Mattel 2005 Annual Report Download - page 85

few outstanding stock options that were granted with an exercise price in excess of the fair market value of
Mattel’s common stock on the date of grant, as to which vesting was dependent upon Mattel’s common stock
achieving a specified fair market value during a specified time period. Options were granted to non-employee
members of Mattel’s Board of Directors under the 1996 Plan with exercise prices equal to the fair market value
of Mattel’s common stock on the date of grant; such options expire no later than ten years from the date of grant
and vest over a period of four years from the date of grant.
Under the 2005 Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options,
stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and shares of common
stock to officers, employees, and other persons providing services to Mattel. Generally, options vest and become
exercisable contingent upon the grantees’ continued employment with Mattel. Nonqualified stock options are
granted at not less than 100% of the fair market value of Mattel’s common stock on the date of grant, expire no
later than ten years from the date of grant and vest on a schedule determined by the Compensation Committee of
the Board of Directors, generally during a period of three years from the date of grant. Restricted stock units
granted under the 2005 Plan are generally accompanied by dividend equivalent rights and generally vest over a
period of three years from the date of grant. The 2005 Plan also contains provisions regarding grants of equity
compensation to the non-employee members of the Board of Directors. Pursuant to these provisions, the
Compensation Committee has approved grants to non-employee members of the Board of Directors that consist
of a mix of nonqualified stock options and restricted stock units; such stock options and restricted stock units vest
over a period of three years from the date of grant, and such stock options have exercise prices equal to the fair
market value of Mattel’s common stock on the date of grant and expire no later than ten years from the date of
grant. The 2005 Plan expires on May 18, 2015, except as to any grants then outstanding.
The number of shares of common stock available for grant under the 2005 Plan is subject to an aggregate
limit of 50 million shares and is further subject to share-counting rules as provided in the 2005 Plan. As a result
of such share-counting rules, full-value grants such as grants of restricted stock or restricted stock units count
against shares remaining available for grant at a higher rate than grants of stock options and stock appreciation
rights. Each stock option or stock appreciation right grant is treated as using one available share for each share
actually subject to such grant, whereas each full-value grant is treated as using three available shares for each
share actually subject to such full-value grant. The 2005 Plan contains detailed provisions with regard to share-
counting.
On December 28, 2005, the Compensation Committee of the Board of Directors of Mattel approved the
acceleration of vesting of options for approximately 12.4 million shares with an exercise price of $16.09 or
greater granted to employees other than Mattel’s Chairman and Chief Executive Officer. Vesting was not
accelerated as to stock options held by any member of the Board of Directors.
The following is a summary of stock option information and weighted average exercise prices for Mattel’s
stock option plans during the year (options in thousands):
2005 2004 2003
Number Price Number Price Number Price
Outstanding at January 1 .................... 45,437 $18.57 42,733 $19.07 40,396 $18.65
Options granted ....................... 7,619 18.68 7,455 16.98 7,394 19.49
Options exercised ...................... (2,077) 13.68 (1,595) 13.82 (3,663) 13.50
Options canceled ...................... (3,128) 22.82 (3,156) 24.00 (1,394) 23.77
Outstanding at December 31 ................. 47,851 $18.53 45,437 $18.57 42,733 $19.07
Exercisable at December 31 .................. 46,871 $18.54 32,371 $18.69 30,646 $18.96
Available for grant at December 31 ............ 42,472 11,274 15,717
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