beard, Dr. Harold Brown, Tully M. Friedman, Ronald M. Loeb,
Andrea L. Rich, William D. Rollnick, Christopher A. Sinclair, John L.
Vogelstein and Ralph V. Whitworth.
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.
[SEE REVERSE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE]
[ SIDE ] [ SIDE ]
<PAGE>
DETACH HERE
Please mark
[_] votes as in
this example.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
- - - - - - - - - - - - - - - - - - - - - -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 1 AND 2
- - - - - - - - - - - - - - - - - - - - - -
1. Election of directors (named on reverse).
FOR WITHHELD
[_] ALL [_] FROM ALL
NOMINEES NOMINEES
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE BELOW
[_] ___________________________________________
For all nominees except as noted above
<TABLE>
<S> <C> <C> <C>
2. Ratification of the selection of PricewaterhouseCoopers LLP as
Mattel, Inc.'s independent accountants for the year ending FOR AGAINST ABSTAIN
December 31, 2000. [_] [_] [_]
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 3, 4, 5
AND 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
3. Approval of stockholder proposal regarding FOR AGAINST ABSTAIN
certain reports by the Board of Directors. [_] [_] [_]
4. Approval of stockholder proposal regarding FOR AGAINST ABSTAIN
the Shareholder Rights Plan. [_] [_] [_]
5. Approval of stockholder proposal regarding FOR AGAINST ABSTAIN
the composition of the Board of Directors. [_] [_] [_]
6. Approval of stockholder proposal regarding FOR AGAINST ABSTAIN
management compensation. [_] [_] [_]
7. TO CONSIDER AND ACT UPON SUCH OTHER BUSINESS OR PROPOSALS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT OF THE MEETING.
</TABLE>
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:
--------------------------------- -----------------------
<PAGE>
MATTEL, INC.
----------------
DIRECTION TO BE GIVEN BY HOLDERS OF EXCHANGEABLE
NON-VOTING SHARES OF SOFTKEY SOFTWARE PRODUCTS INC.
----------------
DIRECTION FOR THE ANNUAL MEETING OF STOCKHOLDERS
OF MATTEL, INC.
The undersigned, having read the Notice of Annual Meeting of Stockholders
(the "Meeting") of Mattel, Inc., a Delaware corporation ("Mattel"), to be held
at in the Manhattan Ballroom of the Manhattan Beach Marriot, 1400 Parkview
Avenue, Manhattan Beach, California, on Wednesday, June 7, 2000 at 10:00 a.m.
(Los Angeles time), the Proxy Statement and the Information Statement dated
April 28, 2000, receipt of which are hereby acknowledged, DOES HEREBY INSTRUCT
AND DIRECT CIBC MELLON TRUST COMPANY (the "Trustee"), pursuant to the
provisions of the Voting and Exchange Trust Agreement dated February 4, 1994,
as supplemented and amended by the Voting and Exchange Trust Supplement dated
as of May 13, 1999 among Mattel, Softkey Software Products Inc., The Learning
Company, Inc. and the Trustee (collectively, the "Agreement") as follows:
(PLEASE SELECT ONE OF A, B OR C.)
A. [_] Exercise or cause to be exercised, whether by proxy given by the Trustee
to a representative of Mattel or otherwise, the Beneficiary Votes (as
defined in the Agreement) to which the undersigned is entitled at the
Meeting, or any adjournment or postponement thereof as follows:
(PLEASE COMPLETE THE FOLLOWING ONLY IF YOU HAVE SELECTED ALTERNATIVE A.)
1. To elect Eugene P. Beard, Dr. Harold Brown, Tully M. Friedman, Ronald M.
Loeb, Andrea L. Rich, William D. Rollnick, Christopher A. Sinclair, John
L. Vogelstein and Ralph V. Whitworth as directors for a one-year term.
If any such nominees should be unavailable, the proxies and each or any
of them may vote for substitute nominees at their discretion.
[_] FOR ALL NOMINEES [_] WITHHELD FROM ALL NOMINEES
[_]
-------------------------------------------------
For all nominees except as noted above.
2. Ratification of the selection of PricewaterhouseCoopers LLP as Mattel's
independent accountants for the year ending December 31, 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of stockholder proposal regarding certain reports by the Board of
Directors.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Approval of stockholder proposal regarding the Shareholder Rights Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Approval of stockholder proposal regarding the composition of the Board of
Directors.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
6. Approval of stockholder proposal regarding management compensation.
[_] FOR [_] AGAINST [_] ABSTAIN
7. To consider and act upon such other business or proposals as may properly
come before the Meeting or any adjournment or postponement of the
Meeting.
(PLEASE NOTE: THE TRUSTEE WILL VOTE AS DIRECTED BUT IN THE ABSENCE OF ANY SUCH
DIRECTION, THE TRUSTEE IS HEREBY AUTHORIZED AND DIRECTED TO VOTE FOR ITEMS 1
AND 2 ABOVE, AGAINST ITEMS 3, 4, 5 AND 6 ABOVE, AND AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING, TO VOTE IN ITS DISCRETION.)
(PLEASE GO DIRECTLY TO THE SIGNATURE LINE AT THE BOTTOM OF THIS PAGE.)
B. [_] Deliver a proxy card to the undersigned at the Meeting, with respect to
all Exchangeable Non-Voting Shares of Softkey Software Products Inc. held
of record by the undersigned on the record date for the Meeting (and not
subsequently disposed of) (the "Exchangeable Shares") so that the
undersigned may exercise personally the Beneficiary Votes (as defined in
the Agreement) to which the undersigned is entitled at the Meeting, or
any adjournment or postponement thereof.
(IF YOU HAVE SELECTED ALTERNATIVE B, GO DIRECTLY TO THE SIGNATURE LINE AT THE
END OF THIS DIRECTION.)
C. [_] Deliver a proxy card to as the designee of
the undersigned to attend and act for and on behalf of the undersigned at
the Meeting, with respect to the Exchangeable Shares, with all the powers
that the undersigned would possess if personally present and acting
thereat including the power to exercise the Beneficiary Votes (as defined
in the Agreement) to which the undersigned is entitled at the Meeting, or
any adjournment or postponement thereof.
(IF YOU HAVE SELECTED ALTERNATIVE C, GO DIRECTLY TO THE SIGNATURE LINE AT THE
END OF THIS DIRECTION.)
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: _______________________________
<PAGE>
April 28, 2000
INFORMATION STATEMENT WITH RESPECT TO THE EXCHANGEABLE
NON-VOTING SHARES OF SOFTKEY SOFTWARE PRODUCTS INC.
TO: HOLDERS OF EXCHANGEABLE NON-VOTING SHARES OF SOFTKEY
SOFTWARE PRODUCTS INC.
Enclosed with this Notice are proxy materials relating to Mattel, Inc.
("Mattel"), the parent company of Softkey Software Products Inc. ("SSPI"), in
connection with Mattel's upcoming annual meeting of stockholders (the
"Meeting") to be held in the Manhattan Ballroom of the Manhattan Beach
Marriott, 1400 Parkview Avenue, Manhattan Beach, California, on Wednesday, June
7, 2000 at 10:00 a.m. (Los Angeles time). Proxy materials relating to Mattel
are being provided to you because, as a holder of SSPI's exchangeable non-
voting shares ("Exchangeable Shares"), you have voting rights at stockholders'
meetings of Mattel. Pursuant to certain orders or rulings issued by certain
Canadian provincial securities commissions, Mattel is required to provide
holders of Exchangeable Shares with all disclosure material furnished to
holders of Mattel's common stock ("Mattel Common Stock") residing in the United
States.
ECONOMIC EQUIVALENCY OF EXCHANGEABLE SHARES AND
MATTEL COMMON STOCK
The Exchangeable Shares provide holders thereof with a security of SSPI
having economic and voting rights that are, as nearly as practicable,
equivalent to those of 1.2 shares of Mattel Common Stock. In particular,
Exchangeable Shares are: (a) entitled to dividends from SSPI payable at the
same time as, and in the Canadian dollar equivalent of, dividends paid by
Mattel on Mattel Common Stock multiplied by 1.2; (b) retractable at the option
of the holder at any time for 1.2 shares of Mattel Common Stock; (c) entitled
on the liquidation, dissolution or winding-up of SSPI to be exchanged for 1.2
shares of Mattel Common Stock; (d) entitled on the dissolution of Mattel to be
exchanged for 1.2 shares of Mattel Common Stock; and (e) entitled to direct
voting rights at stockholders' meetings of Mattel.
As a result of the economic equivalency of the Exchangeable Shares and the
Mattel Common Stock, holders of Exchangeable Shares effectively have a
participating interest in Mattel, rather than SSPI. Accordingly, information
respecting the financial condition and results of operations of SSPI would not
be relevant to holders of Exchangeable Shares because the value of the
Exchangeable Shares is dependent on the consolidated financial condition and
results of operations of Mattel. To ensure that you receive meaningful
disclosure respecting the nature of your investment, you are being provided
with the same disclosure material that Mattel provides to holders of Mattel
Common Stock.
RIGHT TO DIRECT VOTING AT MEETINGS OF
MATTEL STOCKHOLDERS
As you are aware, CIBC Mellon Trust Company (the "Trustee") is entitled at
the Meeting to cast a number of votes attaching to the single outstanding share
of Special Voting Stock of Mattel equal to the number of shares of Mattel
Common Stock for which the outstanding Exchangeable Shares on the record date
of the Meeting (other than Exchangeable Shares held by Mattel and by entities
controlled by Mattel) are exchangeable. These votes to be cast by the Trustee
may only be exercised in accordance with the instructions of the holders of the
Exchangeable Shares of SSPI. This information statement outlines the nature and
extent of your right as a holder to instruct the Trustee and describes the
process by which your instructions will be carried out.
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A form of direction (the "Direction") is enclosed with this information
statement that will serve as your instructions to the Trustee. The Direction
should be completed as soon as possible and returned to CIBC Mellon Trust
Company either in the enclosed envelope or by mail to CIBC Mellon Trust
Company, 200 Queens Quay East, Unit 6, Toronto, Ontario M5A 4K9 or by fax to
(416) 368-2502. Please note that unless the Direction has been received by 5:00
p.m. (Toronto time) on Monday, June 5, 2000 (the "Filing Time"), your
instructions will not be binding upon the Trustee and your voting rights will
not be exercised.
Each of you is entitled to attend the Meeting and to vote in person, or to
designate a person who will attend the Meeting and vote on your behalf. These
alternatives appear as items (B) and (C), respectively, on the Direction. If
you choose one of these alternatives, you can instruct the Trustee to provide
you (or the person designated by you) with a proxy card which will be delivered
to you (or the person designated by you) at the Meeting by the Trustee's
representatives upon the presentation of satisfactory identification. At the
Meeting, you (or the person designated by you) will be entitled to cast 1.2
votes for each Exchangeable Share of SSPI held by you on the record date for
the Meeting (and not subsequently disposed of ), rounded down to the nearest
whole number (the "Beneficiary Votes"), in respect of each matter to be voted
on at the Meeting.
Alternatively, you are entitled to instruct the Trustee to give a proxy card
to a representative of Mattel who will exercise the Beneficiary Votes at the
Meeting in accordance with your instructions. This alternative appears as item
(A) on the Direction. If you decide to proceed in this manner, you should
complete items 1 through 6 on the Direction which represents the business to be
considered and voted on at the Meeting.
In addition to revocation in any manner permitted by law, you may revoke or
amend your instructions by filing an instrument in writing executed by you, or
by your attorney authorized in writing, and delivered to the office of the
Trustee shown above at any time up to and including the Filing Time. Your
instructions may also be revoked in person at the Meeting prior to 9:00 a.m.
(Los Angeles time) on Wednesday, June 7, 2000 by submitting written revocation
of your instructions and satisfactory identification to the Trustee's
representatives. In the event that the Meeting is adjourned, your instructions
may be revoked or amended at any time up to and including 5:00 p.m. (Toronto
time) on the second business day prior to the day of any adjournment of the
9Meeting by delivering an instrument in writing to the office of the Trustee
(in the manner described above), or your instructions may be revoked in person
at any adjournment of the Meeting not less than one hour prior to the time of
such adjourned meeting.
Failure to comply with the foregoing will not affect your right to attend the
Meeting, or any adjournment thereof, and to vote in person so long as
satisfactory identification is presented to the Trustee's representatives.
