SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K/A
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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 1-9599
------
GALOOB TOYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1716574
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Forbes Boulevard So. San Francisco, CA 94080
- - ------------------------------------------ ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650)952-1678
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, Par Value $.01 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[ ]
The aggregate market value of the voting stock held by persons who are not
officers or directors (or their affiliates) of the registrant, as of March 02,
1998, was approximately $159,000,000.
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 02, 1998, was as follows:
Class Number of Shares
----- ----------------
Common Stock, Par Value $.01 Per Share 18,109,864
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
This Amendment No.1 on Form 10-K/A amends and restates in
their entirety the following items of Part III of the Annual Report
on Form 10-K of Galoob Toys, Inc. (the "Company") for the fiscal year
ended December 31, 1997 to add information required by Part III Item
10. Directors and Executive Officers of the Registrant; Item 11.
Executive Compensation; Item 12. Security Ownership of Certain
Beneficial Owners and Management; and Item 13. Certain Relationships
and Related Transactions; and an amended Exhibit 23-1.
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers and their respective positions are as
follows:
Name Age Position
- ----------------------- ---- --------------------------------------------------
Mark D. Goldman....... 47 President, Chief Executive Officer and Director
William G. Catron..... 52 Executive Vice President, General Counsel, Chief
Administrative Officer and Secretary
Andrew J. Cavanaugh... 51 Director
Scott R. Heldfond..... 52 Director
Ronald D. Hirschfeld.. 47 Executive Vice President, International Sales &
Marketing
S. Lee Kling.......... 69 Director
Roger J. Kowalsky..... 63 Executive Vice President and Director
Gary J. Niles......... 58 Executive Vice President, Marketing and Product
Acquisition
Louis R. Novak........ 50 Executive Vice President and Chief Operating
Officer
Craig Louisana........ 41 Senior Vice President, Sales
Kathleen R. McElwee... 43 Senior Vice President and Chief Financial Officer
Ronnie Soong.......... 51 Managing Director of Galco International Toys, Ltd.
Mark D. Goldman, a Director of the Company since 1987, has
served as President and Chief Executive Officer of the Company since
June, 1991. From 1987 to 1991, Mr. Goldman served as Executive Vice
President and Chief Operating Officer. Prior to 1987, Mr. Goldman
served in various executive capacities at Ages Entertainment
Software, Inc. (formerly Sega Enterprises, Inc.) and Mattel, Inc.
Mr. Goldman's term will expire in 2000.
William G. Catron has served as Executive Vice President,
General Counsel and Chief Administrative Officer since May 1992 and
as Corporate Secretary of the Company since June 1995. From 1985 to
1992, Mr. Catron was Senior Vice President, Assistant General Counsel
for Paramount Pictures Corporation. Prior to 1985, Mr. Catron served
in various executive capacities at Ages Entertainment Software, Inc.
(formerly Sega Enterprises, Inc.) and Mattel, Inc.
Andrew J. Cavanaugh, a Director of the Company since 1993,
serves as a Senior Vice President -- Corporate Human Resources of The
Estee Lauder Companies Inc. He has been affiliated with Estee Lauder
in an executive capacity since 1988. Prior to undertaking his current
position, Mr. Cavanaugh served as a Senior Consultant with Coopers &
Lybrand, New York City, from 1986 through 1988, and Senior Vice
President Administration of Paramount Pictures Corporation from 1984
through 1986. Mr. Cavanaugh's term will expire in 1999.
Scott R. Heldfond, a Director of the Company since 1986, has
served as President and Chief Executive Officer of Frank Crystal &
Co. of California Inc., an insurance brokerage firm since February
1997. Prior to undertaking his current position, Mr. Heldfond served
as Managing Director of Hales Capital Advisors, LLC, an insurance
industry merchant bank firm, since January 1995, and he also served
as a consultant to AON Risk Services (successor entity to Rollins
Hudig Hall and DSI Insurance Services) ("AON"), an insurance broker.
From 1992 to 1994, he was President and CEO of Rollins Real
Estate/Investment, and prior thereto was President and CEO of DSI
Insurance Services. The Company retained the services of AON (with
which Mr. Heldfond is no longer associated) for insurance brokerage
in 1997. On December 24, 1997, the Company retained the insurance
brokerage services of Frank Crystal & Co. of California Inc. Mr.
Heldfond's term will expire in 1998.
Ronald D. Hirschfeld has served as Executive Vice President,
International Sales and Marketing of the Company since February 1994.
From 1989 to 1994, Mr. Hirschfeld served as Senior Vice President,
International Sales and Marketing. Mr. Hirschfeld served as Senior
Vice President, International Operations from 1987 to 1989 and has
held various positions with the Company since 1978.
S. Lee Kling, a Director of the Company since 1991, has served
since 1991 as Chairman of the Board of Kling Rechter & Company, a
merchant banking company which operates in partnership with Barclays
Bank PLC. Mr. Kling served as Chairman of the Board of Landmark
Bancshares Corporation, a bank holding company in St. Louis, Missouri
("Landmark"), until December 1991 when Landmark merged with Magna
Group, Inc. Mr. Kling serves on the Boards of Directors of Magna
Group, Inc., Falcon Products, Co., Bernard Chaus Inc., Top Air
Manufacturing, Inc., National Beverage Corp., Hanover Direct, Inc.
and Electro Rent Corp. Mr. Kling's term will expire in 1999.
Roger J. Kowalsky, a Director of the Company since 1994,
has served as Executive Vice President of the Company since June 1996,
and served as Chief Financial Officer of the Company from June 1996
to December 1997. From 1989 to 1996, Mr. Kowalsky served as Director
of the Vermont Studio Center. From 1983 to 1986, Mr. Kowalsky served
as Senior Vice President, Finance & Administration for Yale Materials
Handling Corporation. From 1969 to 1982, Mr. Kowalsky worked at
Pullman Inc., rising to Executive Vice President, Finance and
Administration and President of Pullman Trailmobile, a subsidiary of
Pullman, Inc. Mr. Kowalsky's term will expire in 1998.
Gary J. Niles has served as Executive Vice President, Marketing
and Product Acquisition of the Company since February 1992. From
1989 to 1992, Mr. Niles served as Senior Vice President, Toy Boys
Division. Before joining the Company, Mr. Niles was an executive
with U.A.C., Ltd., a division of Universal Matchbox, Revell
Incorporated and Ages Entertainment Software, Inc. (formerly Sega
Enterprises, Inc.)
Louis R. Novak has served as Executive Vice President and Chief
Operating Officer of the Company since February 1992. From 1989 to
1992, Mr. Novak served as Senior Vice President, Operations. From
1986 to 1989 he was Senior Vice President, Worldwide Product
Operations for Coleco Industries, Inc. Prior to 1986, Mr. Novak was
an executive with All American Gourmet Company, Inc., a manufacturer
of frozen food products, and for Mattel, Inc.
Craig S. Louisana has served as Senior Vice President, Sales of
the Company since November 1997. From 1995 to 1997, Mr. Louisana
served as Director of Field Sales for the Company and as Senior
Account Executive from 1993 to 1995. Prior to joining the Company,
Mr. Louisana held various sales positions with Mattel, Inc. and
Kenner Toys.
Kathleen R. McElwee has served as Senior Vice President and
Chief Financial Officer of the Company since January 1998. From 1995
to December 1997, Ms. McElwee was Vice President of Corporate
Financial Planning, Analysis and Reporting. From 1993 to 1995, Ms.
McElwee held various positions with Nissan Motor Corporation. From
1990 to 1993, Ms. McElwee was with Canteen Corporation, a subsidiary
of Flagstar Cos., and served as Chief Financial Officer in 1993.
Ronnie Soong has served as Managing Director of Galco since May
1995. From 1993 to 1995, Mr. Soong served as General Manager of
Galco. From 1989 to 1993, Mr. Soong was General Manager of Zindart
Industrial Co., Ltd. Prior to 1989, Mr. Soong was the General
Manager of Buddy L (HK) Ltd. and an executive with the Ertl Company
in Taiwan from 1987 to 1989.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Company's officers and
directors, and any persons who own more than ten percent of the
Company's Common Shares to file reports of initial ownership of the
Company's Common Stock and subsequent changes in that ownership with
the Securities and Exchange Commission and the New York Stock
Exchange. Officers, directors and greater than ten-percent beneficial
owners are also required to furnish the Company with copies of all
Section 16(a) forms they file. Based solely upon a review of the
copies of the forms furnished to the Company, or written
representations from certain reporting persons that no Forms 5 were
required, the Company believes that it complied with all Section
16(a) filing requirements during the 1997 fiscal year, except that
Kathleen R. McElwee and Craig S. Louisana filed Forms 3 late.
ITEM 11. Executive Compensation
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table summarizes the compensation paid by the
Company and its subsidiaries, as well as certain other compensation
paid or accrued, to the Chief Executive Officer of the Company and
the other five most highly compensated executive officers of the
Company who earned in excess of $100,000 for the Company's fiscal
years ended December 31, 1995, 1996 and 1997 (each person appearing
in the table is referred to as a "Named Executive"):
SUMMARY COMPENSATION TABLE(1)
Annual Compensation Long
-------- -------- Other Term
Annual Compen- All other
Compen- sation Compen-
Salary Bonus sation ---------- sation
Name and Principal Position Year ($) ($) ($) Options(#) ($)(2)
- -------------------------- -------- -------- -------- -------- ---------- ---------
Mark D. Goldman 1997 500,000 0 89,130 (3) 150,000 5,140
President and Chief 1996 500,000 937,500 0 36,140 4,660
Executive Officer 1995 400,000 750,000 0 200,000 3,980
Gary J. Niles 1997 335,000 0 0 75,000 2,250
Executive Vice President, 1996 320,417 418,750 0 28,130 2,550
Marketing and Product 1995 300,000 360,000 0 0 1,440
Acquistion
Louis R. Novak 1997 300,000 0 0 75,000 870
Executive Vice President 1996 291,169 375,000 0 28,130 870
and Chief Operating 1995 272,803 334,567 0 0 870
Officer
William G. Catron 1997 252,825 0 0 60,000 1,440
Executive Vice President, 1996 248,289 316,031 0 24,520 1,440
General Counsel, Chief 1995 236,729 217,745 0 0 870
Administrative Officer
and Secretary
Ronald D. Hirschfeld 1997 251,057 0 0 60,000 870
Executive Vice President, 1996 246,552 313,821 0 24,520 870
International Sales and 1995 235,073 216,222 0 0 1,440
Marketing
Roger J. Kowalsky 1997 259,992 0 46,535 (4) 60,000 3,510
Executive Vice President 1996 128,330 325,000 0 114,440 1,685
and Director 1995 0 0 0 0 0
(1) Other than as provided in this table, there were no other
transactions among the Named Executives and the Company which
are required to be reported in this table.
(2) These amounts represent premiums paid by the Company with
respect to term life insurance.
(3) This amount includes $68,452 of imputed interest from Mr.
Goldman's note payable to the Company.
(4) This amount represents $32,135 and $14,400 paid to Mr. Kowalsky
for relocation and auto allowance respectively.
STOCK OPTIONS
The following table contains information concerning the grant
of stock options to the Named Executives during the Company's last
fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------- ---------
% of Total
Shares of Options
Common Stock Granted to
Underlying Employees in Exercise Grant Date
Options Fiscal Year Price Expiration Present Value
Name Granted (of 928,000) ($/US) Date ($)(1)
- -------------------------- --------------- -------------- --------- ---------- ------------
Mark D. Goldman 150,000 16.2% 15.75 1/27/07 1,399,500
Gary J. Niles 75,000 8.1% 15.75 1/27/07 699,825
Louis R. Novak 75,000 8.1% 15.75 1/27/07 699,825
William G. Catron 60,000 6.5% 15.75 1/27/07 559,860
Ronald D. Hirschfeld 60,000 6.5% 15.75 1/27/07 559,860
Roger J. Kowalsky 60,000 6.5% 15.75 1/27/07 559,860
(1) The Grant Date Present Values were determined using the
Black-Scholes option pricing model. Assumptions used for the
model are as follows: an option term of 4.7 years, stock
volatility of 66%, dividend yield of 0%, and a risk-free rate
of return of 6.1%. Options will only have values to the extent
the Common Stock Price exceeds the Exercise Prices above. To
fully realize the aggregate values shown above, based upon the
Black-Scholes option model, the Common Stock price must exceed
$25 per share; the options in the above table vest at prices
ranging from $25 to $35. The Grant Date Present Values do not
take into account risk factors such as non-transferability and
limits on exercisability. The Black-Scholes option pricing
model is a commonly utilized model for valuing options. The
model assumes that the possibilities of future stock returns
(dividends plus share price appreciation) resemble a normal
"bell-shaped" curve. In assessing the Grant Date Present
Values indicated in the above table, it should be kept in mind
that no matter what theoretical value is placed on an option on
the date of grant, the ultimate value of the option is
dependent on the market value of the Common Stock at a future
date, which will depend to a large degree on the efforts of the
Named Executives to bring future success to the Company for the
benefit of all stockholders.
The Company does not currently grant stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information with respect to the
options exercised by the Named Executives during the 1997 fiscal year
and the unexercised options held by the Named Executives as of the
end of the 1997 fiscal year.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Fiscal Options at fiscal
Acquired Year End (#) Year-End ($)(1)
on Value ------------ ------------ ---------- ------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------ ------------- ------------ ------------ ---------- ------------
Mark D. Goldman 0 0 454,630 186,140 1,264,873 0
Gary J. Niles 0 0 167,950 93,050 187,471 0
Louis R. Novak 0 0 167,950 93,050 187,471 0
William G. Catron 0 0 96,191 74,440 102,257 0
Ronald D. Hirschfeld 0 0 66,191 74,440 66,632 0
Roger J. Kowalsky 0 0 104,000 74,440 4,375 0
(1) The closing sales price of the Common Stock on the New York
Stock Exchange on December 31, 1997 was $10.19 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
Effective as of November 17, 1997, the Company entered into a
Severance and Change in Control Agreement (the "Agreement") with Mark
Goldman, which supersedes and terminates a previous Severance
Agreement dated October 27, 1994. The Agreement sets forth certain
benefits which are payable if Mr. Goldman's employment is terminated
for various reasons, including termination by the Company (or its
successor) or by him of his employment either prior to or following a
change in control of the Company, as follows (the "Severance
Payment"):
(i) If Mr. Goldman is terminated for other than cause (as
defined in the Agreement) prior to a Change in Control (as
defined in the Agreement), or if Mr. Goldman terminates his
employment for good reason (as defined in the Agreement) prior
to a Change in Control, the Agreement provides that the Company
shall pay to Mr. Goldman a lump sum payment equal to (a) three
times Mr. Goldman's annual base salary, (b) three times an
amount equal to the largest dollar bonus paid (including any
bonus amount that was deferred by Mr. Goldman) in the last five
years, including the year in which Mr. Goldman's termination of
employment occurs (the "Owed Bonus"), and (c) three times the
annual car allowance in effect for Mr. Goldman at the time of
employment termination and three times the annual insurance,
maintenance and gasoline costs incurred for Mr. Goldman's
vehicle during his last full year of employment with the
Company. The Agreement further states that the Company shall
continue to provide Mr. Goldman with medical, health and
welfare and insurance benefits for a period of three years from
the date of Mr. Goldman's termination.
(ii) If Mr. Goldman is terminated by the Company for
other than cause within twenty-four months following a Change
in Control, or if Mr. Goldman terminates his employment for
good reason within twenty-four months following a Change in
Control, the Agreement provides that the Company shall pay to
Mr. Goldman a lump sum payment equal to (a) three times Mr.
Goldman's annual base salary, (b) three times the Owed Bonus,
(c) three times the annual car allowance in effect for Mr.
Goldman at the time of employment termination and three times
the annual insurance, maintenance and gasoline costs incurred
for Mr. Goldman's vehicle during his last full year of
employment with the Company, and (d) the amount of $948,400
(the "Special Payment") and an additional lump sum payment (the
"Make-Whole Payment") in such an amount as to pay any income
taxes and employment taxes on the Special Payment or the Make-
Whole Payment and as to pay the value of the lost tax benefit
caused by the loss of any tax deduction resulting from Mr.
Goldman's receipt of the Special Payment or the Make-Whole
Payment. The Agreement further states that the Company shall
continue to provide Mr. Goldman with medical, health and
welfare and insurance benefits for a period of three years
following the date of Mr. Goldman's termination.
(iii) If Mr. Goldman is terminated for cause, or if Mr.
Goldman terminates his employment for any reason other than for
good reason, the Agreement provides that the Company must pay
to Mr. Goldman his unpaid compensation for services prior to
termination, the value of any accrued unused vacation pay to
the date of termination, and any amounts owed to Mr. Goldman
pursuant to any deferred compensation plan.
The maximum Severance Payment that the Company would have been
required to make under the Agreement if such amount became payable in
the fiscal year 1997 was approximately $6,216,575. In addition, the
Agreement contains a "gross-up" provision which provides that, to the
extent that any Severance Payment is subject to certain excise taxes
occurring as a result of a Change in Control, the Company would make
an additional gross-up payment so that Mr. Goldman would retain an
amount of the Severance Payment equal to the amount he would have
retained had there been no such excise taxes. Mr. Goldman is
employed by the Company as its President and Chief Executive Officer
without an employment agreement. The Company has purchased a life
insurance policy in a $2,000,000 face amount for Mr. Goldman, who
designated the beneficiary of such insurance policy.
Each of the Executive Vice Presidents of the Company named in
the Summary Compensation Table, entered into a Severance and Change
in Control Agreement (the "Severance and Change in Control
Agreements") with the Company, dated as of January 1, 1997, as
amended on August 13, 1997 and December 15, 1997. The Severance and
Change in Control Agreements provide, among other things, that if the
executive is terminated other than for Cause the executive is
entitled to continue to receive his salary and certain benefits
(excluding the continuation of any bonus) for a period of twelve
months. These severance payments will be reduced in the event that
the executive commences regular full-time employment during such
period. If there is a Change in Control (as defined in the Severance
and Change in Control Agreements) and the executive's employment is
terminated voluntarily or involuntarily (other than for Cause) prior
to the first anniversary of a Change in Control, the above-described
severance package is replaced with a lump sum payment equal to three
times such executive's annual salary and bonus (as described in the
Severance and Change in Control Agreements), plus the continuation of
certain benefits for a thirty-six month period of time. If the
executive's employment is terminated involuntarily by the Company
(other than for Cause) during the next twelve months following the
first anniversary of a Change in Control, the executive is entitled
to continue to receive his salary and certain benefits (excluding the
continuation of any bonus) for a period of up to twenty-four months.
Any payment or benefit received pursuant to the Severance and Change
in Control Agreements will be reduced to the extent that such payment
or benefit would be subject to certain excise taxes occurring as a
result of a Change in Control. The Executive Vice Presidents of the
Company named in the Summary Compensation Table are each employed by
the Company in their respective positions without an employment
contract.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information as of
March 31, 1998 with respect to the Common Stock of the Company
beneficially owned by (a) all persons known to the Company to own
beneficially more than 5% of the Common Stock of the Company, (b) all
directors and nominees, (c) the Named Executives (as defined under
the caption "Executive Compensation") and (d) all executive officers
and directors of the Company as a group.
Amount and Percent of
Nature of Common
Beneficial Stock
Name of Beneficial Owner(1) Ownership(2) Ownership(2)
- -------------------------- ------------ ------------
Lucas Licensing (3) 2,130,000 10.5%
Public Employees Retirement System of Ohio(4) 1,600,000 8.8%
Lucasfilm Ltd.(5) 1,450,000 7.4%
State of Wisconsin Investment Board(6) 1,313,000 7.3%
Mellon Bank Corporation(7) 1,155,489 6.4%
William G. Catron(8) 126,917 *
Andrew J. Cavanaugh(9) 9,700 *
Mark D. Goldman(10) 609,041 3.3%
Scott R. Heldfond(11) 11,450 *
Ronald D. Hirschfeld(12) 66,244 *
S. Lee Kling(13) 13,000 *
Roger Kowalsky(14) 106,550 *
Gary J. Niles(15) 167,950 *
Louis R. Novak(16) 178,410 *
All executive officers and directors as a
group (consisting of 12 persons)(17) 1,325,905 6.8%
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, beneficial owner's address is
Company's address at 500 Forbes Boulevard, South San Francisco,
California 94080.
(2) This table identifies persons having sole voting and/or
investment power with respect to the shares of Common Stock set
forth opposite their names as of March 31, 1998, according to
the information furnished to the Company by each of them. A
person is deemed to be the beneficial owner of shares of Common
Stock that can be acquired by such person within 60 days from
March 31, 1998 upon the exercise of options. Percentage of
Common Stock ownership is based on a total of 18,109,164 shares
of Common Stock outstanding and assumes in each case that the
person only, or group only, exercised his or its rights to
purchase all shares of Common Stock underlying the options.
(3) Address is PO Box 2009, San Rafael, CA 94912. Includes options
to purchase 2,130,000 shares of Common Stock.
(4) Address is 277 East Town Street, Columbus, OH 43215.
(5) Address is PO Box 2009, San Rafael, CA 94912. Includes options
to purchase 1,450,000 shares of Common Stock.
(6) Address is PO Box 7842, Madison, WI 53707.
(7) Address is One Mellon Bank Center, Pittsburgh, PA 15258.
(8) Includes options to purchase 96,191 shares of Common Stock.
(9) Includes options to purchase 8,000 shares of Common Stock.
(10) Includes options to purchase 454,630 shares of Common Stock.
(11) Includes options to purchase 8,000 shares of Common Stock.
(12) Includes options to purchase 66,191 shares of Common Stock.
(13) Includes options to purchase 8,000 shares of Common Stock.
(14) Includes options to purchase 104,000 shares of Common Stock.
(15) Includes options to purchase 167,950 shares of Common Stock.
(16) Includes options to purchase 167,950 shares of Common Stock.
(17) Includes an aggregate of options to purchase 1,032,256 shares
of Common Stock.
ITEM 13. Certain Relationships and Related Transactions
On August 29, 1996, Mark D. Goldman, President, Chief Executive
Officer and Director of the Company, borrowed $950,000 in connection
with the purchase of a personal residence and executed a note payable
to the Company, which is secured by a second mortgage on such
residence. The note was amended and restated on November 17, 1997.
Commencing on the first day of September 1996, principal in the
amount of $100 is payable on the first of each month. The note bears
interest at a rate of zero percent per annum. The remaining
principal balance of the note shall be due and payable on (i) August
30, 2006, or (ii) as governed in the Amended and Restated Note and
Mr. Goldman's Severance and Change in Control Agreement, if
termination of Mr. Goldman's employment with the Company occurs.
DIRECTOR COMPENSATION
Directors, who are not full-time employees of the Company, each
received in fiscal year 1997 an annual director's fee of $15,000 plus
$500 for each meeting of the Board of Directors or any committee
thereof attended by such director. Furthermore, directors who were
not full-time employees of the Company received an option immediately
exercisable into 2,000 shares of Common Stock on July 1, 1995 and
have received and will receive an option immediately exercisable into
2,000 shares of Common Stock on January 1 of each year thereafter
until they no longer serve as directors of the Company. The exercise
price of such options shall be at the market price on the date such
options are received. All directors are reimbursed by the Company for
out-of-pocket expenses incurred by them as directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Committee are set forth under "Meetings and
Committees of the Board of Directors," and their relationship to the
Company is set forth under "Election of Directors." None of the
members of the Committee has served as a member of the compensation
committee of another entity so as to create any compensation
committee interlock. No members of the Committee are employed by the
Company.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Index to Financial Statements
The following consolidated financial statements and schedules of the
Company and its subsidiaries are included as Part II, Item 8 of this Report:
(a) 1. Financial Statements Page
Report of Independent Accountants F-1
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 1997 and
December 31, 1996 F-2
Consolidated Statements of Operations for the years
ended December 31, 1997, 1996 and 1995 F-3
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1997,
1996 and 1995 F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 F-5 to
F-6
Notes to Consolidated Financial Statements F-7 to
F-23
(a) 2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 1997, 1996
and 1995 S-1
All other schedules have been omitted because they are inapplicable or
not required, or the information is included in the consolidated financial
statements or notes thereto.
(a) 3. Exhibits
Exhibit No. Description
- ------------ -----------
3.1(a)(1) Certificate of Incorporation.
3.1(b)(1) Amendment to Certificate of Incorporation.
3.2(2) Bylaws.
4.1(3) Form of Certificate for Shares or Common Stock of Company.
4.3(5) Form of Rights Agreement, dated as of January 17,
1990, between the Company and Mellon Securities Trust Company.
4.4(a)(16) Warrant, dated as of October 14, 1997, between Lucasfilm
Ltd. and Galoob Toys, Inc.
4.4(b)(16) Warrant, dated as of October 14, 1997, between Lucas
Licensing Ltd. and Galoob Toys, Inc.
4.4(c)(16) Agreement of Strategic Relationship, dated as of October
14, 1997, between Lucasfilm Ltd., a California
corporation, and Galoob Toys, Inc.
10.1(a)(5)* Amended and Restated 1984 Employee Stock Option Plan.
10.1(b)(6)* 1994 Senior Management Stock Option Plan
10.1(c)(7)* Form of Agreement between each of Mark Goldman, William
Catron, Lou Novak, Gary Niles, Ronald Hirschfeld and the
Company.
10.1(d)(8)* Form of Amendment No. 1 between each of Mark Goldman,
William Catron, Lou Novak, Gary Niles, Ronald Hirschfeld
and the Company.
10.1(e)(9) 1995 Non-Employee Directors' Stock Option Plan.
10.1(f)(13)* Galoob Toys, Inc. 1996 Long Term Compensation Plan
10.1(g)(13)* Galoob Toys, Inc. 1996 Share Incentive Plan
10.1(h)(14)* Galoob Toys, Inc. Officer's Deferred Compensation
Plan
10.3(17)* Severance and Change in Control Agreement dated November
17, 1997 between Mark D. Goldman and the Company.
10.4(a)(14)* Agreement, dated January 1, 1997, between William
G. Catron and the Company.
10.4(b)(14)* Agreement, dated January 1, 1997, between Ronald
Hirschfeld and the Company.
10.4(c)(14)* Agreement, dated January 1, 1997, between Roger J.
Kowalsky and the Company.
10.4(d)(14)* Agreement, dated January 1, 1997, between Gary J.
Niles and the Company.
10.4(e)(14)* Agreement, dated January 1, 1997, between Louis R.
Novak and the Company.
10.5(e)(8) Amended and Restated Loan and Security Agreement, dated
as of March 31, 1995, by and among the Company and
Congress Financial Company (Central).
10.6(a)* Amendments to Agreement, dated August 13 and
December 15, 1997 between William G. Catron and the Company.
10.6(b)* Amendments to Agreement, dated August 13 and
December 15, 1997 between Ronald Hirschfeld and the Company.
10.6(c)* Amendments to Agreement, dated August 13 and
December 15, 1997 between Roger J. Kowalsky and the Company.
10.6(d)* Amendments to Agreement, dated August 13 and
December 15, 1997 between Gary J. Niles and the Company.
10.6(e)* Amendments to Agreement, dated August 13 and
December 15, 1997 between Louis R. Novak and the Company.
10.7(a)(11) License Agreement, dated May 4, 1990, by and among the
Company as Licensee, Codemasters Software Company, Ltd.
and America Corporation, Limited.
10.7(b)(11) Amendment No. 1 dated June 1991 to License Agreement
dated May 4, 1990.
10.7(c)(11) Amendment No. 2 dated December 23, 1991 to License
Agreement, dated May 4, 1990.
10.7(d)(11) European License Agreement, dated December 23, 1991, by
and between Codemasters Software Company, Ltd. and the Company.
10.7(e)(11) Third Amendment to United States License and First
Amendment to European License, dated November 4, 1992.
10.7(f)(8) Fourth Amendment to United States License Agreement,
dated October 14, 1994.
10.8(10) Agreement of Purchase and Sale, dated October 22,
1986, by and between AT Building Company, as Seller, and
the Company, as Buyer.
10.9(a)(2) Lease Agreement, dated March 12, 1982, by and between
Lincoln Alvarado and Patrician Associate, Inc., as
Lessor, and the Company, as Lessee.
10.9(b)(12) Amendment No. 1 to Lease Agreement.
10.9(c)(9) Lease Agreement, dated December 1, 1995, by and between
200 Fifth Avenue Associates, as Lessor, and the Company,
as Lessee.
10.9(d)(13) Lease Agreement, dated December 3, 1996, between
Prudential Insurance Company of America as Lessor and the
Company, as Lessee.
10.10(15) Settlement and Release Agreement, dated June 2, 1997.
10.11(16)+ Toy License Agreement, dated as of October 14, 1997,
between Lucas Licensing Ltd. and Galoob Toys, Inc.
10.11(c)(17) Trademark License Agreement, dated as of October
14, 1997, between Lucas Licensing, Ltd. and Galoob Toys, Inc.
10.12(17) Agreement No. 4 to Amended and Restated Loan and Security
Agreement, dated December 17, 1997, by and among the
Company and Congress Financial Corporation (Central).
21(17) Subsidiaries of the Company
23.1 Consent of Independent Public Accountants
27(17) Financial Data Schedule
- -------------------------------------------------
(1) Incorporated by reference to the Company's Amendment No. 2 to
the Registration Statement on Form S-1, filed with the
Commission on November 8, 1996.
(2) Incorporated by reference to the Company's Amendment No. 1 to
Registration Statement on Form 8-B, filed with the Securities
and Exchange Commission (the "Commission") on January 11, 1988.
(3) Incorporated by reference to the Company's Registration
Statement on Form S-3, filed with the Commission on February 26, 1990.
(4) Incorporated by reference to the Company's Registration
Statement on Form 8-A, filed with the Commission on January 23, 1990.
(5) Incorporated by reference to the Company's Registration
Statement on Form S-8, Registration No. 33-56585, filed with
the Commission on November 23, 1994.
(6) Incorporated by reference to the Company's Registration
Statement on Form S-8, Registration No. 33-56587, filed with
the Commission on November 23, 1994.
(7) Incorporated by reference to the Company's Registration
Statement on Form S-8, Registration No. 33-56589, filed with
the Commission on November 23, 1994.
(8) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1994, filed with the Commission
on March 31, 1995.
(9) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1995, filed with the Commission
on March 11, 1996.
(10) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1986, filed with the Commission
on March 31, 1987.
(11) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1992, filed with the Commission
on March 31, 1993.
(12) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1991, filed with the Commission
on March 30, 1992.
(13) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1996, filed with the Commission
on March 31, 1997.
(14) Incorporated by reference to the Company's Form 10-K/A for the
fiscal year ended December 31, 1996, filed with the Commission
on April 30, 1997.
(15) Incorporated by reference to the Company's Form 10-Q for the
six months ended June 30, 1997, filed with the Commission on
August 6, 1997.
(16) Incorporated by reference to the Company's Form 10-Q for the
nine months ended September 30, 1997, filed with the Commission
on November 14, 1997.
(17) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1997, filed with the Commission
on March 27, 1998.
* Indicates exhibits relating to executive compensation.
+ Portions of this agreement have been omitted pursuant to a
request for confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
GALOOB TOYS, INC.
(Registrant)
By: /s/ Mark D. Goldman
--------------------------
Mark D. Goldman
President, Chief Executive
Officer
Dated:
April 28, 1998
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6(A)
<SEQUENCE>2
<DESCRIPTION>SEVERANCE AND CHANGE IN CONTROL AGREEMENT
<TEXT>
1
SEVERANCE AND CHANGE IN CONTROL AGREEMENT
Exhibit 10.6(a)
MEMORANDUM
Date: August 13, 1997
To: William G. Catron
From: Mark D. Goldman
Re: Severance/Change in Control Agreement
Attached hereto is a revised page 7 to the above-referenced agreement
that was entered into between you and the Company, dated as of
January 1, 1997.
In paragraph 4(b)(ii), in subparts (x) and (z) we have changed the
word reading "paid" to read "awarded" in connection with the bonus
determination in the event of a payout after a CIC.
This change was necessitated due to the implementation of the
Deferred Compensation Plan. The change will allow for any bonus
dollars that are deferred to be included in the bonus calculations.
If anyone has any questions, please see me. Otherwise, please sign
the duplicate originals of this memo in the place provided below and
initial the attached page, and return one set to me and keep the
other for your personal file.
Attachments
ACCEPTED AND AGREED TO THIS 13 DAY OF AUGUST, 1997:
/s/ William G. Catron________
(a) Not later than the 5th day after the Date of
Termination, the Employee's Base Salary through the Date of
Termination, the amount of any accrued but unused FTO or vacation
time to which the employee is entitled through the Date of
Termination, and any amounts to be paid to the Employee pursuant to
any deferred compensation plan; and
(b) If the Date of Termination is within twelve (12)
months following a Change in Control, the Employee shall also receive
the following:
(i) no later than ten (10) days after such Date
of Termination, a lump sum payment (minus withholdings and other
required deductions) of an amount equal to three (3) times the
Employee's Base Salary, plus thirty-six (36) times the amount to
which the Employee was then entitled immediately prior to the Change
in Control for the monthly automobile allowance; and
(ii) no later than ten (10) days after such Date
of Termination, an additional lump sum payment (minus withholdings
and other required deductions) of an amount equal to three (3) times
the greater of (x) the bonus, if any, that was actually awarded to
the Employee for the year's results for the Company's fiscal year
immediately preceding the year in which the Date of Termination
occurs, (y) the percentage of maximum bonus otherwise payable for the
full fiscal year in which the Date of Termination occurs assuming
performance relative to plan for the entirety of such fiscal year was
the same as performance relative to plan year to date as of the Date
of Termination, or (z) the average bonus actually awarded to the
Employee for the five fiscal years immediately preceding the year in
which the Date of Termination occurs (for the purpose of this Section
4 (b) (ii), "bonus" shall include regular annual bonus payments,
annual PlC bonus payments, annual super performance bonus payments
and any other designated annual (as opposed to long-term) bonus
payments); and
(iii) commencing upon the Date of Termination:
(1) All Other Benefits that were in effect
and in which the Employee participated immediately prior to the
Change in Control, for the period of the earlier to occur of
Initials /s/
WGC
MEMORANDUM
Date: December 15, 1997
To: William G. Catron
From: Mark D. Goldman
Re: Severance/Change in Control Agreement
Attached hereto is a revised page 6 to the above-referenced agreement
that was entered into between you and the Company, dated as of
November 6, 1997.
We have changed paragraph 4(b)(ii) in its entirety to read as it
appears on the attached.
This change was required to correct an ambiguity/confusion in the
prior language.
If anyone has any questions, please see me. Otherwise please sign
the duplicate originals of this memo in the place provided below and
initial the attached page, and return one set to me and keep the
other for your personal file.
WGC:vy
Attachments
ACCEPTED AND AGREED TO THIS 16 DAY OF DECEMBER, 1997:
/s/ William G. Catron_________
(a) Not later than the 5th day after the Date of
Termination, the Employee's Base Salary through the Date of
Termination, the amount of any accrued but unused FTO or vacation
time to which the employee is entitled through the Date of
Termination, and any amounts to be paid to the Employee pursuant to
any deferred compensation plan; and
(b) If the Date of Termination is within twelve (12)
months following a Change in Control, the Employee shall also receive
the following:
(i) no later than ten (10) days after such Date
of Termination, a lump sum payment (minus withholdings and other
required deductions) of an amount equal to three (3) times the
Employee's Base Salary, plus thirty-six (36) times the amount to
which the Employee was then entitled immediately prior to the Change
in Control for the monthly automobile allowance; and
(ii) no later than ten (10) days after such Date of
Termination, an additional lump sum payment (minus withholdings and
other required deductions) of an amount equal to three (3) times the
greater of (x) the percentage of maximum bonus otherwise payable for
the full fiscal year in which the Date of Termination occurs assuming
performance relative to plan for the entirety of such fiscal year was
the same as performance relative to plan year to date as of the Date
of Termination, or (y) the largest bonus dollar amount actually
awarded to the Employee for any one of the five fiscal years
immediately preceding the year in which the Date of Termination
occurs (for the purpose of this Section 4(b)(ii), "bonus" shall
include regular annual bonus awards, any annual PIC bonus awards, any
annual super performance bonus awards, and any other designated
annual (as opposed to long-term) bonus awards); and
(iii) commencing upon the Date of Termination:
(1) All Other Benefits that were in effect
and in which the Employee participated immediately prior to the
Change in Control, for the period of the earlier to occur of
/s/ WGC
Initials