Proposals Relating to Compensation
The Amended Plan provides that in the event of a stock dividend, declaration of an extraordinary cash dividend, stock
split, reverse stock split, share combination, recapitalization (or any similar event affecting the capital structure of Mattel), merger, consolidation, acquisition of property or shares, separation, spinoff, reorganization, stock rights offering,
liquidation, or disaffiliation of a subsidiary, affiliate, or division (or any similar event affecting Mattel), the Compensation Committee or the Board will make substitutions or adjustments as it deems appropriate and equitable to (i) the
aggregate number and kind of shares of common stock or other securities reserved for grants under the Amended Plan, (ii) the limitations described above, (iii) the number and kind of shares or other securities subject to outstanding
grants, and (iv) the exercise price of outstanding options and SARs.
The Amended Plan also provides that if a grant is made pursuant to the conversion,
replacement, or adjustment of outstanding equity awards in connection with any acquisition, merger, or other business combination or similar transaction involving Mattel (this kind of grant is referred to in this Proposal as a Substitute
Grant), then the number of shares available under the Amended Plan will not be reduced as a result, to the extent the Substitute Grant is permitted without stockholder approval by the listing standards of the Nasdaq Stock Market.
Administration of the Amended Plan.
The Amended Plan is administered by the Compensation Committee, or such other committee of members of the Board as the Board
may designate from time to time. The Compensation Committee is required to have at least three members, and all of its members must qualify as
non-employee
directors for purposes of Rule
16b-3
under the Securities Exchange Act of 1934 and outside directors for purposes of Section 162(m) of the Internal Revenue Code (Section 162(m)), and must meet the independence
requirements of the listing standards of the Nasdaq Stock Market. The Compensation Committee may include all members of the Board, if they all meet the foregoing requirements.
The Compensation Committee is authorized to construe and interpret the Amended Plan, the rules and regulations under the Amended Plan, and all grants under the Amended
Plan; to adopt, amend, and rescind rules and procedures relating to the administration of the Amended Plan as, in its opinion, may be advisable in the administration of the Amended Plan; and, except as provided in the Amended Plan, to make all other
determinations deemed necessary or advisable under the Amended Plan. The Compensation Committee may, except to the extent prohibited by applicable law or the listing standards of the Nasdaq Stock Market, allocate all or any portion of its
responsibilities and powers to any one or more of its members or to any other person or persons selected by it, including without limitation Mattels Chief Executive Officer. However, the Compensation Committees ability to delegate its
authority is limited in certain respects pursuant to the Amended Plan, including that the Compensation Committee may not make any delegation of its authority to grant awards to Mattels directors and executive officers, except to the extent
permitted by Rule
16b-3.
Types of Awards.
The Amended Plan authorizes the Compensation Committee to grant stock
options, SARs, restricted stock, RSUs, dividend equivalents, and unrestricted stock, in each case based on Mattel common stock. The Amended Plan also authorizes the Compensation Committee to grant performance awards payable in the form of Mattel
common stock or cash.
Stock Options.
The Compensation Committee may grant stock options qualifying as incentive stock options under the Internal Revenue Code
(ISOs) and
non-qualified
stock options. The term of each stock option will be fixed by the Compensation Committee, but may not exceed ten years, or in the case of a ten percent stockholder,
five years. The exercise price for each stock option will also be fixed by the Compensation Committee, but (except in the case of Substitute Grants) may not be less than the fair market value of Mattel common stock on the date of grant. ISOs may
only be granted to employees of Mattel and corporations connected to it by chains of ownership of voting power representing fifty percent or more of the total outstanding voting power of all classes of stock of the lower-tier entity. Stock
options will vest and become exercisable as determined by the Compensation Committee. Participants who hold stock options are not entitled to dividends or dividend equivalents.
Stock Appreciation Rights (SARs).
The exercise price of a SAR may be paid in cash, in shares of Mattel common stock, or a combination, as determined by the
Compensation Committee. SARs may be granted under the Amended Plan either with a stock option (tandem SARs) or separately (free-standing SARs). Participants who hold SARs are not entitled to dividends or dividend equivalents.
Tandem SARs may be granted at the time the related stock option is granted or, in the case of a
non-qualified
stock option,
after the grant. Tandem SARs must vest and be exercisable, and terminate, at the same time as the related stock option. The exercise of a tandem SAR will result in the termination of the related stock option to the same extent, and vice versa.