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SCHEDULE 14A
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SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Tandy Corporation
- --------------------------------------------------------------------------------
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[TANDY RADIOSHACK LOGO]
[TANDY RADIOSHACK LETTERHEAD]
APRIL 6, 1999
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 20, 1999
10:00 AM
WORTHINGTON HOTEL
200 WEST SECOND ST.
FORT WORTH, TEXAS 76102
---------------------------------------------------
AGENDA
(1) To elect directors to serve for the ensuing year;
(2) To approve the Compensation Plan for Executive Officers; and
(3) To transact any other business properly brought before the meeting or
any adjournment of the meeting.
Stockholders of record at close of business on March 23, 1999, will be entitled
to notice of the meeting and the right to vote at the meeting.
By Order of the Board of Directors
Mark C. Hill
Senior Vice President, Corporate
Secretary and General Counsel
Regardless of whether you plan to attend the annual meeting, please COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. In the
event you decide to attend the meeting, you may, if desired, revoke the proxy
and vote your shares in person.
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TABLE OF CONTENTS
PROXY STATEMENT PAGE
o ITEM 1 Election of Directors 2
Security Ownership of Certain Beneficial Owners of Company Voting Securities 5
Section 16(A) Beneficial Ownership Reporting Compliance 7
Director Attendance 7
Director Compensation 7
Board Committees 9
Statement on Corporate Governance 11
Organization and Compensation Committee Report on Compensation of
Executive Officers 13
Executive Compensation 16
Option Grants in the Last Year 18
Option Exercises in the Last Year and Year-End Option Values 19
Retirement and Deferred Compensation 19
Deferred Compensation Plans and Other Agreements 21
Change in Control Protections 23
Compensation Committee Interlocks and Insider Participation 25
Performance Graph 25
Certain Transactions with Management and Others 27
o ITEM 2 Approval of Compensation Plan for Executive Officers 27
Independent Accountants 29
Voting Rights and Proxy Information 30
No Appraisal Rights 31
Stockholder Proposals and Nominations for Directors for the 2000 Annual Meeting 32
Annual Report 32
Other Matters 32
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o Denotes items to be voted on at the meeting.
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PROXY STATEMENT
TANDY CORPORATION
100 Throckmorton Street, Suite 1800
Fort Worth, Texas 76102
ANNUAL MEETING OF STOCKHOLDERS OF TANDY CORPORATION
TO BE HELD ON THURSDAY, MAY 20, 1999
This Proxy Statement is being furnished to stockholders of Tandy Corporation, a
Delaware corporation, in connection with the solicitation of proxies by the
Board of Directors of the Company from holders of record of the Company's
voting securities as of the close of business on March 23, 1999, for use at the
Annual Meeting of Stockholders of the Company to be held on Thursday, May 20,
1999, at 10:00 a.m. (Central Daylight Savings Time) at the Worthington Hotel,
200 West Second Street, Fort Worth, Texas 76102, and at any resumption of the
meeting after adjournment or postponement thereof. This Proxy Statement is
first being mailed to the holders of the Company's voting securities on or
about April 6, 1999.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting holders of shares of Company securities entitled to vote
at the Annual Meeting will be asked to consider and to vote upon the following
matters:
I. the election of 12 directors of the Company to serve until the next
annual meeting of stockholders or until their successors are elected;
II. the approval of the Compensation Plan for Executive Officers; and
III. such other business as may properly come before the meeting.
The Board unanimously recommends a vote FOR the following:
o the election of 12 directors of the Company to serve until the next
annual meeting of stockholders or until their successors are elected;
and
o the approval of the Compensation Plan for Executive Officers.
As of the date of this Proxy Statement the Board knows of no other business
that will come before the Annual Meeting.
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ITEM 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Board of Directors, under the By-Laws of the Company, has determined that
the number of Directors shall not be more than 14. Currently there are 12
Directors. It is the intention of the persons named in the accompanying form of
proxy card to vote for the nominees listed below for election as directors of
the Company unless authority to so vote is withheld. All nominees have
indicated their willingness to serve for the ensuing term. If any nominee is
unable or declines to serve as a director at the date of the Annual Meeting, it
is the intention of the persons named in the proxy card to vote for such other
person or persons as they in their discretion shall determine.
The nominees for directors of the Company are listed below:
- ------------------------------- --------------------------------------------------------------- -------- ---------------
NAME (1) PRINCIPAL OCCUPATION AGE A
DIRECTOR
(2) PUBLICLY HELD COMPANY SINCE
BOARD MEMBERSHIPS
- ------------------------------- --------------------------------------------------------------- -------- ---------------
Frank J. Belatti (1) Chairman and Chief Executive Officer of AFC 51 1998
Enterprises, Inc. (parent company of Popeye's
Chicken & Biscuits, Church's Chicken, Chesapeake
Bagel Bakery, Seattle Coffee Company and
Cinnabon International)
- ------------------------------- --------------------------------------------------------------- -------- ---------------
James I. Cash, Jr. (1) Professor, Harvard University Graduate School of 51 1989
Business Administration
(2) Cambridge Technology Partners, Inc.;
General Electric Company; Knight Ridder,
Inc.; State Street Boston Corporation;
Chubb Corporation and Winstar
Communications, Inc.
- ------------------------------- --------------------------------------------------------------- -------- ---------------
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- ---------------------------------- -------------------------------------------------------------- -------- ---------------
NAME (1) PRINCIPAL OCCUPATION AGE A DIRECTOR
SINCE
(2) PUBLICLY HELD COMPANY
BOARD MEMBERSHIPS
- ---------------------------------- -------------------------------------------------------------- -------- ---------------
Ronald E. Elmquist (1) Chairman, Chief Executive Officer and President of 52 1997
Keystone Automotive Inc. since June 1998.
Previously President, Global Food Service-
Campbell Soup Company and Corporate Vice
President, Campbell Soup Company from January
1994, to April 1998, and Chairman and Chief
Executive Officer, White Swan, Inc. from 1989, to
January 1994.
- ---------------------------------- -------------------------------------------------------------- -------- ---------------
Lewis F. Kornfeld, Jr. (1) Retired Vice Chairman, Tandy Corporation and 82 1975
Retired President, RadioShack Division.
- ---------------------------------- -------------------------------------------------------------- -------- ---------------
Jack L. Messman (1) Chairman and Chief Executive Officer, Union 59 1993
Pacific Resources Group Inc. since October 1996.
Previously President and Chief Executive Officer of
Union Pacific Resources Group Inc. from May
1995, to October 1996; and President and Chief
Executive Officer, Union Pacific Resources
Company from 1991, through May 1995.
(2) Novell, Inc.; Safeguard Scientifics, Inc.; Union
Pacific Resources Group Inc.; US Data Corporation; and
Cambridge Technology Partners, Inc.
- ---------------------------------- -------------------------------------------------------------- -------- ---------------
William G. Morton, Jr. (1) Chairman and Chief Executive Officer, Boston 62 1987
Stock Exchange, Inc.
(2) 12 funds managed by Morgan Stanley Dean Witter
Investment Management, Inc.
- ---------------------------------- -------------------------------------------------------------- -------- ---------------
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- -------------------------------- -------------------------------------------------------------- -------- ---------------
NAME (1) PRINCIPAL OCCUPATION AGE A DIRECTOR
SINCE
(2) PUBLICLY HELD COMPANY
BOARD MEMBERSHIPS
- -------------------------------- -------------------------------------------------------------- -------- ---------------
Thomas G. Plaskett (1) Chairman, Greyhound Lines, Inc. since March 55 1986
1995; Managing Director, Fox Run Capital Associates and
Business Consultant since November 1991. Previously
Interim President and Chief Executive Officer, Greyhound
Lines, Inc., August 1994, to November 1994.
(2) Greyhound Lines, Inc. and Smart & Final Inc.
- -------------------------------- -------------------------------------------------------------- -------- ---------------
John V. Roach (1) Chairman of the Board of Directors, Tandy 60 1980
Corporation; Previously Chief Executive Officer, Tandy
Corporation, 1981, to December 1998; President, Tandy
Corporation, 1980, to December 1995.
(2) Justin Industries, Inc. and Emultek Ltd.
- -------------------------------- -------------------------------------------------------------- -------- ---------------
Leonard H. Roberts (1) Chief Executive Officer of Tandy Corporation since 50 1997
January 1999; President, Tandy Corporation since
December 1995; President, RadioShack since July 1993.
- -------------------------------- -------------------------------------------------------------- -------- ---------------
Alfred J. Stein (1) Chairman and Chief Executive Officer, VLSI 66 1981
Technology, Inc.
(2) VLSI Technology, Inc. and Applied Materials, Inc.
- -------------------------------- -------------------------------------------------------------- -------- ---------------
William E. Tucker (1) Chancellor Emeritus, Texas Christian University 66 1985
since July 1998. Previously Chancellor, Texas
Christian University until June 1998.
(2) Justin Industries, Inc.
- -------------------------------- -------------------------------------------------------------- -------- ---------------
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- -------------------------------- -------------------------------------------------------------- -------- ---------------------
NAME (1) PRINCIPAL OCCUPATION AGE A DIRECTOR
SINCE
(2) PUBLICLY HELD COMPANY
BOARD MEMBERSHIPS
- -------------------------------- -------------------------------------------------------------- -------- ---------------------
Edwina D. Woodbury (1) Consultant; Previously Executive Vice President-Business 47 1998
Process Redesign, Avon Products, Inc. from February
1998, through December 1998. Senior Vice President,
Chief Financial and Administrative Officer, Avon
Products, Inc. from November 1993, to February 1998.
- -------------------------------- -------------------------------------------------------------- -------- ---------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
OF COMPANY VOTING SECURITIES
The following table sets forth, as of February 28, 1999, certain information
with respect to the beneficial ownership of the Company's voting securities by
(i) each current director of the Company, (ii) the Chief Executive Officer and
President and the four most highly compensated current Executive Officers of
the Company for the year ended December 31, 1998, (iii) the former Chief
Executive Officer of the Company (currently a director) who was classified as a
highly compensated Executive Officer at the time of his retirement as Chief
Executive Officer, (iv) the Company's current directors and Executive Officers
as a group, and (v) persons known to the Company to own beneficially more than
5% of any class of the Company's voting securities, except for the Tandy Fund
Trustee, which holds 100% of the Company's outstanding Series B TESOP
Convertible Preferred Stock (the "TESOP") for the benefit of Tandy Fund
participants.
Amount and Nature of
Common Stock Beneficially Owned
-------------------------------------------------------
Numbers of Right to Percent of Common
Shares Acquire (1) Class Stock Units
Beneficially (2)
Owned
- ---------------------------------------------------------- ------------- ------------- ------------- -------------
DIRECTORS AND OTHER NAMED EXECUTIVE OFFICERS
Frank J. Belatti, Director -0- -0- * -0-
James I. Cash, Jr., Director 12,435 26,001 * 681
Ronald E. Elmquist, Director -0- 6,000 * 681
Lewis F. Kornfeld, Jr., Director (3) 22,000 16,001 * -0-
Jack L. Messman, Director 524 38,001 * 2,459
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Amount and Nature of
Common Stock Beneficially Owned
-------------------------------------------------------
Numbers of
Shares Common
Beneficially Right to Percent of Stock Units
Owned Acquire (1) Class (2)
- ---------------------------------------------------------- ------------- ------------- ------------- -------------
William G. Morton 6,000 36,001 * -0-
Thomas G. Plaskett, Director 7,702 11,335 * -0-
John V. Roach, Chairman and former Chief Executive 338,728 317,407 * 22,409
Officer
Leonard H. Roberts, President and Chief Executive 113,993 295,753 * 27,550
Officer; President RadioShack
Alfred J. Stein, Director 8,124 38,001 * 681
William E. Tucker, Director 20,274 38,001 * -0-
Edwina D. Woodbury, Director -0- -0- * 758
David Christopher, Executive Vice President (4) 158,205 172,113 * 16,844
Dwain H. Hughes, Senior Vice President and 57,193 93,299 * 11,129
Chief Financial Officer (5)
Robert M. McClure, Senior Vice President-Tandy 41,144 72,273 * 5,945
Retail Services
Mark C. Hill, Senior Vice President, Corporate Secretary 14,415 7,074 * 5,523
and General Counsel
Directors and Executive Officers as a Group (27 people) 909,685 1,428,221 2.4% 123,893
STOCKHOLDERS
Mellon Bank Corporation (6) 5,638,000 5.8%
The Prudential Insurance Company of America (7) 6,166,985 6.4%
The Equitable Companies Incorporated (8) 6,121,745 6.3%
- ---------------------------------
* Less than 1%
(1) Shares Executive Officers and directors could acquire by exercising stock
options within 60 days of February 28, 1999.
(2) Common stock units are not actual shares of common stock and have no voting
power. The units for directors represent director fee deferrals and Company
matches under the Directors' Unfunded Deferred Compensation Plan and the units
for Executive Officers represent salary and bonus deferrals and Company matches
under either or both the Tandy Corporation Executive Deferred Compensation Plan
and the Tandy Corporation Executive Deferred Stock Plan.
(3) 11,800 shares of Company Common Stock are owned by a trust of which Mr.
Kornfeld is the sole beneficiary.
(4) Includes 6,000 shares held by Mr. Christopher's spouse.
(5) Includes 19,972 shares held by Mr. Hughes' spouse.
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(6) According to Amendment No. 2 to Form 13G dated January 18, 1996, Mellon Bank
Corporation, a holding corporation organized under the laws of the United
States, located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, holds
5,638,000 shares of Company Common Stock.
(7) According to Amendment No. 1 to Form 13G dated January 29, 1999, The
Prudential Insurance Company of America, a mutual insurance company organized
under the laws of the state of New Jersey, located at Prudential Plaza, 751
Broad Street, Newark, New Jersey 07102-3777, holds 6,166,985 shares of Company
Common Stock.
(8) According to Form 13G dated February 10, 1999, the Equitable Companies
Incorporated, a holding company, organized under the laws of the state of
Delaware, located at 1290 Avenue of the Americas, New York, New York 10104, and
its affiliates hold 6,121,745 shares of Company Common Stock
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States the Company's directors,
Executive Officers and all persons holding 10% or more of Company Common Stock
are required to report their ownership of the Company's securities and any
changes in that ownership to the Securities and Exchange Commission and the New
York Stock Exchange. Specific due dates for these reports have been established
and the Company is required to report in this Proxy Statement any failure to
file by these dates during the year ended December 31, 1998. All of these
filing requirements were satisfied by the Company's present directors and
Executive Officers.
DIRECTOR ATTENDANCE
The Board held seven meetings during 1998. All nominees for director, after
being elected to office in 1998, attended 100% of the meetings of the Board.
Additionally, all nominees attended all committee meetings of which they were a
member with the exception of one director who was unable to attend one
specially called committee meeting. Mr. John A. Wilson served on the Audit and
Compliance Committee and the Executive Committee until his retirement on
October 23, 1998.
DIRECTOR COMPENSATION
The following table represents components of non-employee director
compensation:
COMPONENTS NOTE COMPENSATION
------- -----------------------------------
Annual Board Retainer 1 $24,000
------- -----------------------------------
Annual Option Grant 2 One option to purchase 8,000 shares
------- -----------------------------------
Annual Retainer for Committee Chair $2,500
------- -----------------------------------
Board Attendance Fee (per in person meeting) $1,000
------- -----------------------------------
Board Attendance Fee (per conference call meeting) $250
------- -----------------------------------
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COMPONENTS NOTE COMPENSATION
------- -----------------------------------
Committee Attendance Fee (per in person meeting) 3 $500
------- -----------------------------------
Committee Attendance Fee (per conference call meeting) 3 $250
------- -----------------------------------
Expenses of Attendance Reimbursement of expenses incurred
------- -----------------------------------
1. Each non-employee director also has the right to file prior to May 1 of any
year an election to have 50% or 100% of this annual retainer fee paid in
shares of Company Common Stock.
2. Each non-employee director automatically is granted a non-qualified stock
option to purchase 8,000 shares of Company Common Stock on the first
business day in September of each year that he or she serves as a
director. The option exercise price of all options granted non-employee
directors is set at the fair market value (as defined in the 1997 Tandy
Corporation 1997 Incentive Stock Plan (the "1997 ISP")) of a share of
Company Common Stock on the first trading day immediately preceding the
date of grant. The options vest in three equal increments on the first,
second and third annual anniversaries of the date of grant. Grants and
awards will be made to non-employee directors only under one Incentive
Stock Plan of the Company at a time.
3. These fees apply if the committee meeting is held more than 24 hours before
or after a board meeting.
NEW DIRECTORS
Each new non-employee director also receives a one time grant of an option to
purchase 10,000 shares of Company Common Stock on the date he or she attends
his or her first Board meeting.
UNFUNDED DEFERRED COMPENSATION PLAN FOR DIRECTORS
The Company has established the Tandy Corporation Unfunded Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan") for
non-employee directors whereby such directors may elect to defer payment of all
or a specified part of the fees payable for services rendered to or on behalf
of the Company. Annual retainer fees paid in cash or Company Common Stock and
meeting fees may be deferred. In addition, there is a memorandum pension plan
stock account that was established upon the December 31, 1997 termination of an
earlier plan for directors which constitutes a separate account under the
Deferred Compensation Plan. Under the Deferred Compensation Plan, all deferred
fees in cash and interest thereon are held in the general funds of the Company
and are credited to such director's account. Interest is credited at the end of
each quarter based on the balance in the
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cash account at the end of the quarter at the rate of 1% below the prime rate as
published by The Chase Manhattan Bank in effect from time to time during the
quarter. If a director elects to defer payment of retainer fees payable in
Company Common Stock in excess of three years, the Company will make an
additional contribution of 25% of the amount deferred in Company Common Stock.
With respect to deferrals and the 25% additional Company contribution, the
director may elect to receive deferred fees either in a lump sum on a date
specified by him or her in substantially equal annual installments not exceeding
ten payments, or if no election is made by the director, then in a lump sum
payment 60 days after he or she ceases to be a director. Upon a change in
control of the Company a director will receive any deferred fees and the
additional Company contribution in a lump sum.
BOARD COMMITTEES
Under the By-Laws the Board has established four standing committees as of the
record date. The Company has the Audit and Compliance, Corporate Governance,
Executive and the Organization and Compensation Committees of the Board of
Directors. Actions taken by any of these Committees are reported to the Board
and the Board receives a copy of the minutes of all Committee meetings.
Membership in each of the committees as of the record date is as follows:
AUDIT AND COMPLIANCE COMMITTEE EXECUTIVE COMMITTEE
Mr. Elmquist (Chair) Mr. Roberts (Chair)
Mr. Cash Mr. Kornfeld
Mr. Messman Mr. Morton
Mr. Plaskett Mr. Roach
Ms. Woodbury
CORPORATE GOVERNANCE COMMITTEE ORGANIZATION AND COMPENSATION COMMITTEE
Mr. Tucker (Chair) Mr. Cash (Chair)
Mr. Belatti Mr. Messman
Mr. Elmquist Mr. Morton
Mr. Kornfeld Mr. Stein
Mr. Plaskett Ms. Woodbury
Mr. Stein
AUDIT AND COMPLIANCE COMMITTEE 4 meetings in calendar year 1998
1. Reviews the engagement of the independent accountants;
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2. Reviews the scope and timing of the audit of the independent
accountants;
3. Reviews the non-audit related services provided by the independent
accountants;
4. Reviews the report of the independent accountants upon completion of
its audit;
5. Reviews the Company's policies and procedures with respect to internal
auditing, accounting and financial controls, and compliance with
applicable laws and ethical business practices;
6. Reviews major litigation and risk management policies and procedures,
including insurance coverages; and
7. Reviews with the independent accountants and management the Company's
policies and procedures with respect to laws and ethical business
practices.
EXECUTIVE COMMITTEE 1 meeting in calendar year 1998
Exercises all powers of the Board when it is impractical to assemble the full
Board unless otherwise prohibited by law or involves amending the charter of
any Board Committee.
ORGANIZATION AND COMPENSATION COMMITTEE 7 meetings in calendar year 1998
1. Reviews and makes recommendations to the Board concerning compensation
plans for executive management;
2. Reviews management's appointments and promotions to official positions;
and
3. Approves annual salary increases, bonuses, stock option and restricted
stock awards in accordance with existing applicable plans.
CORPORATE GOVERNANCE 4 meetings in calendar year 1998
1. Reviews and recommends to the Board candidates to be directors of the
Company and compensation of Board members.
2. Approves or denies requests by Company officers to serve on the boards
of outside companies;
3. Recommends to the Board the members and chair of all standing
committees.
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4. Recommends the duties to be included in the charter of new standing
committees;
5. Assists the independent directors in conducting a self-evaluation of
the effectiveness of the Board and each of its members; and
6. Reviews with management, the overall effectiveness of the organization
of the Board and the conduct of the Board's business and makes
recommendations to the Board based on its evaluation.
STATEMENT ON CORPORATE GOVERNANCE
The Board of Directors has for many years followed specific policies regarding
corporate governance. The Board of Directors has incorporated these policies
and procedures into its Statement on Corporate Governance. To obtain a complete
Statement on Corporate Governance, please contact Ms. Carolyn Hoopes, Assistant
Corporate Secretary, 100 Throckmorton Street, Suite 1700, Fort Worth, Texas
76102-2816, Telephone (817)415-2758. The following is a summary of the material
items of this Statement.
BOARD RESPONSIBILITIES
The principal responsibility of the Board of Directors is as follows:
Promote and act in the best interests of all stockholders of the Company
through careful selection and oversight of executive management including the
further development of compensation plans based on performance. To consider and
monitor the potential impact of Board and executive management decisions on the
Company's stockholders, employees, customers, suppliers, lenders and the
communities in which it operates.
BOARD OVERSIGHT OF MANAGEMENT
1. Evaluate the Chief Executive Officer and other corporate officers
annually.
2. Review and approve the broad strategic and financial objectives of the
Company through a collaborative process with executive management.
3. Review and approve compensation plans of any officer of the Company who
is paid $100,000 or more per year. The Board believes that compensation
plans should be tied directly to the Company's performance.
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4. Review the succession plans for executive management so that continuity
in the operation of the Company can be maintained in the event of
untimely displacement of key management members.
BOARD COMPOSITION
1. Pursuant to the Company's By-Laws the Board of Directors must have at
least three and not more than 14 members.
2. Four standing committees have been established by the Board: Audit and
Compliance Committee, Organization and Compensation Committee,
Corporate Governance Committee and the Executive Committee.
3. New committees may be established by the Board at any time.
BOARD INDEPENDENCE
1. It is the Board's goal that at least 75% of the members of the Board be
independent.
2. Each of the independent directors, in the opinion of the Board, is
independent of management and free from any relationship that would
interfere with the exercise of independent judgment.
3. Only independent directors are eligible to serve as members of the
Audit and Compliance Committee, the Organization and Compensation
Committee, and the Corporate Governance Committee under the applicable
rules and regulations of the Securities and Exchange Commission, the
New York Stock Exchange and the Internal Revenue Service. Each
independent director is eligible to serve on each of these Committees.
DIRECTORS
1. Under the Company's By-Laws, all directors stand for re-election every
year.
2. The Board of Directors has exclusive responsibility for selecting its
own members.
3. Within three years of their election to the Board, directors are
required to own shares of Company Common Stock that are at least equal
in value to 200% of the Board of Director's annual retainer fee then in
effect.
4. Directors should not stand for re-election after age 70. (This policy
does not apply to directors who were over the age of 70 as of January
1, 1998)
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ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON
COMPENSATION OF EXECUTIVE OFFICERS
The Organization and Compensation Committee (the "Committee") is appointed by
the Board of Directors and is composed entirely of independent directors.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES
The Committee believes that the Company's executive compensation program is a
plan designed to encourage and reward enhancement of stockholder value. The
program focuses on four key objectives:
o Motivate executives toward effective long-term management of the
Company;
o Align the interests of management and key employees with stockholders;
o Reward effective ongoing management of the Company; and
o Attract and retain key executives through competitive salary and
incentive plans.
ANNUAL INCENTIVE BONUS
Four performance measures are used to determine the incentive bonuses for the
named Executive Officers and the Chief Executive Officer;
o Increase in operating income (before income taxes) over the previous
year;
o Increase in earnings per share over the previous year;
o Increase in share price over the previous year; and
o Stock price performance in relation to a similar group of other
companies.
BASE SALARY
The Company's executive compensation program is designed to include a
competitive base salary based on a review of pay practices of similar companies
as well as the Executive Officer's past performance and an assessment of his or
her ability to contribute to the Company's progress.
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LONG TERM INCENTIVES
In 1998, the Committee granted an aggregate of 1,941,050 stock options to 630
employees under the Tandy Corporation 1993 Incentive Stock Plan ("1993 ISP")
and 1997 ISP, including all of the currently serving named Executive Officers.
The amount of options granted to particular officers was determined by the
Committee based on its evaluation of the individual's performance following
consultation with the Chief Executive Officer.
Under the 1993 ISP and 1997 ISP the Company may also grant various types of
other stock-based awards, including performance shares, stock appreciation
rights, restricted stock and performance units, to eligible participants in
amounts to be determined by the Committee, subject to the restrictions set
forth in the plans. Under the present and any contemplated incentive stock
plans of the Company, all options and awards will be awarded at their fair
market value on, or the day before, the date of grant and will not be repriced.
The Committee believes that stock options are very important in motivating and
rewarding creation of long-term stockholder value. The Committee periodically
has awarded in the past, and plans to award now and in the future, stock
options to a broad spectrum of employees based on continuing progress of the
Company and improvements in individual performance.
As part of this process on February 24, 1999, the Board approved adoption of
the Tandy Corporation 1999 Incentive Stock Plan ("1999 ISP") which provides
only for non-qualified stock options and stock appreciation rights. The 1999
ISP is similar to the 1993 ISP and 1997 ISP; however, the 1999 ISP does not
provide for the award of incentive stock options, restricted stock or
performance awards. The 1999 ISP will be administered as a broad based plan
that will provide incentives for over 75% of the full time exempt employees of
the Company.
The Company believes it is in its best interest to retain well trained and
motivated store management as well as a broad base of other competent and
experienced employees at all levels of the Company and to align their interests
with those of the Company's stockholders. In order to accomplish these goals,
the Company in the past has made awards to these employees under the 1993 ISP
and 1997 ISP which has left the Company with an insufficient number of shares
under these plans to provide a continuing incentive for RadioShack store
managers and the other broad based employee groups. In order to continue the
pursuit of these goals, the Company adopted the 1999 ISP and granted
non-qualified stock options under the 1999 ISP to slightly more than 5,000
RadioShack store managers.
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COMPENSATION OF THE EXECUTIVE OFFICERS
The Committee has developed and approved a Compensation Plan for Executive
Officers of the Company. Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), prohibits the deductibility of pay in excess of $1
million unless the Compensation Plan for Executive Officers is approved by the
stockholders. The Company is seeking approval of the Compensation Plan for
Executive Officers. See "Approval of Compensation Plan for Executive Officers."
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
For the year ending December 31, 1998, the compensation of the Chief Executive
Officer was determined under the compensation plan approved by the Board of
Directors in December, 1997, and by the stockholders on May 18, 1995. The bonus
factors utilized were increases in the Company's operating income (before
income taxes) over the previous year, increases in the Company's earnings per
share over the previous year, increases in the Company's share price during
1998 over 1997's share price and the Company's stock price performance in
relation to a similar group of other companies. Mr. Roach was paid a bonus
attributable to 1998 based on these factors; however, he was not awarded any
additional stock options or restricted stock in 1998. Mr. Roach was paid a base
salary of $770,000 for the year 1997 and a base salary of $810,000 in 1998. Mr.
Roach was paid a bonus of $810,000 in 1998, based on the objective measures in
his formula bonus program for 1998.
The Committee has developed and approved a 1999 Compensation Plan for Mr.
Roberts that utilizes the same bonus factors employed for Mr. Roach in 1998 and
in the Compensation Plan for Executive Officers.
POLICY REGARDING INTERNAL REVENUE CODE SECTION 162(m)
As mentioned above, section 162(m) of the Code generally limits corporate
deductions to $1 million dollars for compensation, except for qualified
performance-based compensation, for compensation paid to a person who on the
last day of fiscal years beginning on or after January 1, 1994, is either the
Chief Executive Officer or among the four most highly compensated officers
other than the Chief Executive Officer.
The Committee does not believe that compensation decisions should be
constrained necessarily by how much compensation is deductible for federal
income tax purposes and as such has not and will not make compensation
decisions based solely on the deductibility of compensation.
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ORGANIZATION AND COMPENSATION COMMITTEE
James I. Cash, Jr., Chairman William G. Morton
Jack L. Messman Alfred J. Stein
Edwina D. Woodbury
EXECUTIVE COMPENSATION
The following table reflects the cash and non-cash compensation attributable to
the Chief Executive Officer of the Company, the four other most highly
compensated Executive Officers of the Company for the year ending December 31,
1998, and the former Chief Executive Officer of the Company.
Annual Compensation (1) Long-Term Compensation
------------------------------ -------------------------------------
(a) (b) (c) (d) (f) (g) (i)
Name and Restricted Stock All Other
Principal Fiscal Salary Bonus Stock Award Options Compensation
Position Year ($) ($) ($)(2)(3) (#)(4) ($)(5)
------------------------- ------ -------- -------- ----------- ------- ------------
Leonard H. Roberts 1998 610,000 610,000 2,718,375 300,000 84,088
President and Chief 1997 577,500 306,520 771,250 90,000 57,606
Executive Officer; 1996 550,000 0 0 120,000 69,135
President, RadioShack
David Christopher 1998 308,000 247,953 0 50,000 94,474
Executive Vice
President (6)
Dwain H. Hughes 1998 320,000 320,000 411,875 50,000 79,090
Senior Vice President 1997 280,000 222,252 231,375 33,000 30,462
and Chief Financial Officer 1996 240,000 0 0 31,900 33,616
Robert M. McClure 1998 334,000 226,425 0 40,000 62,488
Senior Vice President 1997 318,300 188,758 0 30,000 35,311
1996 309,000 0 0 26,400 31,141
Mark C. Hill 1998 257,292 250,000 411,875 40,000 18,116
Senior Vice President, 1997 94,492 76,935 77,125 25,000 0
Corporate Secretary
and General Counsel (7)
John V. Roach 1998 810,000 810,000 0 0 198,582
Chairman and Former 1997 770,000 770,000 0 135,000 64,381
Chief Executive Officer (8) 1996 770,000 0 0 150,000 115,919
- -----------------
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(1) Other than restricted stock awards (see #2 and #3 below) for the years
shown, the named Executive Officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites and
other personal benefits. The amounts for perquisites and other personal
benefits for the named Executive Officers are not shown because the aggregate
amount of such compensation, if any, for each of the named Executive Officers
during the fiscal year shown does not exceed the lesser of $50,000 or 10% of
total salary and bonus reported for such officer.
(2) Messrs. Roberts and Hughes were granted awards of restricted stock on May
15, 1997. The awards were 20,000 shares to Mr. Roberts and 6,000 shares to Mr.
Hughes. Upon employment with the Company Mr. Hill was granted an award of 2,000
shares of restricted stock on July 25, 1997. The awards of restricted stock
vest in equal increments annually on the anniversary date of grant over a three
year period, provided the named Executive Officer is still employed by the
Company. Dividends are payable on these shares. The closing price of a share of
Company Common Stock at the end of 1997 was $38.5625.
(3) On October 23, 1998, Mr. Roberts was granted awards of 36,000 shares of
restricted stock and 30,000 shares of restricted stock. The 36,000 share award
will vest on October 23, 2005 or earlier in 12,000 share increments if the
Company's share price reaches for 15 consecutive trading days $69.75, $93.00
and $116.25, respectively. The 30,000 share award will vest in equal increments
annually on the anniversary dates of grant over a three year period. These
restricted stock awards to Mr. Roberts only vest if he is still employed by the
Company. In addition, Messrs. Hill and Hughes were granted awards of restricted
stock on December 16, 1998, attributable to their performances. These awards of
10,000 shares each vest in equal increments annually on the anniversary date of
grant over a three year period; provided, the named Executive Officer is still
employed by the Company. Dividends are payable on these shares. The closing
price of shares of Company Common Stock at the end of 1998 was $41.1875.
(4) Includes all options granted during the year under the 1997 ISP, regardless
of whether the options are incentive stock options ("ISOs") or non-statutory
stock options ("NSOs"). No stock appreciation rights were granted with these
options in 1998.
(5) Includes the Company's contributions allocated to the accounts of the named
Executive Officers participating in the following employee benefit plans: the
Tandy Stock Plan, Tandy Fund, Tandy Employees Supplemental Stock Plan ("SUP"),
Executive Deferred Compensation Plan, Executive Deferred Stock Plan and several
deferred compensation agreements. The applicable amounts allocated in 1998 to
the named Executive Officers in the Tandy Stock Plan, Tandy Fund, SUP and the
deferral plans and agreements, respectively, are: $22,385, $10,338, $25,323 and
$26,042 for Mr. Roberts; $7,722, $10,338, $5,886 and $70,528 for Mr.
Christopher; $26,455, $10,338, $22,234 and $20,063 for Mr. Hughes; $14,654,
$10,338, $8,978 and $28,518 for Mr. McClure; $477, $0, $237 and $17,402 for Mr.
Hill; and $3,748, $10,338, $2,927 and $181,569 for Mr. Roach. Amounts do not
include amounts payable in the event of a change in control of the Company. See
"Change in Control Protections."
(6) Mr. Christopher was appointed by the Board on October 23, 1998, as
Executive Vice President of the Company. Prior to his appointment Mr.
Christopher was Executive Vice President of the Company's RadioShack division.
(7) Mr. Hill was appointed by the Board on July 25, 1997, as Vice President,
Corporate Secretary and General Counsel of the Company and was appointed Senior
Vice President of the Company on October 23, 1998.
(8) Mr. Roach retired as CEO on December 31, 1998, and received salary and bonus
payments through that date.
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OPTION GRANTS IN THE LAST YEAR
Options were granted on October 23, 1998, under the 1997 ISP to the Executive
Officers named in the Executive Compensation table. The potential value of such
options at the specified rates of appreciation is shown in the table below. The
1997 ISP also provides for the grant of restricted stock awards and stock
appreciation rights; however, no stock appreciation rights were granted in
1998. Restricted stock awards were authorized in 1998 and granted on October
23, 1998, to one named Executive Officer and on December 16, 1998, to two named
Executive Officers.
Potential Realizable
Value at Assumed Annual Rates (2)
---------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Options Exercise
Name and Granted or Base
Type of Options To Employees Price Expiration 5% 10%
Option (1) Granted(#) During the Year ($/Share) Date ($) ($)
---------- --------------- --------- ---------- --------- ----------
Leonard H. Roberts 300,000 15.5 50.00 10/23/2008 9,433,425 23,906,130
David Christopher 50,000 2.6 50.00 10/23/2008 1,572,238 3.984,355
Dwain H. Hughes 50,000 2.6 50.00 10/23/2008 1,572,238 3,984,355
Robert M. McClure 40,000 2.1 50.00 10/23/2008 1,257,790 3,187,484
Mark C. Hill 40,000 2.1 50.00 10/23/2008 1,257,790 3,187,484
- --------------------
(1) All options shown were granted under the 1997 ISP. Generally, no options
can be exercised during the 12-month period following the date of grant. ISOs
and NSOs become exercisable as to one-third of the amount of shares on each of
the next two annual anniversaries after the date of grant with full vesting on
the third annual anniversary date except with respect to Mr. Roberts whose
options become exercisable as to one-fifth of the amount of shares on each of
the next four annual anniversaries after the date of the grant with full
vesting on the fifth annual anniversary date. For persons who continue to serve
as employees of the Company, ISOs and NSOs expire 10 years from the date of
grant under the 1997 ISP. All options were granted at fair market value on the
date of grant and will not be repriced except for Mr. Roberts who had 50,000
shares granted at 110% of the fair market value, 50,000 shares at 120% of the
fair market value and 50,000 shares at 130% of the fair market value. The
exercise price and any tax withholding may be paid by cash or delivery of
already owned shares and cash.
(2) The potential gains reported above are net of the option exercise price,
but before taxes associated with the exercise. If these gains are achieved, the
value of the Company's Common Stock would likewise be increased each year by 5%
or 10%, respectively. These gains are calculated based on the stated assumed
rates of appreciation each year over the life of the option. Actual gains, if
any, on stock option exercises are dependent on the future performance of
Company
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Common Stock and overall market conditions, as well as the option-holder's
continued employment through the option expiration date. The amounts reflected
in the table may not necessarily be achieved.
OPTION EXERCISES IN THE LAST YEAR AND YEAR-END OPTION VALUES
The following table summarizes individual option exercises during the year ended
December 31, 1998, by each of the named Executive Officers and the year-end
value of the unexercised options. These options were periodically granted
between 1985 and 1997.
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-The-Money
Shares Options at Options at Year-End
Acquired on Value Year-End ($)(1)
Exercise Realized (#) Exercisable
Name (#) ($) Exercisable Unexercisable Unexercisable
----------- ---------- ----------- ------------- -----------------------
Leonard H. Roberts 0 0 295,753 486,247 5,648,511 2,590,239
David Christopher 38,304 1,218,849 172,113 100,787 3,801,962 636,009
Dwain H. Hughes 7,565 183,884 88,633 97,702 1,730,456 576,719
Robert M. McClure 96,000 2,314,500 72,273 82,087 1,271,598 504,794
Mark C. Hill 0 0 7,074 57,926 80,190 209,185
John V. Roach 430,726 15,753,052 597,254 -0- 9,115,899 -0-
- ------------------
(1) For purposes of calculating whether an option was "in-the-money" this chart
uses the December 31, 1998, average of the high and low trading prices (fair
market value) for Company Common Stock of $41.3125.
RETIREMENT AND DEFERRED COMPENSATION
THE PLANS
Under the Salary Continuation Plan for Executive Employees of Tandy Corporation
and Subsidiaries ("SCP") established in 1979, and the Officers Deferred
Compensation Plan ("DCP") established in 1986 (hereinafter collectively the
"Plans"), the Committee may select full-time executive employees for
participation therein. As of December 31, 1998, a total of 44 executive
employees of the Company were participants in one or both of the Plans. The
Plans generally provide for the payment of reduced benefits following a
participant's early retirement between the ages of 55 and 65, full benefits
between the ages of 65 and 70, reduced benefits between the ages of 70 and 75,
and for payment of a death benefit to the participant's designated beneficiary
in the event of death prior to age 75 during employment. All sums due under the
Plans are payable in 120 equal monthly installments to the participant or, in
the event of death, to his or her beneficiary. The payments are general
obligations of the
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Company that are funded in part by life insurance policies owned by the Company
which name the Company as beneficiary.
Under the Plans the Committee determines an amount designated herein as the
"Retirement Compensation Amount" for each participant. The amount established
by the Committee does not necessarily bear any relationship to the
participant's present compensation, final compensation or years of service. As
of December 31, 1998, the benefit payable to participants upon retirement or
death during employment is a function of the "Retirement Compensation Amount"
and the age of the participant at death or retirement, as set out in the
following table:
Retirement Compensation Annual Benefit
Amount Age at Date of Retirement or Death
----------------------- ---------------------------------------------------------------------
55 (1) 65 to 70 71(2) 75(2)
------- -------- ------- -----
$100,000 $50,000 $100,000 $80,000 $- 0-
225,000 112,500 225,000 180,000 -0-
237,500 118,750 237,500 190,800 -0-
512,500 256,250 512,500 410,000 -0-
- ------------------
(1) Proportionately increases from 50% to 100% between age 55 and age 65.
(2) Proportionately decreases from 100% to 0% between age 70 and age 75.
The Retirement Compensation Amount at death during employment or retirement at
age 65 for the Executive Officers listed in the Executive Compensation table at
December 31, 1998, would have been as follows:
SCP DCP Total
------- -------- --------
Leonard H. Roberts $-0- $512,500 $512,500
David Christopher 100,000 125,000 225,000
Dwain H. Hughes -0- 237,500 237,500
Robert M. McClure 75,000 162,500 237,500
Mark C. Hill -0- 100,000 100,000
John V. Roach (1)
- ------------------
(1) No amounts are furnished for Mr. Roach who retired from the Company on
December 31, 1998.
SPECIAL PROVISIONS OF THE SCP
The SCP provides for payments to be made to certain executive employees in the
event of their voluntary or involuntary termination of employment following a
Change in Control, as defined in a 1984 letter of amendment to the SCP. In the
event that the Company experiences a Change in Control, each executive employee
who is subject to such letter amendment becomes immediately vested at the age
65 benefit level for a period of three years; and if his or
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24
her employment with the Company ceases, whether voluntarily or involuntarily,
during this three year period, he or she will receive payments equal to the
annual retirement benefit at age 65. Payment is made in 120 equal monthly
installments to the participant or to his or her beneficiary.
SPECIAL PROVISIONS OF THE DCP
The DCP provides that for one year following the occurrence of a Change in
Control, as defined in the DCP, it shall not be terminated or amended in any
way, nor shall the manner in which the DCP is administered be changed in any
way which adversely affects the rights of participants or beneficiaries in the
DCP. Upon a Change in Control the provisions of the DCP provide that any
benefit due under the DCP shall be (1) offset by any outstanding loan of the
participant, and (2) forfeited if the participant engages in any activity that
is in competition with the Company. Additionally, in the event of a Change in
Control, each participant in the DCP becomes immediately vested at the age 65
benefit level and if the participant's employment is terminated for any reason
following a Change in Control, the Company must make a lump-sum payment equal
to the present value of the age 65 benefit level discounted for interest only
at the Pension Benefit Guaranty Company's Immediate Annuity Rate used to value
benefits for single-employer plans terminating on the date that the
participant's employment was terminated.
DEFERRED COMPENSATION PLANS AND OTHER AGREEMENTS
The Tandy Corporation Executive Deferred Compensation Plan and the Tandy
Corporation Executive Deferred Stock Plan which were effective April 1, 1998,
permit Executive employees of the Company to defer, on a pre-tax basis, up to
100% of their base salary and/or bonuses. The major features of these plans
are:
o Deferral of the receipt of up to 100% of certain Executive employee's
base salary or bonus;
o Deferral of any restricted stock or NSOs that would otherwise vest;
o Investment of cash deferrals in either Company Common Stock or mutual
funds;
o Company matching payments on salary and bonus as follows: 12% match on
salary and bonus deferrals in the form of Company Common Stock and an
additional 25% match on salary or bonus deferrals in the form of
Company Common Stock if salary and/or bonus deferrals are deferred for
more than five years and are invested in Company Common Stock;
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25
o Selection of a future distribution date to receive the deferrals and
matches in either a lump sum or annual installment payments not
exceeding 20 years; and
o In the event the Company experiences a Change in Control, these plans
provide that, within two weeks of this event, each Executive employee
participant will be paid the full value of his or her accounts in the
plans in the form of cash or Company Common Stock of the Company, as
the case may be.
Agreement with Mr. Roach. Mr. Roach retired as Chief Executive Officer of the
Company and as an officer and director of its subsidiaries on December 31,
1998. Commencing January 1, 1999, Mr. Roach is serving as non-executive
Chairman of the Company's Board of Directors and will do so until the Company's
Annual Meeting in May, 2000. While serving as non-executive Chairman, Mr. Roach
will not receive any Board retainer or meeting fees or be eligible for any
bonus payments. During his service on the Board Mr. Roach will be eligible to
receive the annual September grant of non-qualified stock options to directors.
The Company has agreed to pay Mr. Roach $540,000 per annum for his service as
non-executive Chairman; and during this service he will be eligible to
participate in the Company's welfare, benefit and deferred compensation plans.
Mr. Roach will retire from the Company and as a director upon the Company's
May, 2000, Annual Meeting. The Company has increased the annual payment due to
Mr. Roach under the SCP and DCP so that Mr. Roach will be entitled to receive
$687,500 annually for ten years commencing June 1, 2000. In addition, the
Company will continue paying premiums under individual and group life insurance
policies until June 1, 2000, and provide third party financial consulting
services until December 31, 2001. The Company also has agreed to provide Mr.
Roach an office and related administrative services for ten years from January
1, 1999, and excess insurance liability coverage for two years after his
departure as a director. As provided under the Company's 1985 Stock Option
Plan and 1993 ISP, the exercisability of 279,847 of Mr. Roach's options to
acquire Company Common Stock was accelerated by the Company which resulted in
these options being immediately exercisable and 8,000 shares of previously
awarded Company Common Stock were provided free of restrictions.
Agreement with Mr. Roberts. Upon Mr. Robert's appointment as Chief Executive
Officer of the Company, the Board of Directors determined that it is in the
best interests of the Company and its stockholders to provide for an orderly
mechanism if Mr. Roberts should leave the employ of the Company. Should Mr.
Roberts involuntarily leave the Company under defined circumstances, the
Agreement provides salary and bonus payments and acceleration of certain stock
awards. In the event Mr. Roberts voluntarily leaves the Company or leaves under
other defined circumstances, Mr. Roberts receives no payments or accelerations
under the Agreement. In no event would Mr. Roberts receive benefits under both
this Agreement
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26
and the Termination Protection Agreement described under "Change in Control
Protections" in the Proxy Statement.
CHANGE IN CONTROL PROTECTIONS
In addition to the change in control protections contained in the DCP, SCP, the
Executive Deferred Compensation Plan and the Executive Deferred Stock Plan as
described above in "Retirement and Deferred Compensation", the Company has
implemented the following additional change in control protections:
Bonus Guarantee Letter Agreements. The Company currently has letter agreements
(the "Bonus Guarantee Letter Agreements") with all of the currently serving
Executive Officers named in the Executive Compensation table, which provide
that, if they are employed by the Company on the date of a "Change in Control"
(as defined in the Bonus Guarantee Letter Agreements), then for the fiscal year
during which a Change in Control occurs (the "Change in Control Year") they
will receive an annual bonus following a Change in Control at least equal to
the highest annual bonus paid or payable to them in respect of any of the three
full fiscal years ended prior to a Change in Control (i) for the Change in
Control Year, provided the Executive Officer remains in the employment of the
Company on the last day of the Change in Control Year and (ii) for the fiscal
year ended prior to a Change in Control if the amount of their annual bonus for
such year has not yet been determined at the time of the Change in Control. The
Bonus Guarantee Letter Agreements have an initial term of 24 months, subject to
automatic successive one-year extensions unless written notice not to extend is
given by the Company at least 90 days prior to any extension. At December 31,
1998, the Company had issued similar bonus guarantee letters to approximately
33 other officers and employees of the Company providing that in the event of a
Change in Control each such employee would receive a minimum annual bonus
following a Change in Control as provided for in such bonus guarantee letters.
Assuming a Change in Control occurred on the date of this Proxy Statement, all
of the currently serving named Executive Officers were still employed on that
date, and the currently serving named Executive Officers' employment had
terminated on that date, it is estimated that the minimum bonuses payable under
the Bonus Guarantee Letter Agreements would be approximately $610,000 for Mr.
Roberts, $247,953 for Mr. Christopher, $320,000 for Mr. Hughes, $226,425 for
Mr. McClure, and $250,000 for Mr. Hill.
Benefit Protections. The Board has included change in control protections in
the Tandy Fund, SUP, Tandy Stock Plan, DCP, Post Retirement Death Benefit Plan
("DBP"), 1985 Stock Option Plan, 1993 ISP, 1997 ISP and several other plans.
The DCP and SCP change in control provisions are described above. The Tandy
Fund provides that for a period of one year following a "Change in Control," as
defined in such plan, the plan may not be terminated or amended in any way that
would adversely affect the computation or amount of, or entitlement
23
27
to, the benefits under the plan. The SUP and Tandy Stock Plan contain similar
protections and also provide that in the event of a "Change in Control," as
defined in such plans, the Company may not reduce the level of its contributions
to the SUP and Tandy Stock Plan in effect immediately prior to the Change in
Control. The Tandy Stock Plan additionally provides that in the event of a
Change in Control or a tender offer, other than an issuer tender offer, the
Company shall distribute to each participant in the Tandy Stock Plan all Company
Common Stock held by the Company which was credited to the participant's account
under the Tandy Stock Plan. The change in control provisions of the 1985 Stock
Option Plan, 1993 ISP, 1997 ISP and certain agreements issued under these plans
provide that all outstanding options become immediately vested and exercisable
in the event of a "Change in Control", as defined in such plans. All of the
foregoing are referred to herein as the "Benefit Protections."
Termination Protection Agreements. As of December 31, 1998, the Company has
entered into Termination Protection Agreements ("Agreements") with all of the
currently serving Executive Officers named in the Executive Compensation table
and 3 other employees (collectively, the "Executives"). The Agreements (all of
which are substantially similar) have an initial term of two years which is
automatically extended for successive one-year periods unless terminated by
either party. If the employment of any of the Executives is terminated (with
certain exceptions) within 24 months following a "Change in Control", as
defined in the Agreements, or in certain other instances in connection with a
Change in Control, the Executives will be entitled to receive certain cash
payments (amounts equal to two times current annual salary and the amount of
the bonus guarantee under the Bonus Guarantee Letter Agreement and an amount
equal to the contributions that the Company would have made to the Tandy Stock
Plan, Tandy Fund and SUP over a 24-month period assuming the foregoing salary
and bonus guarantee were used to calculate the Company's contributions), as
well as the continuation of fringe benefits (including life insurance,
disability, medical, dental and hospitalization benefits) for a period of up to
24 months. Additionally, all restrictions on any outstanding incentive awards,
including restricted stock, will lapse; and such awards will become fully
vested, all outstanding stock options will become fully vested and immediately
exercisable, and the Company will be required to purchase for cash, on demand,
any shares of unrestricted stock and shares purchased upon the exercise of
options at the then per-share fair market value.
The Agreements also provide that the Company shall make an additional "Gross-Up
Payment" (as defined in the Agreements) to the Executives to offset fully the
effect of any excise tax imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), on any payment made to any of the
Executives arising out of or in connection with the employment of any of the
Executives. In addition, the Company will pay all legal fees and related
expenses incurred by any of the Executives arising out of employment of any of
the Executives or termination of employment under certain circumstances.
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28
Payments Upon A Change In Control. Assuming a Change in Control occurred on the
date of this Proxy Statement, all of the currently serving named Executive
Officers were still employed on that date, and all of the currently serving
named Executive Officers' employment had terminated on that date, the
approximate cash payment that would have been made by virtue of all change in
control protections implemented by the Company (not including the Gross-Up
Payments) to Messrs. Roberts, Christopher, Hughes, McClure and Hill would have
been approximately $3,398,254; $1,371,644; $1,607,554; $1,370,744; and
$1,272,410, respectively. The amount of the Gross-Up Payment, if any, to be
paid may be substantial and will depend upon numerous factors, including the
price per share of Company Common Stock and the extent, if any, that payments
or benefits made to the Executives constitute "excess parachute payments"
within the meaning of Section 280G of the Code.
Rabbi Trust. In connection with the Benefit Protections, Bonus Guarantee Letter
Agreements, the Termination Protection Agreements, and several other plans and
agreements, the Company is authorized to enter into a Rabbi Trust, which is
intended to be a grantor trust under Section 671 of the Code. The Rabbi Trust
may be funded by the Company at any time but is required to be funded upon a
"Threatened Change in Control" or upon a "Change in Control" (as such terms are
defined in the Rabbi Trust) in an amount sufficient to provide for the payment
of all benefits provided under the Agreements, the Bonus Guarantee Letter
Agreements, the DCP and the DBP. The Rabbi Trust will also provide funds for
litigation on behalf of the participants in such plans to the extent necessary
to ensure their rights thereunder. The Rabbi Trust will be a trust of which the
Company, for tax purposes, is the beneficiary and the trust assets, as assets
of the Company, will be subject to the claims of the Company's creditors in the
event of the Company's bankruptcy or insolvency.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on Company
Common Stock against the cumulative total return on the S&P Corporate 500 Stock
Index and the S&P Retail Composite Stock Index (assuming $100 was invested on
December 31, 1993, in Company Common Stock and in the stocks comprising the S&P
Corporate 500 Stock Index and the S&P Retail Composite Stock Index and also
assuming the reinvestment of all dividends). The S&P Retail Composite Stock
Index, as well as the S&P Corporate 500 Stock Index, include the Company.
The historical stock price performance of Company Common Stock shown on the
graph below is not necessarily indicative of future price performance.
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29
Any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934
shall not be deemed to incorporate by reference this graph and this graph shall
not otherwise be deemed filed under such Acts. The Company may, however,
specifically incorporate this graph by reference in filings under such Acts.
[GRAPH]
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
------ ------ ------ ------ ------ ------
Tandy Corp. 100.00 102.59 86.44 93.31 165.71 178.47
------ ------ ------ ------ ------ ------
S&P 500(R) 100.00 101.32 139.37 171.35 228.50 293.79
------ ------ ------ ------ ------ ------
S&P(R)Retail Stores Composite Index 100.00 91.35 102.37 120.62 174.49 281.50
------ ------ ------ ------ ------ ------
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CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the year ended December 31, 1998, the Company paid approximately
$320,130 to Texas Christian University ("TCU"), of which Dr. Tucker was the
Chancellor until his retirement on June 30, 1998. Dr. Tucker is currently
Chancellor Emeritus of TCU. These payments were for administering the Tandy
Technology Scholars Program and for various TCU scholarship funds, the English
Language Learning Center, advertisements, tickets, seminars, contributions
through the Company's matching gift program and amounts paid for TCU
promotional items sold though the "Fort Worth Store" in the Fort Worth Outlet
Mall, which is operated by the Company.
ITEM 2
APPROVAL OF COMPENSATION PLAN FOR EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
Section 162(m) of the Internal Revenue Code (the "Code"), and the regulations
thereunder (the "Regulations"), provide that a publicly held corporation may
not deduct compensation in excess of $1 million paid to the chief executive
officer and generally, the four other most highly compensated executive
officers, unless such compensation is paid pursuant to qualified
performance-based compensation plans approved by the company's stockholders
before payment. The Board of Directors is therefore seeking stockholder
approval of the Chief Executive Officer's and the Executive Officers'
compensation packages for 1999 and subsequent years.
The Committee has approved a Compensation Plan for the Chief Executive Officer
and other Executive Officers (collectively or individually "Officer(s)") under
which they could each be paid an annual salary and a bonus subject to a
maximum. The maximum bonus for any given year is limited to the amount of each
Officer's salary for that year.
Effective with the beginning of 1999 and each subsequent year, the Committee
may adjust the annual salary of the Officers. Downward adjustments are not
limited. Upward adjustments by the Committee would be based on its subjective
evaluation of the Company's progress, the performance of the individual Officer
and the pay levels of comparable officers at other similar companies.
The amount of the bonus for each year would be computed using a formula based
on changes in Tandy's operating income (before income taxes), earnings per
share and stock price. The amount of the 1999 bonus would be the sum of the
following numbers:
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(a) a number equal to the percentage increase in the Company's income
from operations (before income taxes) in 1999 over income from
operations (before income taxes) in 1998, multiplied by a factor
selected by the Committee, subject to the limitation that no bonus
will be paid with respect to an increase in operating income unless
the increase exceeds a minimum threshold selected by the Committee;
(b) a number equal to the percentage increase in the Company's earnings
per share in 1999 over earnings per share in 1998, multiplied by a
factor selected by the Committee, subject to the limitation that no
bonus will be paid with respect to an increase in earnings per
share unless the increase exceeds a minimum threshold selected by
the Committee;
(c) a number equal to the percentage increase in the Company's stock
price, based on a comparison of the average closing price for the
current calendar year and the average closing price for the
previous calendar year, multiplied by a factor selected by the
Committee, subject to the limitation that no bonus will be paid
with respect to a Company stock price increase unless the increase
exceeds a minimum threshold selected by the Committee; and
(d) a number equal to a percentage, selected by the Committee, of base
salary if the Company's annual average stock price performance
exceeds the annual average stock price performance of the peer
group of companies which are part of the S&P Retail Stores
Composite Index.
Bonuses in subsequent years would be computed in accordance with the same
formula, except that the Committee would have the discretion to adjust the
multipliers and minimum thresholds based on the Company's progress, the
performance of the individual Officer and pay levels at the group of similar
peer companies.
As indicated above, bonuses for a given year would never be permitted to exceed
the applicable base salary for that year. In addition, no bonus would be
payable unless it exceeded a minimum percentage of the base salary specified by
the Committee.
If an Officer is terminated by the Company, he or she will forfeit his or her
right to receive a bonus except as otherwise may be provided in an agreement
with the Company or in the sole discretion of the Company. If he or she retires
or dies before the end of a year, the Officer will receive a bonus for the year
in which he or she retires or dies based on results for the period through the
end of the month preceding death or retirement. If an Officer's duties change,
the Compensation Plan is subject to revision or termination by the Company.
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The Committee expects to grant options to the Officers during 1999 and each
subsequent year. These options will be granted under existing plans of the
Company. The amount of the stock option awards will be based on the Committee's
subjective evaluation of the Company's progress and the Officer's performance.
They will also receive the other benefits described in the "All Other
Compensation" column of the table found in the "Executive Compensation" section
of this Proxy Statement.
The Committee believes that the Compensation Plan for the Officers is
consistent with its overall compensation policy, and will effectively serve the
goals of its executive compensation program. The Committee further believes,
based on its review of surveys of pay practices at retailing, electronics and
other companies conducted by a compensation and benefits consulting firm, as
well as other general pay surveys, that the proposed Compensation Plan is
commensurate with the compensation packages for executive officers of similar
companies. The bonus formula links the Officers' bonuses closely to the
financial interests of the Company's stockholders, by rewarding them only if
there are significant improvements in the Company's operating income, earnings
per share or stock performance. The bonus formula has sharp focus on increasing
stockholder value and encouraging effective management of the Company.
A favorable vote of a majority of the stockholders present at the meeting in
person or by proxy is required for approval of the Compensation Plan for the
Executive Officers. If the Plan is not approved, the Board of Directors intends
to reexamine its compensation plan for the Officers, with a view to developing
a plan that maintains their compensation at competitive levels and provides
appropriate incentives. In this event, the Committee will not be constrained
necessarily by how much compensation is deductible for federal income tax
purposes and as such will not make compensation decisions based solely on the
deductibility of compensation.
The Board of Directors recommends a vote "FOR" the proposal to approve the
Compensation Plan for Executive Officers. Proxies solicited by the Board of
Directors will be so voted unless stockholders otherwise specify in their
proxies.
INDEPENDENT ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP, which has audited the
Company's and its predecessor's books annually since 1899, as independent
accountants for 1999. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting with an opportunity to make a
statement and/or respond to appropriate questions.
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VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of the Company's Common Stock and the
Company's TESOP Stock as of the Annual Meeting Record Date will be entitled to
notice of, and to vote at, the Annual Meeting and at any resumption of the
Annual Meeting after adjournment or postponement thereof. The holders of shares
of Company Common Stock are entitled to one vote per share (a "Common Stock
Vote") on any matter which may properly come before the Annual Meeting. The
holders of TESOP Stock are entitled to 43.536 Common Stock Votes per share.
As of the Annual Meeting Record Date the total number of Common Stock Votes
represented by the voting securities of the Company entitled to vote were
100,237,898. Specifically, there were 96,920,455 shares of Company Common Stock
outstanding, representing 96,920,455 Common Stock Votes; and 76,200 shares of
TESOP Stock outstanding, representing 3,317,443 Common Stock Votes.
As of the Annual Meeting Record Date a total of 76,200 shares of TESOP Stock
were held in the Tandy Fund. Each participant in the Tandy Fund is entitled to
direct the Tandy Fund Trustee with respect to the voting of the TESOP Stock
allocated to his or her account. If a participant does not direct the Tandy
Fund Trustee with respect to the voting of the TESOP Stock, the Trustee will
vote such securities in the same proportion as other participants who have
directed the Trustee with respect to allocated shares. The Trustee will also
vote all unallocated TESOP Stock held by the Tandy Fund in such proportion.
The presence, either in person or by properly executed proxy, of the holders of
a majority of the Common Stock Votes as of the Annual Meeting Record Date is
necessary to constitute a quorum at the Annual Meeting. Shares held by holders
who are either present in person or represented by proxy who abstain will be
treated as present for quorum purposes on all matters.
The affirmative vote of a plurality of the Common Stock Votes entitled to vote
and represented in person or by properly executed proxy at the Annual Meeting
is required to approve the election of each of the Company's nominees for
election as a director. With respect to the election of directors, shares that
abstain will be included in the vote total as withholds (i.e., votes against
the Company's nominees for election).
The affirmative vote of a majority of the Common Stock Votes entitled to vote
and represented in person or by properly executed proxy at the Annual Meeting
is required to approve all matters other than the election of directors. For
purposes of determining whether a proposal
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has received a majority vote, abstentions will be included in the vote total,
with the result that an abstention will have the same effect as a negative vote.
For purposes of determining whether a proposal has received a majority vote, in
instances where brokers are prohibited from exercising discretionary authority
for beneficial holders of Company Common Stock who have not returned a proxy
(so-called "broker non-votes"), those shares will not be included in the vote
totals and, therefore, will have no effect on the outcome of the vote.
All voting securities that are represented at the Annual Meeting by properly
executed proxies received by the Corporate Secretary prior to or at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
such proxies will be voted FOR the election of the Board's nominees for
election as directors of the Company and FOR the Approval of the Compensation
Plan for Executive Officers.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by: (i) filing
with the Company, at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy; (ii) duly executing a
subsequent proxy relating to the same voting securities and delivering it to
the Company at or before the Annual Meeting; or (iii) attending the Annual
Meeting, filing a written revocation of proxy and voting in person (attendance
at the Annual Meeting and voting will not in and of itself constitute a
revocation of a proxy). Any written notice revoking a proxy or subsequent
proxies should be received by mail or other method of delivery or hand
delivered to Tandy Corporation, Attention: Ms. Carolyn Hoopes, Assistant
Corporate Secretary, 100 Throckmorton Street, Suite 1700, Fort Worth, Texas
76102-2818.
The Company will bear the cost of the solicitation. In addition to solicitation
by mail, the Company will request banks, brokers and other custodian nominees
and fiduciaries to supply proxy material to the beneficial owners of Company
Common Stock, Restricted Company Common Stock and TESOP Stock, and will
reimburse them for their expenses in so doing. In addition, the Company may
engage D.F. King & Co., Inc., for a fee anticipated not to exceed $9,500 plus
out-of-pocket expenses, to provide proxy services. Certain directors, officers
and other employees of the Company may solicit proxies, without additional
remuneration therefor, by personal interview, mail, telephone, facsimile or
other electronic means.
NO APPRAISAL RIGHTS
Stockholders of the Company will not be entitled to appraisal rights under
Delaware corporation law in connection with the vote on the nominees for
directors or the Compensation Plan for Executive Officers.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
FOR DIRECTORS FOR THE 2000 ANNUAL MEETING
In order for proposals of stockholders to be considered for inclusion in the
proxy statement for the 2000 Annual Meeting of Stockholders of the Company,
which is now scheduled to be held on May 18, 2000, such proposals must be
received by the Corporate Secretary of the Company by December 8, 1999.
Stockholders who wish to nominate persons for election as directors at the 2000
Annual Meeting, which is now scheduled to be held on May 18, 2000, must give
notice of their intention to make a nomination in writing to the Corporate
Secretary of the Company on or before February 21, 2000. Each notice shall set
forth: (a) the name and address of the stockholder who intends to make the
nomination and the name and address of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) under which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission as then
in effect; and (e) the consent of each nominee to serve as director of the
Company if so elected.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31, 1998, is
being mailed to stockholders with this Proxy Statement. Stockholders who do not
receive a copy of such Annual Report may obtain a copy without charge by
writing or calling Shareholder Services, Tandy Corporation, 100 Throckmorton
Street, Suite 1700, Fort Worth, Texas 76102-2818, telephone number
(817)415-3022.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any other business to be presented to the meeting. If other
business is properly brought before the meeting, the persons named in the Proxy
will vote according to their discretion.
TANDY CORPORATION
April 6, 1999 Fort Worth, Texas
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THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT
Tandy Corporation's 1999 Annual Meeting of Stockholders will be held at
the Worthington Hotel, 200 West Second Street, Fort Worth, Texas 76102, on
Thursday, May 20, 1999, at 10:00 a.m. To ensure that your shares are voted at
the meeting, please complete the proxy card, detach at the perforation and
return to the tabulating agent in the enclosed envelope.
- --------------------------------------------------------------------------------
DETACH HERE
PROXY
TANDY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 20, 1999
The undersigned hereby appoints Leonard H. Roberts, Ronald E. Elmquist, James I.
Cash, Jr. and William E. Tucker, and each or any of them, attorneys and proxies
of the undersigned, with full power of substitution, to vote all the shares of
common stock of the Corporation held by the undersigned at the Annual Meeting of
Stockholders of Tandy Corporation at Fort Worth, Texas on May 20, 1999, or any
resumption of the Annual Meeting after any adjournment thereof, as indicated on
this proxy, and in their discretion on any other matters which may properly come
before the meeting. If no directions are given, this Proxy will be voted "FOR"
Items 1 and 2.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN ON
THE REVERSE SIDE - NO BOXES NEED TO BE CHECKED.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
37
TANDY CORPORATION
100 THROCKMORTON STREET SUITE 1800
POST OFFICE BOX 17180
FORT WORTH, TEXAS 76102-0180
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
1. Election of Directors 2. Compensation Plan for Executive FOR AGAINST ABSTAIN
NOMINEES: Frank J. Belatti, James I. Cash, Jr., Ronald E. Elmquist, Officers [ ] [ ] [ ]
Lewis F. Kornfeld, Jr., Jack L. Messman, William G. Morton, Jr.,
Thomas G. Plaskett, John V. Roach, Leonard H. Roberts, Alfred J. Stein,
William E. Tucker, Edwina D. Woodbury
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
----------------------------------------------------
For all nominees except those written on line above.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY,
DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
Signature: Date: Signature: Date:
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