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<SEC-DOCUMENT>0000898430-01-500038.txt : 20010329
<SEC-HEADER>0000898430-01-500038.hdr.sgml : 20010329
ACCESSION NUMBER: 0000898430-01-500038
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 33
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MATTEL INC /DE/
CENTRAL INDEX KEY: 0000063276
STANDARD INDUSTRIAL CLASSIFICATION: DOLLS & STUFFED TOYS [3942]
IRS NUMBER: 951567322
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-05647
FILM NUMBER: 1582661
BUSINESS ADDRESS:
STREET 1: 333 CONTINENTAL BLVD
CITY: EL SEGUNDO
STATE: CA
ZIP: 90245
BUSINESS PHONE: 3102522000
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K FOR YEAR ENDED 12/31/2000
<TEXT>
<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
(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, 2000
[_] 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 001-05647
----------------
MATTEL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-1567322
(State or other jurisdiction of incorporation
or organization) (I.R.S. Employer Identification No.)
</TABLE>
333 Continental Boulevard
El Segundo, California 90245-5012
(Address of principal executive offices)
(310) 252-2000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, $1.00 par value New York Stock Exchange
(and the associated Preference Share Purchase Pacific Exchange, Inc.
Rights)
</TABLE>
----------------
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
statement incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on March 16, 2001 was $7,591,444,190.
Number of shares outstanding of registrant's common stock, $1.00 par value,
(including 1,682,138 common shares issuable upon exchange of outstanding
exchangeable shares of Softkey Software Products Inc.) as of March 16, 2001:
430,577,290 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Mattel, Inc. Annual Report to Stockholders for the year
ended December 31, 2000 (Incorporated into Parts I, II and IV)
2. Portions of the Mattel, Inc. 2001 Notice of Annual Meeting of
Stockholders and Proxy Statement, to be filed with the Securities and Exchange
Commission within 120 days after the close of the registrant's fiscal year
(Incorporated into Part III).
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- --------------------------------------------------------------------------------
<PAGE>
PART I
Item 1. Business
Mattel, Inc. ("Mattel") designs, manufactures, and markets a broad variety
of toy products on a worldwide basis through both sales to retailers and direct
to consumers.
Mattel believes its products are among the most widely recognized toy
products in the world. Mattel's portfolio of brands and products are grouped in
the following categories:
Girls--Barbie(R) fashion dolls and accessories, collector dolls, Cabbage
Patch Kids(R), Polly Pocket(R), and Diva Starz(TM)
Boys-Entertainment--including Hot Wheels(R), Matchbox(R), Tyco(R) Electric
Racing and Tyco(R) Radio Control (collectively "Wheels"), and Disney,
Nickelodeon(R), Harry Potter(TM), Max Steel(TM), games and puzzles
(collectively "Entertainment")
Infant & Preschool--including Fisher-Price(R), Power Wheels(R), Sesame
Street(R), Disney preschool and plush, Winnie the Pooh(R), Blues Clues(R),
See "N Say(R), Magna Doodle(R), and View-Master(R)
Direct Marketing--American Girl(R), Barbie(R), Wheels and Fisher-Price(R)
Mattel plans to continue to focus on its portfolio of traditional brands
that have historically had worldwide sustainable appeal, to create new brands
utilizing its knowledge of children's play patterns and to target customer and
consumer preferences around the world. Mattel also intends to expand its core
brands through the Internet, and licensing and entertainment partnerships.
On May 16, 2000, Robert A. Eckert was unanimously elected Chairman of the
Board of Directors and Chief Executive Officer of Mattel. Previously, he had
been president and chief executive officer of Kraft Foods, Inc., the largest
packaged food company in North America. Mr. Eckert has outlined a new strategy
for Mattel that includes building core brands, cutting costs and attracting and
developing people. Mattel also added two new outside directors during 2000 and
one new outside director during 2001 to its Board of Directors.
In 2000, Mattel implemented a new two phase interactive media strategy,
consisting of the disposition of the Learning Company division as phase one and
licensing agreements with leading interactive companies for Mattel's core
brands as phase two. The disposition of the Learning Company division was
completed in October 2000. Licensing agreements with Vivendi Universal
Publishing for Barbie(R) and Fisher-Price(R) brands, and THQ, Inc. for Hot
Wheels(R) and Matchbox(R) brands, were announced in January 2001.
During the third quarter of 2000, Mattel initiated a financial realignment
plan designed to improve gross margin; selling, general and administrative
expenses; operating profit, and cash flow. The plan will require a total pre-
tax charge estimated at approximately $250 million, or $170 million on an
after-tax basis. These costs will be recorded over the next two years. Under
the plan, Mattel expects to generate approximately $200 million of cost savings
over the next three years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--2000 Financial Realignment
Plan", Note 9 to the Consolidated Financial Statements in the Annual Report to
Stockholders, incorporated herein by reference, and "Risk Factors."
Mattel also announced a change in its dividend policy, from the past policy
of paying $0.09 per share quarterly when and as declared by the Board of
Directors to $0.05 per share annually when and as declared by the Board of
Directors. See Part II, Item 5., "Market for the Registrant's Common Equity and
Related Stockholder Matters."
Mattel was incorporated in California in 1948 and reincorporated in Delaware
in 1968. Its executive offices are located at 333 Continental Boulevard, El
Segundo, California 90245-5012, telephone (310) 252-2000.
2
<PAGE>
Business Segments
"Mattel" refers to Mattel, Inc. and its subsidiaries as a whole, unless the
context requires otherwise. Mattel's reportable segments are separately managed
business units and include toy marketing and toy manufacturing. The Toy
Marketing segment is divided on a geographic basis between domestic and
international. The Domestic Toy Marketing segment is further divided into US
Girls, US Boys-Entertainment, US Infant & Preschool and Other. The US Girls
segment includes brands such as Barbie(R), Polly Pocket(R), and Cabbage Patch
Kids(R). The US Boys-Entertainment segment includes products in the Wheels and
Entertainment categories. The US Infant & Preschool segment includes Fisher-
Price(R), Disney preschool and plush, Power Wheels(R), Sesame Street(R) and
other preschool products. The Other segment principally sells specialty girls
products, including American Girl(R), which are sold through the direct
marketing distribution channel. The International Toy Marketing segment sells
products in all toy categories. The Toy Manufacturing segment manufactures toy
products, which are sold to the Toy Marketing segments based on intercompany
transfer prices. For additional information with respect to Mattel's business
segment reporting, see Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--Business
Segment Results" and Note 10 to the Consolidated Financial Statements in the
Annual Report to Stockholders, incorporated herein by reference.
Domestic Toy Marketing Segment
The Domestic Toy Marketing segment develops toys that it markets and sells
in the US Girls, US Boys-Entertainment, US Infant & Preschool and Other
segments. Girls products include Barbie(R) fashion dolls and accessories,
collector dolls, Cabbage Patch Kids(R), Polly Pocket(R) and Diva Starz(TM). In
2001, Mattel expects to introduce "Barbie in the Nutcracker(TM)", a ballerina
fashion doll and computer graphic imagery video, Barbie(TM) Perfectly Plush(TM)
pet dolls, the Barbie(R) Jam and Glam Tour bus(TM), and What's Her Face(TM), a
fashion activity doll.
Boys-Entertainment products include Hot Wheels(R), Matchbox(R), Tyco(R)
Electric Racing, Tyco(R) Radio Control, Disney, Nickelodeon(R), Harry
Potter(TM), Max Steel(TM), games and puzzles. New Boys-Entertainment products
in 2001 will include a new toy line based on the worldwide literary phenomenon,
"Harry Potter and the Sorcerer's Stone" and Warner Bros. motion picture. Other
planned new products include Max Steel(TM) R/C Jet Blade, Jimmy Neutron(TM), a
toy line based on a Nickelodeon(R) motion picture, a 35th anniversary Rock "Em
Sock "Em Robots(TM) game and action figure line, the Hot Wheels(R) Big Air
Stunt Set and a Matchbox(R) truck line, Rescue Net.
The US Infant & Preschool segment's products include Fisher-Price(R), Power
Wheels(R), Sesame Street(R), Disney preschool and plush, Winnie the Pooh(R),
Blue's Clues(R), See N Say(R), Magna Doodle(R), and View-Master(R). New product
introductions for 2001 will include Pixter(TM), a personal digital assistant
for children 5 and up, Tickle Me(TM) Elmo Surprise, Goofy R/C Jalopy and Rescue
Heroes(R) Aquatic Rescue Command Center(TM) playset.
The Other segment's products include the Pleasant Company's American Girl(R)
line of historical dolls and clothing for older girls, and the Barbie(R),
Wheels and Fisher-Price(R) direct to consumer business. The most recent
addition to the American Girl(R) doll line is Kit Kittredge(TM), a nine-year-
old girl growing up during America's Great Depression.
International Toy Marketing Segment
Revenues from Mattel's International Toy Marketing segment represented
approximately 29% of total consolidated net sales in 2000.
Generally, products marketed by the International Toy Marketing segment are
the same as those developed and marketed by the Domestic Toy Marketing segment,
although some are developed or adapted for particular international markets.
Mattel's products are sold directly in Canada and most European, Asian and
Latin American countries, and through agents and distributors in those
countries where Mattel has no direct presence.
3
<PAGE>
In 1999, Mattel entered into distribution agreements with Bandai, Japan's
largest toymaker, pursuant to which Mattel distributes certain Bandai products
in Latin America and on a case-by-case basis in the US, and Bandai distributes
certain Mattel products in Japan. In 1999 and 2000, Mattel ceased distribution
through third-party distributors in Central America and the Caribbean and now
distributes products directly in those regions. See "Licenses and Distribution
Agreements." For a description of a number of the risks associated with
Mattel's international operations, see "Risk Factors."
The strength of the US dollar relative to other currencies can significantly
affect the revenues and profitability of Mattel's international operations.
Mattel enters into foreign currency forward exchange and option contracts
primarily to hedge its purchase and sale of inventory, and other intercompany
transactions denominated in foreign currencies to limit the effect of exchange
rate fluctuations on its results of operations and cash flows. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Financial Instruments and --Foreign Currency Risk" and Note 8 to
the Consolidated Financial Statements in the Annual Report to Stockholders,
incorporated herein by reference. For financial information by geographic area,
see Note 10 to the Consolidated Financial Statements in the Annual Report to
Stockholders, incorporated herein by reference.
Toy Manufacturing Segment
The Toy Manufacturing segment manufactures toy products, both in company-
owned facilities and through independent contractors, which are sold to the
Domestic and International Toy Marketing segments based on intercompany
transfer prices. Products are also purchased from unrelated entities that
design, develop and manufacture the products. The Toy Manufacturing segment is
responsible for distribution of products from Mattel or third party
manufacturers to Mattel's customers. In order to provide greater flexibility in
the manufacture and delivery of products, and as part of a continuing effort to
reduce manufacturing costs, Mattel has concentrated production of most of its
core products in Mattel's facilities and generally uses independent contractors
for the production of non-core products. See Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Manufacturing
Risk" in the Annual Report to Stockholders, incorporated herein by reference.
Mattel's primary manufacturing facilities are located in the state of
Kentucky, and in Mexico, China, Indonesia, Malaysia, Thailand and Eastern
Europe. Mattel also utilizes independent contractors to manufacture products in
the US, Europe, Mexico, the Far East and Australia. To help avoid disruption of
its product supply due to political instability, civil unrest, economic
instability, changes in government policies and other risks, Mattel produces
many of its key products in more than one facility. During 1999, Mattel closed
three of its higher-cost manufacturing facilities. See Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Restructuring and Other Charges" and Note 9 to the Consolidated Financial
Statements in the Annual Report to Stockholders, incorporated herein by
reference. Mattel believes that its existing production capacity at its own and
its independent contractors' manufacturing facilities is sufficient to handle
expected volume in the foreseeable future.
Mattel bases its production schedules for toy products on customer orders,
modified by historical trends, results of market research and current market
information. The actual shipments of products ordered and the order
cancellation rate are affected by consumer acceptance of the product line,
strength of competing products, marketing strategies of retailers and overall
economic conditions. Unexpected changes in these factors can result in a lack
of product availability or excess inventory in a particular product line.
The foreign countries in which most of Mattel's products are manufactured
(principally China, Indonesia, Thailand, Malaysia and Mexico) currently enjoy
"normal trade relations" ("NTR") status under US tariff laws, which provides a
favorable category of US import duties. As a result of concerns in the US
Congress regarding China's human rights and trade policies, including the
country's inadequate protection of US intellectual property rights, there has
been, and may be in the future, opposition to the annual extension of NTR
status for China. In 2000 the US Congress passed legislation that will make
permanent China's NTR status once China joins the World Trade Organization.
4
<PAGE>
The loss of NTR status for China would result in a substantial increase in
the import duty for toys manufactured in China and imported into the US and
would result in increased costs for Mattel and others in the toy industry. See
"Risk Factors."
With the implementation of the Uruguay Round agreement effective January 1,
1995, all US duties on dolls and traditional toys were completely eliminated.
Canada also eliminated its tariffs on dolls and most toy categories in 1995,
with the exception of certain toy sets and board games that will have their
duties eliminated over ten years. Meanwhile, both the European Union and Japan
are in the process of implementing Uruguay Round tariff concessions that
reduced their tariffs on dolls by 40% and 15%, respectively, as of January 1,
1999, and will lead to the phased elimination of their duties on several other
toy categories by January 1, 2004.
Virtually all of Mattel's raw materials are available from numerous
suppliers. Prices for petroleum-based products, such as resin, and packaging
materials began rising late in 1999, and this trend has continued into years
2000 and 2001. Mattel has long-term agreements in place with major suppliers
that allow them to only pass on their actual raw material cost increases.
Mattel is increasingly incorporating electronic computer chips into its
products. During 2000, there were shortages of such electronic chips in
numerous industries, including the toy industry, resulting in lost potential
sales of products for Mattel and others in the toy industry. There can be no
assurance that similar shortages will not occur in the future.
Presentation of Discontinued Operations--Consumer Software Segment
The information in Part I of this Form 10-K relates to the continuing
operations of Mattel and its consolidated subsidiaries and does not discuss the
former Consumer Software segment of Mattel. In March 2000, Mattel's board of
directors resolved to dispose of the business that comprised Mattel's Learning
Company division, which was the largest part of the Consumer Software segment,
and as of March 31, 2000 that segment was accounted for as a discontinued
operation. In October 2000, substantially all of the subsidiaries conducting
the business of the Learning Company division were sold to an affiliate of
Gores Technology Group in exchange for future consideration. In January 2001,
Mattel announced licensing agreements with two interactive software companies,
Vivendi Universal Publishing and THQ, who will develop, market and sell
interactive software products based on Mattel's core brands, which Mattel had
previously developed and sold directly through its Mattel Media division, which
was part of its Consumer Software segment. For additional information with
respect to Mattel's discontinued operations, see Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Discontinued Operations" and Note 13 to the Consolidated Financial Statements
in the Annual Report to Stockholders, incorporated herein by reference.
Competition and Industry Background
Mattel's revenues are derived from its Toy Marketing segments. Competition
in the toy industry is intense and is based primarily on price, quality and
play value.
Mattel's US Girls and US Boys-Entertainment Toy Marketing segments compete
with several large toy companies, including Hasbro, Inc. and many smaller toy
companies. The US Infant & Preschool market, which includes Fisher-Price, Inc.
as one of the leading companies, is more fragmented. The more significant
competitors in this area include: Century Products Company, Graco Children's
Products, Inc., V Tech, Leap Frog and Evenflo Company, Inc. Mattel's
International Toy Marketing segment competes with global toy companies
including Hasbro, Lego, Tomy and Bandai, as well as national and regional toy
companies. Foreign national and regional toy markets may include competitors
who are strong in a particular toy line or geographical area, but do not
compete with Mattel and other international toy companies on a worldwide basis.
5
<PAGE>
Seasonality
Sales of toy products at retail are seasonal, with a majority of retail
sales occurring during the period from September through December.
Consequently, shipments of toy products to retailers are typically greater in
each of the third and fourth quarters than in the first and second quarters
combined. As the large toy retailers become more efficient in their control of
inventory levels, this seasonality increases. See "Risk Factors."
In anticipation of this seasonal increase in retail sales, Mattel
significantly increases its production in advance of the peak selling period,
resulting in a corresponding build-up of inventory levels in the first three
quarters of the year. In addition, Mattel and others in the toy industry
develop sales, advertising, promotion and merchandising programs with retailers
to encourage them to purchase merchandise in periods other than the peak
holiday selling season. These programs, together with seasonal shipping
patterns, result in significant peaks in the third and fourth quarters in the
respective levels of inventories and accounts receivable, which result in
seasonal working capital financing requirements. See "Seasonal Financing."
Under just-in-time inventory management systems that have been adopted in
recent years by toy retailers in the US and abroad, retailers are timing orders
so that they are being filled by suppliers closer to the time of purchase by
consumers, rather than maintaining large on-hand inventories to meet consumer
demand. To respond to such shifts, Mattel has taken appropriate actions to
adjust its own shipping to more of a just-in-time pattern. As a result,
products that would have previously been shipped in advance of expected
consumer demand will be shipped closer to the time they are expected to be
purchased by the consumer.
Product Design and Development
Through its product design and development group, Mattel regularly
refreshes, redesigns and extends existing toy product lines and develops
innovative new toy product lines. Mattel's success is dependent on its ability
to continue this activity. See "Risk Factors." Product design and development
are principally conducted by a group of professional designers and engineers
employed by Mattel.
Independent toy designers and developers bring concepts and products to
Mattel and are generally paid a royalty on the net selling price of products
licensed by Mattel. These independent toy designers may also create different
products for other toy companies.
With respect to new product introductions, Mattel's strategy is to begin
production on a limited basis until a product's initial success has been proven
in the marketplace. The production schedule is then modified to meet
anticipated demand. Mattel further limits its risk by generally having
independent contractors manufacture new product lines in order to minimize
capital expenditures associated with new product introductions. This strategy
has reduced inventory risk and significantly limited the potential loss
associated with new product introductions.
Mattel devotes substantial resources to product design and development.
During the years ended December 31, 2000, 1999 and 1998, Mattel spent
approximately $180 million, $172 million and $169 million, respectively, in
connection with the design and development of products for the Toy Marketing
segment, exclusive of royalty payments. See Note 12 to the Consolidated
Financial Statements in the Annual Report to Stockholders, incorporated herein
by reference.
Advertising, Marketing and Sales
Mattel supports its product lines with extensive advertising and consumer
promotions. Advertising continues at varying levels throughout the year and
peaks during the Christmas season. Advertising includes television and radio
commercials, and magazine and newspaper advertisements. Promotions include in-
store displays, coupons, merchandising materials and major events focusing on
products and tie-ins with various consumer products companies. There are BARBIE
Boutiques located in certain F.A.O. Schwarz toy stores, including the F.A.O.
Schwarz flagship stores in New York City, Las Vegas and Orlando, and a HOT
WHEELS Boutique in the New York City flagship store. In November 1998, Mattel
opened its first retail store, American Girl Place(TM), in Chicago featuring
children's products from Pleasant Company.
6
<PAGE>
During the years ended December 31, 2000, 1999, and 1998, Mattel spent
approximately $681 million (14.6% of net sales), $684 million (14.9% of net
sales), and $786 million (16.7% of net sales), respectively, on worldwide
advertising and promotion.
Mattel's products are sold throughout the world. Products within the
Domestic Toy Marketing segment are distributed directly to large retailers,
including discount and free-standing toy stores, chain stores, department
stores, other retail outlets and, to a limited extent, wholesalers. Discount
toy stores continue to increase their market share. Products within the
International Toy Marketing segment are sold directly in Canada and most
European, Asian and Latin American countries, and through agents and
distributors in those countries where Mattel has no direct presence.
During the year ended December 31, 2000, Mattel's two largest customers,
Wal-Mart and Toys "R" Us, accounted for approximately 40% of consolidated net
sales. See "Risk Factors."
In the International Toy Marketing segment there is also significant
concentration of sales to certain large customers. The customers and the degree
of concentration vary depending upon the region or nation.
Licenses and Distribution Agreements
Mattel has license agreements with third parties that permit Mattel to
utilize the trademark, character, or product of the licensor in its product
line. A number of these licenses relate to product lines that are significant
to Mattel's business and operations. An important licensor is Disney
Enterprises, Inc., which licenses many of its characters for use on Mattel's
products. In September 2000, Mattel and Disney entered into a new license
agreement pursuant to which Mattel will produce toys based on classic Disney
characters such as Mickey Mouse, Winnie the Pooh and the Disney Princesses, as
well as any new infant and preschool toys based on Disney television
properties. Concurrently, Disney announced a separate licensing agreement with
another company to develop toys and games based on new Disney films not
targeted at the infant and preschool market. Mattel had previously been a
licensee for such film-based Disney products. Mattel also has entered into
license agreements with, among others: Sesame Workshop relating to its Sesame
Street(R) properties; Viacom International, Inc. relating to its Nickelodeon(R)
properties; Ferrari Idea S.A. for use of the Ferrari trademark; Warner Bros.
Consumer Products relating to its Harry Potter property; and Original
Appalachian Artworks, Inc. for Cabbage Patch Kids(R). In February 2001, Mattel
entered into a license with Lyrick Partnership, L.P. for the worldwide rights
to the popular television property, Barney, the purple dinosaur, as well as
Barney for Babies, for infant and preschool toys, feature plush, electronic
learning aids, games and puzzles. This license becomes effective in 2002 with
an initial term of five years.
Royalty expense during the years ended December 31, 2000, 1999 and 1998 was
approximately $259 million, $220 million, and $197 million, respectively. See
"Product Design and Development" and Note 7 to the Consolidated Financial
Statements in the Annual Report to Stockholders, incorporated herein by
reference.
Mattel also licenses a number of its trademarks, characters and other
property rights to others for use in connection with the sale of non-toy
products that do not compete with Mattel's products, in particular for consumer
software products. See "Risk Factors." Mattel distributes some third party
finished products that are independently designed and manufactured.
Trademarks, Copyrights, and Patents
Most of Mattel's products are sold under trademarks, trade names and
copyrights and a number of those products incorporate patented devices or
designs. Trade names and trademarks are significant assets of Mattel in that
they provide product recognition and acceptance worldwide.
Mattel customarily seeks patent, trademark or copyright protection covering
its products, and it owns or has applications pending for US and foreign
patents covering many of its products. A number of these
7
<PAGE>
trademarks and copyrights relate to product lines that are significant to
Mattel's business and operations. Mattel believes its rights to these
properties are adequately protected but there can be no assurance that its
rights can be successfully asserted in the future or will not be invalidated,
circumvented or challenged. See "Risk Factors."
Commitments
In the normal course of business, Mattel enters into contractual
arrangements for future purchases of goods and services to ensure availability
and timely delivery, and to obtain and protect Mattel's right to create and
market certain products. Certain of these commitments routinely contain
provisions for guaranteed or minimum expenditures during the term of the
contracts. Current and future commitments for guaranteed payments reflect
Mattel's focus on expanding its product lines through alliances with businesses
in other industries.
As of December 31, 2000, the Toy Manufacturing segment had outstanding
commitments for 2001 purchases of inventory of approximately $134 million.
Licensing and similar agreements with terms extending through the year 2006
contain provisions for future guaranteed minimum payments aggregating
approximately $342 million for the Toy Marketing segment. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Commitments" and Note 7 to the Consolidated Financial Statements in
the Annual Report to Stockholders, incorporated herein by reference.
Mattel ships products in accordance with delivery schedules specified by its
customers, which usually request delivery within three to six months. In the
toy industry, orders are subject to cancellation or change at any time prior to
shipment. In recent years, a trend toward just-in-time inventory practices in
the toy industry has resulted in fewer advance orders and therefore less
backlog of orders. Mattel believes backlog orders at any given time may not
accurately indicate future sales.
Financial Instruments
Mattel's results of operations and cash flow may be impacted by exchange
rate fluctuations. Mattel seeks to mitigate its exposure to market risk by
monitoring its currency exchange exposure for the year and partially or fully
hedging such exposure using foreign currency forward exchange and option
contracts primarily to hedge its purchase and sale of inventory, and other
intercompany transactions denominated in foreign currencies. These contracts
generally have maturity dates of up to 18 months. In addition, Mattel manages
its exposure through the selection of currencies used for international
borrowings and intercompany invoicing. Mattel's results of operations can also
be affected by the translation of foreign revenues and earnings into
US dollars. Mattel does not trade in financial instruments for speculative
purposes.
Mattel entered into a cross currency interest rate swap to convert the
interest rate and principal amount from Euros to US dollars on its 200 million
Euro Notes due 2002.
For additional information regarding foreign currency contracts, see
"International Toy Marketing Segment" above, Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Foreign Currency
Risk Management" and Note 8 to the Consolidated Financial Statements in the
Annual Report to Stockholders, incorporated herein by reference.
Seasonal Financing
Mattel's financing of seasonal working capital, as well as that of the
industry taken as a whole, typically grows throughout the first half of the
year and peaks in the third or fourth quarter, when accounts receivable are at
their highest due to increased sales volume, and when inventories are at their
highest in anticipation of expected second half sales volume. See
"Seasonality." Mattel expects to finance its seasonal working capital
requirements for the coming year by using existing and internally generated
cash, issuing commercial paper, selling certain trade receivables under one of
its committed domestic revolving credit facilities, and using various short-
term bank lines of credit. See "Risk Factors." In addition, Mattel avails
itself of individual short-term foreign credit lines with a number of banks,
which will be used as needed to finance seasonal working capital requirements
of certain foreign subsidiaries.
8
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Mattel's domestic unsecured committed revolving credit facility provides
$1.0 billion in short-term borrowings from a commercial bank group. In first
quarter 2000, Mattel implemented a 364-day, $400.0 million unsecured committed
credit facility, with essentially the same terms and conditions as the $1.0
billion revolving credit facility. The $400.0 million, 364-day facility is
expected to be renewed in first quarter 2001. The unsecured credit facilities
and $200.0 million term loan require Mattel to meet financial covenants for
consolidated debt-to-capital and interest coverage. Currently, Mattel is in
compliance with such covenants. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity--Seasonal Financing",
and Note 4 to the Consolidated Financial Statements in the Annual Report to
Stockholders, incorporated herein by reference.
To meet seasonal borrowing requirements of certain foreign subsidiaries,
Mattel negotiates individual financing arrangements. Foreign credit lines total
approximately $392 million. Mattel expects to extend these credit lines
throughout 2001. Mattel also enters into agreements with banks of its foreign
subsidiaries for nonrecourse sales of certain of its foreign subsidiary
receivables.
Mattel believes the amounts available under its unsecured committed
revolving credit facilities, its term loan agreement, its uncommitted money
market facility and its foreign credit lines will be adequate to meet its
seasonal financing requirements.
Government Regulations
Mattel's toy products sold in the US are subject to the provisions of the
Consumer Product Safety Act and the Federal Hazardous Substances Act, and may
also be subject to the requirements of the Flammable Fabrics Act or the Food,
Drug and Cosmetics Act, and the regulations promulgated pursuant to such
statutes. The Consumer Product Safety Act and the Federal Hazardous Substances
Act enable the Consumer Product Safety Commission to exclude from the market
consumer products that fail to comply with applicable product safety
regulations or otherwise create a substantial risk of injury, as well as
articles that contain excessive amounts of a banned hazardous substance. The
Consumer Product Safety Commission may also require the recall and repurchase
or repair by the manufacturer of articles that are banned. Similar laws exist
in some states and cities and in various international markets. See Item 3
"Legal Proceedings."
Fisher-Price's car seats are subject to the provisions of the National
Highway Transportation Safety Act, which enables the National Highway Traffic
Safety Administration to promulgate performance standards for child restraint
systems. Fisher-Price conducts periodic tests to ensure that its child
restraint systems meet applicable standards. A Canadian agency, Transport
Canada, also regulates child restraint systems sold for use in Canada. As with
the Consumer Product Safety Commission, the National Highway Transportation
Safety Administration and Transport Canada can require the recall and
repurchase or repair of products that do not meet their respective standards.
Mattel maintains a quality control program to ensure compliance with various
US federal, state and applicable foreign product safety requirements.
Notwithstanding the foregoing, there can be no assurance that all of Mattel's
products are or will be free from defects or hazard-free. A product recall
could have a material adverse effect on Mattel's results of operations and
financial condition, depending on the product affected by the recall and the
extent of the recall efforts required. A product recall could also negatively
effect Mattel's reputation and the sales of other Mattel products.
Mattel's advertising is subject to the Federal Trade Commission Act, The
Children's Television Act of 1990, the rules and regulations promulgated by the
Federal Trade Commission, the Federal Communications Commission as well as laws
of certain countries that regulate advertising to children. In addition,
Mattel's websites that are directed to children are subject to the Children's
Online Privacy Protection Act. Mattel is subject to various other federal,
state and local laws and regulations applicable to its business. Mattel
believes that it is in substantial compliance with these laws and regulations.
9
<PAGE>
Employees
The total number of persons employed by Mattel and its subsidiaries at any
one time varies because of the seasonal nature of its manufacturing operations.
At December 31, 2000, Mattel's total number of employees, including its
international operations, was approximately 30,000.
Risk Factors
Set forth below and elsewhere in this Form 10-K and in other documents
Mattel files with the Securities and Exchange Commission are important risks
and uncertainties that could cause our actual results of operations, business
and financial condition to differ materially form the results contemplated by
the forward-looking statements contained in this Form 10-K. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cautionary Statement" in the Annual Report to Stockholders,
incorporated herein by reference.
Consumer preferences and trends are difficult to predict and the introduction
of new products is critical in the toy industry.
Mattel's business and operating results depend largely upon the appeal of
its toy products. Mattel's continued success in the toy industry will depend on
Mattel's ability to redesign, restyle and extend its existing core products and
product lines and to develop, introduce and gain customer acceptance of new
products and product lines. However, consumer preferences in this industry are
continuously changing and are difficult to predict.
Several trends in recent years are changing the toy business, including:
. shorter life cycles for individual products;
. the phenomenon of children outgrowing toys at younger ages, particularly
in favor of interactive and high technology products; and
. increasing use of high technology;
There can be no assurance that:
. any given current products or product lines will continue to be popular
for any significant period of time;
. any new products and product lines introduced will achieve an adequate
degree of market acceptance; or
. any new products' life cycles will be sufficient to permit Mattel to
recover development, manufacturing, marketing and other costs of the
products.
A decline in the popularity of existing products and product lines or the
failure of new products and product lines to achieve and sustain market
acceptance and to produce acceptable margins could have a material adverse
effect on Mattel's business, financial condition and results of operations.
Mattel is involved in several litigation matters in which the outcome is
uncertain and could entail significant expense.
As described under Item 3 "Legal Proceedings," Mattel is currently involved
in a number of litigation matters including a number of purported securities
class action claims stemming from the merger with the Learning Company and the
performance of the Learning Company division in the second half of 1999. The
pending litigation against Mattel and its directors, regardless of the outcome,
may result in substantial costs and expenses and significantly divert the
attention of Mattel's management. There can be no assurance that Mattel will be
able to achieve a favorable settlement of the pending litigation or obtain a
favorable resolution of such
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<PAGE>
litigation if it is not settled. An unfavorable resolution of the pending
litigation could have a material adverse effect on Mattel's business, financial
condition and results of operations.
Mattel's business is dependent on its two largest customers that together
accounted for approximately 40% of Mattel's net sales in fiscal 2000 and
Mattel's dependence upon a small base of customers may increase.
A small number of Mattel's customers account for a large share of net sales.
For the year ended December 31, 2000, Mattel's two largest customers, Wal-Mart
and Toys "R" Us, in the aggregate accounted for approximately 40% of net sales,
and the ten largest customers in the aggregate accounted for approximately 63%
of net sales. The failure of on-line toy retailers in 2000 and the tendency of
large, chain retailers to dominate retail sales may cause Mattel to become more
and more reliant upon a small group of large customers.
Recently, some large, chain retailers have begun to sell private label toys
designed and branded by the retailers themselves. Such private label toys may
be sold at prices lower than comparable toys sold by Mattel, and may result in
higher margin sales by the retailer.
If some of Mattel's large customers were to significantly reduce the amount
of their purchases, because of private label toys or any other reason, it could
have a material adverse effect on Mattel's business, financial condition and
results of operations.
There are risks associated with the financial realignment undertaken by Mattel
in 2000.
Mattel announced a significant financial realignment plan in 2000. The
financial realignment plan was initiated to improve gross margins; selling,
general and administrative expenses; operating profit, and cash flow. The plan
will require a total pre-tax charge estimated at $250 million, or $170 million
on an after-tax basis, to be recorded over two years. Major initiatives
include: reducing excess manufacturing capacity; terminating licenses and other
contractual arrangements that do not deliver adequate levels of profitability;
elimination of less profitable product lines; improvement of supply chain
performance and economics; elimination of approximately 350 US headquarters
positions; and the closing or consolidation of certain international offices.
The financial realignment plan requires substantial management and financial
resources to implement. The plan may not achieve intended cost reductions or
adequately address significant operating issues. The failure of the plan to
meet its objectives in whole or in part, or any delay in implementing the plan,
could have a material adverse effect on the business, financial condition and
operating results of Mattel. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--2000 Financial Realignment
Plan", and Note 9 to the Consolidated Financial Statements in the Annual Report
to Stockholders, incorporated herein by reference.
There are risks associated with Mattel's licensing business.
Mattel conducts significant portions of its business as both licensee of
third party brands, such as Disney, Sesame Workshop and Warner Bros. regarding
Harry Potter(TM), and as a licensor of its own brands, including Mattel's
consumer software business. When Mattel acts as a licensee, it is usually
required to pay minimum royalty guarantees that may be substantial, and in some
cases may be greater than Mattel is able to recoup from actual sales. In
addition, acquiring or renewing licenses may require the payment of minimum
guaranteed royalties that Mattel considers to be too high to be profitable,
which may result in Mattel losing licenses it currently holds when they become
available for renewal, or missing business opportunities for new licenses. As a
licensee, Mattel has no guaranty that a particular brand will be a successful
toy product. This is true even of brands, such as the Harry Potter(TM)
character, that are successful in the literary medium, but whose success as a
film or toy character brand cannot be assured. Furthermore, there can be no
assurance that a successful brand will continue to be successful or maintain a
high level of sales in the future. As a licensor, Mattel must rely to a great
extent on its contract partners in connection with the research and
development, marketing and sale of
11
<PAGE>
Mattel-branded products, which may reduce Mattel's ability to create innovative
new products. Unprofitably high minimum royalty guarantees, unproven or
unsustainable success of a licensed brand, and the constraints of licensing
brands to third parties could have a material adverse effect on the business,
financial condition and operating results of Mattel.
The toy business is seasonal and therefore Mattel's annual operating results
will depend, in large part, on sales during the relatively brief holiday
season.
Sales of toy products at retail are seasonal, with a majority of retail
sales occurring during the period from September through December. This
seasonality is increasing as large toy retailers become more efficient in their
control of inventory levels through the just-in-time inventory management
systems. As a result, Mattel's annual operating results will depend, in large
part, on sales during the relatively brief holiday season. This seasonal
pattern requires significant use of working capital mainly to manufacture
inventory during the year, prior to the holiday season, and requires accurate
forecasting of demand for products during the holiday season. Failure to
accurately predict and respond to consumer demand may have a material adverse
effect on Mattel's business, financial condition and results of operations.
Changes in Mattel's credit rating or the credit markets could increase the cost
of satisfying its long-term capital needs.
Mattel expects to satisfy its future long-term capital needs in part through
the issuance of debt securities. The interest rate, selling price, initial
offering discount or any premium offered for Mattel's debt securities will be
based on a number of factors, including:
. Mattel's business, financial condition, results of operation and
prospects;
. ratings with major credit rating agencies;
. the prevailing interest rates being paid by similar companies; and
. the overall condition of the financial and credit markets at the time of
the initial distribution of the debt securities.
The condition of the credit markets and prevailing interest rates have
fluctuated in the past and are likely to fluctuate in the future. Fluctuations
in these factors could make it difficult for Mattel to sell debt securities or
require Mattel to offer higher interest rates in order to sell new debt
securities.
In addition, credit rating agencies continually revise their ratings for the
companies that they follow, such as Mattel. The credit rating agencies also
evaluate the consumer products or family entertainment industry as a whole and
may change their credit rating for Mattel based on their overall view of Mattel
or of the toy industry. In 2000, Mattel's credit rating was reduced by several
credit rating agencies and there can be no assurance that Mattel's credit
rating will not continue to be reduced. A negative change in Mattel's rating
could make it more difficult to sell debt securities and require Mattel to
offer higher interest rates. If Mattel is required to offer higher interest
rates in order to sell new debt securities, the increased interest costs could
have an adverse effect on Mattel's financial condition and results of
operations.
Mattel's sales and manufacturing operations outside the US subject Mattel to
risks normally associated with international operations.
Mattel owns and operates manufacturing facilities, and utilizes third-party
manufacturers, principally in China, Indonesia, Malaysia, Mexico and Thailand.
Such sales and manufacturing operations are subject to the risks normally
associated with international operations, including:
. currency conversion risks and currency fluctuations;
. limitations, including taxes, on the repatriation of earnings;
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. political instability, civil unrest and economic instability;
. greater difficulty enforcing intellectual property rights and weaker
laws protecting such rights;
. greater difficulty and expense in conducting business abroad;
. complications in complying with foreign law and changes in governmental
policies;
. transportation delays and interruptions; and
. the imposition of tariffs.
These risks could negatively impact Mattel's international sales and
manufacturing operations, which could have a material adverse effect on
Mattel's business, financial condition and results of operations.
All foreign countries in which Mattel's products are manufactured currently
enjoy "normal trade relations" status under US tariff laws, which provides a
favorable category of US import duties. As a result of concerns in the US
Congress regarding China's human rights and trade policies, including the
country's inadequate protection of US intellectual property rights, there has
been, and may be in the future, opposition to the annual extension of "normal
trade relations" status for China. The loss of "normal trade relations" status
for China would result in a substantial increase in the import duty of toys
manufactured in China and imported into the US and would result in increased
costs. Such increases in import duties and costs could have a material adverse
effect on Mattel's business, financial condition and results of operations.
Mattel is dependent on intellectual property rights and Mattel cannot ensure
that it will be able to successfully protect such rights.
Mattel relies on a combination of trade secret, copyright, trademark, patent
and other proprietary rights laws to protect its rights to valuable
intellectual property related to Mattel's brands. Mattel also relies on license
and other agreements to establish ownership rights and to maintain
confidentiality. No assurance can be given that such intellectual property
rights can be successfully asserted in the future or will not be invalidated,
circumvented or challenged. Technological developments and the Internet may
create new risks to the ability to protect intellectual property. In addition,
laws of certain foreign countries in which Mattel's products may be sold do not
protect intellectual property rights to the same extent as the laws of the US.
The failure to protect Mattel's proprietary information and any successful
intellectual property challenges or infringement proceedings against Mattel
could have a material adverse effect on its business, financial condition and
results of operations.
Mattel has anti-takeover provisions in place that may make it more difficult
for a third party to acquire Mattel without its consent, which may adversely
effect Mattel's stock price.
Mattel has in place a stockholder rights plan which provides for the
issuance of preferred stock purchase rights designed to protect stockholders
from abusive takeover tactics by causing substantial dilution to a person or
group that attempts to acquire 15% or more of Mattel's stock on terms not
approved by its board of directors. Additionally, the board of directors can,
without obtaining stockholder approval, issue shares of preferred stock having
rights, including the right to vote as a class on any proposed change of
control, that could adversely affect the voting power of holders of common
stock. Mattel's charter documents also contain additional provisions intended
to reduce the risk of abusive takeover tactics, including specifying procedures
for director nominations by stockholders and submission of other proposals by
stockholders at meetings, and restricting the ability of stockholders to call
special meetings. Certain agreements to which Mattel is a party, including loan
and employment agreements and stock option plans, contain provisions that
impose increased costs upon Mattel in the event of a change of control.
Further, Mattel is subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which prohibits Mattel from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the person becomes an interested stockholder unless approval is
received in a prescribed manner. The existence of these anti-takeover
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provisions may make it substantially more difficult for a third party to
acquire control of Mattel or accumulate large blocks of common stock.
Executive Officers of the Registrant
The current executive officers of Mattel, all of which are appointed
annually by the board of directors and serve at the pleasure of the board, are
as follows:
<TABLE>
<CAPTION>
Executive
Officer
Name Age Position Since
---- --- -------- ---------
<C> <C> <S> <C>
Chairman of the Board of Directors
Robert A. Eckert........ 46 and Chief Executive Officer 2000
Matthew C. Bousquette... 42 President, Boys/Entertainment 1999
Executive Vice President, Worldwide
Tom Debrowski........... 50 Operations 2000
Joseph F. Eckroth, Jr... 42 Chief Information Officer 2000
Kevin M. Farr........... 43 Chief Financial Officer 1996
Adrienne Fontanella..... 42 President, Girls/Barbie 1999
Neil B. Friedman........ 53 President, Fisher-Price Brands 1999
Senior Vice President, Human
Alan Kaye............... 47 Resources and Administration 1997
Senior Vice President, General
Robert Normile.......... 41 Counsel and Secretary 1999
William Stavro.......... 61 Senior Vice President and Treasurer 1993
Executive Vice President, Business
Bryan Stockton.......... 47 Planning and Development 2000
</TABLE>
Mr. Eckert has been Chairman of the Board of Directors and Chief Executive
Officer since May 2000. He was formerly President and Chief Executive Officer
of Kraft Foods, Inc., the largest packaged food company in North America and a
subsidiary of Philip Morris Companies Inc. from October 1997 until May 2000.
From 1995 to 1997, Mr. Eckert was Group Vice President of Kraft Foods, Inc.
From 1993 to 1995, Mr. Eckert was President of the Oscar Mayer foods division
of Kraft Foods, Inc. Mr. Eckert worked for Kraft Foods, Inc. for 23 years prior
to joining Mattel.
Mr. Bousquette has been President, Boys/Entertainment since March 1999. From
May 1998 to March 1999, he was Executive Vice President and General Manager-
Boys Toys. From 1995 to 1998, he was General Manager. He joined Mattel in
December 1993 as Senior Vice President-Marketing for Activity Toys, and had
previously worked for Mattel from 1984 to 1988 in Boys Toys marketing.
Mr. Debrowski has been Executive Vice President, Worldwide Operations, since
November 2000. From February 1992 until November 2000, he was Senior Vice
President-Operations and a director of The Pillsbury Company. From September
1991 until February 1992, he was Vice President of Operations for The Baked
Goods Division of The Pillsbury Company. Prior to that, he served as Vice
President and Director of Grocery Operations for Kraft U.S.A.
Mr. Eckroth has been Chief Information Officer since July 2000. From July
1998 until July 2000, he was Chief Information Officer of General Electric
Company's Medical Systems unit. From November 1995 until June 1998, he served
as Chief Information Officer of General Electric Company's Industrial Controls
Systems division. Prior to that, he held several senior positions within
Operations and Information Technology at the Northrop Grumman Corporation.
Mr. Farr has been Chief Financial Officer since February 2000. From
September 1996 to February 2000, he was Senior Vice President and Corporate
Controller. From June 1993 to September 1996, he served as Vice President, Tax.
Prior to that, he served as Senior Director, Taxes from August 1992 to June
1993.
Ms. Fontanella has been President, Girls/Barbie since March 1999. From
November 1998 to March 1999, she was General Manager and Senior Vice President-
Worldwide Barbie Licensing and Collectibles. From February to November 1998,
she was Senior Vice-President-Worldwide Barbie Licensing New Ventures. She
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<PAGE>
joined Mattel in May 1996 as Vice President. Prior to joining Mattel, she held
senior positions within the cosmetics industry, including Chairman of January
Productions from 1995 to 1996.
Mr. Friedman has been President, Fisher-Price Brands since March 1999. From
August 1996 to March 1999, he was President-Tyco Preschool. For more than five
years prior to that time, he was President of MCA/Universal Merchandising,
Executive Vice President and Chief Operating Officer of Lionel Leisure, Inc.,
and President of Aviva/Hasbro.
Mr. Kaye has been Senior Vice President of Human Resources and
Administration since July 1997. From June 1996 to June 1997 he was President,
Texas Division of Kaufman and Broad Homes, a home building company. From June
1991 to June 1996, he served as Senior Vice President, Human Resources for
Kaufman and Broad Homes.
Mr. Normile has been Senior Vice President, General Counsel and Secretary
since March 1999. He served as Vice President, Associate General Counsel and
Secretary from August 1994 to March 1999. From June 1992 to August 1994, he
served as Assistant General Counsel. Prior to that, he was associated with the
law firms of Latham & Watkins and Sullivan & Cromwell.
Mr. Stavro has been Senior Vice President and Treasurer since May 1995. From
November 1993 to May 1995, he was Vice President & Treasurer. From March 1992
to November 1993, he was Vice President & Assistant Treasurer. Prior to that,
he was Assistant Treasurer for more than five years.
Mr. Stockton has been Executive Vice President, Business Planning and
Development, since November 2000. From April 1998 until November 2000, he was
President and Chief Executive Officer of Basic Vegetable Products, the largest
manufacturer of vegetable ingredients in the world. For more than five years
prior to that, he was employed by Kraft Foods, Inc., the largest packaged food
company in North America, and was President of Kraft North American Food
Service from August 1996 to March 1998.
Item 2. Properties
Mattel owns its corporate headquarters in El Segundo, California, consisting
of 335,000 square feet, which is subject to a $42 million mortgage, and an
adjacent 55,000 square foot office building. Mattel also leases buildings in El
Segundo consisting of approximately 327,000 square feet. All segments use these
facilities. Mattel's Fisher-Price subsidiary owns its headquarters facilities
in East Aurora, New York, consisting of approximately 535,000 square feet which
is used by the US Infant & Preschool segment. Pleasant Company owns its
headquarters facilities in Middleton, Wisconsin, consisting of approximately
420,000 square feet which is used by the Other segment.
Mattel maintains leased sales offices in California, Illinois, New York,
North Carolina, Arkansas, Michigan, Georgia and Texas used by the Toy Marketing
segment and leased warehouse and distribution facilities in California,
Kentucky, New Jersey, Wisconsin and Texas, all of which are used by the
Domestic Toy Marketing segment. Mattel owns a computer facility in Phoenix,
Arizona used by the Other segment. Internationally, Mattel has its principal
offices and/or warehouse space in Australia, Brazil, Canada, Chile, France,
Germany, Hong Kong, Italy, Mexico, The Netherlands, Spain, and the United
Kingdom, all of which are leased and which are used by the International Toy
Marketing segment and the Toy Manufacturing segment. Mattel's principal
manufacturing facilities (used by the Toy Manufacturing segment) are located in
China, Indonesia, India, Italy, Malaysia, Mexico, Thailand and the US. See "Toy
Manufacturing Segment."
With respect to leases that are scheduled to expire during the next twelve
months, Mattel may negotiate new lease agreements, renew leases or utilize
alternative facilities. See Note 7 to the Consolidated Financial Statements in
the Annual Report to Stockholders, incorporated herein by reference. Mattel
believes that its owned and leased facilities, in general, are suitable and
adequate for its present and currently foreseeable needs.
15
<PAGE>
Item 3. Legal Proceedings
Power Wheels(R) Recall and Related Matters
On October 22, 1998, Mattel announced that Fisher-Price, in cooperation with
the Consumer Product Safety Commission, would conduct a voluntary recall
involving up to 10 million battery-powered Power Wheels(R) ride-on vehicles.
The recall involves the replacement of electronic components that may overheat,
particularly when consumers make alterations to the product, and covers
vehicles sold nationwide since 1984 under nearly 100 model names. Additionally,
Fisher-Price has been notified by the Consumer Product Safety Commission that
the Commission is considering whether Fisher-Price may be subject to a fine for
delayed reporting of the facts underlying the recall.
Greenwald Litigation
On October 13, 1995, Michelle Greenwald filed a complaint (Case No. YC
025008) against Mattel in Superior Court of the State of California, County of
Los Angeles. Ms. Greenwald is a former employee whom Mattel terminated in July
1995. Her complaint sought $50 million in general and special damages, plus
punitive damages, for breach of oral, written and implied contract, wrongful
termination in violation of public policy and violation of California Labor
Code Section 970. Ms. Greenwald claimed that her termination resulted from
complaints she made to management concerning general allegations that Mattel
did not account properly for sales and certain costs associated with sales and
more specific allegations that Mattel failed to account properly for certain
royalty obligations to The Walt Disney Company.
On December 5, 1996, Mattel's motion for summary adjudication of Ms.
Greenwald's public policy claim was granted. On December 9, 1997, Mattel's
motion for summary judgment of Ms. Greenwald's remaining claims was granted. On
February 4, 1998, Ms. Greenwald appealed from the dismissal of her suit. On
March 27, 2000, the California Court of Appeal filed an opinion that affirmed
in part and reversed in part the judgment in favor of Mattel. The Court of
Appeal ruled that disputed factual issues existed which precluded summary
adjudication of certain claims and that such factual issues must be resolved by
a jury at trial. As a consequence, Ms. Greenwald's claims for termination in
violation of public policy, termination in breach of an implied agreement, and
violation of Labor Code Section 970 were ordered remanded to the trial court
for further proceedings. The Court of Appeal did not rule on whether Ms.
Greenwald's claims had substantive merit; it merely held that the claims should
be presented to a jury.
On July 13, 2000, jurisdiction was restored to the trial court for further
proceedings. In December 2000, the lawsuit was settled for an amount that was
not material to Mattel's financial condition or results of operations.
Litigation Related to Learning Company
Following Mattel's announcement in October 1999 of the expected results of
its Learning Company division for the third quarter of 1999, several of
Mattel's stockholders filed purported class action complaints naming Mattel and
certain of its present and former officers and directors as defendants. The
complaints generally allege, among other things, that the defendants made false
or misleading statements, in the joint proxy statement for the merger of Mattel
and The Learning Company and elsewhere, that artificially inflated the price of
Mattel's common stock.
In March 2000, these shareholder complaints were consolidated into two lead
cases: Thurber v. Mattel, Inc. et al. (containing claims under (S) 10(b) of the
-----------------------------
1934 Securities Exchange Act ("Act")) and Dusek v. Mattel, Inc. et al.
---------------------------
(containing claims under (S) 14(a) of the Act). Mattel and the other defendants
filed motions to dismiss both lawsuits for failure to state a claim. In January
2001, the Court granted defendants' motions to dismiss both Thurber and Dusek,
------- -----
and gave plaintiffs leave to amend. Plaintiffs are expected to file amended
consolidated complaints in March 2001 in both actions.
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<PAGE>
Other purported class action litigation has been brought against Mattel as
successor to Learning Company and the former directors of Learning Company on
behalf of former stockholders of Broderbund Software, Inc. who acquired shares
of Learning Company in exchange for their Broderbund common stock in connection
with the Learning Company-Broderbund merger on August 31, 1998. The
consolidated complaint in In re Broderbund generally alleges that The Learning
----------------
Company misstated its financial results prior to the time it was acquired by
Mattel. Mattel and the other defendants have filed a motion to dismiss the
complaint in In re Broderbund, and are awaiting a ruling. Thurber, Dusek, and
---------------- ------- -----
In re Broderbund are all currently pending in the United States District Court
- ----------------
for the Central District of California.
Several shareholders have filed derivative complaints on behalf and for the
benefit of Mattel, alleging, among other things, that Mattel's directors
breached their fiduciary duties, wasted corporate assets, and grossly
mismanaged Mattel in connection with Mattel's acquisition of Learning Company
and its approval of severance packages to certain former executives. All of
these derivative actions, one of which was filed in the Court of Chancery in
Delaware and the remainder in Los Angeles Superior Court in California, have
been stayed pending the outcome of motions to dismiss in the federal securities
actions.
Mattel believes that the purported class actions and derivative suits are
without merit and intends to defend them vigorously.
Environmental
Fisher-Price. Fisher-Price has executed a consent order with the State of
New York to implement a groundwater remediation system at one of its former
manufacturing plants. Mattel anticipates that the New York State Department of
Environmental Conservation will issue a Record of Decision in March 2001. The
ultimate liability associated with this cleanup presently is estimated to be
$1.76 million, approximately $1.26 million of which has been incurred through
December 31, 2000.
Beaverton, Oregon. Mattel previously operated a manufacturing facility on a
leased property in Beaverton, Oregon that was acquired as part of Mattel's
March 1997 merger with Tyco. In March 1998, samples of groundwater used by the
facility for process water and drinking water disclosed elevated levels of
certain chemicals, including trichloroethylene. Mattel immediately closed the
water supply and self-reported the sample results to the Oregon Department of
Environmental Quality and the Oregon Health Division. Mattel also implemented a
community outreach program to employees, former employees and surrounding
landowners.
In November 1998, Mattel and another potentially responsible party entered
into a consent order with the Oregon Department of Environmental Quality to
conduct a remedial investigation/feasibility study at the property, to propose
an interim remedial action measure and to continue the community outreach
program. Mattel has recorded pre-tax charges totaling $19.0 million for
environmental remediation costs related to this property, based on the
completion and approval of the remediation plan and feasibility study.
General
Mattel is also involved in various other litigation and legal matters,
including claims related to intellectual property, product liability and labor,
which Mattel is addressing or defending in the ordinary course of business.
Management believes that any liability that may potentially result upon
resolution of such matters will not have a material adverse effect on Mattel's
business, financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
17
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
For information regarding the markets in which Mattel's common stock, par
value $1.00 per share, is traded, see the cover page hereof. Information
regarding the high and low closing prices of the common stock for the last two
calendar years is incorporated herein by reference to Note 11 to the
Consolidated Financial Statements in the Annual Report to Stockholders,
incorporated herein by reference. See Item 14 of Part IV.
As of March 16, 2001, Mattel had approximately 51,000 holders of record of
its common stock.
Mattel paid dividends on its common stock of $0.07 per share in January 1998
and April 1999, $0.08 per share in July and October 1998 and January and April
1999. Mattel paid dividends on its common stock of $0.09 per share in July and
October 1999 and in January, April, July and October of 2000. The payment of
dividends on common stock is at the discretion of Mattel's board of directors
and is subject to customary limitations.
Mattel changed its dividend policy in the third quarter of 2000, from the
past policy of paying $0.09 per share quarterly when and as declared by the
Board of Directors quarterly to $0.05 per share annually when and as declared
by the Board of Directors. No quarterly dividend was declared or paid in
respect of the fourth quarter of 2000.
Item 6. Selected Financial Data
The information under the caption "Five-Year Financial Summary" on page 17
in the Annual Report to Stockholders is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 18 through 26 in the
Annual Report to Stockholders is incorporated herein by reference.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Risk Management" on pages 25 and
26 in the Annual Report to Stockholders and Note 8 to the Consolidated
Financial Statements in the Annual Report to Stockholders are incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of Mattel, Inc. and its subsidiaries,
together with the report of PricewaterhouseCoopers LLP dated January 31, 2001,
included on pages 27 through 48 in the Annual Report to Stockholders are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required under this Item relating to members of Mattel's board
of directors is incorporated by reference herein from its 2001 Notice of Annual
Meeting of Stockholders and Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days after December 31, 2000. The information
with respect to the executive officers of Mattel appears under the heading
"Executive Officers of the Registrant" in Part I herein.
Item 11. Executive Compensation
The information required under this Item is incorporated by reference herein
from Mattel's 2001 Notice of Annual Meeting of Stockholders and Proxy Statement
to be filed with the Securities and Exchange Commission within 120 days after
December 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this Item is incorporated by reference herein
from Mattel's 2001 Notice of Annual Meeting of Stockholders and Proxy Statement
to be filed with the Securities and Exchange Commission within 120 days after
December 31, 2000.
Item 13. Certain Relationships and Related Transactions
The information required under this Item is incorporated by reference herein
from Mattel's 2001 Notice of Annual Meeting of Stockholders and Proxy Statement
to be filed with the Securities and Exchange Commission within 120 days after
December 31, 2000.
19
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
<TABLE>
<CAPTION>
Annual
Report Page
Number(1)
-----------
<S> <C>
Consolidated Balance Sheets as of December 31, 2000 and 1999... 27
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998.............................. 28
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998.............................. 29
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2000, 1999 and 1998........................ 30
Notes to Consolidated Financial Statements..................... 31-46
Report of Independent Accountants on Financial Statement
Schedule...................................................... 29
</TABLE>
- --------
(1) Incorporated by reference from the indicated pages of the Annual Report to
Stockholders for the year ended December 31, 2000. With the exception of
the information incorporated by reference in Items 1, 5, 6, 7, 7a, 8 and 14
of the report, the Annual Report to Stockholders is not deemed filed as
part of this report.
2. Financial Statement Schedule for the years ended December 31, 2000, 1999
and 1998(1)
Report of Independent Accountants on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts and Allowances
3. Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K)
<TABLE>
<C> <S>
2.0 Agreement and Plan of Merger, dated as of December 13, 1998, between
Mattel and The Learning Company, Inc. (incorporated by reference to
Exhibit 2.1 of Mattel's Current Report on Form 8-K, dated December 15,
1998)
2.1 Sale and Purchase Agreement between Mattel and Alec E. Gores, Trustee of
the Revocable Living Trust Agreement of Alec E. Gores, and GTG/Wizard,
LLC (incorporated by reference to Exhibit 99.1 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000)
2.2* Sale and Purchase Agreement Amendment No. 1 between Mattel and Alec E.
Gores, Trustee of the Revocable Living Trust Agreement of Alec E. Gores,
and GTG/Wizard, LLC
2.3* Amendment No. 2 to the Sale and Purchase Agreement between Mattel and
Alec E. Gores, Trustee of the Revocable Living Trust Agreement of Alec E.
Gores, and GTG/Wizard, LLC
3.0* Restated Certificate of Incorporation of Mattel (File No. 001-05647)
3.1 Certificate of Amendment of Restated Certificate of Incorporation of
Mattel (incorporated by reference to Exhibit B to Mattel's Proxy
Statement dated March 23, 1996)
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
Mattel (incorporated by reference to Exhibit B to Mattel's Proxy
Statement dated March 30, 1998)
3.3* By-laws of Mattel, as amended to date
</TABLE>
- --------
(1) All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
20
<PAGE>
<TABLE>
<C> <S>
3.4 Certificate of Designations, Preferences, Rights and Limitations of
Special Voting Preferred Stock of Mattel (incorporated by reference to
Exhibit 3.0 to Mattel's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999)
4.0 Rights Agreement, dated as of February 7, 1992, between Mattel and The
First National Bank of Boston, as Rights Agent (incorporated by
reference to Exhibit 1 to Mattel's Registration Statement on Form 8-A,
dated February 12, 1992)
4.1 Amendment No. 1 to Rights Agreement, dated as of May 13, 1999, between
Mattel and BankBoston, N.A. (incorporated by reference to Exhibit 4 to
Mattel's Registration Statement on Form 8-A/A dated May 13, 1999)
4.2 Amendment No. 2 to Rights Agreement, dated as of November 4, 1999,
between Mattel and BankBoston, N.A. (incorporated by reference to
Exhibit 4.3 to Mattel's Registration Statement on Form 8-A/A dated
November 12, 1999)
4.3 Specimen Stock Certificate with respect to Mattel's Common Stock
(incorporated by reference to Mattel's Current Report on Form 8-A,
dated February 28, 1996)
4.4 Indenture dated as of February 15, 1996 between Mattel and Chase Trust
Company of California, as Trustee (incorporated by reference to Exhibit
4.1 to Mattel's Current Report on Form 8-K dated April 11, 1996)
4.5 Plan of Arrangement of Softkey Software Products Inc. under Section 182
of the Business Corporations Act (Ontario) (incorporated by reference
to Exhibit 4.4 of Learning Company's Registration Statement on Form S-
3, Registration No. 333-40549)
4.6 Voting and Exchange Trust Agreement, dated as of February 4, 1994 among
Learning Company, Softkey Software Products Inc. and R-M Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 to Learning
Company's Registration Statement on Form S-3, Registration No. 333-
40549)
4.7 Support Agreement, dated as of February 4, 1994 between Learning
Company and Softkey Software Products Inc. (incorporated by reference
to Exhibit 99.4 of Mattel's Form S-4, Registration No. 333-71587)
4.8 Voting and Exchange Trust Supplement dated as of May 12, 1999 between
Mattel, Learning Company, Softkey Software Products Inc. and CIBC
Mellon Trust Company, as Trustee (incorporated by reference to Exhibit
99.3 of Mattel's Quarterly Report of Form 10-Q for the quarterly period
ended March 31, 1999)
4.9 Support Agreement Amending Agreement dated as of May 12, 1999 between
Mattel, Learning Company and Softkey Software Products Inc.
(incorporated by reference to Exhibit 99.4 of Mattel's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999)
4.10 Rights Agreement dated as of May 13, 1999 between Softkey Software
Products Inc., Mattel and CIBC Mellon Trust Company, as Trustee
(incorporated by reference to Exhibit 99.5 of Mattel's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999)
4.11 Warrant to Purchase Shares of Common Stock of Mattel, Inc., dated as of
June 27, 1996 (incorporated by reference to Exhibit 4.6 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1998)
4.12 Warrant Purchase Agreement dated July 26, 2000 between Mattel and
Warner Bros., a division of Time Warner Entertainment Company, L.P.
(incorporated by reference to Exhibit 99.0 of Mattel's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2000)
4.13* Warrant to Purchase 3,000,000, shares of Common Stock of Mattel, Inc.,
dated as of July 26, 2000
(Mattel has not filed certain long-term debt instruments under which
the principal amount of securities authorized to be issued does not
exceed 10% of its total assets. Copies of such agreements will be
provided to the Securities and Exchange Commission upon request.)
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
10.0 Second Amended and Restated Credit Agreement dated as of March 11, 1998
among Mattel, the Banks named therein and Bank of America National
Trust and Savings Association, as Agent (incorporated by reference to
Exhibit 99.0 to Mattel's Current Report on Form 8-K dated August 21,
1998)
10.1 Fifth Amendment to Second Amended and Restated Credit Agreement dated
as of March 31, 2000 (incorporated by reference to Exhibit 99.6 to
Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000)
10.2 Consent and Sixth Amendment to Second Amended and Restated Credit
Agreement among Mattel, the Banks (as defined) and Bank of America,
N.A., as agent (incorporated by reference to Exhibit 99.2 to Mattel's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000)
10.3 Receivables Purchase Agreement dated as of March 11, 1998 among Mattel,
Mattel Factoring, Inc., the Banks named therein and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit 99.1 to
Mattel's Current Report on Form 8-K dated August 21, 1998)
10.4 First Amendment to Receivables Purchase Agreement dated as of March 31,
2000 (incorporated by reference to Exhibit 99.7 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000)
10.5 Distribution Agreement dated November 12, 1997 among Mattel, Morgan
Stanley & Co. Incorporated and Credit Suisse First Boston Corporation
(incorporated by reference to Exhibit 1.0 to Mattel's Current Report on
Form 8-K dated November 12, 1997)
10.6 Mattel, Inc. Credit Agreement (364-Day Facility) dated as of March 31,
2000 (incorporated by reference to Exhibit 99.5 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000)
10.7 Consent and First Amendment to Credit Agreement (364-Day Facility)
among Mattel, the Banks (as defined) and Bank of America, N.A., as
agent (incorporated by reference to Exhibit 99.3 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000)
10.8 Second Amendment to Term Loan Agreement among Mattel, the Lenders (as
defined)
and The Industrial Bank of Japan, as agent (incorporated by reference
to Exhibit 99.4 to Mattel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000)
Executive Compensation Plans and Arrangements of Mattel
10.9* Form of Indemnity Agreement between Mattel and its directors and
certain of its executive officers
10.10* Executive Employment Agreement dated October 18, 2000 between Mattel
and Robert A. Eckert
10.11 Summary of Principal Terms of Employment Agreement between Robert A.
Eckert and Mattel dated May 15, 2000 (incorporated by reference to
Exhibit 99.4 to Mattel's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000)
10.12 Loan Agreement dated May 18, 2000 between Mattel and Robert A. Eckert
(incorporated by reference to Exhibit 99.3 to Mattel's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000)
10.13* Letter Agreement dated as of February 3, 2000 between Mattel and Ronald
M. Loeb
10.14 Amended and Restated Employment Agreement dated January 1, 1997 between
Mattel and Jill E. Barad (incorporated by reference to Exhibit 10.0 to
Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997)
10.15 Separation Agreement between Mattel and Jill E. Barad dated February
25, 2000 (incorporated by reference to Exhibit 99.3 to Mattel's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)
10.16 Amended and Restated Employment Agreement dated July 29, 1996 between
Mattel and Ned Mansour (incorporated by reference to Exhibit 10.13 to
Mattel's Annual Report on Form 10-K for the year ended December 31,
1996)
</TABLE>
22
<PAGE>
<TABLE>
<C> <S>
10.17 Severance and Consulting Agreement between Mattel and Ned Mansour
(incorporated by reference to Exhibit 99.5 to Mattel's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2000)
10.18 Executive Employment Agreement dated January 31, 2000 between Mattel
and Adrienne Fontanella (incorporated by reference to Exhibit 10.6 to
Mattel's Annual Report on Form 10-K for the year ended December 31,
1999)
10.19* Amendment to Employment Agreement dated July 20, 2000 between Mattel
and Adrienne Fontanella
10.20 Loan Agreement dated October 29, 1999 between Mattel and Adrienne
Fontanella (incorporated by reference to Exhibit 10.7 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1999)
10.21 Loan Agreement dated April 7, 2000 between Mattel and Adrienne
Fontanella (incorporated by reference to Exhibit 99.0 to Mattel's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)
10.22 Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Adrienne Fontanella dated February 10, 2000
(incorporated by reference to Exhibit 10.8 to Mattel's Annual Report on
Form 10-K for the year ended December 31, 1999)
10.23 Executive Employment Agreement dated January 31, 2000 between Mattel
and Matthew C. Bousquette (incorporated by reference to Exhibit 10.9 to
Mattel's Annual Report on Form 10-K for the year ended December 31,
1999)
10.24* Amendment to Employment Agreement dated July 20, 2000 between Mattel
and Matthew C. Bousquette
10.25 Loan Agreement dated October 29, 1999 between Mattel and Matthew C.
Bousquette (incorporated by reference to Exhibit 10.10 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1999)
10.26 Loan Agreement dated April 7, 2000 between Mattel and Matthew C.
Bousquette (incorporated by reference to Exhibit 99.1 to Mattel's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)
10.27 Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Matthew C. Bousquette dated February 10, 2000
(incorporated by reference to Exhibit 10.11 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1999)
10.28 Executive Employment Agreement dated January 31, 2000 between Mattel
and Neil B. Friedman (incorporated by reference to Exhibit 10.12 to
Mattel's Annual Report on Form 10-K for the year ended December 31,
1999)
10.29* Amendment to Employment Agreement dated November 14, 2000 between
Mattel and Neil B. Friedman
10.30 Loan Agreement dated October 29, 1999 between Mattel and Neil B.
Friedman (incorporated by reference to Exhibit 10.13 to Mattel's Annual
Report on Form 10-K for the year ended December 31, 1999)
10.31 Loan Agreement dated April 7, 2000 between Mattel and Neil B. Friedman
(incorporated by reference to Exhibit 99.2 to Mattel's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000)
10.32 Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Neil B. Friedman dated February 10, 2000
(incorporated by reference to Exhibit 10.14 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1999)
10.33* Amended and Restated Executive Employment Agreement dated as of March
28, 2000 between Mattel and Kevin M. Farr
10.34* Amendment to Employment Agreement and Stock Option Grant Agreements
dated July 20, 2000 between Mattel and Kevin M. Farr
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
10.35* Loan Agreement dated as of February 3, 2000 between Mattel and Kevin M.
Farr
10.36* Loan Agreement dated as of April 7, 2000 between Mattel and Kevin M.
Farr
10.37* Mattel, Inc. Management Incentive Plan
10.38 Amendment No. 1 to Mattel, Inc. Management Incentive Plan (incorporated
by reference to Exhibit 10.16 to Mattel's Annual Report on Form 10-K
for the year ended December 31, 1999)
10.39* Mattel, Inc. Long-Term Incentive Plan
10.40 Amended and Restated Mattel Long-Term Incentive Plan (incorporated by
reference to Appendix A to Mattel's Proxy Statement dated April 26,
1999)
10.41 Amendment No. 1 to Amended and Restated Mattel Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.19 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1999)
10.42 Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.12 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1998)
10.43* Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan for Non-
Employee Directors
10.44 Mattel, Inc. Amended & Restated Supplemental Executive Retirement Plan
as of May 1, 1996 (incorporated by reference to Exhibit 10.2 to
Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996)
10.45 Amendment No. 1 to Mattel, Inc. Amended & Restated Supplemental
Executive Retirement Plan (incorporated by reference to Exhibit 10.22
to Mattel's Annual Report on Form 10-K for the year ended December 31,
1999)
10.46 Mattel, Inc. Deferred Compensation Plan (incorporated by reference to
Exhibit 10.14 to Mattel's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.47 Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan
(incorporated by reference to Exhibit 10.24 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1999)
10.48 The Fisher-Price, Inc. Pension Plan (1989 Restatement) (incorporated by
reference to Exhibit 10(l) to Fisher-Price's Registration Statement on
Form 10 dated June 28, 1991)
10.49* Fifth Amendment to The Fisher Price Pension Plan
10.50 The Fisher-Price Section 415 Excess Benefit Plan (incorporated by
reference to Exhibit 10(n) to Fisher-Price's Registration Statement on
Form 10 dated June 28, 1991)
10.51 Mattel, Inc. Personal Investment Plan, April 1, 1997 Restatement
(incorporated by reference to Exhibit 99.3 to Mattel's Current Report
on Form 8-K dated August 21, 1998)
10.52 Mattel, Inc. PIP Excess Plan (incorporated by reference to Exhibit
10.18 to Mattel's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.53 Amendment No. 1 to Mattel, Inc. PIP Excess Plan (incorporated by
reference to Exhibit 10.29 to Mattel's Annual Report on Form 10-K for
the year ended December 31, 1999)
10.54 Pleasant Company Retirement Savings Plan and Trust Agreement, dated
July 1, 1995 (incorporated by reference to Exhibit 10.19 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1998)
10.55 Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to
Exhibit A to the Notice of Annual Meeting of Stockholders and Proxy
Statement of Mattel dated March 15, 1990)
10.56 Amendment No. 1 to the Mattel, Inc. 1990 Stock Option Plan
(incorporated by reference to the information under the heading
"Amendment to Mattel 1990 Stock Option Plan" on page F-1 of the Joint
Proxy Statement/Prospectus of Mattel and Fisher-Price included in
Mattel's Registration Statement on Form S-4, Registration No. 33-50749)
</TABLE>
24
<PAGE>
<TABLE>
<C> <S>
10.57* Amendment No. 2 to the Mattel, Inc. 1990 Stock Option Plan
10.58 Amendment No. 3 to Mattel, Inc. 1990 Stock Option Plan (incorporated by
reference to Exhibit 10.34 to Mattel's Annual Report on Form 10-K for
the year ended December 31, 1999)
10.59 Amendment No. 4 to Mattel, Inc. 1990 Stock Option Plan (incorporated by
reference to Exhibit 99.0 to Mattel's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2000)
10.60* Form of First Amendment to Award Agreement
10.61* Notice of Grant of Stock Options and Grant Agreement
10.62* Grant Agreement for a Non-Qualified Stock Option
10.63* Award Cancellation Agreement
10.64 Amended and Restated Mattel, Inc. 1996 Stock Option Plan (the "1996
Plan") (incorporated by reference to Exhibit 10.2 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996)
10.65 Amendment to Amended and Restated Mattel, Inc. 1996 Stock Option Plan
(incorporated by reference to Exhibit 4.2 to Mattel's Registration
Statement on Form S-8 dated March 26, 1999)
10.66 Amendment No. 2 to Amended and Restated Mattel 1996 Stock Option Plan
(incorporated by reference to Exhibit 10.42 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1999)
10.67 Amendment No. 3 to Amended and Restated Mattel 1996 Stock Option Plan
(incorporated by reference to Exhibit 99.1 to Mattel's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2000)
10.68* Amendment No. 4 to Amended and Restated Mattel 1996 Stock Option Plan
10.69 Form of Option Agreement for Outside Directors under the 1996 Plan, as
amended (incorporated by reference to Exhibit 10.43 to Mattel's Annual
Report on Form 10-K for the year ended December 31, 1999)
10.70 Form of Option Agreement under the 1996 Plan, as amended (incorporated
by reference to Exhibit 10.44 to Mattel's Annual Report on Form 10-K
for the year ended December 31, 1999)
10.71 Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by
reference to Exhibit A to Mattel's Proxy Statement dated March 30,
1998)
10.72 First Amendment to the Mattel, Inc. 1997 Premium Price Stock Option
Plan (incorporated by reference to Exhibit 10.0 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998)
10.73 Second Amendment to the Mattel, Inc. 1997 Premium Price Stock Option
Plan (incorporated by reference to Exhibit 10.26 to Mattel's Annual
report on Form 10-K for the year ended December 31, 1998)
10.74 Amendment No. 3 to the Mattel, Inc. 1997 Premium Price Stock Option
Plan (incorporated by reference to Exhibit 10.48 of Mattel's Annual
Report on Form 10-K for the year ended December 31, 1999)
10.75* Amendment No. 4 to the Mattel, Inc. 1997 Premium Price Stock Option
Plan
10.76 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium
Price Stock Option Plan (25% Premium Grant), as amended (incorporated
by reference to Exhibit 10.1 to Mattel's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998)
10.77 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium
Price Stock Option Plan (33 1/3% Premium Grant), as amended
(incorporated by reference to Exhibit 10.2 to Mattel's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998)
</TABLE>
25
<PAGE>
<TABLE>
<C> <S>
10.78 Mattel 1999 Stock Option Plan (incorporated by reference to Exhibit
10.51 to Mattel's Annual Report on Form 10-K for the year ended
December 31, 1999)
10.79 Amendment No. 1 to Mattel 1999 Stock Option Plan (incorporated by
reference to Exhibit 99.2 to Mattel's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2000)
10.80* Amendment No. 2 to Mattel 1999 Stock Option Plan
10.81 Form of Option Agreement under the Mattel 1999 Stock Option Plan (Two
Year Vesting) (incorporated by reference to Exhibit 10.52 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1999)
10.82 Form of Option Agreement under the Mattel 1999 Stock Option Plan (Three
Year Vesting) (incorporated by reference to Exhibit 10.53 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1999)
11.0* Computation of Income per Common and Common Equivalent Share
12.0* Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends
13.0* Pages 17 through 48 of the Mattel, Inc. Annual Report to Stockholders
for the year ended December 31, 2000
21.0* Subsidiaries of the Registrant
23.0* Consent of PricewaterhouseCoopers LLP
24.0* Power of Attorney (on page 27 of Form 10-K)
</TABLE>
- --------
* Filed herewith.
(b) Reports on Form 8-K
Mattel filed the following Current Reports on Form 8-K during the quarterly
period ended December 31, 2000:
<TABLE>
<CAPTION>
Financial
Items Statements
Date of Report Reported Filed
-------------- -------- ----------
<S> <C> <C>
October 4, 2000........................................ 5, 7 None
</TABLE>
(c) Exhibits Required by Item 601 of Regulation S-K
See Item (3) above
(d) Financial Statement Schedule
See Item (2) above
Copies of Form 10-K (which includes Exhibit 24.0), Exhibits 11.0, 12.0, 21.0
and 23.0 and the Annual Report to Stockholders are available to stockholders of
Mattel without charge. Copies of other Exhibits can be obtained by stockholders
of Mattel upon payment of twelve cents per page for such Exhibits. Written
requests should be sent to Secretary, Mattel, Inc., 333 Continental Boulevard,
El Segundo, California 90245-5012.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MATTEL, INC.
Registrant
/s/ Kevin M. Farr
By: _________________________________
Kevin M. Farr
Chief Financial Officer
Date: As of March 28, 2001
POWER OF ATTORNEY
We, the undersigned directors and officers of Mattel, Inc. do hereby
severally constitute and appoint Ronald M. Loeb, Robert A. Eckert, Robert
Normile, Christopher O'Brien, and John L. Vogelstein, and each of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and behalf in our capacities as directors and officers and to execute any
and all instruments for us and in our names in the capacities indicated below,
which said attorneys and agents, or any of them, may deem necessary or
advisable to enable said Corporation to comply with the Securities Exchange Act
of 1934, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Annual Report on
Form 10-K, including specifically, but without limitation, power and authority
to sign for us or any of us, in our names in the capacities indicated below,
any and all amendments hereto; and we do each hereby ratify and confirm all
that said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert A. Eckert Chairman of the Board and March 28, 2001
____________________________________ Chief Executive Officer
Robert A. Eckert
/s/ Kevin M. Farr Chief Financial Officer March 28, 2001
____________________________________ (principal financial and
Kevin M. Farr accounting officer)
/s/ Eugene P. Beard Director March 28, 2001
____________________________________
Eugene P. Beard
/s/ Harold Brown Director March 28, 2001
____________________________________
Harold Brown
/s/ Tully M. Friedman Director March 28, 2001
____________________________________
Tully M. Friedman
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ronald M. Loeb Director March 28, 2001
____________________________________
Ronald M. Loeb
/s/ Andrea L. Rich Director March 28, 2001
____________________________________
Andrea L. Rich
/s/ William D. Rollnick Director March 28, 2001
____________________________________
William D. Rollnick
/s/ Christopher A. Sinclair Director March 28, 2001
____________________________________
Christopher A. Sinclair
/s/ G. Craig Sullivan Director March 28, 2001
____________________________________
G. Craig Sullivan
/s/ John L. Vogelstein Director March 28, 2001
____________________________________
John L. Vogelstein
/s/ Ralph V. Whitworth Director March 28, 2001
____________________________________
Ralph V. Whitworth
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Mattel, Inc.
Our audits of the consolidated financial statements referred to in our
report dated January 31, 2001 appearing on page 47 of the December 31, 2000
Annual Report to Stockholders of Mattel, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed in
Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
January 31, 2001
29
<PAGE>
SCHEDULE II
MATTEL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charged to Net at End
of Year Operations Deductions of Year
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year Ended December 31, 2000.... $29,520 $18,280 $(23,160)(a) $24,640
Year Ended December 31, 1999.... 40,594 19,050 (30,124)(a) 29,520
Year Ended December 31, 1998.... 30,393 35,212 (25,011)(a) 40,594
Allowance for Inventory
Obsolescence:
Year Ended December 31, 2000.... $35,327 $61,313 $(38,081)(b) $58,559
Year Ended December 31, 1999.... 57,322 48,530 (70,525)(b) 35,327
Year Ended December 31, 1998.... 33,774 65,251 (41,703)(b) 57,322
</TABLE>
- --------
(a) Includes write-offs, recoveries of previous write-offs, and currency
translation adjustments. Increase in net deductions from 1998 to 1999 is
due to transfers to legal reserve for insolvent customers.
(b) Primarily represents relief of previously established reserves resulting
from the disposal of related inventory, raw materials, write-downs and
currency translation adjustments.
30
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.2
<SEQUENCE>2
<FILENAME>dex22.txt
<DESCRIPTION>SALE & PURCHASE AGREEMENT AMENDMENT #1
<TEXT>
<PAGE>
EXHIBIT 2.2
MATTEL, INC
SALE AND PURCHASE AGREEMENT
AMENDMENT NO. 1
October 12, 2000
GTG/Wizard, LLC
c/o Gores Technology Group
10877 Wilshire Boulevard, Suite 1805
Los Angeles, CA 90024
Alec E. Gores, trustee of the
Revocable Living Trust Agreement of Alec E. Gores
c/o Gores Technology Group
10877 Wilshire Boulevard, Suite 1805
Los Angeles, CA 90024
Alec E. Gores
c/o Gores Technology Group
10877 Wilshire Boulevard, Suite 1805
Los Angeles, CA 90024
Ladies and Gentlemen:
We refer to the Sale and Purchase Agreement (the "Sale and Purchase
-----------------
Agreement") dated as of September 28, 2000 by and among Alec E. Gores, trustee
- ---------
of the Revocable Living Trust Agreement of Alec E. Gores, GTG/Wizard, LLC and
Mattel, Inc. Capitalized terms used but not otherwise defined herein shall have
the respective meanings given such terms in the Sale and Purchase Agreement.
1. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, 2000, the Sale and Purchase Agreement is amended
to add Alec E. Gores as a signatory thereto, by adding Alec E. Gores to the
cover page, preamble and signature page thereto.
2. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, the Sale and Purchase Agreement is amended by
deleting the title of Article IV of the Sale and Purchase Agreement and
replacing it with the following: "REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
AEG AND ALEC E. GORES"
3. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, the Sale and Purchase Agreement is amended by
deleting the lead-in
<PAGE>
language to Article IV of the Sale and Purchase Agreement and replacing it with
the following: "Each of the Company, AEG and Alec E. Gores represents and
warrants to Mattel that the statements contained in this Article IV are true and
correct as to such party."
4. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.1 of the Sale and Purchase Agreement is
amended by adding the following after the second sentence thereof: "Alec E.
Gores represents that he is the sole trustee of AEG and has sole power to act on
its behalf."
5. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 3.6 (b) of the Sale and Purchase Agreement
is amended by adding the words "and a similar filing in Ireland" immediately
after the parenthetical defining HSR Act in the first sentence thereof.
6. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.2 of the Sale and Purchase Agreement is
amended and restated as follows:
"4.2 Authorization; Validity and Effect of Agreement. Each of the
-----------------------------------------------
Company and AEG has the requisite corporate or trust power and authority, and
Alec E. Gores has all requisite power and authority, to execute, deliver and
perform such party's obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of the Company and AEG of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by its Board
of Directors or its trustees, as applicable, and all other necessary corporate
or trust action on the part of each of them and no other corporate or trust
proceedings on the part of each of them are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of the Company, AEG and Alec E.
Gores and, assuming that it has been duly authorized, executed and delivered by
Mattel, constitutes a legal, valid and binding obligation of each of them,
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing."
7. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.3 of the Sale and Purchase Agreement is
amended and restated as follows:
"4.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Neither the execution and delivery of this Agreement nor the
performance by each of the Company, AEG and Alec E. Gores of its obligations
hereunder, nor the consummation of the transactions contemplated hereby, will:
(i) conflict with the provisions of the trust instrument or limited liability
company agreement or other organizational document; (ii) assuming satisfaction
of the requirements set forth in Section 4.3(b) below, violate any statute, law,
ordinance, rule or regulation, applicable to it or any of its properties or
assets; or (iii) violate, breach, be in conflict
-2-
<PAGE>
with or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or permit the termination of any
provision of, or result in the termination of, the acceleration of the maturity
of, or the acceleration of the performance of any of any obligation under, or
result in the creation or imposition of any Lien upon any properties, assets or
business of the Company, AEG or Alec E. Gores, as applicable, under, any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or commitment or
any order, judgment or decree to which any of them is a party or by which any of
them or any of their respective assets or properties is bound or encumbered
except, in the case of clauses (ii) and (iii), for such violations, breaches,
conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a material adverse effect on its obligation to perform
its covenants under this Agreement.
(b) Except for the pre-merger notification requirements of the HSR Act
and a similar filing in Ireland, no consent, approval or authorization of,
permit from, or declaration, filing or registration with, any Governmental
Entity or any other Person is required to be made or obtained by the Company,
AEG or Alec E. Gores in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby,
except where the failure to obtain such consent, approval, authorization, permit
or declaration or to make such filing or registration would not, individually or
in the aggregate, have a material adverse effect on any such party's obligation
to perform such party's covenants under this Agreement."
8. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.4 of the Sale and Purchase Agreement is
amended and restated as follows:
"4.4 Broker's Fee. Except as set forth in Section 8.1(a), no broker,
------------
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company, AEG or Alec E. Gores."
9. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.5 of the Sale and Purchase Agreement is
amended and restated as follows:
"4.5 Acquisition of TLC Shares and LLC Interests for Investment;
-----------------------------------------------------------
Ability to Evaluate and Bear Risk . Each of the Company, AEG and Alec E. Gores
- ---------------------------------
agrees that the TLC Shares and LLC Interests may not be, directly or indirectly,
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act of 1933, except pursuant to an
exemption from such registration available under such Act, and without
compliance with foreign securities laws, in each case, to the extent
applicable."
10. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 4.6 (a) of the Sale and Purchase Agreement
is amended and restated as follows:
-3-
<PAGE>
"(a) Each of the Company, Alec E. Gores and AEG is an informed and
sophisticated participant in the transactions contemplated hereby and has
undertaken such investigation, and has been provided with and has evaluated such
documents and information, as it has deemed necessary in connection with the
execution, delivery and performance of this Agreement."
11. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 5.11of the Sale and Purchase Agreement is
amended by adding the following to the end thereof:
"The Capital Contributions Cap shall, in the event of a business
disposition of Company assets that constitutes a Liquidity Event (whether by
stock transfer, asset sale, merger, or other transfer), be reduced by an amount
obtained by multiplying the then-current Capital Contributions Cap by a
fraction, the numerator of which is the amount of revenue earned by the business
so disposed of in the four fiscal quarters ending on the Quarter End Date and
the denominator of which is the amount of revenue earned by the Company in the
four fiscal quarters ending on the Quarter End Date (adjusted to account for any
previous business dispositions during such four fiscal quarters that required an
adjustment of the Capital Contributions Cap). The intention of this adjustment
is to fairly reduce the Capital Contributions Cap and if revenue is not a fair
proxy for determining the amount by which the Company's capital needs have been
reduced as a result of such Liquidity Event, the parties will negotiate in good
faith an amendment to this provision; provided that nothing in this sentence
--------
shall effect the obligation set forth in clause (i) of this Section 5.11(a)."
12. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 8.2 (a) of the Sale and Purchase Agreement
is amended and restated as follows:
"(a) Neither AEG nor Alec E. Gores shall transfer (directly or
indirectly) any portion of the membership interest in the Company held by it
(whether directly or indirectly), other than, in the case of AEG, to a wholly-
owned Subsidiary of AEG, but only if such Subsidiary agrees with Mattel to be
bound by each commitment and obligation of AEG contained in this Agreement."
13. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 8.2 (b) of the Sale and Purchase Agreement
is amended by deleting the words "Neither the Company nor AEG" in the first line
thereof and replacing them with the words "None of the Company, AEG or Alec E.
Gores"
14. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 8.3 of the Sale and Purchase Agreement is
amended by deleting the word "AEG" from the title thereof and by adding the
following to the end thereof: "Alec E. Gores hereby agrees to cause AEG to
perform and fulfill, all of AEG's obligations and commitments set forth in this
Agreement (and to be responsible for such obligations and commitments as if
every reference to AEG in this Agreement were also a reference to Alec E. Gores)
and Alec E. Gores shall not take any actions, including, without limitation, (i)
directly or indirectly authorizing or permitting the amendment or revocation of
AEG's trust documents or
-4-
<PAGE>
trust and (ii) withdrawing assets or property from AEG as to make the
representation contained in Section 4.8 hereof untrue as of immediately after
such withdrawal as if made as and of such time, or permit AEG to take any
actions, that are inconsistent with such obligation.
15. Each of the parties to this Letter Amendment hereby agrees that,
effective as of September 28, Section 12.6 of the Sale and Purchase Agreement is
amended by adding the following to the end thereof:
"(d) If to Alec E. Gores:
Alec E. Gores
c/o Gores Technology Group
10877 Wilshire boulevard, Suite 1805
Los Angeles, CA 90024
Fax No.: (310) 209-3310
With a copy to:
Riordan & McKinzie
600 Anton Boulevard
Costa Mesa, CA 92626
Attention: James W. Loss, Esq.
Fax No.: (714) 549-3244"
Each of the parties to this Letter Amendment (other than Mattel)
hereto represents and warrants to Mattel and Mattel hereby represents and
warrants to the other parties to this Letter Amendment that (i) each has the
requisite power and authority to execute and deliver this Letter Amendment, (ii)
the execution and delivery of this Letter Amendment by it has been duly
authorized (if needed), (iii) this Letter Amendment has been duly and validly
executed and delivered by each of them and, (iv) assuming that this Amendment
has been duly authorized, executed and delivered by the other parties to this
Letter Amendment, this Letter Amendment constitutes a legal, valid and binding
obligation of each of them, enforceable against each of them in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
This Letter Amendment may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
This Letter Amendment shall be governed by and construed in accordance
with the laws of the State of Delaware without reference to the choice of law
principles thereof.
Except as amended hereby, the Sale and Purchase Agreement shall remain
in full force and effect as previously executed, and the parties hereto hereby
ratify the Sale and Purchase Agreement as amended hereby. Alec E. Gores agrees
to be bound by the terms of the Sale and Purchase Agreement as amended hereby as
if he were an original signatory thereto.
-5-
<PAGE>
If you agree with the matters set out above, please execute the
duplicate copy of this Letter Amendment in the space provided for your signature
below and return it to me.
MATTEL, INC.
By: /s/ Robert A. Eckert
-----------------------------
Name: Robert A. Eckert
Title: Chairman & CEO
Agreed to and acknowledged
as of the above date:
ALEC E. GORES, TRUSTEE OF THE REVOCABLE
LIVING TRUST AGREEMENT OF ALEC E. GORES
By: /s/ Alec E. Gores
------------------------------
Alec E. Gores, Trustee
GTG/WIZARD, LLC
By: Wizard Holding Company, LLC
its Manager
By: /s/ Alec E. Gores
--------------------------------
Alec E. Gores
Authorized Signatory
ALEC E. GORES
/s/ Alec E. Gores
- ---------------------------------------------
By: Alec E. Gores, in his individual capacity
-6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.3
<SEQUENCE>3
<FILENAME>dex23.txt
<DESCRIPTION>AMENDMENT #2 TO THE SALE & PURCHASE AGMT
<TEXT>
<PAGE>
EXHIBIT 2.3
AMENDMENT NO. 2 TO THE SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO THE SALE AND PURCHASE AGREEMENT (this "Amendment")
is entered into as of October 18, 2000, by and among Alec E. Gores, trustee of
the Revocable Living Trust Agreement of Alec E. Gores, a trust organized under
the laws of the State of Michigan ("AEG"), Alec E. Gores ("Mr. Gores"),
GTG/Wizard, LLC, a Delaware limited liability company (the "Company") and
Mattel, Inc., a Delaware corporation ("Mattel"), and is intended to constitute
an amendment of that certain Sale and Purchase Agreement dated as of September
28, 2000 by and among AEG, the Company and Mattel, as amended by that certain
Amendment No. 1 to the Sale and Purchase Agreement dated as of October 12, 2000
by and among AEG, Mr. Gores, the Company, and Mattel (as so amended, the
"Agreement"). Capitalized terms used herein which are not defined herein shall
have the meanings given to such terms in the Agreement.
1. Amendment of Recitals. The second recital to the Agreement is hereby
---------------------
amended in its entirety to read as follows:
WHEREAS, AEG is the majority member of Wizard Holding Company,
LLC, a Delaware limited liability company ("Holdings") and together with
--------
the Gores Family Entities (as defined herein) is the beneficial owner of at
least 70% of the membership interests in Holdings and together with Mr.
Gores and the Employees and Consultants (as defined herein) is the
beneficial owner of all of the equity interests in Holdings;
2. Amendment of Certain Definitions. The defined term "AEG Committed
--------------------------------
Capital" shall be changed to "Committed Capital" and the words "and Foothill"
shall be added following the word "Holdings" in such definition (and the
definitions shall be appropriately reordered). The definition of "Excess Cash
Flow" is hereby amended to add the words "mandatory (other than cash sweeps)"
between the words "less" and "principal". A new definition is added which reads
in its entirety as follows: "Foothill" shall mean Foothill Capital Corporation,
--------
a California corporation.
3. Amendment of the Definition of "Funded Capital Commitment". The second
----------------------------------------------------------
sentence of the definition of "Funded Capital Commitment" is hereby amended to
read in its entirety as follows:
In order to ensure that Holdings and Foothill do not receive excess
proceeds from Liquidity Events as a result of contributing excess or
unnecessary capital to the Company to increase its Funded Capital
Commitment (and thereby increase the distribution to it and reduce the
amount available for distribution to Mattel pursuant to Section 7.1), it is
understood that the Funded Capital Commitment shall not include any portion
of the Committed Capital that, as of the date of contribution or payment to
the Company, is not reasonably required to fund ongoing operating cash
flow.
<PAGE>
4. Amendment at Section 5.3. A new Section 5.3(e) is added which reads
------------------------
in its entirety as follows:
"(e) notwithstanding any provision to the contrary in this Section 5.3, the
Company shall not be required to, or to cause the TLC Subsidiaries to,
indemnify, hold harmless or defend any Person described in this Section 5.3
from or against any claim (i) that has been or is subsequently made against
such Persons by present or former holders of securities issued by Mattel,
TLC (prior to the acquisition by Mattel) or Broderbund (prior to the
acquisition by TLC) asserting claims relating to or arising out of any of
the claims asserted in the litigation identified in Items 5 and 6 of
Schedule I of the TLC Disclosure Schedule; (ii) where Mattel as plaintiff
has named such Person as defendant in connection with the claims described
in clause (i) above or (iii) below or (iii) made by any shareholder of
Mattel, as such, to the extent that such claim relates to or arises out of
the execution, delivery or consummation of the Agreement or this Amendment.
Claims described in the foregoing clauses (i), (ii) and (iii) are Excluded
Liabilities.
5. Amendment of Section 5.8. The language that appears in clause (ii) of
------------------------
Section 5.8 is deleted and replaced by the phrase "[intentionally omitted]".
6. Amendment of Section 5.11. Section 5.11 of the Agreement is hereby
-------------------------
amended and restated in its entirety to read as follows:
5.11 Capital Commitment. As of the Closing, AEG shall cause Holdings
------------------
to contribute $5 million in cash to the Company and Foothill shall contribute
(or failing that, AEG shall cause Holdings to contribute an additional) $5
million in cash to the Company, each in the form of an equity contribution.
Following the Closing, AEG shall cause Holdings to make additional contributions
to the Company, in form and on terms reasonably acceptable to Mattel, in such
amounts as are reasonably required to fund the operations of the Company;
provided, that AEG shall not be required to make or cause to be made aggregate
- --------
capital contributions which (together with the $10 million of contributions
required pursuant to the first sentence above) exceed $80 million (as may be
adjusted below, the "Capital Contributions Cap"). AEG may arrange for the
--------------------------
Company to obtain third-party financing in lieu of its obligations in the second
sentence of this Section 5.11, on terms reasonably satisfactory to Mattel;
provided, that the principal amount of such financings, to the extent expended
- --------
to fund the ongoing business of the Company, shall be regarded as a capital
contribution by Holdings solely for the purpose of determining whether AEG has
complied with the covenant set forth in the second sentence of this Section
5.11; it being understood that such third-party financing shall not be regarded
-- ----- ----------
as Committed Capital for purposes of the Funded Capital Commitment as such term
is used in Section 7.1. The Capital Contributions Cap shall, in the event of a
business disposition of Company assets that constitutes a Liquidity Event
(whether by stock transfer, asset sale, merger, or other transfer), be reduced
by an amount obtained by multiplying the then-current Capital Contributions Cap
by a fraction, the numerator of which is the amount of revenue earned by the
business so disposed of in the four fiscal quarters ending on the Quarter End
Date and the
-2-
<PAGE>
denominator of which is the amount of revenue earned by the Company in the four
fiscal quarters ending on the Quarter End Date (adjusted to account for any
previous business dispositions during such four fiscal quarters that required an
adjustment of the Capital Contributions Cap). The intention of this adjustment
is to fairly reduce the Capital Contributions Cap and if revenue is not a fair
proxy for determining the amount by which the Company's capital needs have been
reduced as a result of such Liquidity Event, the parties will negotiate in good
faith an amendment to this provision; provided that nothing in this sentence
--------
shall effect the obligation set forth in clause the first sentence of this
Section 5.11. The obligations of AEG under this Section 5.11 shall terminate
upon the ninety-first day after receipt by Mattel of the payment contemplated by
Section 7.3(b).
7. Addition of Section 5.18. A new Section 5.18 shall be added which
------------------------
reads in its entirety as follows:
5.18 Customer List Agreement. Promptly following the Closing, the Company
-----------------------
shall, pursuant to an agreement containing customary provisions reasonably
satisfactory to the parties (the "Customer List Agreement"), prepare and
-----------------------
provide to Mattel, at Mattel's expense, a tape (or other similar electronic
compilation) containing the names and addresses of the customers of the
Company reasonably reflected in the records of the Company as of the
Closing (the "Company Customer List"). Under the Customer List Agreement,
---------------------
Mattel shall have a nonexclusive, nontransferable, royalty free right to
use the Company Customer List to make four (4) mailings of catalogs during
the 2001 calendar year. The Company Customer List shall be provided to
Mattel "as is," without warranties of any kind, and the Company shall have
no indemnification obligations to Mattel in connection therewith. Under
the Customer List Agreement, the Company also shall disclaim all
liabilities of any kind to Mattel that may arise in connection with the
Company Customer List.
8. Amendment of Article VI.
-----------------------
(a) Section 6.4 of the Agreement is hereby amended to read in its
entirety as follows:
The Company agrees that if as the result of any audit adjustment (or
adjustment in any other Tax Proceeding) made with respect to any Tax Item,
by any taxing authority with respect to the Pre-Closing Period, the
Company, AEG or any of their respective members or Affiliates, including
the TLC Subsidiaries, receives a Tax Benefit (other than a Tax Benefit that
would not have arisen but for an adjustment of Non-income Taxes, which
adjustment is not required to be indemnified by Mattel by reason of the
$1.5 million limitation in the definition of "Excluded Taxes"), then the
Company shall pay to Mattel the amount of such Tax Benefit within 15 days
of the filing of the Tax Return in which such Tax Benefit is utilized. For
purposes of determining the amount and timing of any Tax Benefit, the
recipient of the Tax Benefit shall be deemed to pay Tax at the highest
marginal rate in effect in the year such Tax Benefit is utilized."
-3-
<PAGE>
(b) Section 6.8(a) of the Agreement shall be revised by adding the
following sentence as the final sentence of such Section:
The foregoing provisions of this Section 6.8(a) notwithstanding, the
Company shall be entitled to any refunds of Non-income Taxes of the
TLC Subsidiaries or arising from the operation of the TLC Business for
the Pre-Closing Period to the extent such refunds are granted in a Tax
Proceeding set forth on Schedule 3.10 E and in the aggregate do not
exceed $1.5 million.
9. Amendment of Section 7.1(g). A new sentence shall be added to the end
---------------------------
of Section 7.1(g) as follows:
"Bonus Units may be issued only to bona fide employees and consultants
of the Company or its Subsidiaries."
10. Mattel Secured Notes. Section 7.2(b) of the Agreement is amended by
--------------------
adding the following phrase to the beginning of clause (ii)(F), preceding phrase
"such other terms":
"a term ending on the fifth anniversary of the Closing and"
11. Addition of Section 7.6. A new Section 7.6 is hereby added to read
-----------------------
in its entirety as follows:
7.6 Termination of Payment Obligation in respect of Excess Net
----------------------------------------------------------
Proceeds. The Company shall not be required to make any payment to
--------
Mattel in respect of Excess Net Proceeds received by the Company in
Liquidity Events with respect to which the initial closing occurs
after the fifth anniversary of the Closing.
12. Amendment of Section 8.1(a). Section 8.1(a) of the Agreement is hereby
---------------------------
amended to read in its entirety as follows:
(a) Other than as set forth in Sections 7.1 and 8.1(b) below, the
Company shall not make any payments or distributions to AEG, Holdings or
other equity holders of the Company, or any of their respective Affiliates,
or any of their respective employees (except to the extent employed by the
Company and its Subsidiaries but not any other Affiliate of such above-
described persons), other than (i) a distribution of $2 million to AEG or
Holdings in connection with the Closing, (ii) payment of a management fee
of not more than $150,000 per month to Holdings or an Affiliate of Holdings
to the extent Holdings or such Affiliate renders actual, bona fide
management services to the Company and (iii) the distribution of $2 million
to Foothill in connection with the Closing (the payments made under
subclauses (i), (ii) and (iii), collectively, the "AEG Fees"); provided,
--------
however, that for the purposes of determining whether or not the aggregate
Preferred Return Payments made as of any date are less than the $15 million
threshold set forth in Section 7.1(b)(ii), the aggregate amount of AEG Fees
-4-
<PAGE>
counted as Preferred Return Payments shall not include the first $2 million
in AEG Fees paid as permitted by this Section 8.1(a); provided further,
that the foregoing shall not prohibit the payment of reasonable
compensation to persons, other than Gores Family Entities, engaged by the
Company or any Subsidiary to provide bona fide services, other than
investment banking or similar services, on a "Dedicated" (as defined below)
basis; provided, however, that the compensation paid to such persons may
not exceed the compensation paid to similarly situated employees of the
Company and that this proviso shall not permit such payments to in excess
of 15 such persons. The characterization of the payments permitted by this
Section 8.1(a) as fees is not intended to preclude any recipient of such
payments from treating any such payment in any lawful manner for tax
purposes, including as a return of principal. "Dedicated" shall mean, with
respect to the first 12 months following the Closing, that such person
devotes at least 80% of the working week on the business of the Company and
its Subsidiaries and thereafter that such person is a full-time employee of
the Company or a Subsidiary.
13. Amendment of Section 8.1(f). Section 8.1(f) of the Agreement is hereby
---------------------------
amended to read in its entirety as follows (and Section 8.1(g) is hereby deleted
in its entirety and replaced with "[Intentionally Omitted]"):
(f)(i) The Company shall not (nor shall it permit any of its
Subsidiaries to) engage in any Liquidity Event for consideration to the
Company (or any Subsidiary) other than for (i) cash, (ii) the assumption by
the acquiring Person (or an Affiliate of such Person) of debt for borrowed
money of the Company or any of its Subsidiaries that remains a Subsidiary
of the Company after the Liquidity Event (it being understood that this
subclause (ii) shall not prohibit the Company or any Subsidiary from
engaging in a Liquidity Event solely on account of the fact that the
acquiring Person or Affiliate of such Person assumes liabilities or
obligations of the Company or any Subsidiary), (iii) Deferred Cash
Consideration (as such term is defined below) or (iv) shares of capital
stock or other ownership interests in any other company or entity or
warrants, options or other rights to acquire such shares of capital stock
or other ownership interests or securities convertible into shares of
capital stock or other ownership interests (collectively, "Securities").
----------
As used in this Section 8.1(f), "Deferred Cash Consideration" shall mean
---------------------------
cash consideration received in a Liquidity Event in the form of (A) an
earnout, royalty or similar contingent right to receive future cash
payments, (B) cash held in escrow, or (C) one or more promissory notes or
other debt instruments payable in cash, provided that, in each case, the
Company will ultimately receive a payment in cash, if any payment is made.
For the purposes of Section 7.1 hereof, to the extent that Deferred Cash
Consideration is received by the Company or a Subsidiary in connection with
any Liquidity Event, such Deferred Cash Consideration shall not be deemed
to constitute Net Proceeds from such Liquidity Event until the Company
receives a cash payment with respect thereto (i.e., as an earnout payment,
cash released from escrow or payments under a promissory note or other debt
instrument). In the
-5-
<PAGE>
event that the Company receives any "Securities Distributions" (as defined
below) in respect of Securities, such Securities Distributions shall be
treated as follows: (w) to the extent such Securities Distributions are
Securities, such Securities Distributions shall be treated for all purposes
(including Section 7.1) as Securities received in connection with the
Liquidity Event in which the original Securities (with respect to which
such Securities Distributions were distributed or paid) were received by
the Company; (x) to the extent such Securities Distributions are cash, such
Securities Distributions shall be treated for all purposes (including
Section 7.1) as cash received in respect of Deferred Cash Consideration,
and shall be deemed to have been received in connection with the Liquidity
Event in which the original Securities (with respect to which such cash was
distributed or paid) were received by the Company; (y) to the extent such
Securities Distributions are Deferred Cash Consideration, such Securities
Distributions shall be treated for all purposes (including Section 7.1) as
Deferred Cash Consideration received in connection with the Liquidity Event
in which the original Securities (with respect to which such Securities
Distributions were distributed or paid) were received by the Company; and
(z) to the extent such Securities Distributions are not Securities,
Deferred Cash Compensation or cash, they shall be referred to as "Other
-----
Distributed Instruments" and shall be treated as if they are Deferred Cash
-----------------------
Consideration, except that notwithstanding anything to the contrary in
paragraph (iv) of this Section 8.1(f), the appropriate portion of such
Other Distributed Instruments shall be distributed to Mattel not later than
the fifth anniversary of the Closing, or if that is impossible, valued as
of the date of the fifth anniversary of the Closing and the Company shall
pay Mattel in cash the appropriate portion thereof based on the principles
set forth in Section 7.1 and the fact that such Other Distributed
Instruments were received in the Liquidity Event in which the original
Securities (with respect to which such Other Distributed Instruments were
distributed or paid) were received by the Company. "Securities
----------
Distribution" means, with respect to any Securities received by the Company
------------
in a Liquidity Event, any and all dividends, distributions or payments
received by the Company in respect of or in exchange for such Securities.
(ii) For the purposes of Section 7.1 hereof, to the extent that
Securities are received by the Company or a Subsidiary in connection with
any Liquidity Event, such Securities shall not be deemed to constitute Net
Proceeds from such Liquidity Event until such time as (x) such Securities
have been sold by the Company or such Subsidiary for cash, in which case
the net proceeds from such sale shall be deemed Net Proceeds and the
Company shall as promptly as practicable make the payments required under
Section 7.1(a) in cash, (y) subject to the provisions of clause (vi)
hereof, the board of directors reasonably determines (a "Securities
Determination") in good faith (and immediately notifies Mattel of such
Securities Determination) that such Securities are or have become "Freely
Tradable Securities" (as defined below), in which case, as of the date of
such Securities Determination, the value of such Freely Tradable Securities
(using the valuation formula set forth below) shall be deemed Net Proceeds
from such
-6-
<PAGE>
Liquidity Event and the Company shall make as promptly as practicable the
payments, if any, required under Section 7.1(a) either in cash or, if the
requirements set forth in this Section 8.1(f) below are met, in such Freely
Tradable Securities or (z) Mattel at its option has elected to receive such
Securities and deems them to be Net Proceeds, in which case, from and after
receipt of written notice to such effect from Mattel, such Securities shall
be considered to be Net Proceeds and the applicable portion of such
Securities shall be transferred to Mattel in accordance with Section
7.1(a), with all of such Securities valued at the fair market value as of
the time such notice is received by the Company, without reference to any
liquidity or minority control discount (subject to the dispute resolution
mechanism set forth in Section 7.1(e)); provided, however, that, with
respect to this clause (z), to the extent that such Securities are bound by
contractual restrictions, Mattel shall agree to be bound by such
restrictions to the same extent as the Company, so long as the Company has
notified Mattel of such restrictions prior to Mattel sending such notice
referred to above, but only to the extent that each equity holder of the
Company to whom any Securities of such class have been transferred pursuant
to Section 7.1(b) is also bound by such restrictions.
(iii) Unless Mattel has made the election referred to in
subclause (z) above, the Company may not transfer any Securities to Mattel
unless at the time of transfer (A) such Securities are Freely Tradable
Securities; (B) such Securities are transferred in accordance with Section
7.1 and this Section 8.1(f); (C) at the time of such transfer, the Company
makes arrangements reasonably satisfactory to Mattel to ensure that no
Person that has received or receives, pursuant to Section 7.1(b),
Securities of the same class, may sell, transfer or otherwise reduce its
risk in such Securities, within one year of such transfer, without ensuring
that Mattel is provided the same opportunity to sell, transfer or otherwise
reduce its risk on terms that are no less favorable to Mattel than such
other Person, and Mattel is provided reasonable opportunity to respond to
each such offered opportunity; and (D) Mattel receives the same (or better)
rights (including, without limitation, rights of resale and transaction or
other fees or economic benefits and special governance rights) as any other
Person receiving Securities in connection with such Liquidity Event and no
Person receives Securities of a different class than those transferred to
Mattel in connection with or as a result of such Liquidity Event; provided
that the foregoing clauses (B)-(D) shall not obligate the Company to
restrict the right or ability of such Person receiving the Freely Tradable
Securities from engaging in ordinary course brokerage sales thereof that
are not block trades.
(iv) In the event any Securities received in a Liquidity Event
have not been deemed Net Proceeds and fully paid in accordance with Section
7.1(a) at the fifth anniversary of the Closing Date, such Securities shall
be valued at the fair market value thereof, without reference to any
liquidity or minority control discount (subject to the dispute resolution
mechanism set forth in Section
-7-
<PAGE>
7.1(e)) and be deemed Net Proceeds, which shall be paid in accordance with
Section 7.1(a), and which shall not be included in the determination of the
Fifth Year Enterprise Value. Likewise, to the extent that instruments
("Unpaid Deferred Instruments") are held by the Company on the fifth
anniversary of the Closing Date in respect of Deferred Cash Consideration
that at such time have not yet been fully paid in cash, the value of such
instruments shall not be included in the determination of the Fifth Year
Enterprise Value. Rather, the Company shall take all action necessary to
transfer to Mattel the portion of such instruments as Mattel would be
entitled if such instruments were considered Net Proceeds of the
Liquidation Event for which such instruments were acquired by the Company
and if that is impossible, then the Company shall insure that all cash
received in respect hereof to which Mattel would be entitled under Section
7.1(a) is transferred immediately upon receipt to Mattel. Notwithstanding
anything to the contrary in this Agreement, the parties hereby clarify that
regardless of when Net Proceeds are actually received or deemed to be
received (and regardless of the form of consideration), the portion of
Excess Net Proceeds that shall be paid to Mattel in accordance with Section
7.1(a) shall be determined on the basis of when a binding agreement with
respect to the Liquidity Event giving rise to such Net Proceeds is signed,
as is set forth in Section 7.1(a), and not on the basis of when Net
Proceeds are received or deemed to be received. For purposes of Section
7.3(a), the value of Unpaid Deferred Instruments received in connection
with Liquidity Events and held by the Company and the value of Securities
received in connection with Liquidity Events and held by the Company, in
each case on the third anniversary of the Closing, shall be excluded from
the Three Year Enterprise Value.
(v) As used in this Section 8.1(f), "Freely Tradable Securities"
--------------------------
shall mean shares of common equity securities (1) that are listed on a
national securities exchange or reported through the automated quotation
system of a registered securities association, (2) as to which there is
available adequate current public information with respect to the issuer
thereof that satisfies the informational requirements of Rule 144(c) of the
Securities Act of 1933 and (3) with respect to which there is no
contractual or legal restriction of any kind on the sale, distribution or
other transfer thereof by the Company, any Subsidiary of the Company or
Mattel.
(vi) Following any Liquidity Event in which the Company receives
Securities, the Company's board of directors must consider whether such
Securities satisfy provisions (1) through (3) of the preceding sentence (i)
at least once per calendar month and (ii) within ten business days of the
receipt of a request by Mattel to make such determination. If, pursuant to
a request by Mattel that the Company's board of directors determine whether
the Securities are Freely Tradable Securities, the board of directors fails
to determine that such Securities are Freely Tradable Securities, or in the
event that the Company's board of directors makes a Determination but
Mattel reasonably and in good faith believes
-8-
<PAGE>
that such Securities are not Freely Tradable Securities, Mattel shall have
the right to request that the issue of whether such Securities are Freely
Tradable Securities be determined by arbitration (the date of such
assertion being a "Request Date"); provided that the arbiter shall be a
------------
nationally recognized law firm that has not been engaged for any other
matter by any of the parties to this Agreement, any equity holders of the
Company or Holdings or any of their Affiliates within the two-year period
prior to such dispute. If the Company and Mattel are unable to agree within
five business days of the Request Date upon a suitable nationally
recognized law firm to adjudicate whether such Securities are Freely
Tradable Securities, each of the Company and Mattel shall select a
nationally recognized law firm within six business days of the Request
Date. Within ten business days of the Request Date, the two selected law
firms shall select a third nationally recognized law firm to arbitrate the
dispute. All fees and expenses relating to the work, if any, to be
performed by the arbitrator and the law firms selected pursuant to this
provision shall be borne equally by the parties. The neutral arbitrator's
determination of whether such Securities are Freely Tradable Securities
shall be made within five business days of its selection, shall be set
forth in a written statement delivered to Mattel and the Company and shall
be final, binding and conclusive. In the event that the neutral arbitrator
decides that Securities that the board of directors of the Company
Determined were Freely Tradable Securities are not Freely Tradable
Securities, then notwithstanding the prior Securities Determination, such
Securities shall not be deemed to be Freely Tradable Securities and the
first sentence of this paragraph (vi) shall continue to apply. If the
neutral arbitrator determines that such Securities are Freely Tradable
Securities despite the failure of the board of directors of the Company to
make such a Securities Determination, then such Securities shall be deemed
to be Freely Tradable Securities as of such date.. The procedures of this
Section 8.1(f) shall apply to any Securities received by the Company or a
Subsidiary thereof permitted to receive Securities in a Liquidity Event.
(vii) In the event of a transfer of Freely Tradable Securities
pursuant to Section 7.1 as described above and for purposes of Section 7.4,
Freely Tradable Securities shall be valued at the average of the last sale
prices for the twenty trading days preceding the second business day prior
to the date that the Company gives instructions to the transfer agent to
effect the transfer of such Securities to Mattel, unless during such twenty
day period any dividend has been declared or paid with respect to such
Securities or any extraordinary transaction has occurred with respect
thereto, in which event appropriate adjustments shall be made in such
valuation (and the adjustments shall be subject to the dispute resolution
procedures set forth in Section 7.1(e)). The Company shall not (nor shall
it permit any of its Subsidiaries to) engage in any Liquidity Event in
which the consideration in respect of assets of the Company or any of its
Subsidiaries is received by any Person other than the Company or a wholly
owned Subsidiary of the Company; it being understood that the foregoing
-- ----- ----------
sentence is not intended to and shall not prohibit bona fide payments (x)
to employees of the Company or
-9-
<PAGE>
any of its Subsidiaries that are not employees, consultants or Affiliates
of AEG or Holdings and that are not Gores Family Entities and (y) that are
in the nature of employee "stay" bonuses or hiring bonuses or the
assumption or payment of liabilities to third parties that are not
Affiliates, employees or consultants of AEG or Holdings or Gores Family
Entities (e.g., trade payables).
14. Clarification of Article VIII. By way of clarification, each party
-----------------------------
hereto agrees that all restrictions on the Company set forth in Article VIII
shall apply equally to actions of the Company's Subsidiaries. Thus, for example,
if Article VIII prohibits the Company from taking an action without the consent
of Mattel hereunder, a Subsidiary of the Company could not take such action (or
a similar action) without the consent of Mattel hereunder.
15. Amendment of Section 8.1(h). Section 8.1(h) of the Agreement is hereby
---------------------------
amended by substituting the word "obligations" for the word "obligation" in the
third line from the bottom thereof and by substituting subclause "(B)" for "(b)"
in the second line from the bottom thereof. The reference in Section 8.1(h) to
"this Section 8.1(g)" shall be changed to "this Section 8.1(h)".
16. Ownership of Interests in Holdings. Section 8.1 of the Agreement is
----------------------------------
hereby amended by adding a new subsection (j) at the end thereof as follows:
(j) Mattel understands and acknowledges that certain Employees and
Consultants (as defined herein) own, or may own from time to time,
membership interests in Holdings that in the aggregate do not exceed 30% of
(x) the securities entitled to vote for directors, managers or any similar
governing body of Holdings or (y) the fully diluted equity of Holdings
(each, an "Employees and Consultants Cap"). Mattel hereby agrees that,
notwithstanding any other provision of the Agreement, such interests may be
issued to Employees and Consultants, repurchased by Holdings, transferred
by Employees and Consultants by will or the laws of descent or to their
respective family members, family limited partnerships, family trusts and
similar estate planning vehicles that have agreed to the restriction set
forth in clause (iii) hereof ("Permitted Transferees"), provided that until
---------------------
the fifth anniversary of the Closing (i) such interests do not, at any
time, represent more than the Employees and Consultants Cap, (ii) the Gores
Family Entities (as defined herein) shall at all times own 70% or more of
(x) the securities entitled to vote for directors, managers or any similar
governing body of Holdings and (y) the fully diluted equity of Holdings,
and (iii) each of the Employees and Consultants and each Permitted
Transferee, as applicable, holding any such interests agrees with Mattel
that it will not transfer any such interests except as set forth above or
in connection with a transfer of interests held by AEG to which Mattel has
consented. Except as permitted by Section 8.2(a), AEG will not transfer,
and will cause Holdings not to issue or recognize the purported transfer
of, any equity interests of Holdings to any Person that does not agree with
Mattel to the transfer restrictions set forth above. For purposes of this
Agreement, "Employees and Consultants" means Persons (other than Mr. Gores)
-------------------------
that are good
-10-
<PAGE>
faith employees of, or consultants to, Gores Technology Group or its
Affiliates in accordance with their past practices, but does not include
any Person that is made an employee of or consultant to Gores Technology
Group or any Affiliate thereof primarily for the purpose of providing
membership interests in Holdings to such Person, or otherwise to avoid the
restrictions of this Agreement. For the purposes of this Agreement, "Gores
-----
Family Entities" means Alec E. Gores, his wife, any lineal descendants and
---------------
adopted children, and any family partnership, family trust or similar
estate planning vehicle solely for the benefit of any such persons.
17. Economic Interest of Third Party Lenders in the Company. Mattel
-------------------------------------------------------
understands and acknowledges that certain bona fide, third party lenders may be
offered a direct or indirect economic interest in the Company, either as members
of the Company or otherwise. Mattel hereby agrees that, notwithstanding any
other provision of the Agreement, payment of amounts owed by the Company or any
Subsidiary thereof to such bona fide third party lenders pursuant to
commercially reasonable financing arrangements shall (i) not be disqualified
from being treated as "payments to third parties (that are not Affiliates of the
Company, AEG or any member of the Company) in respect of indebtedness of the
Company" for the purposes of computing Net Proceeds solely by virtue of such
third party lender's direct or indirect economic interest in the Company and
(ii) shall not be precluded by virtue of the limitations set forth in Section
8.1(a) or (b). In addition, debt for borrowed money from such bona fide third
party lenders shall not constitute Assumed Debt.
18. Amendment of Section 8.3. Section 8.3 of the Agreement is hereby
------------------------
amended and restated as follows:
AEG hereby agrees to cause the Company to perform and fulfill all of
its obligations and commitments set forth in this Agreement and shall not take
any actions, including directly or indirectly authorizing or permitting the
amendment of the Company's governing documents, or permit the Company or
Holdings to take any actions, that are inconsistent with such obligation. AEG
shall cause the Company to make payments to Mattel as provided in Article VII of
this Agreement and, to the extent that the Company fails to make any such
payment that it is required to make and that it is lawfully capable of making,
AEG shall (at Mattel's election) either take such action as shall be necessary
to cause the Company to make such payment or shall make such payment to Mattel
on the Company's behalf; provided, however, that in no event shall the aggregate
-------- -------
amount of such payments that AEG shall be obligated to make to Mattel on the
Company's behalf (as opposed to causing the Company to take action) exceed the
aggregate amount of distributions and other payments made by the Company to
Holdings (and other equity holders) in excess of the amounts distributed to
Holdings (and other equity holders) pursuant to Section 7.1(b)(i) and (ii). In
the event that the Company does not perform its obligations under Article XI,
the obligations of AEG to Mattel hereunder in respect of such failure to perform
shall not require a cash payment to Mattel (as opposed to causing the Company to
take action) in excess of the lesser of (a) the sum of (x) any amounts required
to be contributed or paid to the Company by Holdings that have not been so
contributed or paid (it being agreed that indemnification obligations to Mattel
are "operations of the Company" for purposes of Section 5.11) and (y) (I) the
amount of the Losses to Mattel
-11-
<PAGE>
Indemnified Parties that are required to be indemnified pursuant to Article XI
multiplied by (II) a fraction, the numerator of which is (A) the aggregate
amount of payments or distributions made by the Company to Holdings (and other
equity holders) pursuant to Section 7.1, and the denominator of which is (B) the
aggregate amount of payments or distributions made to Holdings (and other equity
holders) and received by Mattel pursuant to Section 7.1 and (b) the sum of (x)
the amount referred to in clause (a)(x) above and (y) the aggregate amount of
payments or distributions made by the Company to Holdings (and other equity
holders).
19. Addition of Section 8.4. A new Section 8.4 is added to the Agreement
-----------------------
which reads in its entirety as follows:
8.4. Execution of Investor Agreement. AEG shall ensure that each Person
-------------------------------
that directly or indirectly holds an equity interest in the Company or
Holdings agrees, in a writing enforceable by Mattel, that until the fifth
anniversary of the Closing, without the prior written consent of Mattel,
such Person shall not transfer (directly or indirectly) any portion of the
membership interest held by it (whether directly or indirectly), other than
to (i) to the individual equityholders of such Person, (ii) to the
transferees of such equityholders by will or the laws of descent, (iii) to
the respective family members, family limited partnerships, family trusts
and similar estate planning vehicles of such equityholders, or (iv) in the
case of transfers by Foothill or any lender to the Company, to additional
lenders to the Company or their Affiliates in connection with the
syndication by Foothill of the Foothill credit facility to the Company
unless such transferee, in each of clauses (i) through (iv) above shall
have agreed (in a written agreement enforceable by Mattel) to the
restriction set forth in this sentence.
20. Addition of Section 8.5. A new Section 8.5 is added which reads in
-----------------------
its entirety as follows:
8.5. Delivery of Certain Agreements; Shareholder Certificate. AEG,
-------------------------------------------------------
Holdings and the Company have provided to Mattel (to the extent any of the
foregoing exist at the date hereof) and shall provide to Mattel (within
five business days of the execution or amendment thereof) true copies of
(i) all limited liability agreements, partnership agreements, charters,
bylaws and other similar governing documents, of each of the Company and
Holdings, and of the trust agreement of AEG; (ii) all written agreements
(and summaries of all oral agreements) and amendments thereto related
directly or indirectly to the ownership of, or the direct or indirect
transfer of any interest in, the Company or Holdings to which the Company,
Holdings, Mr. Gores, AEG or any other direct or indirect holder of equity
of the Company is a party of which AEG, Mr. Gores, Holdings or the Company
is aware (other than agreements to which Mattel is a party), except with
respect to such interests of Employees and Consultants as permitted by
Section 8.1(i); and (iv) the Shareholder Certificate (as defined below).
The "Shareholder Certificate" shall mean a certificate, signed by Mr. Gores
-----------------------
(to his knowledge after due inquiry) stating that, other than as otherwise
set forth in the Shareholder Certificate, no person has directly or
indirectly transferred or agreed to transfer any securities, membership
interests or other equity interests with respect to the Company or to
Holdings
-12-
<PAGE>
in violation of the provisions of Section 8.2 and (A) the Gores Family
Entities collectively beneficially own not less than 70% of the membership
or equity interests in Holdings, free and clear of any liens or
encumbrances other than those permitted by this Agreement, and (B) the
Gores Family Entities, together with the Employees and Consultants,
collectively beneficially own not less than 100% of the membership or
equity interests in Holdings, free and clear of any liens or encumbrances
other than those permitted by this Agreement.
21. Addition of Section 8.6. A new Section 8.6 is added which reads in its
-----------------------
entirety as follows:
8.6 Subordination. Mr. Gores shall cause the Company not to distribute to
-------------
equity holders of the Company any Net Proceeds in respect of any Liquidity
Event unless he also causes the Company at the same time to pay to Mattel
all amounts to which it is then entitled under Section 7.1 with respect to
such Liquidity Event.
22. Addition of Section 8.7. A new Section 8.7 is added which reads in its
-----------------------
entirety as follows:
8.7 Repayment of Foothill Capital Debt. If a binding agreement is
----------------------------------
executed with respect to a Liquidity Event for which it is anticipated that
there will be net proceeds in excess of the amount required to repay the
outstanding amount of the Company's loans under its credit agreement with
Foothill, the Company shall give notice to Mattel and, unless Mattel
otherwise agrees, will apply such net proceeds to repay all obligations
under the credit facility in full and terminate the credit facility. In
addition, the Company will not, and will not permit any Subsidiary to,
borrow any funds that are not reasonably required to fund ongoing operating
cash flow.
23. Amendment of Section 9.3(b). Clause (b) of Section 9.3 is amended to
---------------------------
read in its entirety:
"(b) at or prior to Closing, the $10 million contribution referred to in
Section 5.11 shall have been made."
24. Amendment of Section 12.15. Section 12.15 is amended and restated to
--------------------------
read as follows:
12.15. GGC. Mattel understands and acknowledges that the Company may
issue a membership interest to GGC in settlement of a claim by GGC for
certain fees in connection with the transaction contemplated hereby, and
Mattel agrees that such issuance shall not be deemed to violate Section 4.4
or any other provision of this Agreement.
25. Representations and Warranties of the Company, AEG and Mr. Gores. The
----------------------------------------------------------------
Company, AEG and Mr. Gores represent and warrant to Mattel that (i) the Company,
AEG and Mr. Gores have the requisite power and authority to execute and deliver
this Amendment, (ii) the
-13-
<PAGE>
execution and delivery of this Amendment by the Company and AEG have been duly
authorized, (iii) this Amendment has been duly and validly executed and
delivered by each of the Company, AEG and Mr. Gores and, (iv) assuming that this
Amendment has been duly authorized, executed and delivered by Mattel, this
Amendment constitutes a legal, valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. AEG is
the majority member of Holdings and together with the Gores Family Entities is
the beneficial owner of at least 70% of the membership interests in Holdings and
together with Mr. Gores and the Employees and Consultants is the beneficial
owner of all of the equity interests in Holdings.
26. Representations and Warranties of Mattel. Mattel represents and
----------------------------------------
warrants to the Company, AEG and Mr. Gores that (i) Mattel has the requisite
corporate power and authority to execute and deliver this Amendment, (ii) the
execution and delivery of this Amendment by Mattel have been duly authorized by
all requisite corporate proceedings, (iii) this Amendment has been duly and
validly executed and delivered by Mattel, and (iv) assuming that this Amendment
has been duly authorized, executed and delivered by the Company, AEG and Mr.
Gores, this Amendment constitutes a legal, valid and binding obligation of
Mattel, enforceable against Mattel in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
27. (a) The table of definitions in the Agreement is hereby amended by
adding the terms "Deferred Cash Consideration", "Determination", "Employees and
Consultants", "Employees and Consultants Cap", "Freely Tradable Securities",
"Gores Family Entities", "Other Distributed Instruments", "Permitted
Transferees", "Request Date", "Securities", "Securities Determination",
"Securities Distribution" and "Unpaid Deferred Instruments" in their proper
alphabetical order and with appropriate references to the Sections in which they
are defined.
(b) Amendment of TLC Disclosure Schedule. Sections 1, 5.2, 5.8 and
5.9 of the TLC Disclosure Schedule are amended and restated as set forth in
Exhibit A hereto.
28. Internal References. All references in the Agreement to "this
-------------------
Agreement," "herein" and "hereunder" and all similar references shall be deemed
to refer to the Agreement, as amended by that certain Amendment No. 1 to Sale
and Purchase Agreement dated as of October 12, 2000 by and among AEG, Mr. Gores,
the Company and Mattel, and as further amended by this Amendment.
29. No Other Effect. This Amendment is entered into as permitted by
----------------
Section 12.10 of the Agreement. Except as expressly amended hereby, and
except for appropriate renumbering
-14-
<PAGE>
of Sections and Subsections and Schedule references, the Agreement shall remain
in full force and effect.
[The remainder of this page has been intentionally left blank]
-15-
<PAGE>
[Signature Page to Amendment No.2 to the Sale and Purchase Agreement]
IN WITNESS WHEREOF, the parties have executed this Amendment on the
day and year indicated above.
MATTEL, INC. GTG/WIZARD, LLC
By: Wizard Holding Company, LLC,
By: /s/ Robert A. Eckert its Manager
------------------------------
Name: Robert A. Eckert By: /s/ Alec E. Gores
------------------------------
Title: Chairman and CEO Name: Alec E. Gores
Title:
ALEC E. GORES, Trustee of the Revocable
Living Trust Agreement of Alec E. Gores
/s/ Alec E. Gores
---------------------------------------
ALEC E. GORES, in his individual capacity
/s/ Alec E. Gores
---------------------------------------
-16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.0
<SEQUENCE>4
<FILENAME>dex30.txt
<DESCRIPTION>RESTATED CERTIFICATE OF INCORPORATION OF MATTEL
<TEXT>
<PAGE>
Exhibit 3.0
RESTATED CERTIFICATE OF INCORPORATION
OF
MATTEL, INC.
(Originally incorporated on March 6, 1968)
FIRST: The name of the corporation (hereinafter called the "Company") is
MATTEL, INC.
SECOND: The registered office of the Company in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, in the County of New Castle. The name of its registered agent at
that address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Company is authorized to issue a total of three hundred
twenty three million (323,000,000) shares of all classes of stock. Of such total
number of authorized shares of stock, three hundred million (300,000,000) shares
are Common Stock, each of which shares of Common Stock has a par value of One
Dollar ($1.00), three million (3,000,000) shares are Preferred Stock, each of
which shares of Preferred Stock has a par value of One Dollar ($1.00), and
twenty million (20,000,000) shares of Preference Stock, each of which shares of
Preference Stock has a par value of one cent ($0.01).
A statement of the designations of the authorized classes of stock or of
any series thereof, and the powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, or of the authority of the Board of Directors to fix by
resolution or resolutions such designations and other terms, is as follows:
A. Preferred Stock and Preference Stock:
Shares of Preferred Stock and Preference Stock may be issued from time to
time in one or more series.
The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Article FOURTH, to fix by resolution or resolutions
the designation of each series of Preferred Stock and Preference Stock and the
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, including
without limiting the generality of the foregoing, such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets,
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conversion or exchange, and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of Delaware.
If any proposed amendment to the Certificate of Incorporation of the
Company would alter or change the preferences, special rights or powers given to
any one or more outstanding series of Preferred Stock or Preference Stock so as
to affect such series adversely, or would authorize the issuance of a class or
classes of stock having preferences or rights with respect to dividends or
dissolution or the distribution of assets that would be superior to the
preferences or rights of such series of Preferred Stock or Preference Stock,
then the holders of each such series of Preferred Stock or Preference Stock so
affected by the amendment shall be entitled to vote as a series upon such
amendment, and the affirmative vote of two-thirds (2/3) of the outstanding
shares of each such series shall be necessary to the adoption thereof, in
addition to such other vote as may be required by the General Corporation Law of
Delaware.
The number of authorized shares of Preferred Stock and Preference
Stock may be increased or decreased by the affirmative vote of the holders
of a majority of the stock of the Company entitled to vote, without there
being a class vote of the Preferred Stock or Preference Stock.
B. Common Stock:
Subject to all of the preferences and rights of the Preferred Stock and the
Preference Stock or a series of either that may be fixed by a resolution or
resolutions of the Board of Directors, dividends may be paid on the Common Stock
as and when declared by the Board of Directors, out of any funds of the Company
legally available for the payment of such dividends.
Except as may otherwise be provided by a resolution or resolutions of the
Board of Directors concerning the Preferred Stock and the Preference Stock or a
series of either, or by this Certificate of Incorporation or the General
Corporation Law of Delaware, the holders of the shares of Common Stock issued
and outstanding shall have and possess the exclusive right to notice of
stockholders' meetings and the exclusive power to vote.
C. Series E Junior Participating Preference Stock:
The designated powers, preferences and relative participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
of the Series E Junior Participating Preference Stock are as follows:
1. Designation and Amount. The shares of such series shall be designated
as "Series E Junior Participating Preference Stock" (the "Series E Preference
Stock") and the number of shares constituting the Series E Preference Stock
shall be 2,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors;
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provided, that no decrease shall reduce the number of shares of Series E
Preference Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Company convertible into Series E Preference Stock.
2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock, par value $1.00 per share (the "Preferred Stock"),
of the Company or Preference Stock (or any similar stock) ranking
prior and superior to the Series E Preference Stock with respect to
dividends, the holders of shares of Series E Preference Stock, in
preference to the holders of Common Stock, par value $1.00 per share
(the "Common Stock"), of the Company, and of any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series E Preference Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series E Preference Stock. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise that by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series E
Preference Sock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
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(B) The Company shall declare a dividend or distribution on the
Series E Preference Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series E
Preference Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series E Preference Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless
the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares
of Series E Preference Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series E
Preference Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series E Preference Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series E Preference Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series E Preference Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series E Preference Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the
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numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or Preference Stock
or any similar stock, or by law, the holders of shares of Series E
Preference Stock and the holders of shares of Common Stock and any
other capital stock of the Company having general voting rights shall
vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series E Preference Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series E Preference Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series E
Preference Stock outstanding shall have been paid in full, the Company
shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series E
Preference Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series E Preference Stock, except dividends paid ratably on
the Series E Preference Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series E
Preference Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Company ranking
junior (as to dividends and upon
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dissolution, liquidation and winding up) to the Series E
Preference Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series E Preference Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Preference Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of
the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
5. Reacquired Shares. Any shares of Series E Preference Stock purchased
or otherwise acquired by the Company in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preference Stock and
may be reissued as part of a new series of Preference Stock subject to the
conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designation creating a series of
Preferred Stock or Preference Stock or any similar stock or as otherwise
required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (A) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series E Preference Stock unless,
prior thereto, the holders of shares of Series E Preference Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series E Preference Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (B) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series E Preference Stock,
except distributions made ratably on the Series E Preference Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the
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outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series E Preference Stock were entitled immediately prior
to such event under the provision in clause (A) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series E
Preference Stock shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series E Preference Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
8. No Redemption. The shares of Series E Preference Stock shall not be
redeemable.
9. Rank. The Series E Preference Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of Preferred Stock or Preference Stock.
10. Amendment. If any proposed amendment to the Certificate of
Incorporation would alter or change the preferences, special rights or powers
given to the Series E Preference Stock so as to affect the Series E Preference
Stock adversely, or would authorize the issuance of a class or classes of stock
having preferences or rights with respect to dividends or dissolutions or the
distribution of assets that would be superior to the preferences or rights of
the Series E Preference Stock, then the holders of the Series E Preference Stock
shall be entitled to vote as a series upon such amendment, and the affirmative
vote of two-thirds of the outstanding shares of Series E Preference Stock shall
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<PAGE>
be necessary to the adoption thereof, in addition to such other vote as may be
required by the General Corporation Law of the State of Delaware.
D. 12.5% Convertible Preference Stock, Series F:
The designated powers, preferences and relative participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
the 12.5% Convertible Preference Stock, Series F, are as follows:
1. Designation. The shares of such series shall be designated as "12.5%
Convertible Preference Stock, Series F" (the "Series F Stock")
2. Number of Shares. The number of shares constituting the Series F Stock
be and the same is hereby fixed as 864,293 and cannot be increased.
3. Stated Capital. The amount to be represented in stated capital at all
times for each share of the Series F Stock shall be its par value of $.01 per
share.
4. Rank. The Series F Stock shall, with respect to dividend rights and
rights on liquidation, rank (i) junior to, or on parity with, as the case may
be, any other series of the Preferred Stock or Preference Stock established by
the Board of Directors, the terms of which shall specifically provide that such
series shall rank senior to, or on parity with, as the case may be, the Series F
Stock with respect to dividend rights and rights on liquidation, and (ii) prior
to any other equity securities of the Company including all classes of the
Common Stock, $1.00 par value per share (collectively, the "Common Stock"), of
the Company. (All of such equity securities of the Company to which the Series F
Stock rank prior in right of dividends or in liquidation, as the case may be,
including all classes of the Common Stock, are at times collectively referred to
herein as the "Junior Securities".)
5. Dividends.
(A) From and after November 26, 1991 and prior to the date of
conversion thereof, the holders of such stock shall be entitled to
receive, out of the assets of the Company at the time legally
available therefor and before any dividend or other distribution is
declared or paid with respect to the outstanding shares of Common
Stock, cumulative cash dividends, as and when declared by the Board of
Directors of the Company, at the rate of $4.882 per share per annum.
Such dividends shall be payable in arrears, in equal quarterly
installments of $1.2205 per share on November 26, February 26, May 26
and August 26, or on such other date in November, February, May or
August of each year as or shall be designated by the Board of
Directors of the Company (each such date is referred to herein as a
"Dividend Payment Date" and the quarterly period between consecutive
Dividend Payment Dates is referred to herein as a "Dividend Period");
each such quarterly dividend shall be paid to
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the holders of record of outstanding shares of Series F Stock as their
names shall appear on the share register of the Company on the
corresponding Record Date. As used herein, the term "Record Date"
means, with respect to the quarterly dividends payable on November 26,
February 26, May 26 and August 26, respectively, the preceding
November 15, February 15, May 15 and August 15, or such other record
date as may be designated by the Board of Directors of the Company in
the event that the Board of Directors of the Company designates a
Dividend Payment Date other than the 26th day of each such month.
(B) If, on any Dividend Payment Date which is prior to the date of
conversion of shares of Series F Stock, full cash dividends pursuant
to subclause (A) above are not paid or made available to the holders
of outstanding shares of Series F Stock and the funds available to the
Company for such purpose shall be insufficient to permit payment in
full in cash to all such holders of outstanding shares of Series F
Stock of the preferential dividend amounts to which they are then
entitled pursuant to subclause (A) above, the entire amount available
for payment of cash dividends with respect to the outstanding shares
of Series F Stock pursuant to subclause (A) above shall be distributed
among the holders of outstanding shares of Series F Stock ratably, in
proportion to the full amounts to which they would otherwise be
entitled, and any remainder not paid in cash to the holders of
outstanding shares of Series F Stock shall cumulate as provided in
subclause (C) below.
(C) If, on any Dividend Payment Date which is prior to the date of
conversion of shares of Series F Stock, the holders of outstanding
shares of Series F Stock shall not have received the full cash
dividends to which they are entitled pursuant to sub-clause (A) above,
then such unpaid dividends shall cumulate, whether or not declared,
until so paid.
(D) In addition to the cumulative dividends payable with respect to
outstanding shares of Series F Stock pursuant to subclauses (A), (B)
and (C) above, from and after February 26, 1992 and prior to the date
(the "ESOP Payment Date") the trustee of the International Games, Inc.
("International") Restated Employee Stock Ownership Plan (the "ESOP")
receives written notice of final payment by the ESOP of all amounts
due to the Company pursuant to the Loan Agreement dated as of August
1, 1987, or a suitable replacement thereof, between International and
the ESOP (the "ESOP Loan Agreement"), the holders of such shares shall
be entitled to receive on any Dividend Payment Date in any year, out
of the assets of the Company at the time legally available therefor
and before any dividend or other distribution is declared or paid with
respect to the outstanding shares of Common Stock, noncumulative cash
dividends, as and when declared by the Board of Directors of the
Company, and in such amounts as the Board of Directors of
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the Company shall, in its sole discretion, from time to time determine
to be necessary, together with the amount of the Company's annual
contribution to the ESOP, to amortize all of the amounts due in such
year to the holders of the International's FRESOP Notes, Series 1987
A, or suitable replacements thereof, issued pursuant to the Indenture
of Trust, dated as of August 1, 1987, between the International, as
issuer, and Bankers Trust Company, as trustee, in accordance with the
terms thereof; provided, however, that in no event shall the
outstanding shares of Series F Stock be entitled to receive
noncumulative dividends pursuant to this subclause (D) in excess of
$.5889 per share per annum. Each such dividend shall be paid to the
holders of record of outstanding shares of Series F Stock as their
names shall appear on the share register of the Company on the
corresponding Record Date.
(E) In addition to the cumulative dividends payable with respect to
the outstanding shares of Series F Stock pursuant to subclauses (A),
(B) and (C) above and the noncumulative dividends payable with respect
to such shares pursuant to subclause (D) above, if, on any Dividend
Payment Date which is prior to the date of conversion of shares of
Series F Stock, after the payment of all dividends, if any, with
respect to the outstanding shares of Series F Stock pursuant to
subclauses (A), (B), (C) and (D) above, any dividend shall be declared
by the Board of Directors of the Company with respect to the
outstanding shares of Common Stock, the holders of outstanding shares
of Series F Stock on the applicable Record Date for the dividend on
the Common Stock shall be entitled to receive on the applicable
Dividend Payment Date dividends in such amount as they would be
entitled to receive if their shares of Series F Stock had been
converted into shares of Common Stock on the applicable Record Date.
6. Distributions Upon Liquidation, Dissolution or Winding Up.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company which is prior
to the ESOP Payment Date, after the payment in full of all
preferential liquidation amounts to which the holders of outstanding
shares of Preferred Stock or Preference Stock ranking senior to the
Series F Stock shall be entitled, but before any distribution or
payment shall be made to the holders of outstanding shares of Common
Stock, the holders of outstanding shares of Series F Stock shall be
entitled to receive, out of the assets of the Company at the time
legally available therefor, an amount equal to the positive sum, if
any, of (x) $39.056 per share, together with all dividends accrued
(whether or not declared) during the dividend period in which such
liquidation, dissolution or winding up occurs and all cumulated and
unpaid dividends, if any, accrued during any prior dividend periods,
less (y) the quotient obtained by dividing the principal amount of the
indebtedness of the ESOP to the Company pursuant to the
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ESOP Loan Agreement outstanding on the date of such voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Company by 864,293. If, upon any such voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company,
the assets of the Company legally available therefor after the payment
in full of all preferential liquidation amounts to which the holders of
outstanding shares of Preferred Stock or Preference Stock ranking
senior to the Series F Stock shall be entitled but before any
distribution or payment shall be made to the holders of outstanding
Junior Securities, shall be insufficient to permit the payment in full
to the holders of outstanding shares of Series F Stock of the
preferential liquidation amounts to which they are then entitled, the
entire assets of the Company thus distributable shall be distributed
among the holders of outstanding shares of Series F Stock ratably, in
proportion to the full amounts to which such holders would otherwise be
entitled if such assets were sufficient to permit payment in full. In
addition, after the payment in full of all preferential liquidation
amounts to which the holders of outstanding shares of Series F Stock
shall be entitled, the holders of all outstanding shares of Common
Stock, and the holders of outstanding shares of Series F Stock shall be
entitled to receive the entire assets of the Company available for
distribution, ratably with the holders of outstanding shares of Common
Stock, in proportion to the ratio which the total number of shares of
Common Stock into which the outstanding shares of Series F Stock would
be convertible on the effective date of such voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company
bears to the total number of shares of Common Stock deemed to be
outstanding on such date (assuming for this purpose the conversion of
all outstanding shares of Series F Stock on such effective date). Each
holder of outstanding shares of Series F Stock shall be entitled to
receive that portion of the assets of the Company available for
distribution which the number of shares of Common Stock issuable upon
conversion of such holder's shares of Series F Stock bears to the total
number of shares of Common Stock deemed to be outstanding on the
effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company.
(B) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company which
is after the ESOP Payment Date, after the payment in full of
all preferential liquidation amounts to which the holders of
outstanding shares of Preferred Stock or Preference Stock
ranking senior to the Series F Stock shall be entitled, but
before any distribution or payment to the holders of Junior
Securities, the holders of outstanding shares of Series F Stock
shall be entitled to receive out of the assets of the Company
at the time legally available therefor, an amount equal to
$39.056 per share, together with all dividends accrued
(whether or not declared) during the dividend period in which
such liquidation, dissolution or
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winding up occurs and all cumulated and unpaid dividends, if any,
accrued during any prior Dividend Periods. In addition, after the
payment in full of all preferential liquidation amounts to which the
holders of outstanding shares of Series F Stock shall be entitled, the
holders of outstanding shares of Series F Stock shall be entitled to
receive the entire assets of the Company available for distribution,
ratably with the holders of outstanding shares of Common Stock, in
proportion to the ratio which the total number of shares of Common
Stock into which the outstanding shares of Series F Stock would be
convertible on the effective date of such voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company
bears to the total number of shares of Common Stock deemed to be
outstanding on such date (assuming for this purpose the conversion of
all outstanding shares of Series F Stock on such effective date). Each
holder of outstanding shares of Series F Stock shall be entitled to
receive that portion of the assets of the Company available for
distribution which the number of shares of Common Stock issuable upon
conversion of such holder's shares of Series F Stock bears to the total
number of shares of Common Stock deemed to be outstanding on the
effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company as set forth
above.
7. Redemption. The shares of Series F Stock shall not be redeemable by
the Company.
8. Conversion.
(A) From and after the Date of Issuance of shares of Series
F Stock and prior to the expiration of thirty days following
the ESOP Payment Date, each share of Series F Stock shall
be convertible, at the option of the holder thereof, into one
fully-paid and nonassessable share of Common Stock of the
Company, subject to adjustment as hereinafter set forth in
subclause (E) below.
(B) From and after the thirty-first day following the ESOP
Payment Date, each share of Series F Stock shall be
convertible, at the option of the holder thereof, into .3644353
of a fully-paid and nonassessable share of Common Stock of
the Company, subject to adjustment as hereinafter set forth
in subclause (E) below.
(C) To exercise such conversion option, the holder of shares
of Series F Stock shall surrender the certificate or certificates
representing the shares of Series F Stock to be converted,
duly endorsed for transfer to the Company, at the principal
executive office of the Company, and shall give written notice,
postage prepaid, by certified or registered mail, return receipt
requested, or by hand delivery to the Company at its principal
executive office, of the
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election of such holder to convert all or a portion of the shares of
Series F Stock represented by the certificate or certificates
surrendered into shares of Common Stock which notice shall set forth
the name or names in which the certificate or certificates representing
the shares of Common Stock to be issued upon conversion are to be
issued. Conversion shall be deemed to have been effected on the date of
receipt by the Company of such notice and the certificate or
certificates to be surrendered for conversion (the "Conversion Date").
As promptly as practicable thereafter, the Company shall issue to or
upon the written order of such holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is
entitled. The conversion of shares of Series F Stock into shares of
Common Stock shall be deemed to be effective and such holder, or the
person or persons designated by such holder, shall be deemed to have
become a holder of record of the shares of Common Stock issuable upon
conversion of such shares of Series F Stock on the applicable
Conversion Date unless the transfer books of the Company are closed on
such date, in which event such holder shall be deemed to have become a
holder of record of the shares of Common Stock issued upon conversion
of the shares of Series F Stock on the next succeeding date on which
the transfer books of the Company are open. Upon conversion of only a
portion of the number of shares of Series F Stock represented by a
certificate or certificates surrendered for conversion, the Company
shall issue and deliver to or upon the written order of the holder of
the certificate or certificates so surrendered a new certificate or
certificates representing the number of shares of Series F Stock not so
converted.
(D) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series F Stock. In lieu of issuing fractional
shares of Common Stock upon conversion of shares of Series F Stock, the
Company shall pay a cash adjustment in respect of such fractional
shares of Common Stock equal to the fair market value thereof as
determined by the Board of Directors of the Company. The Company shall
at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting
the conversion of outstanding shares of Series F Stock, the full number
of shares of Common Stock deliverable upon the conversion of all shares
of Series F Stock from time to time outstanding.
(E) The number of shares of Common Stock into which a share of Series
F Stock shall be convertible as set forth in subclauses (A) and (B)
above, shall be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time subdivide its
outstanding shares of Common Stock or shall issue a dividend or
other distribution payable in shares of Common Stock, the number
of shares of Common Stock into which a share of Series F Stock
shall be convertible shall be
13
<PAGE>
proportionately increased, effective immediately after the
effective date of such subdivision or at the close of business on
the record date fixed by the Board of Directors of the Company
for such dividend or other distribution, as the case may be;
(ii) In case the Company shall at any time combine its
outstanding shares of Common Stock, the number of shares of
Common Stock into which a share of Series F Stock shall be
convertible shall be proportionately decreased, effective
immediately after the effective date of such combination; and
(iii) In case the Company shall at any time recapitalize or
reclassify its capital stock, or in case of any consolidation or
merger of the Company with or into any other person (other than a
consolidation or merger in which the Company is the continuing
entity and which does not result in any change in the capital
stock of the Company) or in case of the sale or other disposition
of all or substantially all the assets of the Company to any
other person, then in each such case each outstanding share of
Series F Stock shall after such recapitalization,
reclassification, consolidation, merger, sale or other
disposition be convertible into the kind and number of shares of
capital stock or other securities or assets of the Company or of
the entity resulting from such consolidation or surviving such
merger or to which such assets shall have been sold or otherwise
disposed of to which the holder thereof would have been entitled
if immediately prior to such recapitalization, reclassification,
consolidation, merger, sale or other disposition such holder had
converted its shares of Series F Stock. The provisions set forth
above shall apply to successive recapitalization,
reclassifications, consolidations, mergers, sales or other
dispositions.
(F) All shares of Common Stock issued upon conversion of shares of
Series F Stock shall, upon issuance by the Company, be duly and
validly issued, fully-paid and nonassessable and free from all taxes,
liens and charges with respect to the issuance thereof.
9. Voting Rights. The holders of shares of Series F Stock shall be
entitled to vote on or otherwise consent to any matter requiring the vote or
consent of the stockholders of the Company under the laws of the State of
Delaware. Each holder of outstanding shares of Series F Stock shall be entitled
to one vote for each whole share of Common Stock into which such holder's
outstanding shares of Series F Stock would be convertible immediately after the
close of business on the record date fixed by the Board of Directors of the
Company for determining the stockholders of the Company entitled to vote or
otherwise consent to such matter; provided, however, that in the event (x) the
Company shall fail to pay cumulative dividends in full on the outstanding shares
of Series F Stock for a period of
14
<PAGE>
four consecutive Dividend Periods, or (y) the Company shall fail to pay
cumulative dividends in full on the outstanding shares of Series F Stock for a
period of eight Dividend Periods, in either case after the expiration of thirty
days following the ESOP Payment Date, each holder of outstanding shares of
Series F Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock which such holder would have been entitled to
receive if the shares of Series F Stock held by such holder had been converted
into shares of Common Stock prior to the expiration of thirty days following the
ESOP Payment Date until such time as all cumulative dividends in arrears with
respect to the shares of Series F Stock shall have been paid in full. Except as
otherwise required by the laws of the State of Delaware, the holders of
outstanding shares of Series F Stock shall vote together with the holders of
outstanding shares of Common Stock as a single class.
FIFTH: At all elections of Directors of the Company, each stockholder
who is entitled to vote upon such election shall be entitled to as many votes as
shall be equal to the number of votes which (except for this provision as to
cumulative voting) he would be entitled to cast for the election of Directors
with respect to his shares of stock multiplied by the number of Directors to be
elected, and he may cast all of such votes for a single Director or may
distribute them among the number to be voted for or for any two or more of them,
as he sees fit.
SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter or
repeal the Bylaws of the Company.
SEVENTH: The Company shall indemnify any and all persons whom it has
the power to indemnify pursuant to the Delaware General Corporation Law against
any and all expenses, judgments, fines amounts paid in settlement, and any other
liabilities to the fullest extent permitted by such Law and may, at the
discretion of the Board of Directors, purchase and maintain insurance, at its
expense, to protect itself and such persons against any such expense, judgment,
fine, amount paid in settlement or other liability, whether or not the Company
would have the power to so indemnify such person under the Delaware General
Corporation Law.
A director of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after approval by
the stockholders of this article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Company shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
15
<PAGE>
Any repeal or modification of the foregoing paragraph by the stockholders
of the Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which only
restates and integrates and does not further amend the provisions of the
Certificate of Incorporation of the Company as heretofore amended, supplemented
or restated and there being no discrepancies between those provisions and the
provisions of this Restated Certificate of Incorporation and it having been duly
adopted in accordance with Section 245 of the General Corporation Law of the
State of Delaware by the Executive Committee of the Board of Directors, which
Committee is authorized to act on behalf of the Company's Board of Directors,
has been executed by its Vice President and attested by its Secretary on this
30th day of November, 1993.
Mattel, Inc.
By: /s/ Judy A. Willis
------------------
Vice President
Attest:
By: /s/ N. Ned Mansour
------------------
Secretary
16
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>5
<FILENAME>dex33.txt
<DESCRIPTION>BY-LAWS OF MATTEL, AS AMENDED TO DATE
<TEXT>
<PAGE>
EXHIBIT 3.3
MATTEL, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
---------------------------
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix,
which date shall be within thirteen months subsequent to the later of the date
of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
-----------------------------
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
or the Chief Executive Officer and shall be held at such place, on such date,
and at such time as they or he shall fix.
Section 3. Notice of Meetings.
-------------------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held to each stockholder
entitled to vote at such meeting, except as otherwise provided herein, in the
Restated Certificate of Incorporation or required by law.
When a meeting is adjourned to another place, date, or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
-------------------
At any meeting of the stockholders, the holders of a majority of the
voting power of the shares of the stock entitled to vote at the meeting, present
in person or by proxy, shall constitute a quorum for all purposes, unless or
except to the extent that the presence of a larger number may be required by
law.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
-------------------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the highest ranking officer of the corporation who is
present shall call to order any meeting of the stockholders and act as chairman
of the meeting. In the absence of the Secretary of the corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
--------------------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
Section 7. Proxies and Voting.
-------------------------------
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy in accordance with the procedure established for
the meeting.
Each holder of common stock shall have one vote for every share of
common stock entitled to vote which is registered in his name on the record date
for the meeting, except as otherwise provided herein or required by law. As
provided by the Certificate of Incorporation, at all elections of directors each
stockholder who is entitled to vote shall be entitled to as many votes as shall
equal the number of votes which (except for the provisions as to cumulative
voting contained in the Certificate of Incorporation) he would be entitled to
cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected, and he may cast all of such
votes for a single director or may distribute them among the number to be voted
for, or for any two or more of them as he may see fit.
All voting in person at the meeting, except for the election of
directors and where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a stockholder entitled to vote or his
proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots,
each of which shall state the name of the stockholder or proxy voting and such
other information as may be required under the
2
<PAGE>
procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast.
Section 8. Stock List.
-----------------------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
name, shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 9. Business Brought Before the Meeting,
------------------------------------------------
At any annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting or any adjournment
thereof (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the corporation who is entitled to vote with respect thereto and
who complies with the notice procedures set forth in this Section 9. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered or
mailed to and received at the principal executive offices of the corporation not
less than thirty (30) days prior to the date of the annual meeting the close of
business on the 90/th/ day nor earlier than the 120/th/ day prior to the
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the
120/th/ day prior to such annual meeting and not later than the 90/th/ day prior
to such annual meeting or the 10/th/ day following the day on which public
announcement of the date of such meeting is first made by the corporation. In no
event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above.or prior public disclosure ("Public announcement" means disclosure in a
press release, national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended). A
stockholder's notice to the Secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be
3
<PAGE>
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation's capital stock that are beneficially
owned by such stockholder, and (iv) any material interest of such stockholder in
such business, and (v) if the stockholder intends to solicit proxies in support
of such stockholder's proposal, a representation to that effect; provided,
--------
however, that compliance by such stockholder with the notice provisions and
- -------
other requirements in this Section 9 shall not create a duty of the corporation
to include such stockholder's business or proposal in the corporation's proxy
statement or proxy, and notwithstanding such compliance the corporation shall
retain such discretion as it has to omit such business or proposal from such
proxy statement or proxy or both. Notwithstanding anything in the Bylaws to the
contrary, no business shall be brought before or conducted at an annual meeting
(i) except in accordance with the provisions of this Section 9 or (ii) if the
stockholder solicits proxies in support of such stockholder's proposal made the
representation required by clause (v) of the preceding sentence. The officer of
the corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting or any adjournment thereof in accordance
with the provisions of this Section 9 and, if he or she should so determine, he
or she shall so declare to the meeting and any such business so determined to be
not properly brought before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
Section 10. Nomination for Election to Board.
----------------------------------------------
Only persons who are properly nominated in accordance with the
procedures set forth in these Bylaws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders or any adjournment thereof
at which directors are to be elected only (i) by or at the direction of the
Board of Directors (ii) by any stockholder of the corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 10. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be madeby timely
pursuant to timely and complete notice in writing to the Secretary of the
corporation. For elections at an annual meeting, to be timely, a stockholder's
notice must be delivered or mailed to and received at the principal executive
offices of the corporation not later than the close of business on the 90/th/
day nor earlier than the 120/th/ day prior to the anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120/th/ day prior to such annual
meeting and not later than the 90/th/ day prior to such annual meeting or the
10/th/ day following the day on which public announcement of the date of such
meeting is first made by the corporation. In the event the corporation calls a
special meeting of the stockholders for the purpose of electing one or more
directors to the Board of Directors, a stockholder may
4
<PAGE>
nominate a person or persons (as the case may be), for election to such position
(s) as specified in the corporation's notice of meeting, if the stockholder's
notice shall be delivered or mailed to and received at the principal executive
offices of the corporation not earlier than the close of business on the 120/th/
day prior to such special meeting and not later than the close of business on
the later of the 90/th/ day prior to such meeting or the 10/th/ day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting. In no event shall the public announcement of an adjournment of an
annual or special meeting commence a new time period for the giving of a
stockholder's notice as described above. ("Public announcement" is defined in
Section 9 herein.. Such stockholder's notice shall set forth be complete
provided it sets forth (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
as to serving as a director if elected); and (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the corporation's books,
of such stockholder and (y) class and number of shares of the corporation's
capital stock that are beneficially owned by such stockholder. (a) the name,
age, business address and residence address of the person, (b) the principal
occupation or employment of the person, (c) the class and number of shares of
capital stock of the corporation which are owned directly or beneficially by the
person, (d) a statement as to the person's citizenship, and (e) such person's
written consent to serve as a director if elected; (ii) as to the stockholder
giving the notice (a) the name and address, as they appear on the corporation's
books, of such stockholder and (b) the class and number of shares of the
corporation's stock which are owned by such stockholder, and (iii) if the
stockholder intends to solicit proxies in support of such stockholder's
nominee(s), a representation to that effect; provided, however, that compliance
-------- -------
by a stockholder with the notice provisions and other requirements in this
Section 10 shall not create a duty of the corporation to include the
stockholder's nominee in the corporation's proxy statement or proxy if the
stockholder's nominee is not nominated by the Board of Directors, and the
corporation shall retain any discretion it has to omit the nominee from the
corporation's proxy statement and proxy. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the provisions of this Section
10. The officer of the corporation or other person presiding at the meeting
shall, if the facts so warrant, determine and declare to the meeting that a
nomination made at the meeting or any adjournment thereof was not made in
accordance with such the provisions of this Section 10, with law or rules
applicable to the meeting, or if the stockholder solicits proxies in support of
such stockholder's nominee(s) without such stockholder having made the
representation required by clause (iii) of this Section 10, and if he or she
should so determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 11. Inspectors of Written Consent
------------------------------------------
In the event of the delivery, in the manner provided by ARTICLE V,
Section 3(b), to the corporation of the requisite written consent or consents to
take corporate action and/or any related revocation or revocations, the
corporation shall engage nationally recognized independent inspectors of
elections for the purpose of promptly performing a ministerial review of the
validity of the consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without a
5
<PAGE>
meeting shall be effective until such date as the independent inspectors certify
to the corporation that the consents delivered to the corporation in accordance
with ARTICLE V, Section 3(b) represent at least the minimum number of votes that
would be necessary to take the corporation action. Nothing contained in this
paragraph shall in any way be construed to suggest or imply that the Board of
Directors or any stockholder shall not be entitled to contest the validity of
any consent or revocation thereof, whether before or after such certification by
the independent inspectors, or take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation with
respect thereto, and the seeking of injunctive relief in such litigation).
Section 12. Effectiveness of Written Consent
--------------------------------------------
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the date
the earliest dated written consent was received in accordance with ARTICLE V,
Section 3(b), a written consent or consents signed by a sufficient number of
holders to take such action are delivered to the corporation in the manner
prescribed in ARTICLE V, Section 3(b).
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office.
--------------------------------------
The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by resolution of the Board of
Directors. Each director shall hold office until the annual meeting of
stockholders next succeeding his election and until his successor is elected and
qualified, except as otherwise provided herein or required by law.
The Chairman of the Board of Directors, if there be one, shall be a
director and shall serve as Chairman of the Board of Directors at the pleasure
of the Board of Directors. The Chairman of the Board of Directors shall preside
at all meetings of the stockholders and of the Board of Directors. The Chairman
of the Board of Directors shall also perform such other duties and may exercise
such other powers as may from time to time be assigned by these Bylaws or by the
Board of Directors. If there shall be no Chairman of the Board of Directors,
the Board may designate a director to act in place of a Chairman of the Board of
Directors for any purpose.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors then in office
shall have the power to elect such new directors for the balance of a term and
until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being eliminated by
the decrease.
6
<PAGE>
Section 2. Vacancies.
----------------------
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his successor is elected and
qualified.
Section 3. Regular Meetings.
-----------------------------
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
-----------------------------
Special meetings of the Board of Directors may be called by one-third
of the directors then in office or by the chief executive officer and shall be
held at such place, on such date, and at such time as they or he shall fix.
Notice of the place, date and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not less than
three days before the meeting or by telegraphing, sending by facsimile
transmission or by electronic mail the same not less than eighteen hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
Section 5. Quorum.
-------------------
At any meeting of the Board of Directors, one-third of the total
number of the whole board, but not less than two, shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Conduct of Business.
--------------------------------
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
Section 7. Powers.
-------------------
7
<PAGE>
The Board of Directors may, except as otherwise required by law,
exercise all such power and do all such acts and things as may be exercised or
done by the corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things
necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(6) To adopt from time to time such bonus or other compensation
plans for directors, officers and agents of the corporation and its
subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the corporation's business and
affairs.
Section 8. Compensation of Directors.
--------------------------------------
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
directors.
Section 9. Action without Meeting.
-----------------------------------
Any action required or permitted to be taken at any meeting of the
Board of Directors or of any Committee thereof may be taken without a meeting if
all members of the Board or Committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or Committee.
8
<PAGE>
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
-------------------------------------------------
The Board of Directors, by a vote of a majority of the whole
Board, may from time to time designate committees of the Board, including an
Executive/Finance Committee, with the powers and duties it thereby confers, to
serve at the pleasure of the Board and shall, for those committees and any
others provided for herein, elect the director or directors to serve as the
member or members, designating, if it desires, other directors as alternate
members who may replace any absent or disqualified member at any meeting of the
committee. Committees other than the Executive/Finance Committee may have only
one member. In the absence or disqualification of any member of any committee
and any alternate member in his place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section 2. Executive/Finance Committee.
----------------------------------------
If the Board of Directors shall designate an Executive/Finance
Committee, said Committee shall have the following powers:
During the intervals between meetings of the Board of Directors, that
Committee shall have all of the powers and duties of the Board of Directors,
except with respect to matters delegated to another committee and except as
shall have been otherwise provided by the Board of Directors. All action taken
by the Executive/Finance Committee since the last meeting of the Board of
Directors shall be reported to the Board at its next meeting.
During the intervals between meetings of the Executive/Finance
Committee, the chairman thereof shall have such of the powers and duties of such
Committee as shall have been conferred upon him by the Board of Directors or the
Committee.
Section 3. Conduct of Business.
--------------------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members, but not less
than two, shall constitute a quorum; and all matters shall be determined by a
majority vote of the members present.
Section 4. Emergency Management Committee.
-------------------------------------------
9
<PAGE>
If as a result of a catastrophe or other emergency condition a quorum
of any committee of the Board of Directors having power to act in the premises
cannot readily be convened and a quorum of the Board of Directors cannot readily
be convened, then all the powers and duties of the Board of Directors shall
automatically vest and continue, until a quorum of the Board of Directors can be
convened, in the Emergency Management Committee, which shall consist of all
readily available members of the Board of Directors and two of whose members
shall constitute a quorum. The Emergency Management Committee shall call a
meeting of the Board of Directors as soon as circumstances permit for the
purpose of filling any vacancies on the Board of Directors and its committees
and taking such other action as may be appropriate.
ARTICLE IV - OFFICERS
Section 1. Generally,
----------------------
The officers shall consist of a Chief Executive Officer, a President,
one or more Vice Presidents (who may at the pleasure of the Board of Directors
be designated as Senior Vice Presidents, Executive Vice Presidents, Vice
Presidents in charge of a particular function such as Vice President-
Administration, or merely Vice President), a Secretary, a Treasurer, a
Controller, and such assistants to such officers as may from time to time be
appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold his office at the pleasure of the Board
of Directors and until his successor is elected and qualified or until his
earlier resignation or removal. Any number of offices may be held by the same
person.
The Board of Directors may appoint such other officers as the business
of the corporation may require, each of whom shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
or the Chief Executive Officer may from time to time specify.
Section 2. Chief Executive Officer
-----------------------------------
Subject to the provisions of these Bylaws and to the direction of the
Board of Directors, the Chief Executive Officer of the Corporation shall have
the responsibility for the general management and control of the affairs and
business of the corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him by the Board of Directors.
The Chief Executive Officer shall have power to sign all stock
certificates, contracts and other instruments of the corporation which are
authorized. He shall have general supervision and direction of all of the other
officers and agents of the corporation.
10
<PAGE>
Section 3. President.
----------------------
The President shall have such duties and powers as may from time to
time be delegated to him by the Board of Directors or by the Chief Executive
Officer. In the absence or disability of the Chief Executive Officer, or during
the period of a vacancy in that office, he shall act as the Chief Executive
Officer of the corporation and shall have the duties and powers such office.
Section 4. Vice Presidents.
----------------------------
Each of the Vice Presidents shall have such duties and powers as may
from time to time be delegated to him by the Board of Directors, by the Chief
Executive Officer, or by the President. In the absence or disability of the
President, the Vice President designated by:
(a) the Board of Directors, or if no such designation is made, then by
(b) the Chief Executive Officer, or if no such designation is made, then
by
(c) the President
shall have the duties and powers of the President.
Section 5. The Treasurer.
--------------------------
The Treasurer shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall make such
disbursement of the funds of the corporation as are proper and shall render from
time to time an account of all such transactions and of the financial condition
of the corporation. He shall have such other duties and powers as are commonly
incident to this office or are delegated to him by the Board of Directors, by
the Chief Executive Officer, or by the President.
Section 6. The Secretary.
--------------------------
The Board of Directors shall appoint a Secretary or, at its
discretion, more than one Secretary, each of whom shall have such duties and
other powers as are commonly incident to this office or are delegated to him or
her by the Board of Directors, by the Chief Executive Officer, or by the
President. A Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. A
Secretary shall have charge of the corporate books.
Section 7. Delegation of Authority.
------------------------------------
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officer or agents, notwithstanding any
provision hereof.
11
<PAGE>
Section 8. Removal.
--------------------
Any officer of the corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 9. Action with Respect to Securities of Corporation.
-------------------------------------------------------------
Unless otherwise directed by the Board of Directors, the Chief
Executive Officer and the President, and each of them, shall have power to vote
and otherwise act on behalf of the corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this corporation may hold securities and otherwise to
exercise any and all rights and powers which this corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
----------------------------------
Each stockholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the Chief Executive Officer, or the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him. Signatures required on such certificates may be manually signed by the
transfer agent, registrar or officer, or such signatures may be facsimile.
Section 2. Transfer of Stock.
------------------------------
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of ARTICLE V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Dates.
-------------------------
(a) The Board of Directors may fix a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of any meeting
of stockholders, nor more than sixty (60) days prior to the time for the other
action hereinafter described (except as otherwise set forth in paragraph (b) of
this Section), as of which there shall be determined the stockholders who are
entitled: to notice of or to vote at any meeting of stockholders or any
adjournment thereof; to receive payment of any dividend or other distribution or
allotment of any rights; or to exercise any rights with respect to any change,
conversion or exchange of stock or with respect to any other lawful action.
12
<PAGE>
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or any officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates.
---------------------------------------------------
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
------------------------
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - INDEMNIFICATION
Section 1. Right to Indemnification.
-------------------------------------
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or
13
<PAGE>
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or person of whom he or she is the legal representative, is or was a
director or officer of the corporation, including when any such director or
officer is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
-----------------
that, except as provided in Section 2 of this ARTICLE VI, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the corporation the expenses incurred
in defending any such proceeding in advance of its final disposition, such
advances to be paid by the corporation within 20 days after the receipt by the
corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that, if the Delaware
-----------------
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise.
Section 2. Right of Claimant to Bring Suit.
--------------------------------------------
If a claim under Section 1 of this ARTICLE VI, is not paid in full by
the corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall
14
<PAGE>
be on the corporation. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 3. Non-Exclusivity of Rights.
--------------------------------------
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
ARTICLE VI shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or otherwise. No repeal
or modification of this ARTICLE VI shall in any way diminish or adversely affect
the rights of any director, officer, employee or agent of the corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
Section 4. Insurance.
----------------------
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law. To the extent that the
corporation maintains any policy or policies providing such insurance, each such
director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in Section 7 of this ARTICLE VI,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
Section 5. Procedures for Indemnification
------------------------------------------
To obtain indemnification under this ARTICLE VI, a claimant shall
submit to the corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 5, a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by independent legal counsel ( as hereinafter defined), or (2) if no request is
made by the claimant for a determination by independent legal counsel, (i) by
the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the
Board of
15
<PAGE>
Directors consisting of Disinterested Directors is not obtainable or, even if
obtainable, such quorum of Disinterested Directors so directs, by independent
legal counsel in a written opinion to the Board of Directors, a copy o which
shall be delivered to the claimant, or (iii) if a quorum of Disinterested
Directors so directs, by the stockholders of the corporation. In the event the
determination of entitlement to indemnification is to be made by independent
legal counsel at the request of the claimant, the independent legal counsel
shall be selected by the Board of Directors unless there shall have occurred
within two years prior to the date of the commencement of the action, suit or
proceeding for which indemnification is claimed a Change of Control (as
hereinafter defined), in which case the independent legal counsel shall be
selected by the claimant unless the claimant shall request that such selection
be made by the Board of Directors. If it is so determined that the claimant is
entitled to indemnification, payment to the claimant shall be made within 10
days after such determination.
Section 6. Effect and Validity
-------------------------------
If a determination shall have been made pursuant to ARTICLE VI,
Section 5 that the claimant is entitled to indemnification, the corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to ARTICLE VI, Section 2. The corporation shall be precluded from
asserting in any judicial proceeding commenced pursuant to ARTICLE VI, Section 2
that the procedures and presumptions of this ARTICLE VI are not valid, binding
and enforceable and shall stipulate in such proceeding that the corporation is
bound by all the provisions of this ARTICLE VI.
If any provision or provisions of this ARTICLE VI shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this ARTICLE VI
(including, without limitation, each portion of any paragraph of this ARTICLE VI
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this ARTICLE VI (including, without limitation, each such portion
of any paragraph of this ARTICLE VI containing any such provision held to be
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
Section 7. Employees and Agents
--------------------------------
The corporation may grant rights to indemnification, and rights to be
paid by the corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the corporation,
including when any such person is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans maintained or sponsored by the
corporation, to the fullest extent of the provision of this ARTICLE VI with
respect to the indemnification and advancement of expenses of directors and
officers of the corporation.
Section 8. Definitions
-----------------------
16
<PAGE>
For purposes of this ARTICLE VI:
(a) "Change of Control" means (i) The acquisition by any
individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the corporation (the "Outstanding Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
corporation entitled to vote generally in the election of directors (the
"Outstanding voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the corporation, (ii) any acquisition
by the corporation, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the corporation or any corporation
controlled by the corporation or (iv) any acquisition pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (a) (iii) of this
Section 7; or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the corporation's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as through such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors; or
(iii) Consummation by the corporation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the corporation or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individual and entities who
were the beneficial owners, respectively, of the Outstanding Common Stock and
Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the corporation or all or substantially all of the
corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of the corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
17
<PAGE>
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such
Business Combination; or
(iv) Approval by the stockholders of the corporation of a complete
liquidation or dissolution of the corporation.
(b) "Disinterested Director" means a director of the corporation who is
not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(c) "independent legal counsel" means a law firm, a member of a law firm,
or an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the applicable
standards of professional conduct then prevailing, would not have a
conflict of interest in representing either the corporation or the claimant
in an action to determine the claimant's rights under this ARTICLE VI."
ARTICLE VII - NOTICES
Section 1. Notices.
--------------------
Whenever notice is required to be given to any stockholder, director,
officer, or agent, such requirement shall not be construed to mean personal
notice. Such notice may in every instance be effectively given by depositing a
writing in a post office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such stockholder, director,
officer, or agent at his or her address as the same appears on the books of the
corporation. The time when such notice is dispatched shall be the time of the
giving of the notice.
Section 2. Waivers.
--------------------
A written waiver of any notice, signed by a stockholder, director,
officer or agent, whether before or after the time of the event for which notice
is to be given, shall be deemed equivalent to the notice required to be given to
such stockholder, director, officer, or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver.
18
<PAGE>
ARTICLE VIII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these bylaws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized by
the Board of Directors or the Executive Committee.
Section 2. Corporate Seal.
---------------------------
The Board of Directors shall provide a suitable seal, containing the
name of the corporation, which seal shall be in charge of the Secretary. If and
when so directed by the Board of Directors or by the Executive Committee,
duplicates of the seal may be kept and used by the Treasurer or by any Assistant
Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
-----------------------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the corporation, including reports made to the corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
Section 4. Fiscal Year.
------------------------
The fiscal year of the corporation shall terminate at the end of
business on December 31 in each year, and the following year shall begin on the
next day thereafter.
Section 5. Time Periods.
-------------------------
In applying any provision of these Bylaws which require that an act be
done or not done a specified number of days prior to an event or that an act be
done during a period of a specified number of days prior to any event, calendar
days shall be used, the day of the doing of the act shall be excluded, and the
day of the event shall be included.
Section 6. Independent Accountants.
------------------------------------
The Board of Directors shall appoint on an annual basis such firm of
independent public accountants as it shall deem appropriate to examine the
Company's financial books and records on at least an annual basis. The
appointment of said independent
19
<PAGE>
accountants shall, at the next succeeding annual meeting of stockholders be
presented to the stockholders of the Company for ratification. Should the
stockholders fail to ratify the appointment by the Board of Directors of said
independent public accountants, the Board of Directors shall take the matter
under consideration and the vote of the stockholders in that regard shall be
deemed advisory in nature.
Section 7. Gender.
-------------------
Any reference to the masculine gender in these Bylaws shall be
construed to mean the feminine gender, as the situation may demand.
ARTICLE IX - AMENDMENTS
Section 1. Amendments.
-----------------------
These Bylaws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.13
<SEQUENCE>6
<FILENAME>dex413.txt
<DESCRIPTION>WARRANT TO PURCHASE COMMON STOCK
<TEXT>
<PAGE>
EXHIBIT 4.13
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF THE
HOLDER HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(INCLUDING ANY FUTURE HOLDER) IS BOUND BY THE TERMS OF A WARRANT PURCHASE
AGREEMENT BETWEEN THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY BE
OBTAINED FROM THE COMPANY).
WARRANT TO PURCHASE 3,000,000 SHARES OF COMMON STOCK OF
MATTEL, INC.
This certifies that the holder hereof (the "Holder"), for value
------
received, is entitled to purchase from Mattel, Inc., a Delaware corporation (the
"Company"), three million (3,000,000) fully paid and nonassessable shares (the
-------
"Warrant Shares") of the Company's common stock, par value $1.00 per share (the
- ---------------
"Common Stock"), at a price of $10.875 per share (the "Stock Purchase Price") at
------------ --------------------
any time on or after July 26, 2000 (the "Issue Date"), up to and including 5:00
----------
p.m. (Pacific time) on the Expiration Date (as defined below), upon (a)
surrender to the Company at its principal offices at 333 Continental Boulevard,
El Segundo, California 90245 (or at such other reasonable location as the
Company may advise the Holder in writing) of this Warrant properly endorsed with
the Form of Subscription attached hereto duly completed and signed, and (b)
either (i) compliance with the exercise mechanism (such mechanism referred to as
a "Cashless Exercise") set forth in Section 1(B) of this Warrant, or (ii) with
-----------------
the consent of the Company (which shall not be unreasonably withheld), payment
by wire transfer of immediately available funds of the aggregate Stock Purchase
Price for the Warrant Shares. The Company shall provide the Holder a reasonable
opportunity to ask questions and receive answers concerning the terms and
conditions of the purchase of shares of Common Stock pursuant to its exercise of
the Warrant and to obtain any additional information from the Company that is
reasonably necessary to verify the information furnished in the SEC Documents.
The exercise of this Warrant is hereby expressly conditioned upon the accuracy
of all representations and warranties contained in such Form of Subscription.
The Stock Purchase Price and the number of shares purchasable hereunder are
subject to adjustment as provided in Section 3 of this Warrant. "Expiration
----------
Date" shall mean December 31, 2003 (or, in the event that December 31, 2003 is
- ----
not a business day, the next succeeding business day). Notwithstanding the
above, in the event and only to the extent that this Warrant has not been
previously exercised, this Warrant shall terminate immediately in the event that
the License Agreement, dated as of January 28, 2000, by and between the Company
and Purchaser has been terminated by the Company as a result of a material
breach by Purchaser (after notice of such breach from the Company and an
opportunity to cure within ten (10) business days). Termination by Purchaser as
a result of a material breach by the Company shall not result in termination of
the Warrant.
At any time prior to the Expiration Date, at the election of the
Holder hereof, this Warrant, which represents the Holder's right to purchase
three million (3,000,000) fully-paid and non-assessable shares of the Company's
Common Stock at the Stock Purchase Price (the "Original Warrant"), may be
----------------
divided into two equal Warrants (each, a "One-half Warrant"), each
----------------
<PAGE>
One-half Warrant representing the right to purchase one and one-half million
(1,500,000) fully-paid and nonassessable shares of the Company's Common Stock at
the Stock Purchase Price. Except for such number of shares issuable upon
exercise thereof, each One-half Warrant shall have the same terms and
provisions, and be subject to the same conditions, notice provisions and
restrictions on exercise and transfer, and be identical in all other respects,
to the Original Warrant. From and after the time the Original Warrant becomes
divided into two One-half Warrants, all references herein and in the Warrant
Purchase Agreement, dated as of July 26, 2000 (the "Warrant Purchase
----------------
Agreement"), by and between the Company and the Purchaser, to (a) the "Holder"
- ---------
of this Warrant shall be deemed to refer to the rightful holder of each One-half
Warrant and (b) this "Warrant" shall be deemed to refer to each One-half
Warrant.
This Warrant (or One-half Warrant, as the case may be) may only be
exercised as a whole and may not be exercised in part or from time to time.
This Warrant is issued pursuant to, and subject to the provisions of,
the Warrant Purchase Agreement and, by its acceptance of this Warrant, the
Holder expressly agrees to comply with the provisions of the Warrant Purchase
Agreement applicable to this Warrant (including, without limitation, the
provisions contained in Section 5(C) relating to subsequent transfers of this
Warrant and in Section 5(E) relating to the exercise procedure applicable to
this Warrant). Terms used but not defined in this Warrant shall have the
respective meanings assigned to them in the Warrant Purchase Agreement, to which
reference is hereby made.
This Warrant is subject to the following further terms and conditions:
1. Exercise.
(A) Exercise Procedure; Issuance of Certificates; Payment for Shares.
This Warrant is exercisable at the option of the Holder at any time on or after
the Issue Date and prior to or on the Expiration Date for the Warrant Shares
which may be purchased hereunder. The Company agrees that the Warrant Shares
purchased under this Warrant shall be and are deemed to be issued to the Holder
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares.
Subject to the provisions of Section 2 hereof, certificates for the Warrant
Shares so purchased, together with any other securities or property to which the
Holder is entitled upon such exercise, shall be delivered to the Holder by the
Company's transfer agent at the Company's expense as soon as reasonably
practicable after the rights represented by this Warrant have been exercised.
Each stock certificate so delivered shall be in such denominations of Warrant
Shares as may be requested by the Holder and shall be registered in the name of
the Holder.
The Holder further agrees to comply with the provisions of Section
5(E) of the Warrant Purchase Agreement respecting any proposed exercise of this
Warrant.
(B) Cashless Exercise of this Warrant. The Holder may exercise its
right to receive shares of Common Stock on a net basis such that, without the
exchange of any funds and upon surrender of this Warrant, the Holder receives
shares of Common Stock equal to the value (as determined below) of this Warrant
by surrender of this Warrant to the Company at its principal offices (at the
above address) together with notice of such election, in which event
2
<PAGE>
the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
X = Y (A - B)
---------
A
where:
X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock subject to this Warrant
A = the market price of a share of Common Stock for the date of
exercise (the market price determined, for any date, as the average of the
closing prices of the Common Stock on the New York Stock Exchange (or such other
principal securities exchange or automated quotation system upon which the
Common Stock may then be listed for public trading) for the five immediately
preceding trading days on such exchange)
B = the then current Stock Purchase Price
2. Shares to be Fully Paid, Reservation of Shares. The Company
covenants and agrees that all Warrant Shares which may be issued upon the
exercise of this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive or any similar rights of any
stockholder of the Company and free of any liens or encumbrances arising through
the Company. The Company further covenants and agrees that during the period
within which this Warrant may be exercised, the Company will at all times have
authorized and reserved, for the purpose of issue or transfer upon exercise of
this Warrant, a sufficient number of authorized but unissued shares of Common
Stock, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange or automated quotation system
upon which the Common Stock may be listed.
3. Adjustment of Stock Purchase Price; Number of Shares. The Stock
Purchase Price and the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3; provided, however,
that if a certain event shall cause the Stock Purchase Price to be adjusted to a
price less than the par value of the Common Stock, the Company prior to such
event shall decrease the par value of the Common Stock so that the Stock
Purchase Price shall not be less than the par value of the Common Stock
following the occurrence of such event.
(A) Adjustment for Dividends of Common Stock, etc.. In the event that
the Company at any time or from time to time after the issuance of this Warrant
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in
3
<PAGE>
any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Stock
Purchase Price in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as appropriate. In the event that the Company shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.
Upon each adjustment of the Stock Purchase Price pursuant to this Section 3(A),
the Holder of this Warrant shall thereafter be entitled to purchase, at the
Stock Purchase Price resulting from such adjustment, the number of shares of
Common Stock obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
(B) Adjustments for Reorganization, Reclassification, Consolidation,
Merger or Sale. If any capital reorganization or reclassification of the
capital stock of the Company, or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected (other than as provided for in Section
3(A)) in such a way that holders of Common Stock shall be entitled to receive
cash, stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and upon the terms and conditions specified in this Warrant upon
exercise of this Warrant and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such cash, shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of such Common
Stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, and in any such case appropriate provision shall
be made with respect to the rights and interest of the Holder that the
provisions thereof shall hereafter be applicable, as nearly as may be, in
relation to any shares of cash, stock, securities or assets thereafter
deliverable upon the exercise hereof.
(C) Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price or any increase or decrease in the number of shares of Common Stock
purchasable upon the exercise of this Warrant, the Company shall within ten
business days give written notice thereof, by first class mail, postage prepaid,
addressed to the Holder at the address of the Holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial
officer and shall state the Stock Purchase Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of this Warrant, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
4. Issue Tax. The issuance of certificates in the name of the Holder
for the Warrant Shares upon the exercise of this Warrant shall be made without
charge to the Holder of
4
<PAGE>
this Warrant for any issue tax in respect thereof. Notwithstanding the
foregoing, the Holder shall be responsible for payment of all stock transfer
taxes, if any, in respect of any transfer of this Warrant or any Warrant Shares.
5. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company.
Except for the adjustment to the Stock Purchase Price pursuant to Section 3(A)
hereof in the event of a dividend on the Common Stock payable in shares of
Common Stock, no dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised.
6. Restrictions on Transferability of Securities; Compliance With
Securities Act.
(A) Restrictions on Transferability of the Warrant Shares. The
Warrant Shares shall not be transferable except upon the conditions specified in
Section 5 of the Warrant Purchase Agreement.
(B) Restriction on Transferability of this Warrant; Company Right of
First Refusal; Transfers Not Permitted to Significant Competitors of the
Company.
(i) On and after the date hereof, this Warrant shall not be
transferable, except (a) as a whole Warrant (or whole One-half Warrant) to a
single transferee (where not more than one person or entity has a beneficial
interest in this Warrant or One-half Warrant, as the case may be), and (b) only
to a person or entity that is not a Significant Competitor (as defined below),
and (c) only upon the conditions specified in the Warrant Purchase Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable "blue sky" laws and (d) only in accordance with
the other provisions of this Section 6. A "Significant Competitor" is a toy
----------------------
company which has annual net sales from traditional toy products in excess of
two billion dollars (US$2,000,000,000).
(ii) By acceptance of this Warrant, the Holder agrees to provide
to the Company five (5) business days prior written notice of the Holder's
intention, directly indirectly, to sell, offer or contract to sell, pledge or
otherwise dispose or transfer (collectively, a "transfer") this Warrant, which
--------
notice shall include (a) the identity, in reasonable and specific detail, of the
proposed direct or indirect transferee (including, if the proposed transferee is
a broker or dealer, the identity, in reasonable and specific detail, of any
subsequent transferee to whom such broker or dealer intends or expects to
transfer this Warrant following its receipt hereof), (b) a copy of a binding
agreement (subject only to the Company's right of first refusal discussed
below), executed by the Holder, as the proposed transferor, and the proposed
transferee, (c) in the event the amount of the agreed upon consideration for the
proposed sale of this Warrant is all cash (such amount, the "Warrant Transfer
----------------
Cash Price"), the Warrant Transfer Cash Price and a certification that the
- ----------
Warrant Transfer Cash Price was determined on the basis of bona fide arms length
negotiations between the parties to such agreement, (d) in the event that some
or all of the
5
<PAGE>
agreed upon consideration for the proposed sale of this Warrant is
property (tangible or intangible) other than cash, a reasonably specific
description of such property intended as consideration for the transfer and (e)
all other material terms of the proposed transaction (such notice shall be
referred to herein as a "Holder's Notice of Proposed Transfer of Warrant").
-----------------------------------------------
(iii) Prior to the time and date of the proposed transfer set forth
in a Holder's Notice of Proposed Transfer of Warrant, the Company may elect to
exercise a right of first refusal to purchase the Warrant at the Right of First
Refusal Price by providing the Holder with written notice of such election. If
the Company so notifies the Holder of its election to exercise such right of
first refusal then the Company shall tender to the Holder as payment for this
Warrant a wire transfer of immediately available funds in the amount of the
Right of First Refusal Price, and the closing with respect to the purchase of
this Warrant shall occur (a) in the event the proposed consideration is all
cash, no later than ten (10) business days after the Company receives the
Holder's Notice of Proposed Transfer of Warrant and (b) in the event the
proposed consideration is other than all cash, within the later of (i) ten (10)
business days after the Company receives the Holder's Notice of Proposed
Transfer of Warrant and (ii) three (3) business days following the Company's
receipt from the investment banking firm referred to below of a letter setting
forth the price determined by such firm to be fair (including a reasonable
description of the basis for such determination) and evidence of the Holder's
payment of fees and disbursements of such investment banking firm as provided
below. If the Company does not so notify the Holder of its election to exercise
such right of first refusal, then the Holder may transfer the Warrant on the
terms and to the persons set forth in the Notice of Proposed Transfer of Warrant
within 45 days of the date of such Notice, subject to the limitations set forth
elsewhere in this Warrant and in the Warrant Purchase Agreement. In the event
that such transfer is not made within such 45-day period, any subsequent
transfer shall be subject to the right of first refusal contained in this
Section 5(B). The "Right of First Refusal Price" shall be calculated as (a) in
----------------------------
the event the proposed consideration is all cash, the Warrant Transfer Cash
Price or (b) in the event the proposed consideration is other than all cash, a
price determined to be fair by a nationally-recognized investment banking firm
chosen by the mutual agreement of the independent auditors of the Company and
the Purchaser (or any subsequent Holder) to value the aggregate consideration
which is the subject of such proposed transfer (provided, however, that the
Holder shall be obligated to pay all fees and disbursements of such investment
banking firm incurred in connection with such valuation and any matters related
thereto). Notwithstanding the foregoing, in the event that the Holder intends
to transfer the Warrant to a "subsidiary" (as defined in Rule 1-02 of Regulation
S-X under the Securities Act) of Time Warner, Inc., the Company shall not be
entitled to exercise the right of first refusal to purchase the Warrant set
forth in this Section 6(b)(iii), and the Holder's Notice of Proposed Transfer of
Warrant shall not be required to include the information set forth in clauses
(c) and (d) of Section 6(B)(ii).
(C) Restrictive Legend. Each certificate representing this Warrant or
the Warrant Shares (collectively, the "Securities") or any other securities
----------
issued in respect of Securities upon any such stock split, stock dividend,
reclassification or reorganization shall (unless otherwise permitted by the
provisions of the Warrant Purchase Agreement) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required under applicable federal or state securities laws or the Company's
Certificate of Incorporation):
6
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE AND THE RIGHTS OF THE HOLDER HEREOF ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING
ANY FUTURE HOLDER) IS BOUND BY THE TERMS OF A WARRANT PURCHASE
AGREEMENT BETWEEN THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF
WHICH MAY BE OBTAINED FROM THE COMPANY).
7. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
8. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
the Holder at its address as shown on the books of the Company or to the Company
at the address indicated therefor in the first paragraph of this Warrant.
9. Descriptive Headings and Governing Law. The descriptive headings
of the sections and paragraphs of this Warrant are inserted for convenience only
and do not constitute a part of this Warrant. This Warrant shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Delaware without regard to conflict of laws.
10. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder that upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of any Warrant or
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity and, if requested, bond reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
11. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the market price of the Common Stock (the market price
determined, for any date, as the average of the closing prices of the Common
Stock on the New York Stock Exchange (or such other principal securities
exchange or automated quotation system upon which the Common Stock may then be
listed for public trading) for the five immediately preceding trading days on
such exchange).
7
<PAGE>
12. Notices of Record Date. In the event of (A) any taking by the
Company of a record of the holders of shares of its Common Stock for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (B) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other entity (in which
the Company is not the surviving entity), or any transfer of all or
substantially all of the assets of the Company to any other person or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to the Holder of this Warrant at least ten (10) days
prior to the record date specified therein (or, if no record date is specified
with respect to any event listed in clause (B), at least ten (10) days prior to
such event), a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend or distribution and a description of such
dividend or distribution and/or (ii) the date, if any, that is to be fixed, as
to when the holders of record of shares of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
13. Regulatory Compliance.
(A) The Company and the Holder hereby acknowledge that exercise of
this Warrant by the Holder is subject to receipt of all necessary governmental
consents and approvals and may subject the Company and/or the Holder to the
filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and that the Holder may be prevented from acquiring
-------
shares of Common Stock upon exercise of this Warrant until receipt of all
necessary governmental consents and approvals and the expiration or early
termination of all waiting periods imposed by the HSR Act (collectively,
"Governmental Approvals"). Promptly following the Holders' notice of exercise
- -----------------------
or other written request from the Holder, the Company and the Holder will use
their respective reasonable best efforts to make all filings necessary to obtain
all Governmental Approvals. Notwithstanding the foregoing, neither the Company
nor the Holder of this Warrant shall be obligated to take any action to obtain
any Governmental Approvals if the taking of such action could have the direct or
indirect effect of restricting, limiting or otherwise subjecting to penalty
either the Company or the Holder of this Warrant in the ownership of their
respective assets or the conduct of their respective businesses (including,
without limitation, requiring that the Company or the Holder of this Warrant to
sell, divest or otherwise dispose of any of its assets or businesses). Subject
to clause (B) below, if the Holder and the Company are not able to obtain all
such Governmental Approvals on or before the Expiration Date, the is Warrant
will expire on the Expiration Date.
(B) Notwithstanding anything to the contrary contained within this
Section 13, if the Holder has requested that the Company and the Holder use
their respective reasonable best efforts to make all filings necessary to obtain
all Governmental Approvals at least six months prior to the Expiration Date (the
"Governmental Approvals Procedure"), and the necessary Governmental Approvals
--------------------------------
have not been obtained prior to the Expiration Date (despite the Holders' and
the Company's respective reasonable best efforts to obtain such Governmental
Approvals), the Exercise Period shall be extended for a period not to exceed six
(6) months following the Expiration Date (the "Post Expiration Period") in order
----------------------
to allow for receipt of the necessary Governmental Approvals. If the
Governmental Approvals are obtained within the Post Expiration Period but the
Holder does not deliver notice to the Company of the exercise of this
8
<PAGE>
Warrant and comply with the Cashless Exercise mechanism or tender the Stock
Purchase Price in accordance herewith within ten (10) business days following
the Holder's receipt of notice of the receipt of such Governmental Approvals,
then (i) this Warrant shall expire as of the close of business of such tenth
business day following the Holder's receipt of notice of the receipt of such
Governmental Approvals and (ii) the Holder shall reimburse the Company for all
(a) filing fees and (b) all other costs and expenses (including, without
limitation, all legal expenses) incurred by the Company to obtain such
Governmental Approvals.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers, thereunto duly authorized this 26th day of July, 2000
Mattel, Inc.
/s/ Robert Normile
_____________________________
By: Robert Normile
Title: Senior Vice President and
General Counsel
9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>7
<FILENAME>dex109.txt
<DESCRIPTION>FORM OF INDEMNITY AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.9
INDEMNITY AGREEMENT
This Agreement is made as of the day of , , by and
between MATTEL, INC., a Delaware corporation (the "Corporation"), and
(the "Indemnitee"), a Director and/or Officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
Directors and Officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
Directors and Officers to expensive litigation risks at the same time that the
availability of Directors' and Officers' liability insurance has been severely
limited, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its Directors and Officers so as to provide them with
the maximum possible protection permitted by law, and
WHEREAS, the Corporation does not regard the protection available to
Indemnitee as adequate in the present circumstances, and realizes that
Indemnitee may not be willing to serve as a Director and/or Officer without
adequate protection, and the Corporation desires Indemnitee to serve in such
capacity;
NOW, THEREFORE, in consideration of Indemnitee's service as a Director
and/or Officer after the date hereof, the parties agree as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought by or in the right of
the Corporation or otherwise and whether of a civil, criminal,
administrative or investigative nature.
(b) The term "Expenses" shall include, but is not limited to, expenses
of investigations, judicial or administrative proceedings or appeals,
damages, judgments, fines, amounts paid in settlement by or on behalf of
Indemnitee, attorneys' fees and disbursements and any expenses of
establishing a right to indemnification under this Agreement.
(c) The terms "Director" and "Officer" shall include Indemnitee's
service at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise as well as a Director and/or Officer of the Corporation.
<PAGE>
2. Indemnity of Director or Officer. Subject only to the limitations set
forth in Section 3, Corporation will pay on behalf of the Indemnitee all
Expenses actually and reasonably incurred by Indemnitee because of any claim or
claims made against him in a Proceeding by reason of the fact that he is or was
a Director and/or Officer.
3. Limitations on Indemnity. Corporation shall not be obligated under
this Agreement to make any payment of Expenses to the Indemnitee.
(a) which payment it is prohibited by applicable law from paying as
indemnity;
(b) for which payment is actually made to the Indemnitee under an
insurance policy, except in respect of any excess beyond the amount of
payment under such insurance;
(c) for which payment the Indemnitee is indemnified by Corporation
otherwise than pursuant to this Agreement;
(d) resulting from a claim decided in a Proceeding adversely to the
Indemnitee based upon or attributable to the Indemnitee gaining in fact any
personal profit or advantage to which he was not legally entitled;
(e) resulting from a claim decided in a Proceeding adversely to the
Indemnitee for an accounting of profits made from the purchase or sale by
the Indemnitee of securities of Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law; or
(f) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the
foregoing, the Indemnitee shall be indemnified under this Agreement as to
any claims upon which suit may be brought against him by reason of any
alleged dishonesty on his part, unless it shall be decided in a Proceeding
that he committed (i) acts of active and deliberate dishonesty, (ii) with
actual dishonest purpose and intent, and (iii) which acts were material to
the cause of action so adjudicated.
For purposes of Sections 3 and 4, the phrase "decided in a Proceeding"
shall mean a decision by a court, arbitrator(s), hearing officer or other
judicial agent having the requisite legal authority to make such a decision,
which decision has become final and from which no appeal or other review
proceeding is permissible.
4. Advance Payment of Costs. Expenses incurred by Indemnitee in defending
a claim against him in a Proceeding shall be paid by the Corporation as incurred
and in advance of the final disposition of such Proceeding; provided, however,
that Expenses of defense need not be paid as incurred and in advance where the
judicial
<PAGE>
agent of first impression has decided the Indemnitee is not entitled to be
indemnified pursuant to this Agreement or otherwise. Indemnitee hereby agrees
and undertakes to repay such amounts advanced if it shall be decided in a
Proceeding that he is not entitled to be indemnified by the Corporation pursuant
to this Agreement or otherwise.
5. Enforcement. If a claim under this Agreement is not paid by
Corporation, or on its behalf, within thirty days after a written claim has been
received by Corporation, the Indemnitee may at any time thereafter bring suit
against Corporation to recover the unpaid amount of the claim and if successful
in whole or in part, the Indemnitee shall also be entitled to be paid the
Expenses of prosecuting such claim.
6. Subrogation. In the event of payment under this Agreement, Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable Corporation effectively to bring suit to
enforce such rights.
7. Notice. The Indemnitee, as a condition precedent to his right to be
indemnified under this Agreement, shall give to Corporation notice in writing as
soon as practicable of any claim made against him for which indemnity will or
could be sought under this Agreement. Notice to Corporation shall be given at
its principal office and shall be directed to the Corporate Secretary (or such
other address as Corporation shall designate in writing to the Indemnitee);
notice shall be deemed received if sent by prepaid mail properly addressed, the
date of such notice being the date postmarked. In addition, the Indemnitee
shall give Corporation such information and cooperation as it may reasonably
require.
8. Saving Clause. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify Indemnitee to the full extent permitted
by any applicable portion of this Agreement that shall not have been invalidated
or by any other applicable law.
9. Indemnification Hereunder Not Exclusive. Nothing herein shall be
deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
Bylaws of the Corporation or under Delaware law.
10. Applicable Law. This Agreement shall be governed by and construed in
accordance with Delaware law.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
12. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns.
<PAGE>
13. Continuation of Indemnification. The indemnification under this
Agreement shall continue as to Indemnitee even though he may have ceased to be a
Director and/or Officer and shall inure to the benefit of the heirs and personal
representatives of Indemnitee.
14. Coverage of Indemnification. The indemnification under this Agreement
shall cover Indemnitee's service as a Director and/or Officer prior to or after
the date of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
MATTEL, INC.
By:
--------------------------------
INDEMNITEE
By:
---------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>8
<FILENAME>dex1010.txt
<DESCRIPTION>EXECUTIVE EMPLOYMENT AGMT DATED 10/18/2000
<TEXT>
<PAGE>
EXHIBIT 10.10
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into on
October 18, 2000 and is effective as of May 16, 2000 (the "Effective Date")
between Mattel, Inc., a Delaware corporation ("Mattel") and Robert A. Eckert
(the "Executive").
1. Employment Period. Mattel hereby agrees to employ and continue in its
-----------------
employ the Executive, and the Executive hereby accepts such employment and
agrees to remain in the employ of Mattel, for the period commencing on the
Effective Date and ending on June 30, 2003, subject to earlier termination as
provided herein; provided that commencing on June 30, 2000, the term of this
Agreement shall be extended automatically for one (1) additional day for each
day that has then elapsed since the Effective Date, unless, at any time
thereafter, either the Board of Directors of Mattel (the "Board"), on behalf of
Mattel, or the Executive gives written notice to the other, in accordance with
Section 14(b), below, that such automatic extension of the term of this
Agreement shall cease. Any such notice shall be effective immediately upon
delivery. The initial term of this Agreement, plus any extension by operation of
this Section 1, shall be hereinafter referred to as the "Term."
2. Duties.
------
(a) Executive's Positions and Titles. During the Term, the Executive's
--------------------------------
positions and titles shall be Chairman of the Board and Chief Executive Officer,
Mattel, Inc. He shall also be nominated for election as a director of Mattel at
the earliest opportunity.
(b) Executive's Duties. Executive shall report directly to the Board of
------------------
Directors. Throughout the Term, the Executive's duties, responsibilities and
authority shall include all of the duties, responsibilities, and authority
normally performed by the Chairman and Chief Executive Officer of Mattel, with
such additions or modifications thereto which are consistent with his position,
responsibilities and authority hereunder, as the Board may, from time to time,
in its discretion and acting in good faith after consultation with the
Executive, adopt. In no event shall the duties, responsibilities and authority
of Executive be less than those initially performed by him. The Executive's
services shall be performed in the greater Los Angeles, California, area at
Mattel's headquarters, and, without the Executive's consent, he shall not be
transferred outside such area, other than for normal business travel and
temporary assignments.
<PAGE>
(c) Full Time. The Executive agrees to devote the Executive's full
---------
business time to the business and affairs of Mattel and to use the Executive's
best efforts to perform faithfully and efficiently the duties and
responsibilities assigned to the Executive hereunder, subject to periods of
vacation and sick leave to which he is entitled. Notwithstanding the foregoing,
Executive may serve on civic or charitable boards or committees and manage his
personal investments and affairs to the extent such activities do not materially
interfere with the performance of his duties and responsibilities. After
consultation with the Board or the Executive Committee thereof as to
appropriateness with regard to the Executive's duties and responsibilities to
Mattel, the Executive may also serve on corporate boards of directors of
corporations which do not directly compete with Mattel. In no event will
Executive invest in any business which directly competes with Mattel, nor will
he engage in any outside business activity of any nature, including, but not
limited to, activity as a consultant, agent, partner, officer or provider of
business services of any nature, directly or indirectly to a corporation or
other business enterprise. Nothing in this Agreement shall be construed to
prohibit the Executive from investing in up to 1% of the stock of any
corporation which does not directly compete with Mattel and whose stock is
listed on a national securities exchange or on the Nasdaq National Market
system.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Executive shall receive a base
-----------
salary ("Base Salary"), paid bi-weekly, at an annual rate of at least
$1,250,000. The Base Salary shall be reviewed from time to time in accordance
with Mattel's policies and practices, but no less frequently than once every
eighteen (18) months and may be increased at any time and from time to time by
action of the Board or the Compensation/Options Committee thereof or any
individual having authority to take such action in accordance with Mattel's
regular practices. Any increase in the Base Salary shall not serve to limit or
reduce any other obligation of Mattel hereunder and, after any such increase,
the Base Salary shall not be reduced.
2
<PAGE>
(b) Sign-On Bonus and Corporate Loan.
--------------------------------
(i) Initial Bonus Payment. Mattel has paid the Executive an initial
---------------------
bonus payment of $2,784,874 in cash, which payment constitutes a sign-on
bonus.
(ii) Corporate Loan. Mattel has provided the Executive a loan in the
--------------
amount of $5,500,000, in accordance with the Loan Agreement attached hereto
as Exhibit A.
(c) Annual Bonus Programs. In addition to the Base Salary, the Executive
---------------------
shall be eligible to participate throughout the Term in such annual bonus plans
and programs ("Annual Bonus Programs"), such as Mattel's Management Incentive
Plan (the "MIP"), as may be in effect from time to time in accordance with
Mattel's compensation practices and the terms and provisions of any such plans
or programs as in effect from time to time; provided that the Executive's
eligibility for and participation in each of the Annual Bonus Programs shall be
at a level and on terms and conditions consistent with those for other senior
executives of Mattel. Executive shall have a target annual bonus under such
Annual Bonus Programs equal to at least 100% of Base Salary and a maximum annual
bonus equal to at least 200% of Base Salary. Unless Executive's employment is
terminated for Cause prior to the normal annual bonus payment date for the 2000
year under Mattel's compensation practices, Executive shall receive an annual
bonus for such year equal to at least the target annual bonus of $1,250,000,
without proration.
(d) Long Term Incentive Programs. In addition to the Base Salary and
----------------------------
participation in the Annual Bonus Programs, the Executive shall be eligible to
participate throughout the Term in such long term bonus plans and programs
("Long Term Bonus Programs"), such as Mattel's Long Term Incentive Plan
("LTIP"), as may be in effect from time to time in accordance with Mattel's
compensation practices and the terms and provisions of any such plans or
programs as in effect from time to time; provided that the Executive's
participation in each Long Term Bonus Program shall be at a level and on terms
and conditions consistent with competitive pay practices and with participation
by other senior executives of Mattel. Executive's long term incentive bonus for
the 2000-2002 performance cycle shall be at least $2,000,000 for performance at
the threshold level, $4,000,000 at the target level, and $8,000,000 at the
maximum level, prorated for the period from the Effective Date through the end
of the year 2002.
3
<PAGE>
(e) Equity Based Incentive Compensation.
-----------------------------------
(i) Initial Option Grant. Executive was awarded on the Effective Date
--------------------
an initial grant of ten-year options ("Initial Option Grant") with respect
to 3,000,000 shares of the common stock of Mattel to vest (i) 750,000
shares on the Effective Date, and (ii) 750,000 shares on each of the first
three anniversaries of the Effective Date. The exercise price for the
options was $11.25, the closing NYSE price on May 16, 2000, the date the
Executive accepted employment with Mattel. The Initial Option Grant is
otherwise subject to the terms and conditions of Mattel's Amended and
Restated 1996 Stock Option Plan.
(ii) Initial Restricted Stock Unit Grant. The Executive was awarded on
-----------------------------------
the Effective Date an initial grant of 685,468 shares of deferable
restricted stock units ("Initial Restricted Stock Unit Grant") to vest 25%
on June 30, 2000, 25% on January 31, 2001, 25% on January 31, 2002, and 25%
on June 30, 2008. The shares issuable as a result of the vesting of such
restricted stock units shall be delivered by Mattel to the Executive by the
earlier of: (A) April 1 of the year that next follows the end of the
calendar year during which the Executive ceases to be employed by Mattel;
or (B) thirteen (13) months following the earliest date when the entire
payment would be tax deductible under all pertinent federal tax laws,
including Section 162(m) of the Internal Revenue Code, without affecting
the deductibility of $1 million of the Executive's Base Salary in any year,
as determined by the reasonable belief of the Board's Compensation
Committee.
(iii) Participation In Mattel's Stock Incentive Plans. During the Term,
-----------------------------------------------
the Executive shall be entitled to participate in Mattel's stock option
plans and other stock incentive programs in a manner consistent with
competitive pay practices and in accordance with the policies and practices
of Mattel as in effect from time to time with respect to senior executives
employed by Mattel so as to reflect the Executive's responsibilities.
(f) Other Incentive Plans. During the Term, the Executive shall be
---------------------
eligible to participate, subject to the terms and conditions thereof, in all
incentive plans and programs, including, but not limited to, such cash and
deferred bonus programs as may be in effect from time to time with respect to
senior executives employed by Mattel so as to reflect the Executive's
responsibilities.
4
<PAGE>
(g) Supplemental Retirement Benefits.
--------------------------------
(i) Age 60 Pension. Upon termination of employment, the Executive
--------------
will be entitled to receive from Mattel a supplemental retirement benefit
which, when expressed as a single life annuity and added to any benefits
payable under all qualified and nonqualified defined benefit retirement
plans of Mattel (also expressed as a single life annuity), will produce an
aggregate annual pension benefit at age 60 (the "Age 60 Pension") which is
not less than 35% of (i) the Executive's average annual compensation or, if
greater, (ii) $2,500,000, the sum of the Executive's initial annual Base
Salary under Section 3(a) and initial target annual bonus under Section
3(c), subject to the possible reductions described in paragraph (ii),
below. For purposes hereof, except as provided below, the Executive's
"average annual compensation" shall be equal to the sum of (A) the average
of the Executive's final three years of annual base salary, plus (B) the
average of the greatest two of the five most recent Annual Bonus Program
bonuses earned by the Executive. In the event the Executive has completed
fewer than three or five years of employment with Mattel at the time of
termination of employment, then such average amounts shall be based upon
such shorter period.
(ii) Pre-Age 60 Termination. In the event of termination of
----------------------
employment prior to age 60 for any reason other than termination by Mattel
for Cause or resignation by the Executive without Good Reason, the
Executive will be entitled to the Age 60 Pension. If the Executive's
employment is terminated under circumstances which entitle him to receive
severance benefits under Section 5(d)(i)(C) below, then for the purpose of
determining the Executive's average annual compensation in calculating such
Age 60 Pension, the Executive's average annual compensation shall be
calculated as if the Executive had remained employed by Mattel for three
(3) additional years and had received for each of those years Base Salary
at the rate in effect at the time the Notice of Termination is given and a
Bonus as determined under Section 5(d)(i)(B), below, but without proration
and, in each case, without regard to any contributions by Mattel for the
Executive's benefit to any retirement or other investment plan. In the
event of the Executive's resignation without Good Reason or termination by
Mattel for Cause prior to age 60, the amount of the Age 60 Pension will be
calculated as above and then such amount shall be reduced by (i) 3% of such
amount multiplied by (ii) the number of full years during the period
between such resignation or termination and the Executive's 60th birthday;
and in the event of such a resignation or termination prior to the fifth
anniversary of the Effective Date, the amount of the Age 60 Pension, as
reduced under the preceding clause, will be further prorated by multiplying
it by a fraction the numerator of which is the number of months the
Executive was actively employed by Mattel and the denominator of which is
60.
5
<PAGE>
(iii) Early Commencement of Supplemental Pension. In the event
------------------------------------------
Executive's employment with Mattel is terminated prior to age 60, the
Age 60 Pension may be commenced early, subject to a reduction of 3%
for each full year that the pension commences prior to age 60. In the
event of a Change of Control, the 3% discount for early commencement
will be measured from age 55.
(iv) Form of Payment of Supplemental Pension and Survivor
----------------------------------------------------
Benefits. The Age 60 Pension may be paid in any form permitted under
--------
Mattel's Supplemental Executive Retirement Plan. In the event of the
Executive's death before the Age 60 Pension becomes payable, his wife
will receive, commencing immediately, a survivor annuity for her life
equal to 50% of the amount which would have been payable to the
Executive if he had terminated his employment for Good Reason
immediately prior to the date of his death and elected to commence his
Age 60 Pension immediately. Any such survivor benefit will be reduced
by the amount of any pre-retirement survivor benefit payable to the
Executive's wife under Mattel's qualified and nonqualified defined
benefit retirement plans.
(h) Other Pension and Welfare Benefit Plans. During the Term, the
---------------------------------------
Executive and/or the Executive's dependents, as the case may be, shall be
eligible to participate in, subject to the terms and conditions thereof, all
pension and similar benefit plans (qualified, non-qualified and supplemental),
profit sharing, ESOP, 401(k), medical and dental, disability, group and/or
executive life, accidental death and travel accident insurance, and all similar
benefit plans and programs of Mattel as in effect from time to time with respect
to senior executives employed by Mattel so as to reflect the Executive's
responsibilities. In the event of any applicable waiting periods with respect to
Mattel's group health plan, Executive shall be entitled to receive an additional
payment equal to Executive's premiums for continuation of group health coverage
for Executive and his family under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) or similar law for the period of time prior
to the date Executive and his family become entitled to coverage under Mattel's
group health plan without any further waiting periods, and that additional
payment shall be "grossed-up" for all applicable taxes.
(i) Additional Life Insurance Benefit. In addition to any group
---------------------------------
and/or executive life insurance benefits, Mattel shall maintain life insurance
which will pay to the Executive's beneficiaries a death benefit equal to three
times the Executive's initial Base Salary.
(j) Expenses. During the Term, the Executive shall be entitled to
--------
receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the policies and practices of Mattel as in effect
from time to time. Mattel will pay all reasonable professional expenses incurred
by the Executive in connection with the negotiation and preparation of this
Agreement.
6
<PAGE>
(k) Fringe Benefits. During the Employment Period, the Executive shall be
---------------
entitled to fringe benefits at a level at or above those available to other
senior executives of Mattel, including a leased automobile, car and driver (at
his disposal whenever required by him), personal and home security, and related
expenses as well as first class travel expenses, the use of a company-issued
gasoline credit card, club memberships and related expenses, and financial
counseling and tax preparation services in accordance with the policies of
Mattel as in effect from time to time with respect to senior executives employed
by Mattel.
(l) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the policies and practices of
Mattel as in effect from time to time with respect to senior executives employed
by Mattel.
(m) Certain Amendments. Nothing herein shall be construed to prevent
------------------
Mattel from amending, altering, eliminating or reducing any plans, benefits or
programs so long as the Executive continues to receive compensation and benefits
consistent with Sections 3(a) through (k).
(n) Relocation Expenses. Mattel will pay all costs of relocation of the
-------------------
Executive and his family to California in accordance with Mattel's relocation
policy, supplemented as follows to the extent such benefits are not provided
under that policy:
(i) Mattel shall reimburse the Executive for reasonable temporary
living expenses for the Executive and his family in the Los Angeles
metropolitan area for a period not to exceed one year from the date hereof;
(ii) Mattel shall make available to the Executive the opportunity to
sell his present primary residence at appraised value through Mattel's
relocation firm; and
(iii) Mattel shall pay the Executive, in addition to all relocation
payments otherwise required pursuant to this Section 3(n), an amount such
that after payment by the Executive of all of the Executive's applicable
federal, state and local taxes on such amount, the Executive will retain an
amount sufficient to pay the total of the Executive's applicable federal,
state and local taxes arising due to the other payments under this Section
3(n).
7
<PAGE>
4. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Executive's death; provided that the Executive's Base Salary will be
continued and paid for a period of six months thereafter. Mattel may terminate
this Agreement, after having established the Executive's Disability, by giving
to the Executive written notice of its intention to terminate the Executive's
employment, and the Executive's employment with Mattel shall terminate effective
on the 90th day after receipt of such notice (the "Disability Effective Date").
For purposes of this Agreement, the Executive's "Disability" shall occur and
shall be deemed to have occurred only in the event that the Executive suffers a
disability due to illness or injury which substantially and materially limits
the Executive from performing each of the essential functions of the Executive's
job, even with reasonable accommodation, and he becomes entitled to receive
disability benefits under the Mattel Long-Term Disability Plan for exempt
employees.
(b) Cause. Mattel may terminate the Executive's employment for Cause, if
-----
"Cause" as defined below exists and if at least two-thirds (2/3) of the
nonmanagement members of the Board of Directors make a good faith determination
that termination is appropriate. For purposes of this Agreement, "Cause" means
(i) one or more factually substantiated willful acts of dishonesty on the
Executive's part which are intended to result in the Executive's substantial
personal enrichment at the expense of Mattel; (ii) repeated violations by the
Executive of the Executive's obligations under Section 2 of this Agreement which
are demonstrably willful and deliberate on the Executive's part and which
resulted in material injury to Mattel; (iii) conduct by the Executive of a
factually substantiated criminal nature (commonly defined as a "felony" in
criminal statutes) which has or which is more likely than not to have a material
adverse effect on Mattel's reputation or standing in the community or on its
continuing relationships with its customers or those who purchase or use its
products; or (iv) factually substantiated fraudulent conduct by the Executive in
connection with the business or affairs of Mattel, regardless of whether said
conduct is designed to defraud Mattel or others; provided that, in each case,
the Executive has received written notice of the described activity, has been
afforded a reasonable opportunity to cure or correct the activity described in
the notice, and has failed to substantially cure, correct or cease the activity,
as appropriate.
(c) Good Reason. The Executive may terminate the Executive's employment
-----------
at any time for Good Reason. For purposes of this Agreement, "Good Reason" means
the good faith determination by the Executive that any one or more of the
following have occurred:
(i) without the express written consent of the Executive,
any change(s) in any of the duties, authority, or responsibilities of the
Executive which is (are) inconsistent in any substantial respect with the
Executive's position, authority, duties, or responsibilities as
contemplated by this Agreement;
8
<PAGE>
(ii) any failure by Mattel to comply with any of the provisions of
Section 3 of this Agreement, other than an insubstantial and inadvertent
failure remedied by Mattel promptly after receipt of notice thereof given
by the Executive, so long as Mattel reimburses Executive for cash payments
due to the Executive and not theretofore paid, together with interest
thereon at prevailing rates;
(iii) any proposed termination by Mattel of the Executive's employment
other than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption and agreement to
perform this Agreement by a successor as contemplated by Section 12(b);
(v) without the Executive's consent, any requirement by Mattel that
Executive be based at any office or location other than an office or
location in the greater Los Angeles, California area, or at an office other
than Mattel's headquarters, except for travel reasonably required in the
performance of the Executive's responsibilities; or
(vi) Mattel giving notice to the Executive to stop further operation
of the evergreen feature described in Section 1, above.
(d) Termination by Executive Without Good Reason. Executive may, at any
--------------------------------------------
time without Good Reason, by at least 30 days prior written notice, voluntarily
terminate this Agreement without liability.
9
<PAGE>
(e) Change of Control. "Change of Control" means:
-----------------
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
Mattel, including the shares of common stock of Mattel issuable upon an
exchange of Softkey Exchangeable Shares that are not owned by Mattel or any
corporation controlled by Mattel (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting securities
of Mattel entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following shall not constitute a
Change of Control: (a) any acquisition directly from Mattel, (b) any
acquisition by Mattel or any corporation controlled by Mattel, (c) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by Mattel or any corporation controlled by Mattel, (d) any
acquisition by a Person of 20% of either the Outstanding Company Common
Stock or the Outstanding Company Voting Securities as a result of an
acquisition of common stock of Mattel by Mattel or of Softkey Exchangeable
Shares by Softkey which, by reducing the number of shares of common stock
of Mattel or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or
more of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities; provided, however, that if a Person shall become
the beneficial owner of 20% or more of either the Outstanding Company
Common Stock or the Outstanding Company Voting Securities by reason of a
share acquisition by Mattel or by Softkey as described above and shall,
after such share acquisition by Mattel or Softkey, become the beneficial
owner of any additional shares of common stock of Mattel, then such
acquisition shall constitute a Change of Control or (e) any acquisition
pursuant to a transaction which complies with clauses (a), (b) and (c) of
subsection (iii) of this Section 4(e); provided, further, however, that for
purposes of this subsection (i) any Investing Person (as such term is
defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share (as
such term is defined in the Rights Agreement) shall be deemed not to be a
beneficial owner of such Mattel Special Voting Preferred Share; or
10
<PAGE>
(ii) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Mattel's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(iii) consummation by Mattel of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of Mattel or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns Mattel or all or substantially all of Mattel's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (b) no Person (excluding any employee benefit plan (or
related trust) of Mattel or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding share of common stock of the corporation
resulting from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination and
(c) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(iv) approval by the shareholders of Mattel of a complete liquidation
or dissolution of Mattel.
For the purposes of this Section 4(e), (a) "Rights Agreement" means the
Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated
as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between
Mattel and BankBoston N.A., a national banking association, formerly, The First
National Bank of Boston, and not
11
<PAGE>
giving effect to any amendments subsequent to November 4, 1999, (b) "Softkey"
means Softkey Software Products Inc., an Ontario corporation, and (c) "Softkey
Exchangeable Shares" means the Exchangeable Shares in the capital stock of
Softkey.
(f) Notice of Termination. Any termination of the Executive's
---------------------
employment by Mattel for Disability or for Cause or following a Change of
Control or by the Executive for or without Good Reason shall be communicated by
a Notice of Termination to the other party hereto given in accordance with
Section 14(b). For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon; (ii) except in the event of a termination following a
Change of Control, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated; and (iii) specifies the Date of Termination (defined
below).
(g) Date of Termination. "Date of Termination" means the date of actual
-------------------
receipt of the Notice of Termination or any later date specified therein (but
not more than fifteen (15) days after the giving of the Notice of Termination),
as the case may be; provided that (i) if the Executive's employment is
terminated by Mattel for any reason other than Cause or Disability, the Date of
Termination is the date on which Mattel notifies the Executive of such
termination; (ii) if the Executive's employment is terminated due to Disability,
the Date of Termination is the Disability Effective Date; (iii) if the
Executive's employment is terminated due to the Executive's death, the Date of
Termination shall be the date of death; and (iv) if the Executive's employment
is terminated by the Executive without Good Reason, the Date of Termination is
the date thirty (30) days after the giving of the Notice of Termination, unless
the parties otherwise agree in writing.
5. Obligations of Mattel upon Termination. Other than as specifically set
--------------------------------------
forth or referenced in this Agreement, the Executive shall not be entitled to
any benefits on or after the Date of Termination.
(a) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death, this Agreement shall terminate without further obligations by
Mattel to the Executive's legal representatives under this Agreement, except as
set forth in this Section 5(a) or as contained in an applicable Mattel plan or
program which takes effect at the date of his death, but in no event shall
Mattel's obligations be less than those provided by this Agreement.
(i) As of the Date of Termination, the Executive's family shall be
entitled to health care coverage and financial counseling benefits until
the third anniversary of the Date of Termination;
12
<PAGE>
(ii) From and after the Date of Termination, the
Executive's legal representatives shall be entitled to
receive those benefits payable to the Executive's surviving
spouse or other named beneficiaries under the provisions of
any applicable Mattel plan or program and/or as provided for
under Section 3(g), above, including, without limitation,
any benefits commencing immediately upon the Executive's
death;
(iii) On the Date of Termination, all options to
purchase stock of Mattel theretofore granted to the
Executive ("Options") and not exercised by the Executive
shall become fully vested and shall be exercisable by his
legal representatives for a period of ten (10) years from
the date each such Option was granted; and
(iv) On the Date of Termination, all restricted stock
units and restricted stock, including, without limitation,
any restricted stock units granted as part of the Initial
Restricted Stock Unit Grant described in Section 3(e)(ii),
above, granted by Mattel to the Executive prior to the Date
of Termination which had not vested prior to such date,
shall become fully vested and nonforfeitable.
(b) Disability. If the Executive's employment is terminated
----------
by reason of the Executive's Disability, the Executive shall be entitled to
receive after the Disability Effective Date:
(i) disability benefits, if any, at least equal to
those then provided by Mattel to disabled executives and/or
their families;
(ii) until the earlier of the third anniversary of
the Date of Termination or the date the Executive accepts
other employment, those other benefits described in Section
5(d)(v), on the terms set forth therein;
(iii) all supplemental retirement benefits for which
the Executive is or shall become eligible shall be
immediately available;
(iv) on the Disability Effective Date, all Options
theretofore granted to the Executive and not exercised by
the Executive shall become fully vested and shall be
exercisable for a period of ten (10) years from the date
each such Option was granted; and
(v) On the Disability Effective Date, all restricted
stock units and restricted stock, including, without
limitation, any restricted stock units granted as part of
the Initial Restricted Stock Unit Grant described in Section
3(e)(ii), above, granted by Mattel to the Executive prior to
the Disability Effective Date which had not vested prior to
such date, shall become fully vested and nonforfeitable.
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(c) Cause/Other Than for Good Reason. If the Executive's employ-
--------------------------------
ment is terminated for Cause or if the Executive terminates the Executive's
employment without Good Reason, Mattel shall pay the Executive all Accrued
Obligations, all unvested portions of the Initial Option Grant and the
Initial Restricted Stock Unit Grant shall be forfeited, and Mattel shall
have no further obligations to the Executive under this Agreement. For
purposes of this Section 5(c), the term "Accrued Obligations" shall mean,
as of the Date of Termination, the sum of (i) the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given to the extent not theretofore paid, (ii) the
amount of any bonus, incentive compensation, deferred compensation
(including, but not limited to, any supplemental retirement benefits) and
other cash compensation earned by the Executive as of the Date of
Termination to the extent not theretofore paid and (iii) any vacation pay,
expense reimbursements and other cash entitlements accrued by the Executive
as of the Date of Termination to the extent not theretofore paid. For
purposes of determining an Accrued Obligation under this Section 5(c),
amounts shall be deemed to accrue ratably over the period during which they
are earned, but no discretionary compensation shall be deemed earned or
accrued until it is specifically approved by the Board in accordance with
the applicable plan, program or policy.
(d) Good Reason; Other Than for Cause or Disability. If Mattel
-----------------------------------------------
terminates the Executive's employment other than for Cause or Disability or
the Executive terminates the Executive's employment for Good Reason:
(i) Mattel shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(A) if not theretofore paid, the Executive's Base
Salary through the Date of Termination at the rate in effect
at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus") equal to the
greatest of: (x) the average of the two highest annual
bonuses received by the Executive under the MIP, or any
successor plan, in the three years prior to the Date of
Termination, including any years in which the Executive was
paid no bonus (the "Average Annual Bonus"), and prorated to
reflect the total number of full months the Executive is
employed on an active and full time basis in the year in
which termination occurs; (y) the annual bonus, if any, paid
to the Executive under the MIP or any successor plan, but
excluding for this purpose any bonus paid under Section
3(b)(i), for the 2000 or 2001 calendar year, whichever is
greater, without proration; or (z) the target annual bonus
(100%of Base Salary) for the Executive under the MIP for the
2000 calendar year;
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(C) three times the sum of (I) the Executive's
annual Base Salary at the rate in effect at the time
the Notice of Termination is given, and (II) the Bonus
defined in Section 5(d)(i)(B), but without proration
(and, in each such case, without regard to any
contributions by Mattel for the Executive's benefit to
any retirement or other investment plans).
(ii) Mattel shall pay the Executive a portion of any
long-term incentive compensation that Executive would have
received under the LTIP with respect to any performance
period which is pending as of the Executive's Date of
Termination as if the Executive had remained employed for
the entire performance period, prorated based on the number
of full months of Executive's employment during the
performance period over the total number of months in the
performance period, which amount shall be payable at the end
of the period in accordance with the terms of the LTIP and
shall be net of any interim payments previously made to the
Executive.
(iii) Any Options theretofore granted to the Executive
under Mattel's stock option plans, other than Mattel's 1997
Premium Price Stock Option Plan or any successor thereto,
shall become immediately exercisable and the Executive shall
have until the date which is ten (10) years from the date
each such Option was granted to exercise each such Option.
(iv) On the Date of Termination, all restricted stock
units and restricted stock, including, without limitation,
any restricted stock units granted as part of the Initial
Restricted Stock Unit Grant described in Section 3(e)(ii),
above, granted by Mattel to the Executive prior to the Date
of Termination which had not vested prior to such date,
shall become fully vested and nonforfeitable.
(v) Mattel shall, promptly upon submission by the
Executive of supporting documentation, pay or reimburse to
the Executive any costs and expenses paid or incurred by the
Executive which would have been payable under Section 3(j)
if the Executive's employment had not terminated.
(vi) Until the earlier of (x) the third anniversary
of the Date of Termination or (y) the date the Executive
becomes gainfully employed in a substantially similar
employment position, Mattel shall provide to the Executive
at Mattel's expense:
(A) coverage under Mattel's medical, dental,
prescription drug and vision care group insurance as in
effect from time to time on the same terms and
conditions as such insurance is available to active
employees of Mattel (the last 18 months of the
Executive's coverage under such insurance shall be
deemed to be participation under an election to
continue such benefits under the Consolidated Omnibus
Budget Reconciliation Act at Mattel's expense);
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(B) outplacement services at the expense of
Mattel commensurate with those provided to terminated
executives of comparable level and made available
through and at the facilities of a reputable and
experienced vendor;
(C) financial counseling and tax preparation
services through the vendor engaged and paid for by
Mattel;
(D) automobile benefits; provided however, that
if such automobile is leased by Mattel, such benefits
shall expire upon expiration of such lease. Upon
expiration of the automobile benefits, at which time
the Executive may purchase the car for either $100, if
the automobile benefits terminate at the end of the
lease term, or Mattel's book value, if the automobile
benefits terminate on either the third anniversary of
the Date of Termination or the date on which the
Executive accepts other employment. As of the Date of
Termination, all expenses related to such automobile,
including but not limited to insurance, repairs,
maintenance, gasoline, and car phone and associated
expenses, shall be the sole responsibility of the
Executive; and
(E) membership in one city or country club and
related expenses. Mattel shall cause the membership to
be transferred to the Executive at no cost to the
Executive.
(vii) For purposes of the Mattel Supplemental
Executive Retirement Plan, the Mattel Deferred Compensation
Plan and/or the Mattel Retiree Medical Plan (if and to the
extent the Executive is a participant in such plans), the
Executive shall be given credit for three years of service
(in addition to actual service) and for three years of
attained age to be added to the Executive's actual age for
purposes of computing any service and age-related benefits
for which the Executive is eligible under such plans.
(e) Change of Control. If, within 18 months following
-----------------
a Change of Control, the Executive terminates his employment for Good
Reason, or Mattel or the surviving entity terminates the Executive's
employment other than for Cause or Disability, or if within the 30-day
period immediately following the six (6) month anniversary of a Change
of Control the Executive terminates the Executive's employment for any
reason, the Executive shall be entitled to all of the payments, rights
and benefits described in Section 5(d); provided, however, Section
5(d)(ii) (relating to the LTIP) shall not apply because, in lieu
thereof, the Executive will have received the long term incentive
compensation payments described in Section 6, below. If a Change of
Control occurs during the Term, then (regardless of when the Term
would otherwise end under any other provision of this Agreement) this
Section 5(e), and all other parts of this Agreement which relate to
this Section 5(e), shall continue to apply to the Executive for 18
months after the Change of Control.
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6. Long Term Incentive Compensation Plan Payments After a Change of Control.
------------------------------------------------------------------------
(a) In the event of a Change of Control during the Term, Mattel shall
pay the Executive a cash payment as provided under the provisions of the LTIP,
as in effect immediately prior to the Change of Control.
(b) In addition, in the event of a Change of Control during the Term,
within thirty (30) days after the date of such Change of Control, Mattel shall
pay the Executive any unpaid amounts to which the Executive is entitled with
respect to any performance period under the LTIP, or any other successor long-
term incentive compensation plan of Mattel, that has been completed as of the
date of the Change of Control.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Mattel and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreement with
Mattel or any of its affiliated companies. Except as otherwise provided herein,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of Mattel at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
8. No Set Off, Payment of Fees. Except as provided herein, Mattel's
---------------------------
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation any set-off, counterclaim, recoupment, defense or
other right which Mattel may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amount payable to the Executive under any of
the provisions of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment. Mattel agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by Mattel or others of the validity or enforceability of, or liability under,
any provision of this Agreement other than expenses relating to a claim by the
Executive that the Executive terminated for Good Reason or that a termination
for Cause was improper, in which case such fees and expenses shall be paid only
if the Executive prevails in whole or in part. In the event the Executive shall
in good faith give a Notice of Termination for Good Reason and it shall
thereafter be determined that Good Reason did not exist, the employment of the
Executive shall, unless Mattel and the Executive shall otherwise mutually agree,
be deemed to have terminated at the Date of Termination specified in such
purported Notice of Termination by mutual consent of Mattel and the Executive
and thereupon, the Executive shall be entitled to receive only those payments
and benefits which the Executive would have been entitled to receive at such
date.
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9. Arbitration of Disputes.
-----------------------
(a) The parties agree that any disputes, controversies or claims which
arise out of or relate to this Agreement, the Executive's employment or the
termination of the Executive's employment, including, but not limited to, any
claim relating to the purported validity, interpretation, enforceability or
breach of this Agreement, and/or any other claim or controversy arising out of
the relationship between the Executive and Mattel (or the nature of the
relationship) or the continuation or termination of that relationship,
including, but not limited to, claims that a termination was for Cause, or for
Good Reason, claims for breach of covenant, breach of an implied covenant of
good faith and fair dealing, wrongful termination, breach of contract, or
intentional infliction of emotional distress, defamation, breach of right of
privacy, interference with advantageous or contractual relations, fraud,
conspiracy or other tort or property claims of any kind, which are not settled
by agreement between the parties, shall be settled by expedited arbitration
under the then applicable arbitration rules of JAMS/Endispute (or any other
mutually agreed arbitrator) before a board of three arbitrators, as selected
thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and
the third by the two persons so selected, all in accordance with the then
applicable arbitration rules of JAMS/Endispute then in effect. In the event
that the arbitrator selected by the Executive and the arbitrator selected by
Mattel are unable to agree upon a third arbitrator, then the third arbitrator
shall be selected from a list of seven (each of whom shall be a member of the
"Independent List" of retired judges with experience in resolving employment
disputes) provided by the Los Angeles office of JAMS/Endispute with the parties
striking names in order and the party striking first to be determined by the
flip of a coin. The arbitration shall be held in a location mutually agreed
upon by the parties. In the absence of agreement, the arbitration shall be held
in Los Angeles, California.
(b) In consideration of the parties' agreement to submit to arbitration
all disputes with regard to this Agreement and/or with regard to any alleged
contract, or any other claim arising out of their conduct, the relationship
existing hereunder or the continuation or termination of that relationship, and
in further consideration of the anticipated expedition and the minimizing of
expense resulting from this arbitration remedy, the arbitration provisions of
this Agreement shall provide the exclusive remedy, and each party expressly
waives any right to seek redress in any other forum.
(c) Any claim which either party has against the other party which could
be submitted for resolution pursuant to this Section 8 must be presented in
writing by the claiming party to the other within the period of the applicable
statue of limitations.
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(d) Mattel will pay all costs and expenses of the arbitration.
(e) Any decision and award or order of a majority of the arbitrators shall
be binding upon the parties hereto and judgment thereon may be entered in the
Superior Court of the State of California or any other court having
jurisdiction.
(f) Each of the above terms and conditions of this Section 8 shall have
separate validity, and the invalidity of any part thereof shall not affect
the remaining parts.
(g) Any decision and award or order of a majority of the arbitrators shall
be final and binding between the parties as to all claims which were raised in
connection with the dispute to the full extent permitted by law. In all other
cases, the parties agree that a decision of a majority of arbitrators shall be a
condition precedent to the institution or maintenance of any legal, equitable,
administrative, or other formal proceeding by Mattel or the Executive in
connection with the dispute, and that the decision and opinion of the board of
arbitrators may be presented in any other forum on the merits of the dispute.
10. General Release. The Executive acknowledges and agrees that this
---------------
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Term, and all amounts to which the Executive shall be entitled whether during
the term of employment or upon termination thereof. The Executive also
acknowledges and agrees that the Executive's right to receive severance pay and
other benefits pursuant to subsections (b), (d) and (e) of Section 5 of this
Agreement is contingent upon the Executive's compliance with the covenants set
forth in Section 11 of this Agreement and the Executive's execution and
acceptance of the terms and conditions of, and the effectiveness of the General
Release of All Claims (the "Release") attached hereto as Exhibit "B." If the
Executive fails to comply with the covenants set forth in Section 11 or if the
Executive fails to execute the Release within twenty-one (21) days of receipt of
such Release, then the Executive shall not be entitled to any severance payments
or other benefits to which the Executive would otherwise be entitled under
subsections (b), (d) and (e) of Section 5 of this Agreement.
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11. Executive's Covenants.
---------------------
(a) The Executive shall not, at any time during the Term or thereafter,
make use of or disclose, directly or indirectly, to any person any (i) trade
secret or other confidential or secret information of Mattel or any of its
subsidiaries, affiliates or customers or (ii) other technical, business,
proprietary or financial information of Mattel or any of its subsidiaries,
affiliates or customers not available to the public generally or the competitors
of Mattel or the competitors of any of its subsidiaries or affiliates, in each
case that the Executive obtained as a result of his employment by Mattel or any
of its subsidiaries or affiliates ("Confidential Information"), except to the
extent that such Confidential Information (1) is used by the Executive during
the Term in the proper performance of his duties pursuant to this Agreement, (2)
is disclosed by the Executive to his legal counsel in connection with legal
services performed by such counsel for the Executive, provided that such
disclosure is made on a confidential basis, (3) becomes a matter of public
record or is published in a newspaper, magazine or other periodical available to
the general public, or has otherwise become generally known in the markets in
which Mattel does business and to which the Confidential Information other than
as a result of any act or omission of the Executive outside the proper
performance of his duties pursuant to this Agreement, or (4) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency. Promptly following the termination of the Term, the
Executive shall surrender to Mattel all records, memoranda, notes, plans,
reports, computer media and software and other documents and data which
constitute Confidential Information which he may then possess or have under his
control (together with all copies thereof); provided, however, the Executive may
retain personal diaries and notes and copies of such documents as are necessary
for the preparation of his federal or state income tax returns. Executive
further agrees to affirm and recognize his continuing obligations with respect
to the use and disclosure of Confidential Information by entering into an
Executive Patent and Confidence Agreement, substantially in the form attached
hereto as Exhibit C.
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(b) The Executive acknowledges that in his capacity in management, the
Executive has had and will have a great deal of exposure and access to
Confidential Information. Therefore, if the termination of the Executive's
employment occurs prior to a Change of Control, the Executive agrees that
eligibility for severance payments and other benefits under this Agreement
are contingent upon the Executive's agreement and compliance with Mattel's
requirement that the Executive does not accept employment nor an engagement
as a consultant with a competitor whereupon such position is comparable to
the position the Executive held with Mattel and where the Executive cannot
reasonably satisfy Mattel that the new employer is prepared to and/or does
take adequate steps to preclude and to prevent disclosure of Confidential
Information, as prohibited under Mattel's policies with respect to the use
and disclosure of confidential and proprietary information, as set forth in
Mattel's form Executive Patent and Confidence Agreement, attached hereto
as Exhibit C. If the Executive accepts employment or a consulting
relationship with a competitor as described above, no further payments nor
eligibility for benefits continuation will be available to the Executive as
of the date the Executive commences such employment/consulting. It is a
specific condition of this Agreement that until the earlier of (i) 12
months after the last date on which the Executive receives any payments or
benefits under this Agreement with respect to a termination of the
Executive's employment prior to a Change of Control or (ii) three years
after such termination of employment, the Executive is obligated to
immediately notify Mattel as to the specifics of the new position that the
Executive is planning to commence as an employee or consultant for any
company which is a competitor of Mattel.
(c) The Executive agrees that until the earlier of (i) 12 months after the
last date on which the Executive receives any payments or benefits under this
Agreement or (ii) three years after the termination of Executive's employment,
the Executive will not participate in recruiting any of Mattel's employees or in
the solicitation of Mattel's employees, and the Executive will not communicate
to any other person or entity about the nature, quality or quantity of work, or
any special knowledge or personal characteristics, of any person employed by
Mattel. If the Executive should wish to discuss possible employment with any
then-current Mattel employee during the period set forth above, the Executive
may request written permission to do so from the senior human resources officer
of Mattel who may, in his/her discretion, grant a written exception to the no
solicitation agreement set forth above; provided, however, the Executive agrees
that the Executive will not discuss any such employment possibility with such
employees prior to securing Mattel's permission. If Mattel should decline to
grant such permission, the Executive agrees that the Executive will not at any
time, either during or after the non-solicitation period set forth above, advise
the employee concerned that he/she was the subject of a request under this
paragraph or that Mattel refused to grant the Executive the right to discuss an
employment possibility with him/her.
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12. Successors.
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(a) This Agreement is personal to the Executive and without the prior
written consent of Mattel shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
Mattel and its successors. Mattel shall require any successor to all or
substantially all of the business and/or assets of Mattel, whether direct or
indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as Mattel would be required to perform if no such succession
had taken place.
13. Amendment; Waiver. This Agreement contains the entire agreement between
-----------------
the parties with respect to the subject matter hereof and may be amended,
modified or changed only by a written instrument executed by the Executive and
Mattel. No provision of this Agreement may be waived except by a writing
executed and delivered by the party sought to be charged. Any such written
waiver will be effective only with respect to the event or circumstance
described therein and not with respect to any other event or circumstance,
unless such waiver expressly provides to the contrary.
14. Certain Additional Payments by Mattel.
-------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any Payment (as
defined below) would be subject to the Excise Tax (as defined below), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 14(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Parachute Value of Payments (as defined below)
does not exceed 110% of the Safe Harbor Amount (as defined below), then no
Gross-Up Payment shall be made to the Executive and the Agreement Payments (as
defined below), in the aggregate, shall be reduced (but not below zero) such
that the Parachute Value of all Payments equals the Safe Harbor Amount,
determined in such a manner as to maximize the Value of all Payments (as defined
below) actually made to the Executive.
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(b) Subject to the provisions of Section 14(c), all determinations
required to be made under this Section 14, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to Mattel and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by Mattel.
All fees and expenses of the Accounting Firm shall be borne solely by Mattel.
Subject to Section 14(e) below, any Gross-Up Payment, as determined pursuant to
this Section 14, shall be paid by Mattel to the Executive within five days of
the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Mattel and the Executive. As a result of
the uncertainty in the application of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by Mattel should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that Mattel
exhausts its remedies pursuant to Section 14(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Mattel to or for the benefit of the
Executive.
(c) The Executive shall notify Mattel in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Mattel of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise Mattel of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to Mattel (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If Mattel
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give Mattel any information reasonably requested by Mattel
relating to such claim,
(ii) take such action in connection with contesting such claim as
Mattel shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by Mattel;
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(iii) cooperate with Mattel in good faith in order to effectively
contest such claim, and
(iv) permit Mattel to participate in any proceedings relating to such
claim;
provided, however, that Mattel shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), Mattel shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Mattel shall determine;
provided, however, that if Mattel directs the Executive to pay such claim and
sue for a refund, Mattel shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Mattel's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by Mattel
pursuant to Section 14(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to Mattel's complying
with the requirements of Section 14(c)) promptly pay to Mattel the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by Mattel pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
Mattel does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
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(e) Notwithstanding any other provision of this Section 14, Mattel may
withhold and pay over to the Internal Revenue Service for the benefit of the
Executive all or any portion of the Gross-Up Payment that Mattel determines in
good faith that it is or may be in the future required to withhold, and the
Executive hereby consents to such withholding.
(f) The following terms shall have the following meanings for purposes of
this Section 14.
(i) An "Agreement Payment" shall mean a Payment paid or payable
pursuant to this Agreement (disregarding this Section 14) and any payment
relating to the Loan Agreement.
(ii) "Excise Tax" shall mean the excise tax imposed by Section 4999
of the Code, together with any interest or penalties imposed with respect
to such excise tax.
(iii) The "Net After-Tax Amount" of a Payment shall mean the Value of
a Payment net of all taxes imposed on the Executive with respect thereto
under Sections 1 and 4999 of the Code and applicable state and local law,
determined by applying the highest marginal rates that are expected to
apply to the Executive's taxable income for the taxable year in which the
Payment is made.
(iv) "Parachute Value" of a Payment shall mean the present value, as
of the date of the change of control for purposes of Section 280G of the
Code, of the portion of such Payment that constitutes a "parachute payment"
under Section 280G(b)(2), as determined by the Accounting Firm for purposes
of determining whether and to what extent the Excise Tax will apply to such
Payment.
(v) A "Payment" shall mean any payment or distribution in the
nature of compensation (within the meaning of Section 280G(b)(2) of the
Code) to or for the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise.
(vi) The "Safe Harbor Amount" means the maximum Parachute Value of
all Payments that the Executive can receive without any Payments being
subject to the Excise Tax.
(vii) "Value" of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section
280G of the Code, as determined by the Accounting Firm using the discount
rate required by Section 280G(d)(4) of the Code.
25
<PAGE>
15. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
(b) All notices and other communications hereunder shall be in writing;
shall be delivered by hand delivery to the other party or mailed by registered
or certified mail, return receipt requested, postage prepaid; shall be deemed
delivered upon actual receipt; and shall be addressed as follows:
If to Mattel:
------------
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
If to Executive:
---------------
Mr. Robert A. Eckert
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
(d) Mattel may withhold from any amounts payable under this Agreement such
Federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.
26
<PAGE>
EXECUTIVE:
ROBERT A. ECKERT
/s/ Robert A. Eckert
--------------------
MATTEL:
MATTEL, INC., a Delaware corporation
By:/s/ Alan Kaye
-------------
Its:SVP HR
ATTEST:
/s/ Christopher O'Brien
- -----------------------
Assistant Secretary
27
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>9
<FILENAME>dex1013.txt
<DESCRIPTION>LETTER AGMT DATED 2/3/2000
<TEXT>
<PAGE>
EXHIBIT 10.13
[MATTEL LETTERHEAD]
As of February 3, 2000
Ronald M. Loeb
Sr. Vice President-General Counsel
Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Dear Ron,
In light of the increased responsibility that you have assumed in the
capacity of interim Chief Executive Officer of Mattel, the Company's Board of
Directors, at its February 3, 2000 meeting, approved an increase in the amount
of your compensation for service on the Board. This additional compensation will
be in the form of a single lump sum payment to be made in January 2001 in an
amount equal to $100,000 multiplied by the number of months that you serve in
the capacity of interim Chief Executive Officer, commencing with the month of
February, 2000. Of course you will continue to receive your regular Board fees
in the ordinary course as well.
Please acknowledge your concurrence with the foregoing by signing the
enclosed copy of this letter and returning it to me.
Very truly yours,
/s/ Bob Normile
Bob Normile
BN/mec
Enclosure
Acknowledged by:
/s/ Ronald M. Loeb
- ------------------
Ronald M. Loeb
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>10
<FILENAME>dex1019.txt
<DESCRIPTION>AMENDMENT TO EMPLOYMENT AGMT DATED 7/20/2000
<TEXT>
<PAGE>
EXHIBIT 10.19
July 20, 2000
Ms. Adrienne Fontanella
President Girls/Barbie
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement
--------------------------------------
Dear Adrienne:
Pursuant to action taken by Mattel's Executive/Finance Committee of the
Board of Directors of Mattel, Inc. on April 4, 2000, this letter agreement
constitutes an amendment to your Employment Agreement with Mattel.
Notwithstanding Section 5.4 of the Supplemental Executive Retirement Plan
(the "Plan"), in the event that your employment with Mattel is terminated (i) by
Mattel without Cause (as defined in your Employment Agreement) or (ii) by you
for Good Reason (as defined in your Employment Agreement) after you have
attained fifty-two years of age, your benefits under the Plan shall be fully
vested.
I would appreciate it if you would sign, date and return a copy of this
letter agreement to me. As such, it will constitute a written amendment to your
Employment Agreement.
Sincerely yours,
MATTEL, INC.
By /s/ Alan Kaye
--------------------------------------
Alan Kaye, Senior Vice President
Human Resources & Administration
Agreed to and accepted by:
/s/ Adrienne Fontanella
________________________ Dated: July 23, 2000
Adrienne Fontanella -------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>11
<FILENAME>dex1024.txt
<DESCRIPTION>AMENDMENT TO EMPLOYMENT AGMT DATED 7/20/2000
<TEXT>
<PAGE>
EXHIBIT 10.24
July 20, 2000
Mr. Matthew Bousquette
President Boys/Entertainment
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement
--------------------------------------
Dear Matt:
Pursuant to action taken by Mattel's Executive/Finance Committee of
the Board of Directors of Mattel, Inc. on April 4, 2000, this letter agreement
constitutes an amendment to your Employment Agreement with Mattel.
Notwithstanding Section 5.4 of the Supplemental Executive Retirement
Plan (the "Plan"), in the event that your employment with Mattel is terminated
(i) by Mattel without Cause (as defined in your Employment Agreement) or (ii) by
you for Good Reason (as defined in your Employment Agreement) after you have
attained fifty-two years of age, your benefits under the Plan shall be fully
vested.
I would appreciate it if you would sign, date and return a copy of
this letter agreement to me. As such, it will constitute a written amendment to
your Employment Agreement.
Sincerely yours,
MATTEL, INC.
By /s/ Alan Kaye
------------------------------------
Alan Kaye, Senior Vice President
Human Resources & Administration
Agreed to and accepted by:
/s/ Matthew Bousquette
________________________ Dated: July 23, 2000
Matthew Bousquette -------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>12
<FILENAME>dex1029.txt
<DESCRIPTION>AMENDMENT TO EMPLOYMENT AGMT DATED 11/14/2000
<TEXT>
<PAGE>
EXHIBIT 10.29
November 14, 2000
Mr. Neil Friedman
President of Fisher-Price Brands of Mattel
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement
--------------------------------------
Dear Neil:
Pursuant to action taken by Mattel's Compensation Committee on August
16, 2000, this letter agreement constitutes an amendment to your Employment
Agreement with Mattel.
Notwithstanding Section 5.1 and 5.4 of the Supplemental Executive
Retirement Plan (the "Plan"), and in lieu of any benefits you would otherwise
receive under those provisions of the SERP, in the event that your employment
with Mattel is terminated hereafter (i) by Mattel without Cause (as defined in
your Employment Agreement), or (ii) by you for Good Reason (as defined in your
Employment Agreement) or (iii) by you as a result of your retirement after the
age of fifty-five (55), your benefits under the Plan shall be fully vested and
you shall be entitled to an annual benefit of $300,000 for your lifetime,
regardless of your years of service, age, actual compensation or average
compensation.
You hereby agree that you have no intention, other than as a result of
physical limitations beyond your control, to retire prior to the age of fifty-
eight (58).
I would appreciate it if you would sign, date and return a copy of
this letter agreement to me. As such, it will constitute a written amendment
to your Employment Agreement.
Sincerely yours,
Mattel Inc.,
By /s/ Alan Kaye
-------------------------------------
Alan Kaye, Senior Vice President
Human Resources
Agreed to and accepted by:
/s/ Neil Friedman
________________________ Dated: Nov. 15, 2000
Neil Friedman -------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>13
<FILENAME>dex1033.txt
<DESCRIPTION>AMND & RESTATED EXEC EMPLOYMENT AGMT
<TEXT>
<PAGE>
EXHIBIT 10.33
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT dated as of March
28, 2000 (the "Agreement") is between Mattel, Inc., a Delaware corporation
("Mattel"), and Kevin M. Farr (the "Executive").
WHEREAS, Mattel and the Executive have previously entered into that certain
Employment Agreement (the "Employment Agreement"), dated as of May 30, 1999; and
WHEREAS, Mattel and the Executive each have determined that it would be to
the advantage and best interest of Mattel and the Executive to enter into the
Agreement and modify certain of the Executive's and Mattel's obligations and
responsibilities under the Employment Agreement;
WHEREAS, the Agreement amends and restates the Employment Agreement in its
entirety and shall supersede the Employment Agreement in all respects.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto do hereby agree as
follows:
1. Employment Period. Mattel hereby agrees to employ and continue in its
-----------------
employ the Executive, and the Executive hereby accepts such employment and
agrees to remain in the employ of Mattel, for the period commencing on the date
of this Agreement and ending on the third anniversary of such date, subject to
earlier termination as provided herein (the "Employment Period"); provided that
commencing on the first day of the month next following the effective date
hereof, and on the first day of each month thereafter (the most recent of such
dates is hereinafter referred to as the "Renewal Date"), the Employment Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to any Renewal Date Mattel or the Executive
shall give notice to the other that the Employment Period shall not be so
extended.
2. Duties.
------
(a) Executive's Position and Duties. During the Employment Period,
-------------------------------
the Executive's position and title shall be Chief Financial Officer of Mattel,
reporting directly to the Chief Executive Officer of Mattel, with overall
responsibility, authority and accountability for financial matters relating to
the business of Mattel and any of its subsidiaries with such additions and
modifications, and consistent with responsibilities generally assigned to the
Chief Financial Officer of Mattel as the Chief Executive Officer of Mattel may
in her discretion and acting in good faith from time to time assign to the
Executive. The Executive's services shall be
<PAGE>
performed in the general area in which the Executive was employed on the date of
this Agreement.
(b) Full Time. The Executive agrees to devote his full business time
---------
to the business and affairs of Mattel and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder to the
extent necessary to discharge such responsibilities, except for (i) services on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities which services have
been approved by the Chief Executive Officer; (ii) periods of vacation and sick
leave to which he is entitled; and (iii) the management of personal investments
and affairs. The Executive will not engage in any outside business activity (as
distinguished from personal investment activity and affairs), including, but not
limited to, activity as a consultant, agent, partner or officer, director or
provide business services of any nature directly or indirectly to a corporation
or other business enterprise, except as otherwise set forth in this subsection
(b).
3. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Employment Period, the Executive shall
-----------
receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the
bi-weekly salary paid to Executive by Mattel on the date of this Agreement. The
Base Salary shall be reviewed at least every 18 months, and may be increased at
any time and from time to time by action of the Board of Directors of Mattel or
the Compensation/Options Committee thereof or any individual having authority to
take such action in accordance with Mattel's regular practices.
(b) Bonus Programs. In addition to the Base Salary, the Executive
--------------
shall be eligible to participate throughout the Employment Period in such cash,
deferred bonus, annual bonus and long term bonus plans and programs ("Bonus
Programs"), such as Mattel's Management Incentive Plan (the "MIP") and Long Term
Incentive Plan (the "LTIP"), as may be in effect from time to time in accordance
with Mattel's compensation practices and the terms and provisions of any such
plans or programs as in effect from time to time.
(c) Incentive Plans. In addition to the Base Salary and participation
---------------
in the Bonus Programs, during the Employment Period the Executive, shall be
eligible to participate, subject to the terms and conditions thereof, in all
incentive plans and programs, including, but not limited to, stock option plans
and other equity based incentive plans, as may be in effect from time to time.
(d) Pension and Welfare Benefit Plans. During the Employment Period,
---------------------------------
the Executive and/or his dependents, as the case may be, shall be eligible to
participate in, subject to the terms and conditions thereof, all pension, profit
sharing, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs of Mattel as in effect from time to time.
2
<PAGE>
(e) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and practices of Mattel as in
effect from time to time.
(f) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits (including automobile benefits, financial
counseling, and membership in one city or country club and related expenses) in
accordance with the policies of Mattel as in effect from time to time.
(g) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the policies and practices of
Mattel as in effect from time to time
(h) Stock Options. During the Employment Period, the Executive shall
-------------
be entitled to participate in Mattel's stock option plans in accordance with the
policies and practices of Mattel as in effect from time to time.
(i) Certain Amendments. Nothing herein shall be construed to prevent
------------------
Mattel from amending, altering, eliminating or reducing any plans, benefits or
programs set forth in Sections 3(a) through (h), so long as such actions do not
result in a material diminution in the aggregate value of such compensation and
benefits, except for across-the-board compensation and benefit reductions which
affect all similarly situated executives of Mattel.
4. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Executive's death; provided that the Executive's Base Salary will be
continued and paid for a period of six months thereafter. Mattel may terminate
this Agreement, after having established the Executive's Disability, by giving
to the Executive written notice of its intention to terminate his employment,
and his employment with Mattel shall terminate effective on the 90th day after
receipt of such notice (the "Disability Effective Date"). For purposes of this
Agreement, the Executive's Disability shall occur and shall be deemed to have
occurred only when the Executive becomes entitled to receive disability benefits
under the Mattel Long-Term Disability Plan for exempt employees, as revised from
time to time, but in no event shall such revision or modification to the Mattel
Long-Term Disability Plan provide the Executive with a definition of
"Disability" which is less favorable in the aggregate than that in effect as of
the date hereof.
(b) Cause. Mattel may terminate the Executive's employment for
-----
"Cause" upon a determination of the Chief Executive Officer of Mattel that
"Cause" exists. For purposes of this Agreement, "Cause" means (i) an act or acts
of dishonesty on the Executive's part which are intended to result in his
substantial personal enrichment at the expense of Mattel; (ii) repeated
3
<PAGE>
violations by the Executive of his obligations under Section 2 of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
resulted in material injury to Mattel; (iii) conduct of a factually
substantiated criminal nature (commonly defined as a "felony" in criminal
statutes) which has or which is more likely than not to have a material adverse
effect on Mattel's reputation or standing in the community or on its continuing
relationships with its customers or those who purchase or use its products; or
(iv) factually substantiated fraudulent conduct in connection with the business
or affairs of Mattel, regardless of whether said conduct is designed to defraud
Mattel or others; provided that, in each case, the Executive has received
written notice of the described activity, has been afforded a reasonable
opportunity to cure or correct the activity described in the notice, and has
failed to substantially cure, correct or cease the activity, as appropriate.
(c) Good Reason. The Executive may terminate his employment at any
-----------
time for Good Reason. For purposes of this Agreement, "Good Reason" means the
good faith determination by the Executive that any one or more of the following
have occurred:
(i) without the express written consent of the Executive, any
change(s) in any of the duties, authority, reporting structure or
responsibilities of the Executive which is (are) inconsistent in any substantial
respect with the position, authority, duties, reporting structure or
responsibilities of Mattel executives as contemplated by Section 2 of this
Agreement;
(ii) any failure by Mattel to comply with any of the provisions
of Section 3 of this Agreement, other than an insubstantial and inadvertent
failure remedied by Mattel promptly after receipt of notice thereof given by the
Executive;
(iii) any proposed termination by Mattel of the Executive's
employment other than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption and agreement
to perform this Agreement by a successor as contemplated by Section 11(b); or
(v) transferring the Executive outside of the greater Los
Angeles, California area without the Executive's express written consent.
(d) Change of Control. "Change of Control" means:
-----------------
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of Mattel,
including the shares of common stock of Mattel issuable upon an exchange of
Softkey Exchangeable Shares that are not owned by Mattel or any corporation
4
<PAGE>
controlled by Mattel (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of Mattel
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following shall not constitute a Change of Control: (a) any
acquisition directly from Mattel, (b) any acquisition by Mattel or any
corporation controlled by Mattel, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Mattel or any corporation
controlled by Mattel, (d) any acquisition by a Person of 20% of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities as
a result of an acquisition of common stock of Mattel by Mattel or of Softkey
Exchangeable Shares by Softkey which, by reducing the number of shares of common
stock of Mattel or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of either the Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by Mattel
or by Softkey as described above and shall, after such share acquisition by
Mattel or Softkey, become the beneficial owner of any additional shares of
common stock of Mattel, then such acquisition shall constitute a Change of
Control or (e) any acquisition pursuant to a transaction which complies with
clauses (a), (b) and (c) of subsection (iii) of this Section 4(d); provided,
further, however, that for purposes of this subsection (i), any Investing Person
(as such term is defined in the Rights Agreement) shall be deemed not to be a
beneficial owner of any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share (as such
term is defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Mattel's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as through
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation by Mattel of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of Mattel or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (a)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common
5
<PAGE>
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns Mattel or
all or substantially all of Mattel's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (b) no
Person (excluding any employee benefit plan (or related trust) of Mattel or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding share
of common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (c) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) approval by the shareholders of Mattel of a complete
liquidation or dissolution of Mattel.
For the purposes of this Section 4(d), (a) "Rights Agreement"
means the Rights Agreement, dated as of February 7, 1992, as amended by an
amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999
by and between Mattel and BankBoston N.A., a national banking association,
formerly, The First National Bank of Boston, and not giving effect to any
amendments subsequent to November 4, 1999, (b) "Softkey" means Softkey Software
Products Inc., an Ontario corporation, and (c) "Softkey Exchangeable Shares"
means the Exchangeable Shares in the capital stock of Softkey."
As soon as practicable after a Change of Control, Mattel shall
notify the Executive that a Change of Control has occurred.
(e) Notice of Termination. Any termination of the Executive's
---------------------
employment by Mattel for Cause or following a Change of Control or by the
Executive for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 15(b). Any termination by
Mattel due to Disability shall be given in accordance with Section 4(a). For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon; (ii) except in the event of a termination following a Change of Control,
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated; and (iii) specifies the Date of Termination (defined below).
(f) Date of Termination. "Date of Termination" means the date of
-------------------
actual receipt of the Notice of Termination or any later date specified therein
(but not more than fifteen
6
<PAGE>
(15) days after the giving of the Notice of Termination), as the case may be;
provided that (i) if the Executive's employment is terminated by Mattel for any
reason other than Cause or Disability, the Date of Termination is the date on
which Mattel notifies the Executive of such termination; (ii) if the Executive's
employment is terminated due to Disability, the Date of Termination is the
Disability Effective Date; and (iii) if the Executive's employment is terminated
due to the Executive's death, the Date of Termination shall be the date of
death.
5. Obligations of Mattel upon Termination. Other than as specifically set
--------------------------------------
forth or referenced in this Agreement, the Executive shall not be entitled to
any benefits on or after the Date of Termination.
(a) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death, this Agreement shall terminate without further
obligations by Mattel to the Executive's legal representatives under this
Agreement other than those obligations accrued hereunder or under the terms of
the applicable Mattel plan or program which takes effect at the date of his
death or as otherwise provided in Section 4(a) or this Section 5(a). As of the
Date of Termination, the Executive's family shall be entitled to healthcare
coverage and financial counseling benefits until the third anniversary of the
Date of Termination.
(b) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability, the Executive shall be entitled to receive
after the Disability Effective Date (i) disability benefits, if any, at least
equal to those then provided by Mattel to disabled executives and/or their
families and (ii) until the earlier of the third anniversary of the Date of
Termination or the date the Executive accepts other employment, those other
benefits on the terms described in Section 5(d)(v).
(c) Cause. If the Executive's employment is terminated for Cause or
-----
if the Executive terminates his employment without Good Reason, Mattel shall pay
the Executive his full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, and Mattel shall have no
further obligations to the Executive under this Agreement.
(d) Good Reason; Other Than for Cause or Disability. If Mattel
-----------------------------------------------
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason (in each case, other than
within 18 months following a Change of Control as provided in Section 5(e)):
(i) Mattel shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) if not theretofore paid, the Executive's Base Salary
through the Date of Termination at the rate in effect at the time of Notice of
Termination was given;
7
<PAGE>
(B) a current year bonus under the Management Incentive
Plan ("MIP") equal to the average of the two highest annual MIP bonuses received
by the Executive in the three years prior to the Date of Termination, including
any years in which the Executive was paid no bonus (the "Average Annual Bonus")
and prorated to reflect the total number of full months the Executive is
employed on an active and full time basis in the year in which termination
occurs;
(C) three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Average Annual Bonus defined in Section 5(d)(i)(B), but without
proration (and, in each such case, without regard to any contributions by Mattel
for the Executive's benefit to any retirement or other investment plans).
(ii) Mattel shall pay the Executive a portion of any long-term
incentive compensation that Executive would have received under the Mattel Long
Term Incentive Plan (the "LTIP") with respect to any performance period which
pending as of the Executive's Date of Termination as if he had remained employed
for the entire performance period, pro rated based on the number of full months
of Executive's employment during the performance period over the total number of
months in the performance period, which amount shall be payable at the end of
the period in accordance with the terms of the LTIP and shall be net of any
interim payments previously made to the Executive.
(iii) Any options granted to the Executive under Mattel's stock
option plans (the "Stock Option Plans"), shall become immediately exercisable
and the Executive shall have a period of two (2) years following the Date of
Termination (but in no event past the expiration of the term of the option
grant) to exercise all options granted under the Stock Option Plans then
exercisable or which become exercis able pursuant to this clause (iii).
(iv) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if his employment had not terminated.
(v) Until the earlier of (x) the third anniversary of the Date
of Termination or (y) the date the Executive accepts other employment, Mattel
shall provide to the Executive at Mattel's expense:
(I) coverage under Mattel's medical, dental, prescription
drug and vision care group insurance as in effect from time to time on the same
terms and conditions as such insurance is available to active employees of
Mattel (the last 18 months of the Executive's
8
<PAGE>
coverage under such insurance shall be deemed to be participation under an
election to continue such benefits under the Consolidated Omnibus Budget
Reconciliation Act at Mattel's expense);
(II) outplacement services at the expense of Mattel
commensurate with those provided to terminated executives of comparable level
and made available through and at the facilities of a reputable and experienced
vendor;
(III) financial counseling services through the vendor
engaged and paid for by Mattel; and
(IV) automobile benefits; provided however, that if such
automobile is leased by Mattel, such benefits shall expire upon expiration of
such lease. Upon expiration of the automobile benefits, at which time the
Executive may purchase the car for either $100, if the automobile benefits
terminate at the end of the lease term, or Mattel's book value, if the
automobile benefits terminate on either the third anniversary of the Date of
Termination or the date on which the Executive accepts other employment. As of
the Date of Termination, all expenses related to such automobile, including but
not limited to insurance, repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive.
(V) membership in one city or country club and related
expenses. Mattel shall cause the membership to be transferred to the Executive
at no cost to the Executive.
(vi) If the Executive is a participant in the Mattel Supplemental
Executive Retirement Plan (the "SERP"), the Mattel Deferred Compensation Plan or
the Mattel Retiree Medical Plan, the Executive shall be given credit for three
years of service (in addition to actual service) and for three years of attained
age to be added to the Executive's actual age for purposes of computing any
service and age-related benefits for which the Executive is eligible under such
plans. Further with regard to computing the Executive's benefit under the SERP,
the formula described in Section 5(d)(i)(B) shall be utilized in calculating the
maximum benefit, namely: the formula shall be 25% of the average of the final
three years of annual Base Salary (including the calendar year in which the Date
of Termination occurs), plus the average of the greatest two out of the three
most recent annual MIP bonuses received by the Executive.
(e) Change of Control. If, within 18 months following a Change of
-----------------
Control, the Executive terminates his employment for Good Reason or Mattel or
the surviving entity terminates the Executive's employment other than for Cause
or Disability or within the 30 day period immediately following the six (6)
month anniversary of a Change of Control the Executive terminates the
Executive's employment for any reason:
9
<PAGE>
(i) Mattel shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) if not theretofore paid, the Executive's Base Salary
through the Date of Termination at the rate in effect at the time of Notice of
Termination was given;
(B) a current year MIP bonus (the "Bonus Amount") equal to
the greater of the Average Annual Bonus or the annual bonus that would have been
payable to executives of Mattel in the same bonus category as the Executive,
assuming that the maximum amount of any targets were achieved for the year;
(C) three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Bonus Amount defined in Section 5(e)(i)(B), but without proration (and,
in each such case, without regard to any contributions by Mattel for the
Executive's benefit to any retirement or other investment plans).
(ii) Any options granted to the Executive under Mattel's Stock
Option Plans shall become immediately exercisable and the Executive shall have a
period of two (2) years following the Date of Termination (but in no event past
the expiration of the term of the option grant) to exercise all options granted
under the Stock Option Plans then exercisable or which become exercisable
pursuant to this clause (ii).
(iii) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if his employment had not terminated.
(iv) Until the earlier of (x) the third anniversary of the Date
of Termination or (y) the date the Executive accepts other employment, Mattel
shall provide to the Executive at Mattel's expense:
(I) coverage under Mattel's medical, dental, prescription
drug and vision care group insurance as in effect from time to time on the same
terms and conditions as such insurance is available to active employees of
Mattel (the last 18 months of the Executive's coverage under such insurance
shall be deemed to be participation under an election to continue such benefits
under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(II) outplacement services at the expense of Mattel
commensurate with those provided to terminated executives of comparable level
and made available through and at the facilities of a reputable and experienced
vendor;
10
<PAGE>
(III) financial counseling services through the vendor
engaged and paid for by Mattel;
(IV) automobile benefits; provided however, that if such
automobile is leased by Mattel, such benefits shall expire upon expiration of
such lease. Upon expiration of the automobile benefits, at which time the
Executive may purchase the car for either $100, if the automobile benefits
terminate at the end of the lease term, or Mattel's book value, if the
automobile benefits terminate on either the third anniversary of the Date of
Termination or the date on which the Executive accepts other employment. As of
the Date of Termination, all expenses related to such automobile, including but
not limited to insurance, repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive; and
(V) membership in one city or country club and related
expenses. Mattel shall cause the membership to be transferred to the Executive
at no cost to the Executive.
(vi) If the Executive is a participant in the Mattel Supplemental
Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel
Retiree Medical Plan, the Executive shall be given credit for three years of
service (in addition to actual service) and for three years of attained age to
be added to the Executive's actual age for purposes of computing any service and
age-related benefits for which the Executive is eligible under such plans.
Further with regard to computing the Executive's benefit under the SERP, the
formula described in Section 5(d)(i)(B) shall be utilized in calculating the
maximum benefit, namely: the formula shall be 25% of the average of the final
three years of annual Base Salary (including the calendar year in which the Date
of Termination occurs), plus the average of the greatest two out of the three
most recent annual MIP bonuses received by the Executive.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Mattel and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreement with
Mattel or any of its affiliated companies. Except as otherwise provided herein,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of Mattel at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
7. No Set Off, Payment of Fees. Except as provided herein, Mattel's
---------------------------
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation any set-off, counterclaim, recoupment, defense or
other right which Mattel may have against the Executive or others. Mattel
agrees to pay, to the full extent permitted by law, all legal fees and expenses
11
<PAGE>
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by Mattel or others of the validity or enforceability
of, or liability under, any provision of this Agreement other than expenses
relating to a claim by the Executive that he terminated for Good Reason or that
the termination for Cause was improper, in which case such fees and expenses
shall be paid only if the Executive prevails in whole or in part. In the event
that the Executive shall in good faith give a Notice of Termination for Good
Reason and it shall thereafter be determined that Good Reason did not exist, the
employment of the Executive shall, unless Mattel and the Executive shall
otherwise mutually agree, be deemed to have terminated at the Date of
Termination specified in such purported Notice of Termination by mutual consent
of Mattel and the Executive and thereupon, the Executive shall be entitled to
receive only those payments and benefits which he would have been entitled to
receive at such date.
8. Arbitration of Disputes.
-----------------------
(a) The parties agree that any disputes, controversies or claims which
arise out of or relate to this Agreement, the Executive's employment or the
termination of his employment, including, but not limited to, any claim relating
to the purported validity, interpretation, enforceability or breach of this
Agreement, and/or any other claim or controversy arising out of the relationship
between the Executive and Mattel (or the nature of the relationship) or the
continuation or termination of that relationship, including, but not limited to,
claims that a termination was for Cause, or for Good Reason, claims for breach
of covenant, breach of an implied covenant of good faith and fair dealing,
wrongful termination, breach of contract, or intentional infliction of emotional
distress, defamation, breach of right of privacy, interference with advantageous
or contractual relations, fraud, conspiracy or other tort or property claims of
any kind, which are not settled by agreement between the parties, shall be
settled by arbitration under the labor arbitration rules of the American
Arbitration Association before a board of three arbitrators, as selected
thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and
the third by the two persons so selected, all in accordance with the labor
arbitration rules of the American Arbitration Association then in effect. In the
event that the arbitrator selected by the Executive and the arbitrator selected
by Mattel are unable to agree upon a third arbitrator, then the third arbitrator
shall be selected from a list of seven provided by the office of the American
Arbitration Association nearest to the Executive's residence with the parties
striking names in order and the party striking first to be determined by the
flip of a coin. The arbitration shall be held in a location to be mutually
agreed upon by the parties. In the absence of agreement, the Chairman of the
Board of Mattel shall determine the location.
(b) In consideration of the parties' agreement to submit to
arbitration all disputes with regard to this Agreement and/or with regard to any
alleged contract, or any other claim arising out of their conduct, the
relationship existing hereunder or the continuation or termination of that
relationship, and in further consideration of the anticipated expedition and the
12
<PAGE>
minimizing of expense resulting from this arbitration remedy, the arbitration
provisions of this Agreement shall provide the exclusive remedy, and each party
expressly waives any right he or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other party which
could be submitted for resolution pursuant to this Section 8 must be presented
in writing by the claiming party to the other within one year of the date the
claiming party knew or should have known of the facts giving rise to the claim,
except that claims arising out of or related to the termination of the
Executive's employment must be presented by him within one year after the Date
of Termination. Unless the party against whom any claim is asserted waives the
time limits set forth above, any claim not brought within the time periods
specified shall be waived and forever barred.
(d) Mattel will pay all costs and expenses of the arbitration.
(e) Any decision and award or order of a majority of the arbitrators
shall be binding upon the parties hereto and judgment thereon may be entered in
the Superior Court of the State of California or any other court having
jurisdiction.
(f) Each of the above terms and conditions of this Section 8 shall
have separate validity and the invalidity of any part thereof shall not affect
the remaining parts.
(g) Any decision and award or order of a majority of the arbitrators
shall be final and binding between the parties as to all claims which were
raised in connection with the dispute to the full extent permitted by law. In
all other cases, the parties agree that a decision of a majority of arbitrators
shall be a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the Executive in
connection with the dispute, and that the decision and opinion of the board of
arbitrators may be presented in any other forum on the merits of the dispute.
9. General Release. The Executive acknowledges and agrees that this
---------------
Agreement and that certain letter by Mattel offering employment to the
Executive, dated concurrently herewith (the "Offer Letter"), includes the entire
agreement and understanding between the parties with regard to the Executive's
employment, the termination thereof during the Employment Period, and all
amounts to which the Executive shall be entitled whether during the term of
employment or upon termination thereof. The Executive also acknowledges and
agrees that the Executive's right to receive severance pay and other benefits
pursuant to subsections (b), (d) and (e) of Section 5 of this Agreement is
contingent upon the Executive's execution and acceptance of the terms and
conditions of, and the effectiveness of the General Release of All Claims (the
"Release") attached hereto as Exhibit "A." If the Executive fails to execute
the Release within twenty-one (21) days of receipt of such Release, then the
Executive shall not be
13
<PAGE>
entitled to any severance payments or other benefits to which the Executive
would otherwise be entitled under subsections (b), (d) and (e) of Section 5 of
this Agreement.
10. The Executive's Covenants.
-------------------------
(a) The Executive acknowledges that in the Executive's capacity in
management, the Executive has had a great deal of exposure and access to a broad
variety of commercially valuable proprietary information which is vital to the
success of Mattel's business including, by way of illustration, past, current
and future products and product concepts, marketing strategies, research and
plans and information regarding employees. The Executive acknowledges that as a
result of the Executive's knowledge of the above information and in
consideration for the benefits offered by Mattel under this Agreement, the
Executive hereby agrees to reaffirm and recognize the Executive's continuing
obligations with respect to the use and disclosure of confidential and
proprietary information of Mattel pursuant to the Mattel's policies as set forth
in Mattel's form Executive Patent and Confidence Agreement and by this reference
made a part hereof. Pursuant thereto, the Executive acknowledges and agrees that
Mattel shall be entitled to injunctive relief to prevent a threatened
misappropriation of one or more of the Mattel's trade secrets or to halt an
actual misappropriation of such trade secrets. The Executive shall hold in a
fiduciary capacity for the benefit of Mattel all secret or confidential
information, knowledge or data relating to Mattel or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by Mattel or any of its
affiliated companies and which shall not be public knowledge. After termination
of the Executive's employment with Mattel, the Executive shall not, without the
prior written consent of Mattel, communicate or divulge any such information,
knowledge or data to anyone other than Mattel and those designated by it. The
foregoing shall not apply to any information which Mattel discloses to the
public. The Executive further represents and agrees that, unless otherwise
required by law, the Executive will keep the terms, amount and fact of this
Agreement completely confidential, and that the Executive will not hereafter
disclose any information concerning this Agreement to anyone other than the
Executive's immediate family and professional representatives who will be
informed of and bound by this confidentiality clause.
(b) If the termination of the Executive's employment occurs prior to a
Change of Control, the Executive agrees that eligibility for severance payments
and other benefits under this Agreement are contingent upon the Executive's
agreement and compliance with Mattel's requirement that the Executive does not
accept employment nor an engagement as a consultant with a competitor whereupon
such position is comparable to the position the Executive held with Mattel and
where the Executive can not reasonably satisfy Mattel that the new employer is
prepared to and/or does take adequate steps to preclude and to prevent
inevitable disclosure of trade secrets, as prohibited under the Mattel's
policies with respect to the use and disclosure of confidential and proprietary
information, as set forth in Mattel's form Executive Patent and Confidence
Agreement and by this reference made a part hereof. If the termination of the
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<PAGE>
Executive's employment occurs prior to a Change of Control and if the Executive
accepts employment or a consulting relationship with a competitor and such
position is comparable to the position the Executive held with Mattel and where
the Executive can not reasonably satisfy Mattel that the new employer is
prepared to and/or does take adequate steps to preclude and to prevent
inevitable disclosure of trade secrets, as prohibited under the Mattel's
policies with respect to the use and disclosure of confidential and proprietary
information, as set forth in Mattel's form Executive Patent and Confidence
Agreement and by this reference made a part hereof, then no further payments nor
eligibility for benefits continuation will be available to the Executive as of
the date the Executive commences such employment/consulting. It is a specific
condition of this Agreement that so long as the Executive is receiving any
payments or benefits under this Agreement with respect to a termination of the
Executive's employment prior to a Change of Control, the Executive is obligated
to immediately notify Mattel as to the specifics of the new position that the
Executive is planing to commence as an employee or consultant for any company
which is a competitor of Mattel.
(c) The Executive agrees that so long as the Executive is receiving
any payments or benefits under this Agreement and for a period of 12 months
thereafter, the Executive will not participate in recruiting any of Mattel's
employees or in the solicitation of Mattel's employees other than the
Executive's assistant on the Date of Termination, and the Executive will not
communicate to any other person or entity, about the nature, quality or quantity
of work, or any special knowledge or personal characteristics of any person
employed by Mattel. If the Executive should wish to discuss possible employment
with any then-current Mattel employee other than the Executive's assistant on
the Date of Termination during the 12-month period set forth above, the
Executive may request written permission to do so from the senior human
resources officer of Mattel who may, in his/her discretion, grant a written
exception to the no solicitation agreement set forth above, provided, however,
the Executive agrees that the Executive will not discuss any such employment
possibility with such employees prior to securing Mattel's permission. If Mattel
should decline to grant such permission, the Executive agrees that the Executive
will not at any time, either during or after the non-solicitation period set
forth above, advise the employee concerned that he/she was the subject of a
request under this paragraph or that Mattel refused to grant the Executive the
right to discuss an employment possibility with him/her.
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of Mattel shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
Mattel and its successors. Mattel shall require any successor to all or
substantially all of the business and/or assets of Mattel, whether direct or
indirect, by purchase, merger, consolidation,
15
<PAGE>
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as Mattel would be required
to perform if no such succession had taken place.
12. Amendment; Waiver. This Agreement and the Offer Letter contain the
--------- ------
entire agreement between the parties with respect to the subject matter hereof
and may be amended, modified or changed only by a written instrument executed by
the Executive and Mattel. No provision of this Agreement or the Offer Letter
may be waived except by a writing executed and delivered by the party sought to
be charged. Any such written waiver will be effective only with respect to the
event or circumstance described therein and not with respect to any other event
or circumstance, unless such waiver expressly provides to the contrary.
13. Long Term Incentive Compensation Plan Payments After a Change of
----------------------------------------------------------------
Control.
-------
(a) In the event of a Change of Control during the Employment Period,
Mattel shall pay the Executive a cash payment as provided under the provisions
of the LTIP, as in effect immediately prior to the Change of Control.
(b) In addition, in the event of a Change of Control during the
Employment Period, within thirty (30) days after the date of such Change of
Control, Mattel shall pay the Executive any unpaid amounts to which the
Executive is entitled with respect to any performance period under the LTIP, or
any other successor long-term incentive compensation plan of Mattel, that has
been completed as of the date of the Change of Control.
14. Certain Additional Payments by Mattel.
-------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
(as defined below) would be subject to the Excise Tax (as defined below), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 14(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Parachute Value of Payments (as defined below)
does not exceed 110% of the Safe Harbor Amount (as defined below), then no
Gross-Up Payment shall be made to the Executive and the Agreement Payments (as
defined below), in the aggregate, shall be reduced to (but not below zero) such
that the Parachute Value of all Payments equals the Safe Harbor Amount,
determined in such a manner as to maximize the Value of all Payments (as defined
below) actually made to the Executive.
16
<PAGE>
(b) Subject to the provisions of Section 14(c), all determinations
required to be made under this Section 14, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by
PricewaterhouseCooper LLP or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to Mattel and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by Mattel.
All fees and expenses of the Accounting Firm shall be borne solely by Mattel.
Subject to Section 14(e) below, any Gross-Up Payment, as determined pursuant to
this Section 14, shall be paid by Mattel to the Executive within five days of
the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Mattel and the Executive. As a result of
the uncertainty in the application of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by Mattel should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that Mattel
exhausts its remedies pursuant to Section 14(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Mattel to or for the benefit of the
Executive.
(c) The Executive shall notify Mattel in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Mattel of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise Mattel of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to Mattel (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If
Mattel notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give Mattel any information reasonably requested by Mattel
relating to such claim,
(ii) take such action in connection with contesting such claim as
Mattel shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by Mattel,
(iii) cooperate with Mattel in good faith in order effectively
to contest such claim, and
(iv) permit Mattel to participate in any proceedings relating to
such claim;
17
<PAGE>
provided, however, that Mattel shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), Mattel shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Mattel shall determine;
provided, however, that if Mattel directs the Executive to pay such claim and
sue for a refund, Mattel shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Mattel's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
Mattel pursuant to Section 14(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to Mattel's
complying with the requirements of Section 14(c)) promptly pay to Mattel the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by Mattel pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
Mattel does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 14, Mattel may
withhold and pay over to the Internal Revenue Service for the benefit of the
Executive all or any portion of the Gross-Up Payment that it determines in good
faith that it is or may be in the future required to withhold, and the Executive
hereby consents to such withholding.
(f) Definitions. The following terms shall have the following
-----------
meanings for purposes of this Section 14.
18
<PAGE>
(i) An "Agreement Payment" shall mean a Payment paid or payable
pursuant to this Agreement (disregarding this Section 14) and any payment
relating to the Loan Agreement.
(ii) "Excise Tax" shall mean the excise tax imposed by Section
4999 of the Code, together with any interest or penalties imposed with respect
to such excise tax.
(iii) The "Net After-Tax Amount" of a Payment shall mean the Value
of a Payment net of all taxes imposed on the Executive with respect thereto
under Sections 1 and 4999 of the Code and applicable state and local law,
determined by applying the highest marginal rates that are expected to apply to
the Executive's taxable income for the taxable year in which the Payment is
made.
(iv) "Parachute Value" of a Payment shall mean the present value
as of the date of the change of control for purposes of Section 280G of the Code
of the portion of such Payment that constitutes a "parachute payment" under
Section 280G(b)(2), as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment.
(v) A "Payment" shall mean any payment or distribution in the
nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to
or for the benefit of the Executive, whether paid or payable pursuant to this
Agreement or otherwise.
(vi) The "Safe Harbor Amount" means the maximum Parachute Value
of all Payments that the Executive can receive without any Payments being
subject to the Excise Tax.
(vii) "Value" of a Payment shall mean the economic present value
of a Payment as of the date of the change of control for purposes of Section
280G of the Code, as determined by the Accounting Firm using the discount rate
required by Section 280G(d)(4) of the Code.
15. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in
writing; shall be delivered by hand delivery to the other party or mailed by
registered or certified mail, return receipt requested, postage prepaid; shall
be deemed delivered upon actual receipt; and shall be addressed as follows:
19
<PAGE>
If to Mattel:
------------
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
If to Executive:
---------------
Mr. Kevin M. Farr
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
(d) Mattel may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.
EXECUTIVE: KEVIN M. FARR
/s/ Kevin M. Farr
___________________________________
MATTEL: MATTEL, INC.,
a Delaware corporation
By: /s/ Alan Kaye
-------------------------------
Its: SVP HR
------------------------------
ATTEST:
/s/ Christopher O'Brien
_________________________
Assistant Secretary
21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>14
<FILENAME>dex1034.txt
<DESCRIPTION>AMND TO EMPLOYMENT AGMT & STOCK OPTIONS GRANT
<TEXT>
<PAGE>
EXHIBIT 10.34
July 20, 2000
Mr. Kevin Farr
Chief Financial Officer
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement and Stock Option Grant Agreements
------------------------------------------------------------------------
Dear Kevin:
Pursuant to action taken by Mattel's Board of Directors and
Compensation Committee on March 30, 2000 to amend Mattel's 1990 and 1996 Stock
Option Plans (the "Plans") and to amend the Grant Agreements for Non-Qualified
Stock Options ("Grant Agreements") with respect to all of the stock options
which you hold under the Plans and which are outstanding as of March 30, 2000
(the "Outstanding Options"), this letter agreement constitutes an amendment to
each of your Grant Agreements and your Employment Agreement with Mattel.
Notwithstanding any provision of your Grant Agreements or of your
Employment Agreement to the contrary, in the event that your employment with
Mattel is terminated (i) by Mattel without Cause (as defined in your Employment
Agreement), (ii) by you for Good Reason (as defined in your Employment
Agreement), (iii) by you for any reason during the 30-day period immediately
following the six (6) month anniversary of a Change of Control (as defined in
your Employment Agreement) or (iv) by reason of your death or Disability (as
defined in your Employment Agreement), all of the Outstanding Options shall
become immediately exercisable and you shall have until the date which is ten
(10) years from the date each Outstanding Option was granted to exercise such
Outstanding Option.
I would appreciate it if you would sign, date and return a copy of
this letter agreement to me. As such, it will constitute a written amendment to
your Grant Agreements and your Employment Agreement.
Sincerely yours,
MATTEL, INC.
By /s/ Alan Kaye
-------------------------------------
Alan Kaye, Senior Vice President
Human Resources & Administration
Agreed to and accepted by:
/s/ Kevin M. Farr
________________________ Dated: July 21, 2000
Kevin Farr -------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>15
<FILENAME>dex1035.txt
<DESCRIPTION>LOAN AGMT WITH KEVIN M. FARR DATED 2/3/2000
<TEXT>
<PAGE>
EXHIBIT 10.35
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into as of February
3, 2000, by and between Mattel, Inc., a Delaware corporation ("Lender") and
Kevin M. Farr ("Borrower"). Borrower and Lender are sometimes referred to in
this Agreement as a "Party" or, collectively, as the "Parties."
RECITALS
--------
WHEREAS, Borrower desires to obtain from Lender a loan in the
principal amount of Five Hundred Thousand Dollars ($500,000.00) (the "Loan");
and
WHEREAS, as an additional incentive to retain Borrower in the employ
of Lender for a period of at least three years from the date hereof, Lender
desires to grant Borrower the Loan.
NOW, THEREFORE, in consideration of the terms and conditions herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
---------
1. Loan Terms.
----------
(a) Principal Amount. Lender shall pay to the order of Borrower,
----------------
on February 3, 2000, the principal sum of Five Hundred Thousand Dollars
($500,000.00) (the "Principal").
(b) Interest. Interest shall accrue on the outstanding Principal
--------
amount at the rate of seven percent (7%) per annum, compounded annually.
(c) Promissory Note. Borrower's obligation to repay the Loan shall
---------------
be evidenced by a promissory note substantially in the form attached as Exhibit
-------
A hereto (the "Note"). Borrower shall execute and deliver to Lender the Note
- -
concurrently with execution and delivery of this Agreement.
(d) Repayment. Borrower shall pay to the order of Lender the
---------
Principal and accrued interest under the Note on February 4, 2003, provided,
however, that all Principal and accrued but unpaid interest shall become
immediately due and payable thirty (30) days after the date of Borrower's
termination of employment with Lender for any reason prior to February 4, 2003,
unless Borrower commences arbitration with respect to the grounds for such
termination of employment within such thirty (30) day period, in which case all
Principal and accrued but unpaid interest shall be due and payable five (5) days
after notice to Borrower of the entry of a final judgement in such arbitration.
Interest shall continue to accrue during any such arbitration. The Loan shall be
subject to forgiveness as provided below. The Loan shall be unsecured but with
full recourse against Borrower.
<PAGE>
(e) Forgiveness. The Loan, and Borrower's obligation to repay all
-----------
outstanding Principal and accrued interest thereunder, shall be forgiven and
cancelled by Lender and the Note shall be cancelled on February 3, 2003 if
Borrower is employed by Lender on February 3, 2003, or earlier upon the date of
the termination of Borrower's employment with Lender prior to February 3, 2003
if such termination is by Lender without Cause (as defined below), by Borrower
for Good Reason (as defined below) or by reason of Borrower's death or
Disability (as defined below). In addition, if the Loan is forgiven pursuant to
the preceding sentence and if Borrower is employed by Lender on February 3, 2003
and continues to be employed by Lender, on April 1, 2004, or such earlier date
as Borrower shall be required to pay federal, state or local income taxes with
respect to the forgiveness of the Loan, Lender shall pay Borrower an additional
payment (the "Gross-Up Payment") in an amount required to fully reimburse
Borrower with respect to all federal, state and local income taxes and
employment taxes with respect to the forgiveness of the Loan and with respect to
such taxes, such that upon receipt of the Gross-Up Payment Borrower shall have
no remaining obligations with respect to such taxes. In addition, the Loan
shall be forgiven by Lender on the date of a Change of Control (as defined
below) of Lender if Borrower is employed by Lender on such date and Lender shall
pay Borrower the Gross-Up Payment with respect to the forgiveness of the Loan on
April 1, of the year following the year of the Change of Control, or such
earlier date as Borrower shall be required to pay federal, state or local income
taxes with respect to the forgiveness of the Loan.
(f) Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings indicated below:
"Cause" shall mean a reasonable determination of the Chief Executive
Officer of Lender that at least one of the following has occurred: (i) one or
more factually substantiated willful acts of dishonesty on Borrower's part which
are intended to result in Borrower's substantial personal enrichment at the
expense of Lender; (ii) repeated violations by Borrower of Borrower's employment
obligations to Lender which are demonstrably willful and deliberate on
Borrower's part and which resulted in material injury to Lender; (iii) conduct
of a factually substantiated criminal nature (commonly defined as a "felony" in
criminal statutes) which has or which is more likely than not to have a material
adverse effect on Lender's reputation or standing in the community or on its
continuing relationships with its customers or those who purchase or use its
products; or (iv) factually substantiated fraudulent conduct in connection with
the business or affairs of Lender, regardless of whether said conduct is
designed to defraud Lender or others; provided that, in each case, Borrower has
received written notice of the described activity, has been afforded a
reasonable opportunity to cure or correct the activity described in the notice,
and has failed to substantially cure, correct or cease the activity, as
appropriate.
"Change of Control" means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of Lender, including the
shares of common stock of Lender issuable upon an exchange of Softkey
Exchangeable Shares that are not owned by Lender or any corporation
2
<PAGE>
controlled by Lender (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of Lender
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following shall not constitute a Change of Control: (a) any
acquisition directly from Lender, (b) any acquisition by Lender or any
corporation controlled by Lender, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Lender or any corporation
controlled by Lender, (d) any acquisition by a Person of 20% of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities as
a result of an acquisition of common stock of Lender by Lender or of Softkey
Exchangeable Shares by Softkey which, by reducing the number of shares of common
stock of Lender or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of either the Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by Lender
or by Softkey as described above and shall, after such share acquisition by
Lender or Softkey, become the beneficial owner of any additional shares of
common stock of Lender, then such acquisition shall constitute a Change of
Control or (e) any acquisition pursuant to a transaction which complies with
clauses (a), (b) and (c) of subsection (iii) of this Section 4(d); provided,
further, however, that for purposes of this subsection (i), any Investing Person
(as such term is defined in the Rights Agreement) shall be deemed not to be a
beneficial owner of any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share (as such
term is defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Lender's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as through
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation by Lender of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of Lender or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (a)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns Lender or all or substantially all of Lender's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their
3
<PAGE>
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (b) no Person (excluding any employee benefit plan (or related trust) of
Lender or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding share of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (c) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) approval by the shareholders of Lender of a complete
liquidation or dissolution of Lender.
"Disability" shall mean that Borrower suffers a disability due to
illness or injury which substantially and materially limits Borrower from
performing each of the essential functions of Borrower's job, even with
reasonable accommodation and becomes entitled to receive disability benefits
under Lender's Long-Term Disability Plan for exempt employees.
"Good Reason" shall mean the good faith determination by Borrower
that any one or more of the following have occurred:
(i) without the express written consent of Borrower, any
change(s) in any of the duties, authority, or responsibilities of Borrower which
is (are) inconsistent in any substantial respect with Borrower's position,
authority, duties, or responsibilities as of the date of this Agreement;
(ii) any failure by Lender to pay Borrower Borrower's salary or
earned bonuses, other than an insubstantial and inadvertent failure remedied by
Lender promptly after receipt of notice thereof given by Borrower;
(iii) any proposed termination by Lender of Borrower's
employment other than as permitted by the employment agreement entered into by
the Parties;
(iv) any failure by Lender to obtain the assumption and
agreement to perform the employment agreement entered into by the Parties by a
successor as contemplated by such employment agreement; or
(v) transferring Borrower outside of the greater Los Angeles,
California area without Borrower's express written consent.
"Rights Agreement" means the Rights Agreement, dated as of
February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an
amendment dated as of November 4, 1999 by and between Lender and BankBoston
N.A., a national banking association,
4
<PAGE>
formerly, The First National Bank of Boston, and not giving effect to any
amendments subsequent to November 4, 1999.
"Softkey" means Softkey Software Products Inc., an Ontario
corporation.
"Softkey Exchangeable Shares" means the Exchangeable Shares (as
defined in the Rights Agreement) in the capital stock of Softkey.
2. Transfer of Notes. Borrower shall not assign or transfer any of
-----------------
Borrower's benefits or obligations arising under the Notes. Lender reserves
the right to assign or transfer all or any part of, or any interest in, Lender's
rights and benefits under this Agreement or the Note to any successor to all or
part of its business or assets so long as any assignee or transferee expressly
agrees to assume and perform this Agreement in the same manner and to the same
extent as Lender would be required to perform if no such assignment or transfer
had taken place.
3. Amendment; Waiver. This Agreement and the Note contain the entire
-----------------
agreement between the Parties with respect to the subject matter hereof and may
be amended, modified or changed only by a written instrument executed by the
Parties. No provision of this Agreement or the Note may be waived except by a
writing executed and delivered by the Party sought to be charged. Any such
written waiver will be effective only with respect to the event or circumstance
described therein and not with respect to any other event or circumstance,
unless such waiver expressly provides to the contrary.
4. Choice of Law. This Agreement shall be construed in accordance
-------------
with and governed by the internal laws of the State of California, without
reference to principles of conflict of laws.
5. Headings. The paragraph headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of the provisions hereof.
6. Notices. All notices and other communications hereunder shall be
-------
in writing; shall be delivered by hand delivery to the other party or mailed by
registered or certified mail, return receipt requested, postage prepaid; shall
be deemed delivered upon actual receipt; and shall be addressed as follows:
If to Lender:
------------
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
If to Borrower:
--------------
Mr. Kevin M. Farr
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
5
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
7. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8. Severability. If any provision in or obligation under this
------------
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9. No Third-Party Beneficiary Rights. The Parties do not intend to
---------------------------------
confer and this Agreement shall not be construed to confer any rights or
benefits to any person, firm, group, corporation or entity other than the
Parties.
[Signature Page Follows]
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Parties on the date first written above.
LENDER
By: /s/ Alan Kaye
-----------------------------------
Its:___________________________________
BORROWER
/s/ Kevin M. Farr
_______________________________________
Kevin M. Farr
S-1
<PAGE>
EXHIBIT A
---------
Promissory Note
$500,000.00 Date: February 3, 2000
Mattel, Inc. (herein referred to as "Holder") has agreed to advance to
Kevin M. Farr (herein referred to as "Maker") on February 3, 2000, $500,000.00,
and for said value received Maker promises to repay to the order of Holder, the
principal sum of $500,000.00 on or before February 4, 2003. Maker shall owe to
Holder interest on the principal sum in an amount equal to 7% per annum,
commencing on February 3, 2000, compounded annually, payable with principal on
February 4, 2003.
If Maker fails to make any payment set forth above when due, Holder
may elect to declare the entire unpaid principal amount, including all unpaid
interest, immediately due and payable with or without notice.
In the event of the termination of Maker's employment with Holder for
any reason, all outstanding principal and accrued interest hereunder is
immediately due and payable, with or without notice, thirty (30) days after the
date of such termination unless Maker commences arbitration as provided in that
certain Loan Agreement (the "Loan Agreement"), dated as of February 3, 2000,
between Holder and Maker, unless this note and the loan it evidences shall have
been cancelled and forgiven pursuant to the terms of the Loan Agreement.
In the event of commencement of legal action to enforce payment of
this note, the non-prevailing party agrees to pay the prevailing party's
reasonable attorney's fees and court costs in connection therewith.
By: /s/ Kevin M. Farr 2/10/2000
______________________________________
Kevin M. Farr Date
Witnessed by:
/s/ Alan Kaye 2/10/2000
_________________________________________
Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>16
<FILENAME>dex1036.txt
<DESCRIPTION>LOAN AGMT WITH KEVIN M. FARR DATED 4/7/2000
<TEXT>
<PAGE>
EXHIBIT 10.36
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into as of April 7,
2000, by and between Mattel, Inc., a Delaware corporation ("Lender") and Kevin
M. Farr ("Borrower"). Borrower and Lender are sometimes referred to in this
Agreement as a "Party" or, collectively, as the "Parties."
RECITALS
--------
WHEREAS, Borrower desires to obtain from Lender a loan in the
principal amount of Five Hundred Thousand Dollars ($500,000.00) (the "Loan");
and
WHEREAS, as an additional incentive to retain Borrower in the employ
of Lender for a period of at least three years from the date hereof, Lender
desires to grant Borrower the Loan.
NOW, THEREFORE, in consideration of the terms and conditions herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
---------
1. Loan Terms.
----------
(a) Principal Amount. Lender shall pay to the order of Borrower,
----------------
on April 7, 2000, the principal sum of Five Hundred Thousand Dollars
($500,000.00) (the "Principal").
(b) Interest. Interest shall accrue on the outstanding Principal
--------
amount at the rate of seven percent (7%) per annum, compounded annually.
(c) Promissory Note. Borrower's obligation to repay the Loan
---------------
shall be evidenced by a promissory note substantially in the form attached as
Exhibit A hereto (the "Note"). Borrower shall execute and deliver to Lender the
- ---------
Note concurrently with execution and delivery of this Agreement.
(d) Repayment. Borrower shall pay to the order of Lender the
---------
Principal and accrued interest under the Note on February 4, 2003, provided,
however, that all Principal and accrued but unpaid interest shall become
immediately due and payable thirty (30) days after the date of Borrower's
termination of employment with Lender for any reason prior to February 4, 2003,
unless Borrower commences arbitration with respect to the grounds for such
termination of employment within such thirty (30) day period, in which case all
Principal and accrued but unpaid interest shall be due and payable five (5) days
after notice to Borrower of the entry of a final judgement in such arbitration.
Interest shall continue to accrue during any such arbitration. The Loan shall be
subject to forgiveness as provided below. The Loan shall be unsecured but with
full recourse against Borrower.
<PAGE>
(e) Forgiveness. The Loan, and Borrower's obligation to repay all
-----------
outstanding Principal and accrued interest thereunder, shall be forgiven and
cancelled by Lender and the Note shall be cancelled on February 3, 2003 if
Borrower is employed by Lender on February 3, 2003, or earlier upon the date of
the termination of Borrower's employment with Lender prior to February 3, 2003
if such termination is by Lender without Cause (as defined below), by Borrower
for Good Reason (as defined below) or by reason of Borrower's death or
Disability (as defined below). In addition, if the Loan is forgiven pursuant to
the preceding sentence and if Borrower is employed by Lender on February 3, 2003
and continues to be employed by Lender, on April 1, 2004, or such earlier date
as Borrower shall be required to pay federal, state or local income taxes with
respect to the forgiveness of the Loan, Lender shall pay Borrower an additional
payment (the "Gross-Up Payment") in an amount required to fully reimburse
Borrower with respect to all federal, state and local income taxes and
employment taxes with respect to the forgiveness of the Loan and with respect to
such taxes, such that upon receipt of the Gross-Up Payment Borrower shall have
no remaining obligations with respect to such taxes. In addition, the Loan
shall be forgiven by Lender on the date of a Change of Control (as defined
below) of Lender if Borrower is employed by Lender on such date and Lender shall
pay Borrower the Gross-Up Payment with respect to the forgiveness of the Loan on
April 1, of the year following the year of the Change of Control, or such
earlier date as Borrower shall be required to pay federal, state or local income
taxes with respect to the forgiveness of the Loan.
(f) Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings indicated below:
"Cause" shall mean a reasonable determination of the Chief Executive
Officer of Lender that at least one of the following has occurred: (i) one or
more factually substantiated willful acts of dishonesty on Borrower's part which
are intended to result in Borrower's substantial personal enrichment at the
expense of Lender; (ii) repeated violations by Borrower of Borrower's employment
obligations to Lender which are demonstrably willful and deliberate on
Borrower's part and which resulted in material injury to Lender; (iii) conduct
of a factually substantiated criminal nature (commonly defined as a "felony" in
criminal statutes) which has or which is more likely than not to have a material
adverse effect on Lender's reputation or standing in the community or on its
continuing relationships with its customers or those who purchase or use its
products; or (iv) factually substantiated fraudulent conduct in connection with
the business or affairs of Lender, regardless of whether said conduct is
designed to defraud Lender or others; provided that, in each case, Borrower has
received written notice of the described activity, has been afforded a
reasonable opportunity to cure or correct the activity described in the notice,
and has failed to substantially cure, correct or cease the activity, as
appropriate.
"Change of Control" means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of Lender, including the
shares of common stock of Lender issuable upon an exchange of Softkey
Exchangeable Shares that are not owned by Lender or any corporation
2
<PAGE>
controlled by Lender (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of Lender
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following shall not constitute a Change of Control: (a) any
acquisition directly from Lender, (b) any acquisition by Lender or any
corporation controlled by Lender, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Lender or any corporation
controlled by Lender, (d) any acquisition by a Person of 20% of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities as
a result of an acquisition of common stock of Lender by Lender or of Softkey
Exchangeable Shares by Softkey which, by reducing the number of shares of common
stock of Lender or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of either the Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by Lender
or by Softkey as described above and shall, after such share acquisition by
Lender or Softkey, become the beneficial owner of any additional shares of
common stock of Lender, then such acquisition shall constitute a Change of
Control or (e) any acquisition pursuant to a transaction which complies with
clauses (a), (b) and (c) of subsection (iii) of this Section 4(d); provided,
further, however, that for purposes of this subsection (i), any Investing Person
(as such term is defined in the Rights Agreement) shall be deemed not to be a
beneficial owner of any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share (as such
term is defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or
(ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by Lender's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
through such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation by Lender of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of Lender or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (a)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns Lender or all or substantially all of Lender's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their
3
<PAGE>
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (b) no Person (excluding any employee benefit plan (or related trust) of
Lender or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding share of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (c) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) approval by the shareholders of Lender of a complete
liquidation or dissolution of Lender.
"Disability" shall mean that Borrower suffers a disability
due to illness or injury which substantially and materially limits Borrower from
performing each of the essential functions of Borrower's job, even with
reasonable accommodation and becomes entitled to receive disability benefits
under Lender's Long-Term Disability Plan for exempt employees.
"Good Reason" shall mean the good faith determination by
Borrower that any one or more of the following have occurred:
(i) without the express written consent of Borrower, any
change(s) in any of the duties, authority, or responsibilities of Borrower which
is (are) inconsistent in any substantial respect with Borrower's position,
authority, duties, or responsibilities as of the date of this Agreement;
(ii) any failure by Lender to pay Borrower Borrower's
salary or earned bonuses, other than an insubstantial and inadvertent failure
remedied by Lender promptly after receipt of notice thereof given by Borrower;
(iii) any proposed termination by Lender of Borrower's
employment other than as permitted by the employment agreement entered into by
the Parties;
(iv) any failure by Lender to obtain the assumption and
agreement to perform the employment agreement entered into by the Parties by a
successor as contemplated by such employment agreement; or
(v) transferring Borrower outside of the greater Los
Angeles, California area without Borrower's express written consent.
"Rights Agreement" means the Rights Agreement, dated as of
February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an
amendment dated as of November 4, 1999 by and between Lender and BankBoston
N.A., a national banking association,
4
<PAGE>
formerly, The First National Bank of Boston, and not giving effect to any
amendments subsequent to November 4, 1999.
"Softkey" means Softkey Software Products Inc., an Ontario
corporation.
"Softkey Exchangeable Shares" means the Exchangeable Shares (as
defined in the Rights Agreement) in the capital stock of Softkey.
2. Transfer of Notes. Borrower shall not assign or transfer any of
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Borrower's benefits or obligations arising under the Notes. Lender reserves
the right to assign or transfer all or any part of, or any interest in, Lender's
rights and benefits under this Agreement or the Note to any successor to all or
part of its business or assets so long as any assignee or transferee expressly
agrees to assume and perform this Agreement in the same manner and to the same
extent as Lender would be required to perform if no such assignment or transfer
had taken place.
3. Amendment; Waiver. This Agreement and the Note contain the entire
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agreement between the Parties with respect to the subject matter hereof and may
be amended, modified or changed only by a written instrument executed by the
Parties. No provision of this Agreement or the Note may be waived except by a
writing executed and delivered by the Party sought to be charged. Any such
written waiver will be effective only with respect to the event or circumstance
described therein and not with respect to any other event or circumstance,
unless such waiver expressly provides to the contrary.
4. Choice of Law. This Agreement shall be construed in accordance
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with and governed by the internal laws of the State of California, without
reference to principles of conflict of laws.
5. Headings. The paragraph headings contained in this Agreement are
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for reference