UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-5571
------------------------
TANDY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Throckmorton Street, Suite 1800, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 415-3700
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of the issuer's Common Stock, $1 par value, on
October 31, 1999 was 193,315,436.
Index to Exhibits is on Sequential Page No. 19. Total pages 41.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
(In millions, except per share amounts) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales and operating revenues $ 960.3 $1,128.6 $2,737.2 $3,579.7
Cost of products sold 473.9 676.3 1,332.1 2,187.4
-------- -------- -------- --------
Gross profit 486.4 452.3 1,405.1 1,392.3
-------- -------- -------- --------
Expenses (income):
Selling, general and administrative 361.4 394.9 1,041.5 1,162.9
Depreciation and amortization 23.1 25.0 65.4 77.3
Interest income (4.7) (2.5) (13.8) (5.7)
Interest expense 8.5 11.5 26.4 33.6
Provision for loss on sale of Computer City -- 30.0 -- 103.2
Restricted stock awards -- -- (5.1) --
-------- -------- -------- --------
388.3 458.9 1,114.4 1,371.3
-------- -------- -------- --------
Income (loss) before income taxes 98.1 (6.6) 290.7 21.0
Provision (benefit) for income taxes 38.3 (2.5) 113.4 8.1
-------- -------- -------- --------
Net income (loss) 59.8 (4.1) 177.3 12.9
Preferred dividends 1.4 1.5 4.2 4.4
-------- -------- -------- --------
Net income (loss) available to common shareholders $ 58.4 $ (5.6) $ 173.1 $ 8.5
======== ======== ======== ========
Net income (loss) available per common share:
Basic $ 0.30 $ (0.03) $ 0.89 $ 0.04
======== ======== ======== ========
Diluted $ 0.29 $ (0.03) $ 0.85 $ 0.04
======== ======== ======== ========
Shares used in computing earnings (loss) per
common share:
Basic 194.3 200.6 194.3 202.0
======== ======== ======== ========
Diluted 205.4 200.6 204.7 205.8
======== ======== ======== ========
Dividends declared per common share $ 0.05 $ 0.05 $ 0.15 $ 0.15
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
(In millions, except for share amounts) (Unaudited) (Unaudited)
- -------------------------------------- --------- -------- ---------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 54.3 $ 64.5 $ 47.4
Accounts and notes receivable, less allowance for
doubtful accounts 244.7 215.2 166.5
Inventories, at lower of cost or market 978.5 912.1 974.9
Other current assets 101.6 106.8 129.5
-------- -------- --------
Total current assets 1,379.1 1,298.6 1,318.3
Property, plant and equipment, at cost, less accumulated
depreciation 443.2 433.8 435.5
Other assets, net of accumulated amortization 323.9 261.2 213.7
-------- -------- --------
$2,146.2 $1,993.6 $1,967.5
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of
long-term debt $ 254.3 $ 233.2 $ 289.0
Accounts payable 224.9 206.4 227.6
Accrued expenses 263.3 334.4 236.3
Income taxes payable 137.7 105.5 2.9
-------- -------- --------
Total current liabilities 880.2 879.5 755.8
-------- -------- --------
Long-term debt, excluding current maturities 324.9 235.1 241.2
Other non-current liabilities 39.6 27.5 52.3
-------- -------- --------
Total other liabilities 364.5 262.6 293.5
-------- -------- --------
Common stock put options 25.2 3.3 --
Stockholders' Equity
Preferred stock, no par value, 1,000,000 shares authorized
Series A junior participating; 300,000 shares authorized
and none issued -- -- --
Series B convertible (TESOP), 100,000 shares authorized;
74,000, 77,000 and 78,000 shares outstanding, respectively 73.7 100.0 100.0
Common stock, $1 par value, 250,000,000 shares authorized;
235,840,000, 139,184,000 and 138,332,000 shares
issued, respectively 235.8 139.2 138.3
Additional paid-in capital 63.2 109.7 37.6
Retained earnings 1,247.4 1,693.4 1,655.7
Common stock in treasury, at cost; 42,593,000,
41,747,000, and 38,223,000 shares, respectively (716.5) (1,161.6) (982.3)
Unearned deferred compensation (23.3) (31.5) (29.8)
Accumulated other comprehensive loss (4.0) (1.0) (1.3)
-------- -------- --------
Total stockholders' equity 876.3 848.2 918.2
Commitments and contingent liabilities
-------- -------- --------
$2,146.2 $1,993.6 $1,967.5
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
---------------------
(In millions) 1999 1998
- ------------ -------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 177.3 $ 12.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 65.4 77.3
Adjustment to 1998 restricted stock awards (5.1) --
Provision for loss on sale of Computer City -- 103.2
Other items 19.7 35.6
Changes in operating assets and liabilities:
Receivables (1.3) 17.0
Inventories (64.5) 22.3
Other current assets 6.3 9.9
Accounts payable, accrued expenses and income taxes (8.5) (157.0)
-------- --------
Net cash provided by operating activities 189.3 121.2
-------- --------
Investing activities:
Additions to property, plant and equipment (71.2) (107.3)
Proceeds from sale of property, plant and equipment 2.9 5.1
Investment in NorthPoint Communications, Inc. (20.0) --
Proceeds from sale of Computer City -- 75.0
Other investing activities (4.3) (5.0)
-------- --------
Net cash used by investing activities (92.6) (32.2)
-------- --------
Financing activities:
Purchases of treasury stock (245.6) (185.1)
Proceeds from sale of common stock put options 3.5 --
Sale of treasury stock to employee stock plans 30.1 27.1
Proceeds from exercise of stock options 27.3 21.7
Dividends paid (32.3) (33.8)
Changes in short-term borrowings, net 23.9 11.3
Additions to long-term borrowings 100.6 44.7
Repayments of long-term borrowings (14.4) (33.4)
-------- --------
Net cash used by financing activities (106.9) (147.5)
-------- --------
Decrease in cash and cash equivalents (10.2) (58.5)
Cash and cash equivalents, beginning of period 64.5 105.9
-------- --------
Cash and cash equivalents, end of period $ 54.3 $ 47.4
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and management's discussion and
analysis of results of operations and financial condition included in Tandy
Corporation's 1998 Annual Report on Form 10-K for the year ended December 31,
1998.
NOTE 2 - STOCK SPLIT
On May 20, 1999, Tandy's Board of Directors declared a two-for-one split of
Tandy common stock for stockholders of record at the close of business on June
1, 1999, payable on June 21, 1999. This resulted in the issuance of 96.6 million
shares of common stock along with a corresponding decrease of $96.6 million in
additional paid-in capital. Treasury shares were not split. However, an
adjustment was made to the stockholders' equity section of the balance sheet to
split the cost of treasury stock (in effect a cancellation of treasury shares)
by reducing paid-in-capital and retained earnings. All references to the number
of shares of common stock issued or outstanding, per share prices, and income
(loss) per common share amounts in the consolidated financial statements, the
accompanying notes and management's discussion and analysis have been adjusted
to reflect the split on a retroactive basis. Previously awarded stock options,
restricted stock awards, and all other agreements payable in Tandy's common
stock have been adjusted or amended to reflect the split. Additionally, cash
dividends which were $0.10 per share per quarter prior to the two-for-one split
have been adjusted to $0.05 per share per quarter to reflect the two-for-one
split.
NOTE 3 - EARNINGS PER SHARE
The following schedule is a reconciliation of the numerators and denominators
used in computing the basic and diluted earnings per share calculations for the
three and nine months ended September 30, 1999 and 1998, respectively. Basic EPS
excludes the effect of potentially dilutive securities while diluted EPS
reflects the potential dilution that would have occurred if securities or other
contracts to issue common stock were exercised, converted, or resulted in the
issuance of common stock that would have then shared in the earnings of the
entity.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
----------------------------------------- -----------------------------------------
(Dollars and shares in millions, Income (Loss) Shares Per Share Income (Loss) Shares Per Share
except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -------------------------- ------------ ----------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ 59.8 $ (4.1)
Less: Preferred stock dividends (1.4) (1.5)
-------- --------
Basic EPS
Net income (loss) available to
common shareholders 58.4 194.3 $ 0.30 (5.6) 200.6 $ (0.03)
======== ========
Effect of dilutive securities:
Plus dividends on Series B
preferred stock 1.4 (1)
Additional contribution required
for TESOP if preferred stock had
been converted (1.1) 6.4 (1) (1)
Stock options 4.7 (1)
-------- -------- -------- --------
Diluted EPS
Net income (loss) available to
common shareholders plus
assumed conversions $ 58.7 205.4 $ 0.29 $ (5.6) 200.6 $ (0.03)
======== ======== ======== ======== ======== ========
(1) Not included in the calculation of diluted EPS because inclusion would be antidilutive.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
----------------------------------------- -----------------------------------------
(Dollars and shares in millions, Income (Loss) Shares Per Share Income (Loss) Shares Per Share
except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -------------------------- ----------- ------------ ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 177.3 $ 12.9
Less: Preferred stock dividends (4.2) (4.4)
-------- --------
Basic EPS
Net income available to common
Shareholders 173.1 194.3 $ 0.89 8.5 202.0 $ 0.04
======== ========
Effect of dilutive securities:
Plus dividends on Series B
preferred stock 4.2 (1)
Additional contribution required
for TESOP if preferred stock had
been converted (3.2) 6.5 (1) (1)
Stock options 3.9 3.8
-------- -------- -------- --------
Diluted EPS
Net income available to common
shareholders plus assumed
conversions $ 174.1 204.7 $ 0.85 $ 8.5 205.8 $ 0.04
======== ======== ======== ======== ======== ========
(1) Not included in the calculation of diluted EPS because inclusion would be antidilutive.
</TABLE>
NOTE 4 - SALE OF COMPUTER CITY, INC.
On August 31, 1998, Tandy completed the sale of 100% of the outstanding common
stock of its Computer City, Inc. subsidiary to CompUSA Inc. In the third quarter
of 1998, Tandy received approximately $75.0 million in cash and an unsecured
subordinated note for $136.0 million as consideration for the sale. The amount
of cash to be retained was subject to adjustment and in the fourth quarter of
1998 the amount of cash consideration was reduced to $36.5 million. Tandy
recognized a loss of $73.2 million in the second quarter of 1998, a loss of
$30.0 million in the third quarter of 1998 and a loss of $5.0 million in the
fourth quarter of 1998 from the sale of Computer City, which included certain
liabilities and contractual obligations incurred by Tandy. Computer City's
results from operations through August 31, 1998 are included in the accompanying
Consolidated Financial Statements.
Below is a summary of net sales and operating revenues and net losses, both in
total and per share, for Computer City for the three and nine months ended
September 30, 1999 and 1998, respectively.
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions, except -------------------- --------------------
per share amounts) 1999 1998 1999 1998
----------------- -------- -------- -------- --------
Net sales and operating revenues $ -- $ 285.7 $ -- $1,196.7
Net loss -- (30.3) -- (58.7)
Loss per share $ -- $ (0.15) $ -- $ (0.29)
NOTE 5 - RESTRICTED STOCK AWARDS
On February 1, 1998, Tandy granted, under the 1997 Incentive Stock Plan,
approximately 649,500 restricted stock awards consisting of 500 shares each to
1,299 RadioShack store managers not included in the February 1, 1997 restricted
stock grant to over 5,000 store managers. This restricted stock grant of
February 1998 will vest at the end of five years on February 2, 2003, if
managers receiving the grants are employed by Tandy at a store manager or higher
position at that time. However, the grants provide that the restricted shares
could vest early if Tandy common stock closes at $29 1/16 or more for any 20
consecutive trading days after February 1, 2000. Compensation expense, equal to
the fair market value of the shares, has not been recognized, but will be
recognized when it becomes probable that the performance criteria will be met
and such expense can be reasonably determined or upon actual vesting. At
September 30, 1999, there were 360,500 restricted stock awards outstanding and
eligible for ultimate vesting under this restricted stock award.
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the three months ended September 30, 1999 and
1998 was $50.2 million and $(3.8) million, respectively, and comprehensive
income for the nine months ended September 30, 1999 and 1998 was $174.3 million
and $13.1 million, respectively.
NOTE 7 - REVOLVING CREDIT FACILITY
In the second quarter of 1999, Tandy extended the maturity date of its $200.0
million 364-day revolving credit facility to June 2000. Tandy also has a $300.0
million five-year revolving credit facility maturing June 2003. The revolving
credit facilities are used as backup for the commercial paper program and may
also be utilized for general corporate purposes.
NOTE 8 - SEGMENT DISCLOSURES
The table below summarizes net sales and operating revenues, operating profit
(loss) and assets for Tandy's reportable segments. Consolidated operating profit
is reconciled to Tandy's income before income taxes.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
(In millions) 1999 1998 1999 1998
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales and operating revenues:
RadioShack (1) $ 960.3 $ 842.8 $2,737.1 $2,382.7
Computer City (2) -- 285.7 -- 1,196.7
Closed units -- 0.1 0.1 0.3
-------- -------- -------- --------
$ 960.3 $1,128.6 $2,737.2 $3,579.7
======== ======== ======== ========
Operating profit (loss):
RadioShack $ 111.1 $ 94.6 $ 334.7 $ 273.2
Computer City (2) -- (49.3) -- (95.6)
Closed units -- (6.1) -- (6.4)
Corporate administration and other (9.2) (6.8) (31.4) (19.1)
Provision for loss on sale of Computer City -- (30.0) -- (103.2)
-------- -------- -------- --------
101.9 2.4 303.3 48.9
Interest income (3) 4.7 2.5 13.8 5.7
Interest expense (3) (8.5) (11.5) (26.4) (33.6)
-------- -------- -------- --------
Income (loss) before income taxes $ 98.1 $ (6.6) $ 290.7 $ 21.0
======== ======== ======== ========
At September 30,
--------------------
Assets: 1999 1998
-------- --------
RadioShack $1,541.5 $1,449.6
Computer City (2) -- --
Corporate administration and other 604.7 517.9
-------- --------
$2,146.2 $1,967.5
======== ========
(1)Includes outside sales related to retail support operations of $25.1
million and $20.9 million for the three months ended September 30, 1999 and
1998, respectively, and $56.2 million and $60.8 million for the nine months
ended September 30, 1999 and 1998, respectively.
(2) Computer City was sold to CompUSA on August 31, 1998.
(3) Tandy does not allocate interest income or expense to its operating
segments.
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION ("MD&A")
Factors That May Affect Future Results
With the exception of historical information, the matters discussed in MD&A
contain forward-looking statements that involve various risks and uncertainties
and are indicated by words such as "anticipates," "expects," "believes," "will,"
"could," and similar words and phrases. Factors that could cause Tandy
Corporation's actual results to differ materially from management's projections,
forecasts, estimates and expectations include, but are not limited to, the
following:
o changes in the amount and degree of promotional intensity exerted by current
competitors and potential new competition from both retail stores and
alternative methods or channels of distribution, such as e-commerce and
telephone shopping services and mail order;
o changes in general U.S. or regional U.S. economic conditions including, but
not limited to, consumer credit availability, interest rates, inflation,
personal discretionary spending levels and consumer sentiment about the
economy in general;
o the inability to successfully implement, market and execute the
RadioShack.com(SM) website;
o the presence or absence of new services or products and product features in
the merchandise categories Tandy sells and changes in Tandy's actual
merchandise sales mix;
o the inability to negotiate profitable contracts or execute business plans
with providers of such services as cellular, PCS, direct-to-home satellite,
Internet service and high-speed bandwidth;
o the inability to collect the level of anticipated residuals and commissions
for products and services sold by RadioShack;
o lack of availability or access to sources of supply inventory (as a large
importer of consumer electronic products from Asia, unfavorable trade
imbalances could negatively affect Tandy);
o the inability to retain and grow an effective management team in a dynamic
environment or changes in the cost or availability of a suitable work force
to manage and support RadioShack's service-driven operating strategies;
o the potential negative impact of year 2000 issues; or
o the imposition of new restrictions or regulations regarding the sale of
products and/or services Tandy sells or changes in tax rules and regulations
applicable to Tandy.
Segment Reporting Disclosures
All references to RadioShack and Computer City in MD&A refer to Tandy's
reportable segments, unless otherwise noted. The RadioShack segment includes the
RadioShack retail division and its related retail support operations. The
Computer City segment includes Computer City, Inc., which was sold to CompUSA
Inc. on August 31, 1998. The closed units segment includes all Tandy stores and
non-retail units which were part of the store closure plan announced in December
1996. The corporate administration and other segment includes corporate units
which serve all areas of Tandy and, also, income or expenses which were not
allocated to the RadioShack and Computer City segments. See "Note 8 Segment
Disclosures" for additional information on operating profit (loss) and assets
for each reportable segment.
Net Sales and Operating Revenues
Net sales and operating revenues for the periods ended September 30 were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- %Increase -------------------- %Increase
(In millions) 1999 1998 (Decrease) 1999 1998 (Decrease)
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
RadioShack $ 960.3 $ 842.8 13.9% $2,737.1 $2,382.7 14.9%
Computer City -- 285.7(1) (100.0) -- 1,196.7(1) (100.0)
-------- -------- -------- --------
Retail segments 960.3 1,128.5 (14.9) 2,737.1 3,579.4 (23.5)
Closed units -- 0.1 (100.0) 0.1 0.3 (66.7)
-------- -------- -------- --------
$ 960.3 $1,128.6 (14.9)% $2,737.2 $3,579.7 (23.5)%
======== ======== ======== ========
(1) Includes operations for only two and eight months, respectively, due to the
sale to CompUSA on August 31, 1998.
</TABLE>
Consolidated net sales and operating revenues decreased 14.9% and 23.5% for the
three and nine month periods ended September 30, 1999, respectively, compared to
the same periods in 1998. The decrease is due to the sale of Computer City to
CompUSA on August 31, 1998. Consolidated comparable store sales for the three
and nine month periods ended September 30, 1999 are not meaningful due to this
sale.
<PAGE>
RadioShack's overall sales increased 13.9% and 14.9% for the three and nine
months ended September 30, 1999, respectively, compared to the corresponding
prior year three and nine month periods. RadioShack comparable store sales
increased 11.6% and 13.5% for the three and nine months ended September 30,
1999, respectively, compared to the same periods in the prior year. These sales
increases were driven primarily by strong sales of communications products,
prepaid wireless airtime and "direct-to-home" satellite systems and services.
Sales of communications products increased approximately 17% and 20% during the
three and nine months ended September 30, 1999, respectively, compared to the
same periods ended September 30, 1998, due to strong sales of PCS and cellular
telephones. On October 5, 1999, Tandy's strategic communications partner, Sprint
Corporation, announced it would be merging with MCI WorldCom, Inc., subject to
stockholder and regulatory approvals. The merger is expected to close in the
second half of 2000. Tandy's management anticipates no significant changes to
its existing agreements as a result of the announced merger.
Sales of personal computers increased approximately 2% during the third quarter
of 1999 compared to the third quarter of 1998, despite a 24% reduction in the
average selling price of CPU's in the third quarter of 1999 compared to the
third quarter of 1998. Personal computer sales increased approximately 15% for
the nine months ended September 30, 1999 versus the same period in the prior
year, despite a 10% reduction in the average selling price of CPU's since the
prior period.
The audio and video category experienced a sales increase of approximately 35%
and 21% during the three and nine months ended September 30, 1999, respectively,
when compared to the same periods in 1998, due primarily to increased sales of
direct-to-home satellite systems and services. In May 1999, Tandy entered into a
multi-year retail sales and service agreement with Thomson Consumer Electronics,
Inc. ("Thomson"). Under this agreement, Thomson will supply RadioShack with
various RCA branded audio and video components such as televisions, VCRs,
camcorders, digital video disc (DVD) players, CD shelf systems and other digital
entertainment products beginning in 2000. A few of these items are currently
available in stores. RCA products will be sold through RCA Digital Entertainment
Centers at RadioShack via a "store-within-a-store" concept similar to the Sprint
Store at RadioShack. Management believes this agreement will allow RadioShack to
be more competitive in the evolution of digital technology, which will enhance
sales of audio and video products.
RADIOSHACK RETAIL OUTLETS
September 30, June 30, March 31, December 31, September 30,
1999 1999 1999 1998 1998
-------- -------- -------- -------- --------
Company-owned 5,042 5,020 5,037 5,039 5,006
Dealer/Franchise 2,057 2,007 1,989 1,991 1,978
-------- -------- -------- -------- --------
Total retail outlets 7,099 7,027 7,026 7,030 6,984
======== ======== ======== ======== ========
Gross Profit
Tandy's gross profit as a percent of net sales and operating revenues was 50.7%
and 51.3% for the three and nine months ended September 30, 1999, respectively,
compared to 40.1% and 38.9% for the corresponding 1998 periods. These increases
in the gross profit percentages during 1999 were primarily the result of the
sale of Computer City in August 1998. Computer City operated at a lower gross
margin than consolidated Tandy Corporation. Without Computer City and other
closed units, Tandy's consolidated gross profit as a percent of net sales and
operating revenues would have been 51.9% and 52.8%, respectively, for the three
and nine months ended September 30, 1998.
RadioShack's gross profit dollars increased 11.2% and 11.7% for the three and
nine month periods ended September 30, 1999 versus 1998, respectively, but
decreased as a percentage of RadioShack's total sales by 1.3 and 1.5 percentage
points during the same periods. These percentage decreases were due to mix
shifts within RadioShack's product offerings. For the three and nine months
ended September 30, 1999, increased sales of communications products, coupled
with a decline in the gross margin percentage of certain products within the
category, negatively impacted RadioShack's overall gross margin percentages for
these periods. Increases in residual income, which has 100% gross margin, offset
some of the decrease in the periods noted.
Selling, General and Administrative Expense
Selling, general and administrative ("SG&A") expense for Tandy as a percent of
net sales and operating revenues for the third quarter of 1999 was 37.6%,
compared to 35.0% during the third quarter of 1998; the respective percentages
for the nine months ended September 30, 1999 and 1998 were 38.0% and 32.5%. The
higher SG&A percentages in 1999 were due primarily to the 1998 sale of Computer
City, which operated at lower relative SG&A expense levels than consolidated
Tandy Corporation. Excluding Computer City and other closed units, Tandy's SG&A
expense as a percentage of sales would have approximated 39.0% and 39.6% for the
three and nine months ended September 30, 1998. These decreases of 1.4% and 1.6%
from 1998 were due primarily to the favorable effect of increased sales at
RadioShack during these periods.
Excluding Computer City and other closed units, SG&A expense in dollars
increased by $32.7 million and $98.7 million, respectively, for the three and
nine months ended September 30, 1999, when compared to the same periods in the
prior year. For the three and nine months ended September 30, 1999, advertising
expense and rent expense increased in dollars, but decreased as a percent of
sales and operating revenues when compared to the same periods in the prior
year. Advertising expense increased in dollars due primarily to increased
RadioShack television advertising over the prior year. Rent expense increased in
dollars due to new RadioShack store openings and lease renewals at slightly
higher rates. The decrease in rent and advertising expenses as a percent of
sales and operating revenues was due primarily to the favorable effect of
increased comparable RadioShack store sales on these respective expense rate
structures. Salary expense increased in dollars and increased slightly as a
percent of sales and operating revenues during the three and nine months ended
September 30, 1999, compared to the same periods in 1998. The salary increase is
primarily attributable to retail store expansions and increases in commissions,
bonuses and other incentives resulting from RadioShack's strong comparable store
sales and profits.
Restricted Stock Awards
On February 1, 1998, Tandy granted, under the 1997 Incentive Stock Plan,
approximately 649,500 restricted stock awards consisting of 500 shares each to
1,299 RadioShack store managers not included in the February 1, 1997 restricted
stock grant to over 5,000 store managers. This restricted stock grant of
February 1998 will vest at the end of five years on February 2, 2003, if
managers receiving the grants are employed by Tandy at a store manager or higher
position, at that time. However, the grants provide that the restricted shares
could vest early if Tandy common stock closes at $29 1/16 or more for any 20
consecutive trading days after February 1, 2000. Compensation expense, equal to
the fair market value of the shares, has not been recognized, but will be
recognized when it becomes probable that the performance criteria will be met
and such expense can be reasonably determined or upon actual vesting. At
September 30, 1999, there were 360,500 restricted stock awards outstanding and
eligible for ultimate vesting under this restricted stock award. Management is
no longer granting restricted stock awards to RadioShack store managers.
1999 Incentive Stock Plan
In February 1999, Tandy, based upon the Board of Directors' authorization,
adopted the Tandy Corporation 1999 Incentive Stock Plan ("1999 ISP"), which
authorizes the grants of non-qualified stock options and stock appreciation
rights to broad based employee groups and other eligible employees. Grants of
restricted stock, performance awards and options intended to qualify as
incentive stock options under the Internal Revenue Code are not authorized under
the 1999 ISP. In addition, repricing of outstanding options is not permitted
under the 1999 ISP. The Organization and Compensation Committee, an independent
committee of the Board, administers the 1999 ISP as a broadly based plan to
provide stock option incentives primarily to RadioShack's 5,000 plus store
managers and to other eligible employees of Tandy. A total of 9.5 million shares
of Tandy common stock was reserved for issuance under the 1999 ISP.
The Organization and Compensation Committee granted approximately 2.2 million
stock options under the 1999 ISP at fair market value on February 24, 1999,
primarily to RadioShack's 5,000 plus store managers employed as of that date, as
well as other eligible employees.
Sale of Computer City, Inc.
On August 31, 1998, Tandy completed the sale of 100% of the outstanding common
stock of its Computer City, Inc. subsidiary to CompUSA Inc. In the third quarter
of 1998, Tandy received approximately $75.0 million in cash and an unsecured
subordinated note for $136.0 million as consideration for the sale. The amount
of cash to be retained was subject to adjustment and in the fourth quarter of
1998 the amount of cash consideration was reduced to $36.5 million. Tandy
recognized a loss of $73.2 million in the second quarter of 1998, a loss of
$30.0 million in the third quarter of 1998 and a loss of $5.0 million in the
fourth quarter of 1998 from the sale of Computer City, which included certain
liabilities and contractual obligations incurred by Tandy. Although no
significant additional provisions are expected in 1999 relating to the sale of
Computer City, unexpected contractual requirements associated with the sale,
among other factors, could result in additional charges.
Net Interest Expense
Net interest expense for the three and nine months ended September 30, 1999 was
$3.8 million and $12.6 million versus $9.0 million and $27.9 million for the
comparable three and nine months in 1998. Interest expense decreased $3.0
million and $7.2 million for the three and nine months ended September 30, 1999
versus the three and nine months ended September 30, 1998, due, in part, because
Tandy no longer incurs interest expense on Computer City capital lease
obligations since the sale of this subsidiary. Also, Tandy reduced its average
short-term debt outstanding during the three and nine months ending September
30, 1999 when compared to the same periods in the prior year. Interest income
increased $2.2 million and $8.1 million for the three and nine months ended
September 30, 1999, respectively, compared to the same prior year periods, due
primarily to interest from the CompUSA note receivable. Net interest expense is
expected to increase slightly during the remainder of 1999, when compared to the
prior year.
Provision for Income Taxes
Provision for income taxes for each quarterly period is based on the estimate of
the annual effective tax rate for the fiscal year, as evaluated at the end of
each quarter. The effective tax rates for the third quarter of 1999 and 1998
were 39.0% and 37.9%, respectively. The increase in the effective tax rate over
the prior year is due primarily to an increase in the effective state tax rate,
which results from a higher percentage of income being earned in states with
higher tax rates.
Cash Flow and Financial Condition
Cash flow provided by operating activities approximated $189.3 million in the
nine month period ended September 30, 1999 compared to $121.2 million in the
prior year. This change was due in part to a $28.3 million increase in net
income after adjustments for non-cash items in the first nine months of 1999,
compared to the first nine months of 1998. The increase in cash flow from
operating activities for the first nine months of 1999 was also positively
affected by changes in working capital, which increased cash flow by $39.8
million over the prior year period.
Investing activities used $92.6 million in cash flow in the nine months ended
September 30, 1999, compared to a $32.2 million use during the same period of
the prior year. Investing activities for the nine months ended September 30,
1999 included capital expenditures totaling $71.2 million, primarily for retail
expansion and upgrade of information systems. Additionally, Tandy made a $20.0
million investment in NorthPoint Communications, Inc. ("NorthPoint") in April
1999 (see "Recent Events" for further information). Management anticipates that
capital expenditure requirements will approximate $30.0 million to $40.0 million
for the remainder of 1999, primarily to support RadioShack future store
expansions and refurbishments, and to update additional information systems.
Cash used by financing activities for the nine months ended September 30, 1999
was $106.9 million, compared to $147.5 million in the previous year. Purchases
of treasury stock required $245.6 million for the nine months ended September
30, 1999, compared to $185.1 million during the same period of 1998. The current
year's stock repurchases were partially offset by $57.4 million received from
stock option exercises and the sale of treasury stock to employee stock plans.
Medium-term notes issued by Tandy under its 1997 Debt Shelf Registration
provided approximately $100.6 million in cash flow for the nine months ended
September 30, 1999. Dividends used $32.3 million of cash for the nine months
ended September 30, 1999, compared to a $33.8 million usage in the same period
of the prior year. On October 25, 1999, Tandy announced a 10% increase in the
quarterly dividend from $0.05 per share to $0.055 per share for shareholders of
record on January 3, 2000, with payment scheduled for January 19, 2000.
Total debt as a percentage of total capitalization was 39.8% at September 30,
1999, compared to 35.6% at December 31, 1998 and 36.6% at September 30, 1998.
This increase was due primarily to a decrease in equity caused by Tandy's share
repurchases in 1999. Long-term debt as a percentage of total capitalization was
22.3% at September 30, 1999, compared to 17.9% at December 31, 1998 and 16.6% at
September 30, 1998.
In March 1997, Tandy announced its Board of Directors had authorized management
to purchase up to 20.0 million additional shares of its common stock through its
existing share repurchase program. The share repurchase program was initially
authorized in December 1995 and increased in October 1996 and was undertaken as
a result of management's view of the economic value of its stock. This increase
brought the total authorization to 60.0 million shares, of which approximately
54.5 million shares, totaling $835.8 million, had been purchased as of September
30, 1999. During the quarter ended September 30, 1999, Tandy repurchased
approximately 0.6 million shares for $29.0 million under the program and for the
nine months ended September 30, 1999, Tandy repurchased 2.6 million shares
totaling $90.0 million under the program. Additionally, on October 26, 1998,
Tandy announced its Board of Directors had authorized the repurchase of up to
10.0 million shares of Tandy common stock for an indefinite period of time to be
used to offset the dilution of grants under Tandy's incentive stock plans. As of
September 30, 1999, Tandy had purchased approximately 5.5 million shares for
$176.1 million under this program, which included the repurchase of
approximately 1.5 million shares and 2.7 million shares for $69.1 million and
$112.3 million during the third quarter and nine months ended September 30,
1999, respectively. Purchases will continue to be made from time to time in the
open market and it is expected that funding of these programs will come
primarily from operating cash flow and existing funding sources.
In connection with the share repurchase program, the Board of Directors, at
their October 23, 1998 meeting, authorized management to sell up to 2.0 million
put options on Tandy common stock. Such options grant the purchaser the right to
sell shares of Tandy's common stock to Tandy at specified prices upon exercise
of the options. These put options are exercisable only at maturity and can be
settled in cash at Tandy's option, in lieu of repurchasing the stock. The issued
put options have a maturity of six months. Tandy has sold approximately 1.2
million options since the inception of the program and 0.6 million options
remained outstanding at September 30, 1999. The options expire on various dates
through March 2000. At September 30, 1999, the full redemption value of the
options was classified as common stock put options in the accompanying
Consolidated Balance Sheet. The related offset was recorded in common stock in
treasury, net of premiums received. Put options will continue to be sold from
time to time in order to take advantage of attractive share price levels, as
determined by management. The timing and terms of the transactions, including
maturities, depend on market conditions, Tandy's liquidity and other
considerations.
In May 1997, Tandy filed a $300.0 million Debt Shelf Registration Statement
("Shelf Registration") with the S.E.C., which was declared effective in August
1997. In August 1997, Tandy issued $150.0 million of 10 year unsecured notes
under the Shelf Registration. The interest rate on the notes is 6.95% per annum
with interest payable on September 1 and March 1 of each year, commencing March
1, 1998. The notes are due September 1, 2007. In December 1997 and January 1998,
Tandy issued $4.0 million and $45.0 million, respectively, in medium-term notes
under the remaining $150.0 million Shelf Registration. An additional $32.0
million, $37.0 million and $32.0 million of medium-term notes were issued in
January 1999, August 1999 and September 1999, respectively, completing the
remaining 1997 Shelf Registration. Tandy's medium and long-term notes
outstanding at September 30, 1999 under the 1991 and 1997 shelf registrations
totaled $301.0, compared to $200.0 million outstanding at September 30, 1998.
The interest rates at September 30, 1999 for the outstanding $151.0 million in
medium-term notes ranged from 6.09% to 7.35% with a weighted average coupon rate
of 6.6%.
Inventory
Inventory at September 30, 1999 remained consistent with September 30, 1998.
Increases in personal computers and, to a lesser extent, direct-to-home
satellite systems and wireless telephones offset decreases in residential
telephones and speakers. Inventory at September 30, 1999 increased $66.4 million
or 7.3% since December 31, 1998, due primarily to new store additions as well as
normal seasonal fluctuations. These seasonal increases were offset by an
inventory decrease in residential telephones.
Accounts Receivable
Total accounts receivable at September 30, 1999 increased $29.5 million or 13.7%
since December 31, 1998 and increased $78.2 million or 47.0% since September 30,
1998. The increase in accounts receivable since December 31, 1998 was due
primarily to the acquisition of AmeriLink Corporation (see "Recent Events"
below). The increase since September 30, 1998 was due primarily to an increase
in RadioShack's accounts receivable relating to residuals and brand name vendor
support and, to a lesser extent, the AmeriLink acquisition. Residuals are
recurring revenue from wireless telephone carriers and from long distance,
digital satellite service and pager activation providers. Residual receivables
from these providers increased since September 30, 1998, due to strong sales of
direct-to-home satellite systems and wireless communications.
Accrual for 1996 Business Restructuring
In the fourth quarter of 1996, Tandy initiated certain restructuring programs to
exit its Incredible Universe business, close 21 unprofitable Computer City
stores and close its 53 remaining McDuff stores. These restructuring programs
were undertaken as a result of the highly competitive environment in the
electronics industry. See Tandy's 1998 Annual Report for a discussion of the
1996 restructuring reserve transactions. The following schedule is an analysis
of additional reserves and amounts charged against the reserve during the nine
months ended September 30, 1999. Real estate obligations shown below primarily
represent estimated amounts to be incurred in terminating remaining leases.
Charges
Balance Additional 1/1/99- Balance
(In millions) 12/31/98 Reserves 9/30/99 9/30/99
----------- -------- -------- -------- --------
Real estate obligations $ 19.4 -- (5.2) $ 14.2
Other 0.8 -- (0.2) 0.6
-------- -------- -------- --------
$ 20.2 -- (5.4) $ 14.8
======== ======== ======== ========
Although no significant additional provisions are expected in 1999 relating to
the 1996 restructuring, unexpected defaults by sub-tenants, among other factors,
could result in additional charges.
Changes in Stockholders' Equity
Outstanding
(In millions) Common Shares Dollars
----------- ------------- --------
Balance at December 31, 1998 97.4 $ 848.2
Sale of treasury stock to employee stock plans 0.4 30.2
Purchases of treasury stock (4.7) (237.6)
Common stock put options -- (31.7)
Expired common stock put options -- 13.3
Exercise of stock options and grant of stock awards 1.7 45.2
Purchase of AmeriLink 1.8 69.2
Repurchase of preferred stock -- (10.8)
Preferred stock dividends, net of tax -- (2.7)
TESOP and restricted stock deferred compensation earned -- 8.7
Common stock dividends -- (29.5)
Unrealized loss on NorthPoint Communications, net of tax -- (3.0)
Two-for-one split of common stock 96.6 (0.5)
Net income -- 177.3
======== ========
Balance at September 30, 1999 193.2 $ 876.3
======== ========
On July 24, 1999, the Board of Directors adopted an Amended and Restated Rights
Agreement in an effort to obtain fair value for Tandy shareholders in the event
of a takeover. The Amended and Restated Rights Agreement extends the term of the
existing rights plan for ten years, increases the purchase price of the rights,
removes the delayed amendment and delayed redemption provisions and makes other
modifications, including adjusting the redemption price from $0.05 per right to
$0.01 per right.
Recent Events
On November 11, 1999, Tandy announced On November 11, 1999, Tandy Corporation
announced a five-year strategic alliance with Microsoft Corporation. As part of
the alliance, Microsoft and RadioShack will establish a Microsoft
"store-within-a-store" concept in as many as 7,000 RadioShack locations
nationwide. This "store-within-a-store" will allow customers to view
demonstrations and subscribe to MSN(TM) dial-up or broadband Internet access as
well as view a broad range of existing and future products, solutions and
services based on Microsoft(R) technologies. Additionally, Microsoft will make a
$100.0 million equity investment in Tandy's RadioShack.com subsidiary and will
also provide the RadioShack.com website premier placement across all of the MSN
network and its properties, including the newly launched MSN eShop online
shopping service. Management anticipates that this alliance will accelerate the
adoption rate by consumers of narrowband and broadband Internet access and will
help build the potential of RadioShack.com's e-commerce site.
On July 30, 1999, Tandy acquired AmeriLink in an all stock transaction valued at
approximately $75.0 million. Tandy exchanged approximately 1.8 million shares of
Tandy common stock for all of the outstanding common stock of AmeriLink.
AmeriLink designs, installs and maintains cabling systems for the transmission
of video, voice and data, primarily for home use. AmeriLink, through its 43
regional offices across the United States, will continue to provide these
services to outside parties as well as to RadioShack. The transaction was
accounted for under the purchase method in accordance with the provisions of
Accounting Principles Board Opinion No. 16. The purchase price was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition, which resulted in $50.0 million of goodwill being
recorded at September 30, 1999. Goodwill will be amortized over 20 years.
On April 21, 1999, Tandy announced it had entered into a strategic agreement
with NorthPoint Communications, a provider of Digital Subscriber Line ("DSL")
technology. DSL technology transports data at guaranteed speeds up to 25 times
faster than common dial-up modems, allowing for high-speed Internet access and
other data-intensive applications. Management anticipates this alliance will
accelerate the adoption rate of these services at an affordable price to the
mass market. Additionally, NorthPoint will provide RadioShack with DSL services
for consumer display purposes in many of its retail stores, as well as for
internal use. NorthPoint currently operates in 25 markets in the U.S. and
expects to expand its service territory to 28 markets by the end of 1999.
Management believes these two agreements are significant steps towards achieving
Tandy's strategic plan for RadioShack to become "America's Connectivity Store,"
similar to its existing concept of "America's Telephone Store." Connectivity
will provide solutions for connecting to and utilizing high-speed bandwidth.
Bandwidth refers to volume at which data can be transmitted and, depending on
the volume delivered, may enable consumers to have such capabilities as instant
and/or high speed Internet, movies on demand and multiple phone/fax connections
through a single phone line.
Additionally, in September 1999 Tandy launched its RadioShack.com website, which
currently offers approximately 22,000 products. Another 8,000 products will be
available by January 2000 and management anticipates that the RadioShack.com
website will offer over 75,000 unique products by mid-2000. Among other
features, consumers will have the ability to obtain answers to frequently asked
questions on consumer electronics, download service and instruction manuals for
products sold by RadioShack, check availability of products ordered and pay for
purchases online. Additionally, online customers can purchase, return or
exchange products available on the RadioShack website at their local RadioShack
store. Enhancements will continue to be made with the ultimate goal of becoming
a premier destination site for consumer electronics information, answers and
solutions as well as to be a major search engine for batteries.
Year 2000 Readiness Disclosure
Tandy's management recognizes the importance of taking necessary action in order
that its operations and relationships with key vendors, service providers,
customers and other third parties will not be adversely impacted by software
processing errors arising from calculations using the year 2000 and beyond. Like
many companies, a significant number of Tandy's computer applications and
systems required modifications in order for these systems to be ready for the
year 2000. All statements made and referred to here are Year 2000 Readiness
Disclosures under the "Year 2000 Information and Readiness Disclosure Act."
State of Readiness: Tandy has been and will continue to use a combination of
internal and external resources to identify, assess, remediate and test its many
different information technology ("IT") systems such as point of sale, payroll,
credit, purchase ordering, merchandise distribution, management reporting,
manufacturing, mainframe, and client/server applications, as well as its non-IT
systems (e.g. heating, ventilating and air conditioning systems, building
security systems, etc.).
Since beginning the project in 1995, Tandy has completed identifying and
assessing 100% of its internal mid-range and mainframe IT applications, data
communication and telecommunication systems, servers and most of its personal
computer hardware for year 2000 readiness. As of September 30, 1999, remediation
and unit testing was 99% complete for mid-range and mainframe applications. Unit
testing determines the accuracy of the programming changes to the code. For data
communication systems, telecommunication systems and servers, verification of
year 2000 readiness was approximately 99%, 98% and 100% complete as of September
30, 1999, respectively, with verification expected to be 100% complete by
November 30, 1999.
Testing, which may consist of documented readiness reviews, to validate that all
of Tandy's mission critical systems will interface and operate effectively to
process data containing dates subsequent to January 1, 2000 is expected to be
completed prior to the end of 1999. New third-party software systems, including
financial systems, point-of-sale and manufacturing were implemented during 1999.
The vendors of these third-party software packages have stated that they are
year 2000 ready; however, Tandy continues to conduct its own testing which will
be completed by year end.
With respect to non-IT system issues, Tandy has identified and assessed its
significant building and process and production control systems for any year
2000 issues relating to the operations of its facilities. Identification and
assessment of security access, building control systems and elevators in the
buildings which serve as Tandy's corporate headquarters have been completed. At
September 30, 1999, approximately 99% of the systems have either been certified
by the vendor or manufacturer or determined by other evaluation methods to be
year 2000 ready. Tandy has also identified and assessed non-IT year 2000 issues
at its remote locations, such as its distribution centers, manufacturing plants,
and administrative offices, and has taken appropriate action to ensure year 2000
readiness. All of Tandy's significant non-IT systems are expected to be year
2000 ready or appropriate workarounds and contingency plans in place prior to
the end of 1999.
Although unforeseen circumstances may arise, Tandy expects its few remaining
remediation efforts to be completed prior to the end of 1999. Tandy will
continue communicating with its key suppliers, utilities, financial
institutions, customers and others throughout the remainder of 1999 to determine
and monitor their state of year 2000 readiness, to coordinate year 2000
conversions where appropriate and to determine the extent to which Tandy's
interface systems are vulnerable.
Costs: In management's opinion, the financial impact of being year 2000 ready is
not expected to be material to Tandy's consolidated financial position, results
of operations or cash flows. Management anticipates that total expenditures
associated with the year 2000 internal modifications will range from $11.0
million to $13.0 million, which has been and will continue to be funded from
operating cash flow. As of September 30, 1999, approximately $9.4 million
representing internal payroll and related benefits, depreciation expense,
machine time and incentive bonuses, among other costs, has been spent on these
internal modifications. An additional $1.1 million has been paid to external
parties for consulting and professional fees. As required by generally accepted
accounting principles, all of these costs are expensed as incurred. Combined,
internal and external costs related to the year 2000 project account for
approximately 5.0% to 7.0% of Tandy's annual IT budget. Additionally, Tandy has
purchased and installed third party financial software packages and related
hardware totaling approximately $25.0 million in light of the year 2000 issue.
These purchases are in addition to other capital investments made in the normal
course of business for certain third party software systems and applications
which address the ongoing retail and operational needs of Tandy.
The Risks of Year 2000 Issues: With respect to the risks associated with its IT
and non-IT systems, Tandy believes that the most reasonably likely worst case
scenario is that some of Tandy's store operating and inventory management
systems could fail in one or more geographic areas of the United States. The
consequence of such failure could include the inability of those affected
RadioShack stores to electronically record sales transactions. This could
further result in a breakdown in Tandy's supply chain as Tandy relies on
electronic information to replenish its stores. Such an occurrence would result
in a loss of revenue; however, due to the variables involved it is not possible
to quantify the possible range of such loss.
There can be no assurance that the systems of third party providers on which
Tandy's systems rely will be converted timely and that the systems will not have
an adverse effect on Tandy's systems or ongoing operations. However, concerning
the risks associated with third parties, Tandy believes that the most reasonably
likely worst case scenario is that some of Tandy's merchandise vendors will not
be compliant and will have difficulty filling and distributing orders. Failure
of one or more third party service providers on whom Tandy relies to address
year 2000 issues could also result, in a worst case scenario, in some business
interruption. The lost revenues, if any, resulting from such failures would
depend on the time period in which the failure goes uncorrected and on how
widespread the impact is.
Tandy has catalogued and identified RadioShack branded products it has sold
since 1993 which have a time and/or date function. A listing of these products
and their functionality subsequent to January 1, 2000, if known to RadioShack
through its evaluation, is available at the web site: www.RadioShack.com. Since
the fourth quarter of 1996, RadioShack has required from its vendors correct
date manipulation for any new RadioShack products with date and time functions
that are cognizant of the year, and has adopted related testing and evaluation
procedures. Tandy has considered the implications of possible year 2000-related
claims regarding products it has manufactured or sold, or is currently
manufacturing or selling. However, the outcomes of any year 2000 claims and the
impact of such claims cannot be determined at this time; such outcomes will
depend on the facts and circumstances of each situation and an evolving state of
law as these types of claims are addressed by legal systems in the United States
and worldwide.
Tandy has limited the scope of its risk assessment to those factors upon which
it can reasonably be expected to have an influence. For example, Tandy has
relied upon the information provided by financial institutions, the Federal
Reserve, major utility companies and national telecommunications providers that
they are year 2000 ready. The lack of such services could have a material effect
on Tandy's ability to operate, but Tandy has little, if any, ability to
influence such an outcome, or to reasonably make alternative arrangements in
advance for such services in the event they are unavailable.
Contingency Plans: In order to develop, document and prioritize year 2000
contingency plans, Tandy has identified its critical applications to be its
merchandising and inventory systems, which include purchasing, receiving and
distribution and store replenishment and its point-of-sale store operating
system, as well as its financial systems, which include payroll, accounts
payable and receivable, banking and other financial applications.
Should any or all of the critical applications fail to perform properly
subsequent to January 1, 2000, Tandy will resort to temporary manual processing
for recording sales, ordering product and replenishing its retail stores, which
is not expected to have a material adverse impact on its operations in the
short-term. Tandy's 11 distribution centers are located in various geographic
areas of the United States. Should one or more of these distribution centers
fail to operate due to regional power outages or other unforeseen circumstances,
Tandy's other distribution centers which may be operating could replenish stores
typically serviced by those distribution centers for a relatively short period
of time. Formal documented contingency plans to deal with these and other
scenarios, together with millennium transition and event management plans, have
been written and are in place for all core segments of the Company. These will
be reviewed and revised for changed circumstances such as personnel changes by
December 15, 1999. No single internal or third party supplier accounts for a
material portion of Tandy's sales and operating revenues. As such, management
has determined that a formal list of alternative suppliers is not needed.
Tandy is finalizing its contingency plans for the movement of funds among its
major banks, should one or more banks or one or more funds transfer systems fail
to operate in January 2000. These plans include payroll and vendor commitments
as well as the ability to collect and transfer cash receipts from retail store
operations.
All statements concerning year 2000 issues other than historical statements,
including, without limitation, estimated costs and the projected timetable of
year 2000 compliance, constitute "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements should be read in conjunction with Tandy's disclosures under the
heading "Factors That May Affect Future Results."
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Tandy has various claims, lawsuits, disputes with third parties, investigations
and pending actions involving allegations of negligence, product defects,
discrimination, infringement of intellectual property rights, tax deficiencies,
violations of permits or licenses, and breach of contract and other matters
against Tandy and its subsidiaries incident to the operation of its business.
The liability, if any, associated with these matters was not determinable at
September 30, 1999. Although occasional adverse settlements or resolutions may
occur and negatively impact earnings in the year of settlement, it is the
opinion of management that their ultimate resolution will not have a materially
adverse effect on Tandy's financial position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Index to Exhibits on
page 19, which immediately precedes such exhibits.
b) Reports on Form 8-K.
On August 6, 1999, the Company updated its June 30, 1999 financial
statements for the purpose of selling its medium-term notes. The Form
8-K was filed on August 6, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tandy Corporation
(Registrant)
Date: November 12, 1999 By /s/ Richard L. Ramsey
--------------------------------
Richard L. Ramsey
Vice President and Controller
(Principal Accounting Officer)
Date: November 12, 1999 /s/ Dwain H. Hughes
--------------------------------
Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
<TABLE>
TANDY CORPORATION
INDEX TO EXHIBITS
<CAPTION>
Exhibit Sequential
Number Description Page No.
<S> <C>
3a(i) Restated Certificate of Incorporation of Tandy Corporation dated
July 26, 1999 (filed as Exhibit 3a(i) to Tandy's Form 10-Q filed
on August 11, 1999 and incorporated herein by reference).
3a(ii) Certificate of Elimination of Series C Conversion Preferred Stock
of Tandy Corporation dated July 26, 1999 (filed as Exhibit 3a(ii)
to Tandy's Form 10-Q filed on August 11, 1999 and incorporated
herein by reference).
3a(iii) Amended Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of Tandy
Corporation dated July 26, 1999 (filed as Exhibit 3a(iii) to
Tandy's Form 10-Q filed on August 11, 1999 and incorporated
herein by reference).
3b Tandy Corporation Bylaws, restated as of December 16, 1998 (filed
as Exhibit 3b to Tandy's Form 10-K filed on March 29, 1998 and
incorporated herein by reference).
4a Amended and Restated Rights Agreement dated as of July 26, 1999 .
(filed as Exhibit 4a to Tandy's Form 10-Q filed on August 11,
1999 and incorporated herein by reference).
4b Revolving Credit Agreement (Facility A) dated as of June 25, 1998
among Tandy Corporation, NationsBank, N.A., as Agent and Lender,
Citibank, N.A., as Syndication Agent and Lender, Bank of America
National Trust & Savings Association, as Documentation Agent and
Lender, BankBoston, N.A., Co-Agent and Lender, The Bank of New
York, Co-Agent and Lender, First Union National Bank, Co-Agent
and Lender, Fleet National Bank, Co-Agent and Lender, and twelve
other banks as Lenders (filed as Exhibit 4b to Tandy's Form 10-Q
filed on August 13, 1998 and incorporated herein by reference).
4c First Amendment to Revolving Credit Agreement (Facility A) dated
as of June 24, 1999 among Tandy Corporation, NationsBank, N.A. as
Agent and Lender, Citibank, N.A. as Syndication Agent and Lender,
The Bank of New York, as Documentation Agent, and BankBoston,
N.A., First Union National Bank, Fleet National Bank and The
First National Bank of Chicago as Co-Agents and certain other
lenders, which renewed and extended the maturity date of the
Revolving Credit Agreement (Facility A) dated as of June 25,1998
(filed as Exhibit 4c to Tandy's Form 10-Q filed on August 11,
1999 and incorporated herein by reference).
4d Revolving Credit Agreement (Facility B) dated as of June 25, 1998
among Tandy Corporation, NationsBank, N.A., as Agent and Lender,
Citibank, N.A., as Syndication Agent and Lender, Bank of America
National Trust & Savings Association, as Documentation Agent and
Lender, BankBoston, N.A., Co-Agent and Lender, The Bank of New
York, Co-Agent and Lender, First Union National Bank, Co-Agent
and Lender, Fleet National Bank, Co-Agent and Lender, and twelve
other banks as Lenders (filed as Exhibit 4o to Tandy's Form 10-Q
filed on August 13, 1998 and incorporated herein by reference).
4e First Amendment to Revolving Credit Agreement (Facility B) dated
as of June 24, 1999 among Tandy Corporation, NationsBank, N.A. as
Agent and Lender, Citibank, N.A. as Syndication Agent and Lender,
The Bank of New York, as Documentation Agent, and BankBoston,
N.A., First Union National Bank, Fleet National Bank and The
First National Bank of Chicago as Co-Agents and certain other
lenders, which renewed and extended the maturity date of the
Revolving Credit Agreement (Facility B) dated as of June 25,1998
(filed as Exhibit 4e to Tandy's Form 10-Q filed on August 11,
1999 and incorporated herein by reference).
10a* Salary Continuation Plan for Executive Employees of Tandy
Corporation and Subsidiaries including amendment dated June 14,
1984 with respect to participation by certain executive
employees, as restated October 4, 1990 (filed as Exhibit 10a to
Tandy's Form 10-K filed on March 30, 1994 and incorporated herein
by reference).
10b* Post Retirement Death Benefit Plan for Selected Executive
Employees of Tandy Corporation and Subsidiaries as restated June
10, 1991 (filed as Exhibit 10c to Tandy's Form 10-K filed on
March 30, 1994 and incorporated herein by reference).
10c* Tandy Corporation Officers Deferred Compensation Plan as restated
July 10, 1992 (filed as Exhibit 10d to Tandy's Form 10-K filed on
March 30, 1994 and incorporated herein by reference).
10d* Director Fee Resolution (filed as Exhibit 10h to Tandy's Form
10-K filed on March 30, 1994 and incorporated herein by
reference).
10e* Tandy Corporation 1985 Stock Option Plan as restated effective
August 1990 (filed as Exhibit 10i to Tandy's Form 10-K filed on
March 30, 1994 and incorporated herein by reference).
10f* Tandy Corporation 1993 Incentive Stock Plan as amended and
restated on February 24, 1998 (filed as Exhibit 10f to Tandy's
Form 10-Q filed on August 11, 1999 and incorporated herein by
reference).
10g* Tandy Corporation Officers Life Insurance Plan as amended and
restated effective August 22, 1990 (filed as Exhibit 10k to
Tandy's Form 10-K filed on March 30, 1994 and incorporated herein
by reference).
10h* Third Restated Trust Agreement Tandy Employees Supplemental Stock
Program through Amendment No. VI dated August 31, 1999. 22
10i* Forms of Termination Protection Agreements for (i) Corporate
Executives, (ii) Division Executives, and (iii) Subsidiary
Executives (filed as Exhibit 10m to Tandy's Form 10-Q filed on
August 14, 1995 and incorporated herein by reference).
10j* Tandy Corporation Termination Protection Plans for Executive
Employees of Tandy Corporation and its Subsidiaries (i) the Level
I and (ii) Level II Plans (filed as Exhibit 10n filed on August
14, 1995 and incorporated herein by reference).
10k* Forms of Bonus Guarantee Letter Agreements with certain Executive
Employees of Tandy Corporation and its Subsidiaries (i) Formula,
(ii) Discretionary, and (iii) Pay Plan (filed as Exhibit 10o to
Tandy's Form 10-K filed on March 30, 1994 and incorporated herein
by reference).
10l* Form of Indemnity Agreement with Directors, Corporate Officers
and two Division Officers of Tandy Corporation (filed as Exhibit
10p to Tandy's Form 10-K filed on March 28, 1996 and incorporated
herein by reference).
10m* Tandy Corporation 1997 Incentive Stock Plan as amended and
restated February 24, 1998 (filed as Exhibit 10m to Tandy's Form
10-Q filed on August 11, 1999 and incorporated herein by
reference).
10n* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10s to Tandy's Form 10-K filed on March 26, 1998 and
incorporated herein by reference).
10o* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10t to Tandy's Form 10-K filed on March 26, 1998 and
incorporated herein by reference).
10p* Form of December 1997 Deferred Salary and Bonus Agreement (Stock
Investment) with selected Executive Employees of Tandy
Corporation, (filed as Exhibit 10u to Tandy's Form 10-K filed on
March 26, 1998 and incorporated herein by reference).
10q* Tandy Corporation Executive Deferred Compensation Plan, effective
April 1, 1998, (filed as Exhibit 10w to Tandy's Form 10-K filed
on March 26, 1998 and incorporated herein by reference).
10r* Tandy Corporation Executive Deferred Stock Plan, effective April
1, 1998, (filed as Exhibit 10x to Tandy's Form 10-K filed on
March 26, 1998 and incorporated herein by reference).
10s* Form of September 30, 1997 Deferred Compensation Agreement
between Tandy Corporation and Leonard H. Roberts (filed as
Exhibit 10aa to Tandy's Form 10-Q filed on May 13, 1998 and
incorporated herein by reference).
10t* Form of Executive Pay Plan Letters (filed as Exhibit 10b to
Tandy's Form 10-K filed on March 29, 1999 and incorporated herein
by reference).
10u* Severance Agreement dated October 23, 1998 between Leonard H.
Roberts and Tandy Corporation (filed as Exhibit 10z to Tandy's
Form 10-K filed on March 29, 1999 and incorporated herein by
reference).
10v* Tandy Corporation Unfunded Deferred Compensation Plan for
Directors as amended and restated June 1, 1999 (filed as Exhibit
10x to Tandy's Form 10-Q filed on August 11, 1999 and
incorporated herein by reference).
10w* Tandy Corporation 1999 Incentive Stock Plan dated February 24,
1999 (filed as Exhibit 10y to Tandy's Form 10-Q filed on August
11, 1999 and incorporated herein by reference).
11 Statement of Computation of Ratios of Earnings to Fixed Charges. 41
27 Financial Data Schedule.
- -----------------------
* Each of these exhibits is a "management contract or compensatory plan,
contract, or arrangement."
</TABLE>
<PAGE>
EXHIBIT 10h
THIRD RESTATED
TRUST AGREEMENT
TANDY EMPLOYEES
SUPPLEMENTAL STOCK PROGRAM
DATED AUGUST 31, 1999
(THROUGH AMENDMENT VI)
Agreement made as of this 31st day of August, 1999, between Tandy Corporation, a
corporation organized and existing under the laws of the state of Delaware, with
its principal place of business as Fort Worth, Tarrant County, Texas, hereafter
called "Tandy" or the "Company" and the entity or one or more of the individuals
named on Annex "A" hereto, hereafter collectively called "Trustee";
WITNESSETH
THAT WHEREAS, Tandy desires to establish, on behalf of its eligible employees, a
Trust for the purposes of receiving and holding Tandy Corporation Common Stock
("Tandy Stock") and other property and the paying of certain benefits, as set
out hereinafter, on behalf of its eligible employees who due to benefit
limitations in applicable tax laws under the Internal Revenue Code are unable to
have further contributions made on their behalf under the Tandy Fund, formerly
the Tandy Employees Deferred Salary and Investment Plan or DIP;
WHEREAS, the program provides for employee payroll deductions at a rate up to 8%
of a Participant's Earnings after the Participant has reached the maximum Tandy
Fund, formerly DIP, contribution and a Company matching contribution equal to
80% of the Participant's payroll deduction being paid over to Tandy and the
crediting of these funds to a Participant's account, the balance of which will
be used to purchase Tandy Stock, at regular intervals at current market prices,
which Tandy Stock will be held by the Trustee until such time as a Participant
meets the withdrawal or distribution requirements set out in the Program; and
WHEREAS, Tandy desires to designate the Trustee to hold, manage and disburse
Trust Funds.
NOW, THEREFORE, in consideration of the premises and of the promises and
covenants hereinafter contained and for the purposes herein stated, the parties
hereto do hereby agree as follows:
I
NAME, EFFECTIVE DATE AND PROGRAM YEAR
A. NAME OF TRUST: The Trust herein created, and sometimes for
convenience referred to herein as the "Program", shall be known as the "Tandy
Employees Supplemental Stock Program".
B. EFFECTIVE DATE: This Agreement shall be effective as of the 1st
day of September, 1989.
C. PROGRAM YEAR: The Program Year shall end on December 31 of each
year.
II
ADMINISTRATION
A. APPOINTMENT OF ADMINISTRATIVE COMMITTEE: The Tandy Board of Directors
shall appoint a committee to be known as the "Administrative Committee",
hereinafter referred to as the "Committee", to administer the Program. This
Committee shall consist of three or more members who shall not necessarily be
employees of Tandy. Tandy shall advise the Trustee of the names of the members
of the Committee, and the Trustee shall be entitled to rely thereon until
similarly advised of a change in the membership of the Committee.
B. TERM OF OFFICE OF COMMITTEE MEMBERS: Each member of the Committee
shall hold office until his death, disability, resignation or removal from
office. Any member of the Committee may be removed by the Tandy Board of
Directors at its pleasure. Any Committee member may resign by delivering his
written resignation to Tandy and to the Committee. Vacancies in the Committee
arising from any cause whatsoever shall be filled by the Tandy Board of
Directors.
C. POWERS AND DUTIES: The Committee shall administer the Program in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Program. Without limiting the generality of the foregoing, the
Committee shall have the following powers:
(1) To make and publish such rules and regulations as it may deem
necessary to carry out the provisions of the Program;
(2) To determine all questions arising in the administration,
interpretation and application of the Program, including questions of
eligibility of employees and the status and rights of Participants,
Beneficiaries and any other person hereunder;
(3) To deliver funds or purchase Tandy Stock for delivery to the
Trustee, as more particularly specified hereinafter;
(4) To authorize all disbursements by the Trustee from the Trust
Fund;
(5) To direct the Trustee to sell Tandy Stock to Tandy or on the
open market for the purpose of funding Financial Hardship withdrawals under the
Program;
(6) To decide any dispute arising hereunder;
(7) To construe the provisions of the Program and to correct any
defects therein; and
(8) To provide procedures for the determination of claims for
benefits.
The determination of the Committee as to any questions arising
hereunder shall be conclusive and binding on all persons.
D. ORGANIZATION AND OPERATION OF THE COMMITTEE: The Committee shall act
by a majority of its members at the time in office, and such action may be taken
either by a vote at a meeting or in writing without a meeting; however, a
Committee member shall not vote on any question relating specifically to
himself, but any necessary action regarding such Committee member shall be
decided by the remaining members of the Committee. In the event the remaining
members of the Committee are unable to agree upon the disposition of any
question, the Tandy Board of Directors shall appoint another person eligible for
membership on the Committee to serve as a temporary member for the purpose of
reaching a decision on the matter in issue. Such matters shall then be
determined by a majority of the Committee, including said temporary member.
The Committee may authorize any one or more of its members to execute
any document or documents on behalf of the Committee, in which event the
Committee shall notify the Trustee in writing of such action and the name and
names of its members so designated. The Trustee thereafter shall accept and rely
upon any document executed by such member or members as representing action by
the Committee until the Committee shall file with the Trustee a written
revocation of such designation.
The Committee may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs, and may appoint such accountants,
counsel, specialists, and other persons as it deems necessary or desirable in
connection with the administration of the Program. Such accountants and counsel
may, but need not be accountants and counsel for Tandy. The Committee shall be
entitled to rely conclusively upon, and shall be fully protected in any action
taken by it in good faith in relying upon any opinions or reports which shall be
furnished to it by any such accountant, counsel, or other specialist.
The Committee and the Trustee may by agreement in writing arrange for
the Committee and/or Tandy to perform any of the Trustee's ministerial
functions, including but not limited to the maintenance of records of accounts
of each Participant, preparation and distribution of Internal Revenue Service,
Securities and Exchange Act, or Labor Department forms or documents required to
be provided to each Participant, and delivery of Tandy Stock or cash to the
Trustee.
Tandy may furnish the Committee with such clerical assistance on a full
or part time basis as shall from time to time be reasonable or desirable to
assist in the administration of the Program, and shall pay all costs and
expenses, including Trustee's fees and expenses, incurred in the administration
of the Program, save and except those specified in Section III E; and save and
except those costs and expenses, including attorneys' fees, which are charged to
the accounts of Participant's by a court of competent jurisdiction in any
litigation in which the Program or any of its fiduciaries are a party.
E. RECORDS AND REPORTS: The Committee shall keep a record of all its
proceedings and acts, and shall keep all such books of account, records, and
other data as may be necessary for the proper administration of the Program. The
Committee shall notify the Trustee and the Tandy Board of Directors of any
action taken by the Committee, and, when required, shall notify any other
interested person or persons. The Committee will specifically maintain separate
records as to each Participant's account. Within a reasonable period of time
after the end of each calendar quarter the Committee shall notify each
Participant of the total number of shares credited to his account which will
include the employee's contributions, other contributions and Company
contributions and the cost basis of said shares.
F. IMMUNITY FROM LIABILITY: No member of the Committee shall incur any
liability for any action or failure to act, excepting liability for his own
gross negligence or willful misconduct. Tandy shall indemnify each member of the
Committee against any and all claims, losses, damages, expenses and liabilities,
including any amounts paid in settlement with the Committee's approval, arising
from any action or failure to act, except when the same is judicially determined
to be due to the gross negligence or willful misconduct of such member. The
Committee may, at its discretion, require the written approval or disapproval of
Tandy prior to taking action in any particular matter made the subject of its
responsibility hereunder.
G. CONCLUSIVENESS OF DETERMINATION OF COMPANY CONTRIBUTIONS: Neither the
Trustee, Tandy nor the Committee shall be under any duty to inquire into the
correctness of the amounts contributed and paid over to Tandy by a Company in
accordance with the applicable section hereof; nor shall the Trustee, Tandy or
the Committee or any other person be under any duty to enforce the payment of
the contributions to be made under the applicable sections hereof; and the
determination by the Company of its contributions hereunder shall be final and
conclusive upon all persons.
H. REVERSION AND DIVERSION:
(1) REVERSION: Under no circumstances can a Company recover any
part of the contributions made to this Program and credited to a Participant's
account.
(2) DIVERSION: No part of the Trust Fund created by this Program
except as required to pay taxes and administrative expenses, shall be used or
diverted to purposes other than for the exclusive benefit of the Participants or
their beneficiaries or estates.
I. PAYMENT TO MINORS AND OTHERS: Whenever a Participant or any person
entitled to Tandy Stock or payments under the Program shall be a minor or under
other legal disability or in the sole judgment of the Committee shall otherwise
be unable to apply such Tandy Stock or payments to his or her own best interest
and advantage (as in the case of illness, whether mental or physical, or where
the person not under legal disability is unable to preserve his or her estate
for his or her own best interest), the Committee may in the exercise of its
discretion direct all or any portion of such Tandy Stock or payments to be made
in any one or more of the following ways unless claims shall have been made
therefor by an existing and duly appointed guardian, conservator, committee or
other duly appointed legal representative, in which event delivery or payment
shall be made to such representative:
(1) directly to such Participant or person unless such person shall be an infant
or shall have been legally adjudicated incompetent at the time of delivery or
payment;
(2) to the spouse, child, parent or other blood relative to be expended on
behalf of the Participant or person entitled or on behalf of those dependents as
to whom the Participant or person entitled has the duty of support;
(3) to a recognized charity or governmental institution to be expended for the
benefit of the Participant or person entitled or for the benefit of those
dependents as to whom the Participant or person entitled has the duty of
support; or
(4) to any other institution, approved by the Committee, to be
expended for the benefit of the Participant or person entitled or for the
benefit of those dependents as to whom the Participant or person entitled has
the duty of support.
The decision of the Committee will, in each case, be final and binding
upon all Participants or persons and the Committee shall not be obliged to see
to the proper application or expenditure of any payments so made. Any delivery
or payment made pursuant to the power herein conferred upon the Committee shall
operate as a complete discharge of the obligations of Tandy, the Trustee and of
the Committee.
If the Committee has any doubt as to the proper Participant, Beneficiary
or person to receive deliveries or payments hereunder, the Committee may direct
the Trustee to bring a suit for interpleader in any appropriate court, pay any
amounts due into court, and the Trustee and/or Committee shall have the right to
recover its reasonable attorney's fees from such proceeds so paid or to be paid.
Any delivery or payment made by the Committee, in good faith and in accordance
with this Plan, shall fully discharge Tandy, the Committee and the Trustee from
all further obligations with respect to such deliveries or payments.
III
TRUST AND TRUSTEE
A. ESTABLISHMENT AND ACCEPTANCE OF TRUST: The Trustee shall receive any
contributions paid to it in cash or Tandy Stock. All contributions so received,
and Tandy Stock purchased therefrom, shall be known for purposes of this
Agreement as the "Trust Fund", and shall be held, managed and administered in
Trust at the request of and for the benefit of Participants pursuant to the
terms of this Agreement. The Trustee hereby accepts the Trust created hereunder
and agrees to perform the duties provided for under this Agreement.
B. POWERS OF THE TRUSTEE: The Trustee shall have all the powers granted
by the terms of Title 9 of the Property Code of the State of Texas as it now
exists, or as it may be amended, and in addition thereto and not in modification
or limitation thereof, the Trustee shall have the following powers:
(1) To invest the contributions and earnings thereon of Tandy or
Company in Tandy Stock as soon as practicable after receipt thereof, but to hold
cash temporarily uninvested without liability for interest thereon when the
investment of such cash is impracticable;
(2) To keep the Trust Fund in Tandy Stock, to meet contemplated
withdrawals, as the Committee shall specify in written requests;
(3) To hold Tandy Stock purchased as investments for the Trust
Fund in its name or in the name of its nominees;
(4) To sell, exchange, convey, transfer, or otherwise dispose of
any Tandy Stock held by it, by private contract or at public auction, to fund
Financial Hardship withdrawals on behalf of and for the benefit of the affected
Participant;
(5) Subject to Section XII hereof, to vote upon any stocks,
bonds, or other securities; to give general or special proxies or powers of
attorney with or without power of substitution; to exercise any conversion
privileges, subscription rights or other options; and to make any payments
incidental thereto; to oppose or consent to or otherwise participate in,
corporate reorganization or other change affecting corporate securities and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other properties held as a part of
the Trust Fund;
(6) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust Fund, to commence or defend
suits or legal or administrative proceedings; or
(7) To delegate to Tandy and/or the Committee by agreement in
writing, such ministerial, record keeping and discretionary duties as may be
agreed upon, including but not limited to the maintenance of records of account
of Participants, the quarterly determination of each Participant's account, and
the number of shares of Tandy Stock purchased, delivered, or distributed by it.
The powers granted to the Trustee under this Section III B shall be
exercised by the Trustee in its discretion; however, the Committee may at any
time and from time to time, by written direction to the Trustee, require the
Trustee to obtain the written approval of the Committee before exercising such
powers, as may be specified in such direction. Any such direction may be of a
continuing nature or otherwise, and may be revoked in writing by the Committee
at any time. Neither the Trustee nor any other person shall be under any duty to
question any such direction of the Committee and the Trustee shall as promptly
as possible comply with any directions given by the Committee hereunder. The
Trustee shall not be responsible for any loss which may result from the failure
or refusal of the Committee to give any such required approval.
C. INVESTMENT OF THE TRUST FUND: The Trustee shall at regular intervals
at current market prices invest all of the assets of the Trust Fund in Tandy
Stock.
D. PAYMENTS FROM THE FUND: The Trustee shall from time to time, on the
written direction of the Committee, make distributions out of the Trust Fund to
the Participants or the Participants' Beneficiaries, estates or Alternate
Payees, in such manner, in such Tandy Stock, and for such purposes as may be
specified in written directives of the Committee and upon any such distribution
being made, the amount thereof shall no longer constitute a part of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such distributions or for the adequacy of the Trust Fund to meet and discharge
any and all liabilities under the Program.
E. FEES AND EXPENSES OF THE TRUSTEE: The Trustee shall be paid such
reasonable compensation as shall from time to time be agreed upon in writing by
Tandy and the Trustee; however individual Trustees, who are employees of Tandy,
shall receive no compensation for serving as Trustee. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees, incurred by it in the administration of the Trust Fund, except as
hereinafter provided. Such compensation and expenses incurred shall be paid by
Tandy, but until paid shall constitute a charge upon the Trust Fund; provided,
however, that Tandy shall have no obligation to pay such compensation and
expenses, including counsel fees, as are charged to the accounts of Participants
by a court of competent jurisdiction in any litigation in which the Program or
any of its fiduciaries are a party. All costs and expenses incurred in
connection with the purchase, sale and transfer of Tandy Stock or securities,
and all taxes of any and all kinds whatsoever that may be levied or assessed
under existing or future laws upon, or in respect of, the Trust Fund, or the
income thereof shall be paid by the Trustee from the Trust Fund.
F. ACCOUNTING: The Trustee, or Tandy or the Committee by written
agreement with the Trustee, shall keep accurate and detailed accounts of all
receipts, disbursements and other transactions hereunder.
Within a reasonable time after the close of the Program Year and within
one hundred twenty (120) days following the resignation or removal of the
Trustee or termination of the Program, the Trustee shall render a complete
accounting for the Program Year preceding or then ended, as the case may be, to
a firm of independent public accountants to be selected by Tandy. Such
accountants shall have full authority to examine the Trustee's records and
accounts relating to the Program and to submit written reports thereon to Tandy.
Within a reasonable time after the close of the taxable year of the
Trust, which is hereby established to end on December 31 of each year, and
within one hundred twenty (120) days following the resignation or removal of the
Trustee or termination of the Trust, the Trustee shall render a complete
accounting for the taxable year preceding or then ended, as the case may be, to
Tandy or to a firm of independent public accountants to be selected by Tandy.
Such accountants shall have full authority to examine the Trustee's records and
accounts relating to the Trust and to submit written reports thereon to Tandy.
<PAGE>
Within a reasonable time after the close of the Program Year, the
Trustee shall transmit to each Participant, in such form as the Trustee shall
determine, a statement setting forth the interest of each such Participant in
the Program. Such statement shall be deemed correct unless written notice to the
contrary shall be delivered to the Trustee by a Participant within thirty (30)
days following the mailing or delivery of such statement to the Participant.
Reports relating to the Trustee's accounts prepared by independent
accountants selected by Tandy shall be maintained at the principal office of
Tandy and shall be available for inspection by interested persons hereunder.
Subject to the right of a Participant to challenge the correctness of an annual
statement submitted to him by the Trustee, the approval by the independent
accountants of the Trustee's account shall constitute a complete release and
discharge of the Trustee from any liability in respect to any act or transaction
reflected in the Trustee's accounts. The foregoing provisions notwithstanding,
no person other than Tandy or the Committee may require an accounting or the
furnishing of a statement or bring an action against the Trustee with respect to
the Trust created hereby or its actions as Trustee.
Notwithstanding any of the foregoing provisions, the Trustee shall not
be liable for any failure to submit an account or statement in a timely fashion
where its failure to act is based on the omission of Tandy to name a firm of
independent accountants to whom such accounting is to be rendered or is based on
the failure of either Tandy or the Committee to supply information to the
Trustee necessary for the completion of the accounting or of the statement.
G. AUTHORIZATION TO PROTECT THE TRUSTEE: Any action by Tandy pursuant to
any of the provisions of this Agreement shall be evidenced by a certified
resolution of its Board of Directors delivered to the Trustee over the signature
of any person authorized by the said Board of Directors to make such written
instrument or resolution so certified to it. All orders, requests and
instructions of the Committee shall be in writing, signed by those members or
that member of the Committee so designated by the Committee, and the Trustee may
act and shall be fully protected in so acting in accordance with such orders,
requests and instructions. The Trustee shall not be liable for any loss to or
diminution of the Trust Fund except when the same may be due to its willful
misconduct or bad faith and the Trustee shall in no event have any
responsibility for the properties except those actually received by it.
H. REMOVAL AND RESIGNATION; SUCCESSOR TRUSTEE: The Trustee may be
removed by Tandy at any time upon thirty (30) days notice in writing to Trustee
and the Committee. The Trustee may resign at any time upon thirty (30) days'
notice in writing to Tandy and to the Committee. Upon such removal or
resignation of the Trustee, Tandy shall appoint a successor trustee, which shall
be either one or more individuals who may or may not be employees of Tandy or a
bank or trust company having combined capital and surplus of not less than
twenty-five million dollars ($25,000,000), and such individual(s) or bank, as
the case may be, shall have the same powers and duties conferred upon the
Trustee hereunder. Upon acceptance of such appointment by the successor trustee,
the Trustee shall assign, transfer and pay over to such successor trustee the
funds and properties then constituting the Trust Fund. The Trustee is
authorized, however, to reserve such sum of money, as it may deem advisable for
payment of its fees and expenses in connection with the settlement of its
account or otherwise and any balance of such reserve remaining after the payment
of such fees and expenses shall be paid over to the successor trustee.
I. IMMUNITY FROM LIABILITY: No individual Trustee shall incur any
liability for any action or failure to act, excepting liability for his or her
own gross negligence or willful misconduct. Tandy shall indemnify each
individual Trustee against any and all claims, losses, damages, expenses and
liabilities, including any amounts paid in settlement with the Trustee's
approval, arising from any action or failure to act, except when the same is
judicially determined to be due to the gross negligence or willful misconduct of
such individual Trustee. Each individual Trustee may, at his or her discretion,
require the written approval or disapproval of Tandy prior to taking action in
any particular matter made the subject of his or her responsibility hereunder.
IV
PARTICIPATION IN THE PROGRAM
A. ADOPTION OF PROGRAM. Tandy and each of its affiliates and associates
may adopt the Program for all or part of its employees as its Board of Directors
may in its discretion approve. Tandy and each of its affiliates and associates
adopting the Program are hereinafter collectively referred to as "Company".
B. ELIGIBILITY. Subject to the provisions of Section XX with respect to
union-represented employees, all employees are eligible to participate in the
Program if their contributions are limited in any Tandy Fund, formerly DIP, plan
year ("Tandy Fund Plan Year") as a result of Internal Revenue Code Sections
402(g), 415(c), 401(a)(17) and/or 401(k)(3) and following an election to
participate being received in the Program's administrative office, may make
contributions to the Program as a Participant for the remainder of any Tandy
Fund Plan Year after the date on which the contribution limit is reached.
Participation in the Program is entirely voluntary and the election to
participate may be made through Employee Payroll Deductions under Section V. To
remain as a Participant in the Program, an employee must continue to be an
"Employee" engaged in Continuous Full Time Service for Tandy or a Company, or in
employment which contemplates continued Qualifying Service.
<PAGE>
C. APPLICATION FOR PARTICIPATION. In order to become a Participant
hereunder, each eligible employee shall execute a written application wherein he
shall evidence:
1. His intent to participate in the Program;
2. His joinder of this Trust Agreement executed by Tandy on
his behalf;
3. His consent for Employee Payroll Deductions in accordance
with Section V below; and
4. His acknowledgment and consent to the withholding of taxes
resulting from the Company Contribution during the Taxable Year in which the
Company Contribution is made.
Once an employee has completed the necessary eligibility requirements
for participation in the Program, contributions under Section V shall begin
automatically, but shall be held in a suspense account subject to receipt of a
payroll deduction form by the Program Administration office. The employee shall
have thirty (30) days from the automatic commencement of participation in the
Program to file a written application for participation. His participation in
the Program shall not become effective, however, until the start of the next pay
period after the application is received by the Company or after he has reached
the contribution limit in any Tandy Fund Plan Year following the year of his
initial enrollment in the Program.
In the event that an eligible employee making contribution during the
thirty (30) day period elects not to participate in the Program or fails to file
a written application for participation during the period, payroll deductions
made by the employee during the period shall be returned to the employee and any
Company or Other Contributions will be canceled.
V
INVESTMENT OPTION
A. RATE OF PAYROLL DEDUCTION.
(1) After receipt of a payroll deduction form by the Program
Administration office, Participants shall have Employee Payroll Deductions
withheld at the rate of 1%, 2%, 3%, 4%, 5%, 6%, 7% or 8% of Earnings, in excess
of the maximum amount of Earnings needed to reach one of the contribution limits
to the Tandy Fund, formerly DIP, as set out in the Internal Revenue Code of
1986. Participation in the Program is for the remainder of the Tandy Fund Plan
Year.
(2) Participants shall designate their participation and desire
to participate through payroll deductions by means of a signed payroll deduction
authorization form. The initial authorization shall continue in effect,
notwithstanding any change in Participant's Earnings, until the Participant
becomes ineligible for the Program. Deductions made subject to such
authorization are called "Employee Payroll Deductions".
B. COLLECTION AND PAYMENT OF EMPLOYEE PAYROLL DEDUCTIONS: The Company
shall withhold and deduct on each regular pay day from each Participant's
Earnings the contribution specified. The Company shall pay the Employee Payroll
Deductions over to Tandy and Tandy will use the Employee Payroll Deductions to
either deliver cash to the Trustee to purchase Tandy Stock or purchase and
deliver shares of Tandy Stock to the Trustee within thirty (30) days following
the end of the calendar quarter in which such contributions shall have been
deducted and withheld. In the event a Participant withdraws from the Program and
his contribution for the calendar quarter preceding the time of his withdrawal
has been withheld from his Earnings, but has not been used for the purchase of
Tandy Stock, then the Company shall refund to such withdrawing Participant the
amount of his contribution so withheld.
VI
CREDITS TO PARTICIPANTS
As soon as practicable after the end of each calendar quarter the
following credits shall be made to each Participant's account as of the end of
each calendar quarter:
A. EMPLOYEE PAYROLL DEDUCTION. The amount of Employee Payroll
Deductions withheld during each month of such quarter;
B. COMPANY CONTRIBUTION. A monthly amount (the "Company
Contribution") calculated in accordance with Section VI. B. 1. below:
1. The Company Contribution shall be determined on the basis of
each payroll period by multiplying the Employee Payroll Deduction by Eighty
Percent (80%); and
2. Within thirty (30) days following the end of each calendar
quarter, the Company shall contribute out of its earnings and profits to Tandy
and this amount, calculated in accordance with Section VI B. 1, shall be
delivered to the Trustee for the purchase of Tandy Stock or used to purchase and
deliver Tandy Stock to the Trustee. Except for excess contributions made because
of fraud or mistake of fact and returned within one (1) year after payment to
Tandy under this Program, no part of the contributions of the Company shall be
recoverable by it under any circumstances. In the event the Company should not
have sufficient current earnings or profits and be operating at a loss currently
and thus be unable to pay its full contributions to this Program, then such
contributions, if any, that it shall be able to make shall be allocated among
all Participants on the basis of the relative amounts of contributions made by
each during the quarter.
C. OTHER CONTRIBUTION-DIVIDEND INCOME ON STOCK. All cash dividends paid
on shares credited to the Participant's account on the record date designated by
Tandy for such dividend shall be allocated when paid to each Participant's
account as other contributions ("Other Contributions") and delivered to the
Trustee or applied to the purchase of Tandy Stock in accordance with Section VI.
D. below, for delivery to the Trustee. These Other Contributions will not be
subject to matching contributions by the Company or Tandy.
D. APPLICATION OF CREDITS. The Employee Payroll Deductions, Other
Contributions, and Company Contributions are to be applied to the acquisition of
Tandy Stock quarterly and shall be credited to the Participant's account as soon
as practicable after the end of the calendar quarter as Tandy Stock and any
Fractional Share (as defined in Section XIX) based upon the number of shares of
Tandy Stock purchasable at a price equal to the average closing price of Tandy
Stock as reported for the New York Stock Exchange composite transactions for
each trading day of the calendar month (the "Stock Price") for which the
deductions or contributions are made.
E. DIVIDENDS OTHER THAN CASH AND TANDY STOCK. All dividends with respect
to Tandy Stock held in a Participant's account under the Program that are not
payable in cash or Tandy Stock shall be distributed to the Participant as soon
as possible. All whole units of any security (other than Tandy Stock), any
rights and warrants for a whole unit of any security and whole units of any
other asset shall be distributed in kind. All fractional units of any security
(other than Tandy Stock), any rights and warrants for less than a whole unit of
any security and fractional units of any other asset shall be sold and the net
proceeds paid to the Participant.
F. STOCK DIVIDEND OR SPLIT-UP. Any Tandy Stock issuable by Tandy as a
stock dividend or split-up on the Tandy Stock and any Fractional Share to the
credit of the Participant on the record date designated by Tandy for such stock
dividend or split-up shall be credited to each Participant's account (in an
amount per share equivalent to any stock dividend or split-up actually paid by
Tandy on its Tandy Stock then outstanding) and delivered to the Trustee as soon
as practicable after the distribution date of such stock dividend or split-up.
VII
TRANSFERS TO TRUSTEE
A. EMPLOYEE PAYROLL DEDUCTION. The Company shall pay over to Tandy the
Employee Payroll Deductions of each Participant as soon as practicable after the
payroll period nearest the end of the calendar month in which such Employee
Payroll Deduction is withheld. The Employee Payroll Deductions will be credited
to the Participant's account quarterly and delivered to the Trustee for the
purchase of Tandy Stock and/or used to purchase Tandy Stock which will be
delivered to the Trustee as soon as practicable after the end of the calendar
quarter.
B. COMPANY CONTRIBUTIONS. The Company shall account for the Company
Contributions payable to Tandy on each Participant's account as soon as
practicable after the payroll period nearest the end of the calendar month in
which such Employee Payroll Deductions are withheld. The Company Contributions
shall be paid over to Tandy and credited to the Participant's account quarterly.
Said contributions shall then be delivered to the Trustee for the purchase of
Tandy Stock and/or used to purchase Tandy Stock which will be delivered to the
Trustee as soon as practicable after the end of the calendar quarter.
VIII
INVESTMENT
A. TANDY STOCK.
1. The Trustee will invest all or substantially all of the Trust
Fund in Tandy Stock.
2. Any Tandy Stock required for the Program may be treasury
shares or original issue shares.
3. Tandy Stock may be held by the Trustee, as custodian, at its
discretion either in its name or in the name of one or more nominees. Tandy
Stock shall be purchased and/or delivered to the Trustee as of the end of each
calendar quarter with respect to which the Tandy Stock is acquired by the
Program or Trustee and sold by Tandy, at the Stock Price determined for each
month of the quarter.
B. OTHER INTEREST AND INCOME. Except as herein expressly provided, no
interest or other income will be paid or credited on account of Employee Payroll
Deductions, Company Contributions, or any other amount payable or credited to
Participants.
<PAGE>
IX
HOLDING PERIOD
A. DURATION. The Trustee shall retain for the Holding Period, Tandy
Stock credited to the Participant's account under the Program. The Holding
Period with respect to any Tandy Stock shall commence on the date as of which
the Tandy Stock is credited to the Participant's account and shall end when the
Participant has complied with one of the provisions for withdrawal under the
Program.
B. DISTRIBUTION. As promptly as practicable after the Holding Period,
the Trustee shall distribute the full and any Fractional Share of Tandy Stock
then held which was credited to the Participant's account under the Program
since the Holding Period began in accordance with the rules for withdrawals and
payment (as defined in Section X).
X
WITHDRAWALS AND PAYMENTS
A. WITHDRAWALS.
1. During employment the Program provides for up to the full
withdrawal of a Participant's account upon receipt of a written request and
Notice of Financial Hardship including all supporting documentation at the
Program Administration office (500 One Tandy Center, Fort Worth, Texas 76102)
prior to Program participation termination. A Financial Hardship withdrawal can
only be made if the withdrawal is to satisfy an immediate and heavy financial
need of the employee and is necessary to meet such financial need and where
other sources of payment are not reasonably available to the Participant. A
withdrawal will be deemed to be necessary as a Financial Hardship withdrawal if
all of the following requirements are met: (1) the withdrawal is not in excess
of the amount needed to satisfy the Financial Hardship plus any amounts
necessary to pay any federal, state or local taxes or penalties reasonably
anticipated to result from such payment; (2) the Participant has obtained the
distribution, if any, available to the Participant under the Program as provided
in X A. 2. below; and (3) the Participant has obtained all distributions, under
all plans of the Company except for hardship distributions from the
Participant's Deferred Salary Account in the Tandy Fund, formerly the Tandy
Employees Deferred Salary and Investment Plan, and the ESOP account in the Tandy
Fund, formerly the Tandy Employees Stock Ownership Plan.
2. During employment, the Program additionally provides for up to
the full withdrawal of Tandy Stock held in a Participant's account for at least
three (3) full Tandy Fund Plan Years as of the March 31st immediately preceding
the receipt of a written notice of inservice withdrawal at the Program
Administration Office.
3. The Program also provides for the full withdrawal of a
Participant's account upon receipt of a written Notice of Withdrawal at the
Program Administration Office upon the Participant's (a) death or (b)
termination of Employment, either voluntarily, involuntarily or by retirement at
age 65 or older.
B. PAYMENT IN CASH OR TANDY STOCK.
1. The Participant will be paid in Tandy Stock if the Participant
delivers: (i) a written Notice of Withdrawal to the Program Administration
office; (ii) a written notice of inservice withdrawal to the Program
Administration Office; or (iii) if the Company's records indicate that one of
the above two events of withdrawal (as defined in X. A. 3.) has occurred. All
Financial Hardship withdrawals will be paid in cash as provided for below.
2. Employee Payroll Deductions, Company Contributions and Other
Contributions not yet paid over or delivered as Tandy Stock to the Trustee will
be paid over to the withdrawing Participant by the Company or Tandy in cash.
3. Upon withdrawal no Fractional Share will be distributed by the
Trustee. In lieu of distribution of such Fractional Share of Tandy Stock the
Trustee will pay a Participant the Stock Price for the month preceding the
distribution date.
C. DETERMINATION OF AMOUNT OF PAYMENT. The amount of payment in Tandy
Stock will be determined by the number of shares credited to a Participant's
account:
1. at the end of the calendar quarter preceding the receipt
of the written Notice of Withdrawal by the Program Administration office; or
2. in the absence of receipt by the Program Administration
office of a Notice of Withdrawal from the Participant, Alternate Payee(s), or
the Participant's Beneficiary, at the end of the calendar quarter preceding the
month in which one of the two withdrawal events (as defined in X. A. 3.) is
recorded in the records of the Program Administration office, regardless of the
month in which such event occurred.
In the event of a Financial Hardship withdrawal, when the Participant
delivers a written Notice of Financial Hardship Withdrawal to the Program
Administration office, then the Trustee shall take the number of shares of Tandy
Stock credited to the Participant's account at the end of the preceding calendar
quarter, value it at the Stock Price for the calendar month preceding the date
of receipt of the notice of withdrawal, sell such Tandy Stock and then
distribute cash to the Participant.
D. DETERMINATION OF AMOUNT OF PAYMENT-INSERVICE WITHDRAWAL. The amount
of payment in Tandy Stock will be determined by the number of shares subject to
the inservice withdrawal and which have been credited to a Participant's account
for at least three (3) full Tandy Fund Plan Years as of the March 31st
immediately preceding the receipt of the written notice of inservice withdrawal
by the Program Administration Office.
E. REENTERING THE PROGRAM. In the event of a Financial Hardship
withdrawal under this Program a Participant may not renew participation for a
period of twelve (12) months from the date of distribution of the withdrawal. In
the event of a inservice withdrawal under the Program, the Participant may
continue participation in the Program.
F. RECIPIENT OF DISTRIBUTION. All withdrawal distributions will be made
to the Participant except withdrawal distributions resulting from death or
divorce of the Participant. In the event of death, (and in the event of
Participant's death prior to his receipt of the payment of an inservice
withdrawal), payment will be made to the Beneficiary designated by the
Participant or as otherwise provided by the Program and the Participant's
Beneficiary may act in behalf of the Participant. In the event of a
Participant's divorce, a certified copy of the divorce decree or Qualified
Domestic Relations Order (collectively referred to hereinafter as "Court Order")
must be submitted to the Program Administration office together with any other
identifying information as required by the Program Administration office. The
Participant's account will then be divided as specifically ordered in the Court
Order and the shares awarded to the Alternate Payee(s) will be withdrawn.
Distribution to the Participant, the Alternate Payee(s), or Beneficiary shall be
made as soon as practicable after the event permitting withdrawal.
G. SUSPENSION FROM THE PROGRAM. In the event of a Participant's
withdrawal from the Tandy Fund, formerly DIP, the Participant will be suspended
from participation in the Program as set out below:
1. Partial Withdrawal. If a Participant elects to withdraw all or
any portion of the value of his Voluntary account under the Tandy Fund, formerly
DIP, if any, his participation in the Program does not terminate, but his
Employee Payroll Deductions and Company Contributions shall automatically be
suspended for a period of six months.
2. Total Withdrawal. If a Participant elects to withdraw the full
value of his Company account under the Tandy Fund, formerly DIP, while employed
by Company, his participation under the Program is suspended for a period of 12
months, during which no Employee Payroll Deductions or Company Contributions
will be made.
3. Tandy Fund, formerly DIP, Hardship Withdrawal. If a
participant makes a financial hardship withdrawal under the Tandy Fund, formerly
DIP, his participation under the Program is suspended for a period of 12 months
from the date of distribution of the withdrawal, during which period no Employee
Payroll Deductions or Company Contributions will be made.
XI
BENEFICIARY
A. DESIGNATION OF BENEFICIARY. Participants shall file with the Company
a written designation of Beneficiary designating who is to receive any Tandy
Stock, Fractional Share payment, and any cash to the Participant's credit under
the Program in the event of his death prior to delivery to him of such Tandy
Stock, Fractional Share payment or cash.
B. CHANGE OF BENEFICIARY. A Participant may change his Beneficiary
designation at any time by written notice being delivered to the Program
Administration office. Such change shall take effect as of the date the
Participant signed such written notice, whether or not Participant is living at
the time of receipt of such notice by the Program Administration office, except
that the change of Beneficiary shall not be effective if the Program has
distributed the Participant's account prior to receipt of the change of
Beneficiary form.
C. DISTRIBUTIONS TO BENEFICIARY. Upon the death of a Participant and
upon receipt of proof deemed adequate by the Program Administration office of
the identity and existence at the Participant's death of a Beneficiary or
Beneficiaries validly designated by him under the Program, distribution will be
made to the Beneficiary or Beneficiaries in the manner and form as set forth in
Section X hereof.
D. ABSENCE OF BENEFICIARY. In the absence of a Beneficiary designated
under the Program who is living at the time of Participant's death, distribution
shall be made to the executor or administrator of the estate of the Participant.
If no executor or administrator has been appointed to the knowledge of the
Program Administration office (or in the event such executor or administrator
has been disqualified), distribution may be made to such person or persons as
the Program Administration office shall be satisfied is or are legally entitled
thereto.
<PAGE>
E. INTEREST OF BENEFICIARY IN PROGRAM. No designated Beneficiary shall,
prior to the death of the Participant by whom he has been designated, acquire
any interest in the Tandy Stock, Fractional Share, or cash credited to the
Participant under the Program or in the assets of the Trust.
XII
VOTING AND TENDERING OF TANDY STOCK
A. VOTING OF TANDY STOCK BY PARTICIPANTS AND BENEFICIARIES.
Notwithstanding any provision contained in the Program to the contrary, or:
1. The Trustee shall have the power to vote all Tandy Stock held
by it on matters which may be voted by Member Organizations of the New York
Stock Exchange, Inc. without customer instructions as provided in Rule 452 of
the Rules of the Board of Directors of the New York Stock Exchange, Inc.
(Supplementary Material Item .11).
2. With respect to matters other than those described in
Subsection 1 of this Section A of this Article ("Pass Through Matters"), each
Participant or Beneficiary who timely provides instructions to the Trustee shall
be entitled to direct the Trustee how to vote Tandy Stock allocated to such
Participant's or Beneficiary's accounts in accordance with this Section. In
order to implement these voting directions, Tandy or the Trustee shall provide
each Participant or Beneficiary with proxy solicitation materials or other
notices or an information statement which are distributed to Tandy shareholders,
together with a form requesting confidential instructions as to the manner in
which Tandy Stock allocated to the Participant's or Beneficiary's account are to
be voted. Each Participant or Beneficiary shall, as a named fiduciary described
in Section 403(a)(1) of ERISA, direct the Trustee with respect to the vote of
such Tandy Stock allocated to the account of the Participant or Beneficiary.
Reasonable means shall be employed by the Trustee to provide confidentiality
with respect to the voting by such Participant or Beneficiary and the Trustee
shall hold such directions in confidence and shall not divulge or release such
directions to any person, including Tandy or any director, officer, employee or
agent of Tandy, it being the intent of this provision of this Section to ensure
that Tandy (and its directors, officers, employees and agents) cannot determine
the direction given by any Participant or Beneficiary. Such instructions shall
be in such form and shall be filed in such manner and at such time as the
Trustee may prescribe.
3. On Pass-Through Matters, the Trustee shall vote all Tandy
Stock which is allocated to Participants' and Beneficiaries' accounts for which
it does not receive timely or valid voting instructions in the same proportion
as Tandy Stock which is allocated to Participants' and Beneficiaries' accounts
for which it does receive timely and valid voting instructions.
B. TENDER OFFERS. The provisions of this Section shall apply in the
event any "Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended), either alone or in
conjunction with others, makes a tender offer, or exchange offer, or otherwise
offers to purchase, or solicits an offer to sell to such Person, one percent or
more of the outstanding Company securities (hereinafter referred to as a "Tender
Offer").
1. The Trustee may not take any action in response to a Tender
Offer except as otherwise provided in this Section B of this Article XII. Upon
commencement of a Tender Offer, Tandy or the Trustee shall notify each
Participant or Beneficiary for whom an account is maintained of such Tender
Offer and use its best efforts to timely distribute or cause to be distributed
to each Participant or Beneficiary all information, documents and other
materials as are distributed to shareholders of the Tandy with the Tender Offer.
Each Participant or Beneficiary shall be entitled to direct the Trustee to sell,
offer to sell, exchange or otherwise dispose of the Tandy Stock allocated to
such Participant's or Beneficiary's accounts in accordance with the provisions,
conditions and terms of such Tender Offer and the provisions of this Section.
Such a Participant or Beneficiary shall direct the Trustee with respect to the
tender of such shares of Tandy Stock which are allocated to the accounts of the
Participant or Beneficiary. Reasonable means shall be employed by the Trustee to
provide confidentiality with respect to the tendering directions by each
Participant or Beneficiary and the Trustee shall hold such directions in
confidence and shall not divulge or release such directions to any person,
including Tandy or any director, officer, employee or agent of Tandy, it being
the intent of this provision of this Section to ensure that Tandy (and its
directors, officers, employees and agents) cannot determine the tendering
directions given by any Participant or Beneficiary. Such instructions shall be
in such form and shall be filed in such manner and at such time as the Trustee
may prescribe.
2. A Participant or Beneficiary who has directed the Trustee to
tender or exchange Tandy Stock may, at any time prior to the tender or exchange
offer withdrawal date, or such earlier date as established by the Trustee,
instruct the Trustee to withdraw, and the Trustee shall withdraw, such Tandy
Stock from the tender or exchange offer prior to the withdrawal deadline. The
Trustee may impose reasonable limits on the number of instructions to tender or
exchange or withdraw which a Participant or Beneficiary may give to the Trustee.
3. The Trustee shall sell, offer to sell, exchange or otherwise
dispose of the Tandy Stock allocated to a Participant's or Beneficiary's account
with respect to which it has received directions to do so under this Section and
which have not been withdrawn. The proceeds of a disposition directed by a
Participant or Beneficiary shall be allocated to such Participant's or
Beneficiary's account.
4. To the extent to which Participants or Beneficiaries do not
instruct the Trustee, or do not issue valid directions to the Trustee, to sell,
offer to sell, exchange or otherwise dispose of the Tandy Stock allocated to
their accounts, such Participants or Beneficiaries shall be deemed to have
directed the Trustee that their respective accounts remain invested in Tandy
Stock subject to all provisions of the Program.
5. Following the completion of a Tender Offer, the Committee may
direct the substitution of new "qualified employer securities" as such term is
defined in Internal Revenue Code Section 409(1) for Tandy Stock or for the
proceeds of any disposition of Tandy Stock to the extent provided in the
Program; provided, however, that any such substitute employer securities must be
publicly traded securities. In lieu of the substitution of new qualified
employer securities, the Committee may direct that the Trust Fund be invested in
other securities, properties or investment vehicles. Pending the reinvestment of
any disposition of Tandy Stock, the Trust Fund may be invested in such
securities, property or investment vehicles as the Committee may from time to
time direct; provided, however, in the absence of any direction from the
Committee, the Trustee may invest the cash proceeds in short-term securities
issued by the United States of America or any agency or instrumentality thereof
or any other investment of a short-term nature, including corporate obligations
or participations therein and collective or common investment funds.
XIII
PARTICIPATION BY AFFILIATED COMPANIES
This Program shall apply to any corporation a portion of whose voting
stock is owned directly or indirectly by Tandy, and any of its affiliates, if
such company or corporation shall elect to participate and if, and so long as,
such participation shall be approved by Tandy. Each participating Company shall
be bound by the terms of this document.
XIV
NO WARRANTY OF SECURITY VALUES
Neither the Trustee or Company, their officers, directors, agents or
servants, warrants or represents in any way that the value of Tandy Stock in
which the Participant may have an interest will increase or will not decrease.
Each Participant assumes all risk in connection with any changes in the value of
Tandy Stock to the extent he may have an interest therein.
XV
GENERAL PROVISIONS
A. EXTENT OF CERTAIN RIGHTS OF PARTICIPANTS. Participation in the
Program shall not entitle any employee to be retained in the service of Company.
The at-will employment right and power of Company to dismiss or discharge any
employee is specifically reserved.
B. LIMITATION OF PARTICIPANT'S RIGHTS. No Participant nor any person
claiming under or through them shall have any right or interest under the
Program that is not herein expressly granted.
C. ASSIGNMENT. No interest in any Tandy Stock or cash held under the
Program prior to delivery to the Participant as hereinabove provided, shall be
assigned, alienated, pledged, or otherwise encumbered in whole or in part,
either directly by operation of law, or otherwise. If any attempt is made by a
Participant to assign, alienate, pledge, or otherwise encumber his interest in
such Tandy Stock or cash, prior to such delivery, for his debts, liabilities in
tort or contract, or otherwise, then the Committee (in its absolute discretion)
may treat such attempt as an election by the Participant to withdraw from the
Program permanently and submit to any loss of rights as provided in the Program
in the case of a withdrawal at the time of such attempt, except that a Court
Order, to pay an Alternate Payee(s), issued upon a Participant's divorce shall
not be a violation under this paragraph which requires a Participant's
withdrawal.
D. QUARTERLY STATEMENT OF ACCOUNTS. As soon as practicable after the end
of each calendar quarter, each Participant shall be furnished with a statement
of Tandy Stock credited to his account under the Program.
E. REGISTRATION OF STOCK. Each Participant, Beneficiary or Alternate
Payee shall, at such time as the Program Administration office or Tandy may
reasonably request, furnish written instructions for the registration of the
Tandy Stock to be delivered under the Program upon completion of the Holding
Period. Such Tandy Stock will be registered in the name of the Participant,
Beneficiary or Alternate Payee (or if a minor, in the name of another person as
custodian under the Uniform Gifts to Minors Act, or if incompetent, in the name
of the guardian or such other person(s) as the Program Administrative Committee
or Tandy may determine) alone or in his name and that of one such other adult
person as he may designate as joint tenants with right of survivorship, and not
as tenants in common. Such instructions shall remain in effect until receipt by
the Program Administration office or Tandy of written instructions to change the
registration previously authorized. In the absence of such written instructions,
Tandy Stock to be delivered to a Participant will be registered in his name or
the Alternate Payee's name alone or in the event of his death prior to such
delivery will be registered in the name of the person or persons entitled
thereto.
F. MISCELLANEOUS.
1. The Trustee may rely upon the authenticity of any information
supplied to it by the Company in connection with the operation of the Program,
and shall be fully protected in relying upon such information.
2. No individual administering, or aiding in the administration
of the Program or the Trust shall have any liability, except as provided in
Section XV.F.3. below. As a condition precedent to participation in the Program
or the receipt of benefits thereunder, such liability if any, is expressly
waived and released by each Participant and by any and all persons claiming
under or through any Participant such waiver and release to be conclusively
evidenced by the act of participation or the acceptance of benefits thereunder.
3. No individual administering, or aiding in the administration
of, the Program shall be liable except for his own acts or omissions and then
only for willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. As used herein, "individual
administering, or aiding in the administration of the Program" shall include any
share owner, director, officer, employee or agent of the Company or Trustee.
4. Tandy or the Program Administration office may require
compliance with any legal requirements which it deems necessary as a condition
for delivery of, or payment for, any Tandy Stock or cash to the credit of a
Participant under the Program.
5. By a Participant's act of participating in the Program or by
the acceptance of any of the benefits thereunder, such Participant and any and
all persons claiming under or through any such Participant, shall thereby be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, the application of the provisions of the Program.
6. Tandy Stock purchased, sold or transferred under the Program
by Tandy or the Trustee may be either treasury shares or newly issued shares.
7. No Participant, beneficiary of a Participant, or any other
person shall have any right or claim to the Trust Fund except as specified in
the Program and this Trust Agreement. Any disputes as to the amount of benefits
payable or distributable under this Trust shall be resolved by the Committee,
whose decision shall be final. No Participant or any other person shall have any
right or claim with respect to disputed benefits against the Trust, the Trustee
or Company.
8. The determination of any question relating to the
construction, interpretation, administration or application of the Program and
its rules and regulations is vested solely in the Committee and all
Participant's and other persons shall be bound thereby.
9. For the purposes of the Program, unless the contrary is
clearly indicated by the context, the use of the masculine gender shall also
include within its meaning the feminine, and the use of the singular shall also
include within its meaning the plural, and vice versa.
XVI
NOTICES AND COMMUNICATIONS
A. TO PARTICIPANTS. All notices, reports and other communications to a
Participant under or in connection with the Program shall be deemed to have been
duly given, made or delivered when received by the Participant, or (if mailed)
when mailed with postage prepaid and addressed to the Participant at his address
last appearing on the records of the Company.
B. BY PARTICIPANTS. All notices, instructions or other communications by
a Participant to Tandy under or in connection with the Program shall be duly
given, made or delivered when received by the Corporate Secretary of Tandy (1800
One Tandy Center, Fort Worth, Texas 76102) or when received in the form
specified in writing by Tandy and at the location, or by the person, designated
for receipt of such notice, instruction or other communication by Tandy.
XVII
AMENDMENT, SUSPENSION OR TERMINATION
A. AUTHORITY TO AMEND, SUSPEND OR TERMINATE. The Tandy Board of
Directors, without notice to a Participant, may amend, suspend or terminate the
Program at any time, or from time to time. Without limitation, such amendment
may change (a) the rates of Employee Payroll Deductions which may be designated
by all Participants or (b) the rate of Company Contributions, or (c) any other
provisions of the Program, except a Participant's percentage rate of Employee
Payroll Deductions may not be increased without his consent.
B. DELEGATION OF AUTHORITY. The Tandy Board of Directors may delegate to
the Chairman of the Board, Vice Chairman of the Board, or President the
authority to amend any provision of this Program, provided such amendment is (a)
of an administrative nature or (b) does not result in any material increase in
costs to a Company.
C. AMENDMENTS. No amendment, suspension or termination shall adversely
affect any rights of a Participant to Tandy Stock, Fractional Share payment or
cash to his credit under the Program as of the date of amendment, suspension or
termination. Upon such termination, all Tandy Stock, Fractional Share payment or
cash to the credit of each Participant under the Program shall be promptly paid
over to him.
XVIII
APPLICABLE LAW
Any question concerning or in respect of the validity, construction,
interpretation, administration and effect of the Program, and of its rules and
regulations, and the rights of any or all persons having or claiming to have an
interest therein or thereunder, shall be governed exclusively and solely in
accordance with the laws of the State of Texas, with Jurisdiction for any action
being expressly agreed as being in Tarrant County, Texas where all contributions
to the Trust are deemed to take place.
XIX
DEFINITIONS
For the purposes of the Program, unless some other meaning is clearly
indicated by the context, the following definitions shall be applicable:
"Alternate Payee" shall have the same meaning as defined in Internal
Revenue Code section 414 (p) and in the Employee Retirement Income Security Act
at 29 U.S.C.S. section 105, as it may be amended from time to time.
"Beneficiary" is defined in Section XI.
"Company" is defined in Section IV as "Tandy and each of its affiliates
and associates adopting the Program".
"Company Contribution" is defined in Section VI
"Continuous Full Time Service" means the most recent period of
uninterrupted employment as an employee of the Company when such employment
consists of more than thirty-five (35) hours per week for more than five (5)
months per year. The continuity of an employee's service shall not be deemed to
be broken during such period as the employee shall be:
(a) on military leave; or
(b) on other leave of absence authorized by the Company for
sickness, disability, or other circumstances, granted in
accordance with an established and uniformly applied
Company policy; or
(c) laid off in order to effect a temporary reduction in
personnel, provided such employee shall be reemployed
within three hundred sixty-five (365) days after such
lay-off.
"Court Order" is defined in paragraph X. E.
"Earnings" means the amount which an employee is receiving as salary
or wages from the Company, including (a) payments for overtime, vacation pay,
night shift bonus, and any cost of living adjustment, including incentive
compensation, other variable compensation or bonus, but excluding (b) living
allowance, retainers, any special payments made for service performed outside
his or her regular duties or any other special payments, (c) except to the
extent that the inclusion of item in (b) above is specifically approved by the
Chief Executive Officer of Tandy or by such employee or employees of the Company
as he may authorize in writing. Commissions shall be included as Earnings only
to the extent determined by the Chief Executive Officer of Tandy or by such
employee or employees of the Company as he may authorize in writing. Earnings
shall not include Company Contributions or distributions to or from the Program
or Company Contributions or distributions to or from the Tandy Stock Plan, nor
shall earnings include (x) any compensation deferred under the Tandy Corporation
Executive Deferred Compensation Plan, the Tandy Corporation Executive Deferred
Stock Plan, or any nonqualified agreements between the Company or any Employee
which provides for the deferral of compensation (collectively, the "Deferred
Compensation Plans"), (y) any Tandy contributions made under the Deferred
Compensation Plans and (z) any distribution or payments under the Deferred
Compensation Plans.
"Employee" means a regular employee of the Company receiving wages or
salary, but shall not include any person compensated pursuant to a contract
other than an employment contract with the Company under the terms of which
compensation is paid on a regular fixed salary or wage basis. As used above,
"Employee" shall also include, without limitation, any salesman who is a bona
fide employee of the Company and recognized as such for Social Security
purposes.
"Employee Payroll Deduction" is defined in Section V.
"Financial Hardship" as used in Section X is defined as (1) expenses for
"medical care" (as described in Section 213(d) of the Internal Revenue Code)
which are either: (a) previously incurred by the Participant, the Participant's
spouse, children or any dependents (as defined in Section 152 of the Internal
Revenue Code) of the Participant, or (b) necessary for the foregoing persons to
obtain medical care; (2) the need for funds for the purchase of a principal
residence of the Participant (excluding mortgage payments); (3) payment of
tuition and related educational fees for the next 12 months of post-secondary
education for the Participant or the Participant's spouse, children or
dependents (as defined in Section 152 of the Internal Revenue Code); or (4) the
need for funds to prevent the eviction of the Participant from his principal
residence or to prevent foreclosure on the mortgage of the Participant's
principal residence.
"Fractional Share" means an interest equivalent to and expressed as a
fraction of a share of Tandy Stock determined by dividing that amount credited
to the Participant to be applied to the purchase of Tandy Stock (but which is
insufficient to acquire a full share of Tandy Stock) by the applicable Stock
Price for the applicable month with respect to such credit.
"Holding Period" is defined in Section IX.
"Officers" means the Chairman of the Board, President, any Executive
Vice President, Senior Vice President, Vice President, Treasurer, Secretary,
Assistant Treasurer or Assistant Secretary and such other employees as the Tandy
Board of Directors may designate as "Officers" for this purpose.
"Other Contribution" is defined in Section VI.C.
"Participant" is defined in Section IV.
"Program" is defined in Section I.
"Qualifying Service" means the most recent period of uninterrupted
employment consisting of 1,000 hours of employment in any twelve (12) month
period.
"Stock Price" is defined in Section VI.D. as "a price equal to the
average closing price of Tandy Stock as reported for the New York Stock Exchange
composite transactions for each trading day of the calendar month".
"Tandy" is defined as Tandy Corporation, a Delaware corporation.
"Tandy Stock" is defined as Tandy Corporation Common Stock.
"Trustee" is defined as the entity or individuals listed on Annex A.
"Trust Fund" is defined in Section III as cash or Tandy Stock held for
the benefit of Participants.
XX
TRUST TAX STATUS
A. The Program is intended to be established as a grantor trust under
sections 671-677 of the Internal Revenue Code of 1986, as amended, with each
Participant considered to be a grantor subject to tax on his share of Trust
income as the owner of his respective portion of the Trust as represented by his
Participant account.
B. Tandy shall report to the Trustee within 60 days and the Trustee, or
Tandy, shall report to each Participant within 75 days of the end of each
Program Year the amount of dividends paid on Tandy Stock held in his account.
XXI
EFFECTIVE DATE
A. The Program shall become effective as of the date set forth in
Section I.B. but only upon approvals, rulings and orders (satisfactory to Tandy
and, to the extent deemed by Tandy to be necessary or desirable) by the
appropriate State and Federal or other government authorities with respect to
the Program and any action contemplated under the Program.
B. Notwithstanding the provisions of Section IV, and Paragraph A of this
Section, employees who are represented by a union (pursuant to a certification
by the National Labor Relations Board or otherwise in accordance with the
provisions of Section 9 of the National Labor Relations Act) shall become
eligible to participate in the Program (a) only after the Company and such union
shall have entered into a written agreement to the effect that the Program shall
be offered to the employees so represented and (b) only in accordance with any
conditions or requirements contained in such agreement.
XXII
CHANGE IN CONTROL
A. Notwithstanding any provision contained in the Plan to the contrary,
for a period of one (1) year following a Change in Control (as hereinafter
defined), the Program may not be terminated or amended in any way that would
adversely affect the computation or amount of, or entitlement to, benefits
hereunder, including, but not limited to, (a) any reduction in the right to make
Employee Payroll Deductions by any individual who was an eligible employee on
the date immediately prior to a Change in Control, (b) a reduction in the level
of Company Contributions with respect to such individuals or (c) any change in
the distribution or withdrawal provisions. Any amendment or termination of the
Program that (i) was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control or
(ii) otherwise arose in connection with, or in anticipation of, a Change in
Control shall be null and void, and shall have no effect whatsoever.
B. For purposes of the Program, a "Change in Control" shall mean any of
the following events:
1. An acquisition (other than directly from Tandy) of any voting
securities of Tandy (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of fifteen percent (15%) or more of the combined voting power of
Tandy's then outstanding Voting Securities; provided, however, in determining
whether a Change in 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 in Control. A "Non-Control Acquisition"
shall mean an acquisition by (1) an employee benefit plan ( or a trust forming a
part thereof) maintained by (i) the Company or (ii) 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 Tandy (a "Subsidiary"),
(2) Tandy or its Subsidiaries, or (3) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
2. The individuals who, as of August 22, 1990 are members of the
Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by Tandy's 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 the Program, 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
promulgated under the 1934 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; or
3. Approval by stockholders of Tandy of:
(i) A merger, consolidation or reorganization involving Tandy,
unless
(I) the stockholders of Tandy, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent
(60%) 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,
(II) 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,
(III) no Person (other than any Tandy Subsidiary, any
employee benefit plan (or any trust forming a part
thereof) maintained by Tandy, the Surviving Corporation,
or any Tandy Subsidiary, or any Person who, immediately
prior to such merger, consolidation or reorganization had
Beneficial Ownership of fifteen percent (15%) or more of
the then outstanding Voting Securities) has Beneficial
Ownership of fifteen percent (15%) or more of the combined
voting power of the Surviving Corporation's then
outstanding voting securities, and
(IV) a transaction described in clauses (I) through (III)
shall herein be referred to as a "Non-Control
Transaction";
(ii) A complete liquidation or dissolution of Tandy; or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of Tandy to any Person (other
than a transfer to a Tandy Subsidiary).
Notwithstanding the foregoing, a Change in 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 Tandy 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 in
Control would occur (but for the operation of this sentence) as a result of
acquisition of Voting Securities by Tandy, and after such share acquisition by
Tandy, 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 in Control
shall occur.
C. Notwithstanding any provision contained in the Program to the
contrary, no provision of this Article XXII may be amended at any time.
D. Notwithstanding any provision contained in the Program to the
contrary, the provisions of this Article XXII shall be binding upon Tandy and
its successors and assigns.
E. Notwithstanding any provision contained in the Program to the
contrary, the provisions of this Article XXII shall be deemed severable and the
validity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
F. The provisions of this Article XXII shall govern notwithstanding
anything contained in the Program to the contrary.
IN WITNESS WHEREOF, Tandy and the Trustee have caused this Agreement to
be executed by their duly appointed officers and their corporate seals to be
hereunto affixed as of the date first written above.
Attest (SEAL) TANDY CORPORATION
_____________________________ By______________________________
Assistant Secretary Richard L. Ramsey
Vice President and Controller
TRUSTEE
--------------------------------
Mark A. Barfield
--------------------------------
Mark C. Hill
--------------------------------
Dwain H. Hughes
<PAGE>
Annex "A"
Individual Trustees
Mark A. Barfield
Mark C. Hill
Dwain H. Hughes
<PAGE>
<TABLE>
EXHIBIT 11
TANDY CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------
(In millions, except ratios) 1999 1998 1999 1998
-------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Net income (loss) $ 59.8 $ (4.1) $ 177.3 $ 12.9
Plus provision (benefit) for income taxes 38.3 (2.5) 113.4 8.1
-------- -------- -------- --------
Income (loss) before income taxes 98.1 (6.6) 290.7 21.0
-------- -------- -------- --------
Fixed charges:
Interest expense and amortization of debt discount 8.5 11.5 26.4 33.6
Amortization of issuance expense 0.2 0.1 0.6 0.5
Appropriate portion (33 1/3%) of rentals 17.2 18.0 50.9 55.2
-------- -------- -------- --------
Total fixed charges 25.9 29.6 77.9 89.3
-------- -------- -------- --------
Earnings before income taxes and fixed charges $ 124.0 $ 23.0 $ 368.6 $ 110.3
======== ======== ======== ========
Ratio of earnings to fixed charges 4.79 0.78 4.73 1.24
======== ======== ======== ========
Ratio of Earnings to Fixed Charges and Preferred
Dividends:
Total fixed charges, as above $ 25.9 $ 29.6 $ 77.9 $ 89.3
Preferred dividends 1.4 1.5 4.2 4.4
-------- -------- ---------- --------
Total fixed charges and preferred dividends $ 27.3 $ 31.1 $ 82.1 $ 93.7
======== ======== ========== ========
Earnings before income taxes and fixed charges $ 124.0 $ 23.0 $ 368.6 $ 110.3
======== ======== ========== ========
Ratio of earnings to fixed charges and preferred
dividends 4.54 0.74 4.49 1.18
======== ======== ========== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income contained in
Tandy Corporation's 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000096289
<NAME> TANDY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 54,300
<SECURITIES> 15,417
<RECEIVABLES> 253,500
<ALLOWANCES> 8,800
<INVENTORY> 978,500
<CURRENT-ASSETS> 1,379,100
<PP&E> 1,020,300
<DEPRECIATION> 577,100
<TOTAL-ASSETS> 2,146,200
<CURRENT-LIABILITIES> 880,200
<BONDS> 324,900
0
73,700
<COMMON> 235,800
<OTHER-SE> 551,400
<TOTAL-LIABILITY-AND-EQUITY> 2,146,200
<SALES> 2,737,200
<TOTAL-REVENUES> 2,737,200
<CGS> 1,332,100
<TOTAL-COSTS> 1,332,100
<OTHER-EXPENSES> 5,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,600
<INCOME-PRETAX> 290,700
<INCOME-TAX> 113,400
<INCOME-CONTINUING> 173,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 173,100
<EPS-BASIC> .89
<EPS-DILUTED> .85
</TABLE>
