<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
TYCO TOYS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO OF TYCO TOYS, INC. APPEARS HERE]
TYCO TOYS, INC.
6000 MIDLANTIC DRIVE
MOUNT LAUREL, NEW JERSEY 08054
March [00,] 1995
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders of Tyco Toys, Inc., to be held at 10:00 a.m.
local time at 200 Fifth Avenue, New York, New York 10010, on
Thursday, April 27, 1995. The accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement describe the
matters to be acted upon at the meeting.
A proxy form is enclosed with the Notice of Annual Meeting
and Proxy Statement. Regardless of the number of shares you
own, it is important that your shares be represented.
Accordingly, we hope that you will complete and sign the proxy
form and return it to us promptly in the enclosed envelope
whether or not you are planning to be present.
We look forward to greeting personally as many of our
stockholders as possible at the meeting.
Sincerely yours,
/s/ Richard E. Grey
Richard E. Grey
Chairman
<PAGE>
TYCO TOYS, INC.
6000 MIDLANTIC DRIVE
MOUNT LAUREL, NEW JERSEY 08054
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1995
----------------
The Annual Meeting of Stockholders of Tyco Toys, Inc., a Delaware
corporation (the "Company" or "Tyco"), will be held at 10:00 a.m. local time
at 200 Fifth Avenue, New York, New York 10010, on Thursday, April 27, 1995,
for the following purposes:
1. To elect four members to the Board of Directors to serve for a term
expiring at the Annual Meeting of Stockholders to be held in 1998.
2. Approval of an Amendment to the Certificate of Incorporation of the
Company to increase the authorized Common Shares from 50,000,000 to
75,000,000.
3. Approval of an Amendment to the 1992 Non-Qualified Stock Option Plan
of the Company to increase the number of shares authorized to be issued
under the Plan from 600,000 to 1,200,000 (subject to adjustment) and to
limit the number of options that may be granted to an individual in any
year.
4. Approval of the Long Term Incentive Plan for Senior Executive Managers
of the Company.
5. Approval of the Annual Incentive Plan for Executive Managers of the
Company.
6. To transact such other business as may properly be brought before the
Meeting, or any adjournment thereof.
Holders of record of the Company's Common Stock at the close of business on
March 24, 1995 shall be entitled to notice of and to vote at the Meeting and
any adjournment thereof.
If you cannot be personally present at the Meeting, please date, complete
and promptly return the enclosed proxy. If you receive more than one proxy
because you own shares registered in different names or addresses, each proxy
should be completed and returned.
By Order of the Board of Directors
/s/ R. Michael Kennedy, Jr.,
R. Michael Kennedy, Jr.,
Secretary
Mt. Laurel, New Jersey
March [00,] 1995
<PAGE>
TYCO TOYS, INC.
6000 MIDLANTIC DRIVE
MOUNT LAUREL, NEW JERSEY 08054
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1995
INTRODUCTION
This Proxy Statement is being mailed to stockholders of Tyco Toys, Inc. (the
"Company" or "Tyco") in connection with solicitation by the Company's Board of
Directors of proxies to be used at its Annual Meeting of Stockholders (the
"Annual Meeting"). The Annual Meeting will be held on Thursday, April 27,
1995, at 10:00 a.m. local time at 200 Fifth Avenue, New York, New York 10010
for the purposes set forth in the preceding notice. This Proxy Statement and
the accompanying proxy are first being sent to stockholders on or about March
[00], 1995.
If a proxy in the enclosed form is duly executed and returned, the shares of
the Company's Common Stock, par value $.01 per share (the "Common Stock"),
represented thereby will be voted, where specification is made by the
stockholder on the form of proxy, in accordance with such specification. If no
directions to the contrary are indicated, the persons named in the enclosed
proxy will vote the shares represented thereby FOR the election of the named
nominees for Director, FOR the approval of the Amended Articles of
Incorporation, FOR the amendments of the 1992 Non-Qualified Stock Option Plan,
FOR the approval of the Long Term Incentive Plan, and FOR the approval of the
Annual Incentive Plan. Any stockholder may revoke his proxy by delivery of a
later dated proxy or by providing written notice of revocation to the
Secretary of the Company at any time before it is voted. A proxy will not be
voted if the stockholder attends the meeting and elects to vote in person.
Only stockholders of record at the close of business on March 24, 1995 have
the right to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. As of that date, [00,000,000] shares of Common Stock and
49,789 shares of Series B Voting Convertible Exchangeable Preferred Stock
("Series B Preferred Stock") were outstanding.
On each matter to be voted on at the Annual Meeting, the Common Stock and
the Series B Preferred Stock will vote together, and holders of Common Stock
and Series B Preferred Stock will be entitled to one vote per share and 105
votes per share, respectively. The election of directors requires a plurality
of the votes cast. A majority of the votes cast is required to approve all
other matters that may properly come before the Annual Meeting, other than the
increase in the authorized number of shares of Common Stock, which requires a
majority of the votes entitled to be cast. For purposes of determining the
number of votes cast with respect to any voting matter, only those cast "for"
or "against" are included.
Abstentions and broker non-votes are counted only for purposes of
determining whether a quorum is present at the meeting.
It is not anticipated that there will be presented at the Annual Meeting any
business other than the matters set forth in the enclosed notice. At the date
hereof, the Board was not aware of other matters that might properly be
presented at the Annual Meeting. If any other business should come before the
Annual Meeting, the persons named on the enclosed proxy card will have
discretionary authority to vote all proxies in accordance with their best
judgment.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Annual Meeting:
(a) matters which may be presented at the Annual Meeting at the request of
public stockholders and with respect to which the Company has not received
notice at the date hereof; (b) approval of the minutes of a prior
<PAGE>
meeting of stockholders, if such approval does not amount to ratification of
the action taken at the meeting; (c) the election of any person to any office
for which a bona fide nominee is unable to serve or for good cause will not
serve; (d) any proposal omitted from the Proxy Statement and the form of proxy
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended;
and (e) matters incident to the conduct of the Annual Meeting. The Board of
Directors currently is not aware of any matters (other than procedural matters)
which will be brought before the Annual Meeting and which are not referred to
in the enclosed Notice of Annual Meeting. If any such matters are properly
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will vote in accordance with their best judgment.
The costs of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, certain Directors, officers, and employees of the Company
may solicit proxies in person or by telephone, telegraph, facsimile or mail.
The Company has also retained, on behalf of the Board of Directors, Shareholder
Communications Corporation, to assist in soliciting proxies at a fee estimated
not to exceed $10,000, plus reasonable expenses. Further, the Company will also
request record holders of Common Stock who are brokerage firms, custodians and
fiduciaries to forward proxy material to the beneficial owners of such shares
and upon request will reimburse such record holders for the costs of forwarding
the material in accordance with customary charges.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth information as of March [00,] 1995 with
respect to persons known by the Company to be beneficial owners of more than 5%
of the Common Stock and by each of the Company's Directors, each of the named
Executive Officers and all Directors and Executive Officers as a group:
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
OWNERSHIP (1) PERCENT (1)(2)
------------- --------------
<S> <C> <C>
Harris Associates, L.P. (3)............................................... [3,455,000 [0%]
2 North LaSalle Street
Chicago, Illinois 60602-3790
State of Wisconsin Investment Board (3)................................... 3,454,800
121 East Wilson Street
Madison, Wisconsin 53708
Ariel Capital Management (3).............................................. 1,620,585
307 N. Michigan Ave.
Chicago, Illinois 60601
Richard E. Grey (4)....................................................... 334,000
Harry J. Pearce (4)....................................................... 110,418
Gary Baughman(5).......................................................... 0
Jerome I. Gellman (4)..................................................... 9,000
Ariel Gratch (4).......................................................... 9,000
Joel M. Handel (4)........................................................ 19,000
Arnold Thaler (4)......................................................... 55,614
Timothy J. Danis (4)...................................................... 19,000
Alan Vituli (4)........................................................... 27,500
John A. Canning, Jr. (4)(6)............................................... 184,600
Dr. LaSalle D. Leffall, Jr. (4)........................................... 5,200
Jonathan Kagan (7)........................................................ 5,227,845
David Golub (7)........................................................... 5,237,845
Michael J. Lyden (4)...................................................... 54,000
Karsten Malmos (4)........................................................ 37,340
Jay Kahan (4)............................................................. 32,300
Robert Rao (4)(8)......................................................... 23,000
All Directors and Executive Officers as a group (23 persons) (4)(5)(6)(7). 6,306,597 [ ]
</TABLE>
2
<PAGE>
* Represents less than 1% of the outstanding shares of Common Stock.
(1) The amount and percentage of securities "beneficially owned" by an
individual are determined in accordance with the regulations of the
Securities and Exchange Commission and, accordingly, may include
securities owned by or for, among others, the spouse and/or minor children
of the individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has or
shares voting or investment power or has the right to acquire within 60
days after March [00,] 1995. Beneficial ownership may be disclaimed as to
certain of the securities. Unless otherwise indicated, the persons and
entities named have sole voting and dispositive power over their shares.
(2) Shares subject to outstanding stock options which the individual has the
right to acquire within sixty (60) days after March [00,] 1995 and shares
issuable upon conversion of Series B Preferred Stock are deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such individual, or any group including
such individual, but are not deemed outstanding for the purpose of
computing the percentage of the class owned by any other individual.
(3) Based on information filed with the Securities and Exchange Commission by
the reporting person.
(4) Includes 196,000, 100,000, 9,000, 9,000, 19,000, 9,000, 19,000, 27,500,
35,000, 5,000, 54,000 10,000, 37,000, 29,300 and 23,000 shares that are
subject to options granted pursuant to registered option plans of the
Company and held by Messrs. Grey, Pearce, Gellman, Gratch, Handel, Thaler,
Danis, Vituli, Canning, Lefall, Lyden, Golub, Malmos, Kahan and Rao,
respectively; also 683,900 shares subject to options held by Executive
Officers and Directors as a group, all of which options so included are
presently exercisable.
(5) Does not include 40,000 Restricted Shares which vest in October, 1995.
(6) Includes 149,600 shares issuable upon the conversion of Convertible
Subordinated Debentures held by Madison Dearborn Partners IV, John A.
Canning, Jr., a Director of the Company, is a partner in Madison Dearborn
Partners IV.
(7) Includes 49,789 shares of Series B Preferred Stock held by clients of
Corporate Partners, L.P.; Messrs. Kagan and Golub are Senior Vice
Presidents of Corporate Partners, L.P. Each share of Series B Preferred
Stock is currently convertible into 105 shares of Common Stock.
(8) Mr. Rao was President of the Company's Playtime subsidiary until December,
1994.
3
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Company's by-laws, four members of the Board of Directors
(consisting of a total of thirteen members) are to be elected at the Annual
Meeting for a term expiring at the Annual Meeting of Stockholders to be held
in 1998, and until their successors are elected and qualified. Except where
authority to so vote is withheld, the accompanying proxy will be voted FOR
Harry J. Pearce, Timothy J. Danis, Arnold Thaler and LaSalle D.Leffall, Jr. If
a nominee should become unavailable for election for any presently unforeseen
reason, the persons designated as proxies will have full discretion to cast
votes for a substitute nominee selected by the Board of Directors, unless the
Board of Directors reduces the number of Directors.
Listed below is information regarding the nominees for Director and the
continuing Directors and Executive Officers of the Company.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- --------------------------------------
<S> <C> <C>
Harry J. Pearce...................... 50 Vice Chairman, Chief Financial Officer
Timothy J. Danis..................... 48 Director
Arnold Thaler........................ 72 Director
LaSalle D. Leffall, Jr............... 63 Director
</TABLE>
Harry J. Pearce was appointed Executive Vice President in September 1987 and
has served as Senior Vice President - Finance and Chief Financial Officer of
the Company since December 1985. He has served as a Director of the Company
since September 1988, and was appointed Vice Chairman in April, 1993. Mr.
Pearce is a Director and former Chairman of Toy Manufacturers of America,
Inc., a toy industry trade organization.
Timothy J. Danis was appointed to the Board in December 1990. He is the
Chairman and Chief Executive Officer of Rollins Hudig Hall of Illinois. For
more than five years until January 1992, he served as President and Chief
Executive Officer of Corroon and Black of Missouri, Inc. In January 1992, he
joined the Rollins Burdick Hunter Group, an international insurance brokerage
firm, which became Rollins Hudig Hall in January 1993.
Arnold Thaler was President of View-Master Ideal Group, Inc. ("View-Master")
from July 1981, when he purchased the View-Master line with a group of
investors, until his retirement in 1990. View-Master became a public company
in 1983, and was acquired by the Company in 1989. He was appointed as a
Director of the Company in February 1990. He also served previously as
President of Ekco Housewares Company and as an officer of its parent, American
Home Products Corporation. Mr. Thaler retired as an active officer on December
31, 1990 and now serves as a consultant to the Company.
Dr. LaSalle D. Leffall, Jr. was appointed as a Director of the Company in
February 1993. For more than the last five years, he has been Chairman of the
Department of Surgery at Howard University College of Medicine in Washington,
D.C. Dr. Leffall also serves as a Director of the Warner Lambert Company and
Mutual of America.
4
<PAGE>
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Richard E. Grey(1)............... 60 Chairman and Chief Executive Officer
Gary Baughman(2)................. 38 President, Chief Operating Officer and
Director
John A. Canning, Jr.(2).......... 50 Director
Jerome I. Gellman(2)............. 67 Director
David Golub(1)................... 32 Director
Ariel Gratch(2).................. 43 Director
Joel M. Handel(1)................ 59 Director
Jonathan Kagan(2)................ 38 Director
Alan J. Vituli(1)................ 53 Director
Anthony DiMichele, Jr. .......... 38 Senior Vice President--Finance
Michael J. Lyden(3).............. 52 President--Tyco U.S.
Karsten Malmos(3)................ 50 President--Tyco International
Jay Kahan(3)..................... 61 Executive Vice President--Sales
B. James Alley(3)................ 45 Executive Vice President--Matchbox
James L. Block(3)................ 43 Senior Vice President--Marketing
R. Michael Kennedy, Jr........... 51 Senior Vice President, General Counsel and
Secretary
James A. Lenell(3)............... 54 Senior Vice President--Manufacturing
Paul J. Weaver(3)................ 44 Executive Vice President--International
Finance and Operations
Martin Scheman(4)................ 63 Chairman and Chief Executive Officer, Tyco
Playtime, Inc.
</TABLE>
- --------
(1) Term will expire at the Annual Meeting of Shareholders to be held in 1996.
(2) Term will expire at the Annual Meeting of Shareholders to be held in 1997.
(3) Officer of the Company's principal operating subsidiary, Tyco Industries,
Inc.
(4) Officer of a wholly-owned subsidiary of the Company.
Messrs. David Golub and Jonathan Kagan have been seated as Directors in
accordance with the terms of certain agreements entered into by the Company
and holders of the Series B Preferred Stock.
Richard E. Grey has served as President and Chief Executive Officer of the
Company since December 1985, as Chairman since July 1991, and as a Director
since 1988. Mr. Grey has also served as President, Chief Executive Officer,
Director and a member of the Executive Committee of the Company's principal
operating subsidiary since 1973. Mr. Grey has been employed by the Company and
its predecessor since 1958. Mr. Grey has served as a Director and Chairman of
the Board of Toy Manufacturers of America, Inc.
Gary Baughman was appointed President, Chief Operating Officer and a
Director in October, 1994. For more than five years prior to that time he was
President of the Little Tikes division of Rubbermaid, Inc.
John A. Canning, Jr. was appointed to the Board in July 1991. He is the
President of Madison Dearborn Partners, Inc. During the last five years until
January 1993, he served as President of First Chicago Venture Capital, an
affiliate of First Chicago Investment Corporation (FCIC); FCIC and Madison
Dearborn Partners IV, of which he is a partner, provided the financing for the
purchase by the Company of the equity interest of the Selzer family members in
July 1991. Mr. Canning is also a director of Bayou Steel Corporation and the
Interlake Corporation.
Jerome I. Gellman has served as a Director of the Company since April 1987.
For over five years, until January 1988, he was a partner in the law firm of
Tucker, Gellman & Mulderig, P.C. In January 1988, he became Of Counsel to the
law firm of Cowan, Liebowitz & Latman, P.C.
5
<PAGE>
David Golub was appointed a Director in April, 1994. For more than five
years he has served as a Senior Vice President of Corporate Advisors, L.P.,
investment advisors to three entities who hold the Series B Voting Convertible
Exchangeable Preferred Shares of the Company.
Ariel Gratch has served as Director of the Company since December 1985. Mr.
Gratch has been a partner in the law firm of Gratch, Jacobs & Brozman,
formerly Zellermayer Gratch & Jacobs, since 1982 and prior thereto was
associated with such firm. Zellermayer Gratch & Jacobs from time to time has
represented the Company and its affiliates.
Joel M. Handel has served as a Director of the Company since April 1987. He
has been for more than the past five years, a partner in the law firm of Baer
Marks & Upham, which has served as counsel to the Company. Mr. Handel served
as a Director of Robert Bruce, Inc. and Robert Bruce Industries from November
1984 until his resignation in March 1989. Robert Bruce filed for
reorganization under the bankruptcy code on May 5, 1989.
Jonathan Kagan was appointed Director in April, 1994. For more than five
years he has served as Managing Director of Corporate Advisors, L.P. He is
also a general partner of Lazard Freres and a Director of Continental
Cablevision, Inc.
Alan Vituli was appointed to the Board in May 1991. He has been Chairman of
Carrols Corporation, an operator of fast food restaurants in ten eastern
states, since 1986; he is also a partner in Morgan Realty, a developer of real
estate communities in Maryland, Delaware, Pennsylvania and New Jersey. He has
served as a director of Pollo Tropical, Inc., an operator of restaurants in
the southeastern U.S., since October, 1993.
Anthony Di Michele, Jr. was appointed Senior Vice President - Finance in
November, 1994. For more than five years prior to that time he was Senior Vice
President of AWT, an environmental services company.
Michael J. Lyden has been employed by the Company since 1987 as Vice
President, Business Development; he was appointed Senior Vice President in
1990, and President - Tyco U.S. in January, 1994.
Karsten Malmos joined the Company's principal operating subsidiary as Vice
President - International in 1980. He was appointed Senior Vice President -
International of the Company's principal operating subsidiary in December
1987, Executive Vice President in July 1992 and President of Tyco
International in April, 1993.
Jay Kahan has been employed by the Company's principal operating subsidiary
since 1974, including service as Senior Vice President - Sales since 1978 and
Executive Vice President since July 1992.
B. James Alley has been employed by the Company's principal operating
subsidiary since December 1976, including service as Senior Vice President -
Marketing since October 1986 and as Vice President - Marketing from May 1981
until October 1986. He became Executive Vice President in June, 1994.
James L. Block joined the Company as Vice President - Marketing in April
1992 and was appointed Senior Vice President - Marketing in July 1992. For
more than five years prior to that time, he was Vice President of Marketing of
Kenner Products, a subsidiary of Hasbro.
R. Michael Kennedy, Jr. was appointed Vice President and General Counsel of
the Company in October 1987 and Senior Vice President in 1990. He was
appointed Secretary in July 1991. For over five years prior to 1987, he was
Vice President and General Counsel of Wendy's
6
<PAGE>
International, Inc., an operator and franchisor of fast-food hamburger
restaurants in the United States and other countries.
James A. Lenell has served as Senior Vice President - Manufacturing of the
Company's principal operating subsidiary since 1988. Mr. Lenell has been
employed by the Company's principal operating subsidiary since 1979 when he
joined as Vice President and Managing Director of Tyco (Hong Kong) Ltd.
Paul J. Weaver has been employed by the Company's principal operating
subsidiary since 1975. He was appointed Vice President and Controller of the
Company in October 1987, Senior Vice President in 1990, and Executive Vice
President--International Finance and Operations in May, 1994.
Martin Scheman has, for more than the last five years, been President of
Tyco Preschool Toys, Inc. (formerly Illco Toy Co. U.S.A., Inc.), which the
Company acquired in June, 1992. He was appointed Chairman of the Company's
Tyco Playtime and Preschool subsidiaries in June 1993, and Chief Executive
Officer in December, 1994.
OPERATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met ten times during the fiscal year
ended December 31, 1995. Each director attended after his election more than
75% of the aggregate number of meetings of the Board and the committees of
which he was a member. There are six standing Committees of the Board of
Directors: the Executive Committee; the Audit Committee; the Stock Option
Committee; the Finance Committee; the Compensation Committee; and the
Nominating Committee.
The Executive Committee, comprised of Messrs. Grey, Pearce, Baughman,
Handel, Kagan and Thaler, meets on call and has the authority to act on most
matters during intervals between Board meetings. The Executive Committee met
three times during 1994.
The Audit Committee is comprised of Messrs. Gellman, Danis, Vituli, who are
all outside Directors. It evaluates and approves, among other things, all
transactions between the Company and related parties. The Committee also
reviews the internal controls of the Company, its financial and accounting
practices, the performance of the Company's accounting and financial staff,
and the performance and cost of its outside auditors. The Audit Committee met
twice during 1994.
The function of the Compensation Committee is to review and make
recommendations to the Board of Directors with respect to compensation of the
Company's executive officers. The Compensation Committee consists of outside
Directors, Messrs. Gellman, Canning and Golub and the Committee met nine times
during 1994.
The Stock Option Committee is comprised of outside directors Messrs. Golub
and Canning. The purpose of the Committee is to administer the Stock Option
Plans of the Company. The Stock Option Committee met twice during 1994.
The Finance Committee consists of Messrs. Pearce, Thaler, Vituli, Kagan and
Canning. The Committee's purpose is to make recommendations to the Board
concerning the securities and finance activities of the Company. The Finance
Committee met three times during 1994.
The Nominating Committee consists of Messrs. Thaler, Danis and Vituli. The
purpose of this Committee is to identify qualified candidates for the Board of
Directors of the Company. The Nominating Committee met once during 1994.
Stockholders who wish to suggest qualified candidates should write to the
Secretary of the Company at 6000 Midlantic Drive, Mount Laurel,
7
<PAGE>
New Jersey 08054, stating in detail the qualifications of such persons for
consideration by the Nominating Committee.
All required reports under Section 16 of the Securities Exchange Act of 1934
relating to ownership and changes in ownership by directors and executive
officers of the Company's Common Stock were filed timely.
8
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth remuneration paid or distributed to, or
accrued for, each of the five most highly paid current Executive Officers of
the Company during the Company's fiscal year ended December 31, 1994, and one
Executive Officer no longer with the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- --------------
ALL OTHER
NAME AND OTHER ANNUAL AWARDS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) OPTIONS (#)(2) ($)(3)
- ------------------------ ---- ---------- --------- ------------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Grey......... 1994 550,000 0 24,723 196,000 4,050
Chairman, 1993 550,000 0 18,192 0 4,050
Chief Executive 1992 500,000 0 18,333 260,000 4,263
Officer
Harry J. Pearce......... 1994 375,000 0 16,826 60,000 1,566
Vice Chairman, 1993 375,000 0 15,613 0 1,566
Chief Financial 1992 350,000 0 11,248 40,000 4,169
Officer
Jay Kahan............... 1994 273,000 0 12,335 21,000 6,318
Executive Vice 1993 273,000 0 11,116 0 6,318
President -- 1992 260,000 28,600 12,506 15,000 3,159
Sales
Robert Rao(5)........... 1994 260,000 0 10,890 23,000 2,502
President, 1993 241,200 0 54,798(4) 0 2,592
Tyco Playtime 1992 47,600 0 2,031 5,000 0
Karsten Malmos.......... 1994 240,000 0 13,020 21,000 1,586
President -- Tyco 1993 280,000 0 12,627 0 1,566
International 1992 186,330 30,000 8,584 1,437
Michael J. Lyden........ 1994 238,062 0 17,251 38,000
President -- Tyco 1993 168,031 18,000 31,756
US 1992 165,615 0 76,672
</TABLE>
(1) Includes car allowances, contributions in lieu of pension and medical
expense reimbursements.
(2) No preferential earnings or above market earnings, or discounts from fair
market value, were recognized by executive officers in connection with the
stock option plans of the Company. Information concerning grants and
exercises of fair market stock options granted in 1994 and aggregated
stock options exercised in 1994 are discussed elsewhere in this Proxy.
(See STOCK OPTIONS GRANTED IN 1994).
(3) Represents the taxable cost of group life insurance payments. (See also
KEY EMPLOYEE AGREEMENTS, below).
(4) Includes reimbursement of relocation expenses.
(5) Mr. Rao resigned as President of Tyco Preschool Toys, Inc. in December of
1994.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Grey entered into an Employment Agreement with the Company in July,
1994. The Agreement expires December 31, 1997 and will automatically extend
for an additional one-year period unless either party gives the other written
notice of termination within six months of the expiration of the Agreement.
Under the Agreement, Mr. Grey is entitled to receive an annual base salary of
$600,000 for 1995 and $400,000 for any year during which he does not serve as
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Chief Executive Officer, plus annual incentive compensation of up to 135% of
his annual base salary based upon criteria established by the Company and Mr.
Grey. Mr. Grey has agreed to defer any increase in his salary during 1994. In
addition, he is entitled to $000,000 in Restricted Stock Units over seven
years pursuant to the provisions of the Long Term Incentive Plan. (See Long
Term Incentive Plan below). At all times during the term of his Agreement, Mr.
Grey will be entitled to receive or participate in such medical,
hospitalization and insurance plans as the Company may generally make
available to its executive employees. The Agreement also provides for death
and disability benefits. At any time on or before December 31, 1996, in the
event of a change of control of the Company, as defined in the Agreement, the
Company will pay to Mr. Grey a sum equal to 2.99 times his annual salary, plus
a pro rata portion of Incentive Compensation provided in the Agreement,
provided Mr. Grey's employment is then in full force and effect and the change
of control does not take place in a public offering, as defined in the
Agreement. The Company may terminate Mr. Grey's employment for cause as
defined under the Agreement. If the Company terminates the employment of Mr.
Grey without cause or Mr. Grey terminates his employment for good reason as
such terms are defined in the Agreement, then the Company is obligated to pay
to Mr. Grey the sum of two times his average annual salary and bonus over the
prior five years, plus a pro rata portion of his annual base salary accrued
through the termination date.
Mr. Pearce entered into an Employment Agreement with the Company in July,
1994. The Agreement expires December 31, 1997 and will automatically extend
for an additional one-year period unless either party gives to the other
written notice of termination within six months of the expiration of the
Agreement. Under the Agreement, Mr. Pearce is entitled to receive an annual
base salary of $400,000 for 1995 plus annual incentive compensation of up to
135% of his annual base salary based upon criteria established by the Company
and Mr. Pearce. Mr. Pearce has agreed to his salary during 1995. In addition,
he is entitled to receive up to $000,000 in Restricted Stock Units over seven
years pursuant to the terms of the Long Term Incentive Plan. (See Long Term
Incentive Plan below.) At all times during the term of his Agreement, Mr.
Pearce will be entitled to receive or participate in such medical,
hospitalization and insurance plans as the Company may generally make
available to its executive employees. The Agreement also provides for death
and disability benefits. At any time on or before December 31, 1996, in the
event of a change of control of the Company, as defined in the Agreement, the
Company will pay to Mr. Pearce a sum equal to 2.99 times his annual salary,
plus a pro rata portion of Incentive Compensation provided in the Agreement,
provided Mr. Pearce's employment is then in full force and effect and the
change of control does not take place in a public offering, as defined in the
Agreement. The Company may terminate Mr. Pearce's employment for cause as
defined under the Agreement. In the event the Company terminates the
employment of Mr. Pearce without cause or Mr. Pearce terminates his employment
without good reason, as such terms are defined in the Agreement, the Company
is obligated to pay to Mr. Pearce the sum of two times his average annual base
salary and incentive compensation over the prior five years, plus a pro rata
portion of his annual base salary accrued through the date of such
termination.
Mr. Baughman entered into an Employment Agreement with the Company on
October 3, 1994. The Agreement expires on December 31, 1998 and will
automatically renew for a period of one additional year, unless either party
gives written notice of termination to the other at least ninety days in
advance of such date. Under the Agreement, Mr. Baughman is entitled to receive
an annual base salary of $450,000 in 1995 and not less than $550,000 in the
following years. The Agreement provides that Mr. Baughman will serve as Chief
Executive Officer of the Company beginning January 1, 1996. In addition, Mr.
Baughman is entitled to receive up to 135% of his annual salary based on
criteria established by the Company and Mr. Baughman. In addition, he is
entitled to receive (i) 40,000 shares of restricted common stock of the
Company, which shares will vest after one year from the beginning of his
employment, and (ii) $000,000 in Restricted
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Stock Units over seven years pursuant to the Long Term Incentive Plan. (See
Long Term Incentive Plan below.) At all times during the term of his
Agreement, Mr. Baughman is also entitled to receive or participate in such
medical, hospitalization and insurance plans as the Company may generally make
available to its executive employees. The Agreement provides for certain death
and disability benefits. At any time on or before December 31, 1998, in the
event of a change in control of the Company (as defined in the Agreement) the
Company will pay to Mr. Baughman a sum equal to 2.99 times his average annual
base salary and annual bonus for the last five years (calculated as if his
employment had continued through December 31, 1995, if applicable), provided
that Mr. Baughman's employment is in full force and effect, and the change of
control does not take place in a public offering, as defined in the Agreement.
The Company may terminate Mr. Baughman's employment for cause, as defined in
the Agreement.
My. Lyden has an employment agreement with the Company which provides for an
annual base salary of $240,000 through 1995, and he is eligible to receive
additional annual incentive compensation of up to 105% of his base salary. Mr.
Lyden is also eligible to receive up to $000,000 in Restricted Stock Units
over seven years pursuant to the Long Term Incentive Plan. (See Long Term
Incentive Plan below.) The Company may terminate Mr. Lyden's employment at any
time, without cause, but in such event the Company would be obligated to pay
Mr. Lyden severance payments equal to his annual salary, plus the pro-rata
portion of the incentive compensation that would have been paid to Mr. Lyden
for that year. In the event of a change of control of the Company as defined
in the Agreement, the Company will pay Mr. Lyden a sum equal to one half of
his annual base salary, provided his employment is then in full force and
effect.
Mr. Malmos has an employment agreement with the Company which provides for
an annual salary of $240,000 per year through 1995, and he is eligible for
additional incentive compensation of up to 105% of his base salary. Mr. Malmos
is also eligible to receive up to $000,000 in Restricted Stock Units over
seven years pursuant to the Long Term Incentive Plan. The Company may
terminate his employment at any time without cause, but in such event the
Company would then be obligated to make severance payments equal to his annual
salary, plus the pro-rata portion of the incentive compensation that would
have been paid to him for that year. In the event of a change of control of
the Company, as defined in the agreement, the Company will pay Mr. Malmos a
sum equal to his annual base salary, provided his employment is then in full
force and effect.
Jay Kahan has an employment agreement with the Company which provides for an
annual salary of $273,000 per year through 1995. Mr. Kahan is also eligible
for additional incentive compensation of up to 75% of his annual base salary.
Mr. Kahan is also eligible to receive $000,000 in Restricted Stock Units
pursuant to the provisions of the Long Term Incentive Plan. (See Long Term
Incentive Plan below.) The Company may terminate Mr. Kahan's employment at any
time, without cause, but in such event the Company would then be obligated to
make severance payments equal to his annual salary, plus the pro-rata portion
of the incentive compensation that would have been paid to Mr. Kahan for that
year. In the event of a change of control of the Company, as defined in the
agreement, the Company will pay to Mr. Kahan a sum equal to his annual base
salary, provided his employment is then in full force and effect.
Mr. Rao had an employment agreement with the Company which provides for an
annual salary of $260,000 per year.
Each of the executives referred to above has insurance policies providing
benefits of a maximum of $500,000 in the event of his death, and 60% of his
annual income (up to $200,000 annual benefit) in the event of disability.
KEY EMPLOYEE AGREEMENTS
The Company has entered into Key Employee Agreements with eleven other
executive officers of the Company; under the terms of the Agreements, the
Company will pay to such
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employees amounts equal to their annual salary, in the event of a change of
control of the Company, as such term is defined in the Agreements.
ITEM 2. PROPOSAL TO AMEND ARTICLE IV OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION
The authorized capital stock of the Company presently consists of 50,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock, par value $.10
per share. As of March [20], 1995, there were [00,000,000] shares of Common
Stock and [49,789] shares of Series B Preferred Stock outstanding. For the
reasons stated below, the Board of Directors has unanimously determined that
the Amendment is advisable and has determined to recommend it to stockholders
for adoption. The Amendment, if adopted, will increase the number of
authorized shares of the Company's Common Stock from 50,000,000 to 75,000,000
shares. The number of authorized shares of Preferred Stock will remain at
1,000,000. A copy of the proposed Amendment to Tyco's Restated Certificate of
Incorporation is set forth as Appendix A to this Proxy Statement.
BACKGROUND AND REASONS FOR PROPOSED AMENDMENT
The Board of Directors has approved new annual and long-term incentive plans
for management of the Company in order to enhance the performance of the
Company and provide the opportunity for management to recognize capital
appreciation in exchange for their contributions to the Company. In addition,
there may exist in the future opportunities for the Company to benefit from
acquisition opportunities or to increase its equity by the issuance of
additional Common Stock.
There are now [3,307,938] shares of Common Stock reserved for issuance in
connection with the Company's benefit plans and the Series B Preferred Stock.
If the shareholders do not approve the Amendment, the Company will have only
[3,199,510] authorized shares of Common Stock which have not been issued or
reserved for issuance, which could adversely affect the Company's ability to
respond to favorable opportunities as set forth below. Accordingly, the Board
of Directors believes that it would be beneficial to the Company for the
shareholders to approve the Amendment.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Amendment is approved, the Company thereafter would have
approximately [00,000,000] shares of Common Stock authorized, unissued and
unreserved. Except for shares of Common Stock to be issued or reserved in
connection with the plans described elsewhere in this Proxy Statement and the
Series B Preferred Stock, the Company has no present plans, arrangements,
understandings or agreements for issuing any shares of Common Stock proposed
to be authorized.
Any additional authorized shares that are not issued or reserved for
issuance will enable the Company, as the need may arise, to take timely
advantage of market conditions and the availability of favorable acquisition
opportunities without the delay and expense associated with the holding of a
special meeting or soliciting the consent of its shareholders at the time such
additional shares are needed. Unless required by law, by regulatory
authorities, or by rules of any stock exchange on which the Company's
securities may then be listed, no further authorization by vote of
shareholders will be required for any such share issuance.
The increased availability for issuance of shares of Common Stock also could
enable the Board of Directors to render more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer or
other business combination directed at the
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<PAGE>
Company. For example, the issuance of shares of common stock in a public or
private sale, merger or similar transaction would increase the number of the
Company's outstanding shares, thereby diluting the interest of a party
attempting to obtain control of the Company. The cumulative effect of the
Company's current Restated Certificate of Incorporation, with its staggered
classes of directors, authorized but unissued shares of preferred stock and
super-majority voting rights of shareholders on certain business combination
transactions, coupled with the adoption in September, 1988 of a Preferred
Stock Rights Plan, can be expected to operate to deter certain mergers, tender
offers or future takeover attempts. The Company is not aware of any attempt,
whether formal or informal, to acquire a controlling interest in the Company;
moreover, the Company has no present plan or intention to utilize the
additional shares of Common Stock as an anti-takeover device.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE VOTES ELIGIBLE TO BE CAST
IS REQUIRED FOR APPROVAL OF THE AMENDMENT. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND ARTICLE IV.
ITEM 3. PROPOSAL FOR APPROVAL OF THE AMENDMENT OF THE 1992 NON-QUALIFIED STOCK
OPTION PLAN.
In 1992, the Board of Directors of the Company adopted the 1992 Non-
Qualified Stock Option Plan, subject to ratification by stockholders. The Non-
Qualified Plan was ratified by stockholders at the 1992 annual meeting of
stockholders.
On February 8, 1995, the Board of Directors of the Company unanimously
approved an amendment to and restatement of the Company's 1992 Non-Qualified
Stock Option Plan (the "Stock Option Plan" or the "Plan") to increase the
number of shares that may be granted under the Plan currently and in the
future. The Board of Directors approved the proposed amendment upon the
recommendation of the Compensation Committee in an effort to increase the
attractiveness of the Company and its subsidiaries in recruiting and retaining
the services of key employees and Directors and to provide them with increased
motivation and incentive to exert their best efforts on behalf of the Company
by enlarging their personal stake in its success.
The proposal to amend the Stock Option Plan will be adopted if approved by
the affirmative vote of the holders of a majority of shares of Common Stock of
the Company in attendance or represented at the meeting. The material changes
to the Stock Option Plan are described below:
Increase in Shares. The Stock Option Plan as originally adopted provided
that options to purchase up to an aggregate of 600,000 shares of Common Stock
could be granted thereunder. The Stock Option Plan as amended provides for an
increase in the number of shares of Common Stock that may be granted pursuant
to options under the Plan to 1,200,000. In addition, the amendment provides
for a further increase in the number of shares with respect to which grants
may be made under the Plan in an amount equal to 2% of any shares of Common
Stock issued by the Company after February 8, 1995 in a public offering. Thus,
if the Company were to issue an additional 100,000 shares in a future
offering, 2,000 additional shares would be available for grants of options
under the Stock Option Plan. Without regard to this increase, [ ] shares
of Common Stock would be available for grant under the Stock Option Plan.
Under the Stock Option Plan as amended, individual grants to a participant in
any year cannot exceed 100,000 shares.
The Stock Option Plan presently allows for the use of vesting by the
Compensation Committee. Options for Common Stock is granted to a Stock Option
Plan Participant (the "Participant") pursuant to a vesting schedule prepared
by the Compensation Committee. The
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schedule contains a date or series of dates as of which the Stock Option is
issued and a date or series of dates as of which Stock Option is vested. Prior
to vesting, Stock Options may not be exercised.
A Stock Option vests on the date (the "Vesting Date") set forth in the
vesting schedule if the Participant has been continuously employed by the
Company to that date (except in certain cases involving termination by reason
of death or disability or otherwise at the discretion of the Committee. If
vesting does not occur, the Participant's right to exercise the Stock Option
subject to the grant is forfeited. Upon the occurrence of a change in control
in the Company, all Stock Options that had been granted shall vest
immediately. The Stock Option Plan provides the Compensation Committee with
the power to adjust any grant of Stock Options to prevent the enlargement or
dilution of rights following a change in the Company's capital or corporate
structure.
TERMS OF THE PLAN
The full text of the Non-Qualified Plan incorporating the proposed amendment
is set forth in Appendix B to this Proxy Statement. The following summary is
qualified in its entirety by such text.
NUMBER OF OPTIONS. Options to purchase an aggregate of 600,000 shares of
Common Stock currently are issuable under the Plan. If the amendment to the
Plan is approved, such number will increase to 1,200,000 plus 2% of the number
of shares of Common Stock issued in a public offering after February 8, 1995.
ELIGIBLE PERSONS. Options may be granted to key employees of the Company and
its subsidiaries, as well as to corporations performing services for the
Company, consultants and Directors of the Company and its subsidiaries who are
not also employees of such corporations. The approximate number of persons
presently eligible to receive options is .
ADMINISTRATION. Options will be granted from time to time by the Stock
Option Committee ("Committee") of the Board of Directors when deemed
appropriate for their intended purposes.
EXERCISE PRICE. Options will be exercisable at an exercise price per share
determined by the Committee, but not less than the fair market value of a
share of Common Stock on the date of grant.
EXERCISE. The terms of each option and the manner in which it may be
exercised will be determined by the Committee. The Plan provides that payment
for shares issuable upon the exercise of an option may be made in cash, in
shares of Common Stock or securities of the Company or in a combination
thereof. No options may be granted under the Plan after March 31, 2002.
TRANSFERABILITY. Options will be non-transferable (other than by will or by
operation of the laws of descent) and will be exercisable generally only while
the optionee is employed by the Company, a subsidiary or parent of the
Company, or within three months of the termination of his employment by the
Company, a subsidiary or parent, or within 12 months after such death or
termination of employment by reason of disability, but in no event after the
expiration of the option. In the event of the death of the optionee, the
option will be exercisable by his executor, administrator or other person
entitled by law to exercise the rights of the optionee. The foregoing exercise
shall be only as to the number of shares exercisable upon termination of
employment or within one year after death, permanent disability or retirement.
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<PAGE>
ADJUSTMENT. The number of shares and the exercise price of options granted
thereunder will be adjusted in certain events, including reorganizations,
recapitalizations and stock dividends, in order to preserve the optionee's
rights substantially proportionate to the rights existing prior to any such
event. The total number of shares issuable under the Plan is also subject to
adjustment in such events.
AMENDMENT. The Plan may be amended or suspended from time to time or
terminated by the Board of Directors. The Board of Directors has the right,
without prior approval of the stockholders, to amend, suspend or terminate the
Plan, except that the Board of Directors may not, without the approval of the
stockholders (i) increase the number of shares of Common Stock as to which
options may be granted under the Plan (other than adjustments in certain
events involving dilution, as described above) or (ii) reduce the option price
per share to less than the fair market value of a share of Common Stock on the
date the option is granted (other than adjustments in certain events involving
dilution) or otherwise increase the benefits accruing to participants under
the Plan.
FEDERAL TAX CONSEQUENCES TO THE OPTIONEE
No income will be recognized by an optionee for federal income tax purposes
at the time an option is granted under the Plan. If the optionee is not an
officer or Director of the Company, the optionee will recognize, at the time
the option is exercised, compensation income in an amount equal to the excess
of the fair market value of the shares at the date of exercise over the
exercise price. However, if the optionee is an officer or Director of the
Company, such optionee will not recognize any income at the time the option is
exercised. Instead, such optionee will recognize compensation income upon the
expiration of a six-month following the date of exercise of the option (the
"expiration date") in an amount equal to the excess of the fair market value
of the shares on the expiration date over the exercise price. However, an
officer or Director may elect to recognize compensation income upon the
exercise of the option (as described above) rather than on the expiration
date. The amount of income recognized by the optionee will be deductible by
the Company in the tax year in which compensation income is recognized by the
optionee.
An optionee's basis for the stock acquired will be the exercise price plus
any amount includible in his gross income and the holding period will
generally commence on the later of (A) the date of exercise or (B) the date
after the expiration date. At the time of sale of the option stock (after the
expiration date, if applicable), any gain or loss recognized by the optionee
will be long-term or short-term capital gain or loss, depending on the holding
period of the shares.
If option stock is acquired in exchange for shares of Common Stock
previously acquired by an optionee, to the extent that the fair market value
of the Common Stock surrendered equals the fair market value of the option
stock received (the "exchanged shares"), no taxable income will be recognized
at the time of such exchange. An optionee's basis and holding period in that
number of exchanged shares which do not exceed the value of the surrendered
shares will be equal to his basis and will include his holding period in the
Common Stock surrendered. However, to the extent that the total fair market
value of the option stock received exceeds the fair market value of the Common
Stock surrendered (the shares constituting such excess fair market value being
herein referred to as the "spread shares"), as optionee must include in gross
income the fair market value of the spread shares as compensation for
services. The optionee's basis in the spread shares will be equal to the
amount included in gross income, and the holding period will commence on the
day the option is exercised.
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VOTES REQUIRED
The affirmative vote of a majority of the votes cast will be required for
the amendment of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT OF THE
1992 NON-QUALIFIED STOCK OPTION PLAN.
ITEM 4. PROPOSAL TO APPROVE LONG TERM INCENTIVE PLAN
On February 8, 1995 the Board unanimously approved the establishment of a
new Long Term Incentive Plan for senior executive managers of the Company.
Under the Plan, designed with the assistance of the Wyatt Company, independent
professional compensation consultants, the Company has authority to issue up
to 2,000,000 restricted stock units (the "Restricted Stock Units") of the
Company. This Plan is designed to supplement the 1992 Non-Qualified Stock
Option Plan of the Company through the grant of Restricted Stock Units. (See
PROPOSED AMENDMENT TO 1992 NON-QUALIFIED STOCK OPTION PLAN above.)
Participants will be entitled to receive a prescribed number of shares of
Company stock after seven years of continued employment. A Participant's
vesting of Restricted Stock Units can be accelerated if total return to
shareholders exceeds targeted levels. The potential for acceleration of
vesting of Restricted Stock Units under this plan is summarized in the
following chart.
<TABLE>
<CAPTION>
ANNUAL RETURN LEVEL OVER PERCENT OF VESTING BASED
PERFORMANCE PERIOD(1) ON PERFORMANCE
------------------------ ------------------------
<S> <C>
Less than 15%................................... 0%
15%-20%......................................... 15%
20%-25%......................................... 25%
More than 25%................................... 50%
</TABLE>
- ------------------
(1) To be calculated annually after years 3, 4, 5, and 6.
For example, if total return to shareholders for a participant is below 15%
for all of the years in the performance period, then Restricted Stock Units
will not vest until year 7. If total return to shareholders is 25% for two
years of the performance period, then 50% of the Restricted Stock Units would
vest in each of those two years and all stock would be vested after the second
such year. Prior to vesting, Restricted Stock Units may not be transferred and
constitute only a promise on the part of the Company to issue unrestricted
stock to a Participant upon vesting. Prior to vesting, the Participant does
not have any rights with respect to the Restricted Stock Units, such as the
right to vote, but Participants will be credited with dividend equivalents if
dividends are paid to holders of Common Stock after such Restricted Stock
Units vest.
A Restricted Stock Unit vests on the date set forth in the vesting schedule
so long as the Participant has been continuously employed by the Company to
that date (except in certain cases such as termination by reason of death,
disability or termination without cause). Upon the vesting of Restricted Stock
Unit, shares of Common Stock will be issued which generally will now be
restricted as to transferability. If vesting does not occur and the
Participant leaves the employ of the Company (other than for death, disability
or termination without cause), the right to shares of common stock represented
by the grant is forfeited. In the event of death, disability or termination
without cause (as defined in the Plan), retirement or a change in control of
the Company, a Participant would be entitled to receive a number of Restricted
Stock Units resulting from a pro rata calculation based on the number of years
and months of employment from the date of the award until the termination of
employment compared to the period over which the award was to vest. Executives
of the Company will also have the opportunity (in certain cases, the
requirement) to accept annual incentive compensation in the form of
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Restricted Stock Units. (See ANNUAL INCENTIVE PLAN below). The Plan also
provides the Compensation Committee with the power to adjust any grant of
Restricted Stock Units to prevent the enlargement or dilution of rights
following a change in the Company's capital or corporate structure. The
Committee also has the power to defer the vesting of Restricted Stock Units to
a Participant in cases where amounts paid to a Participant would exceed the
amount deductible by the Company under Section 162(m) of the Internal Revenue
Code or in order to comply with Rule 16b-3 under the Securities Exchange Act
of 1934. A complete statement of the Long Term Incentive Plan is attached to
this Proxy Statement as Appendix "C".
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain federal income tax
consequences of awards under the Long Term Incentive Plan. This discussion
does not present a complete analysis of all tax consequences which may be
relevant to any particular Participant in the Long Term Incentive Plan. It
does not discuss the income tax laws of any state in which a Participant may
reside.
Under the terms of the Long Term Incentive Plan, payments of benefits to
Participants are made either in shares of Common Stock and/or cash, as
determined at the discretion of the Committee. The timing and amount of
payments may depend on a number of factors including the election of the
Participant as to the possible deferral of payments, the future value of the
Common Stock and various events that may be related to vesting and the
continued employment of the Participant. Generally, a Participant will have
taxable income as a result of an award under the Long Term Incentive Plan only
at the time an actual payment or transfer of Common Stock is made.
Where payment under the Long Term Incentive Plan is made in the form of
cash, the amount of income attributable to the cash portion of the payment
that will be recognized by a Participant will be equal to the amount of cash
paid or deemed paid (e.g., including amounts that may be paid over as
withholding with respect to an award of the Participant) to the Participant.
The recognition of income with respect to the portion of an award that is
paid in the form of shares of Common Stock will be governed by Section 83 of
the Code. Under Section 83, if property is transferred in connection with the
performance of services, the excess, if any, of the fair market value of the
property received over the price paid for such property is included in the
income of the person performing such services as ordinary income, at the time
such property is transferred, or, if later, at the time such transferred
property ceases to be subject to a substantial risk of forfeiture or is
transferable free of such risk of forfeiture. Generally, the fair market value
of such property is generally measured at the time of transfer or, if later,
when the substantial risk of forfeiture lapses, or when the property becomes
transferable free of such risk of forfeiture. Because the shares of Common
Stock transferred under the terms of the Long Term Incentive Plan will not be
subject to a substantial risk of forfeiture at the time they are transferred
to a Participant, and are transferred without the payment of any purchase
price by the Participant, the fair market value of the shares of Common Stock
for these purposes will be recognized as income and will be determined at the
time they are transferred. The fair market value of the shares of Common Stock
will generally be equal to their then-current market price. A Participant's
basis for determining gain or loss on a subsequent disposition of such shares
will be the amount which the Participant was required to include in income
when the shares were transferred. Any gain or loss recognized on a disposition
of the shares generally will be long or short term capital gain or loss
depending on the length of time the Participant holds the Shares following the
date of transfer.
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In general, the Company will be entitled to a deduction in an amount equal
to the income recognized by a Participant at the time the payment is made
under the Long Term Incentive Plan.
Under the Long Term Incentive Plan, all benefit payments are subject to
federal, state and local income and/or payroll taxes that the Company is
required to withhold. In general, any amounts so withheld will be taken out of
the cash portion of a payment and will be treated for tax purposes as a cash
payment to the Participant.
In the event the Committee determines that the benefit paid to a Participant
under the Long Term Incentive Plan, when added to all other "compensation" (as
defined for purposes of Section 162(m) of the Code) for the taxable year, may
not be deductible by the Company by reason of Section 162(m) of the Code (the
"Million Dollar Cap"), the Committee will defer payment to the extent and for
the time required in order that such payment not be subject to the deduction
limitations imposed by the Million Dollar Cap.
The proposed Long Term Incentive Plan requires the approval of a majority of
the votes cast at the meeting by proxy or otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE LONG TERM INCENTIVE PLAN.
ITEM 5. PROPOSAL TO APPROVE ANNUAL INCENTIVE PLAN
On February 8, 1995 the Board unanimously approved a new program of annual
incentives for senior managers of the Company. The new plan, combined with the
Long Term Incentive Plan (see above), was developed by the Compensation
Committee with the assistance of outside professional compensation
consultants. The new plans are intended to enhance the retention of key
management personnel in a critical period of the Company's efforts to return
to profitability, increase the immediate ownership of stock by senior
executive managers, recognize individual contributions of managers based on
division/subsidiary performance, and provide significant equity appreciation
potential in exchange for investment by management in these programs.
A complete statement of the Annual Incentive Plan is found at Appendix "D"
to this Proxy Statement. Specifically, the annual incentives have been
designed to reinforce the achievement of long term value as a goal in addition
to short term profitability. This has been done by several distinct plan
features: (i) the targets for individual incentives are, where practicable,
geared to individual performance and financial objectives, such as division
subsidiary performance and asset utilization, and not just overall company
performance; (ii) targets serve as milestones for achievement of higher levels
which generate additional rewards; (iii) awards are combined with the
requirement for key senior managers that 15-30% of the incentive payment be
accepted in Restricted Stock Units. (See DISCUSSION OF RESTRICTED STOCK UNITS,
above). All managers who participate in the Annual Incentive program may
convert more (all, if they elect to do so) of their annual incentive payments
to Restricted Stock.
For most senior executives, incentive compensation will be measured against
profitability goals including earnings before interest and taxes and certain
other charges (EBIT) or a combination of overall EBIT and division/subsidiary
operating income. The Compensation Committee will retain the ability to
withhold 25% of the annual incentive awards for Participants in this Plan.
In addition, individual managers will recognize the ability to receive
incentive awards for achievement of targeted division/subsidiary performance,
including asset utilization targets
18
<PAGE>
where in prior years the measure was solely overall company profitability,
which is generally not within the control of individual executives.
FEDERAL INCOME TAX CONSEQUENCES
Any portions of a bonus paid in cash under the Annual Incentive Plan will be
taxable in the year such cash bonus is paid. The portion paid in the form of
Restricted Stock will be taxable as described below.
Under Section 83 of the Code, if property is transferred in connection with
the performance of services, the excess, if any, of the fair market value of
the property received over the price paid for such property is included in the
income of the person performing such services as ordinary income, at the time
such property either ceases to be subject to a substantial risk of forfeiture
or is transferable free of such risk of forfeiture. The fair market value of
such property is generally measured at the time when the substantial risk of
forfeiture lapses, or when the property becomes transferable free of such risk
of forfeiture, unless an election is made, as described below, to include the
amount of any income at an earlier date.
Any Restricted Stock transferred to a Participant will be treated as
acquired in connection with the performance of services and will be considered
to be subject to a substantial risk of forfeiture until the vesting
requirement applicable to such Restricted Stock lapses. A Participant who
receives Restricted Stock and who continues to be employed by the Company will
recognize ordinary compensation income in the year in which the vesting
requirement ends equal to the fair market value of the shares at that time.
The fair market value of the shares generally will be equal to their then-
current market price. A Participant's basis for determining gain or loss on a
subsequent disposition of such shares will be the amount which the Participant
was required to include in income. Any gain or loss recognized on a
disposition of the shares generally will be long or short term capital gain or
loss depending on the period of time the Participant holds the shares after
the vesting requirement has been satisfied.
Section 83(b) Election. The general rules described above do not apply if a
Participant elects, pursuant to Section 83(b) of the Code, to include in his
income the fair market value of the Restricted Stock at the time the shares
are transferred without taking into account the effect of the restrictions on
such shares. If a Participant makes a Section 83(b) election, the Participant
will not be required to recognize any income when the Restricted Stock vests.
The Participant's basis for determining gain or loss on a disposition of
shares will be the amount which the Participant included in income in the year
of the initial transfer. Any gain or loss recognized by the Participant on a
disposition of shares which were subject to the Section 83(b) election will be
long or short term capital gain or loss (because of the general two year
vesting requirement, any capital gain or loss will likely be long term)
depending on the length of time the Participant holds such shares. In the
event a Participant forfeits any Restricted Stock, the Participant will not be
entitled to deduct his or her loss resulting from such forfeiture even though
the Participant may have been required to include an amount in income by
virtue of a Section 83(b) election.
The Company will be entitled to a deduction in an amount equal to the income
recognized by the Participant when the Restricted Stock vests (or upon the
transfer of Restricted Stock in the case of any employee who has made a
Section 83(b) Election).
Withholding. Whenever a bonus is paid in cash and/or whenever a Participant
is otherwise required to include any portion of a bonus in income for federal,
state or local income tax purposes, the Company has the right to require the
Participant to make available to the Company an amount sufficient to satisfy
any federal, state and/or local withholding tax
19
<PAGE>
requirements prior to the delivery or transfer of any certificate or
certificates for Restricted Stock or the distribution of any bonus. The
Company also has the right to take whatever other action it deems necessary to
protect its interests with respect to tax liabilities, including, without
limitation, withholding or redeeming a portion of any Restricted Stock
otherwise transferrable to the Participant having a fair market value equal to
such withholding tax liabilities. The Company's obligations to make any
transfers or payments under the Annual Incentive Plan are conditioned on the
Participant's compliance with any withholding requirements to the Company's
satisfaction.
(See also, FEDERAL INCOME TAX CONSEQUENCES OF LONG TERM INCENTIVE PLAN
above.)
The Annual Incentive Plan requires the approval of a majority of the votes
cast at the meeting by proxy or otherwise.
THE BOARD RECOMMENDS A VOTE FOR THE ANNUAL INCENTIVE PLAN.
Notwithstanding anything to the contrary as set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Report and the Performance Graph below shall not be incorporated by reference
into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, which consists of three outside directors,
oversees the Company's compensation of its senior executive officers,
including annual incentive bonus arrangements and long term compensation
programs. The Committee reviews compensation levels and performance of the
executive officers of the Company and related matters. The Committee also
reviews in detail with the Board compensation of the Chief Operating Officer,
Vice Chairman -- Chief Financial Officer, and Chairman--Chief Executive
Officer, of the Company. The administration of the Company's Stock Option
Plans are the responsibility of the Stock Option Committee of the Board.
The Compensation Committee reviews the compensation to executive officers of
the Company in light of a variety of factors, including the following: the
Company's performance; advice from outside independent consultants
specializing in matters relating to compensation; compensation levels paid by
competitors of the Company; surveys available from industry and other sources;
and reasonableness. The determination by the Committee of base salary levels
and incentive award levels for executives is based, among other things, on
their potential for contribution to the overall performance of the Company as
a whole, their capacity to meet established individual annual targets, and the
levels of competitive salary and incentives within the industry.
During 1994 the Committee retained the services of The Wyatt Company, a
management consulting firm with expertise in the areas of compensation and
incentives, and after a study and report made by the consultant the Committee
recommended significant changes to the incentive programs of the Company,
which changes have been endorsed by the Board of Directors of the Company. The
Compensation Committee will oversee the administration of the two new plans
approved by the Board. These changes consist principally of two steps. First,
a new approach to annual incentive compensation has been adopted for key
managers of the Company, including the Chief Executive Officer, Chief
Operating Officer and Vice Chairman-Chief Financial Officer. For 1994,
incentive targets for participating employees were established which were
linked to operating income, asset utilization, and other similar measurements;
in
20
<PAGE>
prior years, incentives were based solely on overall Company performance,
which was substantially beyond the control of most individual executives. In
1995, senior executive managers will also receive a significant portion of any
annual incentive compensation in the form of new Restricted Stock Units.
Second, a new Long Term Incentive Compensation Program has been established
for [17] senior executive managers of the Company, including the three
executives referred to above. The new Long Term Incentive Plan includes a
broad group of managers who are eligible to receive a combination of non-
qualified stock options vesting over time under the Company's existing plan
(see 1992 Non-Qualified Stock Option Plan, above) and new Restricted Stock
units. The Restricted Stock units vest over seven years unless performance of
the Company justifies acceleration of vesting. (See LONG TERM INCENTIVE
COMPENSATION PLAN, above).
See also EMPLOYMENT CONTRACTS above.
In making these changes, the Committee's goals were to: design salary and
performance incentives, intended to assure the ability of the Company to
retain experienced and talented managers in a critical period of the Company's
efforts to return to profitability; institute new annual and long term
incentive targets which are more closely aligned with the interests of the
shareholders of the Company; establish new stock ownership on the part of
senior managers which has some immediate value, matures over time and can
accelerate if the performance of the Company warrants the same.
The Committee has recommended to the Board, and the Board has agreed, that
it is appropriate and desirable to establish the new incentive programs for
management; see ANNUAL BONUS PLAN, above and Long Term Incentive Compensation
Program for Senior Executive Managers, above.
In assisting the Committee, the consultant reviewed and provided to the
Committee survey information including the large competitors of the Company,
and the largest toy retailer, as well as other companies included in the
Russell 1000 Consumer Discretionary Economic Sector Index. In reviewing the
new annual incentive targets set for individual managers, and the level of
long term incentives for managers (including the Chief Executive Officer) the
Committee concluded that such programs are both reasonable and appropriate as
incentive vehicles designed to advance the performance of the Company and the
interests of the shareholders, and are in the average range compared to
companies of similar size.
Since January, 1993 the compensation of the executive officers of the
Company has remained unchanged, except for awards made under the new incentive
programs described above. Executive salaries did not increase, bonuses
aggregating $104,150 were paid for 1994 to seven senior managers of the
Company and, although certain existing stock options grants were repriced,
only a limited number of new stock options grants were awarded to two named
Executive Officers. Although the Company's incentive programs for 1994 and
1995 were generally premised on individualized targets relating to a variety
of performance factors, including inventory management, division
profitability, and other similar targets, in 1993 the performance bonus plan
was based solely on Company net income goals; accordingly, based on the
Company's performance, no bonuses were paid to senior managers of the Company
in 1993. During 1994, the Company's domestic business unit achieved
profitability, and, as referred to above, a limited number of bonuses were
paid to managers responsible for that improvement. In the opinion of the
Committee, the compensation of the Chief Executive Officer and the executive
officers of the Company is appropriate and reasonable in light of the
Company's performance on a consolidated basis for the years.
21
<PAGE>
The base compensation for 1994 paid to Mr. Grey as Chief Executive Officer
of the Company remained unchanged and was paid pursuant to a new employment
agreement dated July 27, 1994 and described elsewhere in this Proxy Statement.
(See REMUNERATION OF OFFICERS AND DIRECTORS). Mr. Grey's employment agreement
provides for an annual base salary in an agreed amount and an annual incentive
compensation payment of up to 135% of his base salary based on criteria
established by the Board. No such payment was made in 1994. Beginning in 1995,
Mr. Grey is entitled to receive as long term compensation up to 000,000
Restricted Stock Units over a period of seven years, depending on the
performance of the Company. As a result, a significantly greater portion of
Mr. Grey's total potential compensation is contingent on the annual and long
term performance of the Company, as compared to prior years.
The policy of the Company to make a significant portion of the incentive
compensation payable to senior executive managers of the Company contingent on
the performance of the Company has been advanced by the adoption of the new
Deferred Stock Plan and the Long Term Incentive Plan for senior managers. The
use of Restricted Stock Units, vesting over time, and incentive levels
appropriate for individual executives are all intended to improve the
effectiveness of these incentive programs for senior management executives of
the Company, and to advance the performance of the Company in the interest of
the shareholders. See Deferred Stock Plan, above, and Long Term Incentive
Plan, above. The Committee and the Board recommend to the shareholders that
both plans be approved.
One of the factors considered by the Committee in its review of compensation
matters is the anticipated tax treatment to the Company and to the executives
of various payments and benefits. Some payments and their deductibility (e.g.,
the spread on the exercise of non-qualified option shares) depend on the
timing of vesting for individual executives or the exercise of previously
granted rights. Under the two new incentive plans for executive managers,
incentive compensation generally will be deferred to the extent that it
exceeds in any year the limits fixed by Section 162(m) of the Internal Revenue
Code. But since interpretations of and changes to the tax laws and other
factors beyond the control of the Committee also affect the deductibility of
compensation, including cash annual incentive awards, executive compensation
may not always be limited to that deductible under Section 162(m). The
Committee will consider various alternatives in order to maximize the
deductibility of compensation payments and benefits to the extent practicable
and consistent with the other objectives of the Committee.
In February, 1994 the Stock Option Committee determined that in order to
incentivize employees of the Company, including executive management, certain
outstanding stock options could, at the optionee's election, be exchanged for
a lesser number of options at a lower exercise price. Although this offer
placed the incentives more closely in line with shareholders' interests, the
options do not have value at this time. Accordingly, the Committee has
recommended additional changes to the plans of the Company. (See above, and
also Repricing of Options, below.)
The foregoing report on executive compensation is provided by the following
directors, who comprise the Compensation Committee of the Board of Directors
of the Company.
John A. Canning, Jr.
Jerome I. Gellman
David Golub, Chairman
March 15, 1995
22
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, no executive officer of the Company served as a member of the
compensation committee, or its equivalent, of another entity, one of whose
executive officers served as a director of the Company or a member of the
Company's Compensation Committee. No member of the Company's Compensation
Committee was an officer or employee of the Company during 1994. Mr. Arnold
Thaler, who served as a member of the Compensation Committee until December,
1994 has served as a consultant to the Company since his retirement in 1990 as
President of the Company's View-Master Ideal Group subsidiary. He receives
annual fees of $85,000 and certain insurance benefits and expenses. Mr. Golub
is a Senior Vice President of Corporate Advisors, L.P., which advises three
institutions holding all of the Company's Series "B" Preferred Stock. Mr.
Canning is a partner in Madison Dearborn Partners IV, which holds $1,496,769
of the Company's 7% Convertible Subordinated Notes, and a partner in an entity
which renders advice to First Chicago Investment Corporation, which also holds
such Notes. No other member of the Committee was involved in or had any direct
or indirect material interest in any transaction, or series of transactions,
or currently proposed transaction in which the amount involved exceeded
$60,000. See Continuing Directors and Executive Officers.
COMPENSATION OF DIRECTORS
Each Director who is not an officer or employee of the Company receives an
annual fee of $16,000 for his services during the fiscal year as a Director
and $1,000 for each Board and Committee meeting attended. The Company
reimburses all Directors for their out-of-pocket expenses in attending such
meetings.
In addition, each outside Director received a grant of 10,000 stock options
during 1990 and 1991, and 5,000 options in 1992. Pursuant to a formula
approved by the Board and the shareholders in the 1992 Non-qualified Stock
Option Plan, the members of the Stock Option Committee received a grant of
20,000 stock options at the time of their appointment to the Committee in
1991, and an additional 5,000 stock options in each of July, 1992, 1993 and
1994. Dr. Leffall and Mr. Golub received grants of 5,000 and 10,000 options in
1994, respectively; no other grants of stock options were made to Directors in
1994.
23
<PAGE>
STOCK OPTIONS GRANTED IN 1994
The following table sets forth information relating to the grants of stock
options to the named executive officers during 1994:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED
UNDERLYING SARS ACCRUAL RATES OF STOCK
OPTIONS/ GRANTED TO EXERCISE PRICE APPRECIATION FOR
SARS EMPLOYEES OR BASE OPTION TERM(1)
NAME GRANTED IN FISCAL PRICE EXPIRATION -----------------------
TITLE ($)(2) YEAR ($/SH) DATE 5%($) 10%($)
----- ---------- ---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Grey......... 196,000 19.7% $9.00 2/02/99 $487,361 $1,076,940
Chairman & CEO
Harry J. Pearce......... 60,000 6.0% $9.00 2/02/99 $149,192 $ 329,675
Vice Chairman & CFO
Jay Kahan............... 21,000 2.11% $9.00 2/02/99 $ 52,217 $ 115,386
Executive Vice President
Robert Rao.............. 23,000 2.31% $9.00 2/02/99 $ 57,190 $ 126,376
(Former President of
Playtime Subsidiary)
Karsten Malmos.......... 21,000 2.11% $9.00 2/02/99 $ 52,217 $ 115,386
President--International
Michael J. Lyden........
President--Tyco US 38,000 3.83% $9.00 2/02/99 $ 94,488 $ 208,794
</TABLE>
- --------
(1) Illustrates value that might be realized upon exercise of options
immediately prior to the expiration of the term of the options. Assumed
rates of appreciation are not necessarily indicative of future stock
performance.
(2) Other than grants of options to purchase 20,000 shares to each of Messrs.
Rao and Lyden, the other options represent the exchange and repricing of
existing options. (See Repricing of Options, below.)
AGGREGATED STOCK EXERCISES IN 1994
The following table sets forth information relating to the exercise of stock
options by the named executive officers during 1994 and the value of options
held by the named executives at the end of the year.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1994 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ON EXERCISE (#) REALIZED ($) OPTIONS OF F/Y END (1) FISCAL YEAR END ($)(1)(2)
--------------- ------------ ---------------------- -------------------------
<S> <C> <C> <C> <C>
Richard E. Grey......... 0 0 196,000 0
Harry J. Pearce......... 10,000 30,000 100,000 45,000
Karsten Malmos.......... 10,000 31,250 37,000 18,000
Jay Kahan............... 0 0 29,300 9,338
Robert Rao.............. 0 0 23,000 0
Michael J. Lyden........ 0 0 54,000 18,000
</TABLE>
- --------
(1) All of the outstanding stock options were exercisable at December 31,
1994.
(2) Based on the difference between the share exercise price of all stock
options outstanding and the closing price on the New York Stock Exchange
for the Company's stock on December 30, 1994 which was $5.625 a share.
24
<PAGE>
REPRICING OF OPTIONS
In February, 1994 the Stock Option Committee offered employees, including
executive officers, the opportunity to surrender certain stock option grants
in exchange for a lesser number of options at a lower exercise price. As
required by the Securities and Exchange Commission the Company has scheduled
in Appendix E all options held by executive officers which were repriced since
the Company's initial public offering in 1986.
25
<PAGE>
FIVE YEAR PERFORMANCE GRAPH (1990-1994)
TYCO TOYS, INC.
NEW YORK STOCK EXCHANGE
RUSSELL 1000 CONSUMER DISCRETIONARY
ECONOMIC SECTOR
The following graph presents a comparison of the cumulative annual
shareholder return based on the assumption that $100 was invested in Tyco
Common Stock on December 31, 1989 (as required by the rules of the Securities
& Exchange Commission) and that all quarterly dividends were reinvested each
quarter. The total cumulative return shown represents the value that such
investments would have had on December 31, 1994.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
($) ($) ($) ($) ($)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Tyco Toys 85.6 277.3 211.7 135.4
Russell
1000 Consumer
Discre-
tionary
Economic
Sector
Index 119.5 174.6 203.8 216.9
NYSE
Market
Index 122.36 158.35 165.80 188.25
</TABLE>
26
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche served as the Company's independent auditors for fiscal
year 1994 and will service in that capacity for fiscal year 1995. A
representative of Deloitte & Touche is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
ADDITIONAL CONSIDERATIONS
STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Any proposal submitted by a stockholder of the Company intended to be
presented at the next annual Meeting of Stockholders must be received by the
Secretary of the Company not later than December [20], 1995.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for 1994 has been
furnished to stockholders with the mailing of this Proxy Statement.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR 1994 REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO THE REPORT, BY
SENDING A WRITTEN REQUEST THEREFOR TO:
SHAREHOLDER RELATIONS
TYCO TOYS, INC.
6000 MIDLANTIC DRIVE
MOUNT LAUREL, NEW JERSEY 08054
By Order of the Board of Directors,
R. Michael Kennedy, Jr.
Secretary
Mt. Laurel, New Jersey
March [ ], 1995
27
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TYCO TOYS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Tyco Toys, Inc.
2. The Restated Certificate of Incorporation of the Corporation is hereby
amended by striking out Article IV thereof and by substituting in lieu of said
Article the following new Articles:
"ARTICLE IV
CAPITALIZATION
The total number of shares which the Corporation shall have authority to
issue is Seventy-six Million (76,000,000) shares, consisting of One Million
(1,000,000) shares of Preferred Stock, of the par value of ten cents ($.10)
per share (hereinafter called "Preferred Stock"), and Seventy-five Million
(75,000,000) shares of Common Stock, of the par value of one cent ($.01)
per share (hereinafter called "Common Stock")."
3. The amendment of the Restated Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
228 and 242 of the General Corporation Law of the State of Delaware.
In Witness Whereof, the undersigned have executed this document and affirm
that the facts contained herein are true under penalties of perjury.
Date: _____________, 1994
_____________________________________
ATTEST:
_____________________________________
A-1
<PAGE>
TYCO TOYS, INC. 1992 NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE. The purpose of the Tyco Toys, Inc. 1992 Non-qualified Stock
Option Plan (the "Plan") is to provide a means whereby Tyco Toys, Inc. (the
"Company") may, through the grant of options to purchase Common Stock of the
Company to employees of the Company and of its affiliated companies, attract
and retain persons of ability as key employees and motivate such employees to
exert their best efforts on behalf of the Company and its affiliated
companies. An additional purpose of this plan is to encourage stock ownership
by any corporation performing services for the Company ("Service Company"),
consultants and Directors who are not employees and to provide any such
Service Company, consultants and Directors with an incentive to serve the
Company by a grant of options commensurate with their service as consultants
or Directors on the Company's Board of Directors.
2. ELIGIBILITY FOR OPTION GRANTS. The persons who shall be eligible to
receive options pursuant to this Plan ("Optionee(s)") shall include such key
employees of the Company or its subsidiaries as the Committee (as defined in
Section 4) shall select from time to time. For the purpose of this Plan, each
corporation in an unbroken chain of corporations beginning with the Company
shall be considered to be a subsidiary of the Company, provided each such
corporation other than the last corporation in the unbroken chain owns, at the
time of the option grant, a fifty percent (50%) or more beneficial interest in
one of the other corporations in such chains. In addition, any Service
Company, consultants and Directors of the Company or any subsidiary who are
not employees of the Company or any Subsidiary shall be eligible to
participate in the Plan. For all purposes of this Plan, any Service Company,
consultant or Director who is not also a common law employee and is granted an
option under this Plan shall be considered an "employee" until the effective
date such Service Company or Consultant stops rendering services to the
Company or such Director's resignation or removal from the Corporation's Board
of Directors (including removal as a result of death or disability).
3. SHARES SUBJECT TO THE PLAN. 1,200,000 shares of common stock ($0.01 par
value) of the Company shall be reserved for options granted under the Plan
(subject to adjustment as provided in Section 5(i)). The shares issued upon
exercise of options granted under the Plan may be authorized and unissued
shares or shares held by the Company in its treasury. If any option granted
under the Plan shall terminate or expire, new options may thereafter be
granted to the appropriate employees, consultants or Directors covering such
shares. In the event of a public offering of Common Stock after February 8,
1995 the number of shares reserved for options granted under the Plan shall
automatically be increased by a number of shares equal to two percent (2%) of
the full amount of the number of shares issued in such offering (including any
overallotment to underwriters).
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee
of the Board of Directors of the Company (the "Committee"). Subject to the
provisions of the Plan, the Committee shall have the authority to:
(a) determine and designate from time to time those employees, consultants
and Directors of the Company or of any Subsidiary to whom options are to be
granted and the number of shares to be optioned to each such employee,
consultant or Director, provided, however, that no option shall be granted
after the expiration of the period of ten years from the effective date of the
Plan specified in Section 11;
(b) determine the term of any option (including extension by reason of
Optionee's death, permanent disability or retirement).
(c) extend the term of any option (including extension by reason of
Optionee's death, permanent disability or retirement).
B-1
<PAGE>
The Committee may interpret the Plan, prescribe, amend and rescind any rules
and regulations necessary or appropriate for the administration of the plan,
and make such other determinations and take such other action as it deems
necessary or advisable. Without limiting the generality of foregoing sentence,
the Committee may, in its discretion, treat all or any portion of any period
during which an Optionee is on military service or on an approved leave of
absence from the Company or a Subsidiary as a period of employment of such
Optionee by the Company or such Subsidiary, as the case may be, for purposes
of accrual of his rights under his option. Any interpretation, determination
or other action made or taken by the Committee shall be final, binding and
conclusive.
5. TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan shall
be evidenced by an agreement, in form approved by the Committee, which shall
be subject to the following express terms and conditions and to such other
terms and conditions as the Committee may deem appropriate:
(a) Option Period. Each option agreement shall specify the period for which
the option thereunder is granted and shall provide that the option shall
expire at the end of such period.
(b) Option Price. The option price per share shall be determined by the
Committee at the time any option is granted, and shall be not less than the
fair market value (but in no event less than the par value) of the Common
Stock of the Company on the date the option is granted, as determined by the
Committee.
(c) Exercise of Option. No part of any option may be exercised until the
Optionee shall have remained in the employ of the Company or of a subsidiary
as referred to in Section 2, for such period after the date on which the
option is granted as the Committee may specify in the option agreement, and
until such other conditions as specified in the option agreement shall be
satisfied. Subject in each case to the provisions of this Section 5, any
option may be exercised, to the extent exercisable by its terms, at such time
as may be determined by the committee at the time of grant.
(d) Payment of Purchase Price upon Exercise. The purchase price of the
shares as to which an option shall be exercised shall be paid to the Company
at the time of exercise either (i) in cash, or (ii) by delivering Common Stock
or securities of the Company already owned by the Optionee and having a total
fair market value on the date of such delivery equal to the purchase price or
(iii) delivering a combination of cash. Common Stock and securities of the
Company having a total fair market value on the date of such delivery equal to
the purchase price. In addition, the Optionee shall, upon notification of the
amount due and prior to or concurrently with the delivery to Optionee of a
certificate representing such shares, pay promptly any amount necessary to
satisfy federal, state or local tax requirements.
(e) Notice of Exercise. A person electing to exercise an option shall give
written notice to the Company of such election and of the number of shares he
has elected to purchase; provided that no option may be exercised as to fewer
than 100 shares unless it exercised as to all of the shares then purchaseable
thereunder.
(f) Exercise in the Event of Death or Termination of Employment.
(i) If an Optionee's employment by the Company or a Subsidiary shall
terminate because of disability (which term shall, for the purpose of the
Plan, mean complete and permanent inability by reason of illness or
accident to perform the duties of the occupation at which an Optionee was
employed by the Company or Subsidiary when such disability commenced, as
determined by the Committee) or because of his retirement with the consent
of the Company or a Subsidiary, he may exercise his option within one year
after the date of his termination of employment, to the extent that he
would have been entitled to do so
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had he continued in employment to the date one year after the date of the
termination of his employment, at any time, from time to time, but in no
event later than the expiration date specified under Section 5(a).
(2) If an Optionee shall die while an employee of the Company or a
Subsidiary, his option may be exercised within one year after the date of
his or her termination of employment, to the extent that the Optionee would
have been entitled to do so had he continued in employment to the date one
year after the date of his or her termination of employment, by reason of
his or her death, by the person or persons to whom the Optionee's rights
under the option pass by will or applicable law, or if no such person has
such right, by his or her executors or administrators, at any time, or from
time to time within twelve months after the date of the Optionee's
termination of employment by reason of death, retirement or disability, but
not later than the expiration date specified under Section 5(a).
(3) If an Optionee's employment shall terminate for any reason other than
death, disability or retirement as aforesaid, he or she may exercise his or
her option, to the extent that he may be entitled to do so at the date of
his termination of employment, at any time, or from time to time within
three months after the date of his or her termination of employment, but in
no event later than the expiration date specified under Section 5(a).
(4) For purpose of this Section 5(f), an option shall be deemed to be
exercisable by the Optionee on the date of his termination of employment to
the extent, if any, it becomes exercisable, by acceleration in the
discretion of the Committee or pursuant to a written agreement between the
Company and Optionee, within twelve months following such termination.
(g) Transferability of Options. No options granted under the Plan and no
right arising under any such option shall be transferable other than by will
or by the laws of descent and distribution. During the lifetime of the
Optionee, an option shall be exercisable only by him or her. An interest in an
option may be transferred pursuant to a qualified domestic relations order.
(h) Investment Representation. Each option agreement may contain an
understanding that, upon demand by the Committee for such a representation,
the Optionee (or any person acting under Section 5(f)) shall deliver to the
Committee at the time of any exercise of an option a written representation
that the shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof. Upon
such demand, delivery of such representation prior to the delivery of any
shares issued upon exercise of an option and prior to the expiration of the
option period shall be a condition precedent to the right of the Optionee or
such other person to purchase any shares.
(i) Compliance with Federal and State Statutes. No option granted pursuant
to this Plan shall be exercisable in whole or in part, nor shall the Company
be obligated to sell any shares of Common Stock subject to any such option, if
such exercise and sale would, in the opinion of counsel for the Company,
violate the Securities Act of 1933 (or other Federal or State statutes having
a similar requirement), as it may be in effect at that time. As an example but
not by way of limitation, counsel for the Company may require that the
certificates representing any shares of Common Stock issued pursuant to the
exercise of an option bear a legend in substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE FIRST BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS, IN THE
OPINION OF COUNSEL FOR THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED."
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(i) Adjustments in Event of Change in Common Stock. In the event of any
change in the Common Stock of the Company by reason of any stock dividend,
recapitalization, reorganization, merger consolidation, split-up, combination
or exchange of shares, or rights offering to purchase Common Stock at a price
substantially below fair market value, or of any similar change affecting the
Common Stock, the number and kind of shares which thereafter may be optioned
and sold under the Plan and the number and kind of shares subject to option
agreements and the purchase price per share thereof shall be appropriately
adjusted consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights granted
to, or available for, participants in the Plan.
(k) Optionees to Have No Rights as Stockholders. No Optionee shall have any
rights as a stockholder with respect to any shares subject to his option prior
to the date on which he is recorded as the holder of such shares on the
records of the Company.
(l) Plan and Option Not to Confer Rights with Respect to Continuance of
Employment. The Plan and any option granted under the Plan shall not confer
upon any Optionee any right with respect to continuance of employment by the
Company or any Subsidiary nor shall they interfere in any way with the right
of the Company or Subsidiary by which an Optionee is employed to terminate his
employment at any time.
(m) In no event may an individual option grant to any Participant exceed
100,000 shares in any year.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan, the grant and exercise of
options thereunder, and the obligation of the Company to sell and deliver
shares under such options, shall be subject to all applicable federal and
state laws, rules and regulations and to approvals by any government or
regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to (i) the
listing of such shares on any stock exchange on which the Common Stock may
then be listed and (ii) the completion on any regulation or qualification of
such shares under any federal or state law, or any ruling or regulation of any
government body which the Company shall, in its sole discretion, to determine
to be necessary or advisable.
7. AMENDMENT OR DISCONTINUANCE OF THE PLAN. The Board of Directors of the
Company (the "Board") may at any time amend, suspend or terminate the Plan;
provided, however, that subject to the provisions of Section 5(j), no action
of the Board may (i) increase the number of shares reserved for options
pursuant to Section 2, or (ii) permit the granting of any option at an option
price less than that determined in accordance with Section 5(b).
Without the written consent of an Optionee, no amendment, discontinuance or
termination of the Plan shall alter or impair any option previously granted to
him or her under the Plan.
8. LIMITATIONS FOR CERTAIN AFFILIATED COMPANIES. The following provisions
shall be effective solely for grants under this Plan to employees of an
affiliated company created under, or operating pursuant to, the laws of the
United Kingdom.
(a) Only employees and directors of such a company shall be eligible to
receive options pursuant to this Plan. Service companies and consultants to
such a company shall not be eligible to receive options hereunder.
(b) Only subsidiaries in which Tyco Toys, Inc. has an ownership interest of
51% or more, within the meaning of the Companies Act of the United Kingdom,
shall be eligible for participation in the Plan; employees of any subsidiary
of Tyco Toys, Inc. in which Tyco owns less than a 51% interest shall not be
eligible to receive grants hereunder.
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(c) The definition of "subsidiary" or "subsidiaries" in any grant made
hereunder to employees of an affiliated company in the United Kingdom shall be
deemed to mean a company qualified under Sections 8(a) and (b) of this Plan;
the definition of "subsidiary" as such term is used in any grant made
hereunder to employees of a United Kingdom company prior to the effective date
of this section shall, with the agreement of such employees, be deemed to be
limited to a company qualified under Sections 8(a) and (b) hereof.
9. GRANTS TO THE COMMITTEE. Upon election to the Committee by the Board of
Directors of the Company, each member of the Committee shall receive a grant
of options to purchase ten thousand (10,000) shares of Common Stock of the
Company on the terms and conditions set forth in Section 5 hereof, except
that:
(a) the option price shall be the fair market value of the Common Stock of
the Company on the date of such election, based on the closing price on a
national stock exchange (or the average of the high and low price quoted on
the National Association of Security Dealers Automated Quote system) on such
date;
(b) no minimum period of employment shall be specified under Section 5(c)
hereof;
(c) the period for which the option is granted shall be five (5) years.
Each member of the Committee shall receive on the anniversary of his
election to the Committee a grant of options to purchase five thousand (5,000)
shares of Common Stock of the company upon the terms and conditions set forth
herein.
This Section 9 shall not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
10. SIX MONTH HOLDING PERIOD. Options granted pursuant to the Plan, or
shares of Common Stock issuable upon exercise of options granted to the Plan,
may not be disposed of less than six months from the date such options are
granted.
11. EFFECTIVE DATE OF THE PLAN AND JURISDICTION. The effective date of the
Plan shall be April 1, 1992. This Plan shall be governed by the laws of the
State of Delaware.
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TYCO TOYS, INC.
DEFERRED STOCK UNIT PLAN
TYCO TOYS, INC. (the "Company") has adopted this Deferred Stock Plan,
effective as of January 1, 1995.
1. PURPOSE. The Tyco Toys, Inc. Deferred Stock Unit Plan (the "Plan") is
intended to advance the interests of the Company by providing certain senior
executive officers of the Company and its subsidiaries with an additional
incentive to promote the Company's success and to encourage them to remain in
the employ of the Company or a subsidiary of the Company. The Plan is intended
to conform to the provisions under Rule 16b-3 of the Exchange Act (as
hereinafter defined).
2. DEFINITIONS. Whenever used in the Plan, the following terms shall have
the meanings set forth below unless the context clearly requires a different
meaning:
(a) "APPLICABLE WITHHOLDING TAXES" means the aggregate amount of federal,
state and local income and payroll taxes that the Company is required to
withhold in connection with a distribution under the Plan.
(b) "AWARD" means an award of deferred stock under the Plan.
(c) "BENEFICIARY" means the person or entity determined to be a
Participant's beneficiary pursuant to Section 11 hereof.
(d) "BOARD" means the Board of Directors of the Company.
(e) "BOOK ACCOUNT" means a book account established on the records of the
Company for a Participant.
(f) "CHANGE OF CONTROL" means the occurrence of:
(i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as
that term is used for purposes of Sections 13(d) or 14(d) of the Exchange
Act) other than the Company or any of its affiliates, immediately after
which such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 under the Exchange Act) of more than fifty percent of the combined
voting power of the Company's then outstanding Voting Securities; provided,
however, in determining whether a Change of Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause
a Change of Control. A "Non-Control Acquisition" shall mean an acquisition
by (A) an employee benefit plan (or a trust forming a part thereof)
maintained by (1) the Company or (2) any corporation or other Person of
which a majority of its voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (B) the Company or its Subsidiaries or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined).
(ii) The individuals who, as of January 1, 1995, are members of the Board
(the "Incumbent Board") cease for any reason to constitute at least two-
thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement,
be considered as a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the Incumbent
Board if such individual initially
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assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a person other than the Board (a "Proxy Contest"), including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy
Contest.
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the Company,
unless
(1) the stockholders of the Company immediately before such
merger, consolidation or reorganization own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least sixty percent of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation or reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation, and
(3) no Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of more
than fifty percent of the then outstanding Voting Securities) has
Beneficial Ownership of more than fifty percent of the combined
voting power of the Surviving Corporation's then outstanding voting
securities.
A transaction described in clauses (1) through (3) shall herein be referred
to as a "Non-Control Transaction";
(B) A complete liquidation or dissolution of the Company; or
(C) The sale or other disposition of 50% or more of the net assets of
the Company to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person;
provided that if a Change of Control would occur (but for the operation of
this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change of Control shall
occur.
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "COMMITTEE" means the committee appointed by the Board to administer the
Plan.
(i) "COMPANY STOCK" means the Common Stock, par value $.01, of the Company.
(j) "DISABILITY" means becoming physically or mentally disabled so that such
Participant is unable to perform the services required pursuant to his or her
employment with the Company or a Subsidiary for a period of six successive
months, or an aggregate of six months in any twelve-month period.
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(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "INSIDER" means a person subject to Section 16(b) of the Act.
(m) "PARTICIPANT" means a senior executive officer of the Company or a
subsidiary who has been selected by the Committee to participate in the Plan.
(n) "PLAN" means this Deferred Stock Plan, as it may be amended from time to
time.
(o) "RETIREMENT" means retirement by a Participant on or after attaining age
63 while such Participant is employed by the Company or a Subsidiary.
(p) "RULE 16B-3" means Rule 16b-3 under the Exchange Act, including any
corresponding subsequent rule or any amendments to Rule 16b-3 enacted after
the effective date of the Plan.
3. ELIGIBILITY. The Committee may grant Awards to certain senior executive
officers of the Company and its Subsidiaries who have rendered, and who are
expected to continue to render, valuable services to the Company and its
Subsidiaries. The Committee shall choose the Participants and shall determine
the value of each Award to be granted and the vesting schedule and other terms
of the Award.
4. AWARDS.
(a) The amount of an Award shall be determined as a number of hypothetical
shares of Company Stock as determined by the Committee. The Company shall
establish a Book Account on its records for each Participant and shall credit
to a Participant's Book Account the number of hypothetical shares of Company
Stock granted to such Participant pursuant to the Award. No actual shares of
Company Stock or other certificates shall be issued when an Award is granted.
(b) Awards pursuant to the Plan shall be evidenced by written documents (the
"Award Documents") in such form as the Committee shall approve from time to
time. Such Award Documents shall comply with and be subject to the terms and
conditions which the Committee shall require from time to time which are not
inconsistent with the terms of the Plan. The Committee shall have the right to
amend the Award Documents issued to a Participant subject to the Participant's
consent.
5. DIVIDENDS AND VOTING RIGHTS.
(a) Subsequent to the time an Award (or any part of an Award) becomes
vested, dividends that would be payable with respect to that portion of a
Participant's hypothetical shares of Company Stock that are vested if such
shares were issued and outstanding shares of Company Stock will be credited
for the benefit of the Participant as follows: As of the last day of each
fiscal year of the Company, each Participant's Book Account shall be adjusted
to take into account dividends that were declared on Company Stock during the
fiscal year. The Committee shall first determine the amount of dividends that
were declared as of each record date during the fiscal year with respect to
shares of Company Stock equal to the number of vested hypothetical shares of
Company Stock that were credited to the Participant's Bank Account as of the
record date. The total dividends shall then be converted into additional
vested hypothetical shares of Company Stock by dividing the amount of the
dividends by the fair market value of the Company Stock on the last business
day of the fiscal year, and the nearest whole number of hypothetical shares of
Company Stock so determined shall be credited to the Participant's Book
Account.
(b) For the year in which the final payment is to be made from a
Participant's Book Account, dividends shall be credited to the Participant's
Book Account as of the date of the final payment.
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Dividends will be credited in a manner similar to that described above, based
on the amount of dividends declared on Company Stock since the last day of the
preceding fiscal year and the fair market value of Company Stock at the time
payment is made.
(c) Until such time as an Award is vested, no participant shall be entitled
to receive or be credited with any dividends or hypothetical dividends
attributable to the shares of Company Stock that are the subject of an Award.
No Participant shall in any event be entitled to exercise the voting rights
attributable to the shares of Company Stock underlying an Award unless and
until such Award is paid to the Participant in the form of actual shares of
Company Stock.
6. VESTING; FORFEITURE.
(a) A Participant's interest in the amount credited to his Book Account from
time to time shall become vested in accordance with a vesting schedule
established by the Committee. The vesting schedule may provide for immediate
vesting for all or part of an Award or may provide that a Participant's
interest shall become vested in increments over a period of time determined by
the Committee and may require that certain performance goals are achieved. The
Committee may establish a different vesting schedule for each Participant.
(b) If there is a Change of Control or if a Participant ceases employment
with the Company and its Subsidiaries as a result of death, Disability,
Retirement, termination by the Company without Cause (as hereinafter defined)
or, with respect to any Participant whose employment is governed by an
employment agreement which provides for Participant to terminate his or her
employment for "Good Reason", if the Participant terminates his or her
employment with the Company and its Subsidiaries for "Good Reason" (as defined
in such Participant's employment agreement), or by reason of the expiration of
Participant's employment agreement, if any, without an offer of continued
employment by the Company or any Subsidiary (collectively, an "Event"), such
Participant (or his or her beneficiary) shall be entitled to the sum of (i)
such Participant's vested interest in his or her Book Account on the date of
such Event (to the extent not previously paid) (determined without regard to
this Section 6(b)) plus (ii) a pro-rata share of the remainder of his or her
Book Account based on the number of years and months of employment completed
by the Participant during the period commencing with the date of the grant of
the applicable Award and ending on the date of the Event divided by the period
over which the Award is to vest under the terms of the Award. The balance of
the Participant's non-vested interest shall be forfeited. Except as provided
in the preceding two sentences, upon termination of employment with the
Company and its Subsidiaries for any reason, a Participant's non-vested
interest in his or her Book Account shall be forfeited. Termination for
"Cause" shall mean termination of employment by the Company or a Subsidiary
because of a Participant's (i) intentional failure to perform his or her
assigned duties, (ii) willful misconduct in the performance of his or her
duties, or (iii) willful violation of any law, rule or regulation in
connection with the performance of his or her duties (other than a
misdemeanor) or a violation of any law, rule or regulation involving matters
of moral turpitude, including any such violation or misdemeanor. For purposes
of this Plan, Participants who were hired on or before the fifteenth day of
the month shall be treated as being employed on the first day of the calendar
month in which they were hired. All other Participants shall be treated as
employed on the first day of the calendar month following their date of hire.
Similarly, a Participant shall be deemed to have completed a month of
employment if he or she works until at least the fifteenth day of the month.
7. ELECTION OF FORM OF PAYMENT. When the Committee determines that an Award
is to be granted, the Committee shall give the Participant an opportunity to
elect, from the forms of payment described below, the form in which the amount
credited to his or her Book Account is
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to be paid. All payments under the Plan shall be made as soon as practicable.
The Participant must make the election in writing when first notified that he
or she will be granted an Award. The election shall be irrevocable and may not
be modified by the Participant. All elections under this Section 7 shall be
made subject to the provisions of Section 10.
(a) INSTALLMENT FORM. The amount credited to a Participant's Book Account
will be paid to the Participant in increments as it becomes vested.
(b) DEFERRED PAYMENT FORM. The vested amount credited to a Participant's
Book Account will be paid to the Participant in substantially equal annual
installments commencing as soon as practicable following his or her retirement
from employment with the Company and its Subsidiaries at or after age 63. At
the time the Participant makes this election, the Participant shall designate
the period over which the installment payments will be made. The Committee
will have discretion to modify the form of installment payment designated by
the Participant, if the Committee deems such a modification to be appropriate
and in the best interests of the Company. If a Participant elects the Deferred
Payment Form of payment and dies after the installment payments begin, the
remaining installments will be paid to the Participant's Beneficiary according
to the schedule of installments designated by the Participant.
8. TERMINATION OF EMPLOYMENT. If a Participant dies or his or her employment
with the Company and its Subsidiaries otherwise terminates before the
Participant reaches age 63, any portion of the Participant's vested interest
in his or her Book Account that has not previously been distributed and has
not otherwise been forfeited under the terms of the Plan or the Award shall be
paid to the Participant (or, in the case of death, to the Participant's
Beneficiary) as follows:
(a) Unless the Committee determines otherwise, if (i) the Participant's
termination of employment occurs because of death, Disability or after the
Participant has attained at least age 55 and (ii) the Participant elected the
Deferred Payment Form of payment pursuant to Section 7(b), then the
Participant's vested interest in his or her Book Account shall be paid in the
manner so elected by the Participant pursuant to Section 7(b).
(b) In all other cases, the distributable amount shall be paid in
substantially equal annual installments over a seven-year period commencing as
soon as practicable following the Participant's termination of employment, or
in such other form of payment, within a period not exceeding ten years, as the
Committee shall determine.
9. PAYMENT.
(a) The Committee shall determine whether a payment shall be made (i) in
whole shares of Company Stock equal to the number of hypothetical whole shares
of Company Stock credited to the Participant's Book Account or (ii) in a
combination of whole shares of Company Stock and cash, in such proportions as
the Committee deems appropriate. When a payment is made partly in cash, the
hypothetical shares of Company Stock then credited to the Participant's Book
Account shall be valued, for purposes of the payment, at the fair market value
of a share of Company Stock at the time the payment is made. The Committee
shall have sole discretion to determine the form of payment.
(b) Notwithstanding anything in the Plan to the contrary, the Company shall
not be required to issue or deliver any certificate for shares of Company
Stock before (i) the admission of such shares to listing on any stock exchange
on which the Company Stock may then be listed, (ii) completion of any required
registration or other qualification of such shares under state or federal laws
or regulations that the Committee shall, in its sole discretion, determine is
necessary or advisable, and (iii) the Committee shall have been advised by
counsel that all applicable legal requirements have been complied with.
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(c) All benefits under the Plan shall be paid subject to required Applicable
Withholding Taxes. Applicable Withholding Taxes will automatically be withheld
from all payments.
10. DEFERRAL OF PAYMENT.
(a) The Committee shall defer payment of a Participant's Plan benefit to the
extent that the sum of (i) the Participant's Plan benefit plus (ii) all other
"compensation" (as defined for purposes of Section 162(m) of the Code) with
respect to the Participant for the taxable year in which the Plan benefit
would otherwise be deductible, may not be deductible by the Company by reason
of Section 162(m) of the Code, as determined by the Committee in its sole
discretion. A benefit deferred pursuant to this Section 10(a) shall be paid in
subsequent taxable years of the Company to the extent that the sum of the
Participant's deferred Plan benefit and all other "compensation" with respect
to the Participant would not be nondeductible by the Company by reason of
Section 162(m) of the Code. This Section 10(a) shall apply only to the extent
that the Committee determines in its sole discretion that the deferral could
allow the Plan benefits to be deductible in a future year.
(b) The Committee may defer payment of part or all of a Plan benefit with
respect to a Participant who is an Insider, to the extent necessary or
appropriate to comply with Rule 16b-3.
(c) The Committee shall have sole discretion to determine whether and to
what extent Plan benefits are to be deferred pursuant to this Section 10 and
when deferred payments shall be made. The Committee's determination shall be
final and binding.
11. BENEFICIARY. A Participant may designate, on a form provided by the
Committee, one or more Beneficiaries to receive any payments that are to be
made under the Plan after the Participant's death. If a Participant makes no
valid designation, or if the designated Beneficiary fails to survive the
Participant or otherwise fails to receive the benefits, then the Participant's
Beneficiary shall be the first of the following persons who survives the
Participant: (a) the Participant's spouse (that is, the person to whom the
Participant is legally married when the Participant dies); (b) the
Participant's surviving descendants, PER STIRPES; or (c) the Participant's
estate.
12. FAIR MARKET VALUE OF COMPANY STOCK. For purposes of the Plan, fair
market value of a share of Company Stock on a given day shall be, if the
shares of Company Stock are listed on a national securities exchange or
included in the Nasdaq National Market, the last reported sale price thereof
on the relevant date, or, if the shares are not so listed or included, the
mean between the last reported "bid" and "asked" prices thereof, as reported
on Nasdaq or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc., or as reported in a customary financial reporting service, as
applicable and as the Committee determines, on the relevant date; and if the
Company Stock is not traded in a public market on the relevant date, the fair
market value of a share of Company Stock shall be as determined in good faith
by the Committee.
13. ADMINISTRATION.
(a) The Plan shall be administered by a Committee of two or more directors
of the Company, who shall be appointed by the Board. If and to the extent
required by Rule 16b-3, the Committee shall consist solely of disinterested
persons as that term is defined in Rule 16b-3. If any member of the Committee
fails to qualify as a disinterested person, such person shall immediately
cease to be a member of the Committee and shall not take part in future
Committee deliberations. The Board from time to time may appoint members of
the Committee and may fill vacancies, however caused, in the Committee.
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(b) The Committee may adopt rules and regulations from time to time for
carrying out the Plan. The Committee may impose such restrictions and
requirements on Awards as it deems appropriate to ensure compliance with Rule
16b-3.
(c) The Committee has the express discretionary authority to construe and
interpret the Plan and any Awards, to resolve any ambiguities, to define any
terms, to make determinations with respect to the eligibility for or amount of
benefits, and to make any other determinations required by the Plan. The
interpretation and construction of the Plan's provisions and the provisions of
an Award document by the Committee shall be final and conclusive. All actions
of the Committee shall be binding and conclusive on all persons for all
purposes.
(d) Service on the Committee shall constitute service as a member of the
Board. Each member of the Committee shall be entitled without further act to
indemnity from the Company to the fullest extent provided by applicable law
and the Company's Certificate of Incorporation and/or By-laws in connection
with or arising out of any action, suit or proceeding with respect to the
administration of the Plan or the granting of Awards thereunder in which he or
she may be involved by reason of his or her being or having been a member of
the Committee, whether or not he or she continues to be a member of the
Committee at the time of the action, suit or proceeding.
14. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation or other change in the Company's
capital stock, the number and kind of shares of stock, other securities or
property to be issued under the Plan, the number and kind of hypothetical
shares of stock or other securities allocated to Book Accounts, and any other
relevant provisions shall be appropriately adjusted by the Committee. If the
adjustment would produce fractional shares with respect to any Award, the
Committee may adjust appropriately the number of shares covered by the Award
so as to eliminate the fractional shares.
(d) In the event the Company distributes to its stockholders as a dividend,
or sells or causes to be sold to a Person other than the Company or a
subsidiary or affiliate, shares of stock in any corporation (a "Spin-off
Company") which, immediately before the distribution or sale, was a majority-
owned subsidiary of the Company, the Committee shall have the power, in its
sole discretion, to make such adjustments as the Committee deems appropriate.
The Committee may make adjustments in the number and kind of shares, the
securities or property to be issued under the Plan, the number and kind of
hypothetical shares of stock or other securities allocated to Book Accounts,
and any other relevant provisions, and, without limiting the foregoing, may
substitute securities of the Spin-off Company for securities of the Company.
The Committee shall make such adjustments as it determines to be appropriate,
considering the economic effect of the distribution or sale on the interests
of the Company's stockholders and the Participants in the businesses operated
by the Spin-off Company. The Committee's determination shall be binding on all
persons. If the adjustment would produce fractional shares with respect to any
Award, the Committee may adjust appropriately the number of shares covered by
the Award so as to eliminate the fractional shares.
(c) Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for
all purposes. The Committee shall make its determinations consistent with Rule
16b-3 and the applicable provisions of the Code.
15. NUMBER. Up to 2,000,000 shares of Company Stock may be issued pursuant
to the Plan, subject to the provisions of Section 14.
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16. CLAIMS PROCEDURE.
(a) Each Participant (or Beneficiary of a deceased Participant) shall be
entitled to file with the Committee a written claim for benefits under the
Plan. The Committee will review the claim. If the claim is denied, in whole or
in part, the Committee will furnish the claimant, within 90 days after the
Committee's receipt of the claim (or within 180 days after such receipt, if
special circumstances require an extension of time), a written notice of
denial of the claim containing the following:
(i) Specific reasons for the denial;
(ii) Specific reference to the pertinent Plan provisions on which the
denial is based;
(iii) A description of any additional material or information necessary
for the claimant to perfect the claim, and an explanation of why the
material or information is necessary; and
(iv) An explanation of the claims review procedure.
(b) The claimant may request a review of the claim denial by an appeals
committee appointed by the Board. The review may be requested in writing at
any time within 90 days after the claimant receives written notice of the
denial of his or her claim. The committee shall afford the claimant a full and
fair review of the decision denying the claim and, if so requested, shall:
(i) Permit the claimant to review any documents that are pertinent to the
claim;
(ii) Permit the claimant to submit to the committee issues and comments
in writing; and
(iii) Afford the claimant an opportunity to meet with a quorum of the
committee as part of the review procedure.
The committee's decision on review shall be made in writing and shall be
issued within 60 days following receipt of the request for review. The period
for decision may be extended to a date not later than 120 days after such
receipt if the committee determines that special circumstances require an
extension. The decision on review shall include specific reasons for the
decision and specific references to the Plan provisions on which the decision
of the committee is based.
(c) Any claim not otherwise resolved under this Agreement shall be settled
by arbitration to be held in Philadelphia, Pennsylvania in accordance with the
rules of the American Arbitration Association then obtaining. The
determination of the arbitrator(s) shall be delivered in writing to the
claimant and the Company and shall be final, binding and conclusive upon all
of the parties hereto.
17. RIGHTS UNDER THE PLAN. Title to and beneficial ownership of all benefits
described in the Plan shall at all times prior to the payment thereof remain
with the Company. Participation in the Plan, the crediting of amounts to Book
Accounts, and the right to receive payments under the Plan shall not give a
Participant or Beneficiary any proprietary interest in the Company, any
Subsidiary or any of their assets. No trust fund shall be created in
connection with the Plan, and there shall be no required funding of amounts
that may become payable under the Plan. A Participant and his Beneficiary
shall, for all purposes, be general creditors of the Company. The interests of
a Participant and his Beneficiary in the Plan cannot be assigned, anticipated,
sold, encumbered or pledged and shall not be subject to claims of their
creditors.
18. CONTINUED EMPLOYMENT. NOTHING IN THE PLAN SHALL CONFER UPON ANY
PARTICIPANT THE RIGHT TO CONTINUE IN THE EMPLOY OF THE COMPANY OR ANY
SUBSIDIARY OR SHALL INTERFERE WITH OR RESTRICT IN ANY WAY THE RIGHTS OF THE
COMPANY AND ITS SUBSIDIARIES TO DISCHARGE AN EMPLOYEE AT ANY TIME FOR ANY
REASON WHATSOEVER, WITH OR WITHOUT CAUSE.
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19. TERMINATION OF THE PLAN. Awards may be granted at any time until the
Plan is terminated by the Board, or until such earlier date when termination
of the Plan shall be required by applicable law.
20. AMENDMENTS. The Board may from time to time make such changes in and
additions to the Plan as it may deem proper; provided that, if and to the
extent required by Rule 16b-3, no change shall be made that increases the
number of shares of Company Stock that may be issued under the Plan (except
pursuant to Section 14), expands the class of persons eligible to receive
Awards, or materially increases the benefits accruing to Participants under
the Plan, unless such change is authorized by the Company's stockholders. The
Board may unilaterally amend the Plan as it deems appropriate to ensure
compliance with Rule 16b-3 or other applicable law. Except as provided in the
preceding sentence, the termination of the Plan or any change or addition to
the Plan shall not, without the consent of a Participant who is adversely
affected thereby, alter any Awards previously granted to the Participant.
21. EFFECTIVE DATE. The Plan shall be effective as of January 1, 1995,
subject to the approval of the stockholders of the Company.
22. SUCCESSORS. The Plan shall be binding upon the Participants and their
Beneficiaries and personal representatives. If the Company becomes a party to
any merger, consolidation, reorganization or other corporate transaction, the
Plan shall remain in full force and effect as an obligation of the Company or
its successor in interest.
23. CONSTRUCTION. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware.
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TYCO TOYS, INC.
EXECUTIVE BONUS PLAN
Tyco Toys, Inc. hereby establishes the Tyco Toys, Inc. Executive Bonus Plan
(the "Plan"), effective January 1, 1995.
1.PURPOSE. The Tyco Toys, Inc. Executive Bonus Plan (the "Plan") is intended
as an additional incentive to certain executive employees (each, an
"Executive") to earn incentive compensation based on his or her individual
performance and/or the financial performance of Tyco Toys, Inc. (the
"Company"), its Subsidiaries (as hereinafter defined) and its business
divisions (each such business division hereinafter referred to as a
"Division").
2.DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "BONUS" means the amount of incentive compensation (including Common
Stock) that is payable to a Participant under the Plan with respect to any
Bonus Year.
(c) "BONUS YEAR" means the calendar year with respect to which the amount of
a Bonus is determined.
(d) "CLOSING PRICE" means, if the shares of Common Stock are listed on a
national securities exchange or included in the Nasdaq National Market, the
last reported sale price thereof on the relevant date, or, if the shares are
not so listed or included, the mean between the last reported "bid" and
"asked" prices thereof, as reported on Nasdaq or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc., or as reported in a
customary financial reporting service, as applicable and as the Committee
determines, on the relevant date; and if the Common Stock is not traded in a
public market on the relevant date, the fair market value of a share of Common
Stock as determined in good faith by the Committee.
(e) "COMMITTEE" means the committee appointed by the Board to administer the
Plan.
(f) "COMMON STOCK" means the Company's common stock, par value $0.01 per
share.
(g) "DISABILITY" means becoming physically or mentally disabled so that such
Participant (as hereinafter defined) is unable to perform the services
required pursuant to his or her employment with the Company or a Subsidiary
for a period of six successive months, or an aggregate of six months in any
twelve-month period.
(h) "EXECUTIVE OFFICER" means those Participants designated by the Committee
to be subject to the provisions of Section 7 of the Plan requiring such
Executive Officers to receive a portion of their Bonus in the form of
Restricted Stock.
(i) "PLAN" means this Executive Bonus Plan, as the same may be amended from
time to time.
(j) "RESTRICTED STOCK" or "Restricted Shares" means the shares of Common
Stock issued to Participants under the terms of the Plan subject to such
restrictions and conditions of forfeiture as may be imposed at the discretion
of the Committee.
(k) "TARGET" means the achievement by the Company or by any Subsidiary or
Division of the Company, as the case may be, of a level of performance
measured by reference to objective criteria as determined from time to time by
the Committee. The Target applicable to any
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Participant who is a "covered employee" as that term is defined in Section
162(m)(3) of the Code, shall be a level of net income of the Company as
reflected in the Company's audited financial statement or a level of earnings
before interest, taxes, depreciation and amortization of the Company
(hereinafter referred to as "EBITDA") at a level specified by the Committee
for the Bonus Year. With respect to such "covered employees", the Target shall
be selected by the Committee within the first 90 days of each Bonus Year. With
respect to all Participants who are not "covered employees," the Committee
shall select an appropriate Target or Targets for the Company and for the
separate Subsidiaries and/or Divisions of the Company as required for purposes
of the Plan and as are appropriate for the specific Participant, all
determined at the discretion of the Committee. In the event there is an
acquisition or divestiture, the Target level will be adjusted by the Committee
to reflect such an event.
(l) "TARGET BONUS" means an amount equal to the product of the Target Bonus
Percentage and the Participant's annual base compensation in effect as of the
beginning of the Bonus Year.
(m) "TARGET BONUS PERCENTAGE" means ninety percent (90%) or such lower
percentage as may be determined by the Committee.
(n) "MULTIPLIER" means the factor determined under the provisions of section
5 used in determining the portion of a Participant's Target Bonus that will
become payable in accordance with the Plan.
3.ADMINISTRATION.
(a) COMMITTEE. This Plan shall be administered by a Committee of two or more
directors of the Company, each of whom shall be an "outside director" as that
term is used for purposes of Section 162(m) of the Code, who shall be
appointed by the Board. The Committee shall hold meetings at such times and
places as it may determine. Acts approved by a majority of the members of the
Committee shall be the valid acts of the Committee. The interpretation and
construction by the Committee of any provision of the Plan or of any
Restricted Stock Award (as hereinafter defined) awarded hereunder shall be
final, binding and conclusive.
(b) INDEMNIFICATION. Service on the Committee shall constitute service as a
member of the Board. Each member of the Committee shall be entitled without
further act to indemnity from the Company to the fullest extent provided by
applicable law and the Company's Certificate of Incorporation and/or By-laws
in connection with or arising out of any action, suit or proceeding with
respect to the administration of the Plan or the granting of Bonuses
thereunder in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to
be a member of the Committee at the time of the action, suit or proceeding.
4.ELIGIBILITY. Each person who is employed by the Company or any Subsidiary in
an executive or key management position and who is designated by the Committee
to be eligible to participate in the Plan shall be a participant in the Plan
(a "Participant") effective as of the date determined by the Committee. Each
Participant shall be eligible to participate in the Plan for all or any
portion of the Bonus Year as to which such person qualified as a Participant.
Any Participant who is initially hired by the Company or any Subsidiary during
a Bonus Year or whose employment with the Company and its Subsidiaries is
terminated during a Bonus Year for any reason other than for Cause (as
hereinafter defined) or by reason of such Participant's voluntary resignation,
shall be eligible for a pro-rated Bonus based on that portion of the Bonus
Year equal to the number of months such person was employed by the Company
divided by twelve (12). For this purpose, any Participant hired on or before
the 15th day of a month shall be treated as employed as of the first day of
the calendar month in which such Participant was
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hired. Any other Participant shall be treated as employed as of the first day
of the calendar month following such Participant's date of hire. Any
Participant whose employment with the Company or an Affiliate terminates
during the Bonus Year for Cause, or by reason of such Participant's voluntary
resignation shall cease to participate in the Plan effective on the date of
such termination and shall not be entitled to receive any benefits under the
Plan attributable to such Bonus Year.
5.BONUS AWARDS.
(a) BONUS CATEGORIES. There shall be two categories of Participants: (i) top
corporate executives (hereinafter referred to as "Top Corporate Executives"),
and (ii) all other Participants. The Committee shall designate the applicable
category for each Participant. Notwithstanding anything to the contrary
contained in the Plan, the Committee shall designate the Participants who are
to be Top Corporate Executives within 90 days of the commencement of the
relevant Bonus Year.
(b) BONUSES FOR TOP CORPORATE EXECUTIVES. The Bonus payable to Participants
who are Top Corporate Executives shall be determined on the basis of the
Target applicable to the Company as determined by the Committee in accordance
with Section 2(k) above. Each Participant who is a Top Corporate Executive
shall be entitled to a Bonus equal to the product of the Target Bonus for such
Participant and the multiplier as hereinafter described (the "Multiplier").
The Multiplier for any Bonus Year will be zero if the percentage of the Target
achieved is less than 80%, .50 if the percentage of the Target achieved is at
least 80%, but less than 90%, .75 if the percentage of the Target achieved is
at least 90% but less than 100%, 1.00 if the percentage of the Target achieved
is at least 100% but less than 120%, and 1.50 if the percentage of the Target
achieved equals or exceeds 120% of the Target.
(c) BONUSES FOR ALL OTHER PARTICIPANTS. The Bonus payable to all
Participants whose Bonuses are not determined under Section 5(b) above shall
be determined on the basis of the Target or Targets applicable to the Company
and to the Division(s) or Subsidiary(ies) which the Committee designates to be
an appropriate measure of such Participant's performance, all as determined at
the discretion of the Committee in accordance with Section 2(k) above. Each
Bonus which is determined under this Section 5(c) shall be equal to the sum of
(a) the product of the Target Bonus for such Participant and the
Division/Subsidiary Multiplier(s) and (b) the product of the Target Bonus for
such Participant and the Company Multiplier. The Division/Subsidiary
Multiplier(s) and the Company Multiplier for each such Participant shall be
based on the extent to which the Target for the Division or Subsidiary of the
Company and the Target for the Company is achieved. The relationship between
such Targets and the Multipliers for such Participants shall be determined at
the discretion of the Committee. Notwithstanding anything contained in this
Section 5(d), the senior management of the Company may, at their discretion,
withhold a portion of the Bonus otherwise payable to any Participant whose
Bonus is determined under this Section 5(c) equal to any amount up to 25% of
such Participant's Target Bonus without regard to the extent to which either
the Company or any Division or Subsidiary has achieved its Target.
(d) ANNUAL LIMITATIONS. Notwithstanding anything to the contrary contained
in the Plan, no Participant shall receive more than $1,500,000 as a Bonus
under the Plan during any calendar year.
6.CASH DISTRIBUTIONS.
PAYMENT DATE. Except as otherwise provided under Section 7, Bonuses shall be
payable on or about the March 31 which immediately follows the end of the
Bonus Year.
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7.RESTRICTED STOCK AWARDS.
(a) PORTION OF BONUS PAYABLE IN RESTRICTED STOCK.
(i) A portion (the "Applicable Percentage") of each Executive Officer's
Bonus for each Bonus Year (such portion to be designated as a percentage
within the first 90 days of each Bonus Year at the discretion of the
Committee) shall be paid in Restricted Stock as described herein. Subject
to the provisions of the Plan, the Company shall award the Executive
Officer a Restricted Stock Award (as hereinafter defined) equal to the
number of shares (rounded down to the nearest whole number) calculated in
the following manner:
(A) An amount shall be calculated equal to the Applicable Percentage
of the Executive Officer's Bonus.
(B) The amount calculated under subsection 7(a)(1)(A) above for the
Executive Officer shall then be divided by 80% of the "Average Value"
(as hereinafter defined) of a share of Company Common Stock determined
as of the March 31 of the year following the applicable Bonus Year (the
"Pricing Date"). For these purposes, the "Average Value" shall mean the
average of the Closing Prices for a share of Company Common Stock
during the 30 day period immediately preceding the date for which the
Average Value is to be determined.
(ii) Participants shall be permitted to make an election (which election
shall be irrevocable) to receive a portion of such Participant's Bonus in
Restricted Stock (with respect to each Executive Officer, such election
shall be made with respect only to that portion of the Bonus not required
to be in Restricted Stock pursuant to subsection 7(a)(1) above). The
Participant shall make the election under this Section by executing, at
least six months prior to the Payment Date described in section 6 above,
such election form as may be provided by the Committee. Subject to the
provisions of the Plan, the Committee shall award Restricted Stock
("Restricted Stock Award") to an Executive equal to the number of shares
(rounded down to the nearest whole number) calculated in the following
manner:
(A) An amount shall be calculated equal to the "Elected Percentage"
(as hereinafter defined) of the Participant's Bonus (excluding the
portion, if any, covered under subsection 7(a)(1)(A)). For this
calculation, the "Elected Percentage" shall be that percentage (0%,
25%, 50%, 70%, 85% or 100%) irrevocably elected by the Participant for
the Bonus Year on an applicable form provided by the Committee for this
purpose.
(B) The amount calculated under subsection 7(a)(2)(A) above shall
then be divided by 80% of the Average Value of a share of Company
Common Stock determined as of the Pricing Date.
(iii) Notwithstanding anything contained herein to the contrary, any
Bonus payable under the provisions of the Plan to a Participant who is no
longer an employee of the Company or any Subsidiary shall be payable
exclusively in cash.
(b) VESTING. Except as provided in subsection 7(c), the Restricted Stock
awarded with respect to any Bonus Year shall be fully vested on the second
anniversary of the Pricing Date for such Restricted Stock; provided the
Participant is employed by the Company or a Subsidiary on the second
anniversary of the Pricing Date. The portion of any Bonus which is not payable
in Restricted Stock shall be paid in cash in accordance with Section 6 above.
All Restricted Stock which is not vested under this subsection 7(b) or
subsection 7(c) shall be forfeited by the Participant upon the last day of the
Participant's employment with the Company and may be used for other Restricted
Stock Awards under the Plan. Notwithstanding anything to the contrary
contained herein, until such time as the shares issued pursuant to the Plan
are vested, no Participant shall be entitled to exercise the voting rights or
to receive any of the dividends attributable to such shares.
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(c) ACCELERATION OF VESTING OF RESTRICTED SHARES ON THE OCCURRENCE OF
CERTAIN EVENTS. In the event of a Change of Control or if Participant ceases
employment with the Company and its Subsidiaries as a result of Participant's
death, Disability, Retirement on or after attaining age 63 ("Retirement"),
termination by the Company without Cause (as hereinafter defined) or, if
Participant's terms of employment are governed by an employment agreement
which provides for Participant to terminate Participant's employment for "Good
Reason", if Participant terminates employment with the Company and its
Subsidiaries for "Good Reason" (as defined in Participant's employment
agreement), or by reason of the expiration of Participant's employment
agreement, if any, without an offer of continued employment by the Company or
any Subsidiary (any such occurrence being referred to hereafter as an
"Event"), the Participant's Restricted Stock shall immediately become fully
vested. Termination for "Cause" shall mean termination of employment by the
Company or a Subsidiary because of a Participant's (i) intentional failure to
perform his or her assigned duties, (ii) willful misconduct in the performance
of his or her duties, or (iii) willful violation of any law, rule or
regulation in connection with the performance of his or her duties (other than
a misdemeanor) or a violation of any law, rule or regulation involving matter
of moral turpitude, including any such violation or misdemeanor. In the event
of the death of a Participant, amounts payable under the Plan shall be paid to
the Participant's estate. In the event the Participant's employment terminates
for any reason other than as previously described in this subsection 7(c) or
except as provided in subsection 7(f), the Participant shall receive an amount
payable in cash equal to the lesser of (i) the amount of the Bonus originally
allocated for the Restricted Stock or (ii) the Fair Market Value of the
Restricted Stock as of the date of such termination of employment.
(d) DOCUMENTS. Restricted Shares awarded pursuant to the Plan shall be
evidenced by the stock certificates described in Section 16 and such other
written documents (the "Restricted Stock Award Documents") in such form as the
Committee shall approve from time to time. Such Restricted Stock Award
Documents shall comply with and be subject to the terms, conditions and
restrictions which the Committee shall require from time to time which are not
inconsistent with the terms of the Plan. The Committee shall have the right to
amend the Restricted Stock Award Documents issued to a Participant subject to
the Participant's consent.
(e) CHANGE OF STATUS. In the event a Participant's status as an Executive or
as an Executive Officer changes during a Bonus Year, for purposes of
subsection 7(a)(1) such Participant shall be treated as having, throughout the
period of employment by the Company during such Bonus Year, the same status
that such Participant has as of January 1 of such Bonus Year.
(f) CHANGE OF CONTROL. "Change of Control" means the occurrence of:
(i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as
that term is used for purposes of Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) other than the
Company or any of its affiliates, immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 under the Exchange
Act) of more than fifty percent of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, in
determining whether a Change of Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a Change of Control.
A "Non-Control Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by (1) the
Company or (2) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (a "Subsidiary"), (B) the Company or
its Subsidiaries or (C) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined).
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(ii) The individuals who, as of January 1, 1995, are members of the Board
(the "Incumbent Board") cease for any reason to constitute at least two-
thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement,
be considered as a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule 14a-11 under
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest"), including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest.
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the Company,
unless
(1) the stockholders of the Company immediately before such
merger, consolidation or reorganization own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least sixty percent of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation or reorganization, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation, and
(3) no Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of more
than fifty percent of the then outstanding Voting Securities) has
Beneficial Ownership of more than fifty percent of the combined
voting power of the Surviving Corporation's then outstanding voting
securities.
A transaction described in clauses (1) through (3) shall herein be
referred to as a "Non-Control Transaction";
(B) A complete liquidation or dissolution of the Company; or
(C) The sale or other disposition of 50% or more of the net assets of
the Company to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person;
provided that if a Change of Control would occur (but for the operation of
this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change of Control shall
occur.
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(g) RECONSTRUCTION OF TARGET IN CERTAIN EVENTS. In the event there is a
Change of Control that results in a reorganization of the Company such that
the Company is no longer treated as a separate business, a pro-forma statement
for that Bonus Year shall be prepared reconstructing what the Target would
have been had the Company been treated as a separate business.
(h) PAYMENT FOLLOWING A CHANGE OF CONTROL. In the event of a Change of
Control, any awards that would otherwise be made in shares of Common Stock
under the terms of the Plan or pursuant to a Participant's election shall be
made in cash. The amount of such awards shall be equal to the amount of the
Participant's Bonus that would have been paid to the Participant in cash in
the absence of the provisions of Section 7. To the extent the Plan continues
in effect after a Change of Control, all awards with respect to Bonus Years
ending after the date of the Change of Control shall be made exclusively in
cash, and any provisions of the Plan or a Participant's election providing for
awards to be made in the form of Common Stock shall be without effect.
8.TRANSFER OF RESTRICTED SHARES. No Restricted Shares awarded under this Plan
may be transferred, pledged, or encumbered until such time as any such shares
become vested; provided, however, a Participant may transfer Restricted Shares
to his or her children, grandchildren or spouse or to one or more trusts for
the benefit of such family members or to partnerships in which such family
members are the only partners (a "Family Transfer"), provided that the
Participant receives no consideration for such Family Transfer and the
Restricted Shares transferred in such Family Transfer continue to be subject
to the same terms and conditions that were applicable to such Restricted
Shares immediately prior to the Family Transfer.
9.SHARES AVAILABLE UNDER THE PLAN. The maximum number of shares of Common
Stock available for Restricted Stock Awards under this Plan shall be 5,000,000
shares, adjusted for changes in the Company's capitalization.
10.AMENDMENT OF THE PLAN. The Committee may amend the Plan from time to time
in such manner as it may deem advisable; provided, however, that no amendment
to the Plan shall adversely affect any cash award or Restricted Stock Award
for any Bonus Year in which the amendment is adopted or any prior Bonus Year
without the consent of the Participant. Notwithstanding anything to the
contrary contained herein, no amendment shall be made to the Plan which
increases the benefits available under the Plan for any Executive Officer who
is an "Officer" as that term is defined in Rule 16a-1(f) under the Exchange
Act without the approval of the stockholders of the Company.
11.TERMINATION OF THE PLAN. The Board of Directors reserves the right to
terminate the Plan at any time; provided, however, that the termination of the
Plan shall not eliminate the obligation of the Company to make any cash award
for the Bonus Year during which such termination occurs or the vesting of any
Restricted Stock Award under the Plan granted prior to the termination of the
Plan.
12.NO CONTINUED EMPLOYMENT. THE AWARD OF A BONUS PURSUANT TO THIS PLAN SHALL
NOT BE CONSTRUED TO IMPLY OR TO CONSTITUTE EVIDENCE OF ANY AGREEMENT, EXPRESS
OR IMPLIED, ON THE PART OF THE COMPANY OR ANY SUBSIDIARY THEREOF TO RETAIN THE
PARTICIPANT IN THE EMPLOY OF THE COMPANY OR ANY SUBSIDIARY OR TO MODIFY THE
TERMS OF ANY EMPLOYMENT AGREEMENT WITH A PARTICIPANT, AND EACH SUCH
PARTICIPANT SHALL REMAIN SUBJECT TO DISCHARGE TO THE SAME EXTENT AS IF THIS
PLAN HAD NOT BEEN ADOPTED.
D-7
<PAGE>
13.WITHHOLDING OF TAXES. Whenever a Bonus is paid in cash and/or whenever a
Participant must otherwise include a Bonus or the Restricted Stock in income
for federal, state or local income tax purposes, the Company shall have the
right to (a) require the recipient to remit or otherwise make available to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for Restricted Stock or the distribution of any
Bonus or (b) take whatever action it deems necessary to protect its interests
with respect to tax liabilities, including, without limitation, withholding or
redeeming a portion of any Restricted Stock otherwise deliverable pursuant to
the Plan with a then Fair Market Value equal to such tax liabilities. The
Company's obligation to make any delivery or transfer of vested Restricted
Shares shall be conditioned on the Participant's compliance with any
withholding requirement to the Company's satisfaction.
14.ESTABLISHMENT OF RULES BY THE COMMITTEE. The Committee shall have the
authority to establish rules with respect to the Company's obligations in
connection with the withholding requirements described in Section 13 hereof so
that the conditions precedent set forth in Rule 16b-3 under the Exchange Act
for exempting any such transaction involving an Executive Officer are
satisfied.
15.TERMINATION FOR CAUSE. In the event any Participant's employment with the
Company is terminated for Cause, no awards or payments otherwise due to such
Participant under the Plan shall be made to such Participant after the date of
such termination, and all such awards or payments shall be forfeited (except
for any amounts receivable by the Participant under the last sentence of
subsection 7(c)). Restricted Stock which is forfeited under this provision may
be used to grant Restricted Stock to other Participants under the Plan without
any action by the Participant.
16.STOCK CERTIFICATES. The stock certificate(s) evidencing a Restricted Stock
Award shall be registered in the name of the Participant and shall bear a
legend referring to the terms, conditions and restrictions applicable to such
shares and shall be held by the Company until such time as such shares are
vested.
17.SUCCESSORS. The obligations to make any and all awards granted under the
Plan to the extent such awards have accrued shall be binding upon any
successor corporation or organization which shall succeed to substantially all
of the assets and business of the Company. The term "Company," whenever used
in the Plan, shall mean and include any such corporation or organization after
such succession.
18.RESTRICTION ON PAYMENTS OF BONUSES. Notwithstanding anything to the
contrary contained herein, no payment of any Bonus, whether paid in cash or in
Restricted Stock, shall be made at any time prior to approval of the Plan by
the Company's stockholders. In addition, no payment of any Bonus, whether paid
in cash or in Restricted Stock, shall be made until the Committee has
certified in writing that the performance goals and any other material terms
required under the provisions of the Plan for the payment of such Bonus have
been satisfied. This certification may be in the form of approved minutes of
the Committee or in an action by unanimous consent of the Committee or as
otherwise determined by the Committee.
19.FAIR MARKET VALUE OF COMPANY STOCK. For purposes of the Plan, fair market
value of a share of Company Stock on a given day shall be, if the shares of
Company Stock are listed on a national securities exchange or included in the
Nasdaq National Market, the last reported sale
D-8
<PAGE>
price thereof on the relevant date, or, if the shares are not so listed or
included, the mean between the last reported "bid" and "asked" prices thereof,
as reported on Nasdaq or, if not so reported, as reported by the National
Daily Quotation Bureau, Inc., or as reported in a customary financial
reporting service, as applicable and as the Committee determines, on the
relevant date; and if the Company Stock is not traded in a public market on
the relevant date, the fair market value of a share of Company Stock shall be
as determined in good faith by the Committee.
D-9
<PAGE>
APPENDIX E
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
OPTIONS/ OF STOCK AT PRICE AT OPTION TERM
SARS TIME OF TIME OF NEW REMAINING AT
REPRICED REPRICING REPRICING EXERCISE DATE OF
DATE OF OR AMENDED OR AMENDMENT OR AMENDMENT PRICE REPRICING OR
NAME/TITLE REPRICING (#) ($) ($) ($) AMENDMENT
---------- --------- ---------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
R. E. Grey 8/22/90 50,000 $14.94 $20.81 $14.94 4 yrs. 1 mo.
Chairman & 11/09/90 50,000 9.00 14.94 9.00 3 yrs. 11 mos.
CEO 11/09/90 50,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 100,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 200,000 9.00 17.50 9.00 2 yrs. 11 mos.
2/02/94 60,000 9.00 14.69 9.00 3 yrs. 9 mos.
H. J. Pearce 8/22/90 30,000 14.94 20.81 14.94 4 yrs. 1 mo.
Vice Chairman 11/09/90 30,000 9.00 14.94 9.00 3 yrs. 11 mos.
& CFO 11/09/90 30,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 60,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 40,000 9.00 14.69 9.00 3 yrs. 9 mos.
Jay Kahan 6/22/90 5,000 14.94 20.81 14.94 4 yrs. 1 mo.
Executive 11/09/90 5,000 9.00 14.94 9.00 3 yrs. 11 mos.
Vice President 11/09/90 5,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 15,000 9.00 14.69 9.00 3 yrs. 9 mos.
James Lenell 8/22/90 5,000 14.94 20.81 14.94 4 yrs. 1 mos.
Senior Vice 11/09/90 5,000 9.00 14.94 9.00 3 yrs. 11 mos.
President 11/09/90 5,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
B. J. Alley 8/22/90 5,000 14.94 20.81 14.94 4 yrs. 1 mo.
Executive Vice 11/09/90 5,000 9.00 14.94 9.00 3 yrs. 11 mos.
President 11/09/90 5,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos
2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
K. Malmos 8/22/90 5,000 14.94 20.81 14.94 4 yrs. 1 mo.
President -- 11/09/90 5,000 9.00 14.94 9.00 3 yrs. 11 mos.
International Division 11/09/90 5,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 15,000 9.00 14.69 9.00 3 yrs. 9 mos.
R. M. Kennedy, Jr. 8/22/90 2,000 14.94 20.81 14.94 4 yrs. 1 mo.
Senior Vice President 11/09/90 2,000 9.00 14.94 9.00 3 yrs. 11 mos.
11/09/90 5,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 14,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
M. J. Lyden 8/22/90 2,000 14.94 20.81 14.94 4 yrs. 1 mo.
President-- 11/09/90 2,000 9.00 14.94 9.00 3 yrs. 11 mos.
Tyco U.S. 11/09/90 3,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
OPTIONS/ OF STOCK AT PRICE AT OPTION TERM
SARS TIME OF TIME OF NEW REMAINING AT
REPRICED REPRICING REPRICING EXERCISE DATE OF
DATE OF OR AMENDED OR AMENDMENT OR AMENDMENT PRICE REPRICING OR
NAME/TITLE REPRICING (#) ($) ($) ($) AMENDMENT
---------- --------- ---------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
P. J. Weaver 8/22/90 2,000 $14.94 $20.81 $14.94 4 yrs. 1 mo.
Executive Vice President 11/09/90 2,000 9.00 14.94 9.00 3 yrs. 11 mos.
11/09/90 3,000 9.00 14.81 9.00 2 yrs. 9 mos.
2/02/94 20,000 9.00 15.03 9.00 2 yrs. 10 mos.
2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
J. Block 2/02/94 7,500 9.00 14.69 9.00 3 yrs. 9 mos.
Senior Vice President
M. Scheman 2/02/94 10,000 9.00 14.69 9.00 3 yrs. 9 mos.
Chairman &
CEO of
Playtime
Subsidiary
Robt. Rao 2/02/94 5,000 9.00 14.69 9.00 3 yrs. 9 mos.
Former
President
of Playtime
Subsidiary
Robt. Dorsee 8/22/90 2,000 14.94 20.81 14.94 4 yrs. 1 mo.
Former Vice 11/09/90 2,000 9.00 14.94 9.00 3 yrs. 11 mos.
President 11/09/90 3,000 9.00 14.81 9.00 2 yrs. 9 mos.
Benson A. Selzer 8/22/90 50,000 14.94 20.81 14.94 4 yrs. 1 mo.
Former 11/09/90 50,000 9.00 14.94 9.00 3 yrs. 11 mos.
Chairman 11/09/90 50,000 9.00 14.81 9.00 2 yrs. 9 mos.
John A. Selzer 8/22/90 50,000 14.94 20.81 14.94 4 yrs. 1 mo.
Former 11/09/90 50,000 9.00 14.94 9.00 3 yrs. 11 mos.
Secretary 11/09/90 50,000 9.00 14.81 9.00 2 yrs. 9 mos.
H. Freedhoff 11/09/90 2,000 9.00 14.94 9.00 4 yrs. 1 mo.
Former
President of
Canadian
Subsidiary
</TABLE>
E-2
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
TYCO TOYS, INC.
- --------------------------------------------------------------------------------
Proxy for the Annual Meeting of Shareholders on April 27, 1995.
- --------------------------------------------------------------------------------
The undersigned hereby appoints and authorizes Richard E. Grey and Harry J.
Pearce and each of them (with the Power of Substitution), Proxies for the
undersigned to represent and vote as designated below, all shares of common
stock of Tyco Toys, Inc. held of record by the undersigned on March 24, 1995, at
the Annual Meeting of Shareholders to be held on April 27, 1994 or any
adjournment thereof.
- --------------------------------------------------------------------------------
[_] For All Nominees 1. Election of Directors: Nominees for Term expiring
at the 1998 Annual Meeting
[_] Withhold Authority Harry J. Pearce
to vote for ALL Arnold Thaler
Timothy J. Danis
Nominees LaSalle D. Leffall, Jr.
- --------------------------------------------------------------------------------
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
------------------------------------------------
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
[_] [_] [_] 2. Proposal to amend the amended Articles of
Incorporation of the Company to provide for an
increase of the number of authorized shares to
75,000,000.
[_] [_] [_] 3. Proposal to amend the 1992 Non-Qualified Stock
Option Plan to provide for an increase in the
number of shares authorized to be used under the
Plan.
[_] [_] [_] 4. Approval of the Long-Term Incentive Plan for Senior
Executives Managers of the Company.
[_] [_] [_] 5. Approval of the Annual Incentive Plan for Executive
Managers of the Company.
[_] [_] [_] 6. In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the meeting.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction to the contrary is made, this Proxy
will be voted for the Nominees listed in Proposal 1, for Proposal 2, for
Proposal 3, for Proposal 4 and for Proposal 5.
This Proxy confers certain discretionary authority described in the Proxy
Statement. The undersigned hereby acknowledges receipt of the Proxy Statement
dated March, 1995 and the Annual Report to Stockholders for 1994.
Please mark, sign, date and return this Proxy promptly by using the enclosed
envelope.
++ ++ Dated: ___________________________, 1995
+ +
_________________________________ L.S.
+ +
++ ++ _________________________________ L.S.
(Note: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.)
