Employment Agreement - Mattel Inc. and Robert A. Eckert
Summary of Principal Terms of
Employment Agreement between
Robert A. Eckert ("Executive") and
Mattel, Inc. ("Company")
May 15, 2000
1. Position: Chairman and Chief Executive Officer. Executive will also be
elected a director of the Company.
2. Term: Through June 30, 2003, with a daily three-year evergreen feature
effective June 30, 2000, so that the remaining term will always be at least
three years, subject to either party being able, by written notice, to stop
further operation of that evergreen feature.
3. Annual Salary: $1,250,000 for 2000, subject to increase thereafter.
(a) Annual performance bonus based upon the terms and conditions of the
Company's Management Incentive Plan, with target at 100% of salary and
maximum at 200% of salary. Unless Executive's employment is terminated
for Cause prior to the normal bonus payment date, guaranteed 2000
bonus at target without proration as a minimum.
(b) Participation in the Company's cash Long-Term Incentive Plan (the
"LTIP") for the 2000-2002 performance cycle in accordance with current
Company practice (i.e., $2,000,000 for performance at the threshold
level, $4,000,000 at target level, and $8,000,000 at maximum),
prorated for the period from the commencement of the Executive's
employment with the Company through the end of 2002; and participation
in the LTIP for subsequent performance cycles consistent with
competitive pay practices generally and with participation by other
senior executives of the Company.
(c) Additional bonuses as awarded in the discretion of the Board of
5. Group/Executive Benefits: Participation by Executive and his family, on
terms no less favorable to Executive than the terms offered to other senior
executives of the Company, in any group and/or executive life,
hospitalization or disability insurance plan, health program (with COBRA
equivalent premiums paid on a grossed-up basis during any waiting period),
pension, profit sharing, ESOP, 401(k) and similar benefit plans (qualified,
non-qualified and supplemental) or other fringe benefits of the Company,
including automobile allowance, club memberships and dues, and similar
programs as in effect from time to time (collectively referred to as the
"Benefits"). In addition to any group and/or executive life insurance
benefits, the Company will maintain life insurance which will pay to the
Executive's beneficiaries a death benefit equal to three times the
Executive's annual base salary.
6. Supplemental Retirement Benefits:
(a) Upon termination of employment, the Executive will be entitled to
receive from the Company a supplemental pension benefit which, when
added to any benefits payable under all qualified and nonqualified
defined benefit retirement plans of the Company, will produce an
aggregate pension payable at age 60 which is not less than 35% of (i)
the Executive's final average earnings (determined as described in the
Company's 2000 proxy statement) or, if greater, (ii) the sum of the
Executive's initial annual salary and guaranteed bonus described in
items 3 and 4 above (the "Age 60 Pension").
(b) In the event of termination of employment prior to age 60 for any
reason other than termination by the Company for "Cause" or resignation
by the Executive without "Good Reason", Executive will be entitled to
the Age 60 Pension, which will be calculated by taking into account
(for purposes of determining final average earnings) any salary-and-
bonus-based severance benefits payable as described in item 10 or item
16 below. In the event of the Executive's resignation without "Good
Reason" or termination by the Company for "Cause" prior to age 60, the
amount of the Age 60 Pension will be reduced by 3% of such amount for
each full year during the period between such resignation or
termination and the Executive's 60th birthday; and in the event of such
a resignation or termination prior to the fifth anniversary of the
commencement of the Executive's employment with the Company, the amount
of the Age 60 Pension, as reduced under the preceding clause, will be
prorated by multiplying it by a fraction the numerator of which is the
number of months the Executive was actively employed by the Company and
the denominator of which is 60.
(c) In the event of termination prior to age 60, the Age 60 Pension may be
commenced early, subject to a reduction of 3% for each full year that
the pension commences prior to age 60. In the event of Change-of-
Control, the 3% discount for early commencement will be measured from
(d) The Age 60 Pension may be paid in any form permitted under the
Company's supplemental plans. In the event of the Executive's death
after the date hereof but before the Age 60 Pension becomes payable,
his wife will receive a survivor annuity for her life equal to 50% of
the amount which would have been payable to the Executive if he had
terminated his employment for "Good
Reason" immediately prior to the date of his death and elected to
commence his Age 60 Pension immediately. Any such survivor benefit will
be reduced by the amount of any pre-retirement survivor benefit payable
to the Executive's wife under the Company's qualified and nonqualified
defined benefit retirement plans.
7. Equity Based Incentive Compensation:
(a) Initial grant of ten-year options with respect to 3,000,000 shares to
vest (i) 750,000 shares on the commencement of Executive's employment
with the Company, and (ii) 750,000 shares on each of the first three
anniversaries of such commencement. The exercise price for the options
will be equal to the closing NYSE price on the date that the Executive
accepts employment with the Company.
(b) Initial grant of 550,404 shares of deferable restricted stock units to
vest 1/4 on June 30, 2000, 1/4 on January 31, 2001, 1/4 on January 31,
2002, and 1/4 on June 30, 2008. Executive will be permitted to defer
receipt of shares issuable upon vesting of the restricted stock units.
(The 550,404 stock unit total is an estimate based on a $12.00 per
share value for the Company's stock and the May 5, 2000 closing NYSE
price of the stock of the Executive's prior employer. The actual number
of stock units should be calculated based on the closing NYSE prices of
those stocks on the date that the Executive accepts employment with the
(c) Executive will be eligible to receive future grants under the Company's
stock incentive programs consistent with competitive pay practices
generally and with awards made to other senior executives of the
(d) All equity based awards will fully vest upon a Change of Control.
8. Sign-On Bonus.
(a) $5,500,000 loan to be disbursed within three business days of the
commencement of Executive's employment, to be forgiven (with an
accompanying tax gross-up payment) at the end of three years or upon
earlier termination of the Executive's employment for any reason other
than by the Company for Cause or by the Executive's resignation without
(b) Payment of $2,784,874 in cash within three business days of the
commencement of the Executive's employment.
9. Events Triggering Severance Benefits: Upon the termination of Executive's
employment for any of the following reasons, Executive will be entitled to
receive the severance benefits described in item 10 below:
(a) Termination by the Company without Cause, or
(b) Termination by Executive for Good Reason.
"Cause" means "Cause" as defined in the Company's employment agreements
with its senior executives. "Good Reason" includes the definition of "Good
Reason" contained in the Company's employment agreements with its senior
executives and also includes delivery by the Company of a notice
discontinuing the evergreen feature of the term of Executive's employment
10. Severance Benefits: In the event of a termination of employment described
in item 9 above, Executive will be entitled, in lieu of any other severance
benefits (other than those described elsewhere herein), to severance
benefits essentially comparable to those contained in the Company's
employment agreements with its senior executives.
11. Gross-Up Payment for Golden Parachute Taxes: If it is determined that any
payment by the Company to or for the benefit of Executive, under the
employment agreement or otherwise, would be subject to the federal excise
taxes imposed on golden parachute payments, the Company will make an
additional payment to Executive (the "Gross-Up Payment") in an amount
sufficient to cover (a) any golden parachute excise tax payable by
Executive, (b) all taxes on the Gross-Up Payment, and (c) all interest
and/or penalties imposed with respect to such taxes.
12. No Duty to Mitigate: After a termination of employment, Executive will not
be obligated to mitigate damages by seeking other comparable employment,
and any severance benefits payable to Executive will not be subject to
reduction for any compensation received from other employment.
13. Termination by Executive: Executive may, by at least 30 days prior written
notice, voluntarily terminate the agreement without liability at any time
without Good Reason.
14. Fees and Expenses: The Company will pay all reasonable professional fees
and related expenses incurred by Executive in connection with the
negotiation and preparation of the employment agreement.
15. Relocation: The Company will pay all costs of relocation of Executive and
his family to California in accordance with the Company's relocation policy
supplemented as follows:
(a) The Company will reimburse Executive for reasonable temporary living
expenses for Executive and his family in the Los Angeles metropolitan
area for a period not to exceed one year from the date hereof;
(b) The Company will make available to Executive the opportunity to sell
his present primary residence at appraised value through a relocation
firm mutually acceptable to Executive and the Company; and
(c) All relocation payments will be "grossed-up" for applicable taxes.
16. Change of Control Agreement: In the event of a Change of Control,
Executive will have the benefit of all elements of the Change of Control
provisions in the Company's employment agreements with its senior
executives, except to the extent that the application thereof would reduce
Executive's rights or benefits described herein.
17. Binding of Successors: The Company will be required to have any successor
to all or substantially all of its business and/or assets expressly assume
and agree to perform Executive's employment agreement in the same manner
and to the same extent that the Company would be required to perform if no
such succession had taken place.